File No. 33-23351, 811-5626
Filed under Rule 497(c)
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+ GOLDENSELECT DVA +
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GOLDEN AMERICAN LIFE INSURANCE COMPANY
Golden American Life Insurance Company is a stock company domiciled in Wilming-
ton, Delaware
DEFERRED VARIABLE ANNUITY PROSPECTUS
GOLDENSELECT DVA
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This prospectus describes group and individual deferred variable annuity
contracts (the "contract") offered by Golden American Life Insurance Company
("Golden American" "we" "our" or "us"). The owner ("you" or "your") purchases
the contract with an initial premium and is permitted to make additional
premium payments.
The contract is funded by Separate Account B ("Account B").
Nineteen divisions of Account B are currently available under the contract. The
investments available through the divisions of Account B include mutual fund
portfolios (the "Series") of The GCG Trust (the "GCG Trust") and the Equi-
Select Series Trust (the "ESS Trust").
This prospectus describes the contract and provides background information
regarding Account B. The prospectuses for the GCG Trust and the ESS Trust
(individually "a Trust," and collectively, "the Trusts"), which must accompany
this prospectus, provide information regarding investment activities and poli-
cies of the Trusts.
You may allocate your premiums among the nineteen divisions currently available
under the contract in any way you choose, subject to certain restrictions. You
may change the allocation of your accumulation value up to five times per
contract year free of charge.
You may surrender the contract for its cash surrender value at any time before
the annuity commencement date provided the annuitant and owner are living. The
cash surrender value will vary daily with the investment results of the
contract. We do not guarantee any minimum cash surrender value. You may make
partial withdrawals under the contract, subject to certain restrictions.
We will pay a death benefit to the beneficiary if the annuitant (when there is
no contingent annuitant) or owner dies prior to the annuity commencement date.
See Proceeds Payable to the Beneficiary.
This prospectus describes your principal rights and limitations and sets forth
the information concerning Accounts that investors should know before invest-
ing. A Statement of Additional Information dated May 1, 1997 relating to
Account B has been filed with the Securities and Exchange Commission ("SEC")
and is available without charge upon request. To obtain a copy of this document
call or write our Customer Service Center. The Table of Contents of the State-
ment of Additional Information may be found on the last page of this prospec-
tus. The Statement of Additional Information is incorporated herein by refer-
ence.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
CONTRACTS AND UNDERLYING SERIES SHARES WHICH FUND THE CONTRACTS ARE NOT INSURED
BY THE FDIC OR ANY OTHER AGENCY. THEY ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF
ANY BANK AND ARE NOT BANK GUARANTEED. THEY ARE SUBJECT TO MARKET FLUCTUATION,
REINVESTMENT RISK AND POSSIBLE LOSS OF PRINCIPAL INVESTED.
PLEASE READ THIS PROSPECTUS AND KEEP IT FOR FUTURE REFERENCE. IT IS NOT VALID
UNLESS ACCOMPANIED BY THE CURRENT PROSPECTUSES FOR THE GCG TRUST AND ESS TRUST.
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ISSUED BY: DISTRIBUTED BY: ADMINISTERED AT:
Golden American Life Directed Services, Inc. Customer Service Center
Insurance Company Wilmington, Delaware 19801 Mailing Address: P.O. Box 8794
Wilmington, Delaware 19899-8794
1-800-366-0066
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PROSPECTUS DATED: MAY 1, 1997
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TABLE OF CONTENTS
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PAGE
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DEFINITION OF TERMS........................................................ 3
FEE TABLE.................................................................. 4
SUMMARY OF THE CONTRACT.................................................... 7
CONDENSED FINANCIAL INFORMATION............................................ 10
Index of Investment Experience
Financial Statements
Performance Related Information
INTRODUCTION............................................................... 12
FACTS ABOUT THE COMPANY AND ACCOUNT B...................................... 12
Golden American
Separate Account B
Account B Divisions
The GCG Trust and the ESS Trust
Changes Within Account B
FACTS ABOUT THE CONTRACT................................................... 17
The Owner
The Annuitant
The Beneficiary
Change of Owner or Beneficiary
Availability of the Contract
Types of Contracts
Your Right to Select or Change Contract Options
Premiums
Making Additional Premium Payments
Crediting Premium Payments
Restrictions on Allocation of Premium Payments
Your Right to Reallocate
Dollar Cost Averaging Option
What Happens if a Division is Not Available
Your Accumulation Value
Accumulation Value in Each Division
Measurement of Investment Experience
Cash Surrender Value
Surrendering to Receive the Cash Surrender Value
Partial Withdrawals
Proceeds Payable to the Beneficiary
Reports to Owners
When We Make Payments
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CHARGES AND FEES........................................................... 26
Charge Deduction Division
Charges Deducted from the Accumulation Value
Charges Deducted from the Divisions
Trust Expenses
CHOOSING AN INCOME PLAN.................................................... 27
The Income Plan
Annuity Commencement Date Selection
Frequency Selection
The Annuity Options
Payment When Named Person Dies
OTHER INFORMATION.......................................................... 29
Other Contract Provisions
Contract Changes -- Applicable Tax Law
Your Right to Cancel or Exchange Your Contract
Other Contract Changes
Group or Sponsored Arrangements
Selling the Contract
Reinsurance
REGULATORY INFORMATION..................................................... 31
Voting Rights
State Regulation
Legal Proceedings
Legal Matters
Experts
FEDERAL TAX CONSIDERATIONS................................................. 31
Introduction
Golden American Tax Status
Taxation of Non-Qualified Annuities
Taxation of Individual Retirement Annuities
ADDITIONAL CONSIDERATIONS.................................................. 36
Distribution-at-Death Rules
Taxation of Death Benefit Proceeds
Transfer of Annuity Contracts
(S)1035 Exchanges
Assignments
Multiple Contracts Rule
STATEMENT OF ADDITIONAL INFORMATION........................................ 38
Table of Contents
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THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO PERSON IS AUTHORIZED TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS.
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DEFINITION OF TERMS
ACCOUNT
Separate Account B.
ACCUMULATION VALUE
The amount that the contract provides for investment at any time. Initially,
this amount is equal to the premium paid. Thereafter, the accumulation value
will reflect the premiums paid, investment experience, charges deducted and
partial withdrawals taken.
ANNUITANT
The person designated by the owner to receive the annuity payments and whose
death initiates payment of the death benefit.
ANNUITY COMMENCEMENT DATE
The date on which annuity payments begin.
ANNUITY OPTIONS
Options the owner selects that determine the form and amount of annuity
payments.
ANNUITY PAYMENT
The periodic payment an annuitant receives. It may be either a fixed or a vari-
able amount based on the annuity option chosen.
ATTAINED AGE
The issue age of the annuitant plus the number of full years elapsed since the
contract date.
BENEFICIARY
The person designated to receive benefits in the case of the death of the annu-
itant (when there is no contingent annuitant) or owner.
BUSINESS DAY
Any day the New York Stock Exchange ("NYSE") is open for trading, exclusive of
Federal holidays, or any other day on which the SEC requires that mutual funds,
unit investment trusts or other investment portfolios be valued.
CASH SURRENDER VALUE
The amount the owner receives if the owner surrenders the contract.
CHARGE DEDUCTION DIVISION
The Liquid Asset Division, which is the division from which all charges are
deducted if so designated on the application or enrollment form, or later
elected by the owner.
CONTINGENT ANNUITANT
The person designated by the owner who, upon the annuitant's death prior to the
annuity commencement date, becomes the annuitant.
CONTRACT
The entire contract consisting of the basic contract, the application or
enrollment form and any riders or endorsements.
CONTRACT ANNIVERSARY
The anniversary of the contract date.
CONTRACT DATE
The date on which we have received the initial premium and upon which we begin
determining the contract values. It may or may not be the same as the issue
date. This date is used to determine contract months, processing dates, years
and anniversaries.
CONTRACT PROCESSING DATES
The days when we deduct certain charges from the accumulation value. If the
contract processing date is not a valuation date, it will be on the next
succeeding valuation date. The contract processing dates will be once each year
on the contract anniversary.
CONTRACT PROCESSING PERIOD
The period between successive contract processing dates unless it is the first
contract processing period. In that case, it is the period from the contract
date to the first contract processing date.
CONTRACT YEAR
The period between contract anniversaries.
CUSTOMER SERVICE CENTER
Where service is provided to our contract owners. The mailing address and tele-
phone number of the Customer Service Center are shown on the cover.
DEFERRED ANNUITY
A contract which provides for the accumulation of funds that will reflect
investment experience. These funds may be applied under an annuity option at
the annuity commencement date.
ENDORSEMENTS
An endorsement changes or adds provisions to the contract.
EXPERIENCE FACTOR
The factor which reflects the investment experience of the portfolio in which a
division invests and also reflects the charges assessed against the division
for a valuation period.
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DEFINITION OF TERMS (CONTINUED)
FREE LOOK PERIOD
The period of time within which the contract owner may examine the contract and
return it for a refund.
GENERAL ACCOUNT
The account which contains all of our assets other than those held in our sepa-
rate accounts.
INDEX OF INVESTMENT EXPERIENCE
The index that measures the performance of a separate account division.
INITIAL PREMIUM
The payment amount required to put a contract into effect.
ISSUE AGE
The annuitant's age on his or her last birthday on or before the contract date.
ISSUE DATE
The date the contract is issued at our Customer Service Center.
OWNER
The person who owns the contract and is entitled to exercise all rights under
the contract. This person's death also initiates payment of the death benefit.
RIDER
A rider adds benefits to the contract.
SPECIALLY DESIGNATED DIVISION
The Liquid Asset Division. Distributions from a portfolio underlying a division
in which reinvestment is not available will be allocated to this division
unless you specify otherwise.
VALUATION DATE
The day at the end of a valuation period when each division is valued.
VALUATION PERIOD
Each business day together with any non-business days before it.
FEE TABLE
OWNER TRANSACTION EXPENSE (deducted from accumulation value)
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DISTRIBUTION FEE (ANNUAL SALES LOAD) AS A PERCENTAGE OF THE
INITIAL AND EACH ADDITIONAL PREMIUM, deducted at the end of
each contract processing period following receipt of each
premium over a six year period from the date we receive and
accept each premium payment................................... 1.00%/(1)(2)/
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DURING YEAR
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SURRENDER CHARGE AS A PERCENTAGE OF THE INITIAL OR
ADDITIONAL PREMIUM deducted upon surrender as
measured from the date the premium is accepted... 1......... 6.00%
2......... 5.00
3......... 4.00
4......... 3.00
5......... 2.00
6......... 1.00
7+........ 0.00
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EXCESS ALLOCATION CHARGE............................................ $0/(3)/
PARTIAL WITHDRAWAL CHARGE (2.0% of the withdrawal for each
additional conventional partial withdrawal after the first in a
contract year) not to exceed........................................ $25
ANNUAL CONTRACT FEES (deducted from the accumulation value)
ADMINISTRATIVE CHARGE
If total premiums paid in the first contract year are less than
$100,000............................................................ $40
If total premiums paid in the first contract year are $100,000 or
more................................................................ $0
SEPARATE ACCOUNT ANNUAL EXPENSES (percentage of assets in each separate account
division)
MORTALITY AND EXPENSE RISK CHARGE................................... 0.90%/(2)/
ASSET BASED ADMINISTRATIVE CHARGE................................... 0.10%
Total Separate Account Annual Expenses.............................. 1.00%
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FEE TABLE (CONTINUED)
THE GCG TRUST ANNUAL EXPENSES (based on combined assets of the indicated groups
of Series):
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OTHER TOTAL
SERIES FEES/(4)/ EXPENSES/(5)/ EXPENSES
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Multiple Allocation, Fully
Managed, Capital
Appreciation, Rising
Dividends, All-Growth,
Real Estate, Hard Assets, 0.99% 0.01% 1.00%
Value Equity,
Strategic Equity, and Small
Cap Series:
Emerging Markets Series:/(6)/ 1.75% 0.05% 1.80%
Managed Global Series:/(7)/ 1.25% 0.01% 1.26%
Limited Maturity Bond and 0.60% 0.01% 0.61%
Liquid Asset Series:
THE ESS TRUST ANNUAL EXPENSES:
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OTHER TOTAL
EXPENSES AFTER EXPENSES AFTER
EXPENSE EXPENSE
SERIES FEES/(4)/ REIMBURSEMENTS/(8)/ REIMBURSEMENTS
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OTC, Research, and Total 0.80% 0.40% 1.20%
Return Portfolios:
Growth & Income and Value +
Growth Portfolios: 0.95% 0.40% 1.35%
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(1) Contracts with a contract date prior to May 3, 1993 and the prospectus
delivered in connection with such contracts described the sales load as a
deferred load, which is equivalent to the combination of the distribution
fee and surrender charge described above. Limited Edition contracts
purchased through Golden American Separate Account D and the prospectus
delivered in connection with such contracts also described the sales load
as a deferred load.
(2) If your initial premium will be $25,000 or more, we also offer DVA Series
100 through another prospectus, which is a contract with a different
charging structure.
(3) We reserve the right to impose a charge in the future at a maximum of $25
for each allocation change in excess of twelve per Contract Year.
(4) Fees decline as combined assets increase (see Account B Divisions and the
Trust prospectuses for details).
(5) Other expenses generally consist of independent trustees fees and
expenses.
(6) Expenses have been restated to reflect current fees.
(7) The expenses for the Managed Global Series are based on the actual experi-
ence of the Series together with that of its predecessor for accounting
purposes, the Managed Global Account of Golden American's Separate Account
D. On September 3, 1996, the Managed Global Account was reorganized into
the Managed Global Division of Account B and the Managed Global Series of
the GCG Trust.
(8) Other expenses shown take into account the effect of EISI's agreement to
reimburse the portfolios for all operating expenses, excluding management
fees, that exceed 0.40% of its average daily net assets. This reimburse-
ment agreement commenced February 1, 1997. Prior to February 1, 1997 EISI
reimbursed the portfolios for all operating expenses, excluding management
fees, that exceeded 0.75% of their average daily net assets. This reim-
bursement is voluntary and can be terminated at any time. In the absence
of the current reimbursement agreement, Other Expenses would have been
0.55%, 0.51%, 0.45%, 0.69% and 0.95%, respectively, for the OTC, Research,
Total Return, Growth & Income, and Value + Growth Portfolios for the year
ended December 31, 1996.
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FEE TABLE (CONTINUED)
Examples:
If you surrender your contract at the
end of the applicable time period,
you would pay the following expenses
for each $1,000 of initial premium
assuming a 5% annual return on
assets:
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DIVISION ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
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Multiple Allocation................... $80.92 $123.94 $168.63 $328.36
Fully Managed......................... 80.92 123.94 168.63 328.36
Capital Appreciation.................. 80.92 123.94 168.63 328.36
Rising Dividends...................... 80.92 123.94 168.63 328.36
All-Growth............................ 80.92 123.94 168.63 328.36
Real Estate........................... 80.92 123.94 168.63 328.36
Hard Assets........................... 80.92 123.94 168.63 328.36
Value Equity.......................... 80.92 123.94 168.63 328.36
Strategic Equity...................... 80.92 123.94 168.63 328.36
Small Cap............................. 80.92 123.94 168.63 328.36
Emerging Markets...................... 88.92 147.74 207.91 404.62
OTC................................... 82.92 129.94 178.61 348.05
Research.............................. 82.92 129.94 178.61 348.05
Total Return.......................... 82.92 129.94 178.61 348.05
Growth & Income....................... 84.43 134.43 186.02 362.55
Value + Growth........................ 84.43 134.43 186.02 362.55
Managed Global........................ 83.53 131.74 181.58 353.88
Limited Maturity Bond................. 76.99 112.12 148.89 288.69
Liquid Asset.......................... 76.99 112.12 148.89 288.69
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If you do not surrender your contract or if you annuitize, you would pay the
following expenses for each $1,000 of initial premium assuming a 5% annual
return on assets:
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DIVISION ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
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Multiple Allocation................... $30.92 $ 93.94 $158.63 $328.36
Fully Managed......................... 30.92 93.94 158.63 328.36
Capital Appreciation.................. 30.92 93.94 158.63 328.36
Rising Dividends...................... 30.92 93.94 158.63 328.36
All-Growth............................ 30.92 93.94 158.63 328.36
Real Estate........................... 30.92 93.94 158.63 328.36
Hard Assets........................... 30.92 93.94 158.63 328.36
Value Equity.......................... 30.92 93.94 158.63 328.36
Strategic Equity...................... 30.92 93.94 158.63 328.36
Small Cap............................. 30.92 93.94 158.63 328.36
Emerging Markets...................... 38.92 117.74 197.91 404.62
OTC................................... 32.92 99.94 168.61 348.05
Research.............................. 32.92 99.94 168.61 348.05
Total Return.......................... 32.92 99.94 168.61 348.05
Growth & Income....................... 34.43 104.43 176.02 362.55
Value + Growth........................ 34.43 104.43 176.02 362.55
Managed Global........................ 33.53 101.74 171.58 353.88
Limited Maturity Bond................. 26.99 82.12 138.89 288.69
Liquid Asset.......................... 26.99 82.12 138.89 288.69
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For purposes of computing the annual per contract administrative charge, the
dollar amounts shown in the examples are based on an initial premium of
$65,000.
The purpose of the fee table is to assist you in understanding the various
costs and expenses that you may bear directly or indirectly. The fee table
reflects expenses of Account B as well as the Trusts. Premium taxes may also be
applicable. See Charges and Fees, Premium Taxes. For a complete description of
contract costs and expenses, see the section titled Charges and Fees. For a
more complete description of the costs and expenses of the Trusts, see the
Trust prospectuses.
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN, SUBJECT TO
THE GUARANTEES UNDER THE CONTRACT.
6
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SUMMARY OF THE CONTRACT
This prospectus has been designed to provide you with information regarding the
contract and Account B which funds the contract. Information concerning the
Series underlying the divisions of Account B is set forth in the Trust prospec-
tuses.
This summary is intended to provide only a very brief overview of the more
significant aspects of the contract. Further detail is provided in this
prospectus and in the contract. The contract, together with its attached appli-
cation or enrollment form and any riders or endorsements, constitutes the
entire agreement between you and us and should be retained.
This prospectus has been designed to provide you with the necessary information
to make a decision on purchasing the contract offered by Golden American and
funded by Account B.
You have a choice of investments. We do not promise that your accumulation
value will increase. Depending on the contract's investment experience for
funds invested in the Accounts, the accumulation value, cash surrender value
and death benefit may increase or decrease on any day. You bear the investment
risk.
DESCRIPTION OF THE CONTRACT
The contract is designed to establish retirement benefits for two types of
purchasers. The first type of purchaser is one who is eligible to participate
in, and purchases a contract for use with, an individual retirement annuity
("IRA") meeting the requirements of section 408(b) of the Internal Revenue Code
of 1986 ("qualified plan"). For a contract funding a qualified plan, distribu-
tion must commence not later than April 1st of the calendar year following the
calendar year in which you attain age 70 1/2. The second type of purchaser is
one who purchases a contract outside of a qualified plan ("non-qualified
plan").
The contract also offers a choice of annuity options to which you may apply the
accumulation value on the annuity commencement date or the cash surrender value
upon surrender of the contract. See Choosing an Income Plan.
AVAILABILITY
We can issue a contract if both the annuitant and the owner are not older than
age 85 and accept additional premium payments until either the annuitant or
owner reaches the attained age of 85 for non-qualified plans (age 70 1/2 for
qualified plans, except for rollover contributions). The minimum initial
premium is $10,000 for a non-qualified plan and $1,500 for a qualified plan. If
your initial premium will be $25,000 or more we also offer GoldenSelect DVA
Series 100 through another prospectus, which is a contract with a different
charging structure. We may change the minimum initial or additional premium
requirements for certain group or sponsored arrangements. See Group or Spon-
sored Arrangements.
The minimum additional premium payment we will accept is $500 for a non-quali-
fied plan and $250 for a qualified plan. We will take under consideration and
may refuse to accept a premium payment if the sum of all premium payments
received under the contract totals more than $1,500,000.
THE DIVISIONS
There are nineteen divisions of Account B currently available under the
contract. Each of the nineteen divisions offered under this prospectus invests
in a Mutual Fund portfolio with its own distinct investment objectives and
policies. Each division of Account B invests in a corresponding Series of the
GCG Trust, managed by Directed Services, Inc. ("DSI"), or a corresponding
Series of the ESS Trust, managed by Equitable Investment Services, Inc.
("EISI," and together with DSI, the "Managers"). The Trusts and the Managers
have retained several portfolio managers to manage the assets of each Series.
See Facts About the Company and the Account B and Account B Divisions.
HOW THE ACCUMULATION VALUE VARIES
The accumulation value varies each day based on investment results. You bear
the risk of poor investment performance and you receive the benefits from
favorable investment performance. The accumulation value also reflects premium
payments, charges deducted and partial withdrawals. See Accumulation Value in
Each Division.
SURRENDERING YOUR CONTRACT
The cash surrender value varies each day depending on investment results. We do
not guarantee any minimum cash surrender value. You may surrender the contract
and receive its cash surrender value at any time while both the annuitant and
owner are living and before the annuity commencement date. See Cash Surrender
Value and Surrendering to Receive the Cash Surrender Value.
7
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SUMMARY OF THE CONTRACT (CONTINUED)
TAKING PARTIAL WITHDRAWALS
After the free look period, prior to the annuity commencement date and while
the contract is in effect, you may take partial withdrawals from the accumula-
tion value of the contract. You may take conventional partial withdrawals once
per contract year without charge. Alternatively, you may elect in advance to
take systematic partial withdrawals on a monthly or quarterly basis. If you
have an IRA contract, you may elect IRA partial withdrawals on a monthly, quar-
terly or annual basis.
Partial withdrawals are subject to certain restrictions as defined in this
prospectus and partial withdrawals above a specified percentage of your accumu-
lated value may be subject to a surrender charge. See Partial Withdrawals.
DOLLAR COST AVERAGING
Under this option, you may choose to have a specified dollar amount transferred
from either the Limited Maturity Bond Division or Liquid Asset Division to the
other divisions on a monthly basis with the objective of shielding your invest-
ment from short-term price fluctuations. See Dollar Cost Averaging Option.
YOUR RIGHT TO CANCEL THE CONTRACT
You may cancel your contract within the free look period which is a ten day
period of time beginning when you receive the contract. For purposes of admin-
istering our allocation and certain other administrative rules, we deem this
period to end 15 days after the contract is mailed from our Customer Service
Center. Some states may require that we provide a longer free look period. In
some states we restrict the initial premium allocation during the free look
period. See Your Right to Cancel or Exchange Your Contract.
YOUR RIGHT TO CHANGE THE CONTRACT
The contract may be changed to another annuity plan subject to our rules at the
time of the change. See Other Contract Changes.
DEATH BENEFIT PROCEEDS
The contract provides a death benefit to the beneficiary if the annuitant (when
there is no contingent annuitant) or an owner dies prior to the annuity
commencement date. See Proceeds Payable to the Beneficiary. We may reduce the
death benefit proceeds payable under certain group or sponsored arrangements.
See Group or Sponsored Arrangements.
CONTRACT PROCESSING PERIODS
The first contract processing period begins with the contract date and ends at
the close of business on the first contract processing date. All subsequent
contract processing periods begin at the close of business on the most recent
contract processing date and extend to the close of business on the next
contract processing date. There is one contract processing period each year.
DEDUCTIONS FOR CHARGES AND FEES
We invest the entire amount of the initial and any additional premium payments
in the divisions you select, subject to certain restrictions we impose. See
Restrictions on Allocation of Premium Payments. We then periodically deduct
certain amounts from your accumulation value. See Charges and Fees. We may
reduce certain charges under group or sponsored arrangements. See Group or
Sponsored Arrangements. We may also reduce certain charges for contracts
purchased in combination with certain flexible premium variable life products
that we offer. Charges are deducted proportionately from all divisions in which
you are invested, unless you have elected the Charge Deduction Division. The
charges we deduct are:
DISTRIBUTION FEE
We deduct a sales load in an annual amount of 1.00% of each premium at the
end of each contract processing period for a period of six years from the
date we receive and accept each premium payment.
We also offer through other prospectuses other DVAs which are contracts with
different charging structures.
SURRENDER CHARGE
A surrender charge is imposed as a percentage of premium if the contract is
surrendered or an excess partial withdrawal is taken during the six year
period from the date we receive and accept each premium payment. The
percentage imposed at the time of surrender or excess partial withdrawal
depends on the distribution fee collected to the time the contract is surren-
dered or the excess partial withdrawal is taken. The surrender charge in the
first contract year is 6.00% and reduces by 1.00% each year during the six
year period from the date we receive and accept each premium payment.
Contracts with a contract date prior to May 3, 1993 and the prospectus deliv-
ered in connection with such contracts, described the sales load as a
8
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SUMMARY OF THE CONTRACT (CONTINUED)
deferred load, which is equivalent to the combination of the distribution fee
and surrender charge described above. GoldenSelect Limited Edition contracts
purchased through Golden American Separate Account D and the prospectus
delivered in connection with such contracts also described the sales load as
a deferred load.
If your initial premium will be $25,000 or more we also offer DVA Series 100
through another prospectus, which is a contract with a different charging
structure.
MORTALITY AND EXPENSE RISK CHARGE
We charge each division of Account B with a daily asset based charge for
mortality and expense risks equivalent to an annual rate of 0.90%.
PREMIUM TAXES
Generally, premium taxes are incurred on the annuity commencement date, and a
charge for premium taxes is then deducted from the accumulation value on such
date. Some jurisdictions impose a premium tax at the time the initial or
additional premiums are paid, regardless of the annuity commencement date.
ADMINISTRATIVE CHARGE
The amount deducted is $40 per contract year if total premiums paid in the
first contract year are less than $100,000. If the total premiums paid in the
first contract year equals $100,000 or more, the charge is zero.
EXCESS ALLOCATION CHARGE
The first five allocation changes in any contract year may be made without
charge. Each subsequent allocation change is subject to a $25 excess alloca-
tion charge.
PARTIAL WITHDRAWAL CHARGE
If you take more than one conventional partial withdrawal during a contract
year, we impose a charge of the lesser of $25 and 2.0% of the amount with-
drawn for each additional conventional partial withdrawal. See Partial With-
drawals, Conventional Partial Withdrawal Option.
ASSET BASED ADMINISTRATIVE CHARGE
We charge each division of Account B with a daily asset based charge to cover
a portion of contract administration equivalent to an annual rate of 0.10% .
TRUST EXPENSES
There are fees and expenses deducted from each Series. The investment perfor-
mance of the Series and deductions for fees and expenses from the Trusts will
affect your accumulation value. Please read the Trust prospectuses for
details.
TAX PENALTIES
The ultimate effect of Federal income taxes on the amounts held under an
annuity contract, on annuity payments and on the economic benefits to the
owner, annuitant or beneficiary depends on Golden American's tax status and
upon the tax status of the individuals concerned. In general, an owner is not
taxed on increases in value under an annuity contract until some form of
distribution is made under it. There may be tax penalties if you make a with-
drawal or surrender the contract before reaching age 59 1/2. See Federal Tax
Considerations.
9
<PAGE>
CONDENSED FINANCIAL INFORMATION
INDEX OF INVESTMENT EXPERIENCE
The upper table gives the index of investment experience for each division of
Account B on their respective commencement of operations and on December 31,
1989, 1990, 1991, 1992, 1993, 1994, 1995 and 1996, as applicable. The index of
investment experience is equal to the value of a unit for each division of the
Account B. The total value of each division as of the end of each period indi-
cated is shown in the lower table.
<TABLE>
<CAPTION>
INDEX OF INVESTMENT EXPERIENCE
--------------------------------------------------------------------------------------
1/24/89 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94
------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Multiple Allocation..... $10.00 $10.82 $11.19 $13.30 $13.41 $14.75 $14.43
Fully Managed........... 10.00 10.38 9.87 12.59 13.24 14.11 12.95
Capital Appreciation.... --/(1)/ --/(1)/ --/(1)/ --/(1)/ 11.01 11.81 11.50
Rising Dividends........ --/(3)/ --/(3)/ --/(3)/ --/(3)/ --/(3)/ 10.29 10.25
All-Growth.............. 10.00 10.71 9.74 13.16 12.69 13.39 11.83
Real Estate............. 10.00 9.90 7.68 10.19 11.48 13.33 14.04
Hard Assets............. 10.00 11.86 10.05 10.42 9.30 13.81 14.02
Value Equity............ --/(4)/ --/(4)/ --/(4)/ --/(4)/ --/(4)/ --/(4)/ --/(4)/
Strategic Equity........ --/(5)/ --/(5)/ --/(5)/ --/(5)/ --/(5)/ --/(5)/ --/(5)/
Small Cap............... --/(6)/ --/(6)/ --/(6)/ --/(6)/ --/(6)/ --/(6)/ --/(6)/
Emerging Markets........ --/(3)/ --/(3)/ --/(3)/ --/(3)/ --/(3)/ 12.41 10.42
OTC..................... --/(7)/ --/(7)/ --/(7)/ --/(7)/ --/(7)/ --/(7)/ --/(7)/
Research................ --/(8)/ --/(8)/ --/(8)/ --/(8)/ --/(8)/ --/(8)/ --/(8)/(8)/
Total Return............ --/(8)/ --/(8)/ --/(8)/ --/(8)/ --/(8)/ --/(8)/ --/(8)/(8)/
Growth & Income......... --/(7)/ --/(7)/ --/(7)/ --/(7)/ --/(7)/ --/(7)/ --/(7)/
Value + Growth.......... --/(8)/ --/(8)/ --/(8)/ --/(8)/ --/(8)/ --/(8)/ --/(8)/(8)/
Managed Global.......... --/(2)/ --/(2)/ --/(2)/ --/(2)/ 10.01 10.52 9.09
Limited Maturity Bond... 10.00 10.88 11.61 12.78 13.27 13.95 13.65
Liquid Asset............ 10.00 10.68 11.38 11.90 12.15 12.35 12.68
INDEX OF INVESTMENT EXPERIENCE
------------------------------
12/31/95 12/31/96
-------- --------
<S> <C> <C>
Multiple Allocation..... $17.00 $18.30
Fully Managed........... 15.48 17.83
Capital Appreciation.... 14.83 17.65
Rising Dividends........ 13.30 15.88
All-Growth.............. 14.34 14.11
Real Estate............. 16.20 21.70
Hard Assets............. 15.36 20.26
Value Equity............ 13.39 14.66
Strategic Equity........ 10.01 11.83
Small Cap............... --/(6)/ 11.89
Emerging Markets........ 9.27 9.85
OTC..................... --/(7)/ 15.86
Research................ --/(8)/ --/(8)/
Total Return............ --/(8)/ --/(8)/
Growth & Income......... --/(7)/ 12.52
Value + Growth.......... --/(8)/ --/(8)/
Managed Global.......... 9.66 10.74
Limited Maturity Bond... 15.10 15.59
Liquid Asset............ 13.24 13.76
</TABLE>
<TABLE>
<CAPTION>
TOTAL ACCUMULATION VALUE
---------------------------------------------------------------------------------
12/31/89 12/31/90 12/31/91 12/31/92 12/31/93
----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Multiple Alloca-
tion............... $15,556,366 $23,963,356 $57,739,245 $115,124,744 $273,158,122
Fully Managed....... 5,333,885 5,414,160 9,834,436 37,352,585 108,290,963
Capital Apprecia-
tion............... --/(1)/ --/(1)/ --/(1)/ 18,366,222 86,798,642
Rising Dividends.... --/(3)/ --/(3)/ --/(3)/ --/(3)/ 14,387,382
All-Growth.......... 3,077,542 4,528,380 11,159,814 23,418,811 56,055,565
Real Estate......... 650,003 309,556 696,180 3,600,461 28,772,896
Hard Assets......... 2,320,696 2,460,399 2,646,183 2,882,417 21,436,544
Value Equity........ --/(4)/ --/(4)/ --/(4)/ --/(4)/ --/(4)/
Strategic Equity.... --/(5)/ --/(5)/ --/(5)/ --/(5)/ --/(5)/
Small Cap........... --/(6)/ --/(6)/ --/(6)/ --/(6)/ --/(6)/
Emerging Markets.... --/(3)/ --/(3)/ --/(3)/ --/(3)/ 30,488,589
OTC................. --/(7)/ --/(7)/ --/(7)/ --/(7)/ --/(7)/
Research............ --/(8)/ --/(8)/ --/(8)/ --/(8)/ --/(8)/(8)/
Total Return........ --/(8)/ --/(8)/ --/(8)/ --/(8)/ --/(8)/(8)/
Growth & Income..... --/(7)/ --/(7)/ --/(7)/ --/(7)/ --/(7)/
Value + Growth...... --/(8)/ --/(8)/ --/(8)/ --/(8)/ --/(8)/(8)/
Managed Global...... --/(2)/ --/(2)/ --/(2)/ 38,699,402 88,477,493
Limited Maturity
Bond............... 2,595,966 8,009,970 15,935,184 39,861,202 71,622,231
Liquid Asset........ 2,190,649 8,419,953 9,224,303 12,769,536 16,497,588
<CAPTION>
TOTAL ACCUMULATION VALUE
------------------------------------------------
12/31/94 12/31/95 12/31/96
------------ ------------ ------------
<S> <C> <C> <C>
Multiple Alloca-
tion............... $297,507,994 $305,499,995 $270,427,444
Fully Managed....... 98,836,207 117,325,242 134,430,861
Capital Apprecia-
tion............... 88,344,684 121,047,204 145,988,538
Rising Dividends.... 50,384,765 80,341,660 123,572,620
All-Growth.......... 70,623,784 91,960,166 76,841,848
Real Estate......... 36,936,728 34,814,825 50,680,643
Hard Assets......... 32,746,767 26,991,780 43,301,050
Value Equity........ --/(4)/ 28,447,742 42,860,704
Strategic Equity.... --/(5)/ 8,030,333 29,858,001
Small Cap........... --/(6)/ --/(6)/ 33,055,763
Emerging Markets.... 59,747,048 36,887,958 37,153,421
OTC................. --/(7)/ --/(7)/ 4,571,461
Research............ --/(8)/ --/(8)/ --/(8)/
Total Return........ --/(8)/ --/(8)/ --/(8)/
Growth & Income..... --/(7)/ --/(7)/ 8,274,883
Value + Growth...... --/(8)/ --/(8)/ --/(8)/
Managed Global...... 86,208,555 72,375,222 86,266,168
Limited Maturity
Bond............... 71,573,009 67,838,218 54,334,320
Liquid Asset........ 45,364,989 36,490,508 37,475,760
</TABLE>
- ------------
(1) The Capital Appreciation Division became available for investment on May
4, 1992, starting with an index of investment experience of $10.00.
(2) The index of investment experience for the Managed Global Division is
based on the actual experience of its predecessor for accounting purposes,
the Managed Global Account of Golden American's Separate Account D. The
Managed Global Account became available for investment on October 21,
1992, starting with an index of investment experience of $10.00.
(3) The Rising Dividends and Emerging Markets Divisions became available for
investment on October 4, 1993, starting with an index of investment
experience of $10.00.
(4) The Value Equity Division became available for investment on January 1,
1995, starting with an index of investment experience of $10.00.
(5) The Strategic Equity Division became available for investment in October
2, 1995, starting with an index of investment experience of $10.00.
(6) The Small Cap Division became available for investment on January 2, 1996,
starting with an index of investment experience of $10.00.
(7) The OTC and the Growth & Income Divisions became available for investment
on September 3, 1996, starting with an index of investment experience of
$14.79 and $10.97, respectively.
(8) The Research, Total Return and Value + Growth Divisions became available
for investment on January 20, 1997, starting with indices of investment
experience of $16.64, $13.93, and $12.05, respectively.
In order to provide for continuity in results, the above table is based on
charges for the contract described in this prospectus. Contracts issued prior
to May 1, 1991, were based on lower asset charges and, thus, would have
higher values for the indices of investment experience.
10
<PAGE>
CONDENSED FINANCIAL INFORMATION (CONTINUED)
FINANCIAL STATEMENTS
The audited financial statements of Separate Account B (as well as the audi-
tors' report thereon) and the audited financial statements of the Managed
Global Account of Separate Account D, the predecessor of the Managed Global
Series for accounting purposes, for the years ended December 31, 1995 and 1994
(as well as the auditors' report thereon) appear in the Statement of Additional
Information. The audited financial statements of Golden American prepared in
accordance with generally accepted accounting principles for the years ended
December 31, 1996, 1995 and 1994 (as well as the auditors' report thereon) are
contained in the Statement of Additional Information.
PERFORMANCE RELATED INFORMATION
Performance information for the divisions of Account B, including the yield and
effective yield of the Liquid Asset Division, the yield of the remaining divi-
sions, and the total return of all divisions may appear in reports and promo-
tional literature to current or prospective owners.
Current yield for the Liquid Asset Division will be based on income received by
a hypothetical investment over a given 7-day period (less expenses accrued
during the period), and then "annualized" (i.e., assuming that the 7-day yield
would be received for 52 weeks, stated in terms of an annual percentage return
on the investment). "Effective yield" for the Liquid Asset Division is calcu-
lated in a manner similar to that used to calculate yield, but when annualized,
the income earned by the investment is assumed to be reinvested. The "effective
yield" will be slightly higher than the "yield" because of the compounding
effect of
earnings.
For the remaining divisions, quotations of yield will be based on all invest-
ment income per unit (accumulation value divided by the index of investment
experience -- see Measurement of Investment Experience, Index of Investment
Experience and Unit Value) earned during a given 30-day period, less expenses
accrued during the period ("net investment income"). Quotations of average
annual total return for any division will be expressed in terms of the average
annual compounded rate of return on a hypothetical investment in a contract
over a period of one, five, and ten years (or, if less, up to the life of the
divi- sion), and will reflect the deduction of the applicable distribution fee
and/or surrender charge, the administrative charge and the mortality and
expense risk charge. Quotations of total return may simultaneously be shown for
other periods that do not take into account certain contractual charges, such
as the distribution fee and surrender charge. Quotations of yield and average
annual total return for the Managed Global Division take into account the
period prior to September 3, 1996, during which it was maintained as a division
of Account D.
Performance information for a division may be compared, in reports and promo-
tional literature, to: (i) the Standard & Poor's 500 Stock Index ("S&P 500"),
Dow Jones Industrial Average ("DJIA"), Donoghue Money Market Institutional
Averages, or other indices measuring performance of a pertinent group of secu-
rities so that investors may compare a division's results with those of a group
of securities widely regarded by investors as representative of the securities
markets in general; (ii) other variable annuity separate accounts or other
investment products tracked by Lipper Analytical Services, a widely used inde-
pendent research firm which ranks mutual funds and other investment companies
by overall performance, investment objectives, and assets, or tracked by other
ratings services, including VARDS, companies, publications, or persons who rank
separate accounts or other investment products on overall performance or other
criteria; and (iii) the Consumer Price Index (measure for inflation) to assess
the real rate of return from an investment in the contract. Unmanaged indices
may assume the reinvestment of dividends but generally do not reflect deduc-
tions for administrative and management costs and expenses.
Performance information for any division reflects only the performance of a
hypothetical contract under which the accumulation value is allocated to a
division during a particular time period on which the calculations are based.
Performance information should be considered in light of the investment objec-
tives and policies, characteristics and quality of the portfolio of the Series
of the respective Trust in which the division invests and the market conditions
during the given time period, and should not be considered as a representation
of what may be achieved in the future. For a description of the methods used to
determine yield and total return for the divisions, see the Statement of Addi-
tional Information.
Reports and promotional literature may also contain other information including
the ranking of any division derived from rankings of variable annuity separate
accounts or other investment
11
<PAGE>
CONDENSED FINANCIAL INFORMATION (CONTINUED)
products tracked by Lipper Analytical Services or by rating services, compa-
nies, publications, or other persons who rank separate accounts or other
investment products on overall performance or other criteria.
INTRODUCTION
The following information describes the contract and Account B. Account B
invests in mutual fund portfolios of The GCG Trust and The Equi-Select Series
Trust.
FACTS ABOUT THE COMPANY AND ACCOUNT B
GOLDEN AMERICAN
Golden American Life Insurance Company ("Golden American" or the "Company") is
a stock life insurance company organized under the laws of the State of Dela-
ware and is an indirect wholly owned subsidiary of Equitable of Iowa Companies
("Equitable of Iowa"). Prior to December 30, 1993, Golden American was a Minne-
sota corporation. Prior to August 13, 1996, Golden American was a wholly owned
indirect subsidiary of Bankers Trust Company. We are authorized to do business
in all jurisdictions except New York. In May 1996, we established a subsidiary,
First Golden American Life Insurance Company of New York, which is authorized
to do business in New York. We offer variable annuities and variable life
insurance. Administrative services for the contract are provided at our
Customer Service Center, the address is shown on the cover. As of December 31,
1996, Golden American had stockholder's equity of approximately $140.5 million
and total assets of approximately $1.7 billion, including approximately $1.21
billion of separate account assets.
Equitable of Iowa is the holding company for Equitable Life Insurance Company
of Iowa, USG Annuity & Life Company, Locust Street Securities, Inc., Equitable
American Insurance Company, Equitable Investment Services, Inc. ("EISI"), Equi-
table of Iowa Securities Network, Inc., Directed Services, Inc. ("DSI"), and
Golden American. As of December 31, 1996, Equitable of Iowa had over $12.5
billion in assets.
SEPARATE ACCOUNT B
All obligations under the contract are general obligations of Golden American.
Account B is a separate investment account used to support our variable annuity
contracts and for other purposes as permitted by applicable laws and regula-
tions. The assets of Account B are kept separate from our general account and
any other separate accounts we may have. We may offer other variable annuity
contracts investing in Account B which are not discussed in this prospectus.
Account B may also invest in other series which are not available to the
contract described in this prospectus.
We own all the assets in Account B. Income and realized and unrealized gains or
losses from assets in Account B are credited to or charged against that account
without regard to other income, gains or losses in our other investment
accounts. As required, the assets in Account B are at least equal to the
reserves and other liabilities of that account. These assets may not be charged
with liabilities from any other business we conduct.
They may, however, be subject to liabilities arising from divisions of Account
B whose assets are attributable to other variable annuity contracts supported
by Account B. If the assets exceed the
required reserves and other liabilities, we may transfer the excess to our
general account.
Account B was established on July 14, 1988 to invest in mutual funds, unit
investment trusts or other investment portfolios which we determine to be suit-
able for the contract's purposes. Account B is treated as a unit investment
trust under Federal securities laws. It is registered with the SEC under the
Investment Company Act of 1940 (the "1940 Act") as an investment company. It is
governed by the laws of Delaware, our state of domicile, and may also be
governed by the laws of other states in which we do business. Registration with
the SEC does not involve any supervision by the SEC of the management or
investment policies or practices of Account B.
ACCOUNT B DIVISIONS
Account B is divided into divisions. The Managed Global Series was formerly the
Managed Global Account of Golden American's Separate Account D from October 12,
1992 until September 3, 1996. Currently, each division of Account B offered
under this prospectus invests in a portfolio of the
12
<PAGE>
FACTS ABOUT THE COMPANY AND ACCOUNT B (CONTINUED)
GCG Trust or the ESS Trust. DSI serves as the Manager to each Series of the
GCG Trust, and EISI serves as the Manager to each Series of the ESS Trust. See
the Trusts' prospectuses for details. The Trusts, DSI and EISI have retained
several portfolio managers to manage the assets of each Series as indicated
below. There may be restrictions on the amount of the allocation to certain
divisions based on state laws and regulations. The investment objectives of
the various Series in the Trusts are described below. There is no guarantee
that any portfolio or Series will meet its investment objectives. Meeting
objectives depends on various factors, including, in certain cases, how well
the portfolio managers anticipate changing economic and market conditions.
Account B may also have other divisions investing in other series which are
not available to the contract described in this prospectus.
DSI and EISI provide the overall business management and administrative serv-
ices necessary for the
Series' operation and provide or procure the services and information neces-
sary to the proper conduct of the business of the Series. See the Trust
prospectuses for details.
DSI is responsible for providing or procuring, at DSI's expense, the services
reasonably necessary for the ordinary operation of the Series of the GCG
Trust. DSI does not bear the expense of brokerage fees and other transactional
expenses for securities or other assets (which are generally considered part
of the cost for assets), taxes (if any) paid by a Series of the GCG Trust,
interest on borrowing, fees and expenses of the independent trustees, and
extraordinary expenses, such as litigation or indemnification expenses. See
the GCG Trust prospectus for details.
Each Trust pays its respective Manager for its services a monthly fee based on
the following percentages of the average daily net assets of the Series shown
in the tables below. DSI and EISI (and not the Trusts) pay each portfolio
manager a monthly fee for managing the assets of the Series.
THE GCG TRUST
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SERIES FEES (based on combined assets of the indicated groups of Series)
- ------------------------ -----------------------------------------------------------------
<S> <C>
Multiple Allocation, 1.00% of first $750 million;
Fully Managed, 0.95% of next $1.250 billion;
Capital Appreciation, 0.90% of next $1.5 billion; and
Rising Dividends, 0.85% of amount in excess of $3.5 billion
All-Growth, Real Estate,
Hard Assets, Value
Equity, Strategic
Equity, and Small Cap
Series:
Emerging Markets Series: 1.75% of average daily net assets
Managed Global: 1.25% of first $500 million;
1.05% of amount in excess of $500 million
Limited Maturity Bond 0.60% of first $200 million;
and 0.55% of next $300 million; and
Liquid Asset Series: 0.50% of amount in excess of $500 million
- -------------------------------------------------------------------------------
THE ESS TRUST
- -------------------------------------------------------------------------------
<CAPTION>
SERIES FEES
- ------------------------ -----------------------------------------------------------------
<S> <C>
OTC, Research and Total 0.80% of first $300 million;
Return Portfolios: 0.55% of amount in excess of $300 million
Growth & Income and 0.95% of first $200 million;
Value + Growth Portfo- 0.75% of amount in excess of $200 million
lios:
</TABLE>
- -------------------------------------------------------------------------------
13
<PAGE>
FACTS ABOUT THE COMPANY AND ACCOUNT B (CONTINUED)
The following divisions invest in shares of the designated Series of the GCG
Trust.
MULTIPLE ALLOCATION DIVISION
MULTIPLE ALLOCATION SERIES
OBJECTIVE
The highest total return, consisting of capital appreciation and current
income, consistent with the preservation of capital and elimination of unnec-
essary risk.
INVESTMENTS
Investment in equity and debt securities and the use of certain sophisticated
investment strategies and techniques.
PORTFOLIO MANAGER
Zweig Advisors Inc.
FULLY MANAGED DIVISION
FULLY MANAGED SERIES
OBJECTIVE
High total investment return over the long term, consistent with the preser-
vation of capital and prudent investment risk.
INVESTMENTS
Invests primarily in common stocks. The Series also may invest in fixed
income securities and money market instruments to preserve its principal
value during uncertain or declining market conditions. The Series' strategy
is based on the premise that, from time to time, certain asset classes are
more attractive long-term investments than others.
PORTFOLIO MANAGER
T. Rowe Price Associates, Inc.
CAPITAL APPRECIATION DIVISION
CAPITAL APPRECIATION SERIES
OBJECTIVE
Long-term capital growth.
INVESTMENTS
Invests in common stocks and preferred stock that will be allocated among
various categories of stocks referred to as "components" which consist of the
following: (i) The Growth Component -- Securities that the portfolio manager
believes have the following characteristics: stability and quality of earn-
ings and positive earnings momentum; dominant competitive positions; and
demonstrate above-average growth rates as compared to published S&P 500 earn-
ings projections; and (ii) The Value Component -- Securities that the port-
folio manager regards as fundamentally undervalued, i.e., securities selling
at a discount to asset value and securities with a relatively low price-
/earnings ratio. The securities eligible for this component may include real
estate stocks, such as securities of publicly-owned companies that, in the
portfolio manager's judgement, offer an optimum combination of current divi-
dend yield, expected dividend growth, and discount to current real estate
value.
PORTFOLIO MANAGER
Chancellor LGT Asset Management, Inc.
RISING DIVIDENDS DIVISION
RISING DIVIDENDS SERIES
OBJECTIVE
Capital appreciation, with dividend income as a secondary objective.
INVESTMENTS
Investment in equity securities of high quality companies that meet the
following four criteria: consistent dividend increases; substantial dividend
increases; reinvested profits; and an under-leveraged balance sheet.
PORTFOLIO MANAGER
Kayne, Anderson Investment Management, L.P.
ALL-GROWTH DIVISION
ALL-GROWTH SERIES
OBJECTIVE
Capital appreciation.
INVESTMENTS
Investment in securities selected for their longterm growth prospects.
PORTFOLIO MANAGER
Pilgrim Baxter & Associates, Ltd.
REAL ESTATE DIVISION
REAL ESTATE SERIES
OBJECTIVE
Capital appreciation, with current income as a secondary objective.
INVESTMENTS
Investment in publicly traded equity securities of companies in the real
estate industry listed on national exchanges or on the National Association
of Securities Dealers Automated Quotation System.
PORTFOLIO MANAGER
E.I.I. Realty Securities, Inc.
HARD ASSETS DIVISION
(FORMERLY NATURAL RESOURCES)
HARD ASSETS SERIES
OBJECTIVE
Long-term capital appreciation.
14
<PAGE>
FACTS ABOUT THE COMPANY AND ACCOUNT B (CONTINUED)
INVESTMENTS
Investment in equity and debt securities of companies engaged in the explora-
tion, development, production, and distribution of natural resources.
PORTFOLIO MANAGER
Van Eck Associates Corporation
VALUE EQUITY DIVISION
VALUE EQUITY SERIES
OBJECTIVE
Capital appreciation, with dividend income as a secondary objective.
INVESTMENTS
Investment primarily in equity securities of U.S. and foreign issuers which,
when purchased, meet quantitative standards believed by the Portfolio Manager
to indicate above average financial soundness and high intrinsic value rela-
tive to price.
PORTFOLIO MANAGER
Eagle Asset Management, Inc.
EMERGING MARKETS DIVISION
EMERGING MARKETS SERIES
OBJECTIVE
Long-term growth of capital.
INVESTMENTS
Investment primarily in equity securities of companies that are considered to
be in emerging market countries in the Pacific Basin, Latin America and else-
where. Income is not an objective, and any production of current income is
considered incidental to the objective of growth of capital.
PORTFOLIO MANAGER
Putnam Investment Management, Inc.
MANAGED GLOBAL DIVISION
MANAGED GLOBAL SERIES
OBJECTIVE
Capital appreciation preservation.
INVESTMENTS
Investment primarily in common stocks of both domestic and foreign issuers.
PORTFOLIO MANAGER
Putnam Investment Management, Inc.
LIMITED MATURITY BOND DIVISION
LIMITED MATURITY BOND SERIES
OBJECTIVE
Highest current income consistent with low risk to principal and liquidity.
Also seeks to enhance its total return through capital appreciation when
market factors indicate that capital appreciation may be available without
significant risk to principal.
INVESTMENTS
Investment primarily in a diversified portfolio of limited maturity debt
securities. No individual security will at the time of purchase have a
remaining maturity longer than seven years and the dollar-weighted average
maturity of the Series will not exceed five years.
PORTFOLIO MANAGER
Equitable Investment Services, Inc.
LIQUID ASSET DIVISION
LIQUID ASSET SERIES
OBJECTIVE
High level of current income consistent with the preservation of capital and
liquidity.
INVESTMENTS
Obligations of the U.S. Government and its agencies and instrumentalities;
bank obligations; commercial paper and short-term corporate debt securities.
TERM
All issues maturing in less than one year.
PORTFOLIO MANAGER
Equitable Investment Services, Inc.
STRATEGIC EQUITY DIVISION
STRATEGIC EQUITY SERIES
OBJECTIVE
Long-term capital appreciation.
INVESTMENTS
Investment primarily in equity securities based on various equity market
timing techniques. The amount of the Series' assets allocated to equities
shall vary from time to time to seek positive investment performance from
advancing equity markets and to reduce exposure to equities when risk/reward
characteristics are believed to be less attractive.
PORTFOLIO MANAGER
Zweig Advisors Inc.
SMALL CAP DIVISION
SMALL CAP SERIES
OBJECTIVE
Long-term capital appreciation.
INVESTMENTS
Investment primarily in equity securities of companies that, at the time of
purchase, have a total market capitalization -- present market value per
share multiplied by the total number of shares outstanding -- within the
range of companies included in the Russell 2000 Growth Index.
15
<PAGE>
FACTS ABOUT THE COMPANY AND ACCOUNT B (CONTINUED)
PORTFOLIO MANAGER
Fred Alger Management, Inc.
The following Divisions invest in designated Series of the ESS Trust.
OTC DIVISION
OTC PORTFOLIO
OBJECTIVE
Long-term growth of capital.
INVESTMENTS
Investment primarily in securities of companies that are traded principally
on the over-the-counter (OTC) market.
PORTFOLIO MANAGER
Massachusetts Financial Services Company
RESEARCH DIVISION
RESEARCH PORTFOLIO
OBJECTIVE
Long term growth of capital and future income.
INVESTMENTS
Investment primarily in common stocks or securities convertible into common
stocks of companies believed to possess better than average prospects for
long-term growth.
PORTFOLIO MANAGER
Massachusetts Financial Services Company
TOTAL RETURN DIVISION
TOTAL RETURN PORTFOLIO
OBJECTIVE
Above-average income consistent with prudent employment of capital.
INVESTMENTS
Investment primarily in equity securities.
PORTFOLIO MANAGER
Massachusetts Financial Services Company
GROWTH & INCOME DIVISION
GROWTH & INCOME PORTFOLIO
OBJECTIVE
Long-term total return.
INVESTMENTS
Investment primarily in equity and debt securities, focusing on small- and
mid-cap companies that offer potential appreciation, current income, or both.
PORTFOLIO MANAGER
Robertson, Stephens & Company Investment Management, L.P.
VALUE + GROWTH DIVISION
VALUE + GROWTH PORTFOLIO
OBJECTIVE
Capital appreciation.
INVESTMENTS
Investment primarily in mid-cap growth companies with favorable relationships
between price/earnings ratios and growth rates. Mid-cap companies are those
with market capitalizations ranging from $750 million to approximately $2
billion.
PORTFOLIO MANAGER
Robertson, Stephens & Company Investment Management, L.P.
THE GCG TRUST AND THE ESS TRUST
The GCG Trust is an open-end management investment company, more commonly
called a mutual fund. The GCG Trust's shares may also be available to certain
separate accounts funding variable life insurance policies offered by Golden
American. This is called "mixed funding."
The GCG Trust may also sell its shares to separate accounts of other insurance
companies, both affiliated and not affiliated with Golden American. This is
called "shared funding." Although we do not anticipate any inherent difficul-
ties arising from either mixed or shared funding, it is theoretically possible
that, due to differences in tax treatment or other considerations, the
interest of owners of various contracts participating in the GCG Trust might
at sometime be in conflict. After the GCG Trust receives the requisite order
from the SEC, shares of the GCG Trust may also be sold to certain qualified
pension and retirement plans. The Board of Trustees of the GCG Trust, the GCG
Trust's Manager, and we and any other insurance companies participating in the
GCG Trust are required to monitor events to identify any material conflicts
that arise from the use of the GCG Trust for mixed and/or shared funding or
between various policyowners and pension and retirement plans. For more infor-
mation about the risks of mixed and shared funding, please refer to the GCG
Trust prospectus.
The ESS Trust is also an open-end management investment company. Currently,
the ESS Trust's shares are not available to separate accounts of other insur-
ance companies except affiliated insurance companies such as Golden American.
It is anticipated that in the future the ESS Trust will become available to
separate accounts of unaffiliated companies as well as to separate accounts
funding variable life insurance policies offered by Golden American.
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<PAGE>
FACTS ABOUT THE COMPANY AND ACCOUNT B (CONTINUED)
You will find complete information about both the GCG Trust and the ESS Trust,
including the risks associated with each Series, in the accompanying Trust
prospectuses. You should read them carefully in conjunction with this
prospectus before investing. Additional copies of the Trust prospectuses may
be obtained by contacting our Customer Service Center.
CHANGES WITHIN ACCOUNT B
We may from time to time make additional divisions available. These divisions
will invest in investment portfolios we find suitable for the contract. We
also have the right to eliminate investment divisions from Account B, to
combine two or more divisions, or to substitute a new portfolio for the port-
folio in which a division invests. A substitution may become necessary if, in
our judgment, a portfolio no longer suits the purposes of the contract. This
may happen due to a change in laws or regulations, or a change in a portfo-
lio's investment objectives or restrictions, or because the portfolio is no
longer available for investment, or for some other reason. In addition, we
reserve the right to transfer assets of Account B, which we determine to be
associated with the class of contracts to which your contract belongs, to
another account. If necessary, we will get prior approval from the insurance
department of our state of domicile before making such a substitution or
transfer. We will also get any required approval from the SEC and any other
required approvals before making such a substitution or transfer. We will
notify you as soon as practicable of any proposed changes.
When permitted by law, we reserve the right to:
(1) deregister an Account B under the 1940 Act;
(2) operate an Account B as a management company under the 1940 Act if it is
operating as a unit investment trust;
(3) operate an Account B as a unit investment trust under the 1940 Act if it
is operating as a managed separate account;
(4) restrict or eliminate any voting rights as to Account B; and
(5) combine Account B with other accounts.
FACTS ABOUT THE CONTRACT
THE OWNER
You are the owner. You are also the annuitant unless another annuitant is
named in the application or enrollment form. You have the rights and options
described in the contract. One or more persons may own the contract.
Death of an owner activates the death benefit provision. In the case of a sole
owner who dies prior to the annuity commencement date, we will pay the benefi-
ciary the death benefit then due. The sole owner's estate will be the benefi-
ciary if no beneficiary designation is in effect, or if the designated benefi-
ciary has predeceased the owner. In the case of a joint owner of the contract
dying prior to the annuity commencement date, we will designate the surviving
owner(s) as the beneficiary(ies). This supersedes any previous beneficiary
designation. In the case where the owner is a trust, the beneficial owner of
the trust will be treated as the owner of the contract solely for the purpose
of activating the death benefit provision. See Contracts Owned by Non-Natural
Persons.
THE ANNUITANT
The annuitant will receive the annuity benefits of the contract if living on
the annuity commencement date. If the annuitant dies before the annuity
commencement date, and a contingent annuitant has been named, the contingent
annuitant becomes the annuitant. Once named, neither the annuitant nor the
contingent annuitant, if any, may be changed at any time.
If there is no contingent annuitant when the annuitant dies prior to the
annuity commencement date, we will pay the beneficiary the death benefit then
due. The beneficiary will be as provided in the beneficiary designation then
in effect. If no beneficiary designation is in effect, or if there is no
designated beneficiary living, the owner will be the beneficiary. If the annu-
itant was the sole owner and there is no beneficiary designation, the
annuitant's estate will be the beneficiary.
THE BENEFICIARY
The beneficiary is the person to whom we pay death benefit proceeds if the
annuitant (when there is no contingent annuitant) or owner dies prior to the
annuity commencement date. We pay death benefit proceeds to the primary bene-
ficiary. See Proceeds Payable to the Beneficiary.
If the beneficiary dies before the annuitant or 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 owner (if
other than the annuitant). If the owner was the annuitant, we pay any death
benefit proceeds to the annuitant's estate.
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<PAGE>
FACTS ABOUT THE CONTRACT (CONTINUED)
One or more persons who must be individuals may be named as 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 may specify other than equal shares.
You have the right to change beneficiaries during the annuitant's lifetime
unless you have designated an irrevocable beneficiary. When an irrevocable
beneficiary has been designated, you and the irrevocable beneficiary must act
together to exercise the rights and options under the contract.
CHANGE OF OWNER OR BENEFICIARY
During the annuitant's lifetime and while the contract is in effect, you may
transfer ownership of the contract (if purchased in connection with a non-qual-
ified plan) subject to our published rules at the time of the change. You may
also change the beneficiary. To make either of these changes, you must send us
written notice of the change in a form satisfactory to us. The change will take
effect as of the day the notice is signed. The change will not affect any
payment made or action taken by us before recording the change at our Customer
Service Center. See Additional Considerations, Transfer of Annuity Contracts,
and Assignments.
AVAILABILITY OF THE CONTRACT
We can issue a contract if both the annuitant and the owner are not older than
age 85.
TYPES OF CONTRACTS
QUALIFIED CONTRACTS
The contract may be issued as an Individual Retirement Annuity or in connec-
tion with an individual retirement account. In the latter case, the contract
will be issued without an Individual Retirement Annuity endorsement, and the
rights of the participant under the contract will be affected by the terms
and conditions of the particular individual retirement trust or custodial
account, and by provisions of the Code and the regulations thereunder. For
example, the individual retirement trust or custodial account will impose
minimum distribution rules, which require distributions to commence not later
than April 1st of the calendar year following the calendar year in which you
attain age 70 1/2. For both Individual Retirement Annuities and individual
retirement accounts, the minimum initial premium is $1,500.
IF THE CONTRACT IS PURCHASED TO FUND A QUALIFIED PLAN, DISTRIBUTION MUST
COMMENCE NOT LATER THAN APRIL 1ST OF THE CALENDAR YEAR FOLLOWING THE CALENDAR
YEAR IN WHICH YOU ATTAIN AGE 70 1/2.
NON-QUALIFIED CONTRACTS
The contract may fund any non-qualified plan. Non-qualified contracts do not
qualify for any tax-favored treatment other than the benefits provided for by
annuities.
YOUR RIGHT TO SELECT OR CHANGE CONTRACT OPTIONS
Before the annuity commencement date, you may change the annuity commencement
date, frequency of annuity payments or the annuity option by sending a written
request to the Customer Service Center. The annuitant named on the application
or enrollment form may not be changed at any time.
PREMIUMS
You purchase the contract with an initial premium. After the end of the free
look period, you may make additional premium payments. See Making Additional
Premium Payments. The minimum initial premium is $10,000 for a non-qualified
contract and $1,500 for a qualified contract. If your initial premium will be
$25,000 or more, we also offer DVA Series 100 through another prospectus, which
is a contract with a different charging structure.
We may refuse a premium payment if an initial premium or the sum of all premium
payments is more than $1,500,000. We may change the minimum initial or addi-
tional premium requirements for certain group or sponsored arrangements. See
Group or Sponsored Arrangements.
QUALIFIED PLANS
For IRA contracts, the annual premium on behalf of any individual contract
may not exceed $2,000. Provided your spouse does not make a contribution to
an IRA, you may set up a spousal IRA even if your spouse has earned some
compensation during the year. The maximum deductible amount for a spousal IRA
program is the lesser of $2,250 or 100% of your compensation reduced by the
contribution (if any) made by you for the taxable year to your own IRA.
However, no more than $2,000 can go to either your or your spouse's IRA in
any one year. For example, $1,750 may go to your IRA and $500 to your
spouse's IRA. These maximums are not applicable if the premium is the result
of a rollover from another qualified plan.
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<PAGE>
FACTS ABOUT THE CONTRACT (CONTINUED)
WHERE TO MAKE PAYMENTS
Remit premium payments to our Customer Service Center. The address is shown
on the cover. We will send you a confirmation notice.
MAKING ADDITIONAL PREMIUM PAYMENTS
You may make additional premium payments after the end of the free look
period. We can accept additional premium payments until either the annuitant
or owner reaches the attained age of 85 under non-qualified plans. For quali-
fied plans, no contributions may be made to an IRA contract for the taxable
year in which you attain age 70 1/2 and thereafter (except for rollover
contributions). The minimum additional premium payment we will accept is $500
for a non-qualified plan and $250 for a qualified plan.
CREDITING PREMIUM PAYMENTS
The initial premium will be accepted or rejected within two business days of
receipt by us of a completed application or enrollment form. We may retain the
initial premium for up to five days while attempting to complete an incomplete
application or enrollment form. If the application or enrollment form cannot
be made complete within five valuation days, the applicant or enrollee will be
informed of the reasons for the delay and the initial premium will be returned
immediately unless the applicant or enrollee specifically consents to our
retaining the initial premium until the application or enrollment form is made
complete. Thereafter, all premiums will be accepted on the day received.
We will accept, by agreement with broker-dealers who use wire transmittals,
transmittal of initial and additional premium payments by wire order from the
broker-dealer to the Customer Service Center. Such transmittals must be accom-
panied by a simultaneous telephone facsimile transmission containing the
essential information we require to open an account and allocate the premium
payment.
Premium payments accepted via wire order and accompanying facsimile transmis-
sions will be invested at the value next determined following receipt. Wire
orders not accompanied by facsimile transmissions, or accompanied by facsimile
transmissions which do not contain the essential information we require to
open an account and allocate the premium payment, may be retained for a period
not exceeding five business days while an attempt is made to obtain the
required facsimile transmission. If the required facsimile transmission cannot
be obtained within five business days, the Customer Service Center will inform
the broker-dealer, on behalf of the applicant/enrollee, of the reasons for the
delay and return the premium payment immediately to the broker-dealer for
return to the applicant/enrollee, unless the applicant/enrollee specifically
consents to allow us to retain the premium payment until the required
facsimile transmission is received by the Customer Service Center.
We will issue the contract; however, until we have received and accepted at
the Customer Service Center a properly completed application or enrollment
form, we reserve the right to rescind the contract. If an application or
enrollment form is not received within ten days of receipt of the initial
premium via wire order, or if an incomplete application or enrollment form is
received and cannot be completed within ten days of receipt of the initial
premium, the amount of the initial premium, with any gain, will be returned to
the broker-dealer for return to the applicant/enrollee. In no event will less
than the full amount of the initial premium be returned to the
applicant/enrollee.
On the date we receive and accept your initial or additional premium payment:
(1) We allocate the initial premium among the divisions according to your
instructions, subject to any restrictions. See Restrictions on Allocation
of Premium Payments. For additional premium payments, the accumulation
value will increase by the amount of the premium. If we do not receive
instructions from you, the increase in the accumulation value will be
allocated among the divisions in proportion to the amount of accumulation
value in each division as of the date we receive and accept the additional
premium payment.
(2) For an initial premium, we calculate the distribution fee and any charge
for premium taxes, if applicable. When an additional premium payment is
made we increase any distribution fee and any charge for premium taxes, if
applicable. These charges will be collected by us from the contract's
accumulation value. HOWEVER, WE CURRENTLY WAIVE THE DEDUCTION OF THE
CHARGE FOR PREMIUM TAXES. (See Charges and Fees, Premium Taxes).
(3) For an initial premium, we calculate the guaranteed death benefit. When an
additional premium payment is made we increase the guaranteed death bene-
fit.
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<PAGE>
FACTS ABOUT THE CONTRACT (CONTINUED)
ELECTRONIC DATA TRANSMISSION OF APPLICATION INFORMATION
In certain states, we will also accept, by agreement with broker-dealers who
use electronic data transmissions of application information, wire
transmittals of initial premium payments from the broker-dealer to the
Customer Service Center for purchase of the contract. Contact the Customer
Service Center to find out about state availability.
Upon receipt of the electronic data and wire transmittal, we will open an
account and allocate the premium payment according to the client's instruc-
tions. Based on the information provided, we will generate an application or
enrollment form and contract to be forwarded to the applicant/enrollee for
signature.
During the period from receipt of the initial premium until the signed appli-
cation or enrollment form is received, the owner may not execute any finan-
cial transactions with respect to the contract unless such transactions are
requested in writing and signature guaranteed.
RESTRICTIONS ON ALLOCATION OF PREMIUM PAYMENTS
We may require that the initial premium be allocated to the Specially Desig-
nated Division during the free look period for initial premiums received from
some states. After the free look period, if your initial premium was allocated
to the Specially Designated Division, we will transfer the accumulation value
to the divisions you previously selected based on the index of investment expe-
rience next computed for each division. See Measurement of Investment Experi-
ence, Index of Investment Experience and Unit Value.
YOUR RIGHT TO REALLOCATE
You may reallocate your accumulation value among the divisions of Account B at
the end of the free look period. You are allowed five allocation changes per
contract year without charge. There will be a charge of $25 deducted from the
accumulation value for each additional allocation change. When a reallocation
is made, we redeem shares of the Series underlying the divisions you are trans-
ferring from at their net asset value. Reinvestment is then made in shares of
the Series of the divisions you are transferring to at their net asset value.
To make a reallocation change, you must provide us with satisfactory notice at
our Customer Service Center.
RESTRICTIONS ON REALLOCATIONS
Some restrictions may apply based on the free look provisions of the state
where the contract is issued. See Your Right to Cancel or Exchange Your
Contract.
DOLLAR COST AVERAGING OPTION
If you have at least $10,000 of accumulation value in the Limited Maturity Bond
Division or the Liquid Asset Division, you may choose to have a specified
dollar amount transferred from this division to other divisions in Account B on
a monthly basis. The main objective of dollar cost averaging is to attempt to
shield your investment from short- term price fluctuations. Since the same
dollar amount is transferred to other divisions each month, more units are
purchased in a division if the value per unit is low and less units are
purchased if the value per unit is high.
Therefore, a lower than average value per unit may be achieved over the long
term. This plan of investing allows investors to take advantage of market fluc-
tuations but does not assure a profit or protect against a loss in declining
markets. See Measurement of Investment Experience, Index of Investment Experi-
ence and Unit Value.
This dollar cost averaging option may be elected at the time the application or
enrollment form is completed or at a later date. The minimum amount that may be
transferred each month is $250. The maximum amount which may be transferred is
equal to the accumulation value in the Limited Maturity Bond Division or the
Liquid Asset Division when elected, divided by 12.
The transfer date will be the same calendar day each month as the contract
date. The dollar amount will be allocated to the divisions in which you are
invested in proportion to your accumulation value in each division unless you
specify otherwise. If, on any transfer date, the accumulation value is equal to
or less than the amount you have elected to have transferred, the entire amount
will be transferred and the option will end. You may change the transfer amount
once each contract year, or cancel this option by sending us satisfactory
notice to the Customer Service Center at least seven days before the next
transfer date. Any allocation under this option will not be included in deter-
mining if the excess allocation charge will apply.
WHAT HAPPENS IF A DIVISION IS NOT AVAILABLE
When a distribution is made from an investment portfolio supporting a division
of Account B in
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<PAGE>
FACTS ABOUT THE CONTRACT (CONTINUED)
which reinvestment is not available, we will allocate the distribution, unless
you specify otherwise, to the Specially Designated Division.
Such a distribution can occur when (a) an investment portfolio matures, or (b)
a distribution from a portfolio or division cannot be reinvested in the port-
folio or division due to the unavailability of securities for acquisition. When
an investment portfolio matures, we will notify you in writing 30 days in
advance of that date. To elect an allocation to other than the Specially Desig-
nated Division, you must provide satisfactory notice to us at least seven days
prior to the date the portfolio matures. Such allocations are not counted as an
allocation change of the accumulation value for purposes of the number of free
allocation changes permitted. When a distribution from a portfolio or division
cannot be reinvested in the portfolio due to the unavailability of securities
for acquisition, we will notify you promptly after the allocation has occurred.
If within 30 days you allocate the accumulation value from the Specially Desig-
nated Division to other divisions of your choice, such allocations are not
counted as an allocation change of the accumulation value for purposes of the
number of free allocation changes permitted.
YOUR ACCUMULATION VALUE
Your accumulation value is the sum of the amounts in each of the divisions in
which you are invested, and is the amount available for investment at any time.
You select the divisions to which to allocate the accumulation value. We adjust
your accumulation value on each Valuation Date to reflect the divisions'
investment performance and on each contract processing date to reflect the
removal of any charges. The accumulation value is applied to your choice of an
annuity option on the annuity commencement date. See Choosing an Income Plan.
You may choose up to sixteen divisions and allocate your accumulation value
among them in any way you choose.
ACCUMULATION VALUE IN EACH DIVISION
ON THE CONTRACT DATE
On the contract date, the accumulation value is allocated to each division as
specified on the application or enrollment form, unless the contract is
issued in a state that requires the return of premium payments during the
free look period, in which case, your initial premium will be allocated to
the Specially Designated Division during the free look period. See Your Right
to Cancel or Exchange Your Contract.
ON EACH VALUATION DATE
At the end of each subsequent valuation period, the amount of accumulation
value in each division will be calculated as follows:
(1) We take the accumulation value in the division at the end of the
preceding valuation period.
(2) We multiply (1) by the division's net rate of return for the current
valuation period.
(3) We add (1) and (2).
(4) We add to (3) any additional premium payments allocated to the division
during the current valuation period.
(5) We add or subtract allocations to or from that division during the
current valuation period.
(6) We subtract from (5) any partial withdrawals and any associated charges
allocated to that division during the current valuation period.
(7) We subtract from (6) the amounts allocated to that division for:
(a) any contract fees; and
(b) any distribution fee and any charge for premium taxes. HOWEVER, WE
CURRENTLY WAIVE THE DEDUCTION OF THE CHARGE FOR PREMIUM TAXES. (See
Charges and Fees, Premium Taxes.)
All amounts in (7) are allocated to each division in the proportion that (6)
bears to the accumulation value, unless the Charge Deduction Division has
been specified.
MEASUREMENT OF INVESTMENT EXPERIENCE
INDEX OF INVESTMENT EXPERIENCE AND UNIT VALUE
The investment experience of a division is determined on each valuation date.
We use an index to measure changes in each division's experience during a
valuation period. We set the index at $10 when the first investments in a
division are made, except for the OTC, Research, Total Return, Growth and
Income, and Value + Growth Divisions which started with indices of $14.79,
$16.64, $13.93, $10.97 and $12.05, respectively. The index for a current
valuation period equals the index for the preceding valuation period multi-
plied by the experience factor for the current valuation period.
We may express the value of amounts allocated to the divisions in terms of
units. We determine
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<PAGE>
FACTS ABOUT THE CONTRACT (CONTINUED)
the number of units for a given amount on a valuation date by dividing the
dollar value of that amount by the index of investment experience for that
date. The index of investment experience is equal to the value of a unit.
HOW WE DETERMINE THE
EXPERIENCE FACTOR
For divisions of Account B the experience factor reflects the investment
experience of the Series in which a division invests as well as the charges
assessed against the division for a valuation period. The factor is calcu-
lated as follows:
(1) We take the net asset value of the portfolio in which the division
invests at the end of the current valuation period.
(2) We add to (1) the amount of any dividend or capital gains distribution
declared for the investment portfolio and reinvested in such portfolio
during the current valuation period. We subtract from that amount a
charge for our taxes, if any.
(3) We divide (2) by the net asset value of the portfolio at the end of the
preceding valuation period.
(4) We subtract the daily mortality and expense risk charge from each divi-
sion for each day in the valuation period.
(5) We subtract the daily asset based administrative charge from each divi-
sion for each day in the valuation period.
Calculations for divisions investing in a Series are made on a per share
basis.
NET RATE OF RETURN FOR A DIVISION
OF ACCOUNT B
The net rate of return for a division during a valuation period is the expe-
rience factor for that valuation period minus one.
CASH SURRENDER VALUE
Your contract's cash surrender value fluctuates daily with the investment
results of the divisions you have selected. We do not guarantee any minimum.
On any date before the annuity commencement date while the contract is in
effect, the cash surrender value is calculated as follows:
(1) We take the contract's accumulation value;
(2) We deduct any surrender charge and any unrecovered charge for premium
taxes. (See Charges and Fees, Premium Taxes):
(3) We deduct any charges incurred but not yet deducted. (See Charges and
Fees, Administrative Charge, Excess Allocation Charge, Partial Withdrawal
Charge).
SURRENDERING TO RECEIVE THE
CASH SURRENDER VALUE
The contract may be surrendered by the owner at any time while the annuitant
is living and before the annuity commencement date.
A surrender will be effective on the date your written request and the
contract are received by us at our Customer Service Center and the cash
surrender value is determined accordingly as of that date. All benefits under
the contract will then be terminated as of that date. You may receive the cash
surrender value in a single sum payment or apply it under one or more annuity
options. See The Annuity Options. We will usually pay the cash surrender value
within seven days but we may delay payment as described in the When We Make
Payments provision.
PARTIAL WITHDRAWALS
Prior to the annuity commencement date, while the annuitant is living and the
contract is in effect, you may take partial withdrawals from the accumulation
value by sending satisfactory notice to the Customer Service Center. Unless
you specify otherwise, the amount of the withdrawal will be taken in propor-
tion to the amount of accumulation value in each division in which you are
invested.
There are three options available for selecting partial withdrawals, the
Conventional Partial Withdrawal Option, the Systematic Partial Withdrawal
Option and the IRA Partial Withdrawal Option. All three options are described
below. Partial withdrawals may not be repaid, and in no event may a withdrawal
amount be greater than 90% of the cash surrender value.
CONVENTIONAL PARTIAL WITHDRAWAL OPTION
After the free look period, you may take a conventional partial withdrawal
once each contract year without charge. If you take more than one conven-
tional partial withdrawal in a contract year, we impose a charge of the
lesser of $25 and 2.0% of the amount withdrawn. The minimum amount you may
withdraw under this option is $1,000 and the maximum amount that may be with-
drawn without incurring a surrender charge (assuming no systematic or IRA
partial withdrawals are in place during that contract year) is 15% of the
accumulation value. See Surrender Charges for Excess Partial Withdrawals,
below.
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FACTS ABOUT THE CONTRACT (CONTINUED)
SYSTEMATIC PARTIAL WITHDRAWAL OPTION
This option may be elected at the time the application or enrollment form is
completed, or at a later date. This option may be elected to commence in a
contract year where a conventional partial withdrawal has been taken.
However, it may not be elected while the IRA partial withdrawal option is in
effect.
You may choose to receive systematic partial withdrawals on a monthly or
quarterly basis from the accumulation value in the divisions of Account B.
The commencement of payments under this option may not be elected to start
sooner than 28 days after the contract issue date. You select the date of the
quarter or month when the withdrawals will be made but no later than the 28th
day of the month. If no date is selected, the withdrawals will be made on the
same calendar day of each month as the contract date. You may select a dollar
amount or a percentage of the accumulation value as the amount of your with-
drawal subject to the following maximums, but in no event can a payment be
less than $100:
<TABLE>
<CAPTION>
FREQUENCY MAXIMUM PERCENTAGE
--------- ------------------
<S> <C>
Monthly 1.25%
Quarterly 3.75%
</TABLE>
If a dollar amount is selected and the amount to be systematically withdrawn
would exceed the applicable maximum percentage of the accumulation value on
the withdrawal date, the amount withdrawn will be reduced so that it equals
such percentage. For example, if a $500 monthly withdrawal was elected and on
the withdrawal date 1.25% of the accumulation value equaled $300, the with-
drawal amount would be reduced to $300. If a percentage is selected and the
amount to be systematically withdrawn based on that percentage would be less
than the minimum of $100, we would increase the amount to $100 provided it
does not exceed the maximum percentage. If it is below the maximum percentage
we will send the minimum. If it is above the maximum percentage we will send
the amount and then cancel the option. For example, if you selected 1.0% to
be systematically withdrawn on a monthly basis and that amount equaled $90,
and since $100 is less than 1.25% of the accumulation value, we would send
$100. If 1.0% equaled $75, since $100 is more than 1.25% of the accumulation
value we would send $75 and then cancel the option. In such a case, in order
to receive systematic partial withdrawals in the future, you would be
required to submit a new notice to our Customer Service Center.
You may change the amount or percentage of your withdrawal once each contract
year or cancel this option at any time by sending satisfactory notice to us
at our Customer Service Center at least seven days prior to the next sched-
uled withdrawal date. However, you may not change the amount or percentage of
your withdrawals in any contract year during which you have previously taken
a conventional partial withdrawal.
There may be a surrender charge associated with a partial withdrawal in any
contract year in which you receive systematic partial withdrawals and also
take a conventional partial withdrawal. See Surrender Charges for Excess
Partial Withdrawals, below.
IRA PARTIAL WITHDRAWAL OPTION
If you have an IRA contract and will attain age 70 1/2 in the current
calendar year, distributions will be made to you to satisfy requirements
imposed by Federal tax law. IRA partial withdrawals provide payout of amounts
required to be distributed by the Internal Revenue Service rules governing
mandatory distributions under qualified plans. See Federal Tax Considera-
tions, Taxation of Individual Retirement Annuities. We will send you a notice
before your distributions must commence, and you may elect this option at
that time, or at a later date. You may not elect IRA partial withdrawals
while the systematic partial withdrawal option is in effect. If you do not
elect the IRA partial withdrawal option, and distributions are required by
Federal tax law, distributions adequate to satisfy the requirements imposed
by Federal tax law will be made. Thus, if the systematic partial withdrawal
option is in effect, distribution under that option must be adequate to
satisfy the mandatory distribution rules imposed by Federal tax law.
You may choose to receive IRA partial withdrawals on a monthly, quarterly or
annual frequency. You select the day of the month when the withdrawals will
be made, but it cannot be later than the 28th day of the month. If no date is
selected, the withdrawals will be made on the same calendar day of the month
as the contract date.
We will determine 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
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FACTS ABOUT THE CONTRACT (CONTINUED)
withdraw is $100. At the time we determine the required partial withdrawal
amount for a taxable year based on the frequency you select, if that amount
is less than $100, we will pay $100. At any time where the partial withdrawal
amount is greater than the accumulation value, we will cancel the contract
and send you the amount of the cash surrender value.
You may change the payment frequency of your withdrawals once each contract
year or cancel this option at any time by sending us satisfactory notice to
our Customer Service Center at least seven days prior to the next scheduled
withdrawal date.
There may be a surrender charge associated with a partial withdrawal in any
contract year during which you receive IRA partial withdrawals and take a
conventional partial withdrawal. See Surrender Charges for Excess Partial
Withdrawals, below.
SURRENDER CHARGES FOR EXCESS PARTIAL WITHDRAWALS
An excess partial withdrawal is the amount by which annualized partial with-
drawals for a contract year exceed 15% of the accumulation value on the date
of the withdrawal. Any partial withdrawal and any combination of partial
withdrawals either taken during a contract year or expected to be received in
a contract year will be taken into account in determining the amount of the
excess partial withdrawal. An excess partial withdrawal will be considered a
partial surrender of the contract and we will impose a surrender charge
applicable to the accumulation value. Such amount will be deducted from the
accumulation value in proportion to the accumulation value in each division
from which the excess partial withdrawal was taken.
An excess partial withdrawal will result in the imposition of a surrender
charge and a corresponding reduction in the remaining surrender charge that
subsequently can be imposed under the contract. For example the following
assumes a conventional partial withdrawal of $17,200 is taken at the begin-
ning of the fourth contract year. A contract with a current surrender charge
of $3,000 (an initial surrender charge of $6,000 reducing at the rate of
$1,000 per contract year for six years), has an accumulation value of
$100,000.
In this example, $15,000 (15% of accumulation value) may be withdrawn during
the contract year without the imposition of a surrender charge. The excess
partial withdrawal is the amount by which the withdrawal is in excess of the
maximum ($17,200 - $15,000 = $2,200). The excess is calculated as a
percentage of the accumulation value ($2,200/$100,000 = .022). Applying this
percentage to the current amount of the surrender charge ($3,000 X .022 =
$66) determines the amount to be deducted from the accumulation value as of
the date of the withdrawal.
If the contract were surrendered following the partial withdrawal, the
surrender charge would be $2,934 ($3,000 - $66). If instead, the contract
were surrendered at the beginning of the fifth year assuming no further
partial withdrawals, the surrender charge would be $1,934 ($2,000 - $66).
Contracts with a contract date prior to May 3, 1993 and the prospectus deliv-
ered in connection with such contracts, described this provision as accelera-
tion of recovery of deferred loading, which is the functional equivalent of
the assessment of a surrender charge for excess partial withdrawals. Limited
Edition contracts purchased through Golden American Separate Account D and
the prospectus delivered in connection with such contracts also described
this provision as acceleration of recovery of deferred loading.
PARTIAL WITHDRAWALS IN GENERAL
CONSULT YOUR TAX ADVISOR REGARDING THE TAX CONSEQUENCES ASSOCIATED WITH
TAKING PARTIAL WITHDRAWALS. A partial withdrawal made before the taxpayer
reaches age 59 1/2 may result in imposition of a tax penalty of 10% of the
taxable portion withdrawn. Please refer to Federal Tax Considerations for
more details.
PROCEEDS PAYABLE TO THE BENEFICIARY
If either the annuitant (when there is no contingent annuitant) or owner dies
prior to the annuity commencement date, we will pay the beneficiary the death
benefit proceeds under the contract. Such amount may be received in a single
sum or applied to any of the annuity options. See The Annuity Options. If we do
not receive a request to apply the death benefit proceeds to an annuity option,
a single sum distribution will be made. We may reduce the death benefit
proceeds payable under certain group or sponsored arrangements. See Group or
Sponsored Arrangements.
If the annuitant and owner are both age 75 or younger at issue (age 80 or
younger for contracts
24
<PAGE>
FACTS ABOUT THE CONTRACT (CONTINUED)
with a contract date before November 6, 1992) the death benefit is the greater
of the accumulation value and the guaranteed death benefit.
MAXIMUM GUARANTEED DEATH BENEFIT
This amount is calculated as follows:
(1) We determine the total premiums paid;
(2) We multiply (1) by two;
(3) We determine the total partial withdrawals taken; and
(4) We subtract (3) from (2).
GUARANTEED DEATH BENEFIT
On the contract date the guaranteed death benefit is equal to the initial
premium. On subsequent valuation dates, the guaranteed death benefit is
calculated as follows:
(1) We take the guaranteed death benefit from the prior valuation date;
(2) We calculate interest on (1) for the current valuation period at an
annual rate of 7% (the guaranteed death benefit interest rate), except
that with respect to amounts in the Liquid Asset Division, the interest
rate applied to such amounts will be the net rate of return for the
Liquid Asset Division during the current valuation period, if it is less
than 7%; (Under contracts with a contract date before November 6, 1992,
the 7% test for the Liquid Asset Division does not apply.);
(3) We add (1) and (2);
(4) We add to (3) any additional premiums paid during the current valuation
period; and,
(5) We subtract from (4) any partial withdrawals made during the current
valuation period.
If (5) is greater than the maximum guaranteed death benefit, we will pay
the maximum guaranteed death benefit.
If the annuitant or owner is age 76 or older at issue (age 81 or older for
contracts with a contract date before November 6, 1992), the death benefit is
the greater of:
(1) The cash surrender value; and
(2) The sum of the premiums paid, less any partial withdrawals.
DEATH BENEFIT FOR CONTRACTS PURCHASED IN NORTH CAROLINA WITH A CONTRACT DATE
BEFORE NOVEMBER 6, 1992
If the annuitant and owner are both age 80 or younger at issue the death
benefit is the greater of:
(1) The accumulation value; and
(2) The sum of the premiums paid, less any partial withdrawals.
If the annuitant or owner is age 81 or older at issue, the death benefit is
the greater of:
(1) The cash surrender value; and
(2) The sum of the premiums paid, less any partial withdrawals.
HOW TO CLAIM PAYMENTS TO BENEFICIARY
We must receive due proof of the death of the annuitant or owner (such as an
official death certificate) at our Customer Service Center before we will
make any payments to the beneficiary. We will calculate the death benefit as
of the date we receive due proof of death. The beneficiary should contact our
Customer Service Center for instructions.
REPORTS TO OWNERS
We will send you a report once each contract quarter within 31 days after the
end of each contract quarter. The report will show the accumulation value, the
cash surrender value, and the death benefit as of the end of the contract
quarter.
The report will also show the allocation of the accumulation value as of such
date and the amounts deducted from or added to the accumulation value since
the last report. The report will also include any other information that may
be currently required by the insurance supervisory official of the jurisdic-
tion in which the contract is delivered. We will also send you copies of any
shareholder reports of the portfolios or securities in which Account B
invests, as well as any other reports, notices or documents required by law to
be furnished to contract owners.
WHEN WE MAKE PAYMENTS
We will pay death benefit proceeds and the cash surrender value within seven
days after our Customer Service Center receives all the information needed to
process the payment.
However, we may delay payment of amounts derived from the divisions if it is
not practical for us to value or dispose of shares of Account B because:
(1) The NYSE is closed for trading;
(2) The SEC determines that a state of emergency exists;
(3) An order or pronouncement of the SEC permits a delay for the protection of
contract owners; or,
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FACTS ABOUT THE CONTRACT (CONTINUED)
(4) The check used to pay the premium has not cleared through the banking
system. This may take up to 15 days.
During such times, as to amounts allocated to the divisions, we may delay:
(1) Determination and payment of any cash surrender value;
(2) Determination and payment of any death benefit if death occurs before the
annuity commencement date;
(3) Allocation changes of the accumulation value; or,
(4) Application under an annuity option of the accumulation value.
CHARGES AND FEES
We deduct the charges described below to cover our costs and expenses, serv-
ices provided and risks assumed under the Contracts. We incur certain costs
and expenses for the distribution and administration of the Contracts, for
providing the benefits payable thereunder and for bearing various risks there-
under. The amount of a charge will not necessarily correspond to the costs
associated with providing the services or benefits indicated by the designa-
tion of the charge. For example, the Surrender Charge collected may not fully
cover all of the distribution expenses incurred by us.
CHARGE DEDUCTION DIVISION
You may specify on the application or enrollment form if you wish to use the
Charge Deduction Division Option. If you so specify, all charges against the
accumulation value will be deducted from the Liquid Asset Division. If the
amount of the charge is greater than the amount in the division, the charge
will be deducted proportionately from all the divisions in which you are
invested. You may also choose to elect or cancel this option while the
contract is in force by sending us satisfactory notice to our Customer Service
Center. If you do not elect this option, the charges will be deducted propor-
tionately from all the divisions in which you are invested.
CHARGES DEDUCTED FROM THE ACCUMULATION VALUE
We invest the entire amount of the initial and any additional premium payments
in the divisions you select, subject to certain restrictions. See Restrictions
on Allocation of Premium Payments. We then periodically deduct certain amounts
from your accumulation value. We may reduce certain fees and charges,
including any distribution fees, surrender, administration, and mortality and
expense risk charges, under group or sponsored arrangements. See Group or
Sponsored Arrangements. Charges are deducted proportionately from all divi-
sions in which you are invested, unless you have elected the Charge Deduction
Division. The charges we deduct are:
DISTRIBUTION FEE
We deduct a sales load in an annual amount of 1.00% of each premium at the
end of each contract processing period for a period of six years from the
date we receive and accept each premium payment.
SURRENDER CHARGE
A surrender charge is imposed as a percentage of premium if the contract is
surrendered or an excess partial withdrawal is taken during the six year
period from the date we receive and accept each premium payment. The
percentage imposed at the time of surrender or excess partial withdrawal
depends on the distribution fee collected to the time the contract is surren-
dered or the excess partial withdrawal is taken. The surrender charge in the
first contract year is 6.00% and reduces by 1.00% each year during the six
year period from the date we receive and accept each premium payment.
Contracts with a contract date prior to May 3, 1993 and the prospectus deliv-
ered in connection with such contracts, described the sales load as a
deferred load, which is equivalent to the combination of the distribution fee
and surrender charge described above. Limited Edition contracts purchased
through Golden American Separate Account D and the prospectus delivered in
connection with such contracts also described the sales load as a deferred
load.
If your initial premium will be $25,000 or more, we also offer DVA Series 100
through another prospectus, which is a contract with a different charging
structure.
PREMIUM TAXES
We make a charge for state and local premium taxes in certain states which
can range from 0% to 3.5% of premium. The charge depends on the annuitant's
or owner's state of residence, as applicable. We reserve the right to change
this amount to conform with changes in the law or if the annuitant changes
state of residence.
Premium taxes are generally incurred on the annuity commencement date and a
charge for
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<PAGE>
CHARGES AND FEES (CONTINUED)
such premium taxes is then deducted from your accumulation value on such
date. However, some jurisdictions impose a premium tax at the time the
initial and additional premiums are paid, regardless of the annuity commence-
ment date. In those states we initially advance the amount of the charge for
premium taxes to your accumulation value and then deduct it in equal install-
ments on each contract processing date over a six year period.
CURRENTLY, IN THOSE STATES WHERE WE ADVANCE THE CHARGE FOR PREMIUM TAXES, WE
WILL WAIVE THE DEDUCTION OF THE APPLICABLE INSTALLMENTS OF THE CHARGE FOR
PREMIUM TAXES ON EACH CONTRACT PROCESSING DATE. HOWEVER, WE WILL DEDUCT THE
UNRECOVERED CHARGE FOR PREMIUM TAXES (NOT INCLUDING INSTALLMENTS WHICH WERE
WAIVED) WHEN DETERMINING THE CASH SURRENDER VALUE PAYABLE IF YOU SURRENDER
YOUR CONTRACT. WE RESERVE THE RIGHT TO DEDUCT THE TOTAL AMOUNT OF THE CHARGE
FOR PREMIUM TAXES PREVIOUSLY WAIVED AND UNRECOVERED ON THE ANNUITY COMMENCE-
MENT DATE.
In those cases when we advance the charge for premium taxes, since the charge
for premium taxes is advanced to the accumulation value, a positive net rate
of return will give a higher cash surrender value and a negative net rate of
return will give a lower cash surrender value than would be the case had the
charge for premium taxes been deducted from your premium payment.
ADMINISTRATIVE CHARGE
The administrative charge is incurred at the beginning of the contract
processing period and deducted at the end of each contract processing period.
We deduct this charge when determining the cash surrender value payable if
you surrender the contract prior to the end of a contract processing period.
The amount deducted is $40 per contract year if total premiums paid in the
first contract year are less than $100,000. If the total premium paid in the
first contract year equals $100,000 or more, the charge is zero. See Asset
Based Administration Charge below.
EXCESS ALLOCATION CHARGE
We currently do not assess a charge for allocation changes made during a
Contract Year. We reserve the right, however, to assess a $25 charge for each
allocation change after the twelfth allocation change in a Contract Year.
This amount represents the maximum we will charge. The charge would be
deducted from the division(s) from which each such reallocation is made in
proportion to the amount being transferred from each such division unless you
have chosen to use the Charge Deduction Division. Any allocation(s) or trans-
fer(s) due to the election of the Dollar Cost Averaging Option and realloca-
tion under the provision What Happens if a Division is Not Available will not
be included in determining if the excess allocation charge should apply.
PARTIAL WITHDRAWAL CHARGE
If you take more than one conventional partial withdrawal during a contract
year, we impose a charge of the lesser of $25 and 2.0% of the amount with-
drawn for each additional conventional partial withdrawal. The charge is
deducted from the division(s) from which each such partial withdrawal is made
in proportion to the amount being withdrawn from each division unless you
have chosen to use the Charge Deduction Division. See Partial Withdrawals,
Conventional Partial Withdrawal Option.
CHARGES DEDUCTED FROM THE DIVISIONS
MORTALITY AND EXPENSE RISK CHARGE
The daily charge is at the rate of 0.002477% (equivalent to an annual rate of
0.90%) on the assets in each division.
ASSET BASED ADMINISTRATIVE CHARGE
We will deduct a daily administrative charge from the assets in each division
of the Accounts. The daily charge is at a rate of 0.000276% (equivalent to an
annual rate of 0.10%) on the assets in each division.
TRUST EXPENSES
There are fees and charges deducted from each Series of the GCG Trust and the
ESS Trust. Please read the respective Trust prospectus for details.
CHOOSING AN INCOME PLAN
THE INCOME PLAN
If the annuitant and owner are living on the annuity commencement date, we
will begin making payments to the annuitant under an income plan. We will make
these payments under
27
<PAGE>
CHOOSING AN INCOME PLAN (CONTINUED)
the annuity option chosen in the application or enrollment form or as subse-
quently changed. You may change an annuity option by making a written request
to us at least 30 days prior to the annuity commencement date of the contract.
The amount of the payments will be determined by applying the accumulation
value on the annuity commencement date in accordance with The Annuity Options
section below. See When We Make Payments.
You may also elect an annuity option on surrender of the contract for its cash
surrender value or, you may choose one or more annuity options for the payment
of death benefit proceeds while it is in effect and before the annuity
commencement date. If, at the time of the annuitant's or owner's death, no
option has been chosen for paying death benefit proceeds, the beneficiary may
choose an option within one year.
The minimum monthly annuity income payment that we will make is $20. We may
require that a single sum payment be made if the accumulation value is less
than $2,000 or if the calculated monthly annuity income payment is less than
$20.
For each option we will issue a separate written agreement putting the option
into effect. Before we pay any annuity benefits, we require the return of the
contract. If your contract has been lost, we will require that you complete
and return the applicable lost contract form. Various factors will affect the
level of annuity benefits including the annuity option chosen, the assumed
interest rate used and the investment results of the division(s) in which the
accumulation value has been invested.
Fixed annuity payments are regular payments, the amount of which is fixed and
guaranteed by us. The amount of the payments will depend only on the form and
duration of payments chosen, the age of the annuitant or beneficiary (and sex,
where appropriate), the total accumulation value applied to purchase the fixed
option, and the applicable payment rate.
Our approval is needed for any option where:
(1) The person named to receive payment is other than the owner or benefi-
ciary;
(2) The person named is not a natural person, such as a corporation; or
(3) Any income payment would be less than the minimum annuity income payment
allowed.
ANNUITY COMMENCEMENT DATE SELECTION
You select the annuity commencement date in the application or enrollment
form. You may select any date following the third contract anniversary but
before the contract processing date in the month following the annuitant's
90th birthday. If you do not select a date, the annuity commencement date will
be in the month following the annuitant's 90th birthday. However, in the state
of Pennsylvania the annuity commencement date may not be later than in the
month following the annuitant's 85th birthday for annuitants with an issue age
of 80 and under. For contracts with contract dates before May 3, 1993,
different annuity commencement date limitations may apply. If the annuity
commencement date occurs when the annuitant is at an advanced age, such as
over age 85, it is possible that the contract will not be considered an
annuity for Federal tax purposes. See Federal Tax Considerations. For a
contract purchased in connection with a qualified plan, distribution must
commence not later than April 1st of the calendar year following the calendar
year in which you attain age 70 1/2. Consult your tax advisor.
FREQUENCY SELECTION
You choose the frequency of the annuity payments. They may be monthly, quar-
terly, semi-annually or annually. If we do not receive written notice from
you, the payments will be made monthly. There may be certain restrictions on
minimum payments that we will allow.
THE ANNUITY OPTIONS
There are four options to choose from as shown below. Options 1 through 3 are
fixed and option 4 is variable. For a fixed option, the accumulation value is
transferred to the general account.
OPTION 1. INCOME FOR A FIXED PERIOD
Payment is made in equal installments for a fixed number of years based on
the accumulation value as of the annuity commencement date. We guarantee that
each monthly payment will be at least the amount set forth in the contract.
Guaranteed amounts for annual, semi-annual and quarterly payments are avail-
able upon request. Illustrations are available upon request. If the cash
surrender value or accumulation value is applied under this option, a 10%
penalty tax may apply to the taxable portion of each income payment until the
annuitant reaches age 59 1/2.
OPTION 2. INCOME FOR LIFE
Payment is made in equal monthly installments and guaranteed for at least a
period certain. The period certain can be 10 or 20 years. Other
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CHOOSING AN INCOME PLAN (CONTINUED)
periods certain are available on request. A refund certain may be chosen
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 set forth in the contract corresponding to the
person's age on his or her last birthday before the option's effective date.
Amounts for ages not shown in the contract are available upon request.
OPTION 3. JOINT LIFE INCOME
This option is available if there are two persons named to receive payments.
At least one of the persons named must be either the owner or beneficiary of
the contract. Monthly payments are guaranteed and are made as long as at
least one of the named persons is living. There is no minimum number of
payments. Monthly payment amounts are available upon request.
OPTION 4. ANNUITY PLAN
An amount can be used to buy any single premium annuity we offer on the
option's effective date.
PAYMENT WHEN NAMED PERSON DIES
When the person named to receive payment dies, we will pay any amounts still
due as provided by the option agreement. The amounts still due are determined
as follows:
(1) For options 1, 2, or any remaining guaranteed payments, payments will be
continued. Under options 1 and 2, the discounted values of the remaining
guaranteed payments may be paid in a single sum. This means we deduct the
amount of the interest each remaining guaranteed payment would have earned
had it not been paid out early. The discount interest rate is 3% for
option 1 and 3.50% for option 2 per year. We will however, base the
discount interest rate on the interest rate used to calculate the payments
for options 1 and 2 if such payments were not based on the tables in the
contract.
(2) For option 3, no amounts are payable after both named persons have died.
(3) For option 4, the annuity agreement will state the amount due, if any.
OTHER INFORMATION
OTHER CONTRACT PROVISIONS
IN CASE OF ERRORS ON THE APPLICATION OR ENROLLMENT FORM
If an age or sex given in the application or enrollment form is misstated,
the amounts payable or benefits provided by the contract shall be those that
the premium payment would have bought at the correct age or sex.
SENDING NOTICE TO US
Any written notices, inquiries or requests should be sent to our Customer
Service Center. Please include your name, your contract number and, if you
are not the annuitant, the name of the
annuitant.
ASSIGNING THE CONTRACT AS COLLATERAL
You may assign a non-qualified contract as collateral security for a loan or
other obligation. This does not change the ownership. However, your rights
and any beneficiary's rights are subject to the terms of the assignment. See
Additional Considerations, Transfer of Annuity Contracts, and Assignments. An
assignment may have Federal tax consequences. See Federal Tax Considerations.
You must give us satisfactory written notice at our Customer Service Center
in order to make or release an assignment. We are not responsible for the
validity of any assignment.
NON-PARTICIPATING
The contract does not participate in the divisible surplus of Golden Ameri-
can.
AUTHORITY TO MAKE AGREEMENTS
All agreements made by us must be signed by our president or a vice president
and by our secretary or an assistant secretary. No other person, including an
insurance agent or broker, can change any of the contract's terms, make any
agreements binding on us or extend the time for premium payments.
CONTRACT CHANGES -- APPLICABLE TAX LAW
We reserve the right to make changes in the contract to the extent we deem it
necessary to continue to qualify the contract as an annuity. Any such changes
will apply uniformly to all contracts that are affected. You will be given
advance written notice of such changes.
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<PAGE>
OTHER INFORMATION (CONTINUED)
YOUR RIGHT TO CANCEL OR EXCHANGE YOUR CONTRACT
CANCELLING YOUR CONTRACT
You may cancel your contract within your free look period, which is ten days
after you receive your contract. For purposes of administering our allocation
and administrative rules, we deem this period to expire 15 days after the
contract is mailed to you. Some states may require a longer free look period.
If you decide to cancel, you may mail or deliver the contract to us at our
Customer Service Center. We will refund the accumulation value plus any
charges we deducted, and the contract will be voided as of the date we
receive the contract and your request. Some states require that we return the
premium paid. In these states, we require that your premium be allocated to
the Specially Designated Division during the free look period. If you exer-
cise your right to cancel, we will return the greater of (a) the premium
invested and (b) the accumulation value of your contract plus any amounts
deducted under the contract or by the Trust for taxes, charges or fees. If
you do not choose to exercise your right to cancel during the free look
period, then at the end of the free look period your money will be invested
in the division(s) chosen by you, based on the index of investment experience
next computed for each division. See Measurement of Investment Experience,
Index of Experience and Unit Value.
EXCHANGING YOUR CONTRACT
For information regarding exchanges under Section 1035, of the Internal
Revenue Code of 1986, as amended, see Federal Tax Considerations.
OTHER CONTRACT CHANGES
You may change the contract to another annuity plan subject to our rules at the
time of the change.
GROUP OR SPONSORED ARRANGEMENTS
For certain group or sponsored arrangements, we may reduce any distribution
fee, surrender, administration, and mortality and expense risk charges. We may
also change the minimum initial and additional premium requirements, or reduce
the death benefit proceeds payable. Group arrangements include those in which a
trustee or an employer, for example, purchases contracts covering a group of
individuals on a group basis. Sponsored arrangements include those in which an
employer allows us to sell contracts to its employees on an individual basis.
Our costs for sales, administration, and mortality generally vary with the size
and stability of the group among other factors. We take all these factors into
account when reducing charges. To qualify for reduced charges, a group or spon-
sored arrangement must meet certain requirements, including our requirements
for size and number of years in existence. Group or sponsored arrangements that
have been set up solely to buy contracts or that have been in existence less
than six months will not qualify for reduced charges.
We will make these and any similar reductions according to our rules in effect
when an application or enrollment form for a contract is approved. We may
change these rules from time to time. Any variation in the distribution fee or
administrative charge will reflect differences in costs or services and will
not be unfairly discriminatory.
SELLING THE CONTRACT
DSI is principal underwriter and distributor of the contract as well as for
other contracts issued through Account B and other separate accounts of Golden
American. We pay DSI for acting as principal underwriter under a distribution
agreement. The offering of the contract will be continuous.
DSI has entered into and will continue to enter into sales agreements with
broker-dealers to solicit for the sale of the contract through registered
representatives who are licensed to sell securities and variable insurance
products including variable annuities. These agreements provide that applica-
tions for contracts may be solicited by registered representatives of the
broker-dealers appointed by Golden American to sell its variable life insurance
and variable annuities. These broker-dealers are registered with the SEC and
are members of the National Association of Securities Dealers, Inc. ("NASD").
The registered representatives are authorized under applicable state regula-
tions to sell variable life insurance and variable annuities. The writing agent
will receive commissions of up to 6% of any initial or additional premium
payments made.
REINSURANCE
Golden American reinsures its mortality risk associated with one or more appro-
priately licensed insurance companies. Golden American also, effective June 1,
1994, entered into a reinsurance agreement on a modified coinsurance basis with
an affiliate of a broker-dealer which distributes Golden American's products
with respect to 25% of the business produced by that broker-dealer.
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<PAGE>
REGULATORY INFORMATION
VOTING RIGHTS
We will vote the shares of the Trusts owned by Account B according to your
instructions. However, if the Investment Company Act of 1940 or any related
regulations should change, or if interpretations of it or related regulations
should change, and we decide that we are permitted to vote the shares of the
Trusts in our own right, we may decide to do so.
We determine the number of shares that you have in a division by dividing the
contract's accumulation value in that division by the net asset value of one
share of the portfolio in which a division invests. Fractional votes will be
counted. We will determine the number of shares you can instruct us to vote
180 days or less before a Trust's meeting. We will ask you for voting instruc-
tions by mail at least 10 days before the meeting.
If we do not get your instructions in time, we will vote the shares in the
same proportion as the instructions received from all contracts in that divi-
sion. We will also vote shares we hold in Account B which are not attributable
to owners in the same proportion.
STATE REGULATION
We are regulated and supervised by the Insurance Department of the State of
Delaware, which periodically examines our financial condition and operations.
We are also subject to the insurance laws and regulations of all jurisdictions
where we do business. The variable contract offered by this prospectus has
been approved by the Insurance Department of the State of Delaware and by the
Insurance Departments of other jurisdictions.
We are required to submit annual statements of our operations, including
financial statements, to the Insurance Departments of the various jurisdic-
tions in which we do business to determine solvency and compliance with state
insurance laws and regulations.
LEGAL PROCEEDINGS
Golden American, as an insurance company, is ordinarily involved in litiga-
tion. We do not believe that any current litigation is material and we do not
expect to incur significant losses from such actions.
LEGAL MATTERS
The legal validity of the contract described in this prospectus has been
passed on by Myles R. Tashman, Executive Vice President, General Counsel and
Secretary of Golden American. Sutherland, Asbill & Brennan, L.L.P. of Washing-
ton, D.C. has provided advice on certain matters relating to Federal securi-
ties laws.
EXPERTS
The financial statements of Golden American Life Insurance Company, Separate
Account B and The Managed Global Account of Separate Account D, appearing or
incorporated by reference in the Statement of Additional Information and in
the Registration Statement, have been audited by Ernst & Young LLP, indepen-
dent auditors, as set forth in their reports thereon appearing or incorporated
by reference in the Statement of Additional Information and in the Registra-
tion Statement and are included in reliance upon such reports given upon the
authority of such firm as experts in accounting and auditing.
FEDERAL TAX CONSIDERATIONS
INTRODUCTION
The contract is designed for use by individuals or groups in retirement plans
which are qualified under Section 408 or non-qualified under the provisions of
the Internal Revenue Code of 1986, as amended (the "Code"). The ultimate
effect of Federal income taxes on the amounts paid for the contract, on the
investment return on assets held under the contract, on annuity payments and
on the economic benefits to the owner, annuitant or beneficiary depends upon
the terms of the contract, upon Golden American's tax status and upon the tax
status of the individuals concerned.
The following discussion is general in nature and is not intended as tax
advice. Each person concerned should consult a competent tax advisor. No
attempt is made to consider any applicable state or other tax laws. Moreover,
the discussion is based upon Golden American's understanding of the Federal
income tax laws as they are currently interpreted. No representation is made
regarding the likelihood of continuation of the Federal income tax laws, the
Treasury Regulations, or the current interpretations by the Internal Revenue
Service (the "IRS"). For a discussion of Federal income taxes as they relate
to the Trusts, please see the accompanying prospectus for the respective
Trust.
GOLDEN AMERICAN TAX STATUS
Golden American is taxed as a life insurance company under Part I of
Subchapter L of the
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FEDERAL TAX CONSIDERATIONS (CONTINUED)
Code. Since Account B is not a separate entity from Golden American and its
operations form a part of Golden American, it will not be taxed separately as a
"regulated investment company" under Subchapter M of the Code. Investment
income and realized capital gains on the assets of Account B are reinvested and
taken into account in determining the accumulation value. Under existing
Federal income tax law, Golden American does not incur tax on Account B's
investment income, including realized net capital gains. Golden American
reserves the right to make a deduction for taxes should they be imposed with
respect to such items in the future.
TAXATION OF NON-QUALIFIED ANNUITIES
1. IN GENERAL
Code (S)72 generally governs the taxation of non-qualified annuities. Under
this provision, except as described below, any increase in the contract's
value is generally not taxable to the owner until a distribution is made from
the contract, either in the form of annuity payments as contemplated by the
contract, or in some other form of distribution. (For purposes of this rule,
the amount of any indebtedness that is secured by a pledge or assignment of
the contract is treated as a payment received on account of a partial with-
drawal from the contract.) However, this rule applies only if (1) the invest-
ments of Account B are "adequately diversified" in accordance with Treasury
Department regulations, (2) Golden American, rather than the owner, is
considered the owner of the assets of Account B for Federal income tax
purposes, and (3) the owner is an individual.
Diversification Requirements. Treasury Department regulations ("Regulations")
issued under Code (S)817 (h) prescribe the manner in which the investments of
a segregated asset account, such as Account B, are to be "adequately diversi-
fied." The Regulations generally require that on the last day of each quarter
of a calendar year (i) no more than 55% of the value of each segregated asset
account is represented by any one investment; (ii) no more than 70% is repre-
sented by any two investments; (iii) no more than 80% is represented by any
three investments; and (iv) no more than 90% is represented by any four
investments. For purposes of complying with these requirements, all securi-
ties of the same issuer are treated as a single investment, and each U.S.
government agency or instrumentality will be treated as a separate issuer. In
addition, where a segregated asset account invests in other regulated invest-
ment companies or certain other entities (e.g., the divisions of Account B
do), a "look-through" rule applies and, as a result, each division of an
account must be tested for compliance with the percentage limitations by
looking through to the assets of that division.
If Account B failed to comply with these diversification standards, the
contract would not be treated as an annuity contract for Federal income tax
purposes and the owner would generally be taxable currently on the income on
the contract (as defined in the tax law) beginning with the first period of
non-diversification. Golden American expects that Account B, including each
of the divisions, will comply with the diversification requirements
prescribed by the Regulations.
Ownership Treatment. In certain circumstances, variable annuity contract
owners may be considered the owners, for Federal income tax purposes, of the
assets of the segregated asset account, such as Account B, used to support
their contracts. In those circumstances, income and gains from the segregated
asset account would be includible in the contract owners' gross income. The
IRS has stated in published rulings that a variable contract owner will be
considered the owner of the assets of the segregated asset account if the
owner possesses incidents of ownership in those assets, such as the ability
to exercise investment control over the assets. In addition, the Treasury
Department announced, in connection with the issuance of regulations
concerning investment diversification, that those regulations "do not provide
guidance concerning the circumstances in which investor control of the
investments of a segregated asset account may cause the investor, rather than
the insurance company, to be treated as the owner of the assets in the
account." This announcement also stated that guidance would be issued by way
of regulations or rulings on the "extent to which policyholders may direct
their investments to particular sub-accounts [of a segregated asset account]
without being treated as owners of the underlying assets." As of the date of
this prospectus, no such guidance has been issued.
The ownership rights under the contract are similar to, but different in
certain respects from, those described by the IRS in rulings in which it was
determined that contract owners were not owners of the assets of a segregated
asset account. For example, the owner of this contract
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FEDERAL TAX CONSIDERATIONS (CONTINUED)
has the choice of more investment options to which to allocate premium
payments and accumulation values, and may be able to transfer among invest-
ment options more frequently, than in such rulings. In addition, the owner of
this contract has the choice of certain investment options which may be more
similar to each other in their investment objectives than in such rulings.
These differences could result in the owner being treated as the owner of a
portion of the assets of Account B. In addition, Golden American does not
know what standards will be set forth in the regulations or rulings which the
Treasury Department has stated it expects to issue. Golden American therefore
reserves the right to modify the contract as necessary to attempt to prevent
contract owners from being considered the owners of the assets of Account B.
Frequently, if the IRS or the Treasury Department sets forth a new position
which is adverse to taxpayers, the position is applied on a prospective basis
only. Thus, if the IRS or the Treasury Department were to issue regulations
or a ruling which treated an owner of this contract as the owner of Account
B, that treatment might apply on a prospective basis. However, if the ruling
or regulations were not considered to set forth a new position, an owner
might retroactively be determined to be the owner of the assets of Account B.
Non-Natural Owner. As a general rule, contracts held by "non-natural persons"
such as a corporation, trust or other similar entity, as opposed to a natural
person, are not treated as annuity contracts for Federal tax purposes. The
income on such contracts (as defined in the tax law) is taxed as ordinary
income that is received or accrued by the owner of the contract during the
taxable year. There are several exceptions to this general rule for non-
natural owners. First, contracts will generally be treated as held by a
natural person if the nominal owner is a trust or other entity which holds
the contract as an agent for a natural person. However, this special excep-
tion will not apply in the case of any employer who is the nominal owner of a
contract under a non-qualified deferred compensation arrangement for its
employees.
In addition, exceptions to the general rule for non-natural owners will apply
with respect to (1) contracts acquired by an estate of a decedent by reason
of the death of the decedent, (2) contracts issued in connection with certain
qualified plans, (3) contracts purchased by employers upon the termination of
certain qualified plans, (4) certain contracts used in connection with struc-
tured settlement agreements, and (5) contracts purchased with a single
purchase payment when the annuity starting date is no later than a year from
purchase of the contract and substantially equal periodic payments are made,
not less frequently than annually, during the annuity period.
In addition to the foregoing, if the contract's annuity commencement date
occurs at a time when the annuitant is at an advanced age, such as over age
85, it is possible that the owner will be taxable currently on the annual
increase in the accumulation value. The remainder of this discussion assumes
that the contract will be treated as an annuity contract for Federal income
tax purposes.
2. WITHDRAWALS PRIOR TO THE ANNUITY COMMENCEMENT DATE
Code (S)72 provides that the proceeds of a total surrender of a contract
prior to the annuity commencement date will be taxed to the extent that the
amount distributed exceeds the "investment in the contract" and that any
conventional or systematic partial withdrawal from a contract prior to the
annuity commencement date will be treated as taxable income to the extent the
amount held under the contract immediately before the withdrawal occurs
exceeds the "investment in the contract." The "investment in the contract" is
defined in the Code as that portion, if any, of premium payments by or on
behalf of an individual under a contract which was not excluded from the
individual's gross income at the time of such payment less any amounts previ-
ously received under the contract which were excluded from the individual's
gross income at the time of their receipt. The taxable portion of any distri-
bution received prior to the annuity commencement date will be subject to tax
at ordinary income tax rates. For purposes of this rule, a pledge or assign-
ment of a contract is treated as a payment received on account of a partial
withdrawal of a contract.
In the case of systematic partial withdrawals, the amount of each withdrawal
should be considered as a distribution and taxed in the same manner as a
partial withdrawal prior to the annuity commencement date, as described
above. However, there is some uncertainty regarding the tax treatment of
systematic partial withdrawals, and it is possible that additional amounts
may be includible in income.
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FEDERAL TAX CONSIDERATIONS (CONTINUED)
In addition, the contract provides a death benefit that in certain circum-
stances may exceed the greater of the premium payments and the accumulation
value. As described elsewhere in this prospectus, Golden American imposes
certain charges with respect to, among other things, the death benefit. It is
possible that some portion of those charges could be treated for Federal tax
purposes as a partial withdrawal from the contract.
3. ANNUITY PAYMENTS AND WITHDRAWALS ON OR AFTER THE ANNUITY COMMENCEMENT DATE
Proceeds of a total surrender of the contract after the annuity commencement
date are taxable to the extent the proceeds exceed the investment in the
contract. In addition, proceeds of a partial withdrawal after the annuity
commencement date are fully taxable. Also, a portion of each annuity payment
under the contract is taxable if the value of the contract exceeds the
investment in the contract. The taxable portion of an annuity payment will be
subject to tax at ordinary income tax rates.
For fixed annuity payments, the taxable portion of each payment is determined
by using a formula known as the "exclusion ratio," which establishes the
ratio that the investment in the contract (allocated to the fixed annuity
option) bears to the total expected amount of fixed annuity payments for the
term of the contract. That ratio is then applied to each payment to determine
the non-taxable portion of the payment. The remaining portion of each payment
is taxed at ordinary income rates.
For variable annuity payments, in general, the taxable portion is determined
by a formula which establishes a specific dollar amount of each payment that
is not taxed. The dollar amount is determined by dividing the investment in
the contract (allocated to the variable annuity option) by the total number
of expected periodic payments. The remaining portion of each payment is taxed
at ordinary income rates.
Once the excludable portion of annuity payments to date equals the investment
in the contract, the balance of the annuity payments will be fully taxable.
If amounts have become payable under the contract (such as where the owner
elects to surrender an amount) and if the distribution-at-death rules do not
apply to such amount, the amount will be treated as a partial or full
surrender for Federal income tax purposes if applied under an annuity option
later than 60 days after the time when the amount became payable. Thus, if
such an amount is applied under an annuity option after the 60 day period, it
will be treated as a partial or full surrender, even if the full amount has
not been distributed from the contract.
4. WITHHOLDING AND REPORTING REQUIREMENTS
Golden American will withhold and remit to the U.S. government a part of the
taxable portion of each distribution made under a contract unless the
taxpayer notifies Golden American at or before the time of the distribution
that he or she elects not to have any amounts withheld. The withholding rates
applicable to the taxable portion of periodic annuity payments typically are
the same as the withholding rates generally applicable to payments of wages.
In addition, the withholding rate applicable to the taxable portion of non-
periodic payments (including surrenders prior to the annuity commencement
date) is 10%. Golden American also has tax reporting obligations with respect
to distributions from the contract.
5. PENALTY TAX ON CERTAIN WITHDRAWALS
With respect to amounts withdrawn or distributed before the taxpayer reaches
age 59 1/2, a penalty tax is imposed equal to 10% of the taxable portion of
amounts withdrawn or distributed. However, the penalty tax will not apply to
withdrawals: (i) made on or after the death of the owner, or where the owner
is not an individual, the death of the "primary annuitant" (i.e., the indi-
vidual the events in whose life are of primary importance in affecting the
timing or amount of the payout under the contract); (ii) attributable to the
taxpayer's becoming totally disabled within the meaning of Code (S)72(m)(7);
(iii) which are part of a series of substantially equal periodic payments
made at least annually for the life (or life expectancy) of the taxpayer, or
the joint lives (or joint life expectancies) of the taxpayer and his benefi-
ciary; (iv) from a qualified plan; (v) allocable to investment in the
contract before August 14, 1982; (vi) under a qualified funding asset (as
defined in Code (S)130(d)); (vii) under an immediate annuity contract, or
(viii) which are purchased by an employer on termination of certain types of
qualified plans and which are held by the employer until the employee sepa-
rates from service.
If the penalty tax does not apply to a withdrawal as a result of the applica-
tion of item (iii) above, and the series of payments is subsequently modified
(other than by reason of death
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FEDERAL TAX CONSIDERATIONS (CONTINUED)
or disability), the tax for the year when the modification occurs will be
increased by an amount (as determined by regulations) equal to the tax that
would have been imposed but for item (iii) above, plus interest for the
deferral period, if the modification takes place (a) before the close of the
period which is within five years of the date of the first payment and after
the taxpayer attains age 59 1/2, or (b) before the taxpayer reaches age 59
1/2.
In the case of systematic withdrawals, it is unclear whether such withdrawals
will qualify for exception (iii) above.
TAXATION OF INDIVIDUAL RETIREMENT ANNUITIES
Code (S)408 permits individuals or their employers to contribute to an indi-
vidual retirement program known as an Individual Retirement Annuity. If the
contract is used for this purpose, the owner must be the annuitant. In addi-
tion, distributions from certain other types of qualified retirement plans may
be placed into an Individual Retirement Annuity on a tax deferred basis.
Individual Retirement Annuities are subject to limitations on the amount which
may be contributed and the time when distributions may commence. Tax penalties
may apply to contributions in excess of specified limits, loans or assign-
ments, distributions in excess of a specified amount annually or that do not
meet specified requirements, and in certain other circumstances.
Under the Internal Revenue Code, distributions from qualified retirement
plans, including Individual Retirement Annuities, Simplified Employee
Pensions, and Tax Sheltered Annuities, generally must begin not later than
April 1st of the calendar year following the calendar year in which an owner
attains age 70 1/2. If the required minimum distribution is not withdrawn,
there may be a penalty tax in an amount equal to 50% of the difference between
the amount required to be withdrawn and the amount actually withdrawn. See the
Statement of Additional Information for a discussion of the various special
rules concerning the minimum distribution requirements.
If all premium payments made to an Individual Retirement Annuity were deduct-
ible, all amounts distributed from the contract are included in the recipi-
ent's income when distributed. However, if nondeductible premium payments were
made to the Individual Retirement Annuity (within the limits allowed by the
tax law), a portion of each distribution from the contract typically is
included in income when it is distributed. In such a case, any amount distrib-
uted as an annuity payment or in a lump sum upon death or a full surrender is
taxed as described above in connection with such a distribution from a non-
qualified contract, treating the investment in the contract as the sum of the
non-deductible premium payments at the end of the taxable year in which the
distribution commences or is made (less any amounts previously distributed
that were excluded from income). Also in such a case, any amount distributed
upon a partial surrender is partially includible in income. The includible
amount is the excess of the distribution over the exclusion amount, which in
turn equals the distribution multiplied by the ratio of the investment in the
contract to the amount held under the contract. The amount includible in
income may be subject to a 10% penalty tax if the recipient is under age 59
1/2.
Individual Retirement Annuities generally may not provide life insurance
coverage, but they may provide a death benefit that equals the greater of the
premiums paid and the contract value. The contract provides a death benefit
that in certain circumstances may exceed the greater of the premium payments
and the accumulation value. It is possible that the death benefit could be
viewed as violating the prohibition on investment in life insurance contracts
with the result that the contract would not be viewed as satisfying the
requirements of an IRA.
Subject to certain direct rollover and mandatory withholding requirements
(discussed below), amounts generally may be "rolled over" from a qualified
retirement plan to an Individual Retirement Annuity (or from an Individual
Retirement Annuity or individual retirement account to an Individual Retire-
ment Annuity) without incurring tax if certain conditions are met. Only
certain types of distributions from qualified retirement plans or Individual
Retirement Annuities may be rolled over.
In the case of annuity contracts used in connection with a pension, profit-
sharing, or annuity plan qualified under Code (S)401(a) or (S)403(a), or in
the case of a Code (S)403(b) "Tax Sheltered Annuity," any "eligible rollover
distribution" from the contract will be subject to direct rollover and manda-
tory withholding requirements. An eligible rollover distribution generally is
any taxable distribution from a qualified pension plan under Code (S)401(a),
qualified annuity plan under Code (S)403(a), or Code (S)403(b) Tax Sheltered
Annuity or custodial account, excluding certain amounts (such
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<PAGE>
FEDERAL TAX CONSIDERATIONS (CONTINUED)
as minimum distributions required under Code (S)401 (a) (9) and distributions
which are part of a "series of substantially equal periodic payments" made for
life or a specified period of 10 years or more. Under these requirements, with-
holding at a rate of 20 percent will be imposed on any eligible rollover
distribution. In addition, the participant in these qualified retirement plans
cannot elect out of withholding with respect to an eligible rollover distribu-
tion. However, this 20 percent withholding will not apply if, instead of
receiving the eligible rollover distribution, the participant elects to have
amounts directly transferred to certain qualified retirement plans (such as to
this contract when issued as an Individual Retirement Annuity).
It is important that you consult your tax advisor before purchasing an Indi-
vidual Retirement
Annuity.
ADDITIONAL CONSIDERATIONS
DISTRIBUTION-AT-DEATH RULES
In order to be treated as an annuity contract for Federal tax purposes, a non-
qualified contract must provide the following two distribution rules: (a) if
any holder dies on or after the annuity commencement date, and before the
entire interest in the contract has been distributed, the remainder of his or
her interest will be distributed at least as quickly as under the method of
distribution in effect on the holder's death; and (b) if any holder dies before
the annuity commencement date, the entire interest in the contract must gener-
ally be distributed within five years after the date of death, or to the extent
such interest is payable to a designated beneficiary, such interest must be
distributed over the life of that designated beneficiary or over a period not
extending beyond the life expectancy of that beneficiary, so long as the
distributions begin within one year after the date of death. If the beneficiary
is the surviving spouse of the holder, the contract (together with the deferral
of tax on the accrued and future income thereunder) may be continued in the
name of the spouse. Before the annuity commencement date, the holder will
generally be the owner, and after the annuity commencement date, the holder
generally may be the annuitant and the owner.
Where the holder is not an individual, solely for the purpose of the distribu-
tion at death rules, the primary annuitant is considered the holder. The
primary annuitant is the individual the events in the life of whom are of
primary importance in affecting the timing or amount of payment under a
contract. Finally, in the case of joint holders, the distribution will be
required at the death of the first of the holders to die.
TAXATION OF DEATH BENEFIT PROCEEDS
Amounts may be distributed from a non- qualified contract because of the death
of an owner or annuitant. Generally, such amounts are includible in the income
of the recipient as follows: (a) if distributed in a lump sum, they are taxed
in the same manner as a full surrender of the contract, as described above, or
(b) if distributed under an annuity option, they are taxed in the same manner
as annuity payments, as described above.
TRANSFER OF ANNUITY CONTRACTS
Transfers of non-qualified annuity contracts for less than the full and
adequate consideration will trigger tax on the gain in the contract, at the
time of such transfer, with the transferee getting a step-up in basis for the
amount included in the owner's income. Such a transfer could result on the
annuity commencement date if the annuitant is not the owner or the owner's
spouse. This provision does not apply to transfers between spouses or incident
to a divorce.
(S)1035 EXCHANGES
Code (S)1035 provides that no gain or loss shall be recognized on the exchange
of an annuity contract for another. If the exchanged contract was issued prior
to August 14, 1982, the tax rules which formerly provided that the surrender
was taxable only to the extent the amount received exceeds the owner's invest-
ment in the contract, will continue to apply to the new contract. In contrast,
contracts issued on or after January 19, 1985, in a Code (S)1035 exchange are
treated as new contracts for purposes of the penalty tax and distribution-at-
death rules. Special rules and procedures apply to Code (S)1035 transactions.
Prospective owners wishing to take advantage of Code (S)1035 should consult
their tax advisors.
ASSIGNMENTS
A transfer of ownership, a collateral assignment, or the designation of an
annuitant or other beneficiary who is not also the owner may result in tax
consequences to the owner, annuitant or beneficiary that are not discussed
herein. An owner contemplating such a transfer or assignment of a contract
should contact a competent tax advisor with respect to the potential tax
effects of such a transaction.
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<PAGE>
ADDITIONAL CONSIDERATIONS (CONTINUED)
MULTIPLE CONTRACTS RULE
For purposes of determining the amount of any distribution under Code (S)72(e)
(amounts not received as annuities) that is includible in gross income, all
non-qualified deferred annuity contracts issued by the same (or affiliate)
insurer to the same owner during any calendar year are to be aggregated and
treated as one contract. Thus, any amount received under any such contract
prior to the contract's annuity starting date (as defined in the tax law), such
as a partial surrender, dividend, or loan, will be taxable (and possibly
subject to the 10% penalty tax) to the extent of the combined income in all
such contracts. The Treasury Department has specific authority to issue regula-
tions that prevent the avoidance of (S)72(e) through the serial purchase of
annuity contracts or otherwise. In addition, there may be other situations in
which the Treasury Department may conclude that it would be appropriate to
aggregate two or more contracts purchased by the same owner. Accordingly, an
owner should consult a competent tax advisor before purchasing more than one
annuity contract.
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STATEMENT OF ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM PAGE
<S> <C>
INTRODUCTION............................................................... 1
Description of Golden American Life Insurance Company...................... 1
Safekeeping of Assets...................................................... 1
The Administrator.......................................................... 1
Independent Auditors....................................................... 1
Distribution of Contracts.................................................. 2
Performance Information.................................................... 2
IRA Partial Withdrawal Option.............................................. 9
Other Information.......................................................... 9
Financial Statements of Separate Account B................................. 10
Financial Statements of The Managed Global Account of Separate Account D... 10
Financial Statements of Golden American Life Insurance Company............. 10
Appendix -- Description of Bond Ratings.................................... A-1
</TABLE>
38
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION (CONTINUED)
- --------------------------------------------------------------------------------
PLEASE TEAR OFF, COMPLETE AND RETURN THE FORM BELOW TO ORDER A FREE STATEMENT
OF ADDITIONAL INFORMATION FOR THE CONTRACTS OFFERED UNDER THE PROSPECTUS.
ADDRESS THE FORM TO OUR CUSTOMER SERVICE CENTER, THE ADDRESS IS SHOWN ON THE
COVER.
................................................................................
PLEASE SEND ME A FREE COPY OF THE STATEMENT OF ADDITIONAL INFORMATION FOR SEPA-
RATE ACCOUNT B
PLEASE PRINT OR TYPE
-------------------------------------
NAME
-------------------------------------
SOCIAL SECURITY NUMBER
-------------------------------------
STREET ADDRESS
-------------------------------------
CITY, STATE, ZIP
(DVA 5/97 6%)
................................................................................
39
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
Golden American Life Insurance Company is a stock
company domiciled in Wilmington, Delaware
IN 3107 5/97
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
GOLDENSELECT DVA
DEFERRED COMBINATION VARIABLE
AND FIXED ANNUITY CONTRACT
issued by
SEPARATE ACCOUNT B ("Account B")
of
GOLDEN AMERICAN LIFE INSURANCE COMPANY
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS. THE INFORMATION
CONTAINED HEREIN SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUS FOR THE
GOLDEN AMERICAN LIFE INSURANCE COMPANY DEFERRED VARIABLE ANNUITY CONTRACT WHICH
IS REFERRED TO HEREIN.
THE PROSPECTUS SETS FORTH INFORMATION THAT A PROSPECTIVE INVESTOR OUGHT TO KNOW
BEFORE INVESTING. FOR A COPY OF THE PROSPECTUS, SEND A WRITTEN REQUEST TO
GOLDEN AMERICAN LIFE INSURANCE COMPANY, CUSTOMER SERVICE CENTER, P.O. BOX 8794,
WILMINGTON, DE 19899-8794 OR TELEPHONE 1-800-366-0066.
DATE OF PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION: May 1, 1997
<PAGE>
TABLE OF CONTENTS
ITEM PAGE
---- ----
Introuction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Description of Golden American Life Insurance Company. . . . . . . . . . . . 1
Safekeeping of Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
The Administrator. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Distribution of Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . 2
Performance Information. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
IRA Partial Withdrawal Option. . . . . . . . . . . . . . . . . . . . . . . . 6
Other Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Financial Statements of Separate Account B . . . . . . . . . . . . . . . . . 7
Financial Statements of The Managed Global Account of Separate Account D . . 7
Financial Statements of Golden American Life Insurance Company . . . . . . . 7
Appendix - Description of Bond Ratings
<PAGE>
INTRODUCTION
This Statement of Additional Information provides background information
regarding Account B.
DESCRIPTION OF GOLDEN AMERICAN LIFE INSURANCE COMPANY
Golden American Life Insurance Company ("Golden American") is a stock life
insurance company organized under the laws of the State of Delaware. Prior
to December 30, 1993, Golden American was a Minnesota corporation. From
January 2, 1973 through December 31, 1987, the name of the company was St.
Paul Life Insurance Company. On December 31, 1987, after all of St. Paul
Life Insurance Company's business was sold, the name was changed to Golden
American. On March 7, 1988, all of the stock of Golden American was
acquired by The Golden Financial Group, Inc. ("GFG"), a financial services
holding company. On October 19, 1990, GFG merged with and into MBL
Variable, Inc. ("MBLV"), a wholly owned direct subsidiary of The Mutual
Benefit Life Insurance Company ("MBL"). On January 1, 1991, MBLV became
a wholly owned indirect subsidiary of MBL and Golden American became a
wholly owned direct subsidiary of MBL. Golden American's name had been
changed to MB Variable Life Insurance Company in the state of Minnesota
but subsequently has been changed back to Golden American. In a transaction
that closed on September 30, 1992, Golden American was acquired by a
subsidiary of Bankers Trust Company ("Bankers Trust"). As of December 31,
1996, Golden American had approximately $140.5 million in stockholders'
equity and approximately $1.7 billion in total assets, including
approximately $1.2 billion of separate account assets. On August 13, 1996,
Equitable of Iowa Companies acquired all of the interest in Golden American
and Directed Services, Inc. Golden American is authorized to do business in
all jurisdictions except New York. Golden American offers variable annuities
and variable life insurance. Golden American has formed a subsidiary,
First Golden American Life Insurance Company of New York ("First Golden"),
who will write variable life and annuity business in the state of New
York. The initial capitalization of First Golden was $25 million.
SAFEKEEPING OF ASSETS
Golden American acts as its own custodian for Account B.
THE ADMINISTRATOR
Effective January 1, 1994, Bankers Trust (Delaware), a subsidiary of
Bankers Trust New York Corporation, and Golden American became parties to a
service agreement pursuant to which Bankers Trust (Delaware) has agreed to
provide certain accounting, actuarial, tax, underwriting, sales, management and
other services to Golden American. Expenses
incurred by Bankers Trust (Delaware)in relation to this service agreement
were reimbursed by Golden American on an allocated cost basis. Charges
billed to Golden American by Bankers Trust (Delaware) pursuant to the
service agreement in 1996, 1995 and 1994 were $464,734, $749,741 and
$816,264, respectively.
Prior to 1994, Golden American had arranged with BT Variable, Inc. ("BT
Variable"), an affiliate, to perform services related to the development
and administration of its products. For the year 1993 and the period
from September 30, 1992 to December 31, 1992, fees earned by BT Variable
from Golden American for these services aggregated $2,701,000 and $209,000,
respectively. The agreement was terminated as of January 1, 1994.
In addition, BT Variable provided to Golden American certain of its
personnel to perform management, administrative and clerical services
and the use of certain of its facilities. BT Variable charged Golden
American for such expenses and all other general and administrative costs,
first on the basis of direct charges when identifiable, and second
allocated based on the estimated amount of time spent by BT Variable's
employees on behalf of Golden American. For the year 1993 and the period
from September 30, 1992 to December 31, 1992, BT Variable allocated to
Golden American $1,503,000 and $450,000, respectively. The agreement was
terminated on January 1, 1994.
1
<PAGE>
INDEPENDENT AUDITORS
Ernst & Young LLP, 801 Grand Avenue, Des Moines, Iowa 50309, independent
auditors, will perform annual audits of Golden American and the Accounts.
DISTRIBUTION OF CONTRACTS
Prior to 1994, Golden American had entered into agreements with DSI to
perform services related to the management of its investments and the
distribution of its products. For the year 1993, Golden American incurred
$311,000 for such services. The agreement was terminated as of January 1, 1994.
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, 1994, are
sold primarily through two broker/dealer institutions. For the years ended
1996, 1995 and 1994, commissions paid by Golden American to DSI aggregated
$27,065,000, $8,440,000 and $17,569,000, respectively.
Golden American provided to DSI certain of its personnel to perform
management, administrative and clerical services and the use of certain
facilities. Golden American charged DSI for such expenses and all other general
and administrative costs, first on the basis of direct charges when
identifiable, and the remainder allocated based on the estimated amount of time
spent by Golden American's employees on behalf of DSI. In the opinion of
management, this method of cost allocation is reasonable. For the years ended
December 31, 1994 and 1993, expenses allocated to DSI were $1,983,000 and
$2,013,000, respectively. In 1995, the service agreement between DSI and Golden
American was amended to provide for a management fee from DSI to Golden American
for managerial and supervisory services provided by Golden American. This fee,
calculated as a percentage of average assets in the variable separate accounts,
was $2,267,000 and $986,650 for 1996 and 1995, respectively.
PERFORMANCE INFORMATION
Performance information for the divisions of Account B, including the
yield and effective yield of the Liquid Asset Division, the yield of the
remaining divisions, and the total return of all divisions, may appear in
reports or promotional literature to current or prospective owners. Negative
values are denoted by parentheses. Performance information for measures other
than total return do not reflect sales load which can have a maximum level of
6.% of premium, and any applicable premium tax that can range from 0% to 3.5%.
SEC STANDARD MONEY MARKET DIVISION YIELDS
Current yield for the Liquid Asset Division will be based on the change in
the value of a hypothetical investment (exclusive of capital changes) over a
particular 7-day period, less a pro-rata share of division expenses accrued over
that period (the "base period"), and stated as a percentage of the investment at
the start of the base period (the "base period return"). The base period return
is then annualized by multiplying by 365/7, with the resulting yield figure
carried to at least the nearest hundredth of one percent. Calculation of
"effective yield" begins with the same "base period return" used in the
calculation of yield, which is then annualized to reflect weekly compounding
pursuant to the following formula:
2
<PAGE>
365/7
Effective Yield = [(Base Period Return) +1) ] - 1
For the 7-day period March 24, 1997 to March 31, 1997, the current
yield of the Liquid Asset Division was 3.90% and the effective yield of the
Division was 3.98%.
SEC STANDARD 30-DAY YIELD FOR NON-MONEY MARKET DIVISIONS
Quotations of yield for the remaining divisions will be based on all
investment income per Unit (accumulation value divided by the index of
investment experience) earned during a particular 30-day period, less expenses
accrued during the period ("net investment income"), and will be computed by
dividing net investment income by the value of an accumulation unit on the last
day of the period, according to the following formula:
6
YIELD = 2 [ ( a - b +1) - 1]
-----
cd
Where:
[a] equals the net investment income earned during the
period by the Series attributable to shares owned by
a division
[b] equals the expenses accrued for the period (net of
reimbursements)
[c] equals the average daily number of Units outstanding
during the period based on the index of investment
experience
[d] equals the value (maximum offering price) per index
of investment experience on the last day of the
period
Yield on divisions of Account B is earned from the increase in net asset
value of shares of the Series in which the Division invests and from dividends
declared and paid by the Series, which are automatically reinvested in shares of
the Series.
SEC STANDARD AVERAGE ANNUAL TOTAL RETURN ALL DIVISIONS
Quotations of average annual total return for any division will be
expressed in terms of the average annual compounded rate of return of a
hypothetical investment in a contract over a period of one, five and 10 years
(or, if less, up to the life of the division), calculated pursuant to the
formula:
n
P(1+T) =ERV
Where:
(1) [P] equals a hypothetical initial premium payment of
$1,000
(2) [T] equals an average annual total return
(3) [n] equals the number of years
(4) [ERV] equals the ending redeemable value of a
hypothetical $1,000 initial premium payment made at
the beginning of the period (or fractional portion
thereof)
All total return figures reflect the deduction of the maximum sales load,
the administrative charges, and the mortality and expense risk charges. The SEC
requires that an assumption be made that the contract owner surrenders the
entire contract at the end of the one, five and 10 year periods (or, if less, up
to the life of the division) for which performance is required to be calculated.
This assumption may not be consistent with the typical contract owner's
intentions in purchasing a contract and may adversely affect returns.
Quotations of total return may simultaneously be shown for other periods, as
well as quotations of total return that do not take into account certain
contractual charges such as sales load.
3
<PAGE>
AVERAGE ANNUALIZED TOTAL RETURN FOR PERIODS ENDING 12/31/96 -- STANDARDIZED
<TABLE>
<CAPTION>
One Year Period Five Year Period Inception to
Division Ending 12/31/96 Ending 12/31/96 12/31/96 Inception Date
- -------- --------------- ---------------- ------------ --------------
<S> <C> <C> <C> <C>
Multiple Allocation 1.60% 5.43%* 7.20%* 1/24/89
Fully Managed 9.13% 6.03%* 6.80%* 1/24/89
Capital Appreciation 12.98% N/A 11.68%* 5/4/92
Rising Dividends 13.36% N/A 13.71% 10/4/93
All-Growth -7.64% 0.09%* 3.68%* 1/24/89
Real Estate 27.87% 15.34%* 9.39%* 1/24/89
Natural Resources 25.83% 13.16%* 8.48%* 1/24/89
Value Equity 3.44% N/A 18.12% 1/1/95
Strategic Equity 12.12% N/A 9.62% 10/2/95
Small Cap N/A N/A 12.83% 1/2/96
Emerging Markets 0.13% N/A -2.38% 10/4/93
Managed Global ** 5.12% N/A 0.21%* 10/21/92
Limited Maturity Bond -2.80% 2.85%* 5.05%* 1/24/89
Liquid Asset -2.15% 1.72%* 3.36%* 1/24/89
OTC 13.39%* N/A 20.11%* 10/7/94
Research 16.03% N/A 20.78%* 10/7/94
Total Return 6.47% N/A 11.89%* 10/7/94
Growth & Income N/A N/A 19.16%* 4/1/96
Value + Growth N/A N/A 8.41%* 4/1/96
- -----------------------------------------------------------------------------------------------
</TABLE>
* Total return calculation reflects partial waiver of fees and expenses.
** From it inception date until September 3, 1996, the Managed Global Account
of Separate Account D was a registered management investment company.
On that date it was reorganized into two entities: the Managed Global
Division of Separate Account B and the Managed Global Series of The
GCG Trust. Historical performance for the Managed Global Division remains
unchanged by the reorganization.
NON-STANDARD AVERAGE ANNUAL TOTAL RETURN FOR ALL DIVISIONS
Quotations of non-standard average annual total return for any division will be
expressed in terms of the average annual compounded rate of return of a
hypothetical investment in a contract over a period of one, five and 10 years
(or, if less, up to the life of the division), calculated pursuant to the
formula:
n
[P(1+T) ]=ERV
Where:
(1) [P] equals a hypothetical initial premium
payment of $1,000
(2) [T] equals an average annual total return
(3) [n] equals the number of years
(4) [ERV] equals the ending redeemable value of a
hypothetical $1,000 initial premium payment made at the
beginning of the period (or fractional portion thereof)
assuming certain loading and charges are zero.
All total return figures reflect the deduction of the mortality and expense risk
charge and the administrative charges, but not the deduction of the maximum
sales load and the annual contract fee.
AVERAGE ANNUALIZED TOTAL RETURN FOR PERIODS ENDING 12/31/96 -- NON-STANDARDIZED
<TABLE>
<CAPTION>
One Year Period Five Year Period Inception to
Division Ending 12/31/96 Ending 12/31/96 12/31/96 Inception Date
- -------- --------------- ---------------- ------------ --------------
<S> <C> <C> <C> <C>
Multiple Allocation 7.67% 6.59%* 7.91%* 1/24/89
Fully Managed 15.20% 7.19%* 7.56%* 1/24/89
Capital Appreciation 19.05% N/A 12.93%* 5/4/92
Rising Dividends 19.43% N/A 15.32% 10/4/93
All-Growth -1.57% 1.40%* 4.43%* 1/24/89
Real Estate 33.94% 16.31%* 10.25%* 1/24/89
Natural Resources 31.90% 14.21%* 9.30%* 1/24/89
Value Equity 9.51% N/A 21.03% 1/1/95
Strategic Equity 18.19% N/A 14.26% 10/2/95
Small Cap N/A N/A 18.90% 1/2/96
Emerging Markets 6.20% N/A -0.46% 10/4/93
Managed Global ** 11.19 N/A 1.71%* 10/21/92
Limited Maturity Bond 3.27% 4.04%* 5.75%* 1/24/89
Liquid Asset 3.92% 2.94%* 4.11%* 1/24/89
OTC 19.46%* N/A 22.91%* 10/7/94
Research 22.10% N/A 23.62%* 10/7/94
Total Return 12.54% N/A 14.86%* 10/7/94
Growth & Income N/A N/A 25.23%* 4/1/96
Value + Growth N/A N/A 14.49%* 4/1/96
- -----------------------------------------------------------------------------------------------
</TABLE>
* Total return calculation reflects partial waiver of fees and expenses.
** From its inception date until September 3, 1996, the Managed Global Account
of Separate Account D was a registered management investment company.
On that date it was reorganized into two entities: the Managed Global
Division of Separate Account B and the Managed Global Series of The
GCG Trust. Historical performance for the Managed Global Division
remains unchanged by the reorganization.
4
<PAGE>
Performance information for a division may be compared, in reports and
promotional literature, to: (i) the Standard & Poor's 500 Stock Index ("S&P
500"), Dow Jones Industrial Average ("DJIA"), Donoghue Money Market
Institutional Averages, or other indices that measure performance of a pertinent
group of securities so that investors may compare a division's results with
those of a group of securities widely regarded by investors as representative of
the securities markets in general; (ii) other groups of 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 by overall performance, investment objectives, and
assets, or tracked by other services, companies, publications, or persons who
rank such investment companies on overall performance or other criteria; and
(iii) the Consumer Price Index (measure for inflation) to assess the real rate
of return from an investment in the contract. Unmanaged indices may assume the
reinvestment of dividends but generally do not reflect deductions for
administrative and management costs and expenses.
Performance information for any division reflects only the performance of a
hypothetical contract under which accumulation value is allocated to a division
during a particular time period on which the calculations are based.
Performance information should be considered in light of the investment
objectives and policies, characteristics and quality of the portfolio of the
Series of the Trust in which the Account B divisions invest, and the market
conditions during the given time period, and should not be considered as a
representation of what may be achieved in the future.
Reports and promotional literature may also contain other information
including the ranking of any division derived from rankings of variable annuity
separate accounts or other investment products tracked by Lipper Analytical
Services or by other rating services, companies, publications, or other persons
who rank separate accounts or other investment products on overall performance
or other criteria.
PUBLISHED RATINGS
From time to time, the rating of Golden American as an insurance company by
A.M. Best may be referred to in advertisements or in reports to contract owners.
Each year the A.M. Best Company reviews the financial status of thousands of
insurers, culminating in the assignment of Best's Ratings. These ratings
reflect their current opinion of the relative financial strength and operating
performance of an insurance company in comparison to the norms of the
life/health insurance industry. Best's ratings range from A++ to F. An A++
and A+ rating means, in the opinion of A.M. Best, that the insurer has demon-
strated the strongest ability to meet its respective policyholder and other
contractual obligations.
INDEX OF INVESTMENT EXPERIENCE
The calculation of the Index of Investment Experience ("IIE") is discussed
in the prospectus for the Contracts under Measurement of Investment Experience.
The following illustrations show a calculation of a new IIE and the purchase of
Units (using hypothetical examples):
5
<PAGE>
ILLUSTRATION OF CALCULATION OF IIE
EXAMPLE 1.
1. IIE, beginning of period . . . . . . . . . . . . . . . . . . $1.80000000
2. Value of securities, beginning of period . . . . . . . . . . . . .$21.20
3. Change in value of securities. . . . . . . . . . . . . . . . . . . .$.50
4. Gross investment return (3) divided by (2) . . . . . . . . . . .02358491
5. Less daily mortality and expense charge. . . . . . . . . . . . .00002477
6. Less asset based administrative charge . . . . . . . . . . . . .00000276
7. Net investment return (4) minus (5) minus (6). . . . . . . . . .02355738
8. Net investment factor (1.000000) plus (7). . . . . . . . . . .1.02355738
9. IIE, end of period (1) multiplied by (8) . . . . . . . . . . $1.84240328
ILLUSTRATION OF PURCHASE OF UNITS (ASSUMING NO STATE PREMIUM TAX)
EXAMPLE 2.
1. Initial Premium Payment. . . . . . . . . . . . . . . . . . . . . $100.00
2. IIE on effective date of purchase (see Example 1) . . . . . .$1.8000000
3. Number of Units purchased [(1) divided by (2)] . . . . . . . . .55.55556
4. IIE for valuation date following purchase (see Example 1). . $1.84240328
5. Accumulation Value in account for valuation date
following purchase [(3) multiplied by (4)]. . . . . . . . . . . $102.36
IRA PARTIAL WITHDRAWAL OPTION
If the contract owner has an IRA contract and will attain age 70 1/2 in the
current calendar year, distributions will be made in accordance with the
requirements of Federal tax law. This option is available to assure that the
required minimum distributions from qualified plans under the Internal Revenue
Code (the "Code") are made. Under the Code, distributions must begin no later
than April 1st of the calendar year following the calendar year in which the
contract owner attains age 70 1/2. If the required minimum distribution is not
withdrawn, there may be a penalty tax in an amount equal to 50% of the
difference between the amount required to be withdrawn and the amount actually
withdrawn. Even if the IRA Partial Withdrawal Option is not elected,
distributions must nonetheless be made in accordance with the requirements of
Federal tax law.
Golden American notifies the contract owner of these regulations with a
letter mailed on January 1st of the calendar year in which the contract owner
reaches age 70 1/2 which explains the IRA Partial Withdrawal Option and supplies
an election form. If electing this option, the owner specifies whether the
withdrawal amount will be based on a life expectancy calculated on a single life
basis (contract owner's life only) or, if the contract owner is married, on a
joint life basis (contract owner's and spouse's lives combined). The contract
owner selects the payment mode on a monthly, quarterly or annual basis. If the
payment mode selected on the election form is more frequent than annually, the
payments in the first calendar year in which the option is in effect will be
based on the amount of payment modes remaining when Golden American receives the
completed election form.
Golden American calculates the IRA Partial Withdrawal amount each year
based on the minimum distribution rules. We do this by dividing the
accumulation value by the life expectancy. In the first year withdrawals begin,
we use the accumulation value as of the date of the first payment. Thereafter,
we use the accumulation value on December 31st of each year. The life
expectancy is recalculated each year. Certain minimum distribution rules govern
payouts if the designated beneficiary is other than the contract owner's spouse
and the beneficiary is more than ten years younger than the contract owner.
6
<PAGE>
OTHER INFORMATION
Registration statements have been filed with the Securities and Exchange
Commission under the Securities Act of 1933 as amended, with respect to the
Contracts discussed in this Statement of Additional Information. Not all of the
information set forth in the registration statements, amendments and exhibits
thereto has been included in this Statement of Additional Information.
Statements contained in this Statement of Additional Information concerning the
content of the Contracts and other legal instruments are intended to be
summaries. For a complete statement of the terms of these documents, reference
should be made to the instruments filed with the Securities and Exchange
Commission.
FINANCIAL STATEMENTS OF SEPARATE ACCOUNT B
The audited financial statements of Separate Account B are listed below and
are included in this Statement of Additional Information:
Report of Independent Auditors
Audited Financial Statements
Statement of Assets and Liability as of December 31, 1996
Statement of Operations for the Year ended December 31, 1996
Statements of Changes in Net Assets for the Years Ended
December 31, 1996 and 1995
Notes to Financial Statements
FINANCIAL STATEMENTS OF THE MANAGED GLOBAL ACCOUNT OF SEPARATE ACCOUNT D
The audited financial statements of The Managed Global Account of Separate
Account D listed below appear in the Annual Report of The Managed Global
Account of Separate Account D which was filed with the SEC and are included
in this Statement of Additional Information .
Report of Independent Auditors
Financial Statements -- Audited
Statement of Assets and Liability as of December 31, 1995
Statement of Operations for the Year ended December 31, 1995
Statements of Changes in Net Assets for the Years ended December 31,
1995 and 1994
Statement of Investments as of December 31, 1995
Notes to Audited Financial Statements
FINANCIAL STATEMENTS OF GOLDEN AMERICAN LIFE INSURANCE COMPANY
The audited financial statements of Golden American Life Insurance Company
listed below are prepared in accordance with generally accepted accounting
principles ("GAAP") and appear in the Annual Report of the Golden American
Life Insurance Company which was filed with the SEC and are included in
this Statement of Additional Information.
Report of Independent Auditors
Audited Financial Statements -- GAAP
Consolidated Balance Sheets -- Post-Acquisition as of December 31,
1996 and Pre-Acquisition as of December 31, 1995
Consolidated Statements of Income -- Post-Acquisition for the period
August 14, 1996 through December 31, 1996 and Pre-Acquisition
for the period January 1, 1996 through August 13, 1996 and for
the years ended December 31, 1995 and 1994
Consolidated Statements of Changes in Stockholder's Equity -- Post-
Acquisition for the period August 14, 1996 through December 31,
1996 and Pre-Acquisition for the period January 1, 1996 through
August 13, 1996 and for the years ended December 31, 1995 and
1994
Consolidated Statements of Cash Flows -- Post-Acquisition for the
period August 14, 1996 through December 31, 1996 and Pre-
Acquisition for the period January 1, 1996 through August 13,
1996 and for the years ended December 31, 1995 and 1994
Notes to Consolidated Financial Statements -- December 31, 1996
<PAGE>
Financial Statements
Golden American Life Insurance Company
Separate Account B
Periods ended December 31, 1996 and 1995
with Report of Independent Auditors
Golden American Life Insurance Company
Separate Account B
Financial Statements
Periods ended December 31, 1996 and 1995
Contents
Report of Independent Auditors
Audited Financial Statements
Statement of Assets and Liability
Statements of Operations
Statements of Changes in Net Assets
Notes to Financial Statements
Report of Independent Auditors
The Board of Directors
Golden American Life Insurance Company
We have audited the accompanying statement of assets and liability of Separate
Account B as of December 31, 1996, and the related statements of operations for
the year then ended and the changes in net assets for each of the two years in
the period then ended. These financial statements are the responsibility of
the Account's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of December 31, 1996,
by correspondence with the custodian. 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 financial position of Separate Account B at December
31, 1996, and the results of their operations for the year then ended and the
changes in their net assets for each of the two years in the period then ended
in conformity with generally accepted accounting principles.
/S/ Ernst & Young LLP
Des Moines, Iowa
February 11, 1997
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENT OF ASSETS AND LIABILITY
DECEMBER 31, 1996
(Dollars in thousands)
<TABLE>
<CAPTION>
Combined
____________
<S> <C>
ASSETS
Investments at net asset value:
The GCG Trust Liquid Asset Series,
37,489,519 shares (cost - $37,490) $37,490
The GCG Trust Limited Maturity Bond Series,
5,211,785 shares (cost - $55,124) 54,359
The GCG Trust Natural Resources Series,
2,425,733 shares (cost - $39,320) 43,324
The GCG Trust All-Growth Series,
5,741,919 shares (cost - $75,442) 76,885
The GCG Trust Real Estate Series,
3,172,940 shares (cost - $39,689) 50,704
The GCG Trust Fully Managed Series,
9,081,446 shares (cost - $119,671) 134,496
The GCG Trust Multiple Allocation Series,
21,803,390 shares (cost - $265,203) 270,579
The GCG Trust Capital Appreciation Series,
9,698,486 shares (cost - $123,415) 146,059
The GCG Trust Rising Dividends Series,
7,820,089 shares (cost - $95,887) 123,636
The GCG Trust Emerging Markets Series,
3,824,614 shares (cost - $39,720) 37,175
The GCG Trust Market Manager Series,
422,420 shares (cost - $4,396) 5,584
The GCG Trust Value Equity Series,
3,080,715 shares (cost - $40,413) 42,884
The GCG Trust Strategic Equity Series,
2,557,621 shares (cost - $27,198) 29,873
The GCG Trust Small Cap Series,
2,753,970 shares (cost - $32,401) 33,075
The GCG Trust Managed Global Series,
7,754,689 shares (cost - $81,891) 86,310
Equi-Select Series Trust OTC Portfolio,
315,154 shares (cost - $4,481) 4,356
Equi-Select Series Trust Growth & Income Portfolio,
656,074 shares (cost - $7,989) 8,258
____________
TOTAL INVESTMENTS (cost - $1,089,730) 1,185,047
Accrued investment income 238
____________
TOTAL ASSETS 1,185,285
</TABLE>
See accompanying notes.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENT OF ASSETS AND LIABILITY
DECEMBER 31, 1996
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Combined
____________
<S> <C>
LIABILITY
Payable to Golden American Life Insurance Company $712
____________
TOTAL NET ASSETS $1,184,573
============
NET ASSETS
For Variable Annuity Insurance Contracts $1,161,168
Retained in Separate Account B by Golden American
Life Insurance Company 23,405
____________
TOTAL NET ASSETS $1,184,573
============
</TABLE>
See accompanying notes.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF OPERATIONS
For the year ended December 31, 1996, Except as Noted
(Dollars in thousands)
<TABLE>
<CAPTION>
Limited
Liquid Maturity Natural
Asset Bond Resources
Division Division Division
__________ _________ __________
<S> <C> <C> <C>
INVESTMENT INCOME (LOSS)
Income:
Dividends $1,868 $5,950 $146
Capital gains distributions -- -- 4,557
__________ _________ __________
TOTAL INVESTMENT INCOME 1,868 5,950 4,703
Expenses:
Mortality and expense risk and other charges (405) (629) (382)
Annual administrative charges (16) (21) (22)
Minimum death benefit guarantee charges (8) (2) (6)
Contingent deferred sales charges (1) (2) (4)
Other contract charges -- (5) (4)
Amortization of deferred charges related to:
Deferred sales load (708) (785) (370)
Premium taxes (7) (12) (6)
__________ _________ __________
TOTAL EXPENSES BEFORE WAIVER (1,145) (1,456) (794)
Fees waived by Golden American 7 13 7
__________ _________ __________
NET EXPENSES (1,138) (1,443) (787)
__________ _________ __________
NET INVESTMENT INCOME (LOSS) 730 4,507 3,916
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss) on investments -- 314 2,353
Net unrealized appreciation (depreciation)
of investments -- (3,831) 2,704
__________ _________ __________
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $730 $990 $8,973
========== ========= ==========
</TABLE>
See accompanying notes.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF OPERATIONS
For the year ended December 31, 1996, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
All- Real Fully
Growth Estate Managed
Division Division Division
__________ _________ __________
<S> <C> <C> <C>
INVESTMENT INCOME (LOSS)
Income:
Dividends $1,662 $2,214 $4,716
Capital gains distributions 252 840 5,610
__________ _________ __________
TOTAL INVESTMENT INCOME 1,914 3,054 10,326
Expenses:
Mortality and expense risk and other charges (955) (396) (1,334)
Annual administrative charges (43) (23) (69)
Minimum death benefit guarantee charges (4) (2) (4)
Contingent deferred sales charges (22) (4) (36)
Other contract charges (2) (2) (4)
Amortization of deferred charges related to:
Deferred sales load (1,044) (413) (1,417)
Premium taxes (28) (9) (37)
__________ _________ __________
TOTAL EXPENSES BEFORE WAIVER (2,098) (849) (2,901)
Fees waived by Golden American 34 9 38
__________ _________ __________
NET EXPENSES (2,064) (840) (2,863)
__________ _________ __________
NET INVESTMENT INCOME (LOSS) (150) 2,214 7,463
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss) on investments 2,112 652 2,245
Net unrealized appreciation (depreciation)
of investments (4,894) 8,605 6,614
__________ _________ __________
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ($2,932) $11,471 $16,322
========== ========= ==========
</TABLE>
See accompanying notes.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF OPERATIONS
For the year ended December 31, 1996, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Multiple Capital
Alloca- Apprecia- Rising
tion tion Dividends
Division Division Division
__________ _________ __________
<S> <C> <C> <C>
INVESTMENT INCOME (LOSS)
Income:
Dividends $13,260 $1,532 $970
Capital gains distributions 11,463 9,172 822
__________ _________ __________
TOTAL INVESTMENT INCOME 24,723 10,704 1,792
Expenses:
Mortality and expense risk and other charges (2,989) (1,414) (1,088)
Annual administrative charges (153) (73) (62)
Minimum death benefit guarantee charges (18) (2) (2)
Contingent deferred sales charges (30) (19) (30)
Other contract charges (13) (5) (8)
Amortization of deferred charges related to:
Deferred sales load (3,436) (1,439) (1,069)
Premium taxes (62) (41) (17)
__________ _________ __________
TOTAL EXPENSES BEFORE WAIVER (6,701) (2,993) (2,276)
Fees waived by Golden American 69 46 29
__________ _________ __________
NET EXPENSES (6,632) (2,947) (2,247)
__________ _________ __________
NET INVESTMENT INCOME (LOSS) 18,091 7,757 (455)
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss) on investments 6,043 4,853 4,125
Net unrealized appreciation (depreciation)
of investments (7,108) 8,839 12,317
__________ _________ __________
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $17,026 $21,449 $15,987
========== ========= ==========
</TABLE>
See accompanying notes.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF OPERATIONS
For the year ended December 31, 1996, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Emerging Market Value
Markets Manager Equity
Division Division Division
__________ _________ __________
<S> <C> <C> <C>
INVESTMENT INCOME (LOSS)
Income:
Dividends -- $177 $732
Capital gains distributions -- 272 1,220
__________ _________ __________
TOTAL INVESTMENT INCOME -- 449 1,952
Expenses:
Mortality and expense risk and other charges ($426) -- (441)
Annual administrative charges (22) (1) (21)
Minimum death benefit guarantee charges (2) -- (1)
Contingent deferred sales charges (12) -- (18)
Other contract charges (2) -- (4)
Amortization of deferred charges related to:
Deferred sales load (535) (53) (317)
Premium taxes (7) -- (3)
__________ _________ __________
TOTAL EXPENSES BEFORE WAIVER (1,006) (54) (805)
Fees waived by Golden American 8 1 10
__________ _________ __________
NET EXPENSES (998) (53) (795)
__________ _________ __________
NET INVESTMENT INCOME (LOSS) (998) 396 1,157
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss) on investments (2,959) 327 1,290
Net unrealized appreciation (depreciation)
of investments 5,674 245 601
__________ _________ __________
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $1,717 $968 $3,048
========== ========= ==========
</TABLE>
See accompanying notes.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF OPERATIONS
For the year ended December 31, 1996, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Managed
Strategic Small Cap Global
Equity Division Division
Division (a) (b)
__________ __________ __________
<S> <C> <C> <C>
INVESTMENT INCOME (LOSS)
Income:
Dividends $342 -- --
Capital gains distributions 328 -- $396
__________ __________ __________
TOTAL INVESTMENT INCOME 670 -- 396
Expenses:
Mortality and expense risk and other charges (249) ($222) ($302)
Annual administrative charges (15) (21) (49)
Minimum death benefit guarantee charges (2) (1) --
Contingent deferred sales charges (19) (23) (4)
Other contract charges (2) (3) (6)
Amortization of deferred charges related to:
Deferred sales load (112) (101) (386)
Premium taxes (2) (1) (6)
__________ __________ __________
TOTAL EXPENSES BEFORE WAIVER (401) (372) (753)
Fees waived by Golden American 6 3 7
__________ __________ __________
NET EXPENSES (395) (369) (746)
__________ __________ __________
NET INVESTMENT INCOME (LOSS) 275 (369) (350)
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss) on investments 161 25 116
Net unrealized appreciation (depreciation)
of investments 2,648 674 4,419
__________ __________ __________
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $3,084 $330 $4,185
========== ========== ==========
<FN>
(a) Commencement of operations, January 3, 1996
(b) Commencement of operations, September 3, 1996
</TABLE>
See accompanying notes.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF OPERATIONS
For the year ended December 31, 1996, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Growth &
OTC Income
Division Division
(c) (c) Combined
__________ _________ __________
<S> <C> <C> <C>
INVESTMENT INCOME (LOSS)
Income:
Dividends -- $10 $33,579
Capital gains distributions $218 10 35,160
__________ _________ __________
TOTAL INVESTMENT INCOME 218 20 68,739
Expenses:
Mortality and expense risk and other charges (6) (12) (11,250)
Annual administrative charges (2) (4) (617)
Minimum death benefit guarantee charges -- -- (54)
Contingent deferred sales charges (1) -- (225)
Other contract charges (1) -- (61)
Amortization of deferred charges related to:
Deferred sales load (4) (4) (12,193)
Premium taxes -- -- (238)
__________ _________ __________
TOTAL EXPENSES BEFORE WAIVER (14) (20) (24,638)
Fees waived by Golden American -- -- 287
__________ _________ __________
NET EXPENSES (14) (20) (24,351)
__________ _________ __________
NET INVESTMENT INCOME (LOSS) 204 -- 44,388
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss) on investments 1 1 21,659
Net unrealized appreciation (depreciation)
of investments (125) 269 37,651
__________ _________ __________
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $80 $270 $103,698
========== ========= ==========
<FN>
(c) Commencement of operations, September 23, 1996
</TABLE>
See accompanying notes.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1995 and 1996, Except as Noted
(Dollars in thousands)
<TABLE>
<CAPTION>
Liquid
Asset
Division
__________
<S> <C>
NET ASSETS AT JANUARY 1, 1995 $45,366
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) 1,059
Net realized gain (loss) on investments --
Net unrealized appreciation of investments --
__________
Net increase (decrease) in net assets resulting from operations 1,059
Changes from principal transactions:
Purchase payments 10,242
Contract distributions and terminations (11,794)
Transfer payments from (to) Fixed Accounts and other Divisions (8,292)
Addition to (reallocation from) assets retained in the Account
by Golden American Life Insurance Company (90)
__________
Increase (decrease) in net assets derived from principal
transactions (9,934)
__________
Total increase (decrease) (8,875)
__________
NET ASSETS AT DECEMBER 31, 1995 36,491
</TABLE>
See accompanying notes.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1995 and 1996, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Liquid
Asset
Division
__________
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) $730
Net realized gain (loss) on investments --
Net unrealized appreciation (depreciation) of investments --
__________
Net increase (decrease) in net assets resulting from operations 730
Changes from principal transactions:
Purchase payments 14,178
Contract distributions and terminations (15,313)
Transfer payments from (to) Fixed Accounts and other Divisions 1,242
Addition to (reallocation from) assets retained in the Account
by Golden American Life Insurance Company 148
__________
Increase (decrease) in net assets derived from principal
transactions 255
__________
Total increase (decrease) 985
__________
NET ASSETS AT DECEMBER 31, 1996 $37,476
==========
</TABLE>
See accompanying notes.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1995 and 1996, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Limited
Maturity
Bond
Division
__________
<S> <C>
NET ASSETS AT JANUARY 1, 1995 $71,573
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) (1,721)
Net realized gain (loss) on investments (138)
Net unrealized appreciation of investments 7,902
__________
Net increase (decrease) in net assets resulting from operations 6,043
Changes from principal transactions:
Purchase payments 7,209
Contract distributions and terminations (9,461)
Transfer payments from (to) Fixed Accounts and other Divisions (7,297)
Addition to (reallocation from) assets retained in the Account
by Golden American Life Insurance Company (230)
__________
Increase (decrease) in net assets derived from principal
transactions (9,779)
__________
Total increase (decrease) (3,736)
__________
NET ASSETS AT DECEMBER 31, 1995 67,837
</TABLE>
See accompanying notes.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1995 and 1996, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Limited
Maturity
Bond
Division
__________
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) $4,507
Net realized gain (loss) on investments 314
Net unrealized appreciation (depreciation) of investments (3,831)
__________
Net increase (decrease) in net assets resulting from operations 990
Changes from principal transactions:
Purchase payments 5,869
Contract distributions and terminations (9,672)
Transfer payments from (to) Fixed Accounts and other Divisions (10,189)
Addition to (reallocation from) assets retained in the Account
by Golden American Life Insurance Company (501)
__________
Increase (decrease) in net assets derived from principal
transactions (14,493)
__________
Total increase (decrease) (13,503)
__________
NET ASSETS AT DECEMBER 31, 1996 $54,334
==========
</TABLE>
See accompanying notes.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1995 and 1996, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Natural
Resources
Division
__________
<S> <C>
NET ASSETS AT JANUARY 1, 1995 $32,746
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) (112)
Net realized gain (loss) on investments 1,545
Net unrealized appreciation of investments 495
__________
Net increase (decrease) in net assets resulting from operations 1,928
Changes from principal transactions:
Purchase payments 2,021
Contract distributions and terminations (3,402)
Transfer payments from (to) Fixed Accounts and other Divisions (6,045)
Addition to (reallocation from) assets retained in the Account
by Golden American Life Insurance Company (258)
__________
Increase (decrease) in net assets derived from principal
transactions (7,684)
__________
Total increase (decrease) (5,756)
__________
NET ASSETS AT DECEMBER 31, 1995 26,990
</TABLE>
See accompanying notes.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1995 and 1996, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Natural
Resources
Division
__________
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) $3,916
Net realized gain (loss) on investments 2,353
Net unrealized appreciation (depreciation) of investments 2,704
__________
Net increase (decrease) in net assets resulting from operations 8,973
Changes from principal transactions:
Purchase payments 6,154
Contract distributions and terminations (4,962)
Transfer payments from (to) Fixed Accounts and other Divisions 5,904
Addition to (reallocation from) assets retained in the Account
by Golden American Life Insurance Company 242
__________
Increase (decrease) in net assets derived from principal
transactions 7,338
__________
Total increase (decrease) 16,311
__________
NET ASSETS AT DECEMBER 31, 1996 $43,301
==========
</TABLE>
See accompanying notes.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1995 and 1996, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
All-Growth
Division
__________
<S> <C>
NET ASSETS AT JANUARY 1, 1995 $70,621
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) 2,642
Net realized gain (loss) on investments 1,011
Net unrealized appreciation of investments 10,501
__________
Net increase (decrease) in net assets resulting from operations 14,154
Changes from principal transactions:
Purchase payments 11,312
Contract distributions and terminations (10,713)
Transfer payments from (to) Fixed Accounts and other Divisions 5,721
Addition to (reallocation from) assets retained in the Account
by Golden American Life Insurance Company 861
__________
Increase (decrease) in net assets derived from principal
transactions 7,181
__________
Total increase (decrease) 21,335
__________
NET ASSETS AT DECEMBER 31, 1995 91,956
</TABLE>
See accompanying notes.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1995 and 1996, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
All-Growth
Division
__________
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) ($150)
Net realized gain (loss) on investments 2,112
Net unrealized appreciation (depreciation) of investments (4,894)
__________
Net increase (decrease) in net assets resulting from operations (2,932)
Changes from principal transactions:
Purchase payments 10,539
Contract distributions and terminations (12,597)
Transfer payments from (to) Fixed Accounts and other Divisions (9,493)
Addition to (reallocation from) assets retained in the Account
by Golden American Life Insurance Company (631)
__________
Increase (decrease) in net assets derived from principal
transactions (12,182)
__________
Total increase (decrease) (15,114)
__________
NET ASSETS AT DECEMBER 31, 1996 $76,842
==========
</TABLE>
See accompanying notes.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1995 and 1996, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Real
Estate
Division
__________
<S> <C>
NET ASSETS AT JANUARY 1, 1995 $36,934
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) 521
Net realized gain (loss) on investments 369
Net unrealized appreciation of investments 3,425
__________
Net increase (decrease) in net assets resulting from operations 4,315
Changes from principal transactions:
Purchase payments 1,833
Contract distributions and terminations (4,799)
Transfer payments from (to) Fixed Accounts and other Divisions (3,325)
Addition to (reallocation from) assets retained in the Account
by Golden American Life Insurance Company (145)
__________
Increase (decrease) in net assets derived from principal
transactions (6,436)
__________
Total increase (decrease) (2,121)
__________
NET ASSETS AT DECEMBER 31, 1995 34,813
</TABLE>
See accompanying notes.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1995 and 1996, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Real
Estate
Division
__________
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) $2,214
Net realized gain (loss) on investments 652
Net unrealized appreciation (depreciation) of investments 8,605
__________
Net increase (decrease) in net assets resulting from operations 11,471
Changes from principal transactions:
Purchase payments 5,981
Contract distributions and terminations (4,775)
Transfer payments from (to) Fixed Accounts and other Divisions 3,076
Addition to (reallocation from) assets retained in the Account
by Golden American Life Insurance Company 115
__________
Increase (decrease) in net assets derived from principal
transactions 4,397
__________
Total increase (decrease) 15,868
__________
NET ASSETS AT DECEMBER 31, 1996 $50,681
==========
</TABLE>
See accompanying notes.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1995 and 1996, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Fully
Managed
Division
__________
<S> <C>
NET ASSETS AT JANUARY 1, 1995 $98,837
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) 179
Net realized gain (loss) on investments 1,311
Net unrealized appreciation of investments 16,314
__________
Net increase (decrease) in net assets resulting from operations 17,804
Changes from principal transactions:
Purchase payments 9,654
Contract distributions and terminations (13,651)
Transfer payments from (to) Fixed Accounts and other Divisions 4,159
Addition to (reallocation from) assets retained in the Account
by Golden American Life Insurance Company 524
__________
Increase (decrease) in net assets derived from principal
transactions 686
__________
Total increase (decrease) 18,490
__________
NET ASSETS AT DECEMBER 31, 1995 117,327
</TABLE>
See accompanying notes.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1995 and 1996, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Fully
Managed
Division
__________
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) $7,463
Net realized gain (loss) on investments 2,245
Net unrealized appreciation (depreciation) of investments 6,614
__________
Net increase (decrease) in net assets resulting from operations 16,322
Changes from principal transactions:
Purchase payments 16,217
Contract distributions and terminations (17,846)
Transfer payments from (to) Fixed Accounts and other Divisions 2,478
Addition to (reallocation from) assets retained in the Account
by Golden American Life Insurance Company (67)
__________
Increase (decrease) in net assets derived from principal
transactions 782
__________
Total increase (decrease) 17,104
__________
NET ASSETS AT DECEMBER 31, 1996 $134,431
==========
</TABLE>
See accompanying notes.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1995 and 1996, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Multiple
Allocation
Division
__________
<S> <C>
NET ASSETS AT JANUARY 1, 1995 $297,508
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) 14,068
Net realized gain (loss) on investments 4,715
Net unrealized appreciation of investments 26,239
__________
Net increase (decrease) in net assets resulting from operations 45,022
Changes from principal transactions:
Purchase payments 17,072
Contract distributions and terminations (42,733)
Transfer payments from (to) Fixed Accounts and other Divisions (11,292)
Addition to (reallocation from) assets retained in the Account
by Golden American Life Insurance Company (75)
__________
Increase (decrease) in net assets derived from principal
transactions (37,028)
__________
Total increase (decrease) 7,994
__________
NET ASSETS AT DECEMBER 31, 1995 305,502
</TABLE>
See accompanying notes.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1995 and 1996, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Multiple
Allocation
Division
__________
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) $18,091
Net realized gain (loss) on investments 6,043
Net unrealized appreciation (depreciation) of investments (7,108)
__________
Net increase (decrease) in net assets resulting from operations 17,026
Changes from principal transactions:
Purchase payments 16,631
Contract distributions and terminations (44,014)
Transfer payments from (to) Fixed Accounts and other Divisions (23,461)
Addition to (reallocation from) assets retained in the Account
by Golden American Life Insurance Company (1,257)
__________
Increase (decrease) in net assets derived from principal
transactions (52,101)
__________
Total increase (decrease) (35,075)
__________
NET ASSETS AT DECEMBER 31, 1996 $270,427
==========
</TABLE>
See accompanying notes.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1995 and 1996, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Capital
Appreciation
Division
____________
<S> <C>
NET ASSETS AT JANUARY 1, 1995 $88,346
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) 7,594
Net realized gain (loss) on investments 2,221
Net unrealized appreciation of investments 14,531
____________
Net increase (decrease) in net assets resulting from operations 24,346
Changes from principal transactions:
Purchase payments 8,831
Contract distributions and terminations (13,163)
Transfer payments from (to) Fixed Accounts and other Divisions 11,592
Addition to (reallocation from) assets retained in the Account
by Golden American Life Insurance Company 1,097
____________
Increase (decrease) in net assets derived from principal
transactions 8,357
____________
Total increase (decrease) 32,703
____________
NET ASSETS AT DECEMBER 31, 1995 121,049
</TABLE>
See accompanying notes.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1995 and 1996, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Capital
Appreciation
Division
____________
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) $7,757
Net realized gain (loss) on investments 4,853
Net unrealized appreciation (depreciation) of investments 8,839
____________
Net increase (decrease) in net assets resulting from operations 21,449
Changes from principal transactions:
Purchase payments 16,081
Contract distributions and terminations (16,095)
Transfer payments from (to) Fixed Accounts and other Divisions 3,299
Addition to (reallocation from) assets retained in the Account
by Golden American Life Insurance Company 206
____________
Increase (decrease) in net assets derived from principal
transactions 3,491
____________
Total increase (decrease) 24,940
____________
NET ASSETS AT DECEMBER 31, 1996 $145,989
============
</TABLE>
See accompanying notes.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1995 and 1996, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Rising
Dividends
Division
__________
<S> <C>
NET ASSETS AT JANUARY 1, 1995 $50,385
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) (1,130)
Net realized gain (loss) on investments 776
Net unrealized appreciation of investments 16,037
__________
Net increase (decrease) in net assets resulting from operations 15,683
Changes from principal transactions:
Purchase payments 11,422
Contract distributions and terminations (9,800)
Transfer payments from (to) Fixed Accounts and other Divisions 11,423
Addition to (reallocation from) assets retained in the Account
by Golden American Life Insurance Company 1,229
__________
Increase (decrease) in net assets derived from principal
transactions 14,274
__________
Total increase (decrease) 29,957
__________
NET ASSETS AT DECEMBER 31, 1995 80,342
</TABLE>
See accompanying notes.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1995 and 1996, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Rising
Dividends
Division
__________
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) ($455)
Net realized gain (loss) on investments 4,125
Net unrealized appreciation (depreciation) of investments 12,317
__________
Net increase (decrease) in net assets resulting from operations 15,987
Changes from principal transactions:
Purchase payments 25,572
Contract distributions and terminations (12,639)
Transfer payments from (to) Fixed Accounts and other Divisions 13,857
Addition to (reallocation from) assets retained in the Account
by Golden American Life Insurance Company 454
__________
Increase (decrease) in net assets derived from principal
transactions 27,244
__________
Total increase (decrease) 43,231
__________
NET ASSETS AT DECEMBER 31, 1996 $123,573
==========
</TABLE>
See accompanying notes.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1995 and 1996, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Emerging
Markets
Division
__________
<S> <C>
NET ASSETS AT JANUARY 1, 1995 $59,746
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) (1,137)
Net realized gain (loss) on investments (7,448)
Net unrealized appreciation of investments 1,603
__________
Net increase (decrease) in net assets resulting from operations (6,982)
Changes from principal transactions:
Purchase payments 7,739
Contract distributions and terminations (7,740)
Transfer payments from (to) Fixed Accounts and other Divisions (14,939)
Addition to (reallocation from) assets retained in the Account
by Golden American Life Insurance Company (937)
__________
Increase (decrease) in net assets derived from principal
transactions (15,877)
__________
Total increase (decrease) (22,859)
__________
NET ASSETS AT DECEMBER 31, 1995 36,887
</TABLE>
See accompanying notes.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1995 and 1996, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Emerging
Markets
Division
__________
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) ($998)
Net realized gain (loss) on investments (2,959)
Net unrealized appreciation (depreciation) of investments 5,674
__________
Net increase (decrease) in net assets resulting from operations 1,717
Changes from principal transactions:
Purchase payments 6,432
Contract distributions and terminations (6,450)
Transfer payments from (to) Fixed Accounts and other Divisions (1,273)
Addition to (reallocation from) assets retained in the Account
by Golden American Life Insurance Company (160)
__________
Increase (decrease) in net assets derived from principal
transactions (1,451)
__________
Total increase (decrease) 266
__________
NET ASSETS AT DECEMBER 31, 1996 $37,153
==========
</TABLE>
See accompanying notes.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1995 and 1996, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Market
Manager
Division
__________
<S> <C>
NET ASSETS AT JANUARY 1, 1995 $2,752
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) 144
Net realized gain (loss) on investments 29
Net unrealized appreciation of investments 944
__________
Net increase (decrease) in net assets resulting from operations 1,117
Changes from principal transactions:
Purchase payments 2,140
Contract distributions and terminations (767)
Transfer payments from (to) Fixed Accounts and other Divisions (208)
Addition to (reallocation from) assets retained in the Account
by Golden American Life Insurance Company 172
__________
Increase (decrease) in net assets derived from principal
transactions 1,337
__________
Total increase (decrease) 2,454
__________
NET ASSETS AT DECEMBER 31, 1995 5,206
</TABLE>
See accompanying notes.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1995 and 1996, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Market
Manager
Division
__________
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) $396
Net realized gain (loss) on investments 327
Net unrealized appreciation (depreciation) of investments 245
__________
Net increase (decrease) in net assets resulting from operations 968
Changes from principal transactions:
Purchase payments (111)
Contract distributions and terminations (383)
Transfer payments from (to) Fixed Accounts and other Divisions (187)
Addition to (reallocation from) assets retained in the Account
by Golden American Life Insurance Company (14)
__________
Increase (decrease) in net assets derived from principal
transactions (695)
__________
Total increase (decrease) 273
__________
NET ASSETS AT DECEMBER 31, 1996 $5,479
==========
</TABLE>
See accompanying notes.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1995 and 1996, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Value
Equity
Division
(a)
__________
<S> <C>
NET ASSETS AT JANUARY 1, 1995 --
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) $478
Net realized gain (loss) on investments 687
Net unrealized appreciation of investments 1,870
__________
Net increase (decrease) in net assets resulting from operations 3,035
Changes from principal transactions:
Purchase payments 8,619
Contract distributions and terminations (776)
Transfer payments from (to) Fixed Accounts and other Divisions 16,429
Addition to (reallocation from) assets retained in the Account
by Golden American Life Insurance Company 1,140
__________
Increase (decrease) in net assets derived from principal
transactions 25,412
__________
Total increase (decrease) 28,447
__________
NET ASSETS AT DECEMBER 31, 1995 28,447
<FN>
(a) Commencement of operations, January 10, 1995
</TABLE>
See accompanying notes.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1995 and 1996, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Value
Equity
Division
(a)
__________
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) $1,157
Net realized gain (loss) on investments 1,290
Net unrealized appreciation (depreciation) of investments 601
__________
Net increase (decrease) in net assets resulting from operations 3,048
Changes from principal transactions:
Purchase payments 15,780
Contract distributions and terminations (3,990)
Transfer payments from (to) Fixed Accounts and other Divisions (376)
Addition to (reallocation from) assets retained in the Account
by Golden American Life Insurance Company (48)
__________
Increase (decrease) in net assets derived from principal
transactions 11,366
__________
Total increase (decrease) 14,414
__________
NET ASSETS AT DECEMBER 31, 1996 $42,861
==========
<FN>
(a) Commencement of operations, January 10, 1995
</TABLE>
See accompanying notes.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1995 and 1996, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Strategic
Equity
Division
(b)
__________
<S> <C>
NET ASSETS AT JANUARY 1, 1995 --
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) ($8)
Net realized gain (loss) on investments (1)
Net unrealized appreciation of investments 28
__________
Net increase (decrease) in net assets resulting from operations 19
Changes from principal transactions:
Purchase payments 3,211
Contract distributions and terminations (172)
Transfer payments from (to) Fixed Accounts and other Divisions 4,796
Addition to (reallocation from) assets retained in the Account
by Golden American Life Insurance Company 177
__________
Increase (decrease) in net assets derived from principal
transactions 8,012
__________
Total increase (decrease) 8,031
__________
NET ASSETS AT DECEMBER 31, 1995 8,031
<FN>
(b) Commencement of operations, October 3, 1995
</TABLE>
See accompanying notes.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1995 and 1996, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Strategic
Equity
Division
(b)
__________
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) $275
Net realized gain (loss) on investments 161
Net unrealized appreciation (depreciation) of investments 2,648
__________
Net increase (decrease) in net assets resulting from operations 3,084
Changes from principal transactions:
Purchase payments 12,046
Contract distributions and terminations (1,671)
Transfer payments from (to) Fixed Accounts and other Divisions 8,149
Addition to (reallocation from) assets retained in the Account
by Golden American Life Insurance Company 219
__________
Increase (decrease) in net assets derived from principal
transactions 18,743
__________
Total increase (decrease) 21,827
__________
NET ASSETS AT DECEMBER 31, 1996 $29,858
==========
<FN>
(b) Commencement of operations, October 3, 1995
</TABLE>
See accompanying notes.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1995 and 1996, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Small Cap
Division
(c)
__________
<S> <C>
NET ASSETS AT JANUARY 1, 1995 --
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) --
Net realized gain (loss) on investments --
Net unrealized appreciation of investments --
__________
Net increase (decrease) in net assets resulting from operations --
Changes from principal transactions:
Purchase payments --
Contract distributions and terminations --
Transfer payments from (to) Fixed Accounts and other Divisions --
Addition to (reallocation from) assets retained in the Account
by Golden American Life Insurance Company --
__________
Increase (decrease) in net assets derived from principal
transactions --
__________
Total increase (decrease) --
__________
NET ASSETS AT DECEMBER 31, 1995 --
<FN>
(c) Commencement of operations, January 3, 1996
</TABLE>
See accompanying notes.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1995 and 1996, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Small Cap
Division
(c)
__________
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) ($369)
Net realized gain (loss) on investments 25
Net unrealized appreciation (depreciation) of investments 674
__________
Net increase (decrease) in net assets resulting from operations 330
Changes from principal transactions:
Purchase payments 17,552
Contract distributions and terminations (1,530)
Transfer payments from (to) Fixed Accounts and other Divisions 16,293
Addition to (reallocation from) assets retained in the Account
by Golden American Life Insurance Company 411
__________
Increase (decrease) in net assets derived from principal
transactions 32,726
__________
Total increase (decrease) 33,056
__________
NET ASSETS AT DECEMBER 31, 1996 $33,056
==========
<FN>
(c) Commencement of operations, January 3, 1996
</TABLE>
See accompanying notes.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1995 and 1996, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Managed
Global
Division
(d)
__________
<S> <C>
NET ASSETS AT JANUARY 1, 1995 --
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) --
Net realized gain (loss) on investments --
Net unrealized appreciation of investments --
__________
Net increase (decrease) in net assets resulting from operations --
Changes from principal transactions:
Purchase payments --
Contract distributions and terminations --
Transfer payments from (to) Fixed Accounts and other Divisions --
Addition to (reallocation from) assets retained in the Account
by Golden American Life Insurance Company --
__________
Increase (decrease) in net assets derived from principal
transactions --
__________
Total increase (decrease) --
__________
NET ASSETS AT DECEMBER 31, 1995 --
<FN>
(d) Commencement of operations, September 3, 1996
</TABLE>
See accompanying notes.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1995 and 1996, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Managed
Global
Division
(d)
__________
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) ($350)
Net realized gain (loss) on investments 116
Net unrealized appreciation (depreciation) of investments 4,419
__________
Net increase (decrease) in net assets resulting from operations 4,185
Changes from principal transactions:
Purchase payments 3,524
Contract distributions and terminations (3,844)
Transfer payments from (to) Fixed Accounts and other Divisions 80,286
Addition to (reallocation from) assets retained in the Account
by Golden American Life Insurance Company 2,115
__________
Increase (decrease) in net assets derived from principal
transactions 82,081
__________
Total increase (decrease) 86,266
__________
NET ASSETS AT DECEMBER 31, 1996 $86,266
==========
<FN>
(d) Commencement of operations, September 3, 1996
</TABLE>
See accompanying notes.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1995 and 1996, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
OTC
Division
(e)
__________
<S> <C>
NET ASSETS AT JANUARY 1, 1995 --
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) --
Net realized gain (loss) on investments --
Net unrealized appreciation of investments --
__________
Net increase (decrease) in net assets resulting from operations --
__________
Changes from principal transactions:
Purchase payments --
Contract distributions and terminations --
Transfer payments from (to) Fixed Accounts and other Divisions --
Addition to (reallocation from) assets retained in the Account
by Golden American Life Insurance Company --
__________
Increase (decrease) in net assets derived from principal
transactions --
__________
Total increase (decrease) --
__________
NET ASSETS AT DECEMBER 31, 1995 --
<FN>
(e) Commencement of operations, September 23, 1996
</TABLE>
See accompanying notes.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1995 and 1996, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
OTC
Division
(e)
__________
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) $204
Net realized gain (loss) on investments 1
Net unrealized appreciation (depreciation) of investments (125)
__________
Net increase (decrease) in net assets resulting from operations 80
Changes from principal transactions:
Purchase payments 1,207
Contract distributions and terminations (36)
Transfer payments from (to) Fixed Accounts and other Divisions 3,248
Addition to (reallocation from) assets retained in the Account
by Golden American Life Insurance Company 72
__________
Increase (decrease) in net assets derived from principal
transactions 4,491
__________
Total increase (decrease) 4,571
__________
NET ASSETS AT DECEMBER 31, 1996 $4,571
==========
<FN>
(e) Commencement of operations, September 23, 1996
</TABLE>
See accompanying notes.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1995 and 1996, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Growth &
Income
Division
(e)
__________
<S> <C>
NET ASSETS AT JANUARY 1, 1995 --
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) --
Net realized gain (loss) on investments --
Net unrealized appreciation of investments --
__________
Net increase (decrease) in net assets resulting from operations --
Changes from principal transactions:
Purchase payments --
Contract distributions and terminations --
Transfer payments from (to) Fixed Accounts and other Divisions --
Addition to (reallocation from) assets retained in the Account
by Golden American Life Insurance Company --
__________
Increase (decrease) in net assets derived from principal
transactions --
__________
Total increase (decrease) --
__________
NET ASSETS AT DECEMBER 31, 1995 --
<FN>
(e) Commencement of operations, September 23, 1996
</TABLE>
See accompanying notes.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1995 and 1996, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Growth &
Income
Division
(e)
__________
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) --
Net realized gain (loss) on investments $1
Net unrealized appreciation (depreciation) of investments 269
__________
Net increase (decrease) in net assets resulting from operations 270
Changes from principal transactions:
Purchase payments 2,760
Contract distributions and terminations (43)
Transfer payments from (to) Fixed Accounts and other Divisions 5,164
Addition to (reallocation from) assets retained in the Account
by Golden American Life Insurance Company 124
__________
Increase (decrease) in net assets derived from principal
transactions 8,005
__________
Total increase (decrease) 8,275
__________
NET ASSETS AT DECEMBER 31, 1996 $8,275
==========
<FN>
(e) Commencement of operations, September 23, 1996
</TABLE>
See accompanying notes.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1995 and 1996, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Combined
__________
<S> <C>
NET ASSETS AT JANUARY 1, 1995 $854,814
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) 22,577
Net realized gain (loss) on investments 5,077
Net unrealized appreciation of investments 99,889
__________
Net increase (decrease) in net assets resulting from operations 127,543
Changes from principal transactions:
Purchase payments 101,305
Contract distributions and terminations (128,971)
Transfer payments from (to) Fixed Accounts and other Divisions 2,722
Addition to (reallocation from) assets retained in the Account
by Golden American Life Insurance Company 3,465
__________
Increase (decrease) in net assets derived from principal
transactions (21,479)
__________
Total increase (decrease) 106,064
__________
NET ASSETS AT DECEMBER 31, 1995 960,878
</TABLE>
See accompanying notes.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1995 and 1996, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Combined
___________
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) $44,388
Net realized gain (loss) on investments 21,659
Net unrealized appreciation (depreciation) of investments 37,651
___________
Net increase (decrease) in net assets resulting from operations 103,698
Changes from principal transactions:
Purchase payments 176,412
Contract distributions and terminations (155,860)
Transfer payments from (to) Fixed Accounts and other Divisions 98,017
Addition to (reallocation from) assets retained in the Account
by Golden American Life Insurance Company 1,428
___________
Increase (decrease) in net assets derived from principal
transactions 119,997
___________
Total increase (decrease) 223,695
___________
NET ASSETS AT DECEMBER 31, 1996 $1,184,573
===========
</TABLE>
See accompanying notes.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
NOTE 1 - ORGANIZATION
Separate Account B (the "Account") was established on June 14, 1988, by Golden
American Life Insurance Company ("Golden American"), under Minnesota insurance
law to support the operations of variable annuity contracts ("Contracts").
Effective September 30, 1992, Golden American became a wholly-owned subsidiary
of BT Variable, Inc. ("BTV"), an indirect wholly-owned subsidiary of Bankers
Trust Company. Effective December 30, 1993, Golden American was redomesticated
from the State of Minnesota to the State of Delaware. Effective August 13,
1996, Equitable of Iowa Companies acquired all of the outstanding capital stock
of BTV. As of August 14, 1996, BT Variable, Inc.'s name was changed to EIC
Variable, Inc. These transactions had no effect on the accompanying financial
statements. Golden American is primarily engaged in the issuance of variable
insurance products and is licensed as a life insurance company in the District
of Columbia and all states except New York.
Operations of the Account commenced on January 25, 1989. The Account is
registered as a unit investment trust with the Securities and Exchange
Commission under the Investment Company Act of 1940, as amended. Golden
American provides for variable accumulation and benefits under the contracts by
crediting annuity considerations to one or more divisions within the Account or
to the Golden American Guaranteed Interest Division, the Golden American Fixed
Interest Division and the Fixed Separate Account, which are not part of the
Account, as directed by the Contractowners. The portion of the Account's assets
applicable to Contracts will not be chargeable with liabilities arising out of
any other business Golden American may conduct, but obligations of the Account,
including the promise to make benefit payments, are obligations of Golden
American. The assets and liabilities of the Account are clearly identified and
distinguished from the other assets and liabilities of Golden American.
At December 31, 1996, the Account had, under GoldenSelect Contracts, seventeen
investment divisions: the Liquid Asset, the Limited Maturity Bond, the Natural
Resources, the All-Growth, the Real Estate, the Fully Managed, the Multiple
Allocation, the Capital Appreciation, the Rising Dividends, the Emerging
Markets, the Market Manager, the Value Equity (commenced operations January,
1995), the Strategic Equity (commenced operations October, 1995), the Small Cap
(commenced operations January, 1996), the Managed Global and the OTC (commenced
operations September, 1996) and the Growth & Income (commenced operations
September, 1996) Divisions ("Divisions"). The Managed Global Division was
formerly the Managed Global Account of Golden American's Separate Account D
from October 12, 1992 until September 3, 1996. The assets in each Division are
invested in shares of a designated series ("Series," which may also be referred
to as "Portfolio") of mutual funds of The GCG Trust or the Equi-Select Series
Trust (the "Trusts"). Effective January, 1997, the name of the Natural
Resource Division was changed to the Hard Assets Division. Effective February,
1997, the Research, the Total Return, and the Value + Growth Divisions
commenced operations. The Account also includes The Fund For Life Division,
which is not included in the accompanying financial statements, and which
ceased to accept new Contracts effective December 31, 1994.
The Market Manager Division was open for investment for only a brief period
during 1994 and 1995. This Division is now closed and contractowners are
not permitted to direct their investments into this Division. Contractowners
with investments in the Market Manager Division were permitted to elect to
update their contracts to DVA PLUS contracts.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the significant accounting policies of the
Account:
Use of Estimates: The preparation of the financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
Investments: Investments are made in shares of a Series or Portfolio of the
Trusts and are valued at the net asset value per share of the respective Series
or Portfolio of the Trusts. Investment transactions in each Series or
Portfolio of the Trusts are recorded on the trade date. Distributions of net
investment income and capital gains of each Series or Portfolio of the Trusts
are recognized on the ex-distribution date. Realized gains and losses on
redemptions of the shares of the Series or Portfolio of the Trusts are
determined on the specific identification basis.
Federal Income Taxes: Operations of the Account form a part of, and are taxed
with, the total operations of Golden American which is taxed as a life
insurance company under the Internal Revenue Code. Earnings and realized
capital gains of the Account attributable to the Contractowners are excluded in
the determination of the federal income tax liability of Golden American.
Reclassification: Certain amounts in the 1995 financial statements have been
reclassified to conform to the 1996 financial statement presentation.
NOTE 3 - CHARGES AND FEES
Contracts currently being sold include the DVA 100, DVA Series 100 and the
DVA PLUS. The DVA PLUS has three different death benefit options referred to
as Standard, Annual Ratchet and 7% Solution. Golden American discontinued
external sales of DVA 80 in May 1991. In December 1995, Golden American also
discontinued external sales of DVA 100, however, they continued to be available
to Golden American employees and agents. Under the terms of the Contracts,
certain charges are allocated to the Contracts to cover Golden American's
expenses in connection with the issuance and administration of the Contracts.
Following is a summary of these charges:
Mortality and Expense Risk and Other Charges
Mortality and Expense Risk Charges: Golden American assumes mortality and
expense risks related to the operations of the Account and, in accordance
with the terms of the Contracts, deducts a daily charge from the assets of
the Account. Daily charges are deducted at annual rates of .80%, .90%,
1.25%, 1.10%, 1.25% and 1.40% of the assets attributable to the DVA 80, DVA
100, DVA Series 100, DVA PLUS-Standard, DVA PLUS-Annual Ratchet and DVA
PLUS-7% Solution, respectively, to cover these risks.
Asset Based Administrative Charges: A daily charge at an annual rate of .10%
is deducted from assets attributable to DVA 100 and DVA Series 100 Contracts.
A daily charge at an annual rate of .15% is deducted from the assets
attributable to DVA PLUS Contracts.
Annual Administrative Charges: An administrative charge of $40 per Contract
year is deducted from the accumulation value of Deferred Annuity Contracts to
cover ongoing administrative expenses. The charge is incurred on the Contract
anniversary date and deducted at the end of the Contract anniversary period.
This charge has been waived for certain offerings of the Contracts.
NOTE 3 - CHARGES AND FEES (Continued)
Minimum Death Benefit Guarantee Charges: For certain Contracts, a minimum
death benefit guarantee charge of up to $1.20 per $1,000 of guaranteed death
benefit per Contract year is deducted from the accumulation value of Deferred
Annuity Contracts on each Contract anniversary date.
Contingent Deferred Sales Charges: Under DVA PLUS Contracts issued subsequent
to September 1995, a contingent deferred sales charge ("Surrender Charge") is
imposed as a percentage of each premium payment if the Contract is surrendered
or an excess partial withdrawal is taken during the seven-year period from the
date a premium payment is received. The Surrender Charge is imposed at a rate
of 7% during the first two complete years after purchase declining to 6%, 5%,
4%, 3% and 1% after the second, third, fourth, fifth and sixth years,
respectively.
Other Contract Charges: Under DVA 80, DVA 100 and DVA Series 100 contracts,
a charge is deducted from the accumulation value for contracts taking more than
one conventional partial withdrawal during a contract year. For DVA 80 and DVA
100 contracts, annual distribution fees are deducted from contract accumulation
values.
Deferred Sales Load: Under contracts offered prior to October 1995, a sales
load of up to 7 1/2% was applicable to each premium payment for sales-related
expenses as specified in the Contracts. For DVA Series 100, the sales load is
deducted in equal annual installments over the period the Contract is in force,
not to exceed 10 years. For DVA 80 and DVA 100 Contracts, although the sales
load is chargeable to each premium when it is received by Golden American, the
amount of such charge is initially advanced by Golden American to
Contractowners and included in the accumulation value and then deducted in
equal installments on each Contract anniversary date over a period of six
years. Upon surrender of the Contract, the unamortized deferred sales load is
deducted from the accumulation value by Golden American. In addition, when
partial withdrawal limits are exceeded, a portion of the unamortized deferred
sales load is deducted.
Premium Taxes: For certain contracts, premium taxes are deducted, where
applicable, from the accumulation value of each Contract. The amount and
timing of the deduction depend on the annuitant's state of residence and
currently ranges up to 3.5% of premiums.
Fees Waived by Golden American: Certain charges and fees for various types of
Contracts are currently waived by Golden American. Golden American reserves
the right to discontinue these waivers at its discretion or to conform with
changes in the law.
NOTE 3 - CHARGES AND FEES (Continued)
The net assets retained in the Account by Golden American in the accompanying
financial statements represent the unamortized deferred sales load and premium
taxes advanced by Golden American, noted above. Net assets retained in the
Account by Golden American are as follows:
<TABLE>
<CAPTION>
Combined
_________________________________
1996 1995
_______________ _______________
(Dollars in thousands)
<S> <C> <C>
Balance at beginning of period $34,408 $44,008
Sales load advanced 380 5,370
Premium tax advanced 11 51
Net transfer (to) from Separate Account
D, Fixed Account and other Divisions 1,037 (1,956)
Amortization of deferred sales load
and premium tax (12,431) (13,065)
_______________ _______________
Balance at end of period $23,405 $34,408
=============== ===============
</TABLE>
NOTE 4 - PURCHASES AND SALES OF INVESTMENT SECURITIES
The aggregate cost of purchases and proceeds from sales of investments were as
follows:
<TABLE>
<CAPTION>
Period Ended December 31,
____________________________________________________
1996 1995
_________________________ _________________________
Purchases Sales Purchases Sales
_________________________ _________________________
(Dollars in thousands)
<S> <C> <C> <C> <C>
The GCG Trust Liquid
Asset Series $64,148 $63,169 $36,373 $45,249
The GCG Trust Limited
Maturity Bond Series 13,202 23,196 13,148 24,648
The GCG Trust Natural
Resources Series 22,965 11,706 11,278 19,076
The GCG Trust All-Growth
Series 10,482 22,833 21,261 11,424
The GCG Trust Real
Estate Series 12,388 5,777 4,524 10,440
The GCG Trust Fully
Managed Series 22,506 14,263 13,980 13,106
The GCG Trust Multiple
Allocation Series 28,625 62,678 29,322 52,281
The GCG Trust Capital
Appreciation Series 32,609 21,360 28,436 12,469
The GCG Trust Rising
Dividends Series 41,303 14,500 19,522 6,361
The GCG Trust Emerging
Markets Series 11,043 13,496 10,584 27,621
The GCG Trust Market
Manager Series 449 1,388 3,057 832
The GCG Trust Value
Equity Series 20,546 8,015 29,104 3,199
The GCG Trust Strategic
Equity Series 20,731 1,702 8,151 142
The GCG Trust Small
Cap Series 47,577 15,201 -- --
The GCG Trust Managed
Global Series 85,923 4,148 -- --
Equi-Select Series Trust
OTC Portfolio 4,644 164 -- --
Equi-Select Series Trust
Growth & Income Portfolio 8,037 49 -- --
____________ ____________ ____________ ____________
$447,178 $283,645 $228,740 $226,848
============ ============ ============ ============
</TABLE>
NOTE 5 - SUMMARY OF CHANGES FROM UNIT TRANSACTIONS
Contractowners transactions shown in the following table reflect gross inflows
("Purchases") and outflows ("Sales") in units for each Division. The activity
includes contractowners electing to update a DVA 100 or DVA Series 100
contracts to a DVA PLUS contract beginning in October 1995. Updates to DVA
PLUS contracts result in both a sale (surrender of the old contract) and a
purchase (acquisition of the new contract). All of the purchase transactions
for the Market Manager Division resulted from such updates.
Contractowner transactions in units were as follows:
<TABLE>
<CAPTION>
Period Ended December 31,
__________________________________________________
1996 1995
________________________ ________________________
Purchases Sales Purchases Sales
________________________ ________________________
<S> <C> <C> <C> <C>
Liquid Asset Division 5,982,248 6,003,930 3,119,370 3,934,332
Limited Maturity Bond Division 829,366 1,824,946 1,096,937 1,842,599
Natural Resources Division 1,374,569 978,096 835,272 1,412,435
All-Growth Division 1,228,512 2,169,543 1,548,525 1,094,131
Real Estate Division 754,585 552,462 322,375 802,601
Fully Managed Division 1,450,300 1,450,120 1,020,546 1,063,678
Multiple Allocation Division 1,330,139 4,486,173 1,057,363 3,678,129
Capital Appreciation Division 2,032,074 1,900,755 1,740,091 1,248,056
Rising Dividends Division 3,448,184 1,678,751 1,883,516 753,983
Emerging Markets Division 1,573,766 1,768,185 1,386,840 3,143,521
Market Manager Division 7,958 106,893 282,507 142,437
Value Equity Division 1,834,937 1,024,120 2,459,134 333,200
Strategic Equity Division 2,083,197 353,766 848,555 45,767
Small Cap Division 4,912,458 2,122,101 -- --
Managed Global Division 8,792,080 716,753 -- --
OTC Division 316,184 26,607 -- --
Growth & Income Division 697,746 35,755 -- --
</TABLE>
NOTE 6 - NET ASSETS
Net assets at December 31, 1996 consisted of the following:
<TABLE>
<CAPTION>
Limited
Liquid Maturity Natural All-
Asset Bond Resources Growth
Division Division Division Division
____________ _____________ ____________ _____________
(Dollars in thousands)
<S> <C> <C> <C> <C>
Unit transactions $32,438 $42,710 $29,064 $67,465
Accumulated net investment
income (loss) 5,038 12,389 10,233 7,934
Net unrealized appreciation
(depreciation) of
investments -- (765) 4,004 1,443
____________ _____________ ____________ _____________
$37,476 $54,334 $43,301 $76,842
============ ============= ============ =============
</TABLE>
<TABLE>
<CAPTION>
Real Fully Multiple Capital
Estate Managed Allocation Appreciation
Division Division Division Division
____________ _____________ ____________ _____________
(Dollars in thousands)
<S> <C> <C> <C> <C>
Unit transactions $32,124 $100,420 $184,144 $96,189
Accumulated net investment
income (loss) 7,542 19,186 80,907 27,156
Net unrealized appreciation
(depreciation) of
investments 11,015 14,825 5,376 22,644
____________ _____________ ____________ _____________
$50,681 $134,431 $270,427 $145,989
============ ============= ============ =============
</TABLE>
<TABLE>
<CAPTION>
Rising Emerging Market Value
Dividends Markets Manager Equity
Division Division Division Division
____________ _____________ ____________ _____________
(Dollars in thousands)
<S> <C> <C> <C> <C>
Unit transactions $91,082 $48,602 $3,327 $36,655
Accumulated net
investment income (loss) 4,742 (8,904) 964 3,735
Net unrealized appreciation
(depreciation) of
investments 27,749 (2,545) 1,188 2,471
____________ _____________ ____________ _____________
$123,573 $37,153 $5,479 $42,861
============ ============= ============ =============
</TABLE>
NOTE 6 - NET ASSETS - (Continued)
<TABLE>
<CAPTION>
Strategic Managed
Equity Small Cap Global
Division Division Division
____________ _____________ ____________
(Dollars in thousands)
<S> <C> <C> <C>
Unit transactions $26,740 $32,726 $82,081
Accumulated net
investment income (loss) 443 (344) (234)
Net unrealized appreciation
(depreciation) of
investments 2,675 674 4,419
____________ _____________ ____________
$29,858 $33,056 $86,266
============ ============= ============
</TABLE>
<TABLE>
<CAPTION>
Growth &
OTC Income
Division Division Combined
____________ _____________ ____________
(Dollars in thousands)
<S> <C> <C> <C>
Unit transactions $4,491 $8,005 $918,263
Accumulated net
investment income (loss) 205 1 170,993
Net unrealized appreciation
(depreciation) of
investments (125) 269 95,317
____________ _____________ ____________
$4,571 $8,275 $1,184,573
============ ============= ============
</TABLE>
NOTE 7 - UNIT VALUES
Accumulation unit value information (which is based on total assets) for units
outstanding by contract type as of December 31, 1996 was as follows:
<TABLE>
<CAPTION>
Total Unit
Series Units Unit Value Value
_______________________________________________________________________________
(in thousands)
<S> <C> <C> <C>
LIQUID ASSET
Currently payable annuity products:
DVA 80 1,451 $13.984 $20
DVA 100 4,396 13.762 61
Contracts in accumulation period:
DVA 80 463,720 13.984 6,485
DVA 100 1,703,328 13.762 23,441
DVA Series 100 19,543 13.380 262
DVA PLUS - Standard 76,505 13.506 1,033
DVA PLUS - Annual Ratchet 84,960 13.347 1,134
DVA PLUS - 7% Solution 383,231 13.188 5,054
______________
37,490
LIMITED MATURITY BOND
Currently payable annuity products:
DVA 80 22,205 15.839 352
DVA 100 27,295 15.588 425
Contracts in accumulation period:
DVA 80 81,730 15.839 1,295
DVA 100 2,859,817 15.588 44,579
DVA Series 100 32,874 15.156 498
DVA PLUS - Standard 83,927 15.312 1,285
DVA PLUS - Annual Ratchet 46,293 15.130 701
DVA PLUS - 7% Solution 349,417 14.951 5,224
______________
54,359
NATURAL RESOURCES
Currently payable annuity products:
DVA 80 2,262 20.589 46
DVA 100 21,633 20.262 438
Contracts in accumulation period:
DVA 80 209,024 20.589 4,304
DVA 100 1,404,857 20.262 28,466
DVA Series 100 36,118 19.700 712
DVA PLUS - Standard 94,213 19.886 1,873
DVA PLUS - Annual Ratchet 43,232 19.650 850
DVA PLUS - 7% Solution 341,711 19.417 6,635
______________
43,324
</TABLE>
NOTE 7 - UNIT VALUES (Continued)
<TABLE>
<CAPTION>
Total Unit
Series Units Unit Value Value
_______________________________________________________________________________
(in thousands)
<S> <C> <C> <C>
ALL-GROWTH
Currently payable annuity products:
DVA 80 6,691 $14.337 $96
DVA 100 36,473 14.110 515
Contracts in accumulation period:
DVA 80 151,395 14.337 2,170
DVA 100 4,238,780 14.110 59,809
DVA Series 100 23,840 13.718 327
DVA PLUS - Standard 129,648 13.848 1,795
DVA PLUS - Annual Ratchet 146,161 13.684 2,000
DVA PLUS - 7% Solution 752,345 13.521 10,173
______________
76,885
REAL ESTATE
Currently payable annuity products:
DVA 80 7,224 22.048 159
DVA 100 35,685 21.699 774
Contracts in accumulation period:
DVA 80 109,273 22.048 2,409
DVA 100 1,704,684 21.699 36,990
DVA Series 100 14,864 21.097 314
DVA PLUS - Standard 54,229 21.295 1,155
DVA PLUS - Annual Ratchet 42,710 21.043 899
DVA PLUS - 7% Solution 384,928 20.794 8,004
______________
50,704
FULLY MANAGED
Currently payable annuity products:
DVA 80 9,341 18.115 169
DVA 100 90,888 17.828 1,620
Contracts in accumulation period:
DVA 80 159,907 18.115 2,897
DVA 100 5,978,934 17.828 106,595
DVA Series 100 21,625 17.334 375
DVA PLUS - Standard 203,891 17.497 3,568
DVA PLUS - Annual Ratchet 173,475 17.290 2,999
DVA PLUS - 7% Solution 952,517 17.085 16,273
______________
134,496
</TABLE>
NOTE 7 - UNIT VALUES (Continued)
<TABLE>
<CAPTION>
Total Unit
Series Units Unit Value Value
_______________________________________________________________________________
(in thousands)
<S> <C> <C> <C>
MULTIPLE ALLOCATION
Currently payable annuity products:
DVA 80 35,810 $18.595 $666
DVA 100 131,617 18.300 2,409
Contracts in accumulation period:
DVA 80 739,049 18.595 13,742
DVA 100 12,268,326 18.300 224,510
DVA Series 100 99,857 17.792 1,777
DVA PLUS - Standard 289,954 17.960 5,207
DVA PLUS - Annual Ratchet 150,732 17.747 2,675
DVA PLUS - 7% Solution 1,117,238 17.537 19,593
______________
270,579
CAPITAL APPRECIATION
Currently payable annuity products:
DVA 80 14,341 17.816 255
DVA 100 72,413 17.649 1,278
Contracts in accumulation period:
DVA 80 108,583 17.816 1,934
DVA 100 6,632,504 17.649 117,056
DVA Series 100 35,436 17.359 615
DVA PLUS - Standard 162,558 17.463 2,839
DVA PLUS - Annual Ratchet 174,592 17.343 3,028
DVA PLUS - 7% Solution 1,106,359 17.222 19,054
______________
146,059
RISING DIVIDENDS
Currently payable annuity products:
DVA 80 6,467 15.984 103
DVA 100 27,116 15.880 431
Contracts in accumulation period:
DVA 80 122,375 15.984 1,956
DVA 100 5,269,251 15.880 83,674
DVA Series 100 77,854 15.698 1,222
DVA PLUS - Standard 297,973 15.769 4,699
DVA PLUS - Annual Ratchet 355,191 15.694 5,575
DVA PLUS - 7% Solution 1,663,079 15.619 25,976
______________
123,636
</TABLE>
NOTE 7 - UNIT VALUES (Continued)
<TABLE>
<CAPTION>
Total Unit
Series Units Unit Value Value
_______________________________________________________________________________
(in thousands)
<S> <C> <C> <C>
EMERGING MARKETS
Currently payable annuity products:
DVA 80 1,604 $9.915 $16
DVA 100 23,151 9.850 228
Contracts in accumulation period:
DVA 80 125,073 9.915 1,240
DVA 100 2,729,245 9.850 26,884
DVA Series 100 28,101 9.738 274
DVA PLUS - Standard 97,857 9.782 957
DVA PLUS - Annual Ratchet 102,267 9.735 995
DVA PLUS - 7% Solution 679,247 9.688 6,581
______________
37,175
MARKET MANAGER
Contracts in accumulation period:
DVA 100 373,579 14.641 5,469
DVA PLUS - 7% Solution 7,958 14.451 115
______________
5,584
VALUE EQUITY
Currently payable annuity products:
DVA 80 534 14.722 8
DVA 100 8,244 14.664 121
Contracts in accumulation period:
DVA 80 37,810 14.722 557
DVA 100 1,379,397 14.664 20,227
DVA Series 100 27,355 14.562 398
DVA PLUS - Standard 181,354 14.609 2,649
DVA PLUS - Annual Ratchet 249,994 14.567 3,642
DVA PLUS - 7% Solution 1,052,064 14.525 15,282
______________
42,884
STRATEGIC EQUITY
Currently payable annuity products:
DVA 100 37,512 11.830 444
Contracts in accumulation period:
DVA 80 95,398 11.860 1,131
DVA 100 793,292 11.830 9,384
DVA Series 100 35,219 11.778 415
DVA PLUS - Standard 370,536 11.805 4,374
DVA PLUS - Annual Ratchet 231,567 11.785 2,729
DVA PLUS - 7% Solution 968,694 11.764 11,396
______________
29,873
</TABLE>
NOTE 7 - UNIT VALUES (Continued)
<TABLE>
<CAPTION>
Total Unit
Series Units Unit Value Value
_______________________________________________________________________________
(in thousands)
<S> <C> <C> <C>
SMALL CAP
Currently payable annuity products:
DVA 100 13,782 $11.890 $164
Contracts in accumulation period:
DVA 80 85,117 11.914 1,014
DVA 100 908,778 11.890 10,806
DVA Series 100 40,332 11.848 478
DVA PLUS - Standard 198,338 11.860 2,352
DVA PLUS - Annual Ratchet 227,347 11.843 2,692
DVA PLUS - 7% Solution 1,316,663 11.825 15,569
______________
33,075
MANAGED GLOBAL
Currently payable annuity products:
DVA 80 5,665 10.829 61
DVA 100 32,523 10.740 349
Contracts in accumulation period:
DVA 80 89,636 10.829 971
DVA 100 6,049,685 10.740 64,973
DVA Series 100 64,797 10.589 686
DVA PLUS - Standard 226,224 10.620 2,402
DVA PLUS - Annual Ratchet 231,774 10.554 2,446
DVA PLUS - 7% Solution 1,375,023 10.488 14,422
______________
86,310
OTC
Contracts in accumulation period:
DVA 80 2,623 15.932 42
DVA 100 167,020 15.860 2,649
DVA Series 100 5,670 15.735 89
DVA PLUS - Standard 29,878 15.772 471
DVA PLUS - Annual Ratchet 28,223 15.696 443
DVA PLUS - 7% Solution 56,163 15.665 880
______________
4,574
GROWTH & INCOME
Contracts in accumulation period:
DVA 80 8,340 12.542 104
DVA 100 389,432 12.523 4,877
DVA Series 100 2,225 12.489 28
DVA PLUS - Standard 50,199 12.499 627
DVA PLUS - Annual Ratchet 38,037 12.486 475
DVA PLUS - 7% Solution 173,758 12.471 2,167
______________
8,278
</TABLE>
<PAGE>
[GOLDEN AMERICAN LIFE INSURANCE LOGO ]
ANNUAL REPORT
------------------
THE MANAGED GLOBAL ACCOUNT
OF
SEPARATE ACCOUNT D
OF
GOLDEN AMERICAN LIFE INSURANCE COMPANY
------------------
DECEMBER 31, 1995
GoldenSelect products are issued by Golden American Life Insurance Company and
distributed by
Directed Services, Inc., both subsidiaries of Bankers Trust Company
<PAGE>
Golden American Life Insurance Company
A SUBSIDIARY OF BANKERS TRUST COMPANY
1001 JEFFERSON STREET, SUITE 400, WILMINGTON, DE 19801 TEL: 302-576-3400
FAX: 302-576-3450
February 21, 1996
Dear Contractholder:
I am pleased to provide you with the 1995 Annual Report for The Managed Global
Account of Separate Account D. This portfolio invests in a wide range of equity,
debt securities and money market instruments worldwide. It has been managed by
Warburg, Pincus Counsellors, Inc. since July, 1994 and seeks high total
investment returns consistent with prudent regard for capital preservation.
Included in the Annual Report is a report of Warburg, Pincus Counsellors, Inc.
Warburg, Pincus' comments reflect their views as of the date written, and are
subject to change at any time.
If you have any questions or would like additional information, please call
Golden American customer service: 1-800-366-0066. We would be pleased to assist
you.
Thank you for your continued support of GoldenSelect products. We look forward
to serving you in 1996 and beyond.
Sincerely.
/s/ Terry L. Kendall
Terry L. Kendall
President
D-1
<PAGE>
MANAGED GLOBAL ACCOUNT
The objective of the GoldenSelect Managed Global Account of Separate Account D
is long-term capital appreciation and international diversification.
The year saw fairly wide divergences in performance among foreign markets. Most
European exchanges recorded solid gains, while many of the emerging markets,
particularly in Asia, suffered losses. Japan, after falling sharply in the
year's first six months, staged a powerful recovery at midyear and finished the
year even.
Japan remains the Account's largest commitment to a single country, at 32% of
the portfolio. The Portfolio Manager is encouraged by developments in the
Japanese economy, and is equally optimistic about the stock market's prospects
in 1996.
Emerging markets, collectively, suffered in 1995, and as a result valuations are
now lower than they have been in several years. The Portfolio Manager sees many
attractive opportunities in emerging markets as 1996 begins, particularly in
Asia, which represents the major focus of the Account's emerging-market
exposure.
As 1996 begins, the Portfolio Manager's outlook on international equity markets
is, in general, positive, and believes that the Account is well-positioned with
regard to its regional and country allocations and its specific holdings.
WARBURG, PINCUS COUNSELLORS, INC.
TOP FIVE HOLDINGS AS OF DECEMBER 31, 1995:
<TABLE>
<S> <C>
1. Banco De Santander S.A., ADR................................................... 4.0%
2. Canon Inc...................................................................... 3.7%
3. East Japan Railway Company..................................................... 3.1%
4. Nippon Telegraph & Telephone Corporation....................................... 3.0%
5. VA Technologie AG.............................................................. 3.0%
</TABLE>
ASSET DISTRIBUTION BY COUNTRY
The following table replaces a pie chart showing asset distribution by country
as a precentage of total investments.
Other............................... 36.4%
Argentina........................... 4.0%
Spain............................... 4.0%
Hong Kong........................... 4.1%
New Zealand......................... 6.0%
France.............................. 6.1%
Great Britain....................... 7.4%
Japan............................... 32.0%
D-2
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
THE MANAGED GLOBAL ACCOUNT
OF
SEPARATE ACCOUNT D
DECEMBER 31, 1995
<TABLE>
<S> <C>
ASSETS
Investments, at value (Cost $67,478,262) (Notes 1 and 3)........................................................... $ 70,981,052
Cash............................................................................................................... 78,896
Receivables:
Investment securities sold...................................................................................... 1,336,669
Dividends and interest.......................................................................................... 99,399
Premium payments and reallocations.............................................................................. 20,839
Net unrealized appreciation of forward foreign currency exchange contracts......................................... 351,688
Prepaid expenses and other assets.................................................................................. 9,271
-------------
Total Assets.................................................................................................... 72,877,814
LIABILITIES
Payables:
Investment securities purchased................................................................................. 334,419
Surrenders, withdrawals and reallocations....................................................................... 58,577
Golden American for contract related expenses (Note 2).......................................................... 43,558
Accrued management and organization fees (Note 2).................................................................. 1,684
Accrued expenses................................................................................................... 64,469
-------------
Total Liabilities............................................................................................... 502,707
-------------
Total Net Assets................................................................................................ $ 72,375,107
-------------
-------------
NET ASSETS
For variable annuity contracts..................................................................................... $ 69,499,713
Retained in The Managed Global Account of Separate Account D by Golden American (Note 2)........................... 2,875,394
-------------
Total Net Assets................................................................................................ $ 72,375,107
-------------
-------------
</TABLE>
See Notes to Financial Statements.
D-3
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
THE MANAGED GLOBAL ACCOUNT
OF
SEPARATE ACCOUNT D
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest (net of foreign withholding taxes of $3,203).............................................................. $ 92,139
Dividends (net of foreign withholding taxes of $149,639)........................................................... 1,207,385
------------
Total Investment Income......................................................................................... 1,299,524
------------
EXPENSES:
Mortality and expense risk and asset based administrative charges (Note 2)......................................... 739,881
Management and advisory fees (Note 2).............................................................................. 734,700
Custodian fees (Note 2)............................................................................................ 111,693
Accounting fees.................................................................................................... 51,766
Auditing fees...................................................................................................... 23,639
Printing and mailing............................................................................................... 14,268
Board of governors' fees and expenses (Note 2)..................................................................... 5,987
Legal fees......................................................................................................... 3,818
Other.............................................................................................................. 40,556
------------
Total Expenses.................................................................................................. 1,726,308
Less amounts paid by the investment manager pursuant to expense limitation agreement (Note 2)...................... (63,386)
------------
Net Expenses.................................................................................................... 1,662,922
------------
NET INVESTMENT LOSS.................................................................................................. (363,398)
------------
REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS:
Net realized gain/(loss) from:
Security transactions........................................................................................... (6,119,111)
Forward foreign currency exchange contracts..................................................................... 1,952,175
Foreign currency transactions................................................................................... (4,990)
Net change in unrealized appreciation of:
Securities...................................................................................................... 7,765,310
Forward foreign currency exchange contracts..................................................................... 351,688
Other assets and liabilities denominated in foreign currencies.................................................. 3,323
------------
Net realized and unrealized gain on investments.................................................................... 3,948,395
------------
Net increase in net assets resulting from operations............................................................ $ 3,584,997
------------
------------
</TABLE>
See Notes to Financial Statements.
D-4
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
THE MANAGED GLOBAL ACCOUNT
OF
SEPARATE ACCOUNT D
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1995 1994
------------- -------------
INCREASE/(DECREASE) IN NET ASSETS
<S> <C> <C>
OPERATIONS:
Net investment loss................................................................................ $ (363,398) $ (259,767)
Net realized loss on securities, forward foreign currency exchange contracts and foreign currency
transactions.................................................................................... (4,171,926) (1,363,558)
Net unrealized appreciation/(depreciation) of securities, forward foreign currency exchange
contracts and other assets and liabilities denominated in foreign currencies.................... 8,120,321 (11,511,952)
------------- -------------
Net increase/(decrease) in net assets resulting from operations.................................... 3,584,997 (13,135,277)
------------- -------------
CONTRACT RELATED TRANSACTIONS:
Premiums........................................................................................... 6,235,725 22,680,207
Benefits, surrenders and other withdrawals......................................................... (9,881,861) (8,496,158)
Net transfers (to) from Separate Account B, Fixed Account and Golden American...................... (12,563,025) (2,244,552)
Contract related charges and fees (Note 2)......................................................... (1,209,284) (1,073,158)
------------- -------------
Net increase/(decrease) in net assets resulting from contract related transactions................. (17,418,445) 10,866,339
------------- -------------
Net decrease in net assets......................................................................... (13,833,448) (2,268,938)
NET ASSETS:
Beginning of year.................................................................................. 86,208,555 88,477,493
------------- -------------
End of year........................................................................................ $ 72,375,107 $ 86,208,555
------------- -------------
------------- -------------
</TABLE>
See Notes to Financial Statements.
D-5
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
THE MANAGED GLOBAL ACCOUNT
OF
SEPARATE ACCOUNT D
FOR AN ACCUMULATION UNIT OUTSTANDING THROUGHOUT EACH YEAR FOR THE DVA 100.
<TABLE>
<CAPTION>
YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED
12/31/95 12/31/94** 12/31/93 12/31/92*
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Accumulation unit value, beginning of year................................. $ 9.091 $ 10.518 $ 10.008 $ 10.000
--------- ----------- --------- -----------
INCOME/(LOSS) FROM INVESTMENT OPERATIONS:
Net investment income/(loss) #............................................. (0.044) (0.030) (0.046) 0.022
Net realized and unrealized gain/(loss) on investments..................... 0.612 (1.397) 0.556 (0.014)
--------- ----------- --------- -----------
Total from investment operations........................................... 0.568 (1.427) 0.510 0.008
--------- ----------- --------- -----------
Accumulation unit value, end of year....................................... $ 9.659 $ 9.091 $ 10.518 $ 10.008
--------- ----------- --------- -----------
--------- ----------- --------- -----------
Total return............................................................... 6.25% (13.57)% 5.10% 0.08%++
--------- ----------- --------- -----------
--------- ----------- --------- -----------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of year (in 000's)......................................... $ 68,283 $ 83,702 $ 85,702 $ 38,699
Ratio of operating expenses to average net assets.......................... 2.27% 2.31% 2.68% 2.46%+
Decrease reflected in above expense ratio due to expense limitations....... 0.08% 0.09% 0.03% --
Ratio of net investment income/(loss) to average net assets................ (0.50)% (0.31)% (0.44)% 1.78%+
</TABLE>
- ------------------
* These units were available for sale on October 21, 1992.
** On July 1, 1994 Warburg, Pincus Counsellors, Inc. became Portfolio Manager of
the Account. Prior to that date the Account had been advised by another
Portfolio Manager.
+ Annualized
++ Non-annualized
# Per unit numbers have been calculated using the average unit method, which
more appropriately presents the per unit data for the period.
See Notes to Financial Statements.
D-6
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
THE MANAGED GLOBAL ACCOUNT
OF
SEPARATE ACCOUNT D
FOR AN ACCUMULATION UNIT OUTSTANDING THROUGHOUT EACH YEAR FOR THE DVA 80.
<TABLE>
<CAPTION>
YEAR YEAR PERIOD
ENDED ENDED ENDED
12/31/95 12/31/94** 12/31/93*
----------- ----------- ---------
<S> <C> <C> <C>
Accumulation unit value, beginning of year................................................. $ 9.130 $ 10.541 $ 10.420
----------- ----------- ---------
INCOME/(LOSS) FROM INVESTMENT OPERATIONS:
Net investment loss #...................................................................... (0.027) (0.011) (0.005)
Net realized and unrealized gain/(loss) on investments..................................... 0.617 (1.400) 0.126
----------- ----------- ---------
Total from investment operations........................................................... 0.590 (1.411) 0.121
----------- ----------- ---------
Accumulation unit value, end of year....................................................... $ 9.720 $ 9.130 $ 10.541
----------- ----------- ---------
----------- ----------- ---------
Total return............................................................................... 6.46% (13.39)% 1.16%++
----------- ----------- ---------
----------- ----------- ---------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of year (in 000's)......................................................... $ 1,047 $ 1,877 $ 2,087
Ratio of operating expenses to average net assets.......................................... 2.07% 2.11% 2.48%+
Decrease reflected in above expense ratio due to expense limitations....................... 0.08% 0.09% 0.03%+
Ratio of net investment loss to average net assets......................................... (0.30)% (0.11)% (0.24)%+
</TABLE>
- ------------------
* These units were available for sale on October 14, 1993.
** On July 1, 1994 Warburg, Pincus Counsellors, Inc. became Portfolio Manager of
the Account. Prior to that date the Account had been advised by another
Portfolio Manager.
+ Annualized
++ Non-annualized
# Per unit numbers have been calculated using the average unit method, which
more appropriately presents the per unit data for the period.
See Notes to Financial Statements.
D-7
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
THE MANAGED GLOBAL ACCOUNT
OF
SEPARATE ACCOUNT D
<TABLE>
<CAPTION>
FOR AN ACCUMULATION UNIT OUTSTANDING THROUGHOUT EACH YEAR FOR THE DVA SERIES 100.
YEAR YEAR PERIOD
ENDED ENDED ENDED
12/31/95 12/31/94** 12/31/93*
----------- ----------- ---------
<S> <C> <C> <C>
Accumulation unit value, beginning of year................................................. $ 9.027 $ 10.481 $ 10.536
----------- ----------- ---------
INCOME/(LOSS) FROM INVESTMENT OPERATIONS:
Net investment loss #...................................................................... (0.076) (0.066) (0.036)
Net realized and unrealized gain/(loss) on investments..................................... 0.607 (1.388) (0.019)
----------- ----------- ---------
Total from investment operations........................................................... 0.531 (1.454) (0.055)
----------- ----------- ---------
Accumulation unit value, end of year....................................................... $ 9.558 $ 9.027 $ 10.481
----------- ----------- ---------
----------- ----------- ---------
Total return............................................................................... 5.87% (13.87)% (0.52)%++
----------- ----------- ---------
----------- ----------- ---------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of year (in 000's)......................................................... $ 545 $ 630 $ 688
Ratio of operating expenses to average net assets.......................................... 2.62% 2.66% 3.02%+
Decrease reflected in above expense ratio due to expense limitations....................... 0.08% 0.09% 0.03%+
Ratio of net investment loss to average net assets......................................... (0.85)% (0.66)% (0.79)%+
</TABLE>
- ------------------
* These units were available for sale on April 27, 1993.
** On July 1, 1994 Warburg, Pincus Counsellors, Inc. became Portfolio Manager of
the Account. Prior to that date the Account had been advised by another
Portfolio Manager.
+ Annualized
++ Non-annualized
# Per unit numbers have been calculated using the average unit method, which
more appropriately presents the per unit data for the period.
See Notes to Financial Statements.
D-8
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
THE MANAGED GLOBAL ACCOUNT
OF
SEPARATE ACCOUNT D
FOR AN ACCUMULATION UNIT OUTSTANDING THROUGHOUT THE PERIOD.
<TABLE>
<CAPTION>
DVA PLUS- DVA PLUS- DVA PLUS-
STANDARD ANNUAL RATCHET 7% SOLUTION
----------- --------------- -------------
PERIOD PERIOD PERIOD
ENDED ENDED ENDED
12/31/95* 12/31/95* 12/31/95*
----------- --------------- -------------
<S> <C> <C> <C>
Accumulation unit value, beginning of period................................... $ 9.323 $ 9.282 $ 9.240
----------- --------------- -------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss #.......................................................... (0.013) (0.013) (0.013)
Net realized and unrealized gain on investments................................ 0.266 0.262 0.259
----------- --------------- -------------
Total from investment operations............................................... 0.253 0.249 0.246
----------- --------------- -------------
Accumulation unit value, end of period......................................... $ 9.576 $ 9.531 $ 9.486
----------- --------------- -------------
----------- --------------- -------------
Total return................................................................... 2.71%++ 2.69%++ 2.66%++
----------- --------------- -------------
----------- --------------- -------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)........................................... $ 256 $ 262 $ 1,982
Ratio of operating expenses to average net assets.............................. 2.40%+ 2.55%+ 2.60%+
Decrease reflected in above expense ratio due to expense limitations........... 0.08%+ 0.08%+ 0.08%+
Ratio of net investment loss to average net assets............................. (0.63)%+ (0.78)%+ (0.83)%+
</TABLE>
- ------------------
* These units were available for sale on October 2, 1995.
+ Annualized
++ Non-annualized
# Per unit numbers have been calculated using the average unit method, which
more appropriately presents the per unit data for the period.
See Notes to Financial Statements.
D-9
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
THE MANAGED GLOBAL ACCOUNT
OF
SEPARATE ACCOUNT D
DECEMBER 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
- -------------- -----------
COMMON STOCKS -- 93.7%
ARGENTINA -- 3.9%
<S> <C> <C>
2,318 Banco de Galicia Y Buenos Aires
S.A............................. $ 47,809
21,045 Banco Frances del Rio de la Plata
S.A............................. 186,220
19,320 Banco Frances del Rio de la Plata
S.A., ADR....................... 519,225
61,900 Capex S.A., Class A, GDR**........ 897,550
25,600 Telefonica de Argentina S.A.,
ADR............................. 697,600
21,800 Y.P.F. S.A........................ 471,425
-----------
2,819,829
-----------
AUSTRALIA -- 2.6%
71,312 BTR Ltd. Class A.................. 348,227
51,375 Niugini Mining Ltd.+.............. 98,898
274,500 Pasminco Ltd.+.................... 336,637
212,900 Woodside Petroleum Ltd............ 1,088,677
-----------
1,872,439
-----------
AUSTRIA -- 3.0%
17,000 VA Technologie AG+................ 2,159,051
-----------
BRAZIL -- 0.4%
9,000 Panamerican Beverages Inc., Class
A............................... 288,000
-----------
CHINA -- 0.4%
15,000 Jilan Chemical, ADR............... 322,500
-----------
DENMARK -- 0.3%
11,100 International Service Systems AS,
Class B......................... 249,865
-----------
FINLAND -- 1.1%
15,650 Metsa-Serla, Class B.............. 482,070
500 Metra AB, Class B................. 20,688
11,600 Valmet, Class A................... 287,987
-----------
790,745
-----------
FRANCE -- 6.0%
9,507 Bouygues.......................... 956,907
4,000 Cetelem........................... 750,145
47,300 Largardere Groupe................. 868,598
8,351 Scor S.A.......................... 260,703
19,671 Total S.A., Class B............... 1,326,518
4,597 Total S.A., ADS................... 156,298
-----------
4,319,169
-----------
GERMANY -- 2.9%
12,400 Adidas AG......................... 656,318
11,500 Adidas AG, ADR**.................. 302,158
3,400 Deutsche Bank AG.................. 161,156
13,000 SGL Carbon AG..................... 1,006,276
-----------
2,125,908
-----------
GREAT BRITAIN -- 7.2%
173,956 British Airport Authority Ord..... 1,310,242
11,600 Cookson Group PLC................. 55,125
50,000 Govett & Company Ltd., Ord. PLC... 180,148
64,000 Grand Metropolitan PLC Ord........ 460,682
156,223 Prudential Corporation PLC........ 1,005,637
31,232 Reckitt & Colman PLC Ord.......... 345,589
630,000 Singer & Friedlander Group PLC.... 1,061,553
295,400 Takare PLC........................ 825,761
-----------
5,244,737
-----------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
- -------------- -----------
<S> <C> <C>
HONG KONG -- 4.1%
359,000 Citic Pacific Ltd................. $ 1,228,005
48,737 HSBC Holdings Ltd................. 737,437
141,201 Jardine Matheson Holdings Ltd..... 967,227
-----------
2,932,669
-----------
INDIA -- 3.1%
33,000 Hindalco Industries Ltd., GDR**... 1,126,290
41,400 India Fund (The) Inc.............. 367,425
51,200 Reliance Industries Ltd., GDS..... 716,800
-----------
2,210,515
-----------
INDONESIA -- 2.3%
34,500 Bank International Indonesia
(Foreign)....................... 114,296
99,000 PT Mulia Industrindo Ord.
(Foreign)....................... 279,270
79,500 PT Semen Gresik (Foreign)......... 222,523
10,500 PT Telekomunikas, ADR............. 265,125
410,000 PT Telekomunikas (Foreign)........ 537,940
19,800 PT Tri Polyta Indonesia, ADR...... 272,250
-----------
1,691,404
-----------
ISRAEL -- 1.8%
75,000 Ampal American Israel Corporation,
Class A......................... 393,750
38,500 ECI Telecom, Ltd.................. 878,281
-----------
1,272,031
-----------
JAPAN -- 29.5%
149,000 Canon Inc......................... 2,698,596
22,000 Circle K Japan Company Ltd........ 969,491
170 DDI Corporation................... 1,317,191
458 East Japan Railway Company........ 2,226,789
89,000 Hitachi Ltd....................... 896,465
2,500 Keyence Corporation............... 288,136
75,000 Kirin Beverage Corporation........ 1,009,685
5,000 Kyocera Corporation............... 371,429
11,000 Murata Manufacturing Company
Ltd............................. 404,843
94,000 NEC Corporation................... 1,147,119
27,000 Nippon Communication Systems
Corporation..................... 285,036
267 Nippon Telegraph & Telephone
Corporation..................... 2,161,215
54 NTT Data Communication Systems
Corporation..................... 1,814,818
40,800 Orix Corporation.................. 1,679,419
6,000 Rohm Company...................... 338,789
20,000 Sony Corporation.................. 1,199,031
33,000 TDK Corporation................... 1,684,358
3,000 UNY Company....................... 56,368
21,600 York-Benimaru Company Ltd......... 826,344
-----------
21,375,122
-----------
KOREA -- 2.5%
6,600 Mando Machinery Corporation,
GDR............................. 173,250
40,300 Mando Machinery Corporation,
GDR**........................... 1,057,875
5,800 Samsung Electric, GDR............. 559,700
-----------
1,790,825
-----------
MALAYSIA -- 0.4%
75,000 Westmont BHD...................... 259,873
-----------
MEXICO -- 0.4%
93,000 Gruma S.A., Series B.............. 261,581
-----------
</TABLE>
See Notes to Financial Statements.
D-10
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS --(CONTINUED)
THE MANAGED GLOBAL ACCOUNT
OF
SEPARATE ACCOUNT D
DECEMBER 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
- -------------- -----------
COMMON STOCKS -- (CONTINUED)
<S> <C> <C>
NEW ZEALAND -- 5.9%
1,313,354 Brierley Investments Ltd.......... $ 1,038,912
266,300 Fletcher Challenge Ltd............ 614,550
502,522 Fletcher Challenge (Forest
Division) Ltd................... 716,182
538,800 Lion Nathan Ltd................... 1,285,678
30,000 Sky City Ltd...................... 622,697
-----------
4,278,019
-----------
NORWAY -- 1.0%
17,100 Norsk Hydro, ADR.................. 716,063
-----------
PAKISTAN -- 0.3%
241,000 Pakistan Telecommunications
Corporation..................... 216,589
-----------
SINGAPORE -- 2.5%
9,000 D.B.S. Land Ltd................... 30,414
119,000 Development Bank of Singapore
Ltd............................. 1,480,665
464,000 I.P.C. Corporation................ 308,349
-----------
1,819,428
-----------
SPAIN -- 4.0%
58,100 Banco de Santander S.A., ADR...... 2,861,425
-----------
SWEDEN -- 3.0%
8,100 Asea AB, Class B.................. 787,983
35,200 Astra AB, Class B................. 1,394,112
-----------
2,182,095
-----------
SWITZERLAND -- 1.5%
615 Brown Boveri & Cie AG, Class A.... 714,744
200 Ciba-Geigy AG..................... 175,195
150 Danza Holding AG.................. 163,920
-----------
1,053,859
-----------
TAIWAN -- 2.5%
1,680,000 GP Taiwan Index Fund.............. 1,325,268
75,511 Tuntex Distinct Corporation,
GDS **.......................... 509,701
-----------
1,834,969
-----------
THAILAND -- 1.1%
146,800 Industrial Finance Corporation of
Thailand (Foreign).............. 498,269
81,400 Thai Military Bank Public Company
Ltd. (Foreign).................. 329,607
-----------
827,876
-----------
Total Common Stocks
(Cost $64,252,583).............. 67,776,586
-----------
WARRANTS -- 0.0%# COST ($20,647)
SWITZERLAND -- 0.0%#
600 Danza Holding AG, Expires
08/02/1996...................... 2,667
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
- -------------- -----------
<S> <C> <C>
CONVERTIBLE CORPORATE BONDS -- 3.8%
JAPAN -- 1.8%
JPY Matasushita Electric Works Ltd.,
111,000,000 2.700% due 05/31/2002........... $ 1,313,724
-----------
TAIWAN -- 2.0%
$1,070,000 President Enterprises Corporation,
Zero coupon due 07/22/2001...... 1,358,900
70,000 Yang Ming Marine Transport
Corporation,
2.000% due 10/06/2001........... 77,175
-----------
1,436,075
-----------
Total Convertible Corporate Bonds
(Cost $2,753,032)............... 2,749,799
-----------
REPURCHASE AGREEMENT -- 0.6% Cost ($452,000)
452,000 Agreement with PNC Securities
Corporation, 5.600% dated
12/29/1995 to be repurchased at
$452,281 on 01/02/1996,
collateralized by $445,000 U.S.
Treasury Notes, 5.750% due
09/30/1997 (value $455,324)..... 452,000
-----------
</TABLE>
<TABLE>
<CAPTION>
VALUE
PRINCIPAL AMOUNT (NOTE 1)
- ------------------------------------------ -----------
<S> <C> <C>
TOTAL INVESTMENTS (COST $67,478,262)
(NOTES 1 AND 3).......... 98.1% 70,981,052
OTHER ASSETS AND LIABILITIES (NET)........ 1.9 1,394,055
--------- -----------
NET ASSETS................................ 100.0% $72,375,107
--------- -----------
--------- -----------
</TABLE>
- ----------------------
** Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from registration
to qualified institutional buyers.
+ Non-income producing security.
# Amount is less than 0.1%.
<TABLE>
<S> <C> <C>
GLOSSARY OF TERMS
American Depositary
ADR -- Receipt.
American Depositary
ADS -- Share.
Global Depositary
GDR -- Receipt.
GDS -- Global Depositary Share.
JPY -- Japanese Yen.
</TABLE>
See Notes to Financial Statements.
D-11
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS --(CONTINUED)
THE MANAGED GLOBAL ACCOUNT
OF
SEPARATE ACCOUNT D
DECEMBER 31, 1995
DECEMBER 31, 1995, INDUSTRY CLASSIFICATION OF THE FUND WAS AS FOLLOWS
(UNAUDITED):
<TABLE>
<CAPTION>
% OF NET VALUE
INDUSTRY CLASSIFICATION ASSETS (NOTE 1)
- ------------------------------------- ------------- ------------
<S> <C> <C>
LONG TERM INVESTMENTS:
Electric Machinery
Equipment/Electronics.............. 9.6% $6,970,456
Telecommunications................... 8.4 6,073,941
Investment Companies................. 8.0 5,795,435
Banking/Financials................... 7.7 5,539,247
Financial Services................... 7.5 5,461,877
Durable Goods -- Consumer............ 5.5 3,999,903
Transportation....................... 5.2 3,778,127
Oil/Gas Extraction................... 5.2 3,758,981
Computer Software.................... 2.5 1,814,818
Forest Products/Paper................ 2.5 1,812,802
Industrial........................... 2.4 1,707,127
Technology........................... 2.3 1,684,358
Pharmaceuticals...................... 2.2 1,569,307
Metal/Metal Products................. 2.2 1,561,824
Chemicals/Allied Products............ 1.8 1,311,550
Beverages............................ 1.8 1,297,685
Brewery.............................. 1.8 1,285,678
Insurance............................ 1.8 1,266,339
Automobile Parts..................... 1.7 1,231,125
Industrial/Commercial Machinery...... 1.7 1,199,031
Engineering/Construction............. 1.6 1,179,431
Metals -- Diversified................ 1.4 1,006,276
Convenience Stores................... 1.3 969,492
Shoes/Leather........................ 1.3 958,476
Energy............................... 1.2 897,550
Retail -- Grocery.................... 1.2 882,712
Health Care Services................. 1.1 825,761
Food/Kindred Products................ 1.0 722,263
Electronics -- Semiconductor......... 1.0 710,218
Entertainment........................ 0.9 622,697
Textiles............................. 0.7 509,701
Nondurable Goods -- Consumer......... 0.5 345,589
Computer Industry.................... 0.4 308,349
Communication........................ 0.4 285,036
</TABLE>
<TABLE>
<CAPTION>
% OF NET VALUE
INDUSTRY CLASSIFICATION (CONTINUED) ASSETS (NOTE 1)
- ------------------------------------- ------------- ------------
<S> <C> <C>
Capital Goods........................ 0.4% $279,270
Business Services.................... 0.4 249,865
Other................................ 0.9 656,755
----- ------------
TOTAL LONG TERM INVESTMENTS.......... 97.5 70,529,052
REPURCHASE AGREEMENT................. 0.6 452,000
----- ------------
TOTAL INVESTMENTS.................... 98.1 70,981,052
OTHER ASSETS AND LIABILITIES (NET)... 1.9 1,394,055
----- ------------
NET ASSETS........................... 100.0% $72,375,107
-----
----- ------------
------------
</TABLE>
SCHEDULE OF
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
<TABLE>
<CAPTION>
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS TO SELL
<S> <C> <C> <C> <C> <C>
CONTRACTS TO DELIVER
- ---------------------------------- IN
EXCHANGE UNREALIZED
EXPIRATION LOCAL FOR U.S. VALUE IN APPRECIATION/
DATE CURRENCY $ U.S. $ (DEPRECIATION)
- ---------- ---------------------- --------- ----------- -------------
03/21/1996 JPY 302,112,500 2,999,915 2,961,061 $ 38,854
03/21/1996 JPY 958,387,500 9,514,420 9,393,333 121,087
03/21/1996 FRF 19,600,000 4,000,000 4,004,659 (4,659)
06/17/1996 JPY 282,690,000 3,000,000 2,803,594 196,406
-------------
Net Unrealized Appreciation of Forward Foreign Currency
Exchange Contracts...................................... $ 351,688
-------------
-------------
</TABLE>
<TABLE>
<S> <C> <C>
GLOSSARY OF TERMS
FRF -- French Franc
JPY -- Japanese Yen
</TABLE>
See Notes to Financial Statements.
D-12
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
THE MANAGED GLOBAL ACCOUNT
OF
SEPARATE ACCOUNT D
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Managed Global Account of Separate Account D (the 'Account') is registered
with the Securities and Exchange Commission under the Investment Company Act of
1940, as amended, as a non-diversified open-end investment company and meets the
definition of a separate account under federal securities laws. The Account was
established on April 18, 1990, by Golden American Life Insurance Company
('Golden American'), to support the operations of variable annuity contracts
('Contracts'). Golden American, a wholly-owned subsidiary of BT Variable, Inc.
('BTV'), an indirect subsidiary of Bankers Trust Company ('Bankers Trust'), is a
stock life insurance company organized under the laws of the state of Delaware.
Golden American is primarily engaged in the issuance of variable insurance
products and is authorized to do business in the District of Columbia and in all
states except New York.
Operations on the Account commenced on October 21, 1992. Golden American
provides for variable accumulation and benefits under the Contracts by crediting
annuity considerations to the Account at the direction of contractholders. The
assets of the Account are owned by Golden American. The portion of the Account's
assets applicable to Contracts will not be chargeable with liabilities arising
out of any other business Golden American may conduct, but obligations of the
Account, including the promise to make benefit payments, are obligations of
Golden American.
The net assets maintained in the Account provide the basis for the periodic
determination of the amount of benefits under the Contracts. The net assets may
not be less than the reserves and other contract liabilities with respect to the
Account. Golden American has entered into a reinsurance agreement with an
affiliated reinsurer to cover insurance risks under the Contracts. Golden
American remains liable to the extent that the reinsurer does not meet its
obligations under the reinsurance agreement.
The preparation of financial statements in accordance with Generally Accepted
Accounting Principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates. The following is a summary of the
significant accounting policies consistently followed by the Account in the
preparation of its financial statements. The policies are in conformity with
generally accepted accounting principles.
(A) VALUATION: Domestic and foreign portfolio securities, except as noted below,
for which market quotations are readily available are stated at market value.
Market value is determined on the basis of the last reported sales price in the
principal market where such securities are traded or, if no sales are reported,
the mean between representative bid and asked quotations obtained from a
quotation reporting system or from established market makers.
Long-term debt securities, including those to be purchased under firm commitment
agreements, are normally valued on the basis of quotes obtained from brokers and
dealers or pricing services, which take into account appropriate factors such as
institutional-size trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading characteristics and other market
data. Under certain circumstances, long-term debt securities having a maturity
of sixty days or less may be valued at amortized cost. Short-term debt
securities are valued at their amortized cost which approximates fair value.
Amortized cost involves valuing a portfolio security instrument at its cost,
initially, and thereafter, assuming a constant amortization to maturity of any
discount or premium, regardless of the impact of fluctuating interest rates on
the market value of the instrument.
Securities for which market quotations are not readily available are valued at
fair value as determined in good faith by, or under the direction of the Board
of Governors.
(B) DERIVATIVE FINANCIAL INSTRUMENTS: The Account may engage in various
portfolio strategies, as described below, to seek to manage its exposure to
equity markets and to manage fluctuations in foreign currency rates. Forward
foreign currency exchange contracts to buy, writing puts and buying calls tend
to increase the Account's exposure to the underlying market or currency. Forward
foreign currency exchange contracts to sell, buying puts and writing calls tend
to decrease the Account's exposure to the underlying market or currency. In some
instances, investments in derivative financial instruments may involve, to
varying degrees, elements of market risk and risks in excess of the amount
recognized in the Statement of Assets and Liabilities. Losses may arise under
these contracts due to the existence of an illiquid secondary market for the
contracts, or if the counterparty does not perform under the contract. An
additional primary risk associated with the use of certain of these contracts
may be caused by an imperfect correlation between movements in the price of the
derivative financial instruments and the price of the underlying securities,
indices or currency.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS: The Account may enter into forward
foreign currency exchange contracts. The Account will enter in forward foreign
currency exchange contracts to hedge against fluctuations in currency exchange
D-13
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
THE MANAGED GLOBAL ACCOUNT
OF
SEPARATE ACCOUNT D
rates. Forward foreign currency exchange contracts are valued at the applicable
forward rate, and are marked to market daily. The change in market value is
recorded by the Account as an unrealized gain or loss. When a contract is
closed, the Account records a realized gain or loss equal to the difference
between the value of the contract at the time it was opened and the value at the
time it was closed. Although forward foreign currency exchange contracts limit
the risk of loss due to a decline in the value of the hedged currency, they also
limit any potential gain that might result should the value of the currency
increase. In addition, the Account could be exposed to risks if the
counterparties to the contracts are unable to meet the terms of their contracts.
Open contracts at December 31, 1995 and their related unrealized appreciation
(depreciation) are set forth in the Schedule of Forward Foreign Currency
Exchange Contracts which accompanies the Portfolio of Investments. Realized and
unrealized gain/(loss) arriving from forward foreign currency exchange contracts
are included in net realized and unrealized gain/(loss) on forward foreign
currency exchange contracts.
OPTIONS: The Account may engage in option transactions. When the Account writes
an option, an amount equal to the premium received by the Account is reflected
as an asset and an equivalent liability. The amount of the liability is
subsequently marked to market on a daily basis to reflect the current value of
the option written.
When a security is sold through an exercise of an option, the related premium
received (or paid) is deducted from (or added to) the basis of the security
sold. When an option expires (or the Account enters into a closing transaction),
the Account realizes a gain or loss on the option to the extent of the premiums
received or paid (or gain or loss to the premium paid or received). The Account
did not write options during the year ended December 31, 1995. Realized gains
arising from purchased options are included in the net realized gain/(loss) on
security transactions.
(C) FOREIGN CURRENCY: Assets and liabilities denominated in foreign currencies
and commitments under forward foreign currency exchange contracts are translated
into U.S. dollars at the mean of the quoted bid and asked prices of such
currencies against the U.S. dollar as of the close of business immediately
preceding the time of valuation. Purchases and sales of portfolio securities are
translated at the rates of exchange prevailing when such securities were
acquired or sold. Income and expenses are translated at rates of exchange
prevailing when accrued.
The Account does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain/(loss) from securities.
Reported net realized gains or losses on foreign currency transactions arise
from sales and maturities of short-term securities, sales of foreign currencies,
currency gains or losses realized between the trade and settlement dates on
securities transactions, and the difference between the amounts of dividends,
interest and foreign withholding taxes recorded on the Account's books, and the
U.S. dollar equivalent of the amounts actually received or paid. Net unrealized
gains and losses on other assets and liabilities denominated in foreign
currencies arise from changes in the value of assets and liabilities other than
investments in securities at the end of the reporting period, resulting from
changes in the exchange rate.
(D) REPURCHASE AGREEMENTS: The Account may enter into repurchase agreements in
accordance with guidelines approved by the Board of Governors of the Account.
The Account bears a risk of loss in the event that the other party to a
repurchase agreement defaults on its obligations and the Account is delayed or
prevented from exercising its rights to dispose of the underlying securities
received as collateral including the risk of a possible decline in the value of
the underlying securities during the period while the Account seeks to exercise
its rights. The Account takes possession of the collateral and reviews the value
of the collateral and the creditworthiness of those banks and dealers with which
the Account enters into repurchase agreements to evaluate potential risks. The
market value of the underlying securities received as collateral must be at
least equal to the total amount of the repurchase obligation. In the event of
counterparty default, the Account has the right to use the underlying securities
to offset the loss.
(E) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Investment transactions are
recorded on the trade date. Dividend income is recorded on the ex-dividend date.
Interest income (including amortization of premium and discount on securities)
and expenses are accrued daily. Realized gains and losses from investment
transactions are recorded on the identified cost basis which is the same basis
used for federal income tax purposes.
(F) FEDERAL INCOME TAXES: Operations of the Account form a part of, and are
taxed with, the total operations of Golden American, which is taxed as a life
insurance company under the Internal Revenue Code. Earnings and realized capital
gains of the Account attributable to the contractowners are excluded in the
determination of the federal income tax liability of Golden American.
D-14
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
THE MANAGED GLOBAL ACCOUNT
OF
SEPARATE ACCOUNT D
2. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
OPERATING EXPENSES: Directed Services, Inc. ('DSI'), a wholly owned subsidiary
of BTV, serves as Manager to the Account pursuant to a Management Agreement.
Under the Management Agreement, DSI has overall responsibility, subject to the
supervision of the Board of Governors, for administrating all operations of the
Account and for monitoring and evaluating the management of the assets of the
Account by the Portfolio Manager. In consideration for these services, the
Account pays DSI a management fee based upon the following annual percentage of
the Account's average daily net assets: 0.40% of the first $500 million and
0.30% of the amount over $500 million. Warburg, Pincus Counsellors, Inc.
('Warburg') serves as the Portfolio Manager of the Account and in that capacity
provides investment advisory services for the Account including asset allocation
and security selection. In consideration for these services, Warburg is paid an
advisory fee by the Account, payable monthly, based on the average daily net
assets of the Account at an annual rate of 0.60% of the first $500 million and
0.50% on the excess thereof. For the year ended December 31, 1995, the Account
incurred management and advisory fees of $293,930 and $440,770, respectively.
The Account bears the expenses of its investment management operations,
including expenses associated with custody of securities, portfolio accounting,
the Board of Governors, legal and auditing services, registration fees and other
related operating expenses. Bankers Trust is the custodian of the assets in the
Account. For the year ended December 31, 1995, the Account incurred $111,693 for
custodian fees. In addition, the Account reimburses Golden American for certain
organization expenses (See Note 4). At December 31, 1995, a total of $1,684 was
payable to DSI and Golden American for management and reimbursement of
organization expenses.
Certain officers and governors of the Account are also officers and/or directors
of the Manager, Golden American, BTV and Bankers Trust.
MORTALITY AND EXPENSE RISK CHARGES: Golden American assumes mortality and
expense risks related to the operations of the Account and, in accordance with
the terms of the Contracts, deducts a daily charge from the assets of the
Account at annual rates of 0.80%, 0.90%, 1.25%, 1.10%, 1.25% and 1.40% of the
assets attributable to DVA 80, DVA 100, DVA Series 100, DVA Plus-Standard, DVA
Plus-Annual Ratchet and DVA Plus-7% Solution, respectively, to cover these
risks. Golden American did not deduct mortality and expense risk charges and
asset based administrative charges from the DVA Plus Contract assets until
November 1995, upon which it received exemptive relief from the Securities and
Exchange Commission.
ASSET BASED ADMINISTRATIVE CHARGE: To compensate Golden American for the
administrative expenses under the Contracts, a daily charge at an annual rate of
0.10% is deducted from assets attributable to the DVA 100 and DVA Series 100
Contracts. A daily charge of 0.15% is deducted from the assets attributable to
DVA Plus Contracts.
OTHER CONTRACT CHARGES: An administrative fee of $40 per Contract year is
deducted from the accumulation value of certain DVA 80 and DVA 100 Contracts.
Under DVA Plus Contracts issued subsequent to September of 1995, an excess
allocation charge of $25 per allocation may be imposed by Golden American after
the twelfth allocation change in a contract year. Under DVA 80, DVA 100 and DVA
Series 100 Contracts ('Previous Contracts'), a partial withdrawal charge of the
lower of 2% of the withdrawal or $25 is deducted from the accumulation for each
additional partial withdrawal in a Contract year. In addition, under the
Previous Contracts, there is an excess allocation charge of $25 for each
allocation change between divisions in excess of the five free changes allowed
per contract year.
DEFERRED SALES LOAD: Under contracts offered prior to October of 1995, a sales
load of up to 6.50% was applicable to each premium payment for sales related
expenses as specified in the Contracts. For DVA Series 100 Contracts, the sales
load is deducted in equal annual installments over the period the Contract is in
force, not to exceed 10 years. For DVA 80 and DVA 100 Contracts, although the
sales load is chargeable to each premium when it is received by Golden American,
the amount of such charge is initially advanced by Golden American to
Contractowners and included in the accumulation value and then deducted in equal
installments on each Contract processing date over a period of six years. For
the year ended December 31, 1995, contract sales loads of $1,124,480 initially
advanced by Golden American to the Account were deducted from contractowners'
accumulation value. Upon surrender of the Contract, the unamortized deferred
sales load is deducted from the accumulation value by Golden American. In
addition, when partial withdrawal limits are exceeded, a portion of the
unamortized deferred sales load is deducted.
CONTINGENT DEFERRED SALES CHARGE: Under DVA Plus Contracts issued subsequent to
September of 1995, a contingent deferred sales charge ('Surrender Charges') is
imposed as a percentage of each premium payment if the Contract is surrendered
or an excess partial withdrawal is taken during the seven year period from the
date a premium payment is received. The Surrender Charges are imposed at a rate
of 7% of the premium payment during the first two complete years after purchase
declining to 6%, 5%, 4%, 3%, and 1% after the second, third, fourth, fifth and
sixth complete years, respectively. For the year ended December 31, 1995, Golden
American collected Surrender Charges in the amount of $15.
D-15
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
THE MANAGED GLOBAL ACCOUNT
OF
SEPARATE ACCOUNT D
The net assets retained in the Account by Golden American in the accompanying
financial statements represent the unamortized deferred sales load, surrender
charges and premium taxes advanced by Golden American reduced to conform with
the Commissioner's Annuity Reserve Valuation Methodology ('CARVM') noted above.
Net Assets Retained in the Account by Golden American are as follows:
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
12/31/95 12/31/94
------------ ------------
<S> <C> <C>
Balance at beginning of year........................................................... $ 4,533,964 $ 4,668,658
Sales load advanced and additions to surrender charges................................. 379,811 1,338,526
Premium tax advanced................................................................... 2,628 6,823
Net transfer (to) from Separate Account B, Fixed Account and Golden American........... (899,808) (427,829)
Amortization of deferred sales load, surrender charges and premium tax................. (1,141,201) (1,052,214)
------------ ------------
$ 2,875,394 $ 4,533,964
------------ ------------
------------ ------------
</TABLE>
PREMIUM TAXES: Premium taxes are deducted, where applicable, from the
accumulation value of each Contract. The amount and timing of the deduction
depend on the annuitant's state of residence and currently ranges up to 3.5% of
premiums. Premium taxes are generally incurred on the annuity commencement date
and a charge for such premium taxes is then deducted from the accumulation value
on such date. However, some jurisdictions impose a premium tax at the time the
initial and additional premiums are paid, regardless of the annuity commencement
date. In those states, Golden American advances the amount of the charge for
premium taxes to Contractowners and then deducts it from the accumulation value
in equal installments on each contract processing date over a six year period.
Golden American is currently waiving the deduction of the applicable
installments of the charge for premium taxes previously advanced by Golden
American to Contractowners. Golden American reserves the right to deduct the
total amount of the charge for premium taxes previously waived and unrecovered
on the annuity commencement date or upon surrender of the Contract.
EXPENSE LIMITATION: The Account and DSI entered into an agreement to limit the
ordinary operating expenses of the Account, excluding, among other things,
mortality and expense risk charges, asset based administrative charges, interest
expense, and other contractual charges, through December 31, 1995, so that such
expenses do not exceed on an annual basis 1.25% of the first $500 million of the
average daily net assets and 1.05% of the excess over $500 million. For the year
ended December 31, 1995, $63,386 was reimbursed by DSI to the Account pursuant
to this limitation. Such agreement existed under the same terms for the year
ended December 31, 1994.
DSI, a registered broker/dealer, acts as the distributor and principal
underwriter (as defined in the Securities Act of 1933 and the Investment Company
Act of 1940, as amended) of the Contracts issued through the Account. For the
years ended December 31, 1995 and December 31, 1994, fees paid by Golden
American to DSI in connection with sales of the contracts aggregated
approximately $446,000 and $1,343,000, respectively.
3. PURCHASES AND SALES OF SECURITIES
Purchases and sales of investment securities, excluding short-term securities,
during the year ended December 31, 1995, were $30,992,571 and $4,817,671,
respectively.
At December 31, 1995, aggregate gross unrealized appreciation for all securities
in which there is an excess of value over tax cost and aggregate gross
unrealized depreciation for all securities in which there is an excess of tax
cost over value were $8,320,461 and $4,817,671, respectively.
For the year ended December 31, 1995, the portfolio turnover rate was 44%.
4. ORGANIZATION COSTS
The initial organizational expenses of the Account of approximately $150,000
were paid by Golden American. The Account reimburses Golden American monthly for
such expenses ratably over a period of sixty months from the date of the
Account's commencement of operations. At December 31, 1995, the unamortized
balance of such expenses was $75,090. It is Golden American's intention not to
seek reimbursement for any unpaid amounts should the account cease operations.
D-16
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
THE MANAGED GLOBAL ACCOUNT
OF
SEPARATE ACCOUNT D
5. INCREASE/(DECREASE) IN ACCUMULATION UNITS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
--------------------------
1995 1994
------------ ------------
<S> <C> <C>
DVA 100
Units purchased...................................................................... 409,418 2,267,150
Units redeemed....................................................................... (2,561,328) (1,161,000)
------------ ------------
Net Increase/(Decrease)......................................................... (2,151,910) 1,106,150
Units at the beginning of the period................................................... 9,225,615 8,119,465
------------ ------------
Units at the end of the period......................................................... 7,073,705 9,225,615
------------ ------------
------------ ------------
DVA 80
Units purchased...................................................................... 66,593 154,827
Units redeemed....................................................................... (164,429) (147,275)
------------ ------------
Net Increase/(Decrease)......................................................... (97,836) 7,552
Units at the beginning of the period................................................... 205,564 198,012
------------ ------------
Units at the end of the period......................................................... 107,728 205,564
------------ ------------
------------ ------------
DVA Series 100
Units purchased...................................................................... 27,026 55,550
Units redeemed....................................................................... (39,838) (51,428)
------------ ------------
Net Increase/(Decrease)......................................................... (12,812) 4,124
Units at the beginning of the period................................................... 69,795 65,671
------------ ------------
Units at the end of the period......................................................... 56,983 69,795
------------ ------------
------------ ------------
</TABLE>
<TABLE>
<CAPTION>
PERIOD
ENDED
12/31/95*
------------
<S> <C> <C>
DVA Plus -- Standard
Units purchased...................................................................... 43,964
Units redeemed....................................................................... (17,239)
------------
Net Increase.................................................................... 26,725
Units at the beginning of the period................................................... 0
------------
Units at the end of the period......................................................... 26,725
------------
------------
DVA Plus -- Annual Ratchet
Units purchased...................................................................... 29,267
Units redeemed....................................................................... (1,811)
------------
Net Increase.................................................................... 27,456
Units at the beginning of the period................................................... 0
------------
Units at the end of the period......................................................... 27,456
------------
------------
DVA Plus -- 7% Solution
Units purchased...................................................................... 209,355
Units redeemed....................................................................... (345)
------------
Net Increase.................................................................... 209,010
Units at the beginning of the period................................................... 0
------------
Units at the end of the period......................................................... 209,010
------------
------------
</TABLE>
- ------------------
* The DVA Plus -- Standard, Annual Ratchet and 7% Solution units were offered
for sale commencing October 2, 1995.
D-17
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
THE MANAGED GLOBAL ACCOUNT
OF
SEPARATE ACCOUNT D
6. SUBSEQUENT EVENT
On August 13, 1996, under the terms of a stock purchase agreement, Equitable
of Iowa Companies acquired all of the interest in BTV from Whitewood Properties
Corp., a subsidiary of Bankers Trust Company. DSI and Golden American are
wholly owned subsidiaries of BTV.
In addition at a special meeting held on August 8, 1996, the contractholders
approved the reorganization of the Account from a separate account of Golden
American register as a management investment company toa newly created division
(the "Division") of Separate Account B, an existing separate account of Golden
American which is registered as a unit investment trust. On the date of
reorganization, which is anticipated to be September 3, 1996, the Account will
transfer all of its assets to the Division. The Division will simultaneously
exchange these assets to the Managed Global Series of the The GCG Trust in
consideration for shares of the Series. The Managed Global Series is a newly
created Series of The GCG Trust. Ths GCG Trust is and existing open-end
management investment company registered under the Investment Company Act of
1940.
If this reorganization, described above, had taken place on December 31, 1995,
the unit values and net assets of the Division would have been the same as
reflected in the Account's financial statements contained herein.
D-18
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Contractowners and Board of Governors
The Managed Global Account of Separate Account D
We have audited the accompanying statement of assets and liabilities of The
Managed Global Account of Separate Account D, including the portfolio of
investments, as of December 31, 1995, and the related statement of operations
for the year then ended, the statement of changes in net assets for each of the
two years in the period then ended and the financial highlights for each of
periods indicated therein. These financial statements and financial highlights
are the responsibility of the Account's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included verification by examination of securities
held by the custodian as of December 31, 1995 and confirmation of securities not
held by the custodian by correspondence with others. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of The
Managed Global Account of Separate Account D at December 31, 1995, the results
of its operations for the year then ended, the changes in its net assets for
each of the two years in the period then ended and the financial highlights for
each of the indicated periods in conformity with generally accepted accounting
principles.
/s/ ERNST & YOUNG LLP
New York, New York
February 9, 1996
except for Note 6, as to which the date is August 27, 1996
D-19
REPORT OF INDEPENDENT AUDITORS
________________________________________________________________________________
The Board of Directors and Stockholder
Golden American Life Insurance Company
We have audited the accompanying consolidated balance sheets of Golden American
Life Insurance Company as of December 31, 1996 and 1995, and the related
consolidated statements of income, changes in stockholder's equity, and cash
flows for the post-acquisition period from August 14, 1996 to December 31, 1996
and the pre-acquisition period from January 1, 1996 to August 13, 1996 and for
each of the years ended December 31, 1995 and 1994. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Golden
American Life Insurance Company at December 31, 1996 and 1995, and the
consolidated results of their operations and their cash flows for the post-
acquisition period from August 14, 1996 to December 31, 1996 and the pre-
acquisition period from January 1, 1996 to August 13, 1996 and for each of
the years ended December 31, 1995 and 1994, in conformity with generally
accepted accounting principles.
s/Ernst & Young LLP
Des Moines, Iowa
February 11, 1997
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
POST-ACQUISITION | PRE-ACQUISITION
___________________ | _________________
December 31, 1996 | December 31, 1995
___________________ | _________________
<S> <C> | <C>
ASSETS |
|
Investments: |
Fixed maturities, available for sale, |
at fair value (cost: 1996 - $275,153; |
1995 - $48,671) $275,563 | $49,629
Equity securities, at fair value |
(cost: 1996 - $36; 1995 - $27) 33 | 29
Mortgage loans on real estate 31,459 | --
Policy loans 4,634 | 2,021
Short-term investments 12,631 | 15,614
___________________ | _________________
Total investments 324,320 | 67,293
|
Cash and cash equivalents 5,839 | 5,046
|
Accrued investment income 4,139 | 768
|
Deferred policy acquisition costs 11,468 | 67,314
|
Present value of in force acquired 83,051 | 6,057
|
Property and equipment, less allowances |
for depreciaition of $63 in 1996 and |
$86 in 1995 699 | 490
|
Goodwill, less accumulated amortization |
of $589 in 1996 38,665 | --
|
Other assets 2,471 | 7,136
|
Separate account assets 1,207,247 | 1,048,953
___________________ | _________________
Total assets $1,677,899 | $1,203,057
=================== | =================
</TABLE>
See accompanying notes.
CONSOLIDATED BALANCE SHEETS - CONTINUED
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
POST-ACQUISITION | PRE-ACQUISITION
___________________ | _________________
December 31, 1996 | December 31, 1995
___________________ | _________________
<S> <C> | <C>
LIABILITIES AND STOCKHOLDER'S |
EQUITY |
|
Policy liabilities and accruals: |
Future policy benefits: |
Annuity and interest sensitive life |
products $285,287 | $33,673
Unearned revenue reserve 2,063 | 6,556
___________________ | _________________
287,350 | 40,229
|
Deferred income taxes 365 | --
Surplus note 25,000 | --
Due to affiliates 1,504 | 675
Other liabilities 15,949 | 15,075
Separate account liabilities 1,207,247 | 1,048,953
___________________ | _________________
1,537,415 | 1,104,932
|
Commitments and contingencies |
|
Stockholder's equity: |
Common stock, par value $10 per share, |
authorized, issued and outstanding |
250,000 shares 2,500 | 2,500
Redeemable preferred stock, par value |
$5,000 per share, 50,000 shares |
authorized (1995 - 10,000 shares |
issued and outstanding) -- | 50,000
Additional paid-in capital 137,372 | 45,030
Unrealized appreciation (depreciation) |
of securities at fair value 262 | 658
Retained earnings (deficit) 350 | (63)
___________________ | _________________
Total stockholder's equity 140,484 | 98,125
___________________ | _________________
Total liabilities and stockholder's |
equity $1,677,899 | $1,203,057
=================== | =================
</TABLE>
See accompanying notes.
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands)
<TABLE>
<CAPTION>
POST-ACQUISITION | PRE-ACQUISITION
__________________| ________________
For the period | For the period
August 14, 1996 | January 1, 1996
through | through
December 31, 1996 | August 13, 1996
__________________| ________________
|
<S> <C> | <C>
Revenues: |
Annuity and interest sensitive life |
product charges $8,768 | $12,259
Management fee revenue 877 | 1,390
Net investment income 5,795 | 4,990
Realized gains (losses) on investments 42 | (420)
Other income 486 | 70
__________________| ________________
15,968 | 18,289
|
|
Insurance benefits and expenses: |
Annuity and interest sensitive life benefits: |
Interest credited to account balances 5,741 | 4,355
Benefit claims incurred in excess of |
account balances 1,262 | 915
Underwriting, acquisition and insurance |
expenses: |
Commissions 9,866 | 16,549
General expenses 5,906 | 9,422
Insurance taxes 672 | 1,225
Policy acquisition costs deferred (11,712)| (19,300)
Amortization: |
Deferred policy acquisition costs 244 | 2,436
Present value of in force acquired 2,745 | 951
Goodwill 589 | --
__________________| ________________
15,313 | 16,553
|
Interest expense 85 | --
__________________| ________________
15,398 | 16,553
__________________| ________________
570 | 1,736
|
Income taxes 220 | (1,463)
__________________| ________________
|
Net income $350 | $3,199
==================| ================
</TABLE>
See accompanying notes.
CONSOLIDATED STATEMENTS OF INCOME - CONTINUED
(Dollars in thousands)
<TABLE>
<CAPTION>
PRE-ACQUISITION
____________________________________
For the For the
year ended year ended
December 31, December 31,
1995 1994
____________________________________
<S> <C> <C>
Revenues:
Annuity and interest sensitive life
product charges $18,388 $17,519
Management fee revenue 987 --
Net investment income 2,818 560
Realized gains (losses) on investments 297 65
Other income 63 --
__________________ ________________
22,553 18,144
Insurance benefits and expenses:
Annuity and interest sensitive life benefits:
Interest credited to account balances 1,322 40
Benefit claims incurred in excess of
account balances 1,824 (5)
Underwriting, acquisition and insurance
expenses:
Commissions 7,983 16,978
General expenses 12,650 12,921
Insurance taxes 952 373
Policy acquisition costs deferred (9,804) (23,119)
Amortization:
Deferred policy acquisition costs 2,710 4,608
Present value of in force acquired 1,552 2,164
Goodwill -- --
__________________ ________________
19,189 13,960
Interest expense -- 1,962
__________________ ________________
19,189 15,922
__________________ ________________
3,364 2,222
Income taxes -- --
__________________ ________________
Net income $3,364 $2,222
================== ================
</TABLE>
See accompanying notes.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
PRE-ACQUISITION
__________________________________________________________
Unreal-
ized
Appre-
ciation
(Depre-
ciation)
Addi- of Total
Redeemable tional Securities Retained Stock-
Common Preferred Paid-In at Earnings holder's
Stock Stock Capital Fair Value (Deficit) Equity
__________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
Balance at
January 1, 1994 $2,500 $28,336 $62 ($2,301) $28,597
Issuance of 10,000
shares of preferred
stock -- $50,000 -- -- -- 50,000
Contribution of
capital -- -- 8,750 -- -- 8,750
Net income for 1994 -- -- -- -- 2,222 2,222
Unrealized deprecia-
tion of securities
at fair value -- -- -- (63) -- (63)
__________________________________________________________
Balance at
December 31, 1994 2,500 50,000 37,086 (1) (79) 89,506
Contribution of
capital -- -- 7,944 -- -- 7,944
Net income for 1995 -- -- -- -- 3,364 3,364
Preferred stock
dividends -- -- -- -- (3,348) (3,348)
Unrealized apprecia-
tion of securities
at fair value -- -- -- 659 -- 659
__________________________________________________________
Balance at
December 31, 1995 2,500 50,000 45,030 658 (63) 98,125
Net income for the
period January 1, 1996
to August 13, 1996 -- -- -- -- 3,199 3,199
Preferred stock
dividends -- -- -- -- (719) (719)
Unrealized deprecia-
tion of securities
at fair value -- -- -- (1,175) -- (1,175)
__________________________________________________________
Balance at
August 13, 1996 $2,500 $50,000 $45,030 ($517) $2,417 $99,430
==========================================================
</TABLE>
See accompanying notes.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY - CONTINUED
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
POST-ACQUISITION
__________________________________________________________
Unreal-
ized
Appre-
ciation
(Depre-
ciation)
Addi- of Total
Redeemable tional Securities Retained Stock-
Common Preferred Paid-In at Earnings holder's
Stock Stock Capital Fair Value (Deficit) Equity
__________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
Balance at
August 14, 1996 $2,500 $50,000 $87,372 -- -- $139,872
Contribution of
preferred stock
to additional
paid-in capital -- (50,000) 50,000 -- -- --
Net income for period
August 14, 1996 to
December 31, 1996 -- -- -- -- $350 350
Unrealized apprecia-
tion of securities
at fair value -- -- -- $262 -- 262
__________________________________________________________
Balance at
December 31, 1996 $2,500 $ -- $137,372 $262 $350 $140,484
==========================================================
</TABLE>
See accompanying notes.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
POST-ACQUISITION | PRE-ACQUISITION
___________________| ___________________
For the period | For the period
August 14, 1996 | January 1, 1996
through | through
December 31, 1996 | August 13, 1996
___________________| ___________________
|
<S> <C> | <C>
OPERATING ACTIVITIES |
Net income $350 | $3,199
Adjustments to reconcile net income |
to net cash provided by (used in) |
operations: |
Adjustments related to annuity and |
interest sensitive life products: |
Change in annuity and interest |
sensitive life product reserves 5,106 | 4,472
Change in unearned revenues 2,063 | 2,084
Increase in accrued investment income (877)| (2,494)
Policy acquisition costs deferred (11,712)| (19,300)
Amortization of deferred policy |
acquisition costs 244 | 2,436
Amortization of present value of in |
force acquired 2,745 | 951
Change in other assets, other |
liabilities and accrued income taxes (96)| 4,672
Provision for depreciation and |
amortization 1,242 | 703
Provision for deferred income taxes 220 | (1,463)
Realized (gains) losses on investments (42)| 420
___________________| ___________________
Net cash provided by (used in) |
operating activities (757)| (4,320)
|
|
INVESTING ACTIVITIES |
Sale, maturity or repayment of |
investments: |
Fixed maturities - available for sale 47,453 | 55,091
Fixed maturities - held for investment -- | --
Equity securities -- | --
Mortgage loans on real estate 40 | --
Short-term investments - net 2,629 | 354
___________________| ___________________
50,122 | 55,445
</TABLE>
See accompanying notes.
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
(Dollars in thousands)
<TABLE>
<CAPTION>
POST-ACQUISITION | PRE-ACQUISITION
__________________| _________________
For the period | For the period
August 14, 1996 | January 1, 1996
through | through
December 31, 1996 | August 13, 1996
__________________| _________________
|
<S> <C> | <C>
INVESTING ACTIVITIES - CONTINUED |
Acquisition of investments: |
Fixed maturities - available for sale ($147,170)| ($184,589)
Fixed maturities - held for investment -- | --
Equity securities (5)| --
Mortgage loans on real estate (31,499)| --
Policy loans - net (637)| (1,977)
Short-term investments - net -- | --
__________________| _________________
(179,311)| (186,566)
Funds held in escrow pursuant to |
an Exchange Agreement -- | --
Purchase of property and equipment (137)| --
__________________| _________________
Net cash used in investing activities (129,326)| (131,121)
|
FINANCING ACTIVITIES |
Retirement of short-term debt -- | --
Proceeds from issuance of surplus note 25,000 | --
Receipts from annuity and interest |
sensitive life policies credited |
to policyholder account balances 116,819 | 149,750
Return of policyholder account balances |
on annuity and interest sensitive |
life policies (3,315)| (2,695)
Net reallocations (to) from Separate |
Accounts (10,237)| (8,286)
Contributions of capital by parent -- | --
Issuance of preferred stock -- | --
Dividends paid on preferred stock -- | (719)
__________________| _________________
Net cash provided by financing |
activities 128,267 | 138,050
__________________| _________________
Increase (decrease) in cash and |
cash equivalents (1,816)| 2,609
|
Cash and cash equivalents at |
beginning of period 7,655 | 5,046
__________________| _________________
Cash and cash equivalents at end |
of period $5,839 | $7,655
==================| =================
</TABLE>
See accompanying notes.
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
(Dollars in thousands)
<TABLE>
<CAPTION>
PRE-ACQUISITION
________________________________
For the For the
year ended year ended
December 31, December 31,
1995 1994
________________________________
<S> <C> <C>
OPERATING ACTIVITIES
Net income $3,364 $2,222
Adjustments to reconcile net income
to net cash provided by (used in)
operations:
Adjustments related to annuity and
interest sensitive life products:
Change in annuity and interest
sensitive life product reserves 4,664 (1,370)
Change in unearned revenues 4,949 1,594
Increase in accrued investment income (676) (24)
Policy acquisition costs deferred (9,804) (23,119)
Amortization of deferred policy
acquisition costs 2,710 4,608
Amortization of present value of in
force acquired 1,552 2,164
Change in other assets, other
liabilities and accrued income taxes 4,686 (4,543)
Provision for depreciation and
amortization (142) 13
Provision for deferred income taxes -- --
Realized (gains) losses on investments (297) (65)
______________ ______________
Net cash provided by (used in)
operating activities 11,006 (18,520)
INVESTING ACTIVITIES
Sale, maturity or repayment of
investments:
Fixed maturities - available for sale 24,026 --
Fixed maturities - held for investment -- 321
Equity securities -- 313
Mortgage loans on real estate -- --
Short-term investments - net -- 1,299
______________ ______________
24,026 1,933
</TABLE>
See accompanying notes.
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
(Dollars in thousands)
<TABLE>
<CAPTION>
PRE-ACQUISITION
________________________________
For the For the
year ended year ended
December 31, December 31,
1995 1994
________________________________
<S> <C> <C>
INVESTING ACTIVITIES - CONTINUED
Acquisition of investments:
Fixed maturities - available for sale ($61,723) --
Fixed maturities - held for investment -- ($857)
Equity securities (10) (7)
Mortgage loans on real estate -- --
Policy loans - net (1,508) (369)
Short-term investments - net (1,681) --
______________ ______________
(64,922) (1,233)
Funds held in escrow pursuant to
an Exchange Agreement (1,242) (1,382)
Purchase of property and equipment -- --
______________ ______________
Net cash used in investing activities (42,138) (682)
FINANCING ACTIVITIES
Retirement of short-term debt -- (40,000)
Proceeds from issuance of surplus note -- --
Receipts from annuity and interest
sensitive life policies credited
to policyholder account balances 29,501 --
Return of policyholder account balances
on annuity and interest sensitive
life policies (1,543) --
Net reallocations (to) from Separate
Accounts -- --
Contributions of capital by parent 7,944 8,750
Issuance of preferred stock -- 50,000
Dividends paid on preferred stock (3,348) --
______________ ______________
Net cash provided by financing
activities 32,554 18,750
______________ ______________
Increase (decrease) in cash and
cash equivalents 1,422 (452)
Cash and cash equivalents at
beginning of period 3,624 4,076
______________ ______________
Cash and cash equivalents at end
of period $5,046 $3,624
============== ==============
</TABLE>
See accompanying notes.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996
1. SIGNIFICANT ACCOUNTING POLICIES
________________________________________________________________________________
CONSOLIDATION
The consolidated financial statements include Golden American Life Insurance
Company ("Golden American") and its wholly-owned subsidiary, First Golden
American Life Insurance Company of New York ("First Golden") collectively the
"Company". First Golden was capitalized by Golden American on December 17,
1996. All significant intercompany accounts and transactions have been
eliminated.
ORGANIZATION
Golden American offers variable insurance products and is licensed as a life
insurance company in the District of Columbia and all states except New York.
On January 2, 1997, First Golden became licensed to sell insurance products
in the state of New York. The Company's products are marketed by
broker/dealers, financial institutions and insurance agents. The Company's
primary customers are individuals and families.
On August 13, 1996, Equitable of Iowa Companies ("Equitable") acquired all of
the outstanding capital stock of BT Variable, Inc. ("BT Variable") and its
wholly-owned subsidiaries, Golden American and Directed Services, Inc. ("DSI")
from Whitewood Properties Corporation ("Whitewood") pursuant to the terms of a
Stock Purchase Agreement between Equitable and Whitewood (the "Purchase
Agreement"). See Note 5 for additional information.
For financial statement purposes, the change in control of Golden American
through the acquisition of BT Variable was accounted for as a purchase
acquisition effective August 14, 1996. This acquisition resulted in a new
basis of accounting reflecting estimated fair values of assets and liabilities
at that date. As a result, the Company's financial statements for periods
subsequent to August 13, 1996, are presented on the Post-Acquisition new basis
of accounting, while the financial statements for August 13, 1996 and prior
periods are presented on the Pre-Acquisition historical cost basis of
accounting.
INVESTMENTS
Fixed Maturities: Statement of Financial Accounting Standards ("SFAS") No.
115, "Accounting for Certain Investments in Debt and Equity Securities"
requires fixed maturity securities to be designated as either "available for
sale", "held for investment" or "trading". Sales of fixed maturities
designated as "available for sale" are not restricted by SFAS No. 115.
Available for sale securities are reported at fair value and unrealized gains
and losses on these securities are included directly in stockholder's equity,
after adjustment for related changes in deferred policy acquisition costs,
present value of in force acquired, policy reserves and deferred income taxes.
At December 31, 1996 and 1995, all of the Company's fixed maturity securities
are designated as available for sale although the Company is not precluded
from designating fixed maturity securities as held for investment or trading at
some future date. Securities the Company has the positive intent and ability
to hold to maturity are designated as "held for investment". Held for
investment securities are reported at cost adjusted for amortization of
premiums and discounts. Changes in the fair value of these securities, except
for declines that are other than temporary, are not reflected in the Company's
financial statements. Sales of securities designated as held for investment
are severely restricted by SFAS No. 115. Securities that are bought and held
principally for the purpose of selling them in the near term are designated as
trading securities. Unrealized gains and losses on trading securities are
included in current earnings. Transfers of securities between categories are
restricted and are recorded at fair value at the time of the transfer.
Securities that are determined to have a decline in value that is other than
temporary are written down to estimated fair value which becomes the security's
new cost basis by a charge to realized losses in the Company's Statements of
Income. Premiums and discounts are amortized/accrued utilizing the scientific
interest method which results in a constant yield over the security's expected
life. Amortization/accrual of premiums and discounts on mortgage-backed
securities incorporates a prepayment assumption to estimate the securities'
expected lives.
Equity Securities: Equity securities are reported at estimated fair value if
readily marketable or at cost if not readily marketable. The change in
unrealized appreciation and depreciation of marketable equity securities (net
of related deferred income taxes, if any) is included directly in stockholder's
equity. Equity securities that are determined to have a decline in value that
is other than temporary are written down to estimated fair value which becomes
the security's new cost basis by a charge to realized losses in the Company's
Statement of Income.
Mortgage loans: Mortgage loans on real estate are reported at cost adjusted
for amortization of premiums and accrual of discounts. If the value of any
mortgage loan is determined to be impaired (i.e., when it is probable that
the Company will be unable to collect all amounts due according to the
contractual terms of the loan agreement), the carrying value of the mortgage
loan is reduced to the present value of expected future cash flows from the
loan, discounted at the loan's effective interest rate, or to the loan's
observable market price, or the fair value of the underlying collateral. The
carrying value of impaired loans is reduced by the establishment of a valuation
allowance which is adjusted at each reporting date for significant changes in
the calculated value of the loan. Changes in this valuation allowance are
charged or credited to income.
Other investments: Policy loans are reported at unpaid principal. Short-term
investments are reported at cost adjusted for amortization of premiums and
accrual of discounts.
Fair Values: Estimated fair values, as reported herein, of publicly traded
fixed maturity securities are as reported by an independent pricing service.
Fair values of conventional mortgage-backed securities not actively traded in
a liquid market are estimated using a third party pricing system. This pricing
system uses a matrix calculation assuming a spread over U.S. Treasury bonds
based upon the expected average lives of the securities. Fair values of
private placement bonds are estimated using a matrix that assumes a spread
(based on interest rates and a risk assessment of the bonds) over U.S. Treasury
bonds. Estimated fair values of equity securities which consists of the
Company's investment in its registered separate accounts are based upon the
quoted fair value of the securities comprising the individual portfolios
underlying the separate accounts. Realized gains and losses are determined
on the basis of specific identification and average cost methods for manager
initiated and issuer initiated disposals, respectively.
CASH AND CASH EQUIVALENTS
For purposes of the consolidated statement of cash flows, the Company considers
all demand deposits and interest-bearing accounts not related to the investment
function to be cash equivalents. All interest-bearing accounts classified as
cash equivalents have original maturities of three months or less.
DEFERRED POLICY ACQUISITION COSTS
Certain costs of acquiring new insurance business, principally commissions and
other expenses related to the production of new business, have been deferred.
Acquisition costs for variable annuity and life products are being amortized
generally in proportion to the present value (using the assumed crediting rate)
of expected future gross profits. This amortization is adjusted
retrospectively, or "unlocked", when the Company revises its estimate of
current or future gross profits to be realized from a group of products.
Deferred policy acquisition costs are adjusted to reflect the pro forma impact
of unrealized gains and losses on fixed maturity securities the Company has
designated as "available for sale" under SFAS No. 115.
PRESENT VALUE OF IN FORCE ACQUIRED
As a result of the acquisition of Golden American, a portion of the acquisition
cost was allocated to the right to receive future cash flows from the existing
insurance contracts. This allocated cost represents the present value of in
force acquired ("PVIF") which reflects the value of those purchased policies
calculated by discounting actuarially determined expected cash flows at the
discount rate determined by the purchaser. Interest is imputed on the
unamortized balance of PVIF at rates of 7.70% to 7.80%. Amortization of PVIF
is charged to expense in proportion to expected gross profits. This
amortization is adjusted retrospectively, or "unlocked", when the Company
revises its estimate of current or future gross profits to be realized from
the insurance contracts acquired. PVIF is adjusted to reflect the pro forma
impact of unrealized gains (losses) on available for sale fixed maturities.
PROPERTY AND EQUIPMENT
Property and equipment primarily represent leasehold improvements at the Golden
American headquarters, office furniture and equipment and capitalized computer
software and are not considered to be significant to the Company's overall
operations. Property and equipment are reported at cost less allowances for
depreciation. Depreciation expense is computed primarily on the basis of
straight-line method over the estimated useful lives of the assets.
GOODWILL
Goodwill was established as a result of the acquisition discussed above and is
being amortized over 25 years on a straight line basis. See Note 5 for
additional information.
FUTURE POLICY BENEFITS
Future policy benefits for fixed interest divisions of the variable products,
are established utilizing the retrospective deposit accounting method. Policy
reserves represent the premiums received plus accumulated interest, less
mortality and administration charges. Interest credited to these policies
ranged from 4.00% to 7.25% during 1996.
The unearned revenue reserve represents unearned distribution fees discussed
below. These distribution fees have been deferred and are amortized over the
life of the contract in proportion to its expected gross profits.
SEPARATE ACCOUNTS
Assets and liabilities of the separate accounts reported in the accompanying
balance sheets represent funds that are separately administered principally
for variable annuity and variable life contracts. Contractholders, rather
than the Company, bear the investment risk for variable products. At the
direction of the contractholders, the separate accounts invest the premiums
from the sale of variable annuity and variable life products in shares of
specified mutual funds. The assets and liabilities of the separate accounts
are clearly identified and segregated from other assets and liabilities of
the Company. The portion of the separate account assets applicable to
variable annuity and variable life contracts cannot be charged with liabilities
arising out of any other business the Company may conduct.
Variable separate account assets carried at fair value of the underlying
investments generally represent contractholder investment values maintained
in the accounts. Variable separate account liabilities represent account
balances for the variable annuity and variable life contracts invested in the
separate accounts. Net investment income and realized and unrealized capital
gains and losses related to separate account assets are not reflected in the
accompanying Statement of Income.
Product charges recorded by the Company from variable annuity and variable
life products consist of charges applicable to each contract for mortality and
expense risk, cost of insurance, contract administration and surrender charges.
In addition, some variable annuity and all variable life contracts provide for
a distribution fee collected for a limited number of years after each premium
deposit. Revenue recognition of collected distribution fees is amortized over
the life of the contract in proportion to its expected gross profits. The
balance of unrecognized revenue related to the distribution fees is reported as
an unearned revenue reserve.
DEFERRED INCOME TAXES
Deferred tax assets or liabilities are computed based on the difference between
the financial statement and income tax bases of assets and liabilities using the
enacted marginal tax rate. Deferred tax assets or liabilities are adjusted to
reflect the pro forma impact of unrealized gains and losses on equity securities
and fixed maturity securities the Company has designated as available for sale
under SFAS No. 115. Changes in deferred tax assets or liabilities resulting
from this SFAS No. 115 adjustment are charged or credited directly to
stockholder's equity. Deferred income tax expenses or credits reflected in the
Company's Statement of Income are based on the changes in the deferred tax
asset or liability from period to period (excluding the SFAS No. 115
adjustment).
DIVIDEND RESTRICTIONS
Golden American's ability to pay dividends to its parent is restricted because
prior approval of insurance regulatory authorities is required for payment of
dividends to the stockholder which exceed an annual limitation. During 1997,
Golden American could pay dividends to its parent of approximately $2,186,000
without prior approval of statutory authorities. The Company has maintained
adequate statutory capital and surplus and has not used surplus relief or
financial reinsurance, which have come under scrutiny by many state insurance
departments.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenue and expenses during the preparation period. Actual results
could differ from those estimates.
Management is required to utilize historical experience and assumptions about
future events and circumstances in order to develop estimates of material
reported amounts and disclosures. Included among the material (or potentially
material) reported amounts and disclosures that require extensive use of
estimates and assumptions are (1) estimates of fair values of investments in
securities and other financial instruments, as well as fair values of
policyholder liabilities, (2) policyholder liabilities, (3) deferred policy
acquisition costs and present value of in force acquired, (4) fair values of
assets and liabilities recorded as a result of acquisition transactions, (5)
asset valuation allowances, (6) guaranty fund assessment accruals, (7)
deferred tax benefits (liabilities) and (8) estimates for commitments and
contingencies including legal matters, if a liability is anticipated and can be
reasonably estimated. Estimates and assumptions regarding all of the preceding
are inherently subject to change and are reassessed periodically. Changes in
estimates and assumptions could materially impact the financial statements.
RECLASSIFICATION
Certain amounts in the 1995 and 1994 financial statements have been
reclassified to conform to the 1996 financial statement presentation.
2. BASIS OF FINANCIAL REPORTING
________________________________________________________________________________
The financial statements of the Company differ from related statutory-basis
financial statements principally as follows: (1) acquisition costs of acquiring
new business are deferred and amortized over the life of the policies rather
than charged to operations as incurred; (2) an asset representing the present
value of future cash flows from insurance contracts acquired was established as
a result of an acquisition and is amortized and charged to expense; (3) future
policy benefit reserves for the fixed interest divisions of the variable
products are based on full account values, rather than the greater of cash
surrender value or amounts derived from discounting methodologies utilizing
statutory interest rates; (4) reserves are reported before reduction for
reserve credits related to reinsurance ceded and a receivable is established,
net of an allowance for uncollectible amounts, for these credits rather than
presented net of these credits; (5) fixed maturity investments are designated
as "available for sale" and valued at fair value with unrealized
appreciation/depreciation, net of adjustments to deferred income taxes
(if applicable) and deferred policy acquisition costs, credited/charged directly
to stockholder's equity rather than valued at amortized cost; (6) the carrying
value of fixed maturity securities is reduced to fair value by a charge to
realized losses in the Statements of Income when declines in carrying value are
judged to be other than temporary, rather than through the establishment of a
formula-determined statutory investment reserve (carried as a liability),
changes in which are charged directly to surplus; (7) deferred income taxes
are provided for the difference between the financial statement and income tax
bases of assets and liabilities; (8) net realized gains or losses attributed
to changes in the level of interest rates in the market are recognized when the
sale is completed rather than deferred and amortized over the remaining life of
the fixed maturity security; (9) a liability is established for anticipated
guaranty fund assessments, net of related anticipated premium tax credits,
rather than capitalized when assessed and amortized in accordance with
procedures permitted by insurance regulatory authorities; (10) revenues for
variable annuity and variable life products consist of policy charges for the
cost of insurance, policy administration charges, amortization of policy
initiation fees and surrender charges assessed rather than premiums received;
and (11) assets and liabilities are restated to fair values when a change in
ownership occurs, with provisions for goodwill and other intangible assets,
rather than continuing to be presented at historical cost.
Net income (loss) for Golden American, as determined in accordance with
statutory accounting practices was $(9,188,000) in 1996, $(4,117,000) in 1995
and $(11,260,000) in 1994. Total statutory capital and surplus was
$80,430,000 at December 31, 1996 and $66,357,000 at December 31, 1995.
3. INVESTMENT OPERATIONS
________________________________________________________________________________
INVESTMENT RESULTS
Major categories of net investment income are summarized below:
<TABLE>
<CAPTION>
POST-
ACQUISITION PRE-ACQUISITION
_______________________________________________________
For the | For the
period | period
August 14, | January 1, For the For the
1996 through| 1996 through year ended year ended
December 31,| August 13, December 31, December 31,
1996 | 1996 1995 1994
____________| _________________________________________
(Dollars in thousands)
<S> <C> | <C> <C> <C>
Fixed maturities $5,083 | $4,507 $1,610 $142
Equity securities 103 | -- -- 1
Mortgage loans on real |
estate 203 | -- -- --
Policy loans 78 | 73 56 11
Short-term investments 441 | 341 899 226
Other, net 2 | 22 148 99
Funds held in escrow -- | 145 166 83
____________| _________________________________________
Gross investment income 5,910 | 5,088 2,879 562
Less investment expenses (115)| (98) (61) (2)
____________| _________________________________________
Net investment income $5,795 | $4,990 $2,818 $560
============| =========================================
</TABLE>
Realized gains (losses) are as follows:
<TABLE>
<CAPTION>
REALIZED*
POST-
ACQUISITION PRE-ACQUISITION
_______________________________________________________
For the | For the
period | period
August 14, | January 1,
1996 through| 1996 through Year ended Year ended
December 31,| August 13, December 31, December 31,
1996 | 1996 1995 1994
____________| _________________________________________
(Dollars in thousands)
<S> <C> | <C> <C> <C>
Fixed maturities: |
Available for sale $42 | ($420) $297
Held for investment -- | -- -- $2
Equity securities -- | -- -- 63
____________| _________________________________________
Realized gains (losses) |
on investments $42 | ($420) $297 $65
=======================================================
<FN>
*See Note 6 for the income tax effects attributable to realized gains and
losses on investments.
</TABLE>
The change in unrealized appreciation (depreciation) on securities at fair
value is as follows:
<TABLE>
<CAPTION>
UNREALIZED
POST-
ACQUISITION PRE-ACQUISITION
_______________________________________________________
For the | For the
period | period
August 14, | January 1,
1996 through| 1996 through Year ended Year ended
December 31,| August 13, December 31, December 31,
1996** | 1996 1995 1994
____________| _________________________________________
(Dollars in thousands)
<S> <C> | <C> <C> <C>
Fixed maturities: |
Available for sale $410 | ($2,087) $958 ($65)
Held for investment -- | -- 90 --
Equity securities (3)| 1 3 (63)
____________| _________________________________________
Unrealized appreciation |
(depreciation) of |
securities $407 | ($2,086) $1,051 ($128)
=======================================================
<FN>
**On August 13, 1996, all fixed maturities and equity securities in the
Company's investment portfolio were marked to market.
</TABLE>
At December 31, 1996 and December 31, 1995, amortized cost, gross unrealized
gains and losses and estimated fair values of fixed maturity securities, all of
which are designated as available for sale, are as follows:
<TABLE>
<CAPTION>
POST-ACQUISITION
_______________________________________________
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
December 31, 1996 Cost Gains Losses Value
______________________________________________________________________________
(Dollars in thousands)
<S> <C> <C> <C> <C>
U.S. government and
governmental agencies
and authorities:
Mortgage-backed securities $70,902 $122 ($247) $70,777
Other 3,082 2 (4) 3,080
Public utilities 35,893 193 (38) 36,048
Investment grade corporate 134,487 586 (466) 134,607
Below investment grade
corporate 25,921 249 (56) 26,114
Mortgage-backed securities 4,868 69 -- 4,937
___________ ___________ ___________ ___________
Total $275,153 $1,221 ($811) $275,563
=========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
PRE-ACQUISITION
_______________________________________________
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
December 31, 1995 Cost Gains Losses Value
______________________________________________________________________________
(Dollars in thousands)
<S> <C> <C> <C> <C>
U.S. government and
governmental agencies
and authorities - Other $13,334 $176 $13,510
Public utilities 5,276 26 5,302
Investment grade corporate 27,042 700 ($31) 27,711
Mortgage-backed securities 3,019 87 -- 3,106
___________ ___________ ___________ ___________
Total $48,671 $989 ($31) $49,629
=========== =========== =========== ===========
</TABLE>
At December 31, 1996, net unrealized investment gains on fixed maturities
designated as available for sale totaled $410,000. This appreciation caused
an increase to stockholder's equity of $265,000 at December 31, 1996 (net of
deferred income taxes of $145,000). No fixed maturity securities were
designated as held for investment at December 31, 1996 or 1995. Short-term
investments with maturities of 30 days or less have been excluded from the
above schedules. Amortized cost approximates fair value for these securities.
Amortized cost and estimated fair value of fixed maturities designated as
available for sale, by contractual maturity, at December 31, 1996, are shown
below. Expected maturities will differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or without
call or prepayment penalties.
<TABLE>
<CAPTION>
POST-ACQUISITION
_____________________________
Estimated
Amortized Fair
December 31, 1996 Cost Value
_____________________________________________________________________________
(Dollars in thousands)
<S> <C> <C>
Due within one year $15,908 $15,930
Due after one year through five years 122,958 123,487
Due after five years through ten years 60,517 60,432
_____________ _____________
199,383 199,849
Mortgage-backed securities 75,770 75,714
_____________ _____________
Total $275,153 $275,563
============= =============
</TABLE>
An analysis of sales, maturities and principal repayments of the Company's
fixed maturities portfolio is as follows:
<TABLE>
<CAPTION>
Gross Gross Proceeds
Amortized Realized Realized from
Cost Gains Losses Sale
______________________________________________________________________________
(Dollars in thousands)
<S> <C> <C> <C> <C>
For the period August 14,
1996 through
December 31, 1996:
Scheduled principal
repayments, calls and
tenders $1,612 $1,612
Sales 45,799 $115 ($73) 45,841
______________________________________________________
Total $47,411 $115 ($73) $47,453
======================================================
For the period January 1,
1996 through August 13,
1996:
Scheduled principal
repayments, calls and
tenders $1,801 $1,801
Sales 53,710 $152 ($572) 53,290
______________________________________________________
Total $55,511 $152 ($572) $55,091
======================================================
Year ended December 31,
1995:
Scheduled principal
repayments, calls and
tenders $20,279 $305 ($16) $20,568
Sales 3,450 8 -- 3,458
______________________________________________________
Total $23,729 $313 ($16) $24,026
======================================================
Year ended December 31,
1994:
Scheduled principal
repayments, tenders
(available for sale only)
and calls - held for
investment $319 $2 $ -- $321
______________________________________________________
Total $319 $2 $ -- $321
======================================================
</TABLE>
Investment Valuation Analysis: The company analyzes its investment portfolio
at least quarterly in order to determine if the carrying value of any of its
investments has been impaired. The carrying value of debt and equity
securities is written down to fair value by a charge to realized losses when
an impairment in value appears to be other than temporary. During 1996 and
1995, no investments were identified as having an impairment other than
temporary.
Investments on Deposit: At December 31, 1996 and 1995, affidavits of deposits
covering bonds with a par value of $6,605,000 and $2,695,000, respectively,
were on deposit with regulatory authorities pursuant to certain statutory
requirements.
Investment Diversifications: The Company's investment policies related to its
investment portfolio require diversification by asset type, company and
industry and set limits on the amount which can be invested in an individual
issuer. Such policies are at least as restrictive as those set forth by
regulatory authorities. Fixed maturity investments included investments in
various government bonds and government or agency mortgage-backed securities
(27% in 1996 and 1995), public utilities (13% in 1996, 11% in 1995), basic
industrials (30% in 1996, 20% in 1995) and financial companies (18% in 1996,
30% in 1995). Mortgage loans on real estate have been analyzed by
geographical location and 17% of all mortgage loans are in Georgia. There are
no other concentrations of mortgage loans in any state exceeding ten percent in
1996. Mortgage loans on real estate have also been analyzed by collateral type
with significant concentrations identified in office buildings (36% in 1996),
industrial buildings (31% in 1996) and multi-family residential buildings
(27% in 1996). Equity securities and investments accounted for by the equity
method are not significant to the Company's overall investment portfolio.
No investment in any person or its affiliates (other than bonds issued by
agencies of the United States government) exceeded ten percent of stockholder's
equity at December 31, 1996.
4. FAIR VALUES OF FINANCIAL INSTRUMENTS
________________________________________________________________________________
SFAS No. 107, "Disclosures about Fair Value of Financial Instruments" requires
disclosure of estimated fair value of all financial instruments, including both
assets and liabilities recognized and not recognized in a Company's balance
sheet, unless specifically exempted. SFAS No. 119, "Disclosure about
Derivative Financial Instruments and Fair Value of Financial Instruments"
requires additional disclosures about derivative financial instruments. Most
of the Company's investments, insurance liabilities and debt fall within the
standards' definition of a financial instrument. Although the Company's
insurance liabilities are specifically exempted from this disclosure
requirement, estimated fair value disclosure of these liabilities is also
provided in order to make the disclosures more meaningful. Accounting,
actuarial and regulatory bodies are continuing to study the methodologies to be
used in developing fair value information, particularly as it relates to such
things as liabilities for insurance contracts. Accordingly, care should be
exercised in deriving conclusions about the Company's business or financial
condition based on the information presented herein.
The Company closely monitors the composition and yield of its invested assets,
the duration and interest credited on insurance liabilities and resulting
interest spreads and timing of cash flows. These amounts are taken into
consideration in the Company's overall management of interest rate risk, which
attempts to minimize exposure to changing interest rates through the matching
of investment cash flows with amounts expected to be due under insurance
contracts. As discussed below, the Company has used discount rates in its
determination of fair values for its liabilities which are consistent with
market yields for related assets. The use of the asset market yield is
consistent with management's opinion that the risks inherent in its asset and
liability portfolios are similar. This assumption, however, might not result
in values consistent with those obtained through an actuarial appraisal of the
Company's business or values that might arise in a negotiated transaction.
The following compares carrying values as shown for financial reporting
purposes with estimated fair values.
<TABLE>
<CAPTION>
December 31 1996
_______________________________________________________________________________
(Dollars in thousands)
Estimated
Carrying Fair
Value Value
____________ ____________
<S> <C> <C>
ASSETS
Balance sheet financial assets:
Fixed maturities available for sale $275,563 $275,563
Equity securities 33 33
Mortgage loans on real estate 31,459 30,979
Short-term investments 12,631 12,631
Cash and cash equivalents 5,839 5,839
Other receivables 4,214 4,214
Separate account assets 1,207,247 1,207,247
___________________________
1,536,986 1,536,506
Deferred policy acquisition costs 11,468 --
Present value of in force acquired 83,051 --
Goodwill 38,665 --
Deferred income taxes on fair value adjustments -- 7,741
Non-financial assets 3,095 3,095
___________________________
Total assets $1,673,265 $1,547,342
===========================
LIABILITIES AND STOCKHOLDER'S EQUITY
Balance sheet financial liabilities:
Future policy benefits (net of related policy
loans):
Annuity products $280,076 $253,012
Interest sensitive life products 2,640 2,368
___________________________
282,716 255,380
Surplus note 25,000 28,878
Separate account liabilities 1,207,247 1,119,158
___________________________
1,514,963 1,403,416
Non-financial liabilities 17,818 17,818
___________________________
Total liabilities 1,532,781 1,421,234
Stockholder's equity 140,484 126,108
___________________________
Total liabilities and stockholder's equity $1,673,265 $1,547,342
===========================
</TABLE>
The following methods and assumptions were used by the Company in estimating
fair values.
Fixed maturities: Estimated fair values of publicly traded securities are
as reported by an independent pricing service. Estimated fair values of
conventional mortgage-backed securities not actively traded in a liquid market
are estimated using a third party pricing system. This pricing system uses a
matrix calculation assuming a spread over U.S. Treasury bonds based upon the
expected average lives of the securities.
Equity securities: Estimated fair values of equity securities, which consist
of the Company's investment in the portfolios underlying its separate accounts,
are based upon the quoted fair value of the individual securities comprising
the individual portfolios underlying the separate accounts. For equity
securities not actively traded, estimated fair values are based upon values of
issues of comparable yield and quality.
Mortgage loans on real estate: Fair values are estimated by discounting
expected cash flows, using interest rates currently offered for similar loans.
Short-term investments, cash and cash equivalents, and other receivables:
Carrying values reported in the Company's historical cost basis balance sheet
approximate estimated fair value for these instruments, due to their short-
term nature.
Deferred policy acquisition costs, present value of in force acquired and
goodwill: For historical cost purposes, the recovery of policy acquisition
costs and present value of in force acquired is based on the realization, among
other things, of future interest spreads and gross premiums on in force
business. Because these cash flows are considered in the computation of the
future policy benefit cash flows, the deferred policy acquisition cost and
present value of in force acquired balances do not appear on the estimated fair
value balance sheet. Goodwill does not appear in the estimated fair value
balance sheet because no cash flows are related to this asset.
Separate account assets: Separate account assets represent the estimated
fair values of the underlying securities in the Company's historical cost and
estimated fair value basis balance sheets.
Future policy benefits: Estimated fair values of the Company's liabilities
for future policy benefits for the fixed interest division of the variable
products are based upon discounted cash flow calculations. Cash flows of
future policy benefits are discounted using the market yield rate of the assets
supporting these liabilities. Estimated fair values are presented net of the
estimated fair value of corresponding policy loans due to the interdependent
nature of the cash flows associated with these items.
Surplus note: Estimated fair value of the Company's surplus note was based
upon discounted future cash flows using a discount rate approximating the
Company's return on invested assets.
Separate account liabilities: Separate account liabilities are reported at
full account value in the Company's historical cost balance sheet. Estimated
fair values of separate account liabilities are based upon assumptions using
an estimated long-term average market rate of return to discount future cash
flows. The reduction in fair values for separate account liabilities reflect
the present value of future revenue from product charges, distribution fees
or surrender charges.
Deferred income taxes on fair value adjustments: Deferred income taxes
have been reported at the statutory rate for the differences (except for those
attributed to permanent differences) between the carrying value and estimated
fair value of assets and liabilities set forth herein.
Non-financial assets and liabilities: Values are presented at historical
cost. Non-financial assets consist primarily of property and equipment,
receivable from the Separate Accounts and restricted stock assets. Non-
financial liabilities consist primarily of outstanding checks, guaranty fund
assessments payable, payables for investments and suspense accounts.
At December 31, 1995, the carrying amounts reported for the financial
instruments consisting primarily of short-term investments, policy loans, the
adjustable principal amount promissory note and insurance and annuity reserves
approximate fair value.
SFAS No. 107 and SFAS No. 119 require disclosure of estimated fair value
information about financial instruments, whether or not recognized in the
consolidated balance sheets, for which it is practicable to estimate that
value. In cases where quoted market prices are not available, estimated fair
values are based on estimates using present value or other valuation
techniques. Those techniques are significantly affected by the assumptions
used, including the discount rate and estimates of future cash flows. In that
regard, the derived fair value estimates cannot be substantiated by comparison
to independent markets and, in many cases, could not be realized in immediate
settlement of the instrument. The above presentation should not be viewed as
an appraisal as there are several factors, such as the fair value associated
with customer or agent relationships and other intangible items, which have not
been considered. In addition, interest rates and other assumptions might be
modified if an actual appraisal were to be performed. Accordingly, the
aggregate estimated fair value amounts presented herein are limited by each of
these factors and do not purport to represent the underlying value of the
Company.
5. ACQUISITION
________________________________________________________________________________
Transaction: On August 13, 1996, Equitable acquired all of the outstanding
capital stock of BT Variable from Whitewood, a wholly-owned subsidiary of
Bankers Trust, pursuant to the terms of the Purchase Agreement dated as of
May 3, 1996 between Equitable and Whitewood. In exchange for the outstanding
capital stock of BT Variable, Equitable paid the sum of $93,000,000 in cash
to Whitewood in accordance with the terms of the Purchase Agreement. Equitable
also paid the sum of $51,000,000 in cash to Bankers Trust to retire certain
debt owed by BT Variable to Bankers Trust pursuant to a revolving credit
arrangement. Subsequent to the acquisition, the BT Variable, Inc. name was
changed to EIC Variable, Inc.
Accounting Treatment: The acquisition was accounted for as a purchase
resulting in a new basis of accounting, reflecting estimated fair values for
assets and liabilities at August 13, 1996. The purchase price was allocated
to the three companies purchased - BT Variable, DSI and Golden American.
Goodwill was established for the excess of the acquisition cost over the fair
value of the net assets acquired and pushed down to Golden American. The
acquisition cost is preliminary with respect to the final settlement of taxes
with Bankers Trust and estimated expenses and, as a result, goodwill may
change. The allocation of the purchase price to Golden American was
approximately $139,872,000. The amount of goodwill relating to the
acquisition was $39,254,000 at the acquisition date and is being amortized
over 25 years on a straight line basis. The carrying value of goodwill will
be reviewed periodically for any indication of impairment in value.
Pro Forma Information (Unaudited): The following pro forma information is
presented as if the acquisition had occurred on January 1, 1995. The
information is combined to reflect the purchase accounting in the pre-
acquisition periods of January 1, 1996 through August 13, 1996 and for the
year ended December 31, 1995. This information is intended for informational
purposes only and may not be indicative of the Company's future results of
operations.
<TABLE>
<CAPTION>
Year ended December 31, 1996 1995
___________________________________________________________________
(Dollars in thousands) (Unaudited)
<S> <C> <C>
Revenues $35,955 $25,149
Net income 799 1,093
</TABLE>
The primary pro forma effects are revised amortization of deferred policy
acquisition costs, present value of in force acquired, unearned revenue,
goodwill and the elimination of deferred tax benefits.
Present Value of In Force Acquired: As part of the acquisition, a portion of
the acquisition cost was allocated to the right to receive future cash flows
from the insurance contracts existing with Golden American at the date of
acquisition. This allocated cost represents the present value of in force
acquired ("PVIF") which reflects the value of those purchased policies
calculated by discounting the actuarially determined expected future cash
flows at the discount rate determined by Equitable.
An analysis of the PVIF asset is as follows:
<TABLE>
<CAPTION>
POST-
ACQUISITION PRE-ACQUISITION
_______________________________________________
For the | For the
period | period
August | January
14, 1996 | 1, 1996 Year Year
through | through ended ended
December | August December December
31, 1996 | 13, 1996 31, 1995 31, 1994
____________| _________________________________
(Dollars in thousands)
<S> <C> | <C> <C> <C>
Beginning balance $85,796 | $6,057 $7,620 $9,784
Imputed interest 2,465 | 273 548 696
Amortization (5,210)| (1,224) (2,100) (2,860)
Adjustment for unrealized gains |
on available for sale securities -- | 11 (11) --
____________| _________________________________
Ending balance $83,051 | $5,117 $6,057 $7,620
============ =================================
</TABLE>
Pre-Acquisition PVIF represents the remaining value assigned to in force
contracts when Bankers Trust purchased Golden American from Mutual Benefit on
September 30, 1992. See Note 8, contingent liability for additional
information.
Interest is imputed on the unamortized balance of PVIF at rates of 7.70% to
7.80% for the period August 14, 1996 through December 31, 1996. PVIF is
charged to expense and adjusted for the unrealized gains (losses) on available
for sale securities. Based on current conditions and assumptions as to the
future events on acquired policies in force, the expected approximate net
amortization for the next five years, relating to the balance of the PVIF as of
December 31, 1996, is as follows:
<TABLE>
<CAPTION>
Year Amount
_________________________________________________
(Dollars in thousands)
<S> <C>
1997 $9,664
1998 10,109
1999 9,243
2000 7,919
2001 6,798
</TABLE>
6. INCOME TAXES
________________________________________________________________________________
The Company files a federal income tax return separate from its parent company.
Under the Internal Revenue Service Code, a newly acquired insurance company
must file a separate return for 5 years. Deferred income taxes have been
established based upon the temporary differences, the reversal of which will
result in taxable or deductible amounts in future years when the related asset
or liability is recovered or settled.
At December 31, 1995 and 1994, Golden American had net operating loss ("NOL")
carryforwards for federal income tax purposes of approximately $22,600,000 and
$17,400,000, respectively. As a result of the election made in connection with
the acquisition, the Company will be treated as a new taxpayer commencing on
August 14, 1996. For the period August 14, 1996 through December 31, 1996, the
Company incurred a NOL of $4,725,000.
INCOME TAX EXPENSE
Income tax expenses (credits) are included in the consolidated financial
statements as follows:
<TABLE>
<CAPTION>
POST-ACQUISITION PRE-ACQUISITION
____________________________________
For the period | For the period
August 14, 1996 | January 1, 1996
through | through
December 31, 1996| August 13, 1996
_________________| _________________
(Dollars in thousands)
<S> <C> | <C>
Taxes provided in consolidated |
statements of income - deferred $220 | ($1,463)
|
Taxes provided in consolidated |
statement of changes in |
stockholder's equity on |
unrealized gains - deferred 145 | --
_________________| _________________
$365 | ($1,463)
=================| =================
</TABLE>
Income tax expense (credits) attributed to realized gains and losses on
investments amounted to $15,000 and $(147,000) and for the periods August 14,
1996 through December 31, 1996, and January 1, 1996 through August 13, 1996,
respectively. The effective tax rate on income before income taxes and equity
income (loss) is different from the prevailing federal income tax rate as
follows:
<TABLE>
<CAPTION>
POST-
ACQUISITION PRE-ACQUISITION
_______________________________________________________
For the | For the
period | period
August 14, | January 1,
1996 through| 1996 through Year ended Year ended
December 31,| August 13, December 31, December 31,
1996 | 1996 1995 1994
____________| _________________________________________
(Dollars in thousands)
<S> <C> | <C> <C> <C>
Income before income |
taxes $570 | $1,736 $3,364 $2,222
Income tax at federal |
statutory rate 200 | 607 1,177 778
Tax effect (decrease) of: |
Realization of NOL |
carryforwards -- | (1,214) -- --
Dividends received |
deduction -- | -- (350) (368)
Other items 20 | -- 17 (210)
Valuation allowance -- | (856) (844) (200)
____________| _________________________________________
Income tax expense |
(benefit) $220 | ($1,463) $ -- $ --
============| =========================================
</TABLE>
DEFERRED INCOME TAXES
The tax effect of temporary differences giving rise to the Company's deferred
income tax assets and liabilities at December 31, 1996 and 1995 is as follows:
<TABLE>
<CAPTION>
POST-ACQUISITION PRE-ACQUISITION
___________________________________
December 31, 1996 | 1995
____________________________________________________________ | ________________
(Dollars in thousands)
<S> <C> | <C>
Deferred tax assets: |
Future policy benefits $19,102 | $15,520
Deferred policy acquisition costs 1,985 | 3,666
Goodwill 5,918 | --
Net operating loss carryforwards 1,653 | 7,891
Other 235 | 57
________________ | ________________
28,893 | 27,134
Deferred tax liabilities: |
Net unrealized appreciation of available |
for sale fixed maturity securities 145 | --
Deferred policy acquisition costs -- | 23,560
Unamortized cost assigned to present |
value of in force acquired 29,068 | 2,120
Other 45 | 598
________________ | ________________
29,258 | 26,278
|
Valuation allowance, for deferred tax assets -- | (856)
________________ | ________________
Deferred income tax liability $365 | $ --
================ | ================
</TABLE>
7. RELATED PARTY TRANSACTIONS
________________________________________________________________________________
DSI acts as the principal underwriter (as defined in the Securities Act of
1933 and the Investment Company Act of 1940, as amended) of the variable
insurance products issued by Golden American which as of December 31, 1996
are sold primarily through two broker/dealer institutions. For the periods
August 14, 1996, through December 31, 1996 and January 1, 1996 through August
13, 1996, Golden American paid commissions to DSI totaling $9,995,000 and
$17,070,000, respectively. For the years ended December 31, 1995, and 1994,
commissions paid by Golden American to DSI aggregated $8,440,000 and
$17,569,000, respectively.
Golden American charged DSI for various expenses and all other general and
administrative costs, first on the basis of direct charges when identifiable,
with the remainder allocated based on the estimated amount of time spent by
Golden American's employees on behalf of DSI. For the year ended December
31, 1994 expenses allocated to DSI were $1,983,000.
Golden American provides certain managerial and supervisory services to DSI.
In 1996 and 1995, this fee was calculated as a percentage of average assets
in the variable separate accounts. For the periods August 14, 1996 through
December 31, 1996 and January 1, 1996 through August 13, 1996 the fee was
$877,000 and $1,390,000, respectively. This fee was $987,000 for 1995.
On August 14, 1996, the Company began purchasing investment management
services from an affiliate. Payments for these services totaled $72,000
through December 31, 1996. On August 14, 1996, all employees of Golden
American, except wholesalers, became statutory employees of Equitable Life
Insurance Company, an affiliate.
Surplus Note: On December 17, 1996, Golden American issued a surplus note in
the amount of $25,000,000 to Equitable. The note matures on December 17, 2026
and will accrue interest of 8.25% per annum until paid. The note and accrued
interest thereon shall be subordinate to payments due to policyholders,
claimant and beneficiary claims, as well as debts owed to all other classes of
debtors of Golden American. Any payment of principal made shall be subject to
the prior approval of the Delaware Insurance Commissioner. On December 17,
1996, Golden American contributed the $25,000,000 to First Golden acquiring
200,000 shares of common stock (100% of outstanding stock) of First Golden.
Line of Credit: Golden American maintains a line of credit agreement with
Equitable to facilitate the handling of unusual and/or unanticipated short-
term cash requirements. Under the current agreement, which became effective
December 1, 1996 and expires on December 31, 1997, Golden American can borrow
up to $25,000,000. Interest on any borrowings is charged at the rate of
Equitable's monthly average aggregate cost of short-term funds plus 1.00%.
For the period August 14 through December 31, 1996, the Company paid $85,000
of interest under this agreement. At December 31, 1996, no amounts were
outstanding under this agreement.
Short-term Debt: All short-term debt was repaid as of December 30, 1994.
Interest paid during 1994 was $1,962,000. The repayment of amounts under this
loan had been guaranteed by Bankers Trust.
Stockholder's Equity: On September 23, 1996, EIC Variable, Inc. (formally
known as BT Variable, Inc.) contributed $50,000,000 of Preferred Stock to the
Company's additional paid-in capital.
8. COMMITMENTS AND CONTINGENCIES
________________________________________________________________________________
Contingent Liability: In a transaction that closed on September 30, 1992,
Bankers Trust Company ("Bankers Trust") acquired from Mutual Benefit Life
Insurance Company in Rehabilitation ("Mutual Benefit"), in accordance with
the terms of an Exchange Agreement, all of the issued and outstanding capital
stock of Golden American and DSI and certain related assets for consideration
with an aggregate value of $13,200,000 and contributed them to BT Variable.
The transaction involved settlement of pre-existing claims of Bankers Trust
against Mutual Benefit. The ultimate value of these claims has not yet been
determined by the Superior Court of New Jersey and, prior to August 13, 1996,
was contingently supported by a $5,000,000 note payable from Golden American
and a $6,000,000 letter of credit from Bankers Trust. Bankers Trust had
estimated that the contingent liability due from Golden American amounted to
$439,000 at August 13, 1996 and December 31, 1995. At August 13, 1996 the
balance of the escrow account established to fund the contingent liability was
$4,293,000 ($4,150,000 at December 31, 1995).
On August 13, 1996, Bankers Trust made a cash payment to Golden American in
an amount equal to the balance of the escrow account less the $439,000
contingent liability discussed above. In exchange, Golden American
irrevocably assigned to Bankers Trust all of Golden American's rights to
receive any amounts to be disbursed from the escrow account in accordance with
the terms of the Exchange Agreement. Bankers Trust also irrevocably agreed to
make all payments becoming due under the Golden American note and to indemnify
Golden American for any liability arising from the note.
Reinsurance: At December 31, 1996, Golden American had reinsurance treaties
with reinsurers covering a significant portion of the mortality risks under its
variable contracts with unaffiliated reinsurers. Golden American remains
liable to the extent its reinsurers do not meet their obligations under the
reinsurance agreements. Reinsurance in force for life mortality risks were
$58,368,000 and $24,709,000 at December 31, 1996 and 1995. Included in the
accompanying financial statements are net considerations to reinsurers of
$875,000, $600,000, $2,800,000 and $2,400,000 and net policy benefits
recoveries of $654,000, $1,267,000, $3,500,000 and $1,900,000 for the periods
August 14, 1996 through December 31, 1996, and January 1, 1996 through August
13, 1996 and the years ended 1995 and 1994, respectively.
Effective June 1, 1994, Golden American entered into a modified coinsurance
agreement with an unaffiliated reinsurer. The accompanying financial
statements are presented net of the effects of the treaty which increased
income by $10,000 and $56,000 for the periods August 14, 1996 through December
31, 1996 and January 1, 1996 through December 31, respectively. In 1995 and
1994, net income was reduced by $109,000 and $27,000, respectively.
Guaranty Fund Assessments: Assessments are levied on the Company by life and
health guaranty associations in most states in which the Company is licensed
to cover losses of policyholders of insolvent or rehabilitated insurers. In
some states, these assessments can be partially recovered through a reduction
in future premium taxes. The Company cannot predict whether and to what extent
legislative initiatives may affect the right to offset. Based upon information
currently available from the National Organization of Life and Health Insurance
Guaranty Associations (NOLHGA), the Company believes that it is probable these
insolvencies will result in future assessments which could be material to the
Company's financial statements if the Company's reserve is not sufficient. The
Company regularly reviews its reserve for these insolvencies and updates its
reserve based upon the Company's interpretation of information from the NOLHGA
annual report. The associated cost for a particular insurance company can vary
significantly based upon its fixed account premium volume by line of business
and state premiums levels as well as its potential for premium tax offset.
Accordingly, the Company accrued and charged to expense an additional $291,000
for the period August 14, 1996 through December 31, 1996 and $480,000 for the
period January 1, 1996 through August 13, 1996. At December 31, 1996, the
Company has an undiscounted reserve of $771,000 to cover estimated future
assessments (net of related anticipated premium tax credits) and has
established an asset totaling $3,000 for assessments paid which may be
recoverable through future premium tax offsets. The Company believes this
reserve is sufficient to cover expected future insurance guaranty fund
assessments, based upon previous premium levels, and known insolvencies at this
time.
Litigation: In the ordinary course of business, the Company is engaged in
litigation, none of which management believes is material.
Vulnerability from Concentrations: The Company has various concentrations in
its investment portfolio (see Note 3 for further information). The Company's
asset growth, net investment income and cash flow are primarily generated from
the sale of variable products and associated future policy benefits and
separate account liabilities. A significant portion of the Company's sales are
generated by two broker/dealers. Substantial changes in tax laws that would
make these products less attractive to consumers, extreme fluctuations in
interest rates or stock market returns which may result in higher lapse
experience than assumed, could cause a severe impact to the Company's financial
condition.
Other Commitments: At December 31, 1996, outstanding commitments to fund
mortgage loans on real estate totaled $14,250,000.
7
<PAGE>
APPENDIX: DESCRIPTION OF BOND RATINGS
Excerpts from Moody's Investors Service, Inc. ("Moody's) description of its
bond ratings:
Aaa: Judged to be the best quality; they carry the smallest degree of
investment risk.
Aa: Judged to be of high quality by all standards; together with the Aaa
group, they comprise what are generally known as high grade bonds.
A: Possess many favorable investment attributes and are to be considered
as "upper medium grade obligations."
Baa: Considered as medium grade obligations, i.e., they are neither highly
protected nor poorly secured; interest payments and principal security
appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of
time.
Ba: Judged to have speculative elements; their future cannot be considered
as well assured.
B: Generally lack characteristics of the desirable investment.
Caa: Are of poor standing; such issues may be in default or there may be
present elements of danger with respect to principal or interest.
Ca: Speculative in a high degree; often in default.
C: Lowest rate class of bonds; regarded as having extremely poor
prospects.
Moody's also applies numerical indicators 1, 2 and 3 to rating categories. The
modifier 1 indicates that the security is in the higher end of its rating
category; 2 indicates a mid-range ranking; and 3 indicates a ranking toward the
lower end of the category.
Excerpts from Standard & Poor's Rating Group ("Standard & Poor's") description
of its bond ratings:
AAA: Highest grade obligations; capacity to pay interest and repay
principal is extremely strong.
AA: Also qualify as high grade obligations; a very strong capacity to pay
interest and repay principal and differs from AAA issues only in small
degree.
A: Regarded as upper medium grade; they have a strong capacity to pay
interest and repay principal although it is somewhat more susceptible to
the adverse effects of changes in circumstances and economic conditions
than debt in higher rated categories.
BBB: Regarded as having an adequate capacity to pay interest and repay
principal; whereas it normally exhibits adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to
lead to a weakened capacity than in higher rated categories -- this group
is the lowest which qualifies for commercial bank investment.
BB, B,
CCC,
CC: Predominantly speculative with respect to capacity to pay interest and
repay principal in accordance with terms of the obligation: BB indicates
the lowest degree of speculation and CC the highest.
Standard & Poor's applies indicators "+," no character, and "-" to its rating
categories. The indicators show relative standing within the major rating
categories.
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