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As filed with the Securities and Exchange Commission on May 9, 2000
Registration No. 333-30186
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
PRE-EFFECTIVE AMENDMENT NO. 1 TO
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
GOLDEN AMERICAN LIFE INSURANCE COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation or organization)
6355
(Primary Standard Industrial Classification Code Number)
41-0991508
(I.R.S. Employer Identification No.)
Golden American Life Insurance Company
1475 Dunwoody Drive
West Chester, PA 19380-1478
(610) 425-3400
(Name, address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
Marilyn Talman, Esq. COPY TO:
Golden American Life Insurance Company Stephen E. Roth, Esq.
1475 Dunwoody Drive Sutherland Asbill & Brennan LLP
West Chester, Pennsylvania 19380-1478 1275 Pennsylvania Avenue, N.W.
(610) 425-3400 Washington, D.C. 20004-2404
(Name, address, including zip code,
and telephone number, including area
code, of agent for service)
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 [ ].....................................
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 [ ]
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Calculation of Registration Fee
<TABLE>
<CAPTION>
Proposed
Title of each class Proposed maximum
of securities to be Amount to be maximum offering price aggregate offering Amount of
registered registered price per unit(1) price(1) registration fee(2)
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<S> <C> <C> <C> <C>
Annuity Contracts
(Interests in N/A N/A $50,000,000 $13,200
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) $378,787.88 was previously registered with the initial filing of this
registration statement on February 11, 2000 at which time $100 in
registration fees were previously paid.
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The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance
with Section 8(a) of the Securities Act of 1933 or until this Registration
Statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
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PART I
The Prospectus contained herein does not contain all of the
information permitted by Securities and Exchange Commission
Regulations. Therefore, this Form S-1 for Golden American Life
Insurance Company ("Golden American") incorporates by reference
the Statement of Additional Information for the GoldenSelect
Combination Variable and Fixed Annuity, and Part C (Other
Information) contained in the Registration Statement on Form N-4
(an initial registration statement, File Nos. 333-30180, 811-5626,
filed on or about the date hereof)for Golden American Separate
Account B. This information may be obtained free of charge from
Golden American Life Insurance Company by calling Customer Service
at 800-366-0066.
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PROFILE AND PROSPECTUS OF GOLDENSELECT NC VA
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ING VARIABLE ANNUITIES
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B OF GOLDEN AMERICAN LIFE INSURANCE COMPANY
[BEGIN SHADED BOX]
PROFILE OF
GOLDENSELECT NC VA
DEFERRED COMBINATION VARIABLE AND FIXED ANNUITY CONTRACT
MAY 15, 2000
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 SHADED BOX]
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. 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.
NC PROFILE PROSPECTUS BEGINS AFTER
PAGE 7 OF THIS PROFILE
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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 benefit, and (6) the amount and frequency
of withdrawals.
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>
<CAPTION>
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ANNUITY OPTIONS
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<S> <C> <C>
Option 1 Income for a fixed Payments are made fora specified number of
period years to you or yourbeneficiary.
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Option 2 Income for life with Payments are made forthe rest of your life
a period certain or longer 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.
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Option 3 Joint life income Payments are made for your life and the life
of another person (usually your spouse).
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Option 4 Annuity plan Any other annuitization plan that we choose
to offer on the annuity start date.
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</TABLE>
Annuity payments under Options 1, 2 and 3 are fixed. Annuity
payments under Option 4 may be fixed or variable. If variable and
subject to the Investment Company Act of 1940, it will comply with
the requirements of such Act. 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 $5,000 or
more ($1,500 for a qualified Contract) up to and including age 70.
You may make additional payments of $100 or more ($250 for a
qualified Contract) at any time before you turn 76 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.
Who may purchase this Contract? Contracts offered by the prospectus
accompanying this Profile are available only to customers of First
Union National Bank 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.
2 NC PROFILE
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IRAs and other qualified plans already have the tax-deferral feature
found in this Contract. For an additional cost, the Contract
provides other benefits including death benefits and the ability to
receive a lifetime income. See "Expenses" in this profile.
4. THE INVESTMENT PORTFOLIOS
You can direct your money into (1) the fixed account with guaranteed
interest periods of 6 months, 1, 3, 5, 7 and 10 years, and/or (2)
into any one or more of the following 26 mutual fund investment
portfolios through our Separate Account B. The investment portfolios
are described in the prospectuses for the GCG Trust and the Evergreen
Variable Annuity Trust. Keep in mind that while an investment in the
fixed account earns a fixed interest 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 Mid-Cap Growth Series
Limited Maturity Bond Series Managed Global Series Small Cap Series
Global Fixed Income Series Large Cap Value Series Growth Series
Fully Managed Series All Cap Series Real Estate Series
Total Return Series Research Series Hard Assets Series
Equity Income Series Capital Appreciation Series Developing World Series
Investors Series Capital Growth Series
Value Equity Series Strategic Equity Series
EVERGREEN VARIABLE ANNUITY TRUST
Evergreen VA Equity Index Fund
Evergreen VA Foundation Fund
Evergreen VA Global Leaders
Evergreen VA Small Cap Value
</TABLE>
5. EXPENSES
The Contract has insurance features and investment features, and
there are charges related to each. For the insurance features, the
Company deducts a mortality and expense risk charge, an asset-based
administrative charge and an annual contract administrative charge of
$50. We deduct the mortality and expense risk charge and the asset-
based administrative charges daily directly from your contract value
in the investment portfolios. The mortality and expense risk charge
and the asset-based administrative charge, on an annual basis, are as
follows:
Mortality & Expense Risk Charge........ 1.25%
Asset-Based Administrative Charge...... 0.15%
Total.............................. 1.40%
Each investment portfolio has charges for investment management fees
and other expenses. These charges, which vary by investment
portfolio, currently range from 0.56% to 1.75% 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 is 10% of premium payments not previously withdrawn
received within 10 years prior to the date of the withdrawal. The
following table shows the schedule of the surrender charge that will
apply. The surrender charge is a percent of each premium payment
withdrawn.
3 NC PROFILE
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COMPLETE YEARS ELAPSED 0 | 1 | 2 | 3 | 4 |5 |6 |7 |8 |9 |10+|
SINCE PREMIUM PAYMENT | | | | | | | | | | |
| | | | | | | | | | |
SURRENDER CHARGE 8.5%|8.5%|8.5%|8.5%|8.5%|8% |7% |6% |4% |2% | 0%|
The following table is designed to help you understand the Contract
charges. The "Total Annual Insurance Charges" column includes the
mortality and expense risk charge, the asset-based administrative
charge, and reflects the annual contract administrative charge as
0.17% (based on an assumed average contract value of $30,000). The
"Total Annual Investment Portfolio Charges" column reflects the
portfolio charges for each portfolio and are based on actual expenses
as of December 31, 1999, except for (i) portfolios that commenced
operations during 1999 where the charges have been annualized, and
(ii) 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. The 1 Year examples include an 8.5% surrender charge.
For Years 1 and 10, the examples show the total annual charges
assessed during that time. For these examples, the premium tax is
assumed to be 0%.
4 NC PROFILE
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<TABLE>
<CAPTION>
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EXAMPLES:
TOTAL ANNUAL --------
TOTAL ANNUAL INVESTMENT TOTAL TOTAL CHARGES AT THE END OF:
INSURANCE PORTFOLIO ANNUAL
INVESTMENT PORTFOLIO CHARGES CHARGES CHARGES 1 YEAR 10 YEARS
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THE GCG TRUST
<S> <C> <C> <C> <C> <C>
Liquid Asset 1.57% 0.56% 2.13% $107 $266
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Limited Maturity Bond 1.57% 0.57% 2.14% $107 $267
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Global Fixed Income 1.57% 1.60% 3.17% $117 $368
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Fully Managed 1.57% 0.97% 2.54% $111 $308
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Total Return 1.57% 0.91% 2.48% $110 $302
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Equity Income 1.57% 0.96% 2.53% $111 $307
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Investors 1.57% 1.01% 2.58% $111 $311
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Value Equity 1.57% 0.96% 2.53% $111 $307
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Rising Dividends 1.57% 0.96% 2.53% $111 $307
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Managed Global 1.57% 1.25% 2.82% $114 $335
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Large Cap Value 1.57% 1.01% 2.58% $111 $311
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All Cap 1.57% 1.01% 2.58% $111 $311
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Research 1.57% 0.91% 2.48% $110 $302
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Capital Appreciation 1.57% 0.96% 2.53% $111 $307
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Capital Growth 1.57% 1.05% 2.62% $112 $315
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Strategic Equity 1.57% 0.96% 2.53% $111 $307
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Mid-Cap Growth 1.57% 0.91% 2.48% $110 $302
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Small Cap 1.57% 0.96% 2.53% $111 $307
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Growth 1.57% 1.04% 2.61% $111 $314
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Real Estate 1.57% 0.96% 2.53% $111 $307
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Hard Assets 1.57% 0.96% 2.53% $111 $307
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Developing World 1.57% 1.75% 3.32% $118 $381
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EVERGREEN VARIABLE ANNUITY TRUST
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Evergreen VA
Equity Index Fund 1.57% 0.62% 2.19% $107 $240
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Evergreen VA
Foundation Fund 1.57% 0.95% 2.52% $111 $306
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Evergreen VA
Global Leaders Fund 1.57% 1.20% 2.58% $113 $330
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Evergreen VA
Small Cap Value Fund 1.57% 1.37% 2.58% $115 $346
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</TABLE>
The "Total Annual Investment Portfolio Charges" column above reflect
current expense reimbursements for applicable investment portfolios.
For more detailed information, see "Fees and Expenses" in the
prospectus for the Contract.
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 at your request.
5 NC PROFILE
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<PAGE>
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 taxable
earnings withdrawn.
Any death benefit proceeds are taxable.
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 7. 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.
8. PERFORMANCE
The value of your Contract will fluctuate depending on the investment
performance of the portfolio(s) you choose. Since this is a new
Contract, there is no actual performance history to illustrate.
Actual performance information will be shown in an updated
prospectus. Please keep in mind that past or hypothetical
performance is not a guarantee of future results.
9. DEATH BENEFIT
The death benefit is payable when the first of the following persons
dies: 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 value is
calculated at the close of the business day on which we receive
written notice and due proof of death, as well as 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
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 death benefit, if you die before the annuity start date,
your beneficiary will receive the greatest of:
1) the contract value;
2) the total premium payments made under the Contract after pro
rata adjustments for any withdrawals; or
3) the cash surrender value.
Note: The amount of the death benefit could be reduced by premium
taxes owed and withdrawals not previously deducted.
10. OTHER INFORMATION
FREE LOOK. If you cancel the Contract within 10 days after you
receive it, you will receive a refund of the adjusted 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), and (ii) 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
certain situations, you may be entitled to a longer free look period.
6 NC PROFILE
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<PAGE>
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. See "Federal Tax Consideration-Taxation of Death Benefit
Proceeds" in the prospectus for the Contract.
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 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
surrender 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, PA 19380
(800) 366-0066
or your registered representative.
7 NC PROFILE
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[BEGIN SHADED BOX]
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B OF GOLDEN AMERICAN LIFE INSURANCE COMPANY
DEFERRED COMBINATION VARIABLE AND FIXED ANNUITY PROSPECTUS
GOLDENSELECT [NC]
- -----------------------------------------------------------------------
[END SHADED BOX]
MAY 15, 2000
This prospectus describes GoldenSelect [NC], 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 in one or more of 26 mutual fund investment portfolios.
You may also allocate premium payments 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
listed on the back of this cover.
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, 7and 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
refund of the adjusted contract value (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 and in certain situations.
This prospectus provides information that you should know
before investing and should be kept for future reference. A
Statement of Additional Information, dated May 15, 2000, 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 SUBACCOUNTS THROUGH THE GCG TRUST OR THE
EVERGREEN VARIABLE ANNUITY TRUST IS NOT A BANK DEPOSIT AND IS
NOT INSURED OR GUARANTEED BY ANY 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 AND THE EVERGREEN VARIABLE ANNUITY TRUST.
[BEGIN SHADED BOX]
A LIST OF THE INVESTMENT PORTFOLIOS AND THE MANAGERS ARE LISTED ON
THE BACK OF THIS COVER.
- ------------------------------------------------------------------------
[END SHADED BOX]
<PAGE>
<PAGE>
The investment portfolios available under your Contract and
the portfolio managers are:
THE GCG TRUST
A I M CAPITAL MANAGEMENT, INC.
Capital Appreciation Series
Strategic Equity Series
ALLIANCE CAPITAL MANAGEMENT L. P.
Capital Growth Series
BARING INTERNATIONAL INVESTMENT LIMITED (AN AFFILIATE)
Hard Assets Series
Developing World Series
Global Fixed Income Series
CAPITAL GUARDIAN TRUST COMPANY
Large Cap Value Series
Managed Global Series
Small Cap Series
EAGLE ASSET MANAGEMENT, INC
Value Equity Series
ING INVESTMENT MANAGEMENT, LLC (AN AFFILIATE)
Limited Maturity Bond Series
Liquid Asset Series
JANUS CAPITAL CORPORATION
Growth Series
KAYNE ANDERSON INVESTMENT MANAGEMENT, LLC
Rising Dividends Series
MASSACHUSETTS FINANCIAL SERVICES COMPANY
Mid-Cap Growth Series
Research Series
Total Return Series
THE PRUDENTIAL INVESTMENT CORPORATION
Real Estate Series
SALOMON BROTHERS ASSETS MANAGEMENT, INC.
All Cap Series
Investors Series
T. ROWE PRICE ASSOCIATES, INC.
Equity Income Series
Fully Managed Series
EVERGREEN VARIABLE ANNUITY TRUST
EVERGREEN ASSET MANAGEMENT, INC.
Evergreen VA Equity Index Fund
Evergreen VA Foundation Fund
Evergreen VA Global Leaders Fund
Evergreen VA Small Cap Value Fund
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.
<PAGE>
<PAGE>
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TABLE OF CONTENTS
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PAGE
Index of Special Terms 1
Fees and Expenses 2
Performance Information 5
Accumulation Unit 5
Net Investment Factor 5
Condensed Financial Information 6
Financial Statements 6
Performance Information 6
Golden American Life Insurance Company 7
The Trusts 7
Golden American Separate Account B 8
The Investment Portfolios 8
Investment Objectives 8
Investment Management Fees 10
The Fixed Interest Allocation 11
Selecting a Guaranteed Interest Period 11
Guaranteed Interest Rates 11
Transfers from a Fixed Interest Allocation 12
Withdrawals from a Fixed Interest Allocation 12
Market Value Adjustment 13
The Annuity Contract 14
Contract Date and Contract Year 14
Annuity Start Date 14
Contract Owner 14
Annuitant 14
Beneficiary 15
Purchase and Availability of the Contract 15
Crediting of Premium Payments 16
Contract Value 16
Cash Surrender Value 17
Surrendering to Receive the Cash Surrender Value 17
Addition, Deletion or Substitution of Subaccounts
and Other Changes 17
The Fixed Account 18
Other Contracts 18
Other Important Provisions 18
Withdrawals 18
Regular Withdrawals 18
Systematic Withdrawals 19
IRA Withdrawals 19
Transfers Among Your Investments 20
Dollar Cost Averaging 21
Automatic Rebalancing 21
Death Benefit 22
Death Benefit During the Accumulation Phase 22
Death Benefit During the Income Phase 23
Charges and Fees 23
Charge Deduction Subaccount 23
Charges Deducted from the Contract Value 23
i
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- ----------------------------------------------------------------------
TABLE OF CONTENTS (CONTINUED)
- ----------------------------------------------------------------------
PAGE
Surrender Charge 23
Waiver of Surrender Charge for Extended
Medical Care 24
Free Withdrawal Amount 24
Surrender Charge for Excess Withdrawals 24
Premium Taxes 24
Administrative Charge 24
Transfer Charge 24
Charges Deducted from the Subaccounts 25
Mortality and Expense Risk Charge 25
Asset-Based Administrative Charge 25
Trust Expenses 25
The Annuity Options 25
Annuitization of Your Contract 25
Selecting the Annuity Start Date 26
Frequency of Annuity Payments 26
The Annuity Options 26
Income for a Fixed Period 26
Income for Life with a Period Certain 26
Joint Life Income 26
Annuity Plan 26
Payment When Named Person Dies 26
Other Contract Provisions 27
Reports to Contract Owners 27
Suspension of Payments 27
In Case of Errors in Your Application 27
Assigning the Contract as Collateral 27
Contract Changes-Applicable Tax Law 27
Free Look 27
Group or Sponsored Arrangements 28
Selling the Contract 28
Other Information 29
Voting Rights 29
State Regulation 29
Legal Proceedings 29
Legal Matters 29
Experts 29
Federal Tax Considerations 30
More Information About Golden American Life Insurance
Company
Financial Statements of Golden American Life Insurance
Company
Statement of Additional Information
Table of Contents
Appendix A
Market Value Adjustment Examples A1
Appendix B
Surrender Charge for Excess Withdrawals Example B1
ii
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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
Annuitant 16
Annuity Start Date 15
Cash Surrender Value 18
Contract Date 15
Contract Owner 15
Contract Value 17
Contract Year 15
Fixed Interest Allocation 12
Free Withdrawal Amount 25
Market Value Adjustment 14
Net Investment Factor 6
Death Benefit 23
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
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- ----------------------------------------------------------------------
FEES AND EXPENSES
- ----------------------------------------------------------------------
CONTRACT OWNER TRANSACTION EXPENSES*
Surrender Charge:
COMPLETE YEARS ELAPSED 0 | 1 | 2 | 3 | 4 |5 |6 |7 |8 |9 |10+|
SINCE PREMIUM PAYMENT | | | | | | | | | | |
| | | | | | | | | | |
SURRENDER CHARGE 8.5%|8.5%|8.5%|8.5%|8.5%|8% |7% |6% |4% |2% | 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 ................................ $50
*** We deduct this charge on each contract anniversary and on
surrender.
SEPARATE ACCOUNT ANNUAL CHARGES****
Mortality & Expense Risk Charge....................... 1.25%
Asset-Based Administrative Charge..................... 0.15%
-----
Total Separate Account Charges........................ 1.40%
**** As a percentage of average daily assets in each subaccount.
The Separate Account Annual Charges are deducted daily.
2
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THE GCG TRUST ANNUAL EXPENSES (as a percentage of the average daily
net assets of a portfolio):
- --------------------------------------------------------------------------------
MANAGEMENT OTHER TOTAL
PORTFOLIO FEE(1) EXPENSES(2) EXPENSES(3)
- --------------------------------------------------------------------------------
Liquid Asset 0.56% 0.00% 0.56%
- --------------------------------------------------------------------------------
Limited Maturity Bond 0.56% 0.01% 0.57%
- --------------------------------------------------------------------------------
Global Fixed Income 1.60% 0.00% 1.60%
- --------------------------------------------------------------------------------
Fully Managed 0.96% 0.01% 0.97%
- --------------------------------------------------------------------------------
Total Return 0.91% 0.00% 0.91%
- --------------------------------------------------------------------------------
Equity Income 0.96% 0.00% 0.96%
- --------------------------------------------------------------------------------
Investors 1.00% 0.01% 1.01%
- --------------------------------------------------------------------------------
Value Equity 0.96% 0.00% 0.96%
- --------------------------------------------------------------------------------
Rising Dividends 0.96% 0.00% 0.96%
- --------------------------------------------------------------------------------
Managed Global 1.25% 0.00% 1.25%
- --------------------------------------------------------------------------------
Large Cap Value 1.00% 0.01% 1.01%
- --------------------------------------------------------------------------------
All Cap 1.00% 0.01% 1.01%
- --------------------------------------------------------------------------------
Research 0.91% 0.00% 0.91%
- --------------------------------------------------------------------------------
Capital Appreciation 0.96% 0.00% 0.96%
- --------------------------------------------------------------------------------
Capital Growth 1.04% 0.01% 1.05%
- --------------------------------------------------------------------------------
Strategic Equity 0.96% 0.00% 0.96%
- --------------------------------------------------------------------------------
Mid-Cap Growth 0.91% 0.00% 0.91%
- --------------------------------------------------------------------------------
Small Cap 0.96% 0.00% 0.96%
- --------------------------------------------------------------------------------
Growth 1.04% 0.00% 1.04%
- --------------------------------------------------------------------------------
Real Estate 0.96% 0.00% 0.96%
- --------------------------------------------------------------------------------
Hard Assets 0.96% 0.00% 0.96%
- --------------------------------------------------------------------------------
Developing World 1.75% 0.00% 1.75%
- --------------------------------------------------------------------------------
(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, 1999, except for portfolios that commenced operations
in 2000 where the charges have been estimated.
(3) Total Expenses are based on actual expenses for the fiscal year
ended December 31, 1999.
EVERGREEN VARIABLE ANNUITY TRUST ANNUAL EXPENSES (as a percentage of
the average daily net assets of a portfolio after fees, waivers and
expense reimbursements):
- --------------------------------------------------------------------------------
OTHER TOTAL
EXPENSES EXPENSES
MANAGEMENT AFTER EXPENSE AFTER EXPENSE
PORTFOLIO FEE REIMBURSEMENT REIMBURSEMENT(3)
- --------------------------------------------------------------------------------
Evergreen VA Equity Index
Fund 0.32% 0.30% 0.62%(1)
Evergreen VA Foundation Fund 0.75% 0.20% 0.95%(2)
Evergreen VA Global Leaders
Fund 0.87% 0.33% 1.20%(2)
Evergreen VA Small Cap Value
Fund 0.87% 0.50% 1.37%(2)
(1) Estimated for the fiscal period ending 12/31/2000.
(2) Restated for the fiscal year ended 12/31/99 to reflect
current fees.
(3) Other than the Evergreen VA Foundation Fund, from time to
time, the fund's investment advisor may, at its discretion,
reduce or waive its fees or reimburse a fund for certain of
its expenses in order to
3
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reduce expense ratios. The fund's investment advisor may cease
these waivers or reimbursements at any time. The total expenses
do not reflect fee waivers and expense reimbursements. Estimated
to include fee waivers and expenses, reimbursements and
restating to reflect current fees, total expenses for the
Evergreen VA Equity Index Fund would have been .30%.
Including fee waivers and expense reimbursements, total
expenses for the Evergreen VA Global Leaders Fund and
Evergreen VA Small Cap Value Funds were 1.01%.
The purpose of the foregoing tables is to help you understand various
costs and expenses that you will bear directly and indirectly.
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.
EXAMPLES:
The following two examples are designed to show you the expenses you
would pay on a $1,000 investment that earns 5% annually. The
examples reflect the deduction of a mortality and expense risk
charge, an asset- based administrative charge, and the annual
contract administrative charge as an annual charge of 0.17% of assets
(based on an average contract value of $30,000). Note that surrender
charges may apply if you choose to annuitize your Contract within the
first 5 years, and under certain circumstances, within the first 10
contract years. Thus, in the event you annuitize your Contract under
circumstances which require a surrender charge, you should refer to
Example 1 below which assumes applicable surrender charges.
4
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Example 1:
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 $107 $152 $199 $266
Limited Maturity Bond $107 $152 $200 $267
Global Fixed Income $117 $183 $251 $368
Fully Managed $111 $164 $220 $308
Total Return $110 $162 $217 $302
Equity Income $111 $164 $220 $307
Investors $111 $165 $222 $311
Value Equity $111 $164 $220 $307
Rising Dividends $111 $164 $220 $307
Managed Global $114 $172 $234 $335
Large Cap Value $111 $165 $222 $311
All Cap $111 $165 $222 $311
Research $110 $162 $217 $302
Capital Appreciation $111 $164 $220 $307
Capital Growth $112 $166 $224 $315
Strategic Equity $111 $164 $220 $307
Mid-Cap Growth $110 $162 $217 $302
Small Cap $111 $164 $220 $307
Growth $111 $166 $224 $314
Real Estate $111 $164 $220 $307
Hard Assets $111 $164 $220 $307
Developing World $118 $187 $258 $381
EVERGREEN VARIABLE ANNUITY TRUST
Evergreen VA Equity
Index Fund $107 $154 $202 $272
Evergreen VA Foundation
Fund $111 $163 $219 $306
Evergreen VA Global
Leaders Fund $113 $171 $231 $330
Evergreen VA Small Cap
Value Fund $115 $176 $240 $346
5
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Example 2:
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 $22 $67 $114 $246
Limited Maturity Bond $22 $67 $115 $247
Global Fixed Income $32 $98 $166 $348
Fully Managed $26 $79 $135 $288
Total Return $25 $77 $132 $282
Equity Income $26 $79 $135 $287
Investors Value Equity $26 $80 $137 $291
Value Equity $26 $79 $135 $287
Rising Dividends $26 $79 $135 $287
Managed Global $29 $87 $149 $315
Large Cap Value $26 $80 $137 $291
All Cap $26 $80 $137 $291
Research $25 $77 $132 $282
Capital Appreciation $26 $79 $135 $287
Capital Growth $27 $81 $139 $295
Strategic Equity $26 $79 $135 $287
Mid-Cap Growth $25 $77 $132 $282
Small Cap $26 $79 $135 $287
Growth $26 $81 $139 $294
Real Estate $26 $79 $135 $287
Hard Assets $26 $79 $135 $287
Developing World $33 $102 $173
$361
EVERGREEN VARIABLE ANNUITY TRUST
Evergreen VA Equity
Index Fund $22 $69 $117 $252
Evergreen VA Foundation
Fund $26 $78 $134 $286
Evergreen VA Global
Leaders Fund $28 $86 $146 $310
Evergreen VA Small Cap
Value Fund $30 $91 $155 $326
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.
- ----------------------------------------------------------------------
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 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.
6
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THE NET INVESTMENT FACTOR
The Net Investment Factor is an index number which reflects certain
charges under the Contract and the investment performance of the
subaccount. The Net Investment Factor is calculated for each
subaccount 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 the subaccount.
Calculations for the subaccounts are made on a per share basis.
FINANCIAL STATEMENTS
The audited financial statements of Separate Account B for the years
ended December 31, 1999 and 1998 are included in the Statement of
Additional Information. The audited consolidated financial statements
of Golden American for the years ended December 31, 1999, 1998 and
1997 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 Separate Account B has been investing
in the portfolio. 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 when the
separate account first invested in the portfolios, withdrawal of the
investment at the end of the period, adjusted to reflect the
deduction of all applicable portfolio and current 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 before the separate
account began investing in the portfolios.
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, assuming no surrender.
7
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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 (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.
- ----------------------------------------------------------------------
GOLDEN AMERICAN LIFE INSURANCE COMPANY
- ----------------------------------------------------------------------
Golden American Life Insurance Company is a Delaware stock life
insurance company, which was 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 based in the Netherlands.
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 manager 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, a
portfolio manager 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.
- ----------------------------------------------------------------------
THE TRUSTS
- ----------------------------------------------------------------------
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 other 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 address
of the GCG Trust is 1475 Dunwoody Drive, West Chester, PA 19380.
The Evergreen Variable Annuity Trust is also a mutual fund whose
shares are available to separate accounts of life insurance
companies, including Golden American, for both variable annuity
contracts and variable life insurance policies. The principal
address of the Evergreen Variable Annuity Trust is 201 South College
Street, Charlotte, NC 28288.
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, Evergreen Variable Annuity Trust, Directed Services,
Inc., Evergreen Asset Management, Inc., and any other insurance
companies participating in the Trusts will monitor events to identify
and resolve any material conflicts that may arise.
8
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YOU WILL FIND COMPLETE INFORMATION ABOUT THE GCG TRUST AND THE
EVERGREEN VARIABLE ANNUITY TRUST IN THE ACCOMPANYING TRUSTS'
PROSPECTUSES. YOU SHOULD READ THEM CAREFULLY BEFORE INVESTING.
- ----------------------------------------------------------------------
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,
or the Evergreen Variable Annuity 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 the Company.
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 Company. 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. Under certain circumstances, we may make
certain changes to the subaccounts. For more information see "The
Annuity Contract - Additions, Deletions or Substitution of
Subaccounts and Other Changes."
- ----------------------------------------------------------------------
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 ANY INVESTMENT PORTFOLIO, 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 objectives. 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 AND THE
EVERGREEN VARIABLE ANNUITY TRUST. YOU SHOULD READ THESE PROSPECTUSES
BEFORE INVESTING.
9
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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
Bond with 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 Income Seeks high total return.
Invests primarily in high-grade fixed
income securities, both foreign and
domestic.
----------------------------------------------
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.
----------------------------------------------
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.
----------------------------------------------
Investors Seeks long-term growth of capital.
Current income is a secondary objective.
Invests primarily in equity securities of
U.S. companies and to a lesser degree,
debt securities.
----------------------------------------------
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.
----------------------------------------------
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."
----------------------------------------------
10
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INVESTMENT
PORTFOLIO INVESTMENT OBJECTIVE
- ---------------------------------------------------------------------
Managed Global Seeks capital appreciation. Current
income is only an incidental
consideration.
Invests primarily in common stocks traded
in securities markets throughout the
world.
----------------------------------------------
Large Cap Value Seeks long-term growth of capital and
income.
Invests primarily in equity and equity-
related securities of companies with
market capitalization greater than $1
billion.
----------------------------------------------
All Cap Seeks capital appreciation through
investment in securities which the
portfolio manager believes have above-
average capital appreciation potential.
Invests primarily in equity securities of
U.S. companies of any size.
----------------------------------------------
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.
----------------------------------------------
Capital Seeks long-term capital growth.
Appreciation Invests primarily in equity securities
believed by the portfolio manager to be
undervalued.
----------------------------------------------
Capital Growth Seeks long-term total return.
Invests primarily in common stocks of
companies where the potential for change
(earnings acceleration) is significant.
----------------------------------------------
Strategic Equity Seeks capital appreciation.
Invests primarily in common stocks of
medium- and small-sized companies.
----------------------------------------------
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.
----------------------------------------------
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.
----------------------------------------------
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.
----------------------------------------------
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.
----------------------------------------------
11
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INVESTMENT
PORTFOLIO INVESTMENT OBJECTIVE
- ---------------------------------------------------------------------
Developing World Seeks capital appreciation.
Invests primarily in equity securities of
companies in developing or emerging
countries.
----------------------------------------------
EVERGREEN VARIABLE ANNUITY
TRUST
Evergreen VA Equity Seeks investment results that achieve
Index price and yield performance similar to the
Standard and Poor's 500 Composite Stock
Price Index ("S&P 500 Index").
Invests substantially all of its total
assets in equity securities that represent
a composite of the S&P 500 Index.
----------------------------------------------
Evergreen VA Seeks, in order of priority, reasonable
Foundation income, conservation of capital and
capital appreciation.
Invests principally in a combination of
common stocks, securities convertible into
or exchangeable for common stocks and
fixed income securities.
----------------------------------------------
Evergreen VA Global Seeks to provide investors with long-term
Leaders capital growth.
Invests at least 65% of its assets in a
diversified portfolio of U.S. and non-U.S.
equity securities of companies located in
the world's major industrialized
countries.
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Evergreen VA Small Seeks current income and capital growth in
Cap the value of its shares.
Invests primarily in common stocks and
convertible preferred stocks of small
companies (less than $1 billion in market
capitalization).
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INVESTMENT MANAGEMENT FEES
Directed Services, Inc. serves as the overall manager to each
portfolio of the GCG Trust. The GCG Trust pays Directed Services a
monthly fee for its investment advisory and management services,
including retaining portfolio managers to manage the assets of
various portfolios. 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 operations of the portfolio. Directed Services (and not the GCG
Trust) pays each portfolio manager a monthly fee for managing the
assets of a portfolio based on the annual rates of the average daily
net assets of a portfolio. For a list of the portfolio managers, see
the front cover of this prospectus. Directed Services does not bear
the expenses 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.
Evergreen Asset Management Corp. serves as the investment advisor to
the Evergreen VA Foundation Fund, Evergreen VA Global Leaders Fund
and the Evergreen VA Small Cap Value Fund. Evergreen Investment
Management serves as the investment advisor to the Evergreen VA
Equity Index Fund. The Evergreen Variable Annuity Trust pays
Evergreen Asset Management, Inc. and Evergreen Investment Management,
both subsidiaries of First Union Corporation, a monthly advisory fee
based on the average daily net assets of the investment portfolio for
managing the assets of the portfolios and for administering the
Evergreen Variable Annuity Trust.
Each portfolio deducts portfolio management fees and charges from the
amounts you have invested in the portfolios. For 1999, total
portfolio fees and charges ranged from 0.56% to 1.75%. See "Fees and
Expenses" in this prospectus.
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We may receive compensation from the investment advisors,
administrators and distributors in connection with administrative,
distribution or other services and cost savings attributable to our
services. It is anticipated that such compensation will be based on
assets of the particular portfolios attributable to the Contract.
The compensation paid by advisors, administrators or distributors may
vary.
YOU CAN FIND MORE DETAILED INFORMATION ABOUT EACH PORTFOLIO,
INCLUDING ITS MANAGEMENT FEES, IN THE PROSPECTUSES FOR EACH TRUST.
YOU SHOULD READ THESE PROSPECTUSES BEFORE INVESTING.
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THE FIXED INTEREST ALLOCATION
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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
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.
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 Center or your registered 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-
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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. 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. 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,
canceling 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 is 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.
Currently we 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, 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 pro-rata 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
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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 (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 the affected Fixed Interest Allocation
as of the first day of its 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 currently is
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 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 A.
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THE ANNUITY CONTRACT
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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 and the Evergreen Variable Annuity Trust
through 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 then 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.
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 pass to the
surviving joint owner.
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,
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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 the annuitant was the sole contract
owner and there is no beneficiary designation, the annuitant's estate
will be the beneficiary.
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.
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 before the annuity start
date and before a death benefit becomes payable, 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
Before the annuity start date and before a death benefit becomes
payable, 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. The new owner's death will determine
when a death benefit is payable. 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.
If the new owner's age is less than 86, the death benefit in effect
prior to the change in owner will remain in effect. If the new
owner's age is 86 or greater (based on the age of the older owner, if
joint owners), the death benefit will be the cash surrender value.
Once a death benefit has been changed due to a change in owner, a
subsequent change to a younger owner will not restore any death
benefit.
PURCHASE AND AVAILABILITY OF THE CONTRACT
Contracts offered by this prospectus are available only to customers
of First Union National Bank and its affiliates. We will issue a
Contract only if both the annuitant and the contract owner are not
older than age 70.
The initial premium payment must be $5,000 or more ($1,500 for
qualified Contracts). You may make additional payments of $100 or
more ($250 for qualified Contracts) at any time after the free look
period
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before you turn age 76. 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. 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.
IRAs and other qualified plans already have the tax-deferral feature
found in this Contract. For an additional cost, the Contract
provides other benefits including death benefits and the ability to
receive a lifetime income. See "Fees and Expenses" in this
prospectus.
CREDITING OF PREMIUM PAYMENTS
We will process your initial premium within 2 business days after
receipt, if the application and all information necessary for
processing the Contract are complete. Subsequent premium payments
will be processed within 1 business day if we receive all necessary
information. 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 your initial premium payment 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.
We will allocate your initial payment according to the instructions
you specified. If a subaccount is not available or is requested in
error, we will make inquiry about a replacement subaccount. If we
are unable to reach you or your representative, we will allocate your
initial payment proportionally among the other subaccount(s) in your
instructions. For initial premium payments, the payment will be
credited at the accumulation unit value next determined after we
receive your premium payment and the completed application. Once the
completed application is received, we will allocate the payment 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. We will allocate the subsequent payment(s) pro
rata according to the current variable subaccount allocation unless
you specify otherwise. Any fixed allocation(s) will not be
considered in the pro rata calculations. If a subaccount is no
longer available or is requested in error, we will allocate the
subaccount payment(s) proportionally among the other subaccount(s) in
your current allocation or your allocation instructions. For any
subsequent premium payments, the payment will be credited at the
accumulation unit value next determined after receipt of your premium
payment and instructions.
Once we allocate your premium payment to the subaccounts selected by
you, we convert the premium payment into accumulation units. We
divide the amount of the premium payment 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 5
days of the premium payment. If we do not receive the
application or form within 5 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
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transactions on your Contract unless they are
requested in writing by you. We may require additional
information before complying with your request (e.g.,
signature guarantee).
In some states, we may require that an initial premium designated for
a subaccount of Account B or the Fixed Account be allocated 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
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. Currently, initial premiums designated for Fixed
Interest Allocations are allocated to a Fixed Interest Allocation
with the guaranteed interest period you have chosen; however, in the
future we may allocate the premiums to the specially designated
subaccount during the free look period.
We may accept a request for Contract service in writing, by
telephone, or other approved electronic means, subject to our
administrative procedures, which vary depending on the type of
service requested and may include proper completion of certain forms,
providing appropriate identifying information, and/or other
administrative requirements. We will process your request at the
accumulation value next determined after you have met all
administrative requirements.
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
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 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 not allocated to a Fixed Interest
Allocation may 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 then add
or subtract any transfers to or from that subaccount.
(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
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surrender value as follows: we start with your contract value,
then we adjust for any Market Value Adjustment, then we deduct any
surrender charge, any charge for premium taxes, the annual contract
administrative fee, 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.
THE SUBACCOUNTS
Each of the 26 subaccounts of Account B offered under this prospectus
invests in an investment portfolio with its own distinct investment
objectives and policies. Each subaccount of Account B invests in a
corresponding portfolio of the GCG Trust or a corresponding portfolio
of the Evergreen Variable Annuity Trust.
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. If you have elected the dollar cost averaging,
systematic withdrawals, or automatic rebalancing programs or if you
have other outstanding instructions, and we substitute or otherwise
eliminate a portfolio which is subject to those instructions, we will
execute your instructions using the substituted portfolios or
proposed replacement portfolio, unless you request otherwise.
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 affect 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," "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
owner, you may withdrawal all or part of your money. Keep in mind
that if you request a withdrawal for more than 90% of the cash
surrender value, 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 is 10% of premium payments not previously
withdrawn received within 10 years prior to the date of the
withdrawal.
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.
Definitive guidance on the proper federal tax treatment of the Market
Value Adjustment has not been issued. You may want to discuss the
potential tax consequences of a Market Value Adjustment with your tax
adviser. 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 affect 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 $100. 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 choose 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 they start 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, 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 the premiums
not previously withdrawn from the subaccounts in which you are
invested. 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 withdrawn would exceed the applicable maximum percentage of
your contract value on the 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 systematic withdrawal
program.
If your systematic withdrawal is based on a percentage of the
premiums not previously withdrawn from the subaccounts in which you
are invested and the amount to be 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. If you submit a
subsequent premium payment after you have applied for systematic
withdrawals, we will not adjust future withdrawals under the
systematic withdrawal program unless you specifically request that we
do so.
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 an annual maximum
of 10% of your premium payments not previously withdrawn 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 withdrawal exceeds the
maximum limit as calculated on the withdrawal date. We will assess a
Market Value Adjustment on the withdrawal date if the 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.
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Flat dollar systematic withdrawals which are intended to satisfy the
requirements of Section 72(q) or 72(t) of the Tax Code may exceed the
maximum. Such withdrawals are subject to surrender charges and
Market Value Adjustment when they exceed the applicable free
withdrawal amount.
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 pay out 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.
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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.
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 or other electronic means that
we reasonably believe to be genuine. We require personal identifying
information to process a request for transfer made over the telephone
or over the internet.
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
nits 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. Before choosing this
program, 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. If you make
an additional premium payment into a Fixed Interest Allocation
subject to dollar cost averaging, the amount of your transfers under
the dollar cost averaging program remains the same, unless you
instruct us to increase the transfer amount.
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 a Market 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.
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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.
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
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DEATH BENEFIT DURING THE ACCUMULATION PHASE
During the accumulation phase, a death benefit is payable on the
first person to die of the contract owner or the first joint owner
or, if the contract owner is not an individual, the annuitant.
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
paperwork, 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. For information on
required distributions under federal income tax laws, you should see
"Required Distributions under Contract Owner's Death."
The death benefit applies on the first to die of the contract owner,
joint owner, or annuitant (if a contract owner is not an individual).
Assuming you are the contract owner and the annuitant, if you die
during the accumulation phase, your beneficiary will receive a death
benefit unless the beneficiary is the surviving spouse and elects to
continue the Contract. The death benefit under the Contract is the
greatest of (i) your contract value; (ii) total premium payments less
pro rata adjustments for any withdrawals; and (iii) the cash
surrender value.
Pro rata withdrawal adjustment on the death benefit is calculated by
(i) dividing the contract value withdrawn by the contract value
immediately prior to the withdrawal, and then (ii) multiplying the
result by the amount of the death benefit component immediately prior
to the withdrawal.
The amount of the death benefit amount could be reduced by premium
taxes owed and withdrawals not previously deducted.
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DEATH BENEFIT DURING THE INCOME PHASE
If any contract owner or the annuitant dies after the annuity start
date, we will pay the beneficiary any certain benefit remaining under
the annuity in effect at the time.
REQUIRED DISTRIBUTIONS UPON CONTRACT OWNER'S DEATH
We will not allow any payment of benefits provided under a non-
qualified Contract which do not satisfy the requirements of Section
72(s) of the Code.
If any 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.
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.
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CHARGES AND FEES
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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 administering 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
with it. 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.
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CHARGE DEDUCTION SUBACCOUNT
You may elect to have all charges against your contract value
deducted directly from a single subaccount designated by the Company.
Currently we 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 10-year period from the date we receive and accept a premium
payment. The surrender charge is based on a percentage of each
premium payment withdrawn. 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 withdrawn as follows:
COMPLETE YEARS ELAPSED 0 | 1 | 2 | 3 | 4 |5 |6 |7 |8 |9 |10+|
SINCE PREMIUM PAYMENT | | | | | | | | | | |
| | | | | | | | | | |
SURRENDER CHARGE 8.5%|8.5%|8.5%|8.5%|8.5%|8% |7% |6% |4% |2% | 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.
FREE WITHDRAWAL AMOUNT. The Free Withdrawal Amount is 10% of
premium payments not previously withdrawn within 10 years prior to
the date of the withdrawal.
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 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
their 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
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how this works in Appendix B. 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 that 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 an 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 $50 per
Contract unless waived under conditions established by Golden
American. 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 risk charge is equivalent,
on an annual basis, 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.
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
business day at the rate of .000411% for each day since the previous
business day. This charge is deducted daily from your assets in each
subaccount.
TRUST EXPENSES
There are fees and charges deducted from each investment portfolio of
the Trusts. Each portfolio deducts portfolio management fees and
charges from the amounts you have invested in the portfolios. For
1999, total porttolio fees and charges ranged from 0.56% to 1.75%.
See "Fees and Expenses" in this prospectus.
Additionally, we may receive compensation from the investment
advisors, administrators and distributors in connection with
administrative, distribution or other services and cost savings
attributable to our services. It is anticipated that such
compensation will be based on assets of the particular portfolios
attributable to the Contract. Some advisors, administrators or
distributors may pay us more than others.
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THE ANNUITY OPTIONS
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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 under applicable law), 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 5
years from the contract date but before the month immediately
following the 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 case, retire.
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Distributions may be made through annuitization or withdrawals. You
should consult your tax adviser for tax advice.
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. Annuity payments under Option 4 may be fixed or variable. If
variable and subject to the Investment Company Act of 1940, it will
comply with the requirements of such Act.
The minimum rates for Option 1 are based on 3% interest, compounded
annually. The minimum rates for Options 2 and 3 are based on 3%
interest, compounded annually, and the Annuity 2000 Mortality Table.
We may pay a higher rate at our discretion.
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 that when we calculate
the amount of the payment, we deduct the amount of the
interest each remaining guaranteed payment would have earned
had it not been paid out early. The discount interest rate is
never less than 3% per year for Option 1 and 2. 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.
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(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.
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OTHER CONTRACT PROVISIONS
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REPORTS TO CONTRACT OWNERS
We will send you a quarterly report within 31 days after the end 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. You have 30 days to notify our Customer
Service Center of any errors or discrepancies contained in the report
or in any confirmation notices. 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 Securities and Exchange Commission ("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 under applicable federal tax law.
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. Some states 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), and (ii) 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. In these states, your premiums
designated for investment in the subaccounts may 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
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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 and the investment is
allocated to a subaccount specially designated by the Company, 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
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 10% commission, and passes through 100% of the
commission to the broker-dealer 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 10% | Reimbursement of any |
| | of any initial | covered expenses incurred|
| | or additional | by registered |
| | premium payments. | representatives in |
| | | connection with |
| | | the distribution |
| | | of the Contracts. |
|----------------------------------------------------------------------------|
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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
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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 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.
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 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.
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FEDERAL TAX CONSIDERATIONS
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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.
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 whose premium payments are comprised solely of
proceeds from and/or contributions under retirement plans that are
intended to qualify as plans entitled to special
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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 non-qualified 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.
INVESTOR CONTROL. 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"
(generally, the premiums or other consideration you paid for the
contract less any nontaxable withdrawals) 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
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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 the 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 one non-qualified deferred
annuity contract for purposes of determining the amount includible in
such contract owner's income when a taxable distribution occurs.
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
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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.
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.
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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 any
Roth IRA. A 10% penalty tax may apply to amounts attributable to a
conversion from an IRA if they are distributed during the five
taxable years beginning with the year in which the conversion was
made.
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.
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). You should consult a tax adviser with respect to
legislative developments and their effect on the Contract.
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MORE INFORMATION ABOUT GOLDEN AMERICAN LIFE INSURANCE COMPANY
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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"), according 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>
<CAPTION>
SELECTED GAAP BASIS FINANCIAL DATA
(IN THOUSANDS)
POST-MERGER | POST-ACQUISITION
------------------------------------------ | --------------------------
| For the
For the | Period For the
For the For the Period | January 1, Period
Year Year October 25, | 1997 August 14,
Ended Ended 1997 through | through 1996 through
December 31, 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......... $ 82,935 $ 39,119 $ 3,834 | $ 18,288 $ 8,768
Net Income before |
Federal Income Tax ..... $ 19,737 $ 10,353 $ (279) | $ (608) $ 570
Net Income (Loss)........... $ 11,214 $ 5,074 $ (425) | $ 729 $ 350
Total Assets................ $ 9,392,857 $ 4,754,623 $ 2,446,395 | N/A $ 1,677,899
Total Liabilities........... $ 8,915,008 $ 4,400,729 $ 2,219,082 | N/A $ 1,537,415
Total Stockholder's Equity.. $ 477,849 $ 353,894 $ 227,313 | N/A $ 140,484
Pre-Acquisition
---------------
For the Period
January 1,
1996 through
August 13,
1996
---------------
Annuity and Interest
Sensitive Life
Product Charges......... $ 12,259
Net Income before
Federal Income Tax...... $ 1,736
Net Income (Loss)........... $ 3,199
Total Assets................ N/A
Total Liabilities........... N/A
Total Stockholder's Equity.. N/A
</TABLE>
38
<PAGE>
<PAGE>
BUSINESS ENVIRONMENT
The current business and regulatory environment presents many challenges to the
insurance industry. The variable annuity competitive environment remains intense
and is dominated by a number of large highly rated insurance companies.
Increasing competition from traditional insurance carriers as well as banks and
mutual fund companies offers consumers many choices. However, overall demand for
variable insurance products remains strong for several reasons including: strong
stock market performance over the last four years; relatively low interest
rates; an aging U.S. population that is increasingly concerned about retirement,
estate planning, and 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.
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 is also 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. Golden American reports 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 OPERATION
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 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 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.
39
<PAGE>
<PAGE>
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 included for the period
January 1, 1997 through October 24, 1997 are presented on the Post-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.
1999 COMPARED TO 1998
PREMIUMS
PERCENTAGE DOLLAR
FOR THE YEAR ENDED DECEMBER 31 1999 CHANGE CHANGE 1998
---- ------ ------ ----
(Dollars in millions)
Variable annuity premiums:
Separate account............... $2,511.7 71.9% $1,050.5 $1,461.2
Fixed account.................. 770.7 30.9 182.0 588.7
-------- ----- -------- --------
Total variable annuity premiums.... 3,282.4 60.1 1,232.5 2,049.9
Variable life premiums............. 8.6 (37.8) (5.2) 13.8
-------- ----- -------- --------
Total premiums..................... $3,291.0 59.5% $1,227.3 $2,063.7
======== ===== ======== ========
For the Companies' variable insurance 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 spread and
product charges.
Variable annuity separate account premiums increased 71.9% in 1999. The fixed
account portion of the Companies' variable annuity premiums increased 30.9% in
1999. These increases resulted from increased sales of the Premium Plus variable
annuity product.
Variable life premiums decreased 37.8% in 1999. In August 1999, Golden American
discontinued offering variable life products.
Premiums, net of reinsurance, for variable products from two significant
broker/dealers each having at least ten percent of total sales for the year
ended December 31, 1999 totaled $918.4 million, or 28% of premiums compared to
$528.9 million, or 26%, from two significant broker/dealers for the year ended
December 31, 1998.
REVENUES
PERCENTAGE DOLLAR
FOR THE YEAR ENDED DECEMBER 31 1999 CHANGE CHANGE 1998
---- ------ ------ ----
(Dollars in millions)
Annuity and interest sensitive life
product charges.................... $ 82.9 112.0% $43.8 $39.1
Management fee revenue................. 10.1 112.5 5.3 4.8
Net investment income.................. 59.2 39.3 16.7 42.5
Realized gains (losses) on investments. (2.9) 96.1 (1.4) (1.5)
Other income........................... 10.8 94.4 5.2 5.6
-------- ----- ----- -----
$ 160.1 77.0% $69.6 $90.5
======== ===== ===== =====
40
<PAGE>
<PAGE>
Total revenues increased 77.0%, or $69.6 million, to $160.1 million in 1999.
Annuity and interest sensitive life product charges increased 112.0%, or $43.8
million, to $82.9 million in 1999, primarily due to additional fees earned from
the increasing block of business in the separate accounts.
Golden American provides certain managerial and supervisory services to DSI. The
fee paid to Golden American for these services, which is calculated as a
percentage of average assets in the variable separate accounts, was $10.1
million for 1999 and $4.8 million for 1998.
Net investment income increased 39.3%, or $16.7 million, to $59.2 million in
1999 from $42.5 million in 1998, due to growth in invested assets from December
31, 1998, increasing interest rates, and a relative increase in below investment
grade investments.
During 1999, the Company had net realized losses on investments of $2.9 million,
which includes a $1.6 million write down of two impaired fixed maturities,
compared to net realized losses on investments of $1.5 million in 1998 which
included a $1.0 million write down of two impaired fixed maturities.
Other income increased $5.2 million to $10.8 million in 1999, due primarily to
income received under a modified coinsurance agreement with an unaffiliated
reinsurer.
EXPENSES
<TABLE>
<CAPTION>
PERCENTAGE DOLLAR
FOR THE YEAR ENDED DECEMBER 31 1999 CHANGE CHANGE 1998
---- ------ ------ ----
(Dollars in millions)
<S> <C> <C> <C> <C>
Insurance benefits and expenses:
Annuity and interest sensitive life benefits:
Interest credited to account balances ... $ 175.9 85.4% $ 81.0 $ 94.9
Benefit claims incurred in excess of
account balances ...................... 6.3 200.2 4.2 2.1
Underwriting, acquisition, and insurance
expenses:
Commissions ............................. 188.4 55.5 67.2 121.2
General expenses ........................ 60.2 60.2 22.6 37.6
Insurance taxes, state licenses, and fees 4.0 (4.0) (0.1) 4.1
Policy acquisition costs deferred ....... (346.4) 75.1 (148.6) (197.8)
Amortization:
Deferred policy acquisition costs ..... 33.1 543.3 28.0 5.1
Value of purchased insurance in force . 6.2 32.0 1.5 4.7
Goodwill .............................. 3.8 -- -- 3.8
-------- ----- -------- --------
$ 131.5 73.7% $ 55.8 $ 75.7
======== ===== ======== ========
</TABLE>
Total insurance benefits and expenses increased 73.7%, or $55.8 million, in 1999
from $75.7 million in 1998. Interest credited to account balances increased
85.4%, or $81.0 million, in 1999 from $94.9 million in 1998. The premium credit
on the Premium Plus variable annuity product increased $69.3 million to $123.8
million at December 31, 1999. The bonus interest on the fixed account increased
$3.0 million to $10.9 million at December 31, 1999. The remaining increase in
interest credited relates to higher account balances associated with the
Companies' fixed account options within the variable products.
Commissions increased 55.5%, or $67.2 million, in 1999 from $121.2 million in
1998. Insurance taxes, state licenses, and fees decreased 4.0%, or $0.1 million,
in 1999 from $4.1 million in 1998. 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 of Golden American, which were offset by a decrease in 1999 of
guaranty fund assessments paid. Most costs incurred as the result of sales have
been deferred, thus having very little impact on current earnings.
41
<PAGE>
<PAGE>
General expenses increased 60.2%, or $22.6 million, in 1999 from $37.6 million
in 1998. Management expects general expenses to continue to increase in 2000 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 and sales bonuses of these wholesalers are
included in 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, Equitable Life, ING Mutual Funds
Management Co., LLC, an affiliate, Security Life of Denver Insurance Company, an
affiliate, Southland Life Insurance Company, an affiliate, and United Life &
Annuity Insurance Company, 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 a new asset of $44.3 million representing VPIF was
established for all policies in force at the merger date. During 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 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. 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. Amortization of DPAC
increased $28.0 million, or 543.3%, in 1999. This increase resulted from growth
in policy acquisition costs deferred from $197.8 million at December 31, 1998 to
$346.4 million at December 31, 1999, which was generated by expenses associated
with the large sales volume experienced since December 31, 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 December 31, 1999 is $4.0 million in 2000, $3.6 million in 2001, $3.3 million
in 2002, $2.8 million in 2003, and $2.3 million in 2004. Actual amortization may
vary based upon changes in assumptions and experience.
Interest expense increased 102.6%, or $4.5 million, in 1999 from $4.4 million in
1998. Interest expense on a $25 million surplus note issued December 1996 and
expiring December 2026 was $2.1 million for the year ended December 31, 1999,
unchanged from the same period of 1998. Interest expense on a $60 million
surplus note issued in December 1998 and expiring December 2028 was $4.3 million
for the year ended December 31, 1999. Interest expense on a $75 million surplus
note, issued September 30, 1999 and expiring September 29, 2029 was $1.5 million
for the year ended December 31, 1999. Golden American also paid $0.8 million in
1999 and $1.8 million in 1998 to ING America Insurance Holdings, Inc. ("ING
AIH") for interest on a reciprocal loan agreement. Interest expense on a
revolving note payable with SunTrust Bank, Atlanta was $0.2 million and $0.3
million for the years ended December 31, 1999 and 1998, respectively. In
addition, Golden American incurred interest expense of $0.2 million in 1998 on a
line of credit with Equitable.
INCOME. Net income for 1999 was $11.2 million, an increase of $6.1 million from
$5.1 million for 1998.
Comprehensive income for 1999 was $3.0 million, a decrease of $0.9 million from
comprehensive income of $3.9 million for 1998.
42
<PAGE>
<PAGE>
1998 COMPARED TO 1997
The following analysis combines Post-Merger and Post-Acquisition activity for
1997.
PREMIUMS
<TABLE>
<CAPTION>
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 $528.9 million, or 26% of premiums ($328.2 million, or
53% from two significant broker/dealers for the year ended December 31, 1997).
REVENUES
<TABLE>
<CAPTION>
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>
43
<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, which is 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>
<CAPTION>
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 expenses: |
|
Commissions......................... 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.
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
44
<PAGE>
<PAGE>
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.
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.
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.
FINANCIAL CONDITION
RATINGS. Currently, the Companies' ratings are A+ by A. M. Best Company, AAA by
Duff & Phelps Credit Rating Company, and AA+ by Standard & Poor's Rating
Services ("Standard & Poor's").
INVESTMENTS. The financial statement carrying value and amortized cost basis of
the Companies' total investments grew 15.5% and 17.5%, respectively, in 1999.
All of the Companies' investments, other than mortgage loans on real estate, are
carried at fair value in the Companies' financial statements. Therefore, growth
in the carrying value of the Companies' investment portfolio was due to 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 December 31, 1999, the Companies investments had a yield of 6.6%. The
Companies estimate the total investment portfolio, excluding policy loans, had a
fair value approximately equal to 97.6% of amortized cost value at December 31,
1999.
45
<PAGE>
<PAGE>
FIXED MATURITIES: At December 31, 1999, the Companies had fixed maturities with
an amortized cost of $858.1 million and an estimated fair value of $835.3
million. The Companies classify 100% of securities as available for sale. Net
unrealized depreciation of fixed maturities of $22.8 million was comprised of
gross appreciation of $0.9 million and gross depreciation of $23.7 million. Net
unrealized holding losses on these securities, net of adjustments to VPIF, DPAC,
and deferred income taxes of $7.0 million were included in stockholder's equity
at December 31, 1999.
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 ($558.0 million or 65.0%), that are rated BBB+ to
BBB- by Standard & Poor's ($123.5 million or 14.4%), and below investment grade
securities, which are securities issued by corporations that are rated BB+ to B-
by Standard & Poor's ($64.6 million or 7.5%). Securities not rated by Standard &
Poor's had a National Association of Insurance Commissioners ("NAIC") rating of
1, 2, 3, 4, or 5 ($112.0 million or 13.1%). The Companies' fixed maturity
investment portfolio had a combined yield at amortized cost of 6.6% at December
31, 1999.
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 December 31, 1999, the amortized cost value of the Companies' total
investment in below investment grade securities, excluding mortgage-backed
securities, was $72.3 million, or 6.9%, of the Companies' investment portfolio.
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 December 31, 1999, the yield at
amortized cost on the Companies' below investment grade portfolio was 7.8%
compared to 6.5% for the Companies' investment grade corporate bond portfolio.
The Companies estimate the fair value of the below investment grade portfolio
was $69.1 million, or 95.5% of amortized cost value, at December 31, 1999.
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.
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.
In 1999, fixed maturities designated as available for sale with a combined
amortized cost of $221.8 million were sold, called, or repaid by their issuers.
In total, net pre-tax losses from sales, calls, and repayments of fixed
maturities amounted to $1.3 million in 1999, excluding the $1.6 million pre-tax
loss on the write-down of two bonds in 1999.
During the fourth quarter of 1998, Golden American determined that the carrying
value of two 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
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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 realizable 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 realizable value of $1.1
million.
EQUITY SECURITIES: Equity securities represent 1.4% of the Companies' investment
portfolio. At December 31, 1999, the Companies owned equity securities with a
cost of $15.0 million and an estimated fair value of $17.3 million. Net
unrealized appreciation of equity securities was comprised entirely of gross
appreciation of $2.3 million. 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 represent 9.5% of
the Companies' investment portfolio. Mortgages outstanding at amortized cost
were $100.1 million at December 31, 1999 with an estimated fair value of $95.5
million. The Companies' mortgage loan portfolio includes 58 loans with an
average size of $1.7 million and average seasoning of 0.7 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 1999 and
1998), Utah (10% in 1999, 11% in 1998), and Georgia (9% in 1999, 10% in 1998).
There are no other concentrations of mortgage loans on real estate in any state
exceeding ten percent at December 31, 1999 and 1998. Mortgage loans on real
estate have also been analyzed by collateral type with significant
concentrations identified in office buildings (34% in 1999, 36% in 1998),
industrial buildings (33% in 1999, 32% in 1998), retail facilities (19% in 1999,
20% in 1998), and multi-family apartments (10% in 1999 and 8% in 1998).
At December 31, 1999, the yield on the Companies' mortgage loan portfolio was
7.3%. At December 31, 1999, no mortgage loan on real estate was delinquent by 90
days or more. The Companies' loan investment strategy is consistent with other
life insurance subsidiaries of ING in the United States. The insurance
subsidiaries of EIC have experienced a historically low default rate in their
mortgage loan portfolios.
OTHER ASSETS. Accrued investment income increased $1.6 million during 1999, 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 insurance products.
DPAC represents certain deferred costs of acquiring new insurance business,
principally first year commissions and interest bonuses, premium credit, 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 December 31, 1999, the Companies had
DPAC and VPIF balances of $529.0 million and $31.7 million, respectively. During
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.
Property and equipment increased $6.5 million, or 89.0%, during 1999, due to
leasehold improvements, the purchase of furniture and other equipment for Golden
American's new offices in West Chester, Pennsylvania, and 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 December 31, 1999 was $8.2
million.
Other assets increased $1.8 million during 1999, due to increases in a
receivable from the separate account and accounts receivable.
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At December 31, 1999, the Companies had $7.6 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
growth in sales of the Companies' variable annuity products, net of redemptions.
At December 31, 1999, the Companies had total assets of $9.4 billion, a 97.6%
increase from December 31, 1998.
LIABILITIES. Future policy benefits for annuity and interest sensitive life
products increased $152.6 million, or 17.3%, to $1.0 billion reflecting premium
growth in the Companies' fixed account options of the variable products, net of
transfers to the separate accounts. Market appreciation, increased transfer
activity, and premiums, net of redemptions, accounted for the $4.2 billion, or
122.7%, increase in separate account liabilities to $7.6 billion at December 31,
1999.
On December 30, 1999, Golden American issued a $50 million, 8.179% surplus note
to Equitable Life, which matures on December 29, 2029.
On December 8, 1999, Golden American issued a $35 million, 7.979% surplus note
to First Columbine Life Insurance Company, an affiliate, which matures on
December 7, 2029.
On September 30, 1999, Golden American issued a $75 million, 7.75% surplus note
to ING AIH, which matures on September 29, 2029.
On December 30, 1999, ING AIH assigned the surplus note to Equitable Life. 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.
Other liabilities increased $21.7 million from $34.7 million at December 31,
1998, due primarily to increases in remittances to be applied, outstanding
checks, accrued interest payable, and pension liability.
In conjunction with the volume of variable annuity sales, the Companies' total
liabilities increased $4.5 billion, or 102.6%, during 1999 and totaled $8.9
billion at December 31, 1999.
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 $121.0 million, or
34.8%, from December 31, 1998 to $468.6 million at December 31, 1999, 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 premium
credits, investment purchases, repayment of debt, as well as withdrawals and
surrenders.
Net cash used in operating activities was $73.4 million in 1999 compared to
$63.9 million in 1998. 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.
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Net cash used in investing activities was $177.5 million during 1999 as compared
to $390.0 million in 1998. This decrease is primarily due to greater net
purchases of fixed maturities, equity securities, and mortgage loans on real
estate during 1998 than in 1999. Net purchases of fixed maturities reached
$124.0 million in 1999 versus $331.3 million in 1998. Net purchases of mortgage
loans on real estate declined to $3.1 million from $12.6 million in the prior
year.
Net cash provided by financing activities was $258.6 million during 1999 as
compared to $439.5 million during the prior year. In 1999, net cash provided by
financing activities was positively impacted by net fixed account deposits of
$626.5 million compared to $520.8 million in 1998 and by a $6.7 million increase
in net borrowings in 1999 compared to 1998. This increase was offset by net
reallocations to the Companies' separate accounts, which increased to $650.3
million from $239.7 million during the prior year. In 1999, another important
source of cash provided by financing activities was $121.0 million in capital
contributions from the Parent compared to $103.8 million in 1998. Another source
of cash provided by financing activities during 1999 was $160.0 million in
proceeds from surplus notes compared to $60.0 million in 1998
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, which expires on December 31, 2007. In addition, the
Companies have established an $85.0 million revolving note facility with
SunTrust Bank, Atlanta, which expires on July 31, 2000. Management believes
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 sales.
It is anticipated that a continuation of capital contributions from the Parent,
the issuance of additional surplus notes, and/or modified coinsurance agreements
will cover these net cash outflows. ING AIH is committed to the sustained growth
of Golden American. During 2000, ING AIH 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 ratio 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 1999, Golden American occupied
105,000 square feet of leased space; its affiliate occupies 20,000 square feet.
Previously, Golden American's home office operations were housed in leased
locations in Wilmington, Delaware and locations in Pennsylvania. Golden
American's New York subsidiary is housed in leased space in New York, New York.
The Companies intend to spend approximately $2.4 million on capital needs for
2000.
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 limit. During 2000, 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, Golden American,
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 dividends to Golden
American during 2000.
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
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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 that the Companies have total adjusted capital well above all
required capital levels.
Reinsurance: At December 31, 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.
The reinsurance treaties that covered the nonstandard minimum guaranteed death
benefits for new business have been terminated for business issued after
December 31, 1999. The Companies are currently pursuing alternative reinsurance
arrangements for new business issued after December 31, 1999. There can be no
assurance that such alternative arrangements will be available. The reinsurance
covering business in force at December 31, 1999 will continue to apply in the
future.
Impact of Year 2000: In prior years, the Companies discussed the nature and
progress of plans to become Year 2000 ready. In late 1999, the Companies
completed remediation and testing of systems. As a result of those planning and
implementation efforts, the Companies experienced no significant disruptions in
mission critical information technology and non-information technology systems
and believe those systems successfully responded to the Year 2000 date change.
Golden American expensed approximately $264,000 during 1999 in connection with
remediating systems. The Companies are not aware of any material problems
resulting from Year 2000 issues, either with products, internal systems, or the
products and services of third parties. The Companies will continue to monitor
mission critical computer applications and those of suppliers and vendors
throughout the Year 2000 to ensure that any latent Year 2000 matters that may
arise are addressed promptly.
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 insurance 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 1999 levels, variable separate account funds, which represent 88% of
the in force, pass the risk in underlying fund performance to the contractholder
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(except for certain minimum guarantees). With respect to interest rate movements
up or down 100 basis points from year end 1999 levels, the remaining 12% of the
in force 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, fee revenue,
and the lapse rate of the Companies' policies, notwithstanding product
design features intended to enhance persistency of the Companies'
products.
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.
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 variable insurance products.
Golden American and its affiliate DSI are party to in excess of 480 sales
agreements with broker-dealers, five of whom, Locust Street Securities, Inc.,
Vestax Securities Corporation, Compu Life Investors Services, Inc., IFG Network
Securities, Inc. and Multi-Financial Securities Corporation, are affiliates of
Golden American. As of December 31, 1999, two broker-dealers produce 10% or more
of Golden American's product sales.
REINSURANCE. Golden American reinsured its mortality risk associated with the
Contract's guaranteed death benefit on Contracts issued through December 31,
1999 with one or more appropriately licensed insurance companies. Golden
American is currently pursuing alternative reinsurance arrangements for new
business. 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
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insurers in the life insurance business in the United States, a substantial
number of which are significantly larger than Golden American.
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 American and its subsidiary First
Golden American Life Insurance Company of New York ("First Golden"), $1.3
million and $1.1 million, for the years ended December 31, 1999 and 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 $10.1 million and $4.8 million for the years 1999 and 1998, 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 and accounting services for
a fee, payable quarterly. For the years ended December 31, 1999 and 1998, Golden
American and First Golden incurred fees of $2.2 million and $1.5 million,
respectively, under this agreement.
Since 1997, Golden American has provided certain advisory, computer and other
resources and services to Equitable Life. Revenues for these services totaled
$6.1 million for 1999 and $5.8 million for 1998.
The Companies provide resources and services to DSI. Revenues for these services
totaled $0.4 million of 1999. Golden American provides resources and services to
ING Mutual Funds Management Co., LLC, an affiliate. Revenues for these services
totaled $0.2 million for 1999 and $0.1 million for 1998.
Golden American provides resources and services to United Life & Annuity
Insurance Company, an affiliate. Revenues for these services, which reduce
general expenses incurred by Golden American, totaled $0.5 million in 1999.
The Companies provide resources and services to Security Life of Denver
Insurance Company, an affiliate. Revenues for these services, which reduce
general expenses incurred by the Companies totaled $0.2 million in 1999.
The Companies provide resources and services to Southland Life Insurance
Company, an affiliate. Revenues for these services, which reduce general
expenses incurred by the Companies totaled $0.1 million in 1999.
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 December 31, 1999, are sold primarily
through two broker/dealer institutions. For the years 1999 and 1998, commissions
paid by Golden American to DSI (including commissions paid by First Golden)
aggregated $181.5 million and $117.5 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.
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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 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 (50) President and Director
Myles R. Tashman (57) Director, Executive Vice President,
General Counsel and Secretary
Michael W. Cunningham (51) Director
Mark A. Tullis (44) Director
Phillip R. Lowery (46) Director
James R. McInnis (52) Executive Vice President and Chief Marketing Officer
Stephen J. Preston (42) Executive Vice President and Chief Actuary
E. Robert Koster (41) Senior Vice President and Chief Financial Officer
Patricia M. Corbett (35) Treasurer and Assistant V.P.
David L. Jacobson (50) Senior Vice President and Assistant Secretary
William L. Lowe (36) Senior Vice President, Sales and Marketing
Ronald R. Blasdell (46) Senior Vice President, Project Implementation
Steven G. Mandel (40) Senior Vice President and Chief Information Officer
Gary F. Haynes (55) Senior Vice President, Operations
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. Golden American's directors and senior executive officers and
their principal positions for the past five years are listed below:
Mr. Barnett Chernow became President of Golden American and First Golden in
April, 1998. From, 1996 to 1998, Mr. Chernow served as Executive V.P. of First
Golden. From 1993 to 1998, Mr. Chernow also served as Executive Vice President
of Golden American. He was elected to serve as a director of First Golden in
June, 1996 and Golden American in April, 1998.
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. 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.
Mr. Mark A. Tullis became a Director of Golden American and First Golden in
December 1999. He has served as Executive Vice President, Strategy and
Operations for ING Americas Region since September 1999. From June, 1994 to
August, 1999, he was with Pimerica, serving as Executive Vice President at the
time of his departure.
Mr. Phillip R. Lowery became a Director of Golden American in April 1999 and
First Golden in December 1999. He has served as Executive Vice President and
Chief Actuary for ING Americas Region since 1990.
Mr. James R. McInnis joined Golden American and First Golden 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 and First Golden 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.
54
<PAGE>
<PAGE>
Mr. David L. Jacobson joined Golden American in November 1993 as Vice President
and Assistant Secretary and became Senior Vice President in December, 1993. He
was elected Senior Vice President and Assistant Secretary for First Golden in
June, 1996.
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. He was elected Senior Vice President and Chief
Actuary of First Golden in June, 1996 and elected Executive Vice President in
June, 1998.
Mr. William L. 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 Senior
Vice President and Chief Information Officer in June, 1998.
Mr. Ronald R. Blasdell joined Golden American in February, 1994 and became
Senior Vice President, Project Implementation in June, 1998.
Mr. Gary Haynes rejoined Golden American in April, 1999 as Senior Vice
President, Operations. From August, 1995 to February, 1998 he was with F&G Life
Insurance Company; serving as Senior Vice President, Operations at the time of
his departure. He served as Senior Vice President Operations with Golden
American from July, 1994 to August, 1995.
COMPENSATION TABLE 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,
1999. Certain executive officers of Golden American are also officers of DSI and
First Golden. The salaries of such individuals are allocated among Golden
American, DSI and First Golden pursuant to an arrangement among these companies.
EXECUTIVE COMPENSATION TABLE
The following table sets forth information with respect to the annual salary and
bonus for Golden American's Chief Executive Officer, the four other most highly
compensated executive officers and the two most highly compensated former
executive officers for the fiscal year ended December 31, 1999.
55
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------- -----------------------
RESTRICTED SECURITIES
NAME AND STOCK AWARDS UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS 1 OPTIONS 2 OPTIONS COMPENSATION 3
- ------------------ ---- ------ ------- --------- ------- --------------
<S> <C> <C> <C> <C> <C> <C>
Barnett Chernow.......... 1999 $ 300,009 $ 698,380 6,950 $ 20,464 4
President 1998 $ 284,171 $ 105,375 8,000
1997 $ 234,167 $ 31,859 $ 277,576 4,000
James R. McInnis......... 1999 $ 250,007 $ 955,646 5,550 $ 15,663 4
Executive Vice 1998 $ 250,004 $ 626,245 2,000
President
Myles R. Tashman......... 1999 $ 199,172 $ 293,831 1,800 $ 14,598 4
Executive Vice 1998 $ 189,337 $ 54,425 3,500
President, General 1997 $ 181,417 $ 25,000 $ 165,512 5,000
Counsel and Secretary
Stephen J. Preston....... 1999 $ 198,964 $ 235,002 2,050 $ 12,564 4
Executive Vice 1998 $ 173.870 $ 32,152 3,500
President and Chief 1997 $ 160,758 $ 16,470
Actuary
Steven G. Mandel......... 1999 $ 153,754 $ 261,330 1,400 $ 11,551 4
Senior Vice 1998 $ 139,169 $ 25,833
President 1997 $ 129,167 $ 25,000
R. Brock Armstrong....... 1999 $ 500,014 $ 500,000 10,175 $ 23,921 4
Former Chief
Executive Officer
Keith Glover............. 1999 $ 87,475 $ 761,892 $ 558,541 4, 5
Former Executive 1998 $ 250,000 $ 145,120 3,900
Vice President
</TABLE>
- --------------------
1 The amount shown relates to bonuses paid in 1999, 1998, and 1997.
2 Restricted stock awards granted to executive officers vested on October 24,
1997 with the change in control of Equitable of Iowa.
3 Other compensation for 1999 includes reimbursements to named employee for
participation in company sponsored programs such as tuition reimbursement,
PC purchase assistance program, and other miscellaneous payments or
reimbursements. For 1999, Mr. Chernow received $2,464; Mr. McInnis received
$636; Mr. Tashman received $2,598; Mr. Preston received $564; Mr. Mandel
received $2,251; Mr. Armstrong received $1,421; and Mr. Glover received
$3,089.
4 Other compensation for 1999 includes a business allowance for each named
executive which is required to be applied to specific business expenses of
the named executive.
5 In connection with the termination of his employment, Mr. Glover received
payments and benefits totaling $555,452.
56
<PAGE>
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE AT
% OF TOTAL ASSUMED ANNUAL
NUMBER OF OPTIONS RATES OF STOCK
SECURITIES GRANTED TO PRICE APPRECIATION
UNDERLYING EMPLOYEES EXERCISE FOR OPTION 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.......... 2,000 3.18 $54.210 01/04/2004 $ 29,954 $ 66,191
4,950 7.86 $54.210 04/01/2009 $ 168,757 $ 427,664
James R. McInnis......... 2,550 4.05 $54.210 04/01/2009 $ 86,936 $ 220,312
3,000 4.77 $55.070 10/01/2009 $ 103,900 $ 263,302
Myles R. Tashman......... 1,800 2.86 $54.210 04/01/2009 $ 61,366 $ 155,514
Stephen J. Preston....... 2,050 3.26 $54.210 04/01/2009 $ 69,889 $ 177,113
Steven G. Mandel......... 1,400 2.22 $54.210 04/01/2009 $ 47,729 $ 120,955
R. Brock Armstrong....... 10,175 16.16 $54.210 04/01/2009 $ 346,890 $ 879,087
</TABLE>
- ----------------
1 Stock appreciation rights granted in 1999 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 the
date of grant.
3 Total dollar gains based on indicated rates of appreciation of share price
over the total term of the rights.
57
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
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, 1999 and 1998, and the related
consolidated statements of operations, changes in stockholder's equity, and cash
flows for the years ended December 31, 1999 and 1998 and for the periods from
October 25, 1997 through December 31, 1997, and January 1, 1997 through October
24, 1997. These financial statements are the responsibility of the Companies'
management. Our responsibility is to express an opinion on these financial
statements and schedules based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. 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, 1999 and 1998, and the consolidated
results of its operations and its cash flows for the years ended December 31,
1999 and 1998 and for the periods from October 25, 1997 through December 31,
1997 and January 1, 1997 through October 24, 1997, in conformity with accounting
principles generally accepted in the United States.
/s/Ernst & Young LLP
Des Moines, Iowa
February 4, 2000
58
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)
POST-MERGER
---------------------------
December 31, December 31,
1999 1998
------------ ------------
ASSETS
Investments:
Fixed maturities, available for sale,
at fair value (Cost: 1999 - $858,052;
1998 - $739,772)....................... $835,321 $741,985
Equity securities, at fair value (cost:
1999 - $14,952; 1998 - $14,437)........ 17,330 11,514
Mortgage loans on real estate............ 100,087 97,322
Policy loans............................. 14,157 11,772
Short-term investments................... 80,191 41,152
---------- ----------
Total investments........................... 1,047,086 903,745
Cash and cash equivalents................... 14,380 6,679
Reinsurance recoverable..................... 14,834 7,586
Due from affiliates......................... 637 2,983
Accrued investment income................... 11,198 9,645
Deferred policy acquisition costs........... 528,957 204,979
Value of purchased insurance in force....... 31,727 35,977
Current income taxes recoverable............ 35 628
Deferred income tax asset................... 21,943 31,477
Property and equipment, less allowances for
depreciation of $3,229 in 1999 and $801
in 1998.................................. 13,888 7,348
Goodwill, less accumulated amortization of
$8,186 in 1999 and $4,408 in 1998........ 142,941 146,719
Other assets................................ 2,514 743
Separate account assets..................... 7,562,717 3,396,114
---------- ----------
Total assets................................ $9,392,857 $4,754,623
========== ==========
See accompanying notes.
59
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS - CONTINUED
(Dollars in thousands, except per share data)
POST-MERGER
-----------------------------
December 31, December 31,
1999 1998
-------------- ------------
LIABILITIES AND STOCKHOLDER'S EQUITY
Policy liabilities and accruals:
Future policy benefits:
Annuity and interest sensitive
life products....................... $1,033,701 $881,112
Unearned revenue reserve.............. 6,300 3,840
Other policy claims and benefits......... 8 --
---------- ----------
1,040,009 884,952
Surplus notes.............................. 245,000 85,000
Revolving note payable..................... 1,400 --
Due to affiliates.......................... 9,547 --
Other liabilities.......................... 56,335 34,663
Separate account liabilities............... 7,562,717 3,396,114
---------- ----------
8,915,008 4,400,729
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............... 468,640 347,640
Accumulated other comprehensive loss..... (9,154) (895)
Retained earnings........................ 15,863 4,649
---------- ----------
Total stockholder's equity................. 477,849 353,894
---------- ----------
Total liabilities and stockholder's equity. $9,392,857 $4,754,623
========== ==========
See accompanying notes.
60
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands)
POST-
POST-MERGER ACQUISITION
--------------------------------------------|-------------
For the period |or the period
October 25, | January 1,
For the year For the year 1997 | 1997
ended ended through | hrough
December 31, December 31, December 31, | October 24,
1999 1998 1997 | 1997
--------------------------------------------|--------------
<S> <C> <C> <C> <C>
Revenues |
Annuity and interest |
sensitive life product |
charges....................... $ 82,935 $ 39,119 $ 3,834 | $18,288
Management fee revenue........... 10,136 4,771 508 | 2,262
Net investment income............ 59,169 42,485 5,127 | 21,656
Realized gains (losses) |
on investments................ (2,923) (1,491) 15 | 151
Other income..................... 10,827 5,569 236 | 426
-------- ------- ------- | -------
160,144 90,453 9,720 | 42,783
|
Insurance benefits and expenses: |
Annuity and interest sensitive |
life benefits: |
Interest credited to account |
balances..................... 175,851 94,845 7,413 | 19,276
Benefit claims incurred in |
excess of account balances... 6,370 2,123 -- | 125
Underwriting, acquisition, and |
insurance expenses: |
Commissions.................... 188,383 121,171 9,437 | 26,818
General expenses............... 60,194 37,577 3,350 | 13,907
Insurance taxes, state |
licenses, and fees........... 3,976 4,140 450 | 1,889
Policy acquisition costs |
deferred..................... (346,396) (197,796) (13,678) | (29,003)
Amortization: |
Deferred policy acquisition |
costs....................... 33,119 5,148 892 | 1,674
Value of purchased insurance |
in force.................... 6,238 4,724 948 | 5,225
Goodwill...................... 3,778 3,778 630 | 1,398
-------- ------- ------- | -------
131,513 75,710 9,442 | 41,309
|
Interest expense.................... 8,894 4,390 557 | 2,082
-------- ------- ------- | -------
140,407 80,100 9,999 | 43,391
-------- ------- ------- | -------
Income (loss) before income taxes... 19,737 10,353 (279) | (608)
|
Income taxes........................ 8,523 5,279 146 | (1,337)
-------- ------- ------- | -------
|
Net income (loss)................... $ 11,214 $ 5,074 $ (425) | $ 729
======== ======= ======= | =======
</TABLE>
See accompanying notes.
61
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
(Dollars in thousands)
Accumulated
Additional Other Total
Common Paid-in Comprehensive Retained Stockholder's
Stock Capital Income (Loss) Earnings Equity
------------------------------------------------------------
PRE-ACQUISITION
------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1997..... $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
====== ======== ======= ======= ========
-----------------------------------------------------------
POST-MERGER
-----------------------------------------------------------
Balance at October 25, 1997.... $2,500 $224,997 -- -- $227,497
Comprehensive income:
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.... 2,500 224,997 (895) 4,649 353,894
Comprehensive income:
Net income................... -- -- -- 11,214 11,214
Change in net unrealized
investment gains (losses). -- -- (8,259) -- (8,259)
--------
Comprehensive income........... 2,955
Contribution of Capital........ -- 121,000 -- -- 121,000
------ -------- ------- ------- --------
Balance at December 31,1999.... $2,500 $468,640 $(9,154) $15,863 $477,849
====== ======== ======= ======= ========
</TABLE>
See accompanying notes.
62
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
| POST-
POST-MERGER | ACQUISITION
-------------------------------------------|---------------
For the period | For the period
October 25, | January 1,
For the year For the year 1997 | 1997
ended ended through | through
December 31, December 31, December 31, | October 24,
1999 1998 1997 | 1997
------------ ------------ -------------- | --------------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES |
Net income (loss)................................. $11,214 $5,074 $(425) | $729
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................ 175,851 94,845 7,413 | 19,276
Charges for mortality and administration..... 524 (233) (62) | (99)
Change in unearned revenues.................. 2,460 2,651 1,189 | 3,292
Increase (decrease) in policy liabilities and |
accruals..................................... 8 (10) 10 | --
Decrease (increase) in accrued investment |
income....................................... (1,553) (3,222) 1,205 | (3,489)
Policy acquisition costs deferred.............. (346,396) (197,796) (13,678) | (29,003)
Amortization of deferred policy |
acquisition costs............................ 33,119 5,148 892 | 1,674
Amortization of value of purchased |
insurance in force........................... 6,238 4,724 948 | 5,225
Change in other assets, due to/from |
affiliates, other liabilities, and accrued |
income taxes................................. 24,845 9,979 4,205 | (8,944)
Provision for depreciation and amortization.... 8,850 8,147 1,299 | 3,203
Provision for deferred income taxes............ 8,523 5,279 146 | 316
Realized (gains) losses on investments......... 2,923 1,491 (15) | (151)
-------- -------- ------- | ---------
Net cash provided by (used in) operating |
activities..................................... (73,394) (63,923) 3,127 | (7,971)
|
INVESTING ACTIVITIES |
Sale, maturity, or repayment of investments: |
Fixed maturities - available for sale.......... 220,547 145,253 9,871 | 39,622
Mortgage loans on real estate.................. 6,572 3,791 1,644 | 5,828
Short-term investments - net................... -- -- -- | 11,415
-------- -------- ------- | ---------
227,119 149,044 11,515 | 56,865
Acquisition of investments: |
Fixed maturities - available for sale.......... (344,587) (476,523) (29,596) | (155,173)
Equity securities.............................. -- (10,000) (1) | (4,865)
Mortgage loans on real estate.................. (9,659) (16,390) (14,209) | (44,481)
Policy loans - net............................. (2,385) (2,940) (328) | (3,870)
Short-term investments - net................... (39,039) (26,692) (13,244) | --
-------- -------- ------- | ---------
(395,670) (532,545) (57,378) | (208,389)
Net purchase of property and equipment............ (8,968) (6,485) (252) | (875)
-------- -------- ------- | ---------
Net cash used in investing activities............. (177,519) (389,986) (46,115) | (152,399)
</TABLE>
See accompanying notes.
63
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(Dollars in thousands)
| POST-
POST-MERGER | ACQUISITION
-------------------------------------------|---------------
For the period | For the period
October 25, | January 1,
For the year For the year 1997 | 1997
ended ended through | through
December 31, December 31, December 31, | October 24,
1999 1998 1997 | 1997
------------ ------------ -------------- | --------------
<S> <C> <C> <C> <C>
FINANCING ACTIVITIES |
Proceeds from reciprocal loan agreement |
borrowings.............................. $396,350 $500,722 -- | --
Repayment of reciprocal loan agreement |
borrowings.............................. (396,350) (500,722) -- | --
Proceeds from revolving note payable....... 220,295 108,495 -- | --
Repayment of revolving note payable........ (218,895) (108,495) -- | --
Proceeds from surplus note................. 160,000 60,000 -- | --
Proceeds from line of credit borrowings.... -- -- $10,119 | $97,124
Repayment of line of credit borrowings..... -- (5,309) (2,207) | (80,977)
Receipts from annuity and interest |
sensitive life policies credited to |
account balances........................ 773,685 593,428 62,306 | 261,549
Return of account balances on annuity |
and interest sensitive life policies.... (147,201) (72,649) (6,350) | (13,931)
Net reallocations to separate accounts..... (650,270) (239,671) (17,017) | (93,069)
Contributions of capital by parent......... 121,000 103,750 -- | 1,011
-------- -------- ------- | ---------
Net cash provided by financing activities.. 258,614 439,549 46,851 | 171,707
-------- -------- ------- | ---------
|
Increase (decrease) in cash and cash |
equivalents............................. 7,701 (14,360) 3,863 | 11,337
Cash and cash equivalents at |
beginning of period..................... 6,679 21,039 17,176 | 5,839
-------- -------- ------- | ---------
Cash and cash equivalents at |
end of period........................... $14,380 $6,679 $21,039 | $17,176
======== ========= ======= | =========
|
SUPPLEMENTAL DISCLOSURE |
OF CASH FLOW INFORMATION |
Cash paid during the period for: |
Interest................................ $6,392 $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....... -- 18,750 -- | --
</TABLE>
See accompanying notes.
64
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
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 collectively
with Golden American, 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. First Golden is
licensed to sell insurance products in New York and Delaware. 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. ("BT Variable") 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
included for the periods after October 24, 1997 are presented on the Post-Merger
new basis of accounting and for the period January 1, 1997 through October 24,
1997 are presented on the Post-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 of purchased insurance in force ("VPIF"), deferred policy acquisition
costs ("DPAC"), and deferred income taxes. At December 31, 1999 and 1998, 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
65
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
1. SIGNIFICANT ACCOUNTING POLICIES (continued)
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 becomes the new cost basis by a charge to realized losses in
the Companies' Statements of Operations.
Mortgage Loans On Real Estate: 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.
Fair Values: Estimated fair values, as reported herein, of conventional
mortgage-backed securities not actively traded in a liquid market are estimated
using a third party pricing process. This pricing process uses a matrix
calculation assuming a spread over U.S. Treasury bonds based upon the expected
average lives of the securities. Estimated fair values of publicly traded fixed
maturities are reported by an independent pricing service. 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.
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, premium credit, and other expenses related to
the production of new business, have been deferred. Acquisition costs for
variable insurance 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.
66
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
1. SIGNIFICANT ACCOUNTING POLICIES (continued)
VALUE OF PURCHASED INSURANCE IN FORCE
As a result of the merger and 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 of the variable products with fixed
interest guarantees 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 11.00% during 1999, 3.00% to
10.00% during 1998, and 3.30% to 8.25% during 1997. 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.
SEPARATE ACCOUNTS
Assets and liabilities of the separate accounts reported in the accompanying
Balance Sheets represent funds separately administered principally for variable
contracts. Contractholders, rather than the Companies, bear the investment risk
for the variable insurance products. At the direction of the contractholders,
the separate accounts invest the premiums from the sale of variable insurance
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 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 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.
67
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
1. SIGNIFICANT ACCOUNTING POLICIES (continued)
Product charges recorded by the Companies from variable insurance 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 2000, 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, Golden American,
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.
SEGMENT REPORTING
The Companies manage their business as one segment, the sale of variable
insurance products designed to meet customer needs for tax-advantaged saving for
retirement and protection from death. Variable insurance products are sold to
consumers and corporations throughout the United States.
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
68
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
1. SIGNIFICANT ACCOUNTING POLICIES (continued)
regarding
all of the preceding items are inherently subject to change and are reassessed
periodically. Changes in estimates and assumptions could materially impact the
financial statements.
RECLASSIFICATIONS
Certain amounts for the periods ended in the 1998 and 1997 financial statements
have been reclassified to conform to the 1999 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 insurance products are based on full account values, rather than
the greater of cash surrender value or amounts derived from discounting
methodologies utilizing statutory interest rates; (4) reserves are reported
before reduction for reserve credits related to reinsurance ceded and a
receivable is established, net of an allowance for uncollectible amounts, for
these credits rather than presented net of these credits; (5) fixed maturity
investments are designated as "available for sale" and valued at fair value with
unrealized appreciation/depreciation, net of adjustments to 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 insurance 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 $85,578,000 in 1999, $68,002,000 in 1998, and $428,000
in 1997. Total statutory capital and surplus was $368,928,000 at December 31,
1999 and $183,045,000 at December 31, 1998.
69
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
3. INVESTMENT OPERATIONS
INVESTMENT RESULTS
Major categories of net investment income are summarized below:
<TABLE>
<CAPTION>
POST-MERGER |POST-ACQUISITION
-------------------------------------------|----------------
For the period | For the period
October 25, | January 1,
For the year For the year 1997 | 1997
ended ended through | through
December 31, December 31, December 31, | October 24,
1999 1998 1997 | 1997
------------ ------------ -------------- | --------------
(Dollars in thousands)
|
<S> <C> <C> <C> <C>
Fixed maturities............... $50,352 $35,224 $ 4,443 | $18,488
Equity securities.............. 515 -- 3 | --
Mortgage loans on real estate.. 7,074 6,616 879 | 3,070
Policy loans................... 485 619 59 | 482
Short-term investments......... 2,583 1,311 129 | 443
Other, net..................... 388 246 (154) | 24
------- ------- ------- | -------
Gross investment income........ 61,397 44,016 5,359 | 22,507
Less investment expenses....... (2,228) (1,531) (232) | (851)
------- ------- ------- | -------
Net investment income.......... $59,169 $42,485 $ 5,127 | $21,656
======= ======= ======= | =======
</TABLE>
Realized gains (losses) on investments follows:
<TABLE>
<CAPTION>
POST-MERGER |POST-ACQUISITION
-------------------------------------------|----------------
For the period | For the period
October 25, | January 1,
For the year For the year 1997 | 1997
ended ended through | through
December 31, December 31, December 31, | October 24,
1999 1998 1997 | 1997
------------ ------------ -------------- | --------------
(Dollars in thousands)
|
<S> <C> <C> <C> <C>
Fixed maturities, available for |
sale.......................... $(2,910) $(1,428) $ 25 | $ 151
Mortgage loans on real estate... (13) (63) (10) | --
------- ------- ------- | -------
Realized gains (losses) on |
investments................... $(2,923) $(1,491) $15 | $151
======= ======= ======= | ========
</TABLE>
The change in unrealized appreciation (depreciation) of securities at fair value
follows:
<TABLE>
<CAPTION>
POST-MERGER |POST-ACQUISITION
-------------------------------------------|----------------
For the period | For the period
October 25, | January 1,
For the year For the year 1997 | 1997
ended ended through | through
December 31, December 31, December 31, | October 24,
1999 1998 1997 | 1997
------------ ------------ -------------- | --------------
(Dollars in thousands)
|
<S> <C> <C> <C> <C>
|
Fixed maturities, available for |
sale........................... $(24,944) $ 1,100 $ (3,494) | $ 4,197
Equity securities................ 5,301 (2,390) (68) | (462)
-------- -------- -------- | --------
Unrealized appreciation |
(depreciation) of securities.. $(19,643) $ (1,290) $ (3,562) | $ 3,735
======== ======== ======== | ========
</TABLE>
70
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
3. INVESTMENT OPERATIONS (continued)
At December 31, 1999 and December 31, 1998, amortized cost, gross unrealized
gains and losses, and estimated fair values of fixed maturities, all of which
are designated as available for sale, follows:
<TABLE>
<CAPTION>
POST-MERGER
---------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---------- ---------- ---------- ---------
(Dollars in thousands)
<S> <C> <C> <C> <C>
December 31, 1999
-----------------------------
U.S. government and
governmental agencies
and authorities............ $ 21,363 -- $ (260) $ 21,103
Public utilities.............. 53,754 $ 25 (2,464) 51,315
Corporate securities.......... 396,494 53 (12,275) 384,272
Other asset-backed securities. 207,044 850 (4,317) 203,577
Mortgage-backed securities.... 179,397 39 (4,382) 175,054
-------- ------ -------- --------
Total......................... $858,052 $ 967 $(23,698) $835,321
======== ====== ======== ========
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
======== ====== ======== ========
Foreign governments.......................
.......
</TABLE>
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. At December 31, 1999, net unrealized investment loss on fixed
maturities designated as available for sale totaled $22,731,000. Depreciation of
$6,955,000 was included in stockholder's equity at December 31, 1999 (net of
adjustments of $1,785,000 to VPIF, $10,246,000 to DPAC, and $3,745,000 to
deferred income taxes). 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 adjustments of $203,000 to VPIF, $455,000 to DPAC, and $550,000 to
deferred income taxes).
At December 31, 1999, net unrealized appreciation on equity securities was
comprised entirely of gross appreciation of $2,378,000. At December 31, 1998,
net unrealized depreciation of equity securities was comprised entirely of gross
depreciation of $2,923,000.
Amortized cost and estimated fair value of fixed maturities designated as
available for sale, by contractual maturity, at December 31, 1999 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.
71
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
3. INVESTMENT OPERATIONS (continued)
POST-MERGER
-------------------------
Amortized Estimated
December 31, 1999 Cost Fair Value
- ---------------------------------------------------------------------
(Dollars in thousands)
Due within one year..................... $ 25,317 $ 25,186
Due after one year through five years... 355,205 344,998
Due after five years through ten years.. 83,004 78,976
Due after ten years..................... 8,085 7,530
-------- --------
471,611 456,690
Other asset-backed securities........... 207,044 203,577
Mortgage-backed securities.............. 179,397 175,054
-------- --------
Total................................... $858,052 $835,321
======== ========
An analysis of sales, maturities, and principal repayments of the Companies'
fixed maturities portfolio follows:
<TABLE>
<CAPTION>
Gross Gross Proceeds
Amortized Realized Realized from
Cost Gains Losses Sale
--------- -------- -------- --------
(Dollars in thousands)
POST-MERGER:
<S> <C> <C> <C> <C>
For the year ended December 31, 1999:
Scheduled principal repayments, calls,
and tenders.......................... $141,346 $216 $(174) $141,388
Sales................................... 80,472 141 (1,454) 79,159
-------- ---- ------- --------
Total................................... $221,818 $357 $(1,628) $220,547
======== ==== ======= ========
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
======== ==== ======= ========
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
======== ==== ======= ========
</TABLE>
72
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
3. INVESTMENT OPERATIONS (continued)
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 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 $1,639,000 to further reduce the carrying value of the bonds to their
combined net realizable value of $1,137,000. During 1997, no investments were
identified as having an other than temporary impairment.
Investments on Deposit: At December 31, 1999 and 1998, affidavits of deposits
covering bonds with a par value of $6,470,000 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, 1999 and December 31, 1998. Fixed maturities included investments in basic
industrials (29% in 1999, 26% in 1998), conventional mortgage-backed securities
(22% in 1999, 25% in 1998), financial companies (16% in 1999, 19% in 1998), and
other asset-backed securities (19% in 1999, 11% in 1998). Mortgage loans on real
estate have been analyzed by geographical location with concentrations by state
identified as California (12% in 1999 and 1998), Utah (10% in 1999, 11% in
1998), and Georgia (9% in 1999, 10% in 1998). There are no other concentrations
of mortgage loans on real estate in any state exceeding ten percent at December
31, 1999 and 1998. Mortgage loans on real estate have also been analyzed by
collateral type with significant concentrations identified in office buildings
(34% in 1999, 36% in 1998), industrial buildings (33% in 1999, 32% in 1998),
retail facilities (19% in 1999, 20% in 1998), and multi-family apartments (10%
in 1999, 8% in 1998). 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, 1999.
4. COMPREHENSIVE INCOME
Comprehensive income includes all changes in stockholder's equity during a
period except those resulting from investments by and distributions to the
stockholder. Total comprehensive income (loss) for the Companies includes
$(452,000) for the year ended December 31, 1999 for First Golden ($1,015,000 for
the year ended December 31, 1998 and $159,000, and $536,000, respectively, for
the periods October 25, 1997 through December 31, 1997 and January 1, 1997
through October 24, 1997). 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 $(1,468,000) in
1999 and $(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 $(1,441,000) in 1999 and $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
73
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
5. FAIR VALUES OF FINANCIAL INSTRUMENTS (continued)
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 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>
<CAPTION>
POST-MERGER
-----------------------------------------------
December 31, 1999 December 31, 1998
---------------------- ---------------------
Estimated Estimated
Carrying Fair Carrying Fair
Value Value Value Value
-------- --------- -------- ---------
(Dollars in thousands)
<S> <C> <C> <C> <C>
ASSETS
Fixed maturities, available for sale.. $ 835,321 $ 835,321 $ 741,985 $ 741,985
Equity securities..................... 17,330 17,330 11,514 11,514
Mortgage loans on real estate......... 100,087 95,524 97,322 99,762
Policy loans.......................... 14,157 14,157 11,772 11,772
Short-term investments................ 80,191 80,191 41,152 41,152
Cash and cash equivalents............. 14,380 14,380 6,679 6,679
Separate account assets............... 7,562,717 7,562,717 3,396,114 3,396,114
LIABILITIES
Annuity products...................... 1,017,105 953,546 869,009 827,597
Surplus notes......................... 245,000 226,100 85,000 90,654
Revolving note payable................ 1,400 1,400 -- --
Separate account liabilities.......... 7,562,717 7,562,717 3,396,114 3,396,114
</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 process. This pricing
74
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
5. FAIR VALUES OF FINANCIAL INSTRUMENTS (continued)
process 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.
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
current market value.
Revolving note payable: Carrying value reported in the Companies' historical
cost basis balance sheet approximates estimated fair value for this instrument,
as the agreement carries a variable interest rate provision.
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.
75
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
6. MERGER (continued)
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.
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 follows:
<TABLE>
<CAPTION>
POST-MERGER
-------------------------------------------------
For the period
For the year For the year October 25, 1997
ended ended through
December 31, December 31, December 31, 1997
-------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C>
Beginning balance........................ $35,977 $43,174 $44,297
------- ------- -------
Imputed interest......................... 2,373 2,802 1,004
Amortization............................. (7,930) (7,753) (1,952)
Changes in assumptions of timing of
gross profits.......................... (681) 227 --
------- ------- -------
Net amortization......................... (6,238) (4,724) (948)
Adjustment for unrealized gains (losses)
on available for sale securities....... 1,988 (28) (175)
Adjustment for other receivables and
merger costs........................... -- (2,445) --
------- ------- -------
Ending balance........................... $31,727 $35,977 $43,174
======= ======= =======
</TABLE>
76
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
6. MERGER (continued)
Interest is imputed on the unamortized balance of VPIF at a rate of 7.33% for
the year ended December 31, 1999, 7.38% for the year ended December 31, 1998,
and 7.03% for the period October 25, 1997 through December 31, 1997. In 1999,
VPIF was adjusted to increase amortization by $681,000 to reflect changes in the
assumptions related to the timing of estimated gross profits. The amortization
of VPIF, net of imputed interest, is charged to expense. VPIF decreased
$2,664,000 during 1998 to adjust the value of other receivables and increased
$219,000 in 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, 1999 is $3,958,000 in 2000, $3,570,000 in 2001, $3,322,000 in
2002, $2,807,000 in 2003, and $2,292,000 in 2004. 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 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.
77
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
7. ACQUISITION (continued)
An analysis of the VPIF asset follows:
<TABLE>
<CAPTION>
POST-ACQUISITION
----------------
For the period
January 1, 1997
through
October 24, 1997
----------------
(Dollars in thousands)
<S> <C>
Beginning balance............ $ 83,051
--------
Imputed interest............. 5,138
Amortization................. (12,656)
Changes in assumption of
timing of gross profits.... 2,293
--------
Net amortization............. (5,225)
Adjustment for unrealized
gains on available for
sale securities............ (373)
--------
Ending balance............... $ 77,453
========
</TABLE>
Interest was imputed on the unamortized balance of VPIF at rates of 7.70% to
7.80% for the period January 1, 1997 through October 24, 1997. The amortization
of VPIF, net of imputed interest, was charged to expense. VPIF was also adjusted
for the unrealized gains 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
the Parent's consolidated tax return for 5 years.
At December 31, 1999, the Companies have net operating loss ("NOL")
carryforwards for federal income tax purposes of approximately $161,799,000.
Approximately $5,094,000, $3,354,000, $53,310,000, and $100,041,000 of these NOL
carryforwards are available to offset future taxable income of the Companies
through the years 2011, 2012, 2013, and 2014, respectively.
INCOME TAX EXPENSE (BENEFIT)
Income tax expense (benefit) included in the consolidated financial statements
follows:
POST-MERGER |POST-ACQUISITION
--------------------------------------------|----------------
For the period | For the period
October 25, | January 1,
For the year For the year 1997 | 1997
ended ended through | through
December 31, December 31, December 31, | October 24,
1999 1998 1997 | 1997
------------ ------------ -------------- | --------------
(Dollars in thousands)
|
Current -- -- -- | $ 12
Deferred $8,523 $5,279 $146 | (1,349)
------ ------ ---- | -------
$8,523 $5,279 $146 | $(1,337)
====== ====== ==== | =======
78
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
8. INCOME TAXES (continued)
The effective tax rate on income (loss) before income taxes is different from
the prevailing federal income tax rate. A reconciliation of this difference
follows:
<TABLE>
<CAPTION>
POST-MERGER |POST-ACQUISITION
---------------------------------------------|-----------------
For the period | For the period
October 25, | January 1,
For the year For the year 1997 | 1997
ended ended through | through
December 31, December 31, December 31, | October 24,
1999 1998 1997 | 1997
------------ ------------ -------------- | -------------
(Dollars in thousands)
|
<S> <C> <C> <C> <C>
Income (loss) before income taxes.. $19,737 $10,353 $(279) | $ (608)
======= ======= ===== =======
|
Income tax (benefit) at federal |
statutory rate.........................$ 6,908 $ 3,624 $ (98) | $ (213)
Tax effect (decrease) of: |
Goodwill amortization............ 1,322 1,322 220 | --
Compensatory stock option and
restricted stock expense....... -- -- -- | (1,011)
Meals and entertainment.......... 199 157 23 | 53
Other items...................... 94 176 1 | (166)
------- ------- ------- | --------
Income tax expense (benefit)....... $ 8,523 $ 5,279 $146 | $ (1,337)
======= ======= ======= | ========
</TABLE>
79
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
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, 1999 and 1998 follows:
<TABLE>
<CAPTION>
POST-MERGER
----------------------------
December 31, December 31,
1999 1998
------------ ------------
(Dollars in thousands)
|
<S> <C> <C>
Deferred tax assets:
Net unrealized depreciation of securities
at fair value............................ -- $1,023
Net unrealized depreciation of available
for sale fixed maturities................ $3,745 --
Future policy benefitS..................... 133,494 66,273
Goodwill................................... 16,323 16,323
Net operating loss carryforwards........... 56,630 17,821
Other...................................... 1,333 1,272
------- -------
211,525 102,712
Deferred tax liabilities:
Net unrealized appreciation of securities
at fair value............................ (832) --
Net unrealized appreciation of available
for sale fixed maturities................ -- (332)
Fixed maturity securities.................. (17,774) (1,034)
Deferred policy acquisition costs.......... (154,706) (55,520)
Mortgage loans on real estate.............. (715) (845)
Value of purchased insurance in force...... (10,462) (12,592)
Other...................................... (1,348) (912)
------- -------
(185,837) (71,235)
------- -------
Valuation allowance........................... (3,745) --
------- -------
Deferred income tax asset..................... $21,943 $31,477
======= =======
</TABLE>
At December 31, 1999, the Company reported, for financial statement purposes,
unrealized losses on certain investments which have not been recognized for tax
purposes. The Companies have established a valuation allowance against the
deferred income tax assets associated with unrealized depreciation on fixed
maturities available for sale as the Companies are uncertain as to whether their
capital losses, if ever realized, could be utilized to offset future capital
gains.
80
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
9. RETIREMENT PLANS AND EMPLOYEE STOCK COMPENSATION
DEFINED BENEFIT PLANS
In 1999 and 1998, 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, 1999:
1999 1998
-----------------------------------
(Dollars in thousands)
Change in benefit obligation:
Benefit obligation at January 1... $ 4,454 $956
Service cost...................... 1,500 1,138
Interest cost..................... 323 97
Actuarial (gain) loss............. (2,056) 2,266
Benefit payments.................. -- (3)
------- -------
Benefit obligation at December 31. $ 4,221 $ 4,454
======= =======
Funded status:
Funded status at December 31...... $(4,221) $(4,454)
Unrecognized net loss............. 210 2,266
------- -------
Net amount recognized............. $(4,011) $(2,188)
======= =======
The Companies' plan assets were held by Equitable Life, an affiliate. During
1998, the Equitable Life Employee Pension Plan began investing in an undivided
interest of the ING-NA Master Trust (the "Master Trust"). Boston Safe Deposit
and Trust Company holds the Master Trust's investment assets.
The weighted-average assumptions used in the measurement of the Companies'
benefit obligation follows:
December 31 1999 1998
- -----------------------------------------------------------------
Discount rate.................... 8.00% 6.75%
Expected return on plan assets... 9.25 9.50
Rate of compensation increase.... 5.00 4.00
81
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
9. RETIREMENT PLANS AND EMPLOYEE STOCK COMPENSATION (continued)
The following table provides the net periodic benefit cost for the fiscal years
1999, 1998, and 1997:
<TABLE>
<CAPTION>
POST-MERGER |POST-ACQUISITION
----------------------------------------------|---------------------
For the year For the year For the period | For the period
ended ended October 25, 1997 | January 1, 1997
December 31, December 31, through | through
1999 1998 December 31, 1997 |October 24, 1997
----------------------------------------------|---------------------
(Dollars in thousands)
|
<S> <C> <C> <C> <C>
Service cost................ $1,500 $1,138 $114 | $568
Interest cost............... 323 97 10 | 15
Amortization of net loss.... -- -- -- | 1
------ ------ ---- | ----
Net periodic benefit cost... $1,823 $1,235 $124 | $584
====== ====== ==== | ====
</TABLE>
There were no gains or losses resulting from curtailments or settlements during
1999, 1998, or 1997.
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 $4,221,000, $2,488,000, and $0, respectively, as of December
31, 1999 and $4,454,000, $3,142,000, and $0, respectively, as of December 31,
1998.
During 1997, ING approved the 1997 Phantom Plan for certain key employees. The
Phantom Plan is similar to a standard stock option plan; however, the phantom
share option entitles the holder to a cash benefit in Dutch Guilders linked to
the rise in value of ING ordinary shares on the Amsterdam Stock Exchange. The
plan participants are entitled to any appreciation in the value of ING ordinary
shares over the Phantom Plan option price (strike price) of 53.85 Euros for
options issued on July 1, 1999, 140.40 Dutch Guilders for options issued on May
26, 1998, and 85.10 Dutch Guilders for options issued on May 23, 1997, not the
ordinary shares themselves.
Options are granted at fair value on the date of grant. Options in the Phantom
Plan are subject to forfeiture to ING should the individuals terminate their
relationship with ING before the three-year initial retention period has
elapsed. All options expire five years from the date of grant.
On July 1, 1999, ING issued 34,750 options to employees of Golden American
related to this plan at a strike price of 53.85 Euros.
On May 26, 1998, ING issued 42,400 options related to this plan at a strike
price of 140.40 Dutch Guilders. Since the strike price at December 31, 1998 was
higher than the ING share price, there was no compensation expense related to
these options in 1998.
On May 23, 1997, ING issued 3,500 options related to this plan at a strike price
of 85.10 Dutch Guilders. Since the strike price was lower than the ING share
price at December 31, 1998, Golden American incurred $46,000 of compensation
expense related to these options during 1998.
No expense was recognized in 1999 related to the above options. As of December
31, 1999, 58,250 options remain outstanding.
10. RELATED PARTY TRANSACTIONS
Operating Agreements: 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
82
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
10. RELATED PARTY TRANSACTIONS (continued)
distribute the Companies' variable insurance products and appoint
representatives of the broker/dealers as agents. For the years ended December
31, 1999 and 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 $181,536,000, $117,470,000, $9,931,000, and $26,419,000,
respectively.
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 years ended December 31, 1999
and 1998 and for the periods October 25, 1997 through December 31, 1997 and
January 1, 1997 through October 24, 1997, the fee was $10,136,000, $4,771,000,
$508,000, and $2,262,000, 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 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 years ended December 31, 1999 and 1998, the Companies
incurred fees of $2,227,000 and $1,504,000, respectively, 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 and $768,000
for the periods October 25, 1997 through December 31, 1997 and January 1, 1997
through October 24, 1997, 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 1999 or in 1998.
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 $6,107,000 and $5,833,000 for the
years ended December 31, 1999 and 1998, respectively ($1,338,000 and $2,992,000
for the periods October 25, 1997 through December 31, 1997 and January 1, 1997
through October 24, 1997, respectively).
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 $1,251,000 and $1,058,000 for the
years ended December 31, 1999 and 1998, respectively ($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
$387,000 in 1999 and $75,000 in 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 $244,000 in 1999.
83
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
10. RELATED PARTY TRANSACTIONS (continued)
Golden American provides resources and services to United Life & Annuity
Insurance Company, an affiliate. Revenues for these services, which reduce
general expenses incurred by Golden American, totaled $460,000 in 1999.
The Companies provide resources and services to Security Life of Denver
Insurance Company, an affiliate. Revenues for these services, which reduce
general expenses incurred by the Companies, totaled $216,000 in 1999.
The Companies provide resources and services to Southland Life Insurance
Company, an affiliate. Revenues for these services, which reduce general
expenses incurred by the Companies, totaled $103,000 in 1999.
In 1999, 1998, and 1997, the Companies received 10.0%, 9.6%, and 5.1% of total
premiums, net of reinsurance, for variable products sold through five affiliates
as noted in the following table:
<TABLE>
<CAPTION>
POST-MERGER |POST-ACQUISITION
----------------------------------------------|-----------------
|
For the year For the year For the period | For the period
ended ended October 25, 1997 |January 1, 1997
December 31, December 31, through | through
1999 1998 December 31, 1997|October 24, 1997
------------ ------------ -----------------|----------------
(Dollars in millions)
<S> <C> <C> <C> <C>
|
LSSI.................................. $168.5 $122.9 $9.3 | $16.9
Vestax Securities Corporation......... 88.1 44.9 1.9 | 1.2
DSI................................... 2.5 13.6 2.1 | 0.4
Multi-Financial Securities Corporation 44.1 13.4 -- | --
IFG Network Securities, Inc........... 25.8 3.7 -- | --
------ ------ ----- | -----
Total................................. $329.0 $198.5 $13.3 | $18.5
====== ====== ===== | =====
</TABLE>
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 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 $815,000 in
1999 and $1,765,000 in 1998. At December 31, 1999 and 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 and $362,000 for the period January 1, 1997 through October 24, 1997). The
outstanding balance was paid by a capital contribution and with funds borrowed
from ING AIH.
84
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
10. RELATED PARTY TRANSACTIONS (continued)
Surplus Notes: On December 30, 1999, Golden American issued an 8.179% surplus
note in the amount of $50,000,000 to Equitable Life. The note matures on
December 29, 2029. 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, 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 no interest in 1999.
On December 8, 1999, Golden American issued a 7.979% surplus note in the amount
of $35,000,000 to First Columbine Life Insurance Company ("First Columbine"), an
affiliate. The note matures on December 7, 2029. 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, 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 paid no interest in 1999.
On September 30, 1999, Golden American issued a 7.75% surplus note in the amount
of $75,000,000 to ING AIH. The note matures on September 29, 2029. 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, 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 $1,469,000 in 1999. On December 30, 1999, ING AIH
assigned the note to Equitable Life.
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 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. Under this agreement, Golden American
incurred interest expense of $4,350,000 in 1999. Golden American incurred no
interest in 1998.
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 $2,063,000 in 1999, unchanged from 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).
Stockholder'S Equity: During 1999 and 1998, Golden American received capital
contributions from its Parent of $121,000,000 and $122,500,000, respectively.
11. COMMITMENTS AND CONTINGENCIES
Reinsurance: At December 31, 1999, the Companies 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 reinsurers do not meet their obligations under the
reinsurance agreements. Reinsurance ceded in force for life mortality risks were
$119,575,000 and $111,552,000 at December 31, 1999 and 1998, respectively. At
December 31, 1999 and 1998, the Companies have a net receivable of $14,834,000
and $7,586,000, respectively, for reserve credits, reinsurance claims, or
85
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
11. COMMITMENTS AND CONTINGENCIES (continued)
other
receivables from these reinsurers comprised of $493,000 and $439,000,
respectively, for claims recoverable from reinsurers, $1,201,000 and $543,000,
respectively, for a payable for reinsurance premiums, and $15,542,000 and
$7,690,000, respectively, for a receivable from an unaffiliated reinsurer.
Included in the accompanying financial statements are net considerations to
reinsurers of $9,883,000, $4,797,000, $326,000, and $1,871,000 and net policy
benefits recoveries of $3,059,000, $2,170,000, $461,000, and $1,021,000 for the
years ended December 31, 1999 and 1998 and for the periods October 25, 1997
through December 31, 1997 and January 1, 1997 through October 24, 1997,
respectively.
Effective June 1, 1994, Golden American entered into a modified coinsurance
agreement with an unaffiliated reinsurer. The accompanying financial statements
are presented net of the effects of the treaty which increased income by
$1,729,000, $1,022,000, $265,000, and $335,000 for the years ended December 31,
1999 and 1998 and for the periods October 25, 1997 through December 31, 1997 and
January 1, 1997 through October 24, 1997, respectively.
The reinsurance treaties that covered the nonstandard minimum guaranteed death
benefits for new business have been terminated for business issued after
December 31, 1999. The Companies are currently pursuing alternative reinsurance
arrangements for new business issued after December 31, 1999. There can be no
assurance that such alternative arrangements will be available. The reinsurance
covering business in force at December 31, 1999 will continue to apply in the
future.
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 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 $3,000 and $1,123,000 for
the years ended December 31, 1999 and 1998, respectively, $141,000 for the
period October 25, 1997 through December 31, 1997 and $446,000 for the period
January 1, 1997 through October 24, 1997. At December 31, 1999 and 1998, the
Companies have an undiscounted reserve of $2,444,000 and $2,446,000,
respectively, to cover estimated future assessments (net of related anticipated
premium tax credits) and has established an asset totaling $618,000 and
$586,000, respectively, 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 lawsuits 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 (see Note 3 for further information). The Companies'
asset growth, net investment income, and cash flow are primarily generated from
the sale of variable insurance 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, each having at least ten percent of total sales,
generated 28% of the Companies' sales in 1999
86
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
11. COMMITMENTS AND CONTINGENCIES (continued)
(26% and 53% by two broker/dealers
during 1998 and 1997, respectively). The Premium Plus product generated 79% of
the Companies' sales during 1999 (63% during 1998 and 11% 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 years ended December 31, 1999 and 1998 and for the periods
October 25, 1997 through December 31, 1997 and January 1, 1997 through October
24, 1997, rent expense totaled $2,273,000, $1,241,000, $39,000, and $331,000,
respectively. At December 31, 1999, minimum rental payments due under all
non-cancelable operating leases with initial terms of one year or more are: 2000
- - $3,596,000; 2001 - $3,403,000; 2002 - $2,859,000; 2003 - $2,486,000; 2004 -
$2,419,000, and 2005 and thereafter - $42,852,000.
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. As of July 31, 1999, the SunTrust Bank,
Atlanta revolving note facility was extended to July 31, 2000. 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 years ended December 31, 1999 and 1998, the Companies incurred
interest expense of $198,000 and $352,000, respectively.
87
<PAGE>
<PAGE>
- ----------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
- ----------------------------------------------------------------------
TABLE OF CONTENTS
ITEM PAGE
Introduction............................... 1
Description of Golden American Life
Insurance Company.................. 1
Safekeeping of Assets...................... 1
The Administrator.......................... 1
Independent Auditors....................... 1
Distribution of Contracts.................. 1
Performance Information.................... 2
IRA Withdrawal Option...................... 5
Other Information.......................... 6
Financial Statements of Separate Account B. 6
PLEASE TEAR OFF, COMPLETE AND RETURN THE FORM BELOW TO ORDER A
FREE STATEMENT OF ADDITIONAL INFORMATION FOR THE CONTRACTS OFFERED
UNDER THE PROSPECTUS. ADDRESS THE FORM TO OUR CUSTOMER SERVICE
CENTER; THE ADDRESS IS SHOWN ON THE 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
107407 NC VA (5/00)
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
88
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<PAGE>
This page intentionally left blank.
89
<PAGE>
<PAGE>
APPENDIX A
MARKET VALUE ADJUSTMENT EXAMPLES
EXAMPLE #1: FULL SURRENDER EXAMPLE OF A NEGATIVE MARKET VALUE
ADJUSTMENT
Assume $100,000 was allocated to a Fixed 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 $128,371 ( $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.
A1
<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)) = $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.
A2
<PAGE>
<PAGE>
APPENDIX B
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 30% of the contract value of $35,000.
In this example, $3,000 (0.10 x $30,000) is the
maximum free withdrawal amount that you may withdraw during the
contract year without a surrender charge. The total withdrawal would
be $10,500 ($35,000 x .30). Therefore, $7,500 ($10,500 - $3,000) is
considered an excess withdrawal of a part of the initial premium
payment of $10,000 and would be subject to a 8.5% surrender charge of
$637.50 ($7,500 x .085). This example does not take into account any
Market Value Adjustment or deduction of any premium taxes.
B1
<PAGE>
<PAGE>
ING VARIABLE ANNUITIES
GOLDEN AMERICAN LIFE INSURANCE COMPANY
Golden American Life Insurance Company is a stock company domiciled
in Delaware
107407 NC VA 5/00
<PAGE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Not applicable.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The following provisions regarding the Indemnification of
Directors and Officers of the Registrant are applicable:
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND
INCORPORATORS
Delaware General Corporation Law, Title 8, Section 145
provides that corporations incorporated in Delaware may
indemnify their officers, directors, employees or agents
for threatened, pending or past legal action by reason
of the fact he/she is or was a director, officer,
employee or agent. Such indemnification is provided for
under the Company's By-Laws under Article VI.
Indemnification includes all liability and loss suffered
and expenses (including attorneys' fees) reasonably
incurred by such indemnitee. Prepayment of expenses is
permitted, however, reimbursement is required if it is
ultimately determined that indemnification should not
have been given.
DIRECTORS' AND OFFICERS' INSURANCE
The directors, officers, and employees of the
registrant, in addition to the indemnifications
described above, are indemnified through the blanket
liability insurance policy of Registrant's ultimate
parent, ING Groep N.V., or directly by Equitable of
Iowa Companies, Inc. for liabilities not covered through
the indemnification provided under the By-Laws.
SECURITIES AND EXCHANGE COMMISSION POSITION ON
INDEMNIFICATION
Insofar as indemnification for liabilities arising under
the Securities Act of 1933 may be permitted to
directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in
the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such
liabilities (other than the payment by the Registrant of
expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted
by such director, officer or controlling person in
connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against
public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Not Applicable.
<PAGE>
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS.
1 Distribution Agreement Between Golden American Life
Insurance Company and Directed Services, Inc. (1)
3(a) Restated Certificate of Incorporation of Golden American
Life Insurance Company, as amended. (1)
3(b) By-Laws of Golden American Life Insurance Company, as amended. (1)
3(c) Resolution of Board of Directors for Powers of Attorney. (1)
4(a) Individual Deferred Combination Variable and Fixed Annuity
Contract. (1)
4(b) Group Deferred Combination Variable and Fixed Annuity Certificate.(1)
4(c) Individual Deferred Variable Annuity Contract. (1)
4(d) Individual Retirement Annuity Rider Page. (1)
4(e) Roth Individual Retirement Annuity Rider. (1)
4(f) Individual Deferred Combination Variable and Fixed
Annuity Application.
4(g) Group Deferred Combination Variable and Fixed
Annuity Enrollment Form.
4(h) Individual Deferred Variable Annuity Application.
5 Opinion and Consent of Myles R. Tashman.
10(a) Administrative Services Agreement between Golden American
and Equitable Life Insurance Company of Iowa. (1)
10(b) Service Agreement between Golden American and Directed
Services, Inc. (1)
10(c) Asset Management Agreement between Golden American and
ING Investment Management LLC. (1)
10(d) Reciprocal Loan Agreement between Golden American and
ING America Insurance Holdings, Inc. (1)
10(e) Revolving Note Payable between Golden American and
SunTrust Bank. (1)
10(f) Form of Participation Agreement between Golden American
and the Evergreen Variable Annuity Trust.
10(g) Surplus Note, dated 12/17/96, between Golden American and
Equitable of Iowa Companies.
10(h) Surplus Note, dated 12/30/98, between Golden American and
Equitable Life Insurance Company of Iowa.
10(i) Surplus Note, dated 09/30/99, between Golden American and
ING AIH.
10(j) Surplus Note, dated 12/08/99, between Golden American and
First Columbine Life Insurance Company. (1)
10(k) Surplus Note, dated 12/30/99, between Golden American and
Equitable of Iowa Companies. (1)
10(l) Form of Service Agreement among Golden American, Evergreen
Asset Management Corp., and First Capital Group
23(a) Consent of Sutherland Asbill & Brennan LLP
23(b) Consent of Ernst & Young LLP.
23(c) Consent of Myles R. Tashman, incorporated in Item 5 of this
Part II, together with the Opinion of Myles R. Tashman.
24 Powers of Attorney.
27 Financial Data Schedule.
(1) Incorporated herein by reference to the Initial Registration Statement
on Form S-1 for Separate Account B filed with the Securities and Exchange
Commission on February 11, 2000 (File No. 333-30186).
<PAGE>
<PAGE>
(b) FINANCIAL STATEMENT SCHEDULE.
(1) All financial statements are included in the Prospectus
as indicated therein.
(2) Schedules I, III and IV follow. 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.
<TABLE>
<CAPTION>
SCHEDULE I
SUMMARY OF INVESTMENTS
OTHER THAN INVESTMENTS IN RELATED PARTIES
(DOLLARS IN THOUSANDS)
BALANCE
SHEET
DECEMBER 31, 1999 COST 1 VALUE AMOUNT
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TYPE OF INVESTMENT
Fixed maturities, available for sale:
Bonds:
United States government and governmental agencies and authorities.. $21,363 $21,103 $21,103
Public utilities.................................................... 53,754 51,315 51,315
Corporate securities................................................ 396,494 384,272 384,272
Other asset-backed securities....................................... 207,044 203,577 203,577
Mortgage-backed securities.......................................... 179,397 175,054 175,054
--------------------------------------------
Total fixed maturities, available for sale.......................... 858,052 835,321 835,321
Equity securities:
Common stocks: industrial, miscellaneous, and all other............. 14,952 17,330 17,330
Mortgage loans on real estate.......................................... 100,087 100,087
Policy loans........................................................... 14,157 14,157
Short-term investments................................................. 80,191 80,191
--------------- -------------
Total investments...................................................... $1,067,439 $1,047,086
=============== =============
</TABLE>
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.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE III
SUPPLEMENTARY INSURANCE INFORMATION
(DOLLARS IN THOUSANDS)
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
- ---------------------------------------------------------------------------
FUTURE
POLICY
BENEFITS, OTHER
LOSSES, POLICY
DEFERRED CLAIMS CLAIMS INSURANCE
POLICY AND UNEARNED AND PREMIUMS
ACQUISITION LOSS REVENUE BENEFITS AND
SEGMENT COSTS EXPENSES RESERVE PAYABLE CHARGES
- ---------------------------------------------------------------------------
POST-MERGER
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1999:
Life insurance $528,957 $1,033,701 $6,300 $8 $82,935
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
</TABLE>
<TABLE>
<CAPTION>
COLUMN A COLUMN G COLUMN H COLUMN I COLUMN J COLUMN K
- ---------------------------------------------------------------------------
AMORTIZA-
BENEFITS TION OF
CLAIMS, DEFERRED
LOSSES POLICY
NET AND ACQUI- OTHER
INVESTMENT SETTLEMENT SITION OPERATING PREMIUMS
SEGMENT INCOME EXPENSES COSTS EXPENSES* WRITTEN
- ---------------------------------------------------------------------------
POST-MERGER
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1999:
Life insurance $59,169 $182,221 $33,119 $(83,827) --
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 --
</TABLE>
* This includes policy acquisition costs deferred for first year commissions
and interest bonuses, premium credit, and other expenses related to the
production of new business. The costs related to first year interest
bonuses and the premium credit are included in benefits claims, losses, and
settlement expenses.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE IV
REINSURANCE
COLUMN A COLUMN B COLUMN C
- ----------------------------------------------------------------------------
CEDED TO
GROSS OTHER
AMOUNT COMPANIES
- ----------------------------------------------------------------------------
<S> <C> <C>
AT DECEMBER 31, 1999:
Life insurance in force................. $225,000,000 $119,575,000
===============================
AT DECEMBER 31, 1998:
Life insurance in force................. $181,456,000 $111,552,000
===============================
AT DECEMBER 31, 1997:
Life insurance in force................. $149,842,000 $96,686,000
===============================
</TABLE>
<TABLE>
<CAPTION>
SCHEDULE IV
REINSURANCE
COLUMN A COLUMN D COLUMN E COLUMN F
- ------------------------------------------------------------------------------------
PERCENTAGE
ASSUMED OF AMOUNT
FROM OTHER NET ASSUMED
COMPANIES AMOUNT TO NET
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
AT DECEMBER 31, 1999:
Life insurance in force................. -- $105,425,000 --
========================================
AT DECEMBER 31, 1998:
Life insurance in force................. -- $69,904,000 --
========================================
AT DECEMBER 31, 1997:
Life insurance in force................. -- $53,156,000 --
========================================
</TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
<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
Pursuant to the requirements of 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 State of Pennsylvania, on the 9th
day of May, 2000.
GOLDEN AMERICAN LIFE
INSURANCE COMPANY
(Registrant)
By:
------------------------
Barnett Chernow*
President
Attest: /s/Marilyn Talman
----------------------
Marilyn Talman
Vice President, Associate General Counsel
and Assistant Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons
in the capacities indicated on May 9, 2000.
Signature Title
- --------- -----
President and Director
- --------------------
Barnett Chernow*
Senior Vice President
- -------------------- and Chief Financial Officer
E. Robert Koster*
DIRECTORS OF DEPOSITOR
- ----------------------
Myles R. Tashman*
- ----------------------
Michael W. Cunningham*
- ----------------------
Phillip R. Lowery*
- ----------------------
Mark A. Tullis*
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(f) Individual Deferred Combination Variable and Fixed EX-4.F
Annuity Application.
4(g) Group Deferred Combination Variable and Fixed EX-4.G
Annuity Enrollment Form.
4(h) Individual Deferred Variable Annuity Application. EX-4.H
5 Opinion and Consent of Myles R. Tashman EX-5
10(f) Form of Participation Agreement between Golden EX-10.F
American and the Evergreen Variable Annuity Trust.
10(g) Surplus Note between GALIC & EIC, 12/17/96 EX-10.G
10(h) Surplus Note between GALIC & ELIC, 12/30/98 EX-10.H
10(i) Surplus Note between GALIC & ING AIH, 09/30/99 EX-10.I
10(l) Form of Service Agreement among Golden American,
Evergreen Asset Management Corp., and First
Capital Group EX-10.L
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(f)
|
| [APPLICATIONS appears down the left margin]
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| FUIG
| ----
| A GOLDEN OPPORTUNITY FOR SELECT CLIENTS
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| GoldenSelect/R/ Application
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| [GOLDENSELECT/R/ appears down left margin]
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| Issued by Golden American Life Insurance Company
| Distributed by Directed Services, Inc., Member NASD
| GA-AA-1062 ING VARIABLE ANNUITIES
| 107184
|
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY DEFERRED VARIABLE ANNUITY FUIG
APPLICATION ----
P.O. Box 2700, West Chester, PA 19380-2700 Phone:(800) 366-0066
Express Mail: ING Variable Annuities 1475 Dunwoody Drive West Chester, PA 19380
===============================================================================
|1(A)| OWNER
- ------
Name: SSN# or Tax ID:
- -------------------------------------------------------------------------------
Permanent Address: City: State: Zip:
- -------------------------------------------------------------------------------
Date of Birth: Phone: EMail Address: Male / / Female / /
- -------------------------------------------------------------------------------
===============================================================================
|1(B)| JOINT OWNER(S) Relationship to Owner:
- ------ ----------------------
Name: SSN# or Tax ID:
- -------------------------------------------------------------------------------
Permanent Address: City: State: Zip:
- -------------------------------------------------------------------------------
Date of Birth: Phone: EMail Address: Male / / Female / /
- -------------------------------------------------------------------------------
===============================================================================
|2(A)| ANNUITANT (If other than owner)
- ------
Name: SSN# or Tax ID:
- -------------------------------------------------------------------------------
Permanent Address: City: State: Zip:
- -------------------------------------------------------------------------------
Date of Birth: Phone: EMail Address: Male / / Female / /
- -------------------------------------------------------------------------------
===============================================================================
|2(B)| CONTINGENT ANNUITANT (Optional)
- ------
Name: SSN# or Tax ID:
- -------------------------------------------------------------------------------
Permanent Address: City: State: Zip:
- -------------------------------------------------------------------------------
Date of Birth: Phone: EMail Address: Male / / Female / /
- -------------------------------------------------------------------------------
===============================================================================
| 3 | BENEFICIARY(S)
- ----- Percentage
Primary Name: Relationship to Owner: %
--------------- ----------------- ---------
Primary Name: Relationship to Owner: %
--------------- ----------------- ---------
Primary Name: Relationship to Owner: %
--------------- ----------------- ---------
Contingent Name: Relationship to Owner: %
--------------- ----------------- ---------
Contingent Name: Relationship to Owner: %
--------------- ----------------- ---------
===============================================================================
| 4 |
- -----
PRODUCT
/ / Peak Plus: / / / / / / / / / / / / / /
- -------------------------------------------------------------------------------
/ / ---
/ / Product: / / / / / / / / / / / / / /
- -------------------------------------------------------------------------------
ANY PERSON WHO KNOWINGLY AND WITH INTENT TO DEFRAUD ANY INSURANCE COMPANY OR
OTHER PERSON FILES AN APPLICATION FOR INSURANCE CONTAINING ANY MATERIALLY FALSE
INFORMATION, OR CONCEALS FOR THE PUROSE OF MISLEADING INFORMATION CONCERNING
ANY FACT MATERIAL THER TO, COMMITS A FRAUDULENT INSURANCE ACT, WHICH IS A CRIME
107184
GA-AA-1062 04/12/2000
<PAGE>
<PAGE>
===============================================================================
| 5 | INITIAL INVESTMENT & DOLLAR COST AVERAGING FUIG
- ----- ----
A. INITIAL INVESTMENT
1) Initial Premium Paid: $________ (If initital premium is either an exchange
or transfer, please indicate approximate premium.) Please make check payable
to Golden American Life Insurance Company
2) Fill in percentages for your initial investment allocation(s) in Column (A)
below
B. DOLLAR COST AVERAGING (DCA) OPTIONAL
1) Amount to be transferred monthly $_________ (Max: 1/12of premium allocated
to divisions below: 1/6 for 6 Month DCA)
2) Division or Allocation you're transferring from: / /Limited Maturity Bond
Division / /Liquid Asset Division / /1 YR Fixed / / 6 Month DCA
3) Please indicate the divisions you wish to transfer to by filling in
percentage and dollar amounts in Column B below
INVESTMENT ADVISER ACCOUNT DIVISION A)INITIAL INVESTMENT B)DCA
- ------------------ ---------------- ------------------ ---
A I M CAPITAL CAPITAL APPRECIATION $________ ________% ______%
MANAGMENT, INC.
A I M CAPITAL STRATEGIC EQUITY $________ ________% ______%
MANAGMENT, INC.
ALLIANCE CAPITAL CAPITAL GROWTH $________ ________% ______%
MANAGMENT, INC.
BARING INTERNATIONAL GLOBAL FIXED INCOME $________ ________% ______%
INVESTMENT LIMITED
BARING INTERNATIONAL HARD ASSETS $________ ________% ______%
INVESTMENT LIMITED
BARING INTERNATIONAL DEVELOPING WORLD $________ ________% ______%
INVESTMENT LIMITED
CAPITAL GUARDIAN SMALL CAP $________ ________% ______%
TRUST COMPANY
CAPITAL GUARDIAN MANAGED GLOBAL $________ ________% ______%
TRUST COMPANY
CAPITAL GUARDIAN LARGE CAP $________ ________% ______%
TRUST COMPANY
EAGLE ASSET VALUE EQUITY $________ ________% ______%
MANAGEMENT, LLC
EII REALTY REAL ESTATE $________ ________% ______%
SECURITIES, INC.
EVERGREEN ASSET FOUNDATION $________ ________% ______%
MANAGEMENT, INC.
EVERGREEN ASSET GLOBAL LEADERS $________ ________% ______%
MANAGEMENT, INC.
EVERGREEN ASSET SMALL CAP VALUE $________ ________% ______%
MANAGEMENT, INC.
EVERGREEN ASSET EQUITY INDEX $________ ________% ______%
MANAGMENT, INC
ING INVESTMENT LIMITED MATURITY BOND $________ ________% ______%
MANAGEMENT, LLC
ING INVESTMENT LIQUID ASSET $________ ________% ______%
MANAGEMENT, LLC
JANUS CAPITAL GROWTH $________ ________% ______%
CORPORATION
KAYNE ANDERSON RISING DIVS $________ ________% ______%
INVESTMENT MANAGEMENT,LLC
MFS INVESTMENT MID-CAP GROWTH $________ ________% ______%
MANAGEMENT
MFS INVESTMENT RESEARCH $________ ________% ______%
MANAGEMENT
MFS INVESTMENT TOTAL RETURN $________ ________% ______%
MANAGEMENT
SALOMON BROTHERS ALL-CAP $________ ________% ______%
ASSET MANAGEMENT, INC.
SALOMON BROTHERS INVESTORS $________ ________% ______%
ASSET MANAGEMENT, INC.
T. ROWE PRICE EQUITY INCOME $________ ________% ______%
ASSOCIATES INC.
T. ROWE PRICE FULLY MANAGED $________ ________% ______%
ASSOCIATES INC.
FIXED ALLOCATIONS: / /1 YR / /3 YR / /5 YR
/ /10 YR (Not Available in all
states) / /6 Month DCA
TOTAL = $________ 100% 100%
107184
GA-AA-1062 04/12/2000
<PAGE>
<PAGE>
===============================================================================
| 6 | TELEPHONE REALLOCATION AUTHORIZATION FUIG
- ----- ----
(Owner's initials to validate agent)_______
I authorize Golden American to act upon reallocation instructions given by
electronic means or voice command from the agen that signs below and/or the
following individuals:______________________, _______________________; upon
furnishing his/her social security number or alternative identification.
Neither Golden American nor any person authorized by Golden American will be
responsible for any claim, loss, liability or expenses in connection with
reallocation instructions received by electronic means or voice command from
such person if Golden American or other such person acted on such electronic
means or voice command in good faith in reliance upon this authorization. Golden
American will continue to act upon this authorization until such time as the
person indicated above is no longer affiliated with the broker/dealer under
which my contract was purchased or until such time that I notify Golden American
in writing of a change in instructions.
===============================================================================
| 7 | TAX-QUALIFIED PLANS (If you are funding a qualified plan, please
- ----- specify type):
/ /IRA Indicate contribution amount and appropriate tax year ________________
/ /IRA Rollover
/ /SEP/IRA / /SAR SEP IRA / /401(B) TSA Transfer / /401(a) Plan
/ /CONDUIT IRA
/ /Roth IRA If transfer, provide original conversion date ___________
/ /Simple IRA Transfer Provide establishment date ____________
/ / Other ________________________
===============================================================================
| 8 | REPLACEMENT
- ----
Will the coverage applied for replace any existing annuity or life insurance
coverage? / / Yes (If yes, please fill in below) / / No
Company Name: Policy Number: Cash Value:
--------------------- ---------- ----------
===============================================================================
| 9 | PLEASE READ THE FOLLOWING STATEMENTS CAREFULLY AND SIGN BELOW:
- -----
BY SIGNING BELOW, I ACKNOWLEDGE RECEIPT OF THE PROSPECTUS. I AGREE
THAT, TO THE BEST OF MY KNOWLEDGE AND BELIEF, ALL STATEMENTS AND
ANSWERS IN THIS APPLICATION ARE COMPLETE AND TRUE AND MAY BE RELIED
UPON IN DETERMINING WHETHER TO ISSUE THE CONTRACT. MY ANSWERS WILL FORM
A PART OF ANY CONTRACT TO BE ISSUED, AND ONLY THE OWNER AND GOLDEN
AMERICAN HAVE THE AUTHORITY TO MODIFY THIS APPLICATION.
CONTRACTS AND POLICIES AND UNDERLYING SERIES SHARES OR SECURITIES
WHICH FUND CONTRACTS AND POLICIES ARE NOT INSURED BY THE FDIC OR ANY
OTHER AGENCY. THEY ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF ANY BANK
AND ARE NOT BANK GUARANTEED. ALSO, THEY ARE SUBJECT TO MARKET
FLUCTUATION, INVESTMENT RISK AND POSSIBLE LOSS OF PRINCIPAL INVESTED.
I UNDERSTAND THAT THE CONTRACT'S CASH SURRENDER VALUE, WHEN BASED
ON THE INVESTMENT EXPERIENCE OF A SEPARATE ACCOUNT DIVISION, MAY
INCREASE OR DECREASE ON ANY DAY AND THAT NO MINIMUM VALUE IS GUARANTEED.
THE CONTRACT'S COVERAGE IS IN ACCORD WITH MY ANTICIPATED FINANCIAL
OBJECTIVES.
I UNDERSTAND THAT ANY AMOUNT ALLOCATED TO THE FIXED ACCOUNT MAY BE SUBJECT
TO A MARKET VALUE ADJUSTMENT, WHICH MAY CAUSE THE VALUES TO INCREASE OR
DECREAS, PRIOR TO A SPECIFIED DATE OR DATES AS SPECIFIED INTHE CONTRACT.
MY SIGNATURE CERTIFIES, UNDER PENALTY OF PERJURY, THAT TEH TAXPAYER
IDENTIFICATION NUMBER PROVIDED IS CORRECT. I AM NOT SUBJECT TO BACKUP
WITHHOLDING BECAUSE: I AM EXEMPT; OR I HAVE NOT BEEN NOTIFIED THAT I AM
SUBJECT TO BACKUP WITHHOLDINGS FROM FAILURE TO REPORT ALL INTEREST
DIVIDENDS; OR I HAVE BEEN NOTIFIED THAT I AM NO LONGER SUBJECT TO BACKUP
WITHHOLDING. (STRIKE OUT THE PRECEDING SENTENCE IF SUBJECT TO BACKUP
WITHHOLDING.) THE IRS DOES NOT REQUIRE MY CONSENT TO ANY PROVISION OF THIS
DOCUMENT OTHER THAN THE CERTIFICATION REQUIRED TO AVOID BACKUP WITHHOLDING.
_______________________________________________________________________________
Signature of Owner Signed at (City, State) Date
_______________________________________________________________________________
Signature of Joint Owner (if applicable) Signed at (City, State) Date
_______________________________________________________________________________
Signature of Annuitant (if other than Signed at (City, State) Date
Owner)
===============================================================================
|10| SPECIAL REMARKS
- ----
===============================================================================
|11| FOR AGENT USE ONLY
- ----
DO YOU HAVE REASON TO BELIEVE THAT THE CONTRACT APPLIED FOR WILL REPLACE ANY
EXISTING ANNUITY OR LIFE INSURANCE COVERAGE?
/ / YES / / NO
Commission Alternative (select one): / / A / / B / / C / / D
Client Account No. (if applicable)_____________________
_______________________________________________________________________________
Agent Signature Print Agent Name Social Security # Broker/Dealer/Branch
107184
GA-AA-1062 04/12/2000
<PAGE>
<PAGE>
<PAGE>
<PAGE>
Exhibit 4(g)
|
| [ENROLLMENT FORM appears down the left margin]
|
| FUIG
| ----
|
| A GOLDEN OPPORTUNITY FOR SELECT CLIENTS
|
| GoldenSelect/R/ Enrollment Form
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| [GOLDENSELECT/R/ appears down left margin]
|
|
|
|
|
|
|
|
|
|
| Issued by Golden American Life Insurance Company
| Distributed by Directed Services, Inc., Member NASD
| GA-EA-1062 ING VARIABLE ANNUITIES
| 107183
|
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY DEFERRED VARIABLE ANNUITY FUIG
ENROLLMENT FORM ----
P.O. Box 2700, West Chester, PA 19380-2700 Phone:(800) 366-0066
Express Mail: ING Variable Annuities 1475 Dunwoody Drive West Chester, PA 19380
===============================================================================
|1(A)| OWNER
- ------
Name: SSN# or Tax ID:
- -------------------------------------------------------------------------------
Permanent Address: City: State: Zip:
- -------------------------------------------------------------------------------
Date of Birth: Phone: EMail Address: Male / / Female / /
- -------------------------------------------------------------------------------
===============================================================================
|1(B)| JOINT OWNER(S) Relationship to Owner:
- ------ ----------------------
Name: SSN# or Tax ID:
- -------------------------------------------------------------------------------
Permanent Address: City: State: Zip:
- -------------------------------------------------------------------------------
Date of Birth: Phone: EMail Address: Male / / Female / /
- -------------------------------------------------------------------------------
===============================================================================
|2(A)| ANNUITANT (If other than owner)
- ------
Name: SSN# or Tax ID:
- -------------------------------------------------------------------------------
Permanent Address: City: State: Zip:
- -------------------------------------------------------------------------------
Date of Birth: Phone: EMail Address: Male / / Female / /
- -------------------------------------------------------------------------------
===============================================================================
|2(B)| CONTINGENT ANNUITANT (Optional)
- ------
Name: SSN# or Tax ID:
- -------------------------------------------------------------------------------
Permanent Address: City: State: Zip:
- -------------------------------------------------------------------------------
Date of Birth: Phone: EMail Address: Male / / Female / /
- -------------------------------------------------------------------------------
===============================================================================
| 3 | BENEFICIARY(S)
- ----- Percentage
Primary Name: Relationship to Owner: %
--------------- ----------------- ---------
Primary Name: Relationship to Owner: %
--------------- ----------------- ---------
Primary Name: Relationship to Owner: %
--------------- ----------------- ---------
Contingent Name: Relationship to Owner: %
--------------- ----------------- ---------
Contingent Name: Relationship to Owner: %
--------------- ----------------- ---------
===============================================================================
| 4 |
- -----
PRODUCT
/ / Peak Plus: / / / / / / / / / / / / / /
- -------------------------------------------------------------------------------
/ / Product: / / / / / / / / / / / / / /
- -------------------------------------------------------------------------------
ANY PERSON WHO KNOWINGLY AND WITH INTENT TO DEFRAUD ANY INSURANCE COMPANY OR
OTHER PERSON FILES AN APPLICATION FOR INSURANCE CONTAINING ANY MATERIALLY FALSE
INFORMATION, OR CONCEALS FOR THE PUROSE OF MISLEADING INFORMATION CONCERNING
ANY FACT MATERIAL THER TO, COMMITS A FRAUDULENT INSURANCE ACT, WHICH IS A CRIME
GA-EA-1062 107183
04/12/2000
<PAGE>
<PAGE>
===============================================================================
| 5 | INITIAL PREMIUM AND ALLOCATION INFORMATION FUIG
- ----- ----
A. INITIAL INVESTMENT
1) Initial Premium Paid: $________ (If initital premium is either an exchange
or transfe, please indicate approximate premium.) Please make check payable
to Golden American Life Insurance Company
2) Fill in percentages for your initial investment allocation(s) in Column (A)
below
B. DOLLAR COST AVERAGING (DCA) OPTIONAL
1) Amount to be transferred monthly $_________ (Max: 1/12of premium allocated
to divisions below: 1/6 for 6 Month DCA)
2) Division or Allocation your transferred from: / /Limited Maturity Bond
Division / /Liquid Asset Division / /1 YR Fixed / / 6 Month DCA
3) Please indicate the divisions you wish to transfer to by filling in
percentage and dollar amounts in Column B below
INVESTMENT ADVISER ACCOUNT DIVISION A)INITIAL INVESTMENT B)DCA
- ------------------ ---------------- ------------------ ---
A I M CAPITAL CAPITAL APPRECIATION $________ ________% ______%
MANAGMENT, INC.
A I M CAPITAL STRATEGIC EQUITY $________ ________% ______%
MANAGMENT, INC.
ALLIANCE CAPITAL CAPITAL GROWTH $________ ________% ______%
MANAGMENT, INC.
BARING INTERNATIONAL GLOBAL FIXED INCOME $________ ________% ______%
INVESTMENT LIMITED
BARING INTERNATIONAL HARD ASSETS $________ ________% ______%
INVESTMENT LIMITED
BARING INTERNATIONAL DEVELOPING WORLD $________ ________% ______%
INVESTMENT LIMITED
CAPITAL GUARDIAN SMALL CAP $________ ________% ______%
TRUST COMPANY
CAPITAL GUARDIAN MANAGED GLOBAL $________ ________% ______%
TRUST COMPANY
CAPITAL GUARDIAN LARGE CAP $________ ________% ______%
TRUST COMPANY
EAGLE ASSET VALUE EQUITY $________ ________% ______%
MANAGEMENT, LLC
EII REALTY REAL ESTATE $________ ________% ______%
SECURITIES, INC.
EVERGREEN ASSET FOUNDATION $________ ________% ______%
MANAGEMENT, INC.
EVERGREEN ASSET GLOBAL LEADERS $________ ________% ______%
MANAGEMENT, INC.
EVERGREEN ASSET SMALL CAP VALUE $________ ________% ______%
MANAGEMENT, INC.
EVERGREEN ASSET EQUITY INDEX $________ ________% ______%
MANAGEMENT, INC
ING INVESTMENT LIMITED MATURITY BOND $________ ________% ______%
MANAGEMENT, LLC
ING INVESTMENT LIQUID ASSET $________ ________% ______%
MANAGEMENT, LLC
JANUS CAPITAL GROWTH $________ ________% ______%
CORPORATION
KAYNE ANDERSON RISING DIVS $________ ________% ______%
INVESTMENT MANAGEMENT,LLC
MFS INVESTMENT MID-CAP GROWTH $________ ________% ______%
MANAGEMENT
MFS INVESTMENT RESEARCH $________ ________% ______%
MANAGEMENT
MFS INVESTMENT TOTAL RETURN $________ ________% ______%
MANAGEMENT
SALOMON BROTHERS ALL-CAP $________ ________% ______%
ASSET MANAGEMENT, INC.
SALOMON BROTHERS INVESTORS $________ ________% ______%
ASSET MANAGEMENT, INC.
T. ROWE PRICE EQUITY INCOME $________ ________% ______%
ASSOCIATES INC.
T. ROWE PRICE FULLY MANAGED $________ ________% ______%
ASSOCIATES INC.
FIXED ALLOCATIONS: / /1 YR / /3 YR / /5 YR
/ /10 YR (Not Available in all
states) / /6 Month DCA
TOTAL = $________ 100% 100%
/1/ ONLY AVAILABLE WITH DVAPLUS AND ACCESS
GA-EA-1062 107183
04/12/2000
<PAGE>
<PAGE>
===============================================================================
| 6 | TELEPHONE REALLOCATION AUTHORIZATION FUIG
- ----- ----
(Owner's initials to validate agent)_______
I authorize Golden American to act upon reallocation instructions given by
electronic means or voice command from the agen that signs below and/or the
following individuals:______________________, _______________________; upon
furnishing his/her social security number or alternative identification.
Neither Golden American nor any person authorized by Golden American will be
responsible for any claim, loss, liability or expenses in connection with
reallocation instructions received by electronic means or voice command from
such person if Golden American or other such person acted on such electronic
means or voice command in good faith in reliance upon this authorization. Golden
American will continue to act upon this authorization until such time as the
person indicated above is no longer affiliated with the broker/dealer under
which my contract was purchased or until such time that I notify Golden American
in writing of a change in instructions.
===============================================================================
| 7 | TAX-QUALIFIED PLANS (If you are funding a qualified plan, please
- ----- specify type):
/ /IRA Indicate contribution amount and appropriate tax year ________________
/ /IRA Rollover
/ /SEP/IRA / /SAR SEP IRA / /401(B) TSA Transfer / /401(a) Plan
/ /CONDUIT IRA
/ /Roth IRA If transfer, provide original conversion date ___________
/ /Simple IRA Transfer Provide establishment date ____________
/ / Other _____________ Employer Name_____________________________
===============================================================================
| 8 | REPLACEMENT
- ----
Will the coverage applied for replace any existing annuity or life insurance
coverage? / / Yes (If yes, please fill in below) / / No
Company Name: Policy Number: Cash Value:
--------------------- ---------- ----------
===============================================================================
| 9 | PLEASE READ THE FOLLOWING STATEMENTS CAREFULLY AND SIGN BELOW:
- -----
BY SIGNING BELOW, I ACKNOWLEDGE RECEIPT OF THE PROSPECTUS. I AGREE
THAT, TO THE BEST OF MY KNOWLEDGE AND BELIEF, ALL STATEMENTS AND
ANSWERS IN THIS APPLICATION ARE COMPLETE AND TRUE AND MAY BE RELIED
UPON IN DETERMINING WHETHER TO ISSUE THE CONTRACT. MY ANSWERS WILL FORM
A PART OF ANY CONTRACT TO BE ISSUED, AND ONLY THE OWNER AND GOLDEN
AMERICAN HAVE THE AUTHORITY TO MODIFY THIS APPLICATION.
CONTRACTS AND POLICIES AND UNDERLYING SERIES SHARES OR SECURITIES
WHICH FUND CONTRACTS AND POLICIES ARE NOT INSURED BY THE FDIC OR ANY
OTHER AGENCY. THEY ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF ANY BANK
AND ARE NOT BANK GUARANTEED. ALSO, THEY ARE SUBJECT TO MARKET
FLUCTUATION, INVESTMENT RISK AND POSSIBLE LOSS OF PRINCIPAL INVESTED.
I UNDERSTAND THAT THE CONTRACT'S CASH SURRENDER VALUE, WHEN BASED
ON THE INVESTMENT EXPERIENCE OF A SEPARATE ACCOUNT DIVISION, MAY
INCREASE OR DECREASE ON ANY DAY AND THAT NO MINIMUM VALUE IS GUARANTEED.
THE CONTRACT'S COVERAGE IS IN ACCORD WITH MY ANTICIPATED FINANCIAL
OBJECTIVES.
I UNDERSTAND THAT ANY AMOUNT ALLOCATED TO THE FIXED ACCOUNT MAY BE SUBJECT
TO A MARKET VALUE ADJUSTMENT, WHICH MAY CAUSE THE VALUES TO INCREASE OR
DECREAS, PRIOR TO A SPECIFIED DATE OR DATES AS SPECIFIED INTHE CONTRACT.
MY SIGNATURE CERTIFIES, UNDER PENALTY OF PERJURY, THAT TEH TAXPAYER
IDENTIFICATION NUMBER PROVIDED IS CORRECT. I AM NOT SUBJECT TO BACKUP
WITHHOLDING BECAUSE: I AM EXEMPT; OR I HAVE NOT BEEN NOTIFIED THAT I AM
SUBJECT TO BACKUP WITHHOLDINGS FROM FAILURE TO REPORT ALL INTEREST
DIVIDENDS; OR I HAVE BEEN NOTIFIED THAT I AM NO LONGER SUBJECT TO BACKUP
WITHHOLDING. (STRIKE OUT THE PRECEDING SENTENCE IF SUBJECT TO BACKUP
WITHHOLDING.) THE IRS DOES NOT REQUIRE MY CONSENT TO ANY PROVISION OF THIS
DOCUMENT OTHER THAN THE CERTIFICATION REQUIRED TO AVOID BACKUP WITHHOLDING.
_______________________________________________________________________________
Signature of Owner Signed at (City, State) Date
_______________________________________________________________________________
Signature of Joint Owner (if applicable) Signed at (City, State) Date
_______________________________________________________________________________
Signature of Annuitant (if other than Signed at (City, State) Date
Owner)
===============================================================================
|10| SPECIAL REMARKS
- ----
===============================================================================
|11| FOR AGENT USE ONLY
- ----
DO YOU HAVE REASON TO BELIEVE THAT THE CONTRACT APPLIED FOR WILL REPLACE ANY
EXISTING ANNUITY OR LIFE INSURANCE COVERAGE?
/ / YES / / NO
Commission Alternative (select one): / / A / / B / / C / / D
Client Account No. (if applicable)_____________________
_______________________________________________________________________________
Agent Signature Print Agent Name Social Security # Broker/Dealer/Branch
GA-EA-1062 107183
04/12/2000
<PAGE>
<PAGE>
<PAGE>
<PAGE>
Exhibit 4(h)
|
| [APPLICATIONS appears down the left margin]
|
|
|
|
| A GOLDEN OPPORTUNITY FOR SELECT CLIENTS
|
| GoldenSelect/R/ Application
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| [GOLDENSELECT/R/ appears down left margin]
|
|
|
|
|
|
|
|
|
|
| Issued by Golden American Life Insurance Company
| Distributed by Directed Services, Inc., Member NASD
| GA-AA-1063 ING VARIABLE ANNUITIES
| 107185
|
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY DEFERRED VARIABLE ANNUITY
APPLICATION
P.O. Box 2700, West Chester, PA 19380-2700 Phone:(800) 366-0066
Express Mail: ING Variable Annuities 1475 Dunwoody Drive West Chester, PA 19380
===============================================================================
|1(A)| OWNER
- ------
Name: SSN# or Tax ID:
- -------------------------------------------------------------------------------
Permanent Address: City: State: Zip:
- -------------------------------------------------------------------------------
Date of Birth: Phone: EMail Address: Male / / Female / /
- -------------------------------------------------------------------------------
===============================================================================
|1(B)| JOINT OWNER(S) Relationship to Owner:
- ------ ----------------------
Name: SSN# or Tax ID:
- -------------------------------------------------------------------------------
Permanent Address: City: State: Zip:
- -------------------------------------------------------------------------------
Date of Birth: Phone: EMail Address: Male / / Female / /
- -------------------------------------------------------------------------------
===============================================================================
|2(A)| ANNUITANT (If other than owner)
- ------
Name: SSN# or Tax ID:
- -------------------------------------------------------------------------------
Permanent Address: City: State: Zip:
- -------------------------------------------------------------------------------
Date of Birth: Phone: EMail Address: Male / / Female / /
- -------------------------------------------------------------------------------
===============================================================================
|2(B)| CONTINGENT ANNUITANT (Optional)
- ------
Name: SSN# or Tax ID:
- -------------------------------------------------------------------------------
Permanent Address: City: State: Zip:
- -------------------------------------------------------------------------------
Date of Birth: Phone: EMail Address: Male / / Female / /
- -------------------------------------------------------------------------------
===============================================================================
| 3 | BENEFICIARY(S)
- ----- Percentage
Primary Name: Relationship to Owner: %
--------------- ----------------- ---------
Primary Name: Relationship to Owner: %
--------------- ----------------- ---------
Primary Name: Relationship to Owner: %
--------------- ----------------- ---------
Contingent Name: Relationship to Owner: %
--------------- -------------- ---------
Contingent Name: Relationship to Owner: %
--------------- -------------- ---------
===============================================================================
| 4 |
- -----
PRODUCT
- -------------------------------------------------------------------------------
/ / Peak Plus:
- -------------------------------------------------------------------------------
/ / Product: / / / / / / / / / / / / / /
- -------------------------------------------------------------------------------
ANY PERSON WHO KNOWINGLY AND WITH INTENT TO DEFRAUD ANY INSURANCE COMPANY OR
OTHER PERSON FILES AN APPLICATION FOR INSURANCE CONTAINING ANY MATERIALLY FALSE
INFORMATION, OR CONCEALS FOR THE PUROSE OF MISLEADING INFORMATION CONCERNING
ANY FACT MATERIAL THER TO, COMMITS A FRAUDULENT INSURANCE ACT, WHICH IS A CRIME
GA-AA-1063 107185
04/13/2000
<PAGE>
<PAGE>
===============================================================================
| 5 | INITIAL PREMIUM AND ALLOCATION INFORMATION
- -----
A. INITIAL INVESTMENT
1) Initial Premium Paid: $________ (If initital premium is either an exchange
or transfe, please indicate approximate premium.) Please make check payable
to Golden American Life Insurance Company
2) Fill in percentages for your initial investment allocation(s) in Column (A)
below
B. DOLLAR COST AVERAGING (DCA) OPTIONAL
1) Amount to be transferred monthly $_________ (Max: 1/12of premium allocated
to divisions below: 1/6 for 6 Month DCA)
2) Division or Allocation your transferred from: / /Limited Maturity Bond
Division / /Liquid Asset Division / /1 YR Fixed / / 6 Month DCA
3) Please indicate the divisions you wish to transfer to by filling in
percentage and dollar amounts in Column B below
INVESTMENT ADVISER ACCOUNT DIVISION A)INITIAL INVESTMENT B)DCA
- ------------------ ---------------- ------------------ ---
A I M CAPITAL CAPITAL APPRECIATION $________ ________% ______%
MANAGMENT, INC.
A I M CAPITAL STRATEGIC EQUITY $________ ________% ______%
MANAGMENT, INC.
ALLIANCE CAPITAL CAPITAL GROWTH $________ ________% ______%
MANAGMENT, INC.
BARING INTERNATIONAL GLOBAL FIXED INCOME $________ ________% ______%
INVESTMENT LIMITED
BARING INTERNATIONAL HARD ASSETS $________ ________% ______%
INVESTMENT LIMITED
BARING INTERNATIONAL DEVELOPING WORLD $________ ________% ______%
INVESTMENT LIMITED
CAPITAL GUARDIAN SMALL CAP $________ ________% ______%
TRUST COMPANY
CAPITAL GUARDIAN MANAGED GLOBAL $________ ________% ______%
TRUST COMPANY
CAPITAL GUARDIAN LARGE CAP $________ ________% ______%
TRUST COMPANY
EAGLE ASSET VALUE EQUITY $________ ________% ______%
MANAGEMENT, LLC
EII REALTY REAL ESTATE $________ ________% ______%
SECURITIES, INC.
EVERGREEN ASSET FOUNDATION $________ ________% ______%
MANAGEMENT, INC.
EVERGREEN ASSET GLOBAL LEADERS $________ ________% ______%
MANAGEMENT, INC.
EVERGREEN ASSET SMALL CAP VALUE $________ ________% ______%
MANAGEMENT, INC.
EVERGREEN ASSET EQUITY INDEX $________ ________% ______%
MANAGEMENT, INC
ING INVESTMENT LIMITED MATURITY BOND $________ ________% ______%
MANAGEMENT, LLC
ING INVESTMENT LIQUID ASSET $________ ________% ______%
MANAGEMENT, LLC
JANUS CAPITAL GROWTH $________ ________% ______%
CORPORATION
KAYNE ANDERSON RISING DIVS $________ ________% ______%
INVESTMENT MANAGEMENT,LLC
MFS INVESTMENT MID-CAP GROWTH $________ ________% ______%
MANAGEMENT
MFS INVESTMENT RESEARCH $________ ________% ______%
MANAGEMENT
MFS INVESTMENT TOTAL RETURN $________ ________% ______%
MANAGEMENT
SALOMON BROTHERS ALL-CAP $________ ________% ______%
ASSET MANAGEMENT, INC.
SALOMON BROTHERS INVESTORS $________ ________% ______%
ASSET MANAGEMENT, INC.
T. ROWE PRICE EQUITY INCOME $________ ________% ______%
ASSOCIATES INC.
T. ROWE PRICE FULLY MANAGED $________ ________% ______%
ASSOCIATES INC.
FIXED ALLOCATIONS: / /1 YR / /3 YR / /5 YR
/ /10 YR (Not Available in all
states) / /6 Month DCA
TOTAL = $________ 100% 100%
/1/ ONLY AVAILABLE WITH DVAPLUS AND ACCESS
GA-AA-1063 107185
04/13/2000
<PAGE>
<PAGE>
===============================================================================
| 6 | TELEPHONE REALLOCATION AUTHORIZATION
- ----- (Owner's initials to validate agent)_______
I authorize Golden American to act upon reallocation instructions given by
electronic means or voice command from the agen that signs below and/or the
following individuals:______________________, _______________________; upon
furnishing his/her social security number or alternative identification.
Neither Golden American nor any person authorized by Golden American will be
responsible for any claim, loss, liability or expenses in connection with
reallocation instructions received by electronic means or voice command from
such person if Golden American or other such person acted on such electronic
means or voice command in good faith in reliance upon this authorization. Golden
American will continue to act upon this authorization until such time as the
person indicated above is no longer affiliated with the broker/dealer under
which my contract was purchased or until such time that I notify Golden American
in writing of a change in instructions.
===============================================================================
| 7 | TAX-QUALIFIED PLANS (If you are funding a qualified plan, please
- ----- specify type):
/ /IRA Indicate contribution amount and appropriate tax year ________________
/ /IRA Rollover
/ /SEP/IRA / /SAR SEP IRA / /401(B) TSA Transfer / /401(a) Plan
/ /CONDUIT IRA
/ /Roth IRA If transfer, provide original conversion date ___________
/ /Simple IRA Transfer Provide establishment date ____________
/ / Other ________________________
===============================================================================
| 8 | REPLACEMENT
- ----
Will the coverage applied for replace any existing annuity or life insurance
coverage? / / Yes (If yes, please fill in below) / / No
Company Name: Policy Number: Cash Value:
--------------------- ---------- ----------
===============================================================================
| 9 | PLEASE READ THE FOLLOWING STATEMENTS CAREFULLY AND SIGN BELOW:
- -----
BY SIGNING BELOW, I ACKNOWLEDGE RECEIPT OF THE PROSPECTUS. I AGREE
THAT, TO THE BEST OF MY KNOWLEDGE AND BELIEF, ALL STATEMENTS AND
ANSWERS IN THIS APPLICATION ARE COMPLETE AND TRUE AND MAY BE RELIED
UPON IN DETERMINING WHETHER TO ISSUE THE CONTRACT. MY ANSWERS WILL FORM
A PART OF ANY CONTRACT TO BE ISSUED, AND ONLY THE OWNER AND GOLDEN
AMERICAN HAVE THE AUTHORITY TO MODIFY THIS APPLICATION.
CONTRACTS AND POLICIES AND UNDERLYING SERIES SHARES OR SECURITIES
WHICH FUND CONTRACTS AND POLICIES ARE NOT INSURED BY THE FDIC OR ANY
OTHER AGENCY. THEY ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF ANY BANK
AND ARE NOT BANK GUARANTEED. ALSO, THEY ARE SUBJECT TO MARKET
FLUCTUATION, INVESTMENT RISK AND POSSIBLE LOSS OF PRINCIPAL INVESTED.
I UNDERSTAND THAT THE CONTRACT'S CASH SURRENDER VALUE, WHEN BASED
ON THE INVESTMENT EXPERIENCE OF A SEPARATE ACCOUNT DIVISION, MAY
INCREASE OR DECREASE ON ANY DAY AND THAT NO MINIMUM VALUE IS GUARANTEED.
THE CONTRACT'S COVERAGE IS IN ACCORD WITH MY ANTICIPATED FINANCIAL
OBJECTIVES.
MY SIGNATURE CERTIFIES, UNDER PENALTY OF PERJURY, THAT TEH TAXPAYER
IDENTIFICATION NUMBER PROVIDED IS CORRECT. I AM NOT SUBJECT TO BACKUP
WITHHOLDING BECAUSE: I AM EXEMPT; OR I HAVE NOT BEEN NOTIFIED THAT I AM
SUBJECT TO BACKUP WITHHOLDINGS FROM FAILURE TO REPORT ALL INTEREST
DIVIDENDS; OR I HAVE BEEN NOTIFIED THAT I AM NO LONGER SUBJECT TO BACKUP
WITHHOLDING. (STRIKE OUT THE PRECEDING SENTENCE IF SUBJECT TO BACKUP
WITHHOLDING.) THE IRS DOES NOT REQUIRE MY CONSENT TO ANY PROVISION OF THIS
DOCUMENT OTHER THAN THE CERTIFICATION REQUIRED TO AVOID BACKUP WITHHOLDING.
_______________________________________________________________________________
Signature of Owner Signed at (City, State) Date
_______________________________________________________________________________
Signature of Joint Owner (if applicable) Signed at (City, State) Date
_______________________________________________________________________________
Signature of Annuitant (if other than Signed at (City, State) Date
Owner)
===============================================================================
|10| SPECIAL REMARKS
- ----
===============================================================================
|11| FOR AGENT USE ONLY
- ----
DO YOU HAVE REASON TO BELIEVE THAT THE CONTRACT APPLIED FOR WILL REPLACE ANY
EXISTING ANNUITY OR LIFE INSURANCE COVERAGE?
/ / YES / / NO
Commission Alternative (select one): / / A / / B / / C / / D
Client Account No. (if applicable)_____________________
_______________________________________________________________________________
Agent Signature Print Agent Name Social Security # Broker/Dealer/Branch
GA-AA-1063 107185
04/13/2000
<PAGE>
<PAGE>
<PAGE>
<PAGE>
EXHIBIT 5
ING VARIABLE ANNUITIES
MYLES R. TASHMAN
Executive Vice President,
General Counsel and Secretary
May 9, 2000
Members of the Board of Directors
Golden American Life Insurance Company
1475 Dunwoody Drive
West Chester, PA 19380-1478
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(f)
EVERGREEN VARIABLE ANNUITY TRUST
PARTICIPATION AGREEMENT
THIS AGREEMENT is made this ____ day of __________, 2000
between EVERGREEN VARIABLE ANNUITY TRUST, an open-end management
investment company organized as a Delaware business trust (the
"Trust"), and _________________________, a life insurance company
organized under the laws of the State of __________ (the ACompany"),
on its own behalf and on behalf of each segregated asset account of
the Company set forth on Schedule A, as may be amended from time to
time (the "Accounts").
W I T N E S S E T H:
WHEREAS, the Trust is registered as an open-end management
investment company under the Investment Company Act of 1940, as
amended (the "1940 Act"), and the offer and sale of its shares are
registered under the Securities Act of 1933, as amended (the "1933
Act"); and
WHEREAS, the Trust desires to act as an investment vehicle for
separate accounts established for variable life insurance policies
and variable annuity contracts to be offered by insurance companies
that have entered into participation agreements with the Trust (the
"Participating Insurance Companies"); and
WHEREAS, the beneficial interest in the Trust is divided into
several series of shares, each series representing an interest in a
particular managed portfolio of securities and other assets (the
"Portfolios"); and
WHEREAS, the Trust has obtained an order from the Securities and
Exchange Commission ("Commission") granting Participating Insurance
Companies and their separate account(s) exemptions from the
provisions of Section(s) 9(a), 13(a), 15(a) and 15(b) of the 1940 Act
and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent
necessary to permit shares of the Trust to be sold to and held by
variable annuity and variable life insurance separate accounts of
both affiliated and nonaffiliated life insurance companies and
certain qualified pension and retirement plans (the "Shared Trust
Exemptive Order"); and
WHEREAS, the Company has registered or will register under the
1933 Act certain variable life insurance policies and/or variable
annuity contracts identified by the form number(s) listed on Schedule
A, as may be amended from time to time (the "Contracts"); and
WHEREAS, the Company has registered or will register each
Account as a unit investment trust under the 1940 Act; and
WHEREAS, each Account is a duly organized, validly existing
segregated asset account, established by resolution of the Board of
Directors of the Company on the date shown for that Account on
Schedule A, to set aside and invest assets attributable to the
Contracts; and
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WHEREAS, to the extent permitted by applicable insurance laws
and regulations, the Company intends to purchase shares of the
Portfolios at net asset value on behalf of each Account to fund the
Contracts;
NOW, THEREFORE, in consideration of their mutual promises, the
parties agree as follows:
ARTICLE I
Sale of Trust Shares
1.1. The Trust shall make shares of its Portfolios available
to the Accounts at the net asset value next computed after receipt of
such purchase order by the Trust (or its agent), as established in
accordance with the provisions of the then current prospectus of the
Trust. Shares of a particular Portfolio of the Trust shall be
ordered in such quantities and at such times as determined by the
Company to be necessary to meet the requirements of the Contracts.
The trustees of the Trust (the "Trustees") 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 Trustees acting in good faith and in light of their
fiduciary duties under federal and any applicable state laws,
necessary and in the best interest of the shareholders of such
Portfolio.
1.2. The Trust will redeem any full or fractional shares of
any Portfolio when requested by the Company on behalf of an Account
at the net asset value next computed after receipt by the Trust (or
its agent) of the request for redemption, as established in
accordance with the provisions of the then current prospectus of the
Trust. The Trust shall make payment for such shares in the manner
established from time to time by the Trust, but in no event shall
payment be delayed for a greater period than is permitted by the 1940
Act.
1.3. For the purposes of Sections 1.1. and 1.2., the Trust
hereby appoints the Company as its agent for the limited purpose of
receiving and accepting purchase and redemption orders resulting from
investment in and payments under the Contracts. Receipt by the
Company shall constitute receipt by the Trust provided that: (a) such
orders are received by the Company in good order prior to the close
of the regular trading session of the New York Stock Exchange, and
(b) the Trust receives notice of such orders by 9:30 a.m., New York
time, on the next following Business Day. "Business Day" shall mean
any day on which the New York Stock Exchange is open for trading and
on which the Trust calculates its net asset value.
1.4. Purchase orders that are transmitted to the Trust in
accordance with Section 1.3. shall be paid for on the same Business
Day that the Trust receives notice of the order. Payments shall be
made in federal funds transmitted by wire.
2
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<PAGE>
1.5. The Trust shall furnish prompt notice to the Company of
any income dividends or capital gain distributions payable on shares
of any Portfolio. The Company hereby elects to receive all such
income dividends and capital gain distributions as are payable on a
Portfolio's shares in additional shares of that Portfolio. The Trust
shall notify the Company of the number of shares so issued as payment
of such dividends and distributions.
1.6 The Trust shall make the net asset value per share for each
Portfolio available to the Company on a daily basis as soon as
reasonably practical after the net asset value per share is
calculated and shall use its best efforts to make such net asset
value per share available by 7:00 p.m., New York time.
1.7. The Trust agrees that its shares will be sold only to
Participating Insurance Companies and their separate accounts and to
certain qualified pension and retirement plans to the extent
permitted by the Shared Trust Exemptive Order. No shares of any
Portfolio will be sold directly to the general public. The Company
agrees that the Trust shares will be used only for the purposes of
funding the Contracts and Accounts listed in Schedule A, as amended
from time to time.
1.8. The Trust agrees that all Participating Insurance
Companies shall have the obligations and responsibilities regarding
pass-through voting and conflicts of interest corresponding to those
contained in Section 2.12. and Article IV of this Agreement.
ARTICLE II
Obligations of the Parties
2.1. The Trust shall bear the costs of registering and
qualifying the Trust's shares, and of preparing and filing the
Trust's prospectus, registration statement, Trust sponsored proxy
materials (or similar materials such as voting instruction
solicitation materials), reports to shareholders, and all statements
and notices required by federal or state law. The Trust shall pay
all taxes on the issuance and/or transfer of the Trust's shares.
2.2. The Trust shall bear the printing costs (or duplicating
costs with respect to the statement of additional information)
associated with distributing the Trust's current prospectus,
statement of additional information, annual report, semi-annual
report, Trust sponsored proxy material or other shareholder
communications, including any amendments or supplements to any of the
foregoing, to the extent required to be provided by the Trust to its
then-current shareholders. The Trust shall not bear any costs of
preparing, printing, recording, taping or disseminating sales
literature or other promotional materials or the costs of printing
and mailing prospective Contract owners copies of the Trust's
prospectus, statement of additional information, periodic reports or
other printed materials.
3
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<PAGE>
2.3. The Trust shall provide the Company (at the Company's
expense) with as many copies of the Trust's current prospectus as the
Company may reasonably request for distribution to prospective
purchasers of Contracts. If requested by the Company in lieu
thereof, the Trust shall provide such documentation (including a
final copy of the current prospectus as set in type at the Trust's
expense) and other assistance as is reasonably necessary in order for
the Company once each year (or more frequently if the prospectus for
the Trust is amended) to have the prospectus for the Contracts and
the Trust's prospectus printed together in one document (at the
Company's expense).
2.4. The Company will bear the costs of registering and
qualifying the Accounts for sale, printing (or duplicating costs with
respect to the statement of additional information) and mailing costs
associated with the delivery of the Accounts' current prospectuses
and statements of additional information, private placement
memoranda, annual and semi-annual reports, Contracts, Contract
applications, sales literature or other promotional material, Account
sponsored proxy materials and voting solicitation instructions.
2.4. The Company will bear the responsibility and correlative
expense for administrative and support services for Contract owners.
The Trust recognizes the Company as the sole shareholder of shares of
the Trust issued under this Agreement.
2.5. The Company agrees and acknowledges that one of the
Trust's advisers, Evergreen Asset Management Corp. ("Evergreen
Asset"), is the sole owner of the name and mark "Evergreen" and that
all use of any designation comprised in whole or in part of Evergreen
(an "Evergreen Mark") under this Agreement shall inure to the benefit
of Evergreen Asset. Except as provided in Section 2.6., the Company
shall not use any Evergreen Mark on its own behalf or on behalf of
the Accounts or Contracts in any registration statement,
advertisement, sales literature or other materials relating to the
Accounts or Contracts without the prior written consent of Evergreen
Asset. Upon termination of this Agreement for any reason, the
Company shall cease all use of any Evergreen Mark(s) as soon as
reasonably practicable.
2.6. The Company shall furnish, or cause to be furnished, to
the Trust or its designee, a copy of each Contract prospectus or
statement of additional information in which the Trust or its
investment advisers are named prior to the filing of such document
with the Commission. The Company shall also furnish, or shall cause
to be furnished, to the Trust or its designee, each piece of sales
literature or other promotional material including private placement
memoranda, in which the Trust or its investment advisers are named,
at least fifteen Business Days prior to its use. No such material
shall be used if the Trust or its designee reasonably objects to such
use within fifteen Business Days after receipt of such material.
2.7. The Company will provide to the Trust at least one
complete copy of each report, solicitation for voting instructions,
application for exemption, request for no-action relief, and any
amendment to any of the above (or any amendment to the registration
statement, prospectus,
4
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statement of additional information, piece of sales literature or
other promotional material) that relates to the Contracts or the
Account, contemporaneously with the filing of the document with the
Commission, the NASD, or other regulatory authorities.
2.8. For purposes of this Article II, the phrase Asales
literature or other promotional material" includes, but is not
limited to, advertisements, newspapers, magazines, or other
periodicals, radio, television, telephone or tape recording,
videotape display, signs or billboards, motion pictures, or other
public media, 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, shareholder newsletters, seminar texts, reprints or
excerpts of any other advertisement, sales literature, or published
article), educational or training materials or other communications
distributed or made generally available to some or all agents or
employees, and registration statements, prospectuses, statements of
additional information, shareholder reports and proxy materials.
2.9. The Company shall not give any information or make any
representations or statements on behalf of the Trust or concerning
the Trust or its investment advisers in connection with the sale of
the Contracts other than information or representations contained in
and accurately derived from the registration statement or prospectus
for the Trust shares (as such registration statement and prospectus
may be amended or supplemented from time to time), annual and semi-
annual reports of the Trust, Trust-sponsored proxy statements, or in
sales literature or other promotional material approved by the Trust
or its designee, except as required by legal process or regulatory
authorities or with the written permission of the Trust or its
designee.
2.10. The Trust shall furnish or cause to be furnished, to the
Company or its designee, a copy of each Trust prospectus or statement
of additional information in which the Company or the Accounts are
named prior to the filing of such document with the Commission. The
Trust shall furnish, or shall cause to be furnished, to the Company
or its designee, each piece of sales literature or other promotional
material in which the Company or the Accounts are named, at least
fifteen Business Days prior to its use. No such material shall be
used if the Company or its designee reasonably objects to such use
within fifteen Business Days after receipt of such material.
2.11. The Trust shall not give any information or make any
representations or statements on behalf of the Company or concerning
the Company, the Accounts or the Contracts other than information or
representations contained in and accurately derived from the
registration statement, prospectus or private placement memorandum
for the Contracts (as such registration statement, prospectus or
private placement memorandum may be amended or supplemented from time
to time), or in materials approved by the Company for distribution
including sales literature or other promotional materials, except as
required by legal process or regulatory authorities or with the
written permission of the Company.
5
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2.12. At the request of either party to this Agreement, the
other party will make available to the requesting party's independent
auditors and/or representatives of the appropriate regulatory
agencies, all records, data and access to operating procedures that
may be reasonably requested.
2.13. So long as, and to the extent that the Commission
interprets the 1940 Act to require pass-through voting privileges for
variable contract owners, the Company will provide pass-through
voting privileges to owners of policies whose cash values are
invested, through the Accounts, in shares of the Trust and shall
distribute all proxy material furnished by the Trust. The Trust
shall require all Participating Insurance Companies to calculate
voting privileges in the same manner and the Company shall be
responsible for assuring that the Accounts calculated voting
privileges in the manner established by the Trust. With respect to
each Account, the Company will vote shares of the Trust held by the
Account and for which no timely voting instructions from policy
owners are received as well as shares it owns that are held by that
Account, in the same proportion as those shares for which voting
instructions are received. The Company and its agents will in no way
recommend or oppose or interfere with the solicitation of proxies for
Trust shares held by Contract owners without the prior written
consent of the Trust, which consent may be withheld in the Trust's
sole discretion.
ARTICLE III
Representations and Warranties
3.1. The Company represents and warrants that it is an
insurance company duly organized and in good standing under the laws
of the State of ____________ and that it has legally and validly
established each Account as a segregated asset account under such law
on the dates set forth in Schedule A.
3.2. The Company represents and warrants that it has registered
or, prior to any issuance or sale of the Contracts, will register
each Account as a unit investment trust in accordance with the
provisions of the 1940 Act to serve as a segregated investment
account for the Contracts.
3.3. The Company represents and warrants that the Contracts
are, or will be, registered under the 1933 Act to the extent required
by the 1933 Act prior to any issuance or sale of the Contracts, the
Contracts will be issued and sold in compliance in all material
respects with all applicable federal and state law, and the sale of
the Contracts will comply in all material respects with state
insurance suitability requirements.
3.4. The Trust represents and warrants that it is duly
organized and validly existing under the laws of the State of
Delaware.
3.5. The Trust represents and warrants that the Trust shares
offered and sold pursuant to this Agreement will be registered under
the 1933 Act and that the Trust is registered under the
6
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1940 Act prior to any issuance or sale of such shares. The Trust
shall amend its registration statement 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 Trust shall register and
qualify its shares for sale in accordance with the laws of the
various states only if and to the extent deemed advisable by the Trust.
3.6. The Trust represents and warrants that the investments of
each Portfolio will comply with the diversification requirements set
forth in Section 817(h) of the Internal Revenue Code of 1986, as
amended (the "Code"), and the rules and regulations thereunder. In
the event of a breach of this Section 3.6 by the Trust, it will take
all reasonable steps to: (1) immediately notify the Company of such
breach, and (2) adequately diversify the Trust so as to achieve
compliance within the grace period afforded by Section 1.817-5(b) of
the rules and regulations under the Code.
3.7. The Company represents that the Contracts are currently
treated as annuity or life insurance contracts under applicable
provisions of the Code and warrants and agrees that it will make
every effort to maintain such treatment and that it will notify the
Trust 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.
ARTICLE IV
Potential Conflicts
4.1. The parties acknowledge that the Trust's shares may be
made available for investment to other Participating Insurance
Companies. In such event, the Trustees will monitor the Trust for
the existence of any material irreconcilable conflict between the
interests of the contract owners of all Participating Insurance
Companies. A material irreconcilable conflict may arise for a
variety of reasons, including: (a) an action by any state insurance
regulatory or other 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 Trustees shall promptly
inform the Company if they determine that a material irreconcilable
conflict exists and the implications thereof. The Trustees shall
have sole authority to determine whether a material irreconcilable
conflict exists and their determination shall be binding upon the
Company.
4.2. The Company agrees to promptly report any potential or
existing conflicts of which it is aware to the Trustees. The Company
will assist the Trustees in carrying out their
7
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responsibilities under the Shared Trust Exemptive Order and this
Article IV by providing the Trustees with all information reasonably
necessary for them to consider any issues raised including, but not
limited to, information as to a decision by the Company to disregard
Contract owner voting instructions.
4.3. If it is determined by a majority of the Trustees, or a
majority of the disinterested Trustees, that a material
irreconcilable conflict exists that affects the interests of Contract
owners, the Company shall, in cooperation with other Participating
Insurance Companies whose contract owners are also affected, at its
expense and to the extent reasonably practicable (as determined by
the Trustees) take whatever steps are necessary to remedy or
eliminate the material irreconcilable conflict, which steps could
include: (a) withdrawing the assets allocable to some or all of the
Accounts from the Trust or any Portfolio and reinvesting such assets
in a different investment medium, including (but not limited to)
another Portfolio of the Trust, or submitting the question of whether
or not 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 (b) establishing a new registered
management investment company or managed separate account and
obtaining any necessary approvals or orders of the Commission in
connection therewith.
4.4. 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
Trust's election, to withdraw the affected Account's investment in
the Trust and terminate this Agreement with respect to such 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 Trustees. Any such withdrawal and termination must
take place within six (6) months after the Trust gives written notice
that this provision is being implemented. Until the end of such six
(6) month period, the Trust shall continue to accept and implement
orders by the Company for the purchase and redemption of shares of
the Trust.
4.5. If any 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
Trust and terminate this Agreement with respect to such Account
within six (6) months after the Trust gives written notice that it
has determined that such decision has created a material
irreconcilable 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 Trustees. Until the end of such six (6) month period,
the Trust shall continue to accept and implement orders by the
Company for the purchase and redemption of shares of the Trust.
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4.6. For purposes of Sections 4.3. through 4.5. of this
Agreement, a majority of the disinterested Trustees shall determine
whether any proposed action adequately remedies any material
irreconcilable conflict. The Company shall not be required by
Section 4.3 to establish a new funding medium for the Contracts if
any offer to do so has been declined by vote of a majority of
Contract owners materially adversely affected by the material
irreconcilable conflict. In the event that the Trustees determine
that any proposed action does not adequately remedy any material
irreconcilable conflict, then the Company will withdraw the Account's
investment in the Trust and terminate this Agreement within six (6)
months after the Trust gives written notice 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 Trustees.
4.7. The Company shall at least annually submit to the Trustees
such reports, materials or data as the Trustees may reasonably
request so that the Trustees may fully carry out the duties imposed
upon them by the Shared Trust Exemptive Order and this Article IV.
Said reports, materials and data shall be submitted more frequently
if deemed appropriate by the Trustees.
4.8. 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 and/or shared funding (as defined in the Shared
Trust Exemptive Order) on terms and conditions materially different
from those contained in the Shared Trust Exemptive Order, then the
Trust 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.
ARTICLE V
Indemnification
5.1. The Company agrees to indemnify and hold harmless the
Trust and each of its Trustees, officers, employees and agents, and
each person, if any, who controls the Trust within the meaning of
Section 15 of the 1933 Act (collectively, the AIndemnified Parties"
for purposes of this Section 5.1.) against any and all losses,
claims, damages, liabilities (including amounts paid in settlement
with the written consent of the Company) or expenses (including the
reasonable costs of investigating or defending any alleged loss,
claim, damage, liability or expense and reasonable legal counsel fees
incurred in connection therewith) (collectively, "Losses"), to which
the Indemnified Parties may become subject under any statute or
regulation, or at common law or otherwise, insofar as such Losses are
related to the sale, acquisition, or redemption of the Trust's shares
or the Contracts and:
(a) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in a
registration statement, prospectus or private placement
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memorandum for the Contracts or in the Contracts themselves or in sales
literature generated or approved by the Company relating to the
Contracts or Accounts (or any amendment or supplement to any of the
foregoing) (collectively, "Company Documents"), or arise out of or
are based upon the omission or the alleged omission to state therein
a material fact required to be stated therein or necessary to make
the statements therein not misleading, provided that this indemnity
shall not apply as to any Indemnified Party if such statement or
omission or such alleged statement or omission was made in reliance
upon and was accurately derived from written information furnished to
the Company by or on behalf of the Trust for use in Company Documents
or otherwise for use in connection with the sale of the Contracts or
Trust shares; or
(b) arise out of or result from statements or
representations (other than statements or representations contained
in and accurately derived from Trust Documents as defined in Section
5.2.(a)) or wrongful conduct of the Company or persons under its
control, with respect to the sale, distribution or acquisition of the
Contracts or Trust shares; or
(c) arise out of or result from any untrue statement or
alleged untrue statement of a material fact contained in Trust
Documents as defined in Section 5.2.(a) or the omission or alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading if
such statement or omission was made in reliance upon and accurately
derived from written information furnished to the Trust by or on
behalf of the Company; or
(d) arise out of or result from any failure by the Company
to provide the services or furnish the materials required under the
terms of this Agreement; or
(e) arise out of or result from any material breach of any
representation, warranty or agreement made by the Company in this
Agreement or arise out of or result from any other material breach of
this Agreement by the Company; or
(f) arise out of or result from negligence or wrongful
conduct in the Company's administration of the Accounts or the
Contracts.
5.2. The Trust agrees to indemnify and hold harmless the
Company and each of its directors, officers, employees and agents and
each person, if any, who controls the Company within the meaning of
Section 15 of the 1933 Act (collectively, the "Indemnified Parties"
for purposes of this Section 5.2.) against any and all losses,
claims, damages, liabilities (including amounts paid in settlement
with the written consent of the Trust) or expenses (including the
reasonable costs of investigating or defending any alleged loss,
claim, damage, liability or expense and reasonable legal counsel fees
incurred in connection therewith) (collectively, "Losses"), to which
the Indemnified Parties may become subject under any statute or
regulation, or at common law or otherwise, insofar as such Losses are
related to the sale, acquisition, or redemption of the Trust's shares
or the Contracts and:
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(a) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the
registration statement or prospectus for the Trust (or any amendment
or supplement thereto), (collectively, "Trust Documents"), or arise
out of or are based upon the omission or the alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, provided,
that this indemnity shall not apply as to any Indemnified Party if
such statement or omission or such alleged statement or omission was
made in reliance upon and was accurately derived from written
information furnished to the Trust by or on behalf of the Company for
use in Trust Documents or otherwise for use in connection with the
sale of the Contracts or Trust shares; or
(b) arise out of or result from statements or
representations (other than statements or representations contained
in and accurately derived from Company Documents) or wrongful conduct
of the Trust or persons under its control, with respect to the sale,
distribution or acquisition of the Contracts or Trust shares; or
(c) arise out of or result from any untrue statement or
alleged untrue statement of a material fact contained in Company
Documents or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading if such statement or omission was
made in reliance upon and accurately derived form written information
furnished to the Company by or on behalf of the Trust; or
(d) arise out of or result from any failure by the Trust to
provide the services or furnish the materials required under the
terms of this Agreement; or
(e) arise out of or result from any material breach of any
representation, warranty or agreement made by the Trust in this
Agreement or arise out of or result from any other material breach of
this Agreement by the Trust.
5.3. Neither the Company nor the Trust shall be liable under
the indemnification provisions of Section 5.1. or 5.2., as
applicable, with respect to any Losses incurred or assessed against
an indemnified party that arise from such indemnified party's willful
misfeasance, bad faith or gross negligence in the performance of such
indemnified party's duties or by reason of such indemnified party's
reckless disregard of obligations or duties under this Agreement.
5.4. Neither the Company nor the Trust shall be liable under
the indemnification provisions of Section 5.1. or 5.2., as
applicable, with respect to any claim made against an indemnified
party unless such indemnified party shall have notified the other
party in writing within a reasonable time after the summons, or other
first written notification, giving information of the nature of the
claim which shall have been served upon or otherwise received by such
indemnified party (or after such indemnified party shall have
received notice of service upon or other notification to any
designated agent), but failure to notify the party against whom
indemnification is sought of any such claim shall not relieve that
party from any liability which it may have to the indemnified party
in the absence of Sections 5.1. and 5.2. except to the extent
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that the indemnifying party has been prejudiced by such failure to give
notice.
5.5. In case any such action is brought against the indemnified
parties, the indemnifying party shall be entitled to participate, at
its own expense, in the defense of such action. The indemnifying
party also shall be entitled to assume the defense thereof, with
counsel reasonably satisfactory to the party named in the action.
After notice from the indemnifying party to the indemnified party of
an election to assume such defense, the indemnified party shall bear
the fees and expenses of any additional counsel retained by it, and
the indemnifying party will not be liable to the indemnified 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.
ARTICLE VI
Termination
6.1. This Agreement shall continue in full force and effect
until the first to occur of:
(a) termination by any party for any reason by six (6) months
advance written notice delivered to the other party; or
(b) termination by the Company by written notice to the Trust
with respect to any Portfolio based upon the Company's determination
that shares of such Portfolio are not reasonably available to meet
the requirements of the Contracts or not consistent with the
Company's obligations to Contract owners; provided, however, that
such a termination shall apply only to the Portfolio not reasonably
available and the Trust shall have ninety (90) days from the initial
notification by the Company of the deficiency to correct such
deficiency. If not cured within ninety (90) days, prompt written
notice of the election to terminate for such cause shall again be
furnished by the Company to the Trust; or
(c) termination by the Company by written notice to the Trust
with respect to any Portfolio in the event such 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 the Company; or
(d) termination by the Company by written notice to the Trust
with respect to any Portfolio in the event that the Trust ceases to
qualify as a Regulated Investment Company under Subchapter M of the
Code or any independent or resulting failure under Section 817
of the Code, or under any successor or similar provision of either,
or if the Company reasonably believes that the Trust may fail to so
qualify; or
(e) termination by the Trust by written notice to the Company if
the Trust shall
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determine, in its sole judgment exercised in good faith, that the
Company and/or its affiliated companies has suffered a material
adverse change in its business, operations, financial condition
or prospects since the date of this Agreement or is the subject
of material adverse publicity and that material adverse change
or material adverse publicity will have a material adverse impact
upon the business and operations of the Company or the Trust; but
no such termination shall be effective under this subsection (e)
until the Company has been afforded a reasonable opportunity to
respond to a statement by the Trust concerning the reason for notice
of termination hereunder; or
(f) termination by the Company by written notice to the Trust if
the Company shall determine, in its sole judgment exercised in good
faith, that either the Trust or an investment adviser to the Trust
has suffered a material adverse change in its business, operations,
financial condition or prospects since the date of this Agreement or
is the subject of material adverse publicity and that material
adverse change or material adverse publicity will have a material
adverse impact upon the business and operations of the Trust; but no
such termination shall be effective under this subsection (f) until
the Trust has been afforded a reasonable opportunity to respond to a
statement by the Company concerning the reason for notice of
termination hereunder; or
(g) termination by the Trust in the event that formal
administrative proceedings are instituted against the Company by the
NASD, the Commission, an insurance commissioner or any other
regulatory body regarding the Company's duties under this Agreement
or related to the sale of the Contracts, the operation of any
Account, or the purchase of the Trust's shares; provided, however,
that the Trust determines in its sole judgement exercised in good
faith, that any such administrative proceedings will have a material
adverse effect upon the ability of the Company to perform its
obligations under this Agreement; or
(h) termination by the Company in the event that formal
administrative proceedings are instituted against the Trust by the
NASD, the Commission, any state securities or insurance department or
any other regulatory body regarding the Trust's duties under this
Agreement, provided, however, that the Company determines in its sole
judgement exercised in good faith, that any such administrative
proceedings will have a material adverse effect upon the ability of
the Trust to perform its obligations under this Agreement.
6.2. Notwithstanding any termination of this Agreement, the
Trust shall, at the option of the Company, continue to make available
additional shares of the Trust (or any Portfolio) pursuant to the
terms and conditions of this Agreement for all Contracts in effect on
the effective date of termination of this Agreement, provided that
the Company continues to pay the costs set forth in Article II.
6.3. The provisions of Article V shall survive the termination
of this Agreement, and the provisions of Article IV and Section 2.12.
shall survive the termination of this Agreement as long as shares of
the Trust are held on behalf of Contract owners in accordance with
Section 6.2.
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ARTICLE VII
Notices
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 Trust:
- ---------------
Evergreen Funds
200 Berkeley Street
Boston, Massachusetts 02116-9000
Attention: Legal Department
If to the Company:
- -----------------
ARTICLE VIII
Miscellaneous
8.1. 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.
8.2. This Agreement may be executed simultaneously in two or
more counterparts, each of which taken together shall constitute one
and the same instrument.
8.3. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the
remainder of the Agreement shall not be affected thereby.
8.4. This Agreement shall be construed and the provisions
hereof interpreted under and in accordance with the laws of the
Commonwealth of Massachusetts.
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8.5. The parties to this Agreement acknowledge and agree that
all liabilities of the Trust arising directly or indirectly under
this Agreement, of any and every nature whatsoever, shall be
satisfied solely out of the assets of the Trust and that no Trustee,
officer, agent or holder of shares of beneficial interest of the
Trust shall be personally liable for any such liabilities.
8.6. Each party shall cooperate with each other party and all
appropriate governmental authorities (including without limitation
the Commission, the NASD and state insurance regulators) and shall
permit 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.
8.7. The rights, remedies and obligations contained in this
Agreement are cumulative and are in addition to any and all rights,
remedies and obligations, at law or in equity, which the parties
hereto are entitled to under state and federal laws.
8.8. The parties to this Agreement acknowledge and agree that
this Agreement shall not be exclusive in any respect.
8.9. This Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors and assigns,
provided that no party may assign this Agreement without the prior
written consent of the other party.
8.10. No provisions of this Agreement may be amended or
modified in any manner except by a written agreement properly
authorized and executed by both parties.
IN WITNESS WHEREOF, the parties have each caused this Agreement
to be executed in its name and on its behalf by its duly authorized
representative as of the date and year first above written.
INSURANCE COMPANY EVERGREEN VARIABLE ANNUITY TRUST
- -------------
By: By:
--------------------- ---------------------
Name: Name:
Title: Title:
15
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SCHEDULE A
Separate Accounts, Contracts and Associated Portfolios
------------------------------------------------------
Name of Separate Accounts and Date
Established by Board of Directors
- ---------------------------------
Contracts Funded by Separate Account and Form Number
- ----------------------------------------------------
Designated Portfolios
- ---------------------
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EXHIBIT 10(g)
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SURPLUS NOTE
Golden American Life Insurance Company agrees to pay Equitable of
Iowa Companies, an Iowa corporation, the sum of $25 million
($25,000,000.00) plus interest at the rate of 8.25% per annum from
the date hereof, December 17, 1996 until paid. In any event, this
note will mature on December 17, 2026.
This Surplus Note and accrued interest thereon shall be subordinate
to payments due to policyholders, claimant and beneficiary claims, as
well as debts owed to all other classes of debtors of Golden American
Life Insurance Company in the event of (a) the institution of
bankruptcy, reorganization, insolvency or liquidation proceedings by
or against Golden American Life Insurance Company, or (b) the
appointment of a Trustee, receiver or other Conservator for a
substantial part of Golden American Life Insurance Company
properties.
Any payments made shall first apply to accrued interest, and the
balance of such payment shall apply to reduce the principal of this
Note.
Any payment of principal and/or interest made shall be subject to the
prior approval of the Delaware Insurance Commissioner. If the
Commissioner has not approved payment of principal to retire the note
prior to its maturity date, the maturity date will be automatically
extended until such time as the Commissioner authorizes payment of
the final balance of principal.
Golden American Life Insurance Company hereby waives presentment and
notice of dishonor.
In witness whereof, Golden American Life Insurance Company has caused
this Note to be executed and delivered.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
By: /s/ Terry L. Kendall
---------------------------------
Terry L. Kendall, President and CEO
Attest by:
/s/ Myles R. Tashman
- ------------------------------
Myles R. Tashman
Executive Vice President and
General Counsel
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EXHIBIT 10(h)
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SURPLUS NOTE
Golden American Life Insurance Company agrees to pay Equitable Life
Insurance Company of Iowa corporation, the sum of $60 million
($60,000,000.00) plus interest at the rate of 7.25% per annum from the
date hereof, December 30, 1998 until paid. In any event, this note
will mature on December 29, 2028.
This Surplus Note and accrued interest thereon shall be subordinate to
payments due to policyholders, claimant and beneficiary claims, as well
as debts owed to all other classes of debtors, other than surplus note
holders, of Golden American Life Insurance Company in the event of (a)
the institution of bankruptcy, reorganization, insolvency or
liquidation proceedings by or against Golden American Life Insurance
Company, or (b) the appointment of a Trustee, receiver or other
Conservator for a substantial part of Golden American Life Insurance
Company properties.
Any payments made shall first apply to accrued interest, and the
balance of such payment shall apply to reduce the principal of this
Note.
Any payment of principal and/or interest made shall be subject to the
prior approval of the Delaware Insurance Commissioner. If the
Commissioner has not approved payment of principal to retire the note
prior to its maturity date, the maturity date will be automatically
extended until such time as the Commissioner authorizes payment of the
final balance of principal.
Golden American Life Insurance Company hereby waives presentment and
notice of dishonor.
In witness whereof, Golden American Life Insurance Company has caused
this Note to be executed and delivered.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
By: /s/ Stephen J. Preston
--------------------------------
Stephen J. Preston, Executive
Vice President
Attest by:
/s/ David L. Jacobson
- -------------------------
David L. Jacobson
Senior Vice President and
Assistant Secretary
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EXHIBIT 10(i)
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SURPLUS NOTE
Golden American Life Insurance Company agrees to pay ING America
Insurance Holdings, Inc. a Delaware corporation, the sum of $75 million
($75,000,000.00) plus interest at the rate of 7.75% per annum from the
date hereof, September 30, 1999 until paid. In any event, this note
will mature on September 29, 2029.
This Surplus Note and accrued interest thereon shall be subordinate to
payments due to policyholders, claimant and beneficiary claims, as well
as debts owed to all other classes of debtors, other than surplus note
holders, of Golden American Life Insurance Company in the event of (a)
the institution of bankruptcy, reorganization, insolvency or
liquidation proceedings by or against Golden American Life Insurance
Company, or (b) the appointment of a Trustee, receiver or other
Conservator for a substantial part of Golden American Life Insurance
Company properties.
Any payments made shall first apply to accrued interest, and the
balance of such payment shall apply to reduce the principal of this
Note.
Any payment of principal and/or interest made shall be subject to the
prior approval of the Delaware Insurance Commissioner. If the
Commissioner has not approved payment of principal to retire the note
prior to its maturity date, the maturity date will be automatically
extended until such time as the Commissioner authorizes payment of the
final balance of principal.
Golden American Life Insurance Company hereby waives presentment and
notice of dishonor.
In witness whereof, Golden American Life Insurance Company has caused
this Note to be executed and delivered.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
By: /s/ Stephen J. Preston
--------------------------------
Stephen J. Preston, Executive
Vice President
Attest by:
/s/ David L. Jacobson
- --------------------------
David L. Jacobson
Senior Vice President and
Assistant Secretary
<PAGE>
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EXHIBIT 10(l)
SERVICES AGREEMENT
The terms and conditions of this Services Agreement between
Evergreen Asset Management Corp. ("EAMC"), First Capital Group
("FCG") and Golden American Life Insurance Company (the "Company")
are effective as of XXXXX, 2000.
WHEREAS, the Company and Evergreen Variable Annuity Trust (the
"Trust") have entered into a Participation Agreement dated XXXXX,
2000, as may be amended from time to time (the "Participation
Agreement"), pursuant to which the Company, on behalf of certain of
its separate accounts (the "Separate Accounts"), purchases shares
("Shares") of certain Portfolios of the Trust ("Portfolios") to serve
as an investment vehicle under certain variable annuity and/or
variable life insurance contracts ("Variable Contracts") offered by
the Company, which Portfolios may be one of several investment
options available under the Variable Contracts; and
WHEREAS, EAMC and FCG recognize that they will derive
substantial savings in administrative expenses by virtue of having a
sole shareholder rather than multiple shareholders in connection with
each Separate Account's investments in the Portfolios, and that in
the course of soliciting applications for Variable Contracts issued
by the Company and in servicing owners of such Variable Contracts,
the Company will provide information about the Trust and its
Portfolios from time to time, answer questions concerning the Trust
and its Portfolios, including questions respecting Variable Contract
owners' interests in one or more Portfolios, and provide services
respecting investments in the Portfolios; and
WHEREAS, EAMC and FCG wish to compensate the Company for the
efforts of the Company in providing written and oral information and
services regarding the Trust to Variable Contract owners; and
WHEREAS, the following represents the collective intention and
understanding of the service fee agreement between EAMC, FCG and the
Company.
NOW, THEREFORE, in consideration of their mutual promises, the
Company, EAMC and FCG agree as follows:
1. Services. The Company and/or its affiliates agree to provide
services ("Services") to owners of Variable Contracts including, but
not limited to: teleservicing support in connection with the
Portfolios; delivery of current Trust private placement memoranda,
reports, notices, proxies and proxy statements, as applicable, and
other informational materials; facilitation of the tabulation of
Variable Contract owners' votes in the event of a Trust shareholder
vote; maintenance of Variable Contract records reflecting Shares
purchased and redeemed and Share balances, and the conveyance of that
information to the Trust or EAMC, with regard to the VA Foundation
Fund, the VA Global Leaders Fund and the VA Small Cap Value Fund or
FCG with regard to the VA Equity Index Fund, as may be reasonably
requested; provision of support services, including providing
information about the Trust and its Portfolios and answering
questions concerning the Trust and its Portfolios, including
questions respecting Variable Contract owners' interests in one or
more Portfolios; provision and administration of Variable
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Contract features for the benefit of Variable Contract owners in
connection with the Portfolios, which may include fund transfers,
dollar cost averaging, asset allocation, portfolio rebalancing,
earnings sweep, and pre-authorized deposits and withdrawals; and
provision of other services as may be agreed upon from time to time.
2. Compensation. In consideration of the Services, EAMC
agrees to pay to the Company a service fee at an annual rate equal to
fifteen (15) basis points (0.15%) of the average daily value of the
Shares held in the Separate Accounts investing in the VA Foundation
Fund, the VA Global Leaders Fund and the VA Small Cap Value Fund. In
consideration of the Services, FCG agrees to pay to the Company a
service fee at an annual rate equal to fifteen (15) basis points
(0.15%) of the average daily value of the Shares held in the Separate
Account investing in the VA Equity Index Fund. Such payments will be
made monthly in arrears. For purposes of computing the payment to the
Company under this paragraph 2, the average daily value of Shares
held in the Separate Accounts over a monthly period shall be computed
by totaling such Separate Accounts' aggregate investment (Share net
asset value multiplied by total number of Shares held by such
Separate Accounts) on each business day during the calendar month,
and dividing by the total number of business days during such month.
The payment to the Company under this paragraph 2 shall be calculated
by EAMC and FCG at the end of each calendar month and will be paid to
the Company within 30 days thereafter. Payment will be accompanied
by a statement showing the calculation of the monthly amounts payable
by EAMC and FCG and such other supporting data as may be reasonably
requested by the Company.
3. Term. This Services Agreement shall remain in full force
and effect for an initial term of one year, and shall automatically
renew for successive one year periods. This Services Agreement may
be terminated by either party hereto upon 30 days written notice to
the other. This Services Agreement shall terminate automatically
upon the redemption of all Shares held in the Separate Accounts, upon
termination of the Participation Agreement, upon a material,
unremedied breach of the Participation Agreement, as to a Portfolio
upon termination of the investment advisory agreement between the
Trust, on behalf of such Portfolio, and EAMC or FCG, as applicable,
or upon assignment of the Participation Agreement by either the
Company, EAMC or FCG. Notwithstanding the termination of this
Services Agreement, EAMC and FCG will continue to pay the applicable
service fees in accordance with paragraph 2 so long as net assets of
the Separate Accounts remain in a Portfolio, provided such continued
payment is permitted in accordance with applicable law and
regulation.
4. Amendment. This Services Agreement may be amended only upon
mutual agreement of the parties hereto in writing.
5. Effect on Other Terms, Obligations and Covenants. Nothing
herein shall amend, modify or supersede any contractual terms,
obligations or covenants among or between any of the Company, EAMC,
FCG or the Trust previously or currently in effect, including those
contractual terms, obligations or covenants contained in the
Participation Agreement.
-2-
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<PAGE>
In witness whereof, the parties have caused their duly
authorized officers to execute this Services Agreement.
EVERGREEN ASSET MANAGEMENT CORP.
--------------------------------------
By:
Title:
Date:
FIRST CAPITAL GROUP
--------------------------------------
By:
Title:
Date:
GOLDEN AMERICAN LIFE INSURANCE COMPANY
--------------------------------------
By:
Title:
Date:
-3-
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EXHIBIT 23(a)
SUTHERLAND
ASBILL & 1275 Pennsylvania Avenue, N.W.
BRENNAN LLP Washington, D.C. 20004-2415
Attorneys at Law Tel: (202) 383-0100
Fax: (202) 637-3593
www.sablaw.com
May 9, 2000
STEPHEN E. ROTH
DIRECT LINE: (202) 383-0158
Internet: [email protected]
VIA EDGAR
- ---------
Board of Directors
Golden American Life Insurance Company
1475 Dunwoody Drive
West Chester, PA 19380-1478
Ladies and Gentlemen:
We hereby consent to the reference to our name under the caption
"Legal Matters" in the Prospectus filed as part of the Pre-Effective
Amendment No. 1 of the registration statement on Form S-1 for Golden
American Life Insurance Company (File No. 333-30186). 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
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EXHIBIT 23(b)
Exhibit 23(b) - Consent of Ernst & Young LLP, Independent Auditors
We consent to the reference to our firm under the caption "Independent
Auditors" and to the use of our report dated February 25, 2000, 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. 333-30180) filed with the Securities
and Exchange Commission contemporaneously with this Registration Statement.
We also consent to the use of our report dated February 4, 2000, with
respect to the financial statements of Golden American Life Insurance
Company, and to the reference to our firm under the caption "Experts"
in the Prospectus included in this Registration Statement
(Form S-1 No. 333-30186) 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
May 4, 2000
<PAGE>
<PAGE>
<PAGE>
<PAGE>
EXHIBIT 24
ING VARIABLE ANNUITIES
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, 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:
Variable Annuity Product to be sold by First Union
* Initial registration of Contracts under Separate Account B of Golden
American's Registration Statement on Form N-4 (Nos. 333-30180; 811-5626).
* Initial registration of fixed account interests on Golden American's
Registration Statement on Form S-1 (No. 333-30186).
SIGNATURE TITLE DATE
- --------- ----- ----
/s/Barnett Chernow
- ----------------------- Director, Chairman of May 5, 2000
Barnett Chernow the Board of
Directors and President
/s/Myles R. Tashman
- ----------------------- Director, Executive May 5, 2000
Myles R. Tashman Vice President,
General Counsel and
Secretary
/s/E. Robert Koster
- ----------------------- Senior Vice President May 4, 2000
E. Robert Koster and Chief Financial
Officer
/s/Michael W. Cunningham
- ----------------------- Director May 9, 2000
Michael W. Cunningham
/s/Phillip R. Lowery
- ----------------------- Director May 9, 2000
Phillip R. Lowery
/s/Mark A. Tullis
- ----------------------- Director May 9, 2000
Mark A. Tullis
1475 Dunwoody Drive GoldenSelect Series
West Chester, PA 19380-1478 Issued by Golden American Life Insurance Company
<PAGE>
<PAGE>
<TABLE> <S> <C>
<PAGE>
<PAGE>
<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE CONSOLIDATED
BALANCE SHEETS AND STATEMENTS OF INCOME AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1
<DEBT-HELD-FOR-SALE> 835,321
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 17,330
<MORTGAGE> 100,087
<REAL-ESTATE> 0
<TOTAL-INVEST> 1,047,086
<CASH> 14,380
<RECOVER-REINSURE> 14,834
<DEFERRED-ACQUISITION> 528,957
<TOTAL-ASSETS> 9,392,857
<POLICY-LOSSES> 1,033,701
<UNEARNED-PREMIUMS> 6,300
<POLICY-OTHER> 8
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 246,400
0
0
<COMMON> 2,500
<OTHER-SE> 475,349
<TOTAL-LIABILITY-AND-EQUITY> 9,392,857
0
<INVESTMENT-INCOME> 59,169
<INVESTMENT-GAINS> (2,923)
<OTHER-INCOME> 103,898
<BENEFITS> 182,221
<UNDERWRITING-AMORTIZATION> 33,119
<UNDERWRITING-OTHER> (83,827)
<INCOME-PRETAX> 19,737
<INCOME-TAX> 8,523
<INCOME-CONTINUING> 11,214
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,214
<EPS-BASIC> 0
<EPS-DILUTED> 0
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
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<CUMULATIVE-DEFICIENCY> 0
<PAGE>
<PAGE>
</TABLE>
