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As Filed with the Securities and Exchange Commission on April 30, 1998
Registration Nos. 333-28755; 811-5626
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.___
Post-Effective Amendment No. 2
and/or
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 55
SEPARATE ACCOUNT B
(EXACT NAME OF REGISTRANT)
GOLDEN AMERICAN LIFE INSURANCE COMPANY
(NAME OF DEPOSITOR)
1001 Jefferson Street
Wilmington, DE 19801
302-576-3400
(ADDRESS AND TELEPHONE NUMBER OF DEPOSITOR'S PRINCIPAL OFFICES)
Marilyn Talman, Esq. COPY TO:
Golden American Life Insurance Company Stephen E. Roth, Esq.
1001 Jefferson Street, Suite 400 Sutherland, Asbill & Brennan LLP
Wilmington, DE 19801 1275 Pennsylvania Avenue, N.W.
(NAME AND ADDRESS OF AGENT FOR SERVICE Washington, D.C. 20004-2404
OF PROCESS)
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
A soon as practical after the effective date of the Registration Statement
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE:
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[x] on May 1, 1998 pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a)(1) of Rule 485
[ ] on _________ pursuant to paragraph (a)(1) of Rule 485
IF APPROPRIATE, CHECK THE FOLLOWING BOX:
[ ] this Post-Effective Amendment designates a new effective date for
a previously filed Post-Effective Amendment.
TITLE OF SECURITIES BEING REGISTERED:
Deferred Combination Variable and Fixed Annuity Contracts
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CROSS REFERENCE SHEET
Pursuant to Rule 495(a)
PART A
N-4 Item Prospectus Heading
1. Cover Page Cover Page
2. Definitions Definition of Terms
3. Synopsis Summary of the Contracts
4. Condensed Financial Information Condensed Financial Information
5. General Description of Facts About the Company
Registrant, Depositor, and the Accounts
and Portfolio Companies
6. Deductions and Expenses Charges and Fees
7. General Description of Variable Facts About the Contracts
Annuity Contracts
8. Annuity Period Choosing Your Annuitization Options
9. Death Benefit Facts About the Contracts
10. Purchases and Contract Value Facts About the Contracts,
Charges and Fees
11. Redemptions Facts About the Contracts
12. Taxes Federal Tax Considerations
Additional Considerations
13. Legal Proceedings Regulatory Information
14. Table of Contents of the Statement of Additional Information
Statement of Additional
Information
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PART B
Statement of Additional
N-4 Item Information Heading
15. Cover Page Cover Page
16. Table of Contents Table of Contents
17. General Information and Description of Golden American
History Life Insurance Company
18. Services Safekeeping of Assets,
Independent Auditors,
The Administrator
19. Purchase of Securities Distribution of Contracts
Being Offered
20. Underwriters Distribution of Contracts
21. Calculation of Performance Performance Information
Data
22. Annuity Payments Part A, Choosing Your
Annuitization Options
23. Financial Statements Part B, Financial Statements of
Separate Account B,
Part A, Financial Statements of
Golden American Life
Insurance Company
PART C
Items required in Part C are located therein.
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PART A
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PROSPECTUS SUPPLEMENT
PREMIUM PLUS PROSPECTUS SUPPLEMENT
FOR USE IN STATES WHICH DO NOT PERMIT MARKET VALUE ADJUSTMENTS
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PROSPECTUS SUPPLEMENT
DATED MAY 1, 1998
Supplement to the
Prospectus dated May 1, 1998 for
DEFERRED COMBINATION VARIABLE AND FIXED ANNUITY CONTRACT
issued
by Golden American Life Insurance Company
(the "GoldenSelect PREMIUM PLUS Prospectuses")
__________
This supplement should be retained with your Prospectus.
A Fixed Interest Division option is available through the
group and individual deferred variable annuity contracts
offered by Golden American Life Insurance Company. The
Fixed Interest Division is part of the Golden American
General Account. Interests in the Fixed Interest Division
have not been registered under the Securities Act of 1933,
and neither the Fixed Interest Division nor the General
Account are registered under the Investment Company Act of
1940.
Interests in the Fixed Interest Division are offered through
an Offering Brochure, dated October 1, 1997. The Fixed
Interest Division is different from the Fixed Account which
is described in the prospectus but which is not available
in your state. When reading through the GoldenSelect
PREMIUM PLUS Prospectus, the Fixed Interest Division should
be counted among the various divisions available for the
allocation of your premiums,in lieu of the Fixed Account.
The Fixed Interest Division may not be available in some
states. Some restrictions may apply.
More complete information relating to the Fixed Interest
Division is found in the Offering Brochure. Please read the
Offering Brochure carefully before you invest in the Fixed
Interest Division.
G3316 FID PREMIUM PLUS 5/98
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PROSPECTUS SUPPLEMENT
PREMIUM PLUS PROSPECTUS 5.5% WA SUPPLEMENT
FOR USE ONLY IN THE STATE OF WASHINGTON
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GOLDEN AMERICAN LIFE INSURANCE COMPANY
PROSPECTUS SUPPLEMENT
MAY 1, 1998
SUPPLEMENT TO THE PROSPECTUS DATED MAY 1, 1998 FOR
DEFERRED COMBINATION VARIABLE AND FIXED ANNUITY CONTRACTS
(THE "GOLDENSELECT/r/ PREMIUM PLUS PROSPECTUS")
ISSUED BY GOLDEN AMERICAN LIFE INSURANCE COMPANY
FOR USE ONLY IN THE STATE OF WASHINGTON
__________
The following information supplements and replaces certain
information contained in the Deferred Combination Variable
and Fixed Annuity Prospectus, dated May 1, 1998
(the "Prospectus"). All capitalized terms have the meaning
set forth in the Prospectus. This supplement should be
retained with your Prospectus.
GoldenSelect PREMIUM PLUS contracts issued for delivery in
the State of Washington will have a "5.5% Enhanced Death
Benefit Option." This option replaces that referred to as
the "7% Solution Enhanced Death Benefit Option" in the
Prospectus. The following describes the option and its
features.
The following replaces the paragraph titled "7% Solution
Enhanced Death Benefit Option" on page 2 of the Prospectus:
5.5% Solution Enhanced Death Benefit Option
An enhanced death benefit option that may be elected only at
issue and only if the Owner or Annuitant (when the Owner is
other than an individual) is age 80 or younger. The
enhanced death benefit provided by this option is equal to
premiums paid plus any Credits accumulated at an annual rate
of return of 5.5%, except on those premiums and Credits
invested in the Liquid Asset Division, Limited Maturity Bond
Division, and the General Account, as adjusted for
additional premiums and partial withdrawals. Any Credit
applied within twelve months prior to the date of death may
reduce the death benefit. Each accumulated initial or
additional premium payment plus any Credits reduced by any
partial withdrawals taken will continue to grow at 5.5% for
as long as the contract remains in force.
The following supplements the section titled "Fee Table,"
beginning on page 5 of the Prospectus:
The following changes the table titled "Annual Contract
Fees" on page 5:
Administrative Charge...................... $30
The following changes the table titled "Separate Account
Annual Expenses" on page 5:
Replace the column headed "7% Solution" with a column
identical to the column "Annual Ratchet" but headed "5.5%
Solution" under the heading "Enhanced Death Benefit" (shown
below):
5.5% Solution
Mortality and Expense Risk Charge........ 1.40%
Asset Based Administrative Charge........ 0.15%
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Total Separate Account Expenses.......... 1.55%
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The examples shown on pages 8 and 9 of the Prospectus are the
highest expenses associated with a contract which would
occur based on the election of the 7% Solution Enhanced
Death Benefit Option. If all other assumptions are the
same, the fees associated with an election of the 5.5%
Solution Enhanced Death Benefit Option would not exceed
those shown on pages 8 and 9.
The following changes the first two paragraphs under the
heading "Death Benefit Options" on page 31:
Replace the text "7% Solution" with "5.5% Solution" in all
instances.
The following replaces the discussion titled "7% Solution
Enhanced Death Benefit Option" on page 31 of the Prospectus:
5.5% Solution Enhanced Death Benefit Option
(1) We take the enhanced death benefit from the prior
Valuation Date. On the Contract Date, the enhanced
death benefit is equal to the Initial Premium plus any
Credits.
(2) We calculate interest on (1) for the current Valuation
Period at the enhanced death benefit interest rate,
which rate is an annual rate of 5.5%; except that with
respect to amounts in the Liquid Asset Division and the
Limited Maturity Bond Division, the interest rate
applied to such amounts will be the respective net rate
of return for such Divisions during the current
Valuation Period, if it is less than an annual rate of
5.5%; and except with respect to amounts in a Fixed
Allocation, the interest rate applied to such amounts
will be the interest credited to such Fixed Allocation
during the current Valuation Period, if it is less that
an annual rate of 5.5%.
(3) We add (1) and (2).
(4) We add to (3) any additional premiums paid and any
Credits during the current Valuation Period.
(5) We subtract from (4) any partial withdrawals (including
any surrender charges incurred) made during the current
Valuation Period.
The following supplements the paragraph titled "Administrative
Charge," appearing on page 34 of the Prospectus:
The administrative charge, if applicable, is $30 per Contract
Year.
The following supplements the paragraph titled "Mortality and
Expense Risk Charge," appearing on page 34 of the Prospectus:
The annual charge for the mortality and expense risk is the
same as that described for the Annual Ratchet Death Benefit
Option. If the 5.5% Solution Death Benefit Option is elected,
the charge is equivalent, on an annual basis, to 1.40% of
the assets in each Division. The charge is deducted on each
Valuation Date at the rate of .003863% for each day in the
Valuation Period.
This supplement should be retained with your GoldenSelect/r/
PREMIUM PLUS Prospectus.
Golden American Life Insurance Company
Golden American Life Insurance Company is a stock company domiciled
in Wilmington, Delaware
IN G3760-WA PREMIUM PLUS 5/98
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GOLDEN AMERICAN LIFE INSURANCE COMPANY
Golden American Life Insurance Company is a stock company domiciled in
Wilmington, Delaware
DEFERRED COMBINATION VARIABLE AND
FIXED ANNUITY PROSPECTUS
GOLDENSELECT PREMIUM PLUS
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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 two accounts, Separate Account B ("Account B") and the
Fixed Account (collectively, the "Accounts").
Twenty-three 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"), the Equi-Select
Series Trust (the "ESS Trust"), the Warburg Pincus Trust (the "WP Trust") and
the PIMCO Variable Insurance Trust (the "PIMCO Trust"). The investments
available through the Fixed Account include various Fixed Allocations which we
credit with fixed rates of interest for the Guarantee Periods you select. We
currently offer Guarantee Periods with durations of 1, 3, 5, 7 and 10 years. We
reserve the right at any time to increase or decrease the number of Guarantee
Periods offered. Not all Guarantee Periods may be available.
This prospectus describes the Contract and provides background information
regarding Account B and the Fixed Account. The prospectuses for the GCG Trust,
the ESS Trust, the WP Trust and the PIMCO Trust (individually, "a Trust," and
collectively, "the Trusts"), which must accompany this prospectus, provide
information regarding investment activities and policies of the Trusts.
You may allocate your premiums and Credits among the twenty-three Divisions and
the Fixed Allocations available under the Contract in any way you choose,
subject to certain restrictions. You may change the allocation of your
Accumulation Value during a Contract Year free of charge. We reserve the right,
however, to assess a charge for each allocation change after the twelfth
allocation change in a Contract Year.
Your Accumulation Value in Account B will vary in accordance with the investment
performance of the Divisions selected by you. Therefore, you bear the entire
investment risk for all amounts allocated to Account B. You also bear investment
risk with respect to surrenders, partial withdrawals, transfers and
annuitization from a Fixed Allocation prior to the end of the applicable
Guarantee Period. Such surrender, partial withdrawal, transfer or annuitization
may be subject to a Market Value Adjustment, which could have the effect of
either increasing or decreasing your Accumulation Value.
We will pay a death benefit to the Beneficiary if the Owner dies prior to the
Annuity Commencement Date or the Annuitant dies prior to the Annuity
Commencement Date when the Owner is other than an individual.
This prospectus describes your principal rights and limitations and sets forth
the information concerning the Accounts that investors should know before
investing. A Statement of Additional Information, dated May 1, 1998, about
Account B has been filed with the Securities and Exchange Commission ("SEC") and
is available without charge upon request. To obtain a copy of this document call
or write our Customer Service Center. The Table of Contents of the Statement of
Additional Information may be found on the last page of this prospectus. The
Statement of Additional Information is incorporated herein by reference.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE 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, THE ESS TRUST
AND THE WP TRUST.
THE FIXED ACCOUNT AND ENHANCED DEATH BENEFITS MAY NOT BE AVAILABLE IN ALL
STATES. YOU MAY CONTACT OUR CUSTOMER SERVICE CENTER TO FIND OUT ABOUT STATE
AVAILABILITY.
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<CAPTION>
ISSUED BY: DISTRIBUTED BY: ADMINISTERED AT:
<S><C>
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, 1998
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TABLE OF CONTENTS
PAGE
DEFINITION OF TERMS................................ 1
SUMMARY OF THE CONTRACT............................ 3
FEE TABLE.......................................... 5
CONDENSED FINANCIAL AND OTHER INFORMATION.......... 10
Index of Investment Experience................... 10
Financial Statements............................. 10
Performance Related Information.................. 10
INTRODUCTION....................................... 11
FACTS ABOUT THE COMPANY AND THE ACCOUNTS........... 11
Golden American.................................. 11
The Trusts....................................... 12
Separate Account B............................... 13
Account B Divisions.............................. 13
Changes Within Account B......................... 19
The Fixed Account................................ 20
FACTS ABOUT THE CONTRACT........................... 22
The Owner........................................ 22
The Annuitant.................................... 22
The Beneficiary.................................. 23
Change of Owner or Beneficiary................... 23
Availability of the Contract..................... 23
Types of Contracts............................... 23
Your Right to Select or Change Contract
Options......................................... 23
Premiums......................................... 24
Qualified Plans.................................. 24
Making Additional Premium Payments............... 24
Crediting Premium Payments....................... 24
Restrictions on Allocation of Premium Payments... 25
Your Right to Reallocate......................... 25
Dollar Cost Averaging............................ 26
What Happens if a Division is Not Available...... 26
Additional Credit to Premium..................... 26
Your Accumulation Value.......................... 27
Accumulation Value in Each Division.............. 27
Measurement of Investment
Experience...................................... 27
Cash Surrender Value............................. 28
Surrendering to Receive the Cash Surrender
Value........................................... 28
Partial Withdrawals.............................. 28
Automatic Rebalancing............................ 30
Proceeds Payable to the Beneficiary.............. 30
Death Benefit Options............................ 31
Reports to Owners................................ 32
When We Make Payments............................ 32
CHARGES AND FEES................................... 32
Charge Deduction Division........................ 33
Charges Deducted from the Accumulation Value..... 33
PAGE
Charges Deducted from the Divisions.............. 34
Trust Expenses................................... 35
CHOOSING YOUR ANNUITIZATION OPTIONS................ 35
Annuitization of Your Contract................... 35
Annuity Commencement Date Selection.............. 35
Frequency Selection.............................. 36
The Annuitization Options........................ 36
Payment When Named Person Dies................... 36
OTHER CONTRACT PROVISIONS.......................... 36
In Case of Errors in Application Information..... 36
Contract Changes -- Applicable Tax Law........... 37
Your Right to Cancel or Exchange Your Contract... 37
Other Contract Changes........................... 37
Group or Sponsored Arrangements.................. 37
Selling the Contract............................. 38
REGULATORY INFORMATION............................. 38
Voting Rights.................................... 38
State Regulation................................. 38
Legal Proceedings................................ 38
Legal Matters.................................... 39
Experts.......................................... 39
MORE INFORMATION ABOUT GOLDEN AMERICAN LIFE
INSURANCE COMPANY.................................
Selected Financial Data..........................
Management's Discussion and Analysis of Financial
Condition and
Results of Operations...........................
Directors and Executive Officers.................
Compensation Tables and Other Information........
FEDERAL TAX CONSIDERATIONS......................... 52
Introduction..................................... 52
Tax Status of Golden American.................... 53
Taxation on Non-qualified Annuities.............. 53
IRA Contracts and Other Qualified Retirement
Plans........................................... 56
Federal Income Tax Withholding................... 59
AUDITED FINANCIAL STATEMENTS OF GOLDEN AMERICAN
LIFE INSURANCE COMPANY............................
STATEMENT OF ADDITIONAL INFORMATION................ 93
Table of Contents................................ 93
APPENDIX A......................................... A1
Market Value Adjustment Examples................. A1
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
ACCOUNTS -- Separate Account B and the Fixed Account.
ACCUMULATION VALUE -- The total amount invested under the Contract. Initially,
this amount is equal to the premium paid plus any Credit. Thereafter, the
Accumulation Value will reflect the premiums paid, plus any Credit, investment
experience of the Divisions and interest credited to your Fixed Allocations,
charges deducted and any partial withdrawals.
ANNUAL RATCHET ENHANCED DEATH BENEFIT OPTION -- An enhanced death benefit option
that may be elected only at issue and only if the Owner or Annuitant (when the
Owner is other than an individual) is age 79 or younger. The enhanced death
benefit provided by this option is the highest Accumulation Value on any
Contract Anniversary on or prior to the Owner turning age 80, as adjusted for
additional premiums, credits and partial withdrawals. The death benefit may be
reduced for any Credit applied within 12 months prior to the date of death.
ANNUITANT -- The person designated by the Owner to be the measuring life in
determining Annuity Payments.
ANNUITY COMMENCEMENT DATE -- The date on which Annuity Payments begin.
ANNUITY OPTIONS -- Options the Owner selects that determine the form and amount
of Annuity Payments.
ANNUITY PAYMENT -- The periodic payment an Owner receives. It may be either a
fixed or a variable amount based on the Annuity Option chosen.
ATTAINED AGE -- The Issue Age of the Owner or Annuitant plus the number of full
years elapsed since the Contract Date.
BENEFICIARY -- The person designated to receive benefits in the case of the
death of the Owner or the Annuitant (when the Owner is other than an
individual).
BUSINESS DAY -- Any day the New York Stock Exchange ("NYSE") is open for
trading, exclusive of Federal holidays, or any day on which the SEC requires
that mutual funds, unit investment trusts or other investment portfolios be
valued.
CASH SURRENDER VALUE -- The amount the Owner receives upon surrender of the
Contract, including any Market Value Adjustment.
CHARGE DEDUCTION DIVISION -- The Division from which all charges are deducted if
so designated by you. The Charge Deduction Division currently is the Liquid
Asset Division.
CONTINGENT ANNUITANT -- The person designated by the Owner who, upon the
Annuitant's death prior to the Annuity Commencement Date, becomes the Annuitant.
CONTRACT -- The entire Contract consisting of the basic Contract and any riders
or endorsements.
CONTRACT ANNIVERSARY -- The anniversary of the Contract Date.
CONTRACT DATE -- The date on which we have received the Initial Premium and upon
which we begin determining the Contract values. It may or may not be the same as
the Issue Date. This date is used to determine Contract months, processing
dates, years and anniversaries.
CONTRACT PROCESSING DATES -- The days when we deduct certain charges from the
Accumulation Value. If the Contract Processing Date is not a Valuation Date, it
will be on the next succeeding Valuation Date. The Contract Processing Dates
will be once each year on the Contract Anniversary.
CONTRACT PROCESSING PERIOD -- The first Contract processing period begins with
the Contract Date and ends at the close of business on the first Contract
Processing Date. All subsequent Contract processing periods begin at the close
of business on the most recent Contract Processing Date and extend to the close
of business on the next Contract Processing Date. There is one Contract
processing period each year.
CONTRACT YEAR -- The period between Contract anniversaries.
CREDIT -- An amount added to the Contract's Accumulation Value at the time a
premium payment is made.
CUSTOMER SERVICE CENTER -- Where service is provided to you. The mailing address
and telephone number of the Customer Service Center are shown on the cover.
DIVISIONS -- The investment options available under Account B.
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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.
FIXED ACCOUNT -- An Account which contains all of our assets that support Owner
Fixed Allocations and any interest credited thereto.
FIXED ALLOCATION -- An amount allocated to the Fixed Account that is credited
with a Guaranteed Interest Rate for a specified Guarantee Period.
FREE LOOK PERIOD -- The period of time within which the Owner may examine the
Contract and return it for a refund.
GUARANTEED INTEREST RATE -- The effective annual interest rate which we will
credit for a specified Guarantee Period. The Guaranteed Interest Rate will never
be less than 3%.
GUARANTEE PERIOD -- The period of time for which a rate of interest is
guaranteed to be credited to a Fixed Allocation. We currently offer Guarantee
Periods with durations of 1, 3, 5, 7 and 10 years.
INDEX OF INVESTMENT EXPERIENCE -- The index that measures the performance of a
Division.
INITIAL PREMIUM -- The payment required to put a Contract into effect.
ISSUE AGE -- The Owner's or Annuitant's age on his or her last birthday on or
before the Contract Date.
ISSUE DATE -- The date the Contract is issued at our Customer Service Center.
MARKET VALUE ADJUSTMENT -- A positive or negative adjustment made to a Fixed
Allocation. It may apply to certain withdrawals and transfers, whether in whole
or in part, and annuitizations of all or part of a Fixed Allocation prior to the
end of a Guarantee Period.
MATURITY DATE -- The date on which a Guarantee Period matures.
OWNER -- The person who owns the Contract and is entitled to exercise all rights
under the Contract. This person's death also initiates payment of the death
benefit.
RIDER -- A rider amends the Contract, in certain instances adding benefits.
7% SOLUTION ENHANCED DEATH BENEFIT OPTION -- An enhanced death benefit option
that may be elected only at issue and only if the Owner or Annuitant (when the
Owner is other than an individual) is age 80 or younger. The enhanced death
benefit provided by this option is equal to premiums paid plus credits
accumulated at an annual rate of return of 7%, except those invested in the
Liquid Asset Division, Limited Maturity Bond Division, and the Fixed Account, as
adjusted for additional premiums, credits and partial withdrawals. Any Credit
applied within twelve months prior to the date of death may reduce the death
benefit. Each accumulated initial or additional premium payment, including any
credit and reduced by any partial withdrawals taken will continue to grow at 7%
until it reaches the maximum enhanced death benefit.
SPECIALLY DESIGNATED DIVISION -- The Division to which distributions from a
portfolio underlying a Division in which reinvestment is not available will be
allocated unless you specify otherwise. The Specially Designated Division
currently is the Liquid Asset Division.
STANDARD DEATH BENEFIT OPTION -- The death benefit option that you will receive
under the Contact unless one of the enhanced death benefit options is elected.
The death benefit provided by this option is equal to the greatest of (i)
Accumulation Value less an amount equal to all Credits applied within 12 months
prior to the date of the death; (ii) total premium payments less any partial
withdrawals; and (iii) Cash Surrender Value.
VALUATION DATE -- The day at the end of a Valuation Period when each Division is
valued.
VALUATION PERIOD -- Each business day together with any non-business days before
it.
2
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SUMMARY OF THE CONTRACT
This prospectus has been designed to provide you with information regarding the
Contract and the Accounts which fund the Contract. Information concerning the
Series underlying the Divisions of Account B is set forth in the Trusts'
prospectuses.
This summary is intended to provide only a very brief overview of the more
significant aspects of the Contract. Further detail is provided in this
prospectus and in the Contract. The Contract, together with any riders or
endorsements, constitutes the entire agreement between you and us and should be
retained.
This prospectus has been designed to provide you with the necessary information
to make a decision on purchasing the Contract. You have a choice of investments.
We do not promise that your Accumulation Value will increase. Depending on the
investment experience of the Divisions and interest credited to the Fixed
Allocations in which you are invested, your Accumulation Value, Cash Surrender
Value and death benefit may increase or decrease on any day. You bear the
investment risk.
DESCRIPTION OF THE CONTRACT
This Contract provides a 4% Credit to each Purchase Payment which increases the
Accumulation Value, except for certain circumstances. See Additional Credit to
Premium. 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, a "qualified plan." A qualified plan
is an individual retirement annuity ("IRA") or another annuity meeting the
requirements of section 408(b) or other sections of the Internal Revenue Code of
1986, as amended (the "Code"), an individual retirement annuity ("Roth IRA")
meeting the requirements of section 408A of the Code, or some other retirement
plan meeting the respective section of the Code. For a Contract funding a
qualified plan, distributions may be made to you to satisfy requirements imposed
by Federal tax law. The second type of purchaser is one who purchases a Contract
outside of a qualified plan ("non-qualified plan").
The Contract also offers a choice of Annuity Options to which you may apply all
or a portion of the Accumulation Value on the Annuity Commencement Date or the
Cash Surrender Value upon surrender of the Contract. See Choosing Your Annuity
Options.
AVAILABILITY
We can issue a Contract if both the Annuitant and the Owner are not older than
age 85 and accept additional premium payments until either the Annuitant or
Owner reaches the Attained Age of 85 for non-qualified plans (age 70 for
qualified plans, except for rollover contributions and contributions to a Roth
IRA). The minimum Initial Premium is $10,000 for a non-qualified plan and $1,500
for a qualified plan. We may change the minimum initial or additional premium
requirements for certain group or sponsored arrangements. See Other Contract
Provisions, Group or Sponsored Arrangements.
The minimum additional premium payment we will accept is $500 for a
non-qualified plan and $250 for a qualified plan. You must receive our prior
approval before making a premium payment that causes the Accumulation Value of
all annuities that you maintain with us to exceed $1,000,000.
THE DIVISIONS
Each of the twenty-three Divisions of Account B offered under this prospectus
invests in a mutual fund portfolio with its own distinct investment objectives
and policies. Each Division of Account B invests in a corresponding Series of
the GCG Trust, managed by Directed Services, Inc. ("DSI"), a corresponding
Series of the ESS Trust, also managed by DSI, a corresponding Series of the WP
Trust, managed by Warburg Pincus Asset Management, Inc. ("Warburg") or a
corresponding Series of the PIMCO Trust, managed by Pacific Investment
Management Company ("PIMCO"). From its inception through December 31, 1997, the
ESS Trust was managed by Equitable Investment Services, Inc. ("EISI"), an
affiliate of DSI. As of January 1, 1998, DSI assumed EISI's management
responsibilities to the ESS Trust. The GCG and ESS Trusts and DSI have retained
several portfolio managers to manage the assets of each Series of those Trusts.
See Facts About the Company and the Accounts, Account B Divisions.
HOW THE ACCUMULATION VALUE VARIES
The Accumulation Value in the Divisions varies each day based on investment
results. You bear the risk of poor investment performance and you receive the
benefits from favorable investment performance. The Accumula-
3
<PAGE>
<PAGE>
tion Value also reflects premium payments, Credits, charges deducted and partial
withdrawals. See Facts About the Contract, Accumulation Value in Each Division.
THE FIXED ACCOUNT
The investments available through the Fixed Account include various Fixed
Allocations which we credit with fixed rates of interest for the Guarantee
Periods you select. We reset the interest rates for new Guarantee Periods
periodically based on our sole discretion. We may offer Guarantee Periods from
one to ten years. We currently offer Guarantee Periods with durations of 1, 3,
5, 7 and 10 years.
You bear investment risk with respect to surrenders, partial withdrawals,
transfers and annuitization from your Fixed Allocations. A surrender, partial
withdrawal, transfer or annuitization made prior to the end of a Guarantee
Period may be subject to a Market Value Adjustment, which could have the effect
of either increasing or decreasing your Accumulation Value. We will not apply a
Market Value Adjustment on a surrender, partial withdrawal, transfer or
annuitization made within 30 days prior to the Maturity Date of the applicable
Guarantee Period or certain transfers made in connection with the dollar cost
averaging program. Systematic withdrawals from a Fixed Allocation also are not
subject to a Market Value Adjustment.
MARKET VALUE ADJUSTMENT
We will apply a Market Value Adjustment, subject to certain exceptions, to a
surrender, partial withdrawal, transfer or annuitization from a Fixed Allocation
made prior to the end of a Guarantee Period. The Market Value Adjustment does
not apply to amounts invested in Account B.
SURRENDERING YOUR CONTRACT
You may surrender the Contract and receive its Cash Surrender Value at any time
while both the Annuitant and Owner are living and before the Annuity
Commencement Date. See Facts About the Contract, Cash Surrender Value and
Surrendering to Receive the Cash Surrender Value.
TAKING PARTIAL WITHDRAWALS
After the Free Look Period, prior to the Annuity Commencement Date and while the
Contract is in effect, you may take partial withdrawals from the Accumulation
Value of your Contract. You may elect in advance to take systematic partial
withdrawals on a monthly, quarterly, or annual basis. If you have an IRA
Contract or a Roth IRA Contract, you may elect IRA partial withdrawals on a
monthly, quarterly or annual basis.
Partial withdrawals are subject to certain restrictions as defined in this
prospectus, including a surrender charge and a Market Value Adjustment. Partial
withdrawals above a specified percentage of your Accumulation Value may be
subject to a surrender charge. See Facts About the Contract, Partial
Withdrawals.
DOLLAR COST AVERAGING
Under this program, you may choose to have a specified dollar amount transferred
from either the Limited Maturity Bond Division, Liquid Asset Division or a Fixed
Allocation with a one year Guarantee Period to the other Divisions of Account B
on a monthly basis with the objective of shielding your investment from short-
term price fluctuations. See Facts About the Contract, Dollar Cost Averaging.
YOUR RIGHT TO CANCEL THE CONTRACT
You may cancel your Contract within the Free Look Period which is a ten day
period of time beginning once you receive the Contract. For purposes of
administering our allocation and certain other administrative rules, we deem
this period to end 15 days after the Contract is mailed from our Customer
Service Center. Some states may require that we provide a longer free look
period. In some states we restrict the Initial Premium allocation during the
Free Look Period. See Other Contract Provisions, Your Right to Cancel or
Exchange Your Contract.
YOUR RIGHT TO CHANGE THE CONTRACT
The Contract may be changed to another annuity plan subject to our rules at the
time of the change. See Other Contract Provisions, Other Contract Changes.
DEATH BENEFIT OPTIONS
The Contract provides a death benefit to the beneficiary if the Owner dies prior
to the Annuity Commencement Date. Subject to our rules, there are three death
benefit options that may be available to you under the Contract: the Standard
Death Benefit Option; the 7% Solution Enhanced Death Benefit Option; and the
Annual
4
<PAGE>
<PAGE>
Ratchet Enhanced Death Benefit Option. See Facts About the Contract, Death
Benefit Options. We may offer a reduced death benefit under certain group and
sponsored arrangements. See Other Contract Provisions, Group or Sponsored
Arrangements.
DEDUCTIONS FOR CHARGES AND FEES
We invest the entire amount of the initial and any additional premium payments
in the Divisions and the Fixed Allocations you select, subject to certain
restrictions we impose. See Facts About the Contract, Restrictions on Allocation
of Premium Payments. We then may deduct an annual Contract fee from your
Accumulation Value. See Other Contract Provisions, Charges and Fees. We may
reduce certain charges under group or sponsored arrangements. See Other Contract
Provisions, Group or Sponsored Arrangements. Unless you have elected the Charge
Deduction Division, charges are deducted proportionately from all Account B
Divisions in which you are invested. If there is no Accumulation Value in these
Divisions, charges will be deducted from your Fixed Allocations starting with
Guarantee Periods nearest their Maturity Dates until such charges have been
deducted.
FEDERAL INCOME TAXES
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 withdrawal or surrender
the Contract before reaching age 59 1/2. See Federal Tax Considerations.
OTHER CONTRACTS
We offer other variable annuity contracts which also invest in many of the same
Series of the Trusts. These contracts may have different charges that could
affect Division performance, and may offer different benefits more suitable to
your needs. To obtain information about these contracts, contact your agent, or
call 1-800-366-0066.
- --------------------------------------------------------------------------------
FEE TABLE
TRANSACTION EXPENSES(1)
Contingent Deferred Sales Charge(2) (imposed as a percentage of premium payments
withdrawn upon excess partial withdrawal or surrender):(3)
COMPLETE YEARS
ELAPSED SURRENDER
SINCE PREMIUM PAYMENT CHARGE
0 8%
1 8%
2 8%
3 8%
4 7%
5 6%
6 5%
7 3%
8 1%
9+ 0%
Excess Allocation Charge.............................. $0(4)
ANNUAL CONTRACT FEES:
Administrative Charge................................. $40
(Waived if the Accumulation Value equals or exceeds $100,000 at the end
of the Contract Year, or once the sum of premiums paid equals or exceeds
$100,000.)
SEPARATE ACCOUNT ANNUAL EXPENSES (percentage of assets in each Division):(5)
<TABLE>
<CAPTION>
ENHANCED DEATH BENEFIT
STANDARD -----------------------------
DEATH BENEFIT ANNUAL RATCHET 7% SOLUTION
------------- -------------- -----------
<S><C>
Mortality and Expense Risk Charge....................... 1.25% 1.40% 1.55%
Asset Based Administrative Charge....................... 0.15% 0.15% 0.15%
------------- -------------- -----------
Total Separate Account Expenses......................... 1.40% 1.55% 1.70%
</TABLE>
5
<PAGE>
<PAGE>
THE GCG TRUST ANNUAL EXPENSES (as a percentage of the average daily net assets
of a Series):
<TABLE>
<CAPTION>
MANAGEMENT OTHER TOTAL
SERIES AVAILABLE CURRENTLY FEES(6) EXPENSES(7) EXPENSES
- -------------------------- ---------- --------------- ---------------
<S><C>
Multiple Allocation, Fully Managed,
Capital Appreciation, Rising Dividends,
All-Growth, Real Estate, Hard Assets, 0.98% 0.01% 0.99%
Value Equity, Strategic Equity, and
Small
Cap Series:
Growth Opportunities Series(8): 1.10% 0.01% 1.11%
Developing World Series: 1.75% 0.05% 1.80%
Limited Maturity Bond and Liquid Asset
Series: 0.60% 0.01% 0.61%
</TABLE>
<TABLE>
<CAPTION>
TOTAL EXPENSES
MANAGEMENT AFTER FEE
FEES(6) OTHER EXPENSES(7) WAIVERS
SERIES ADDED TO THE GCG TRUST AND AFTER FEE AFTER EXPENSE AND EXPENSE
AVAILABLE AFTER TRUST CONSOLIDATION(9) WAIVERS(10) REIMBURSEMENT(10) REIMBURSEMENT(10)
- -------------------------------------- ----------- ----------------- -----------------
<S><C>
Research Series(11): 0.96% 0.00% 0.96%
Total Return Series(11): 0.96% 0.01% 0.97%
Mid-Cap Growth Series(11): 0.96% 0.01% 0.97%
Growth & Income and Value + Growth
Series(8): 1.10% 0.01% 1.11%
Global Fixed Income Series: 1.60% 0.00% 1.60%
</TABLE>
THE ESS TRUST ANNUAL EXPENSES (prior to Trust Consolidation)
(as a percentage of the average daily net assets of a Series):
<TABLE>
<CAPTION>
SERIES FEES(6) OTHER EXPENSES TOTAL EXPENSES
- ------ ---------- --------------- ---------------
<S><C>
OTC Portfolio: 0.80% 0.19% 0.99%
Research Portfolio: 0.80% 0.16% 0.96%
Total Return Portfolio: 0.80% 0.17% 0.97%
Growth & Income Portfolio: 0.95% 0.17% 1.12%
Value + Growth Portfolio: 0.95% 0.25% 1.20%
International Fixed Income Portfolio: 0.85% 0.98% 1.83%
</TABLE>
THE WP TRUST ANNUAL EXPENSES (as a percentage of the average daily net assets of
a Series):
<TABLE>
<CAPTION>
OTHER TOTAL
EXPENSES EXPENSES
AFTER EXPENSE AFTER EXPENSE
SERIES FEES REIMBURSEMENTS(12) REIMBURSEMENTS
- ------ ---------- ------------------ --------------
<S><C>
International Equity Portfolio: 1.00% 0.36% 1.36%
</TABLE>
THE PIMCO TRUST ANNUAL EXPENSES (as a percentage of the average daily net assets
of a Series):
<TABLE>
<CAPTION>
OTHER
PORTFOLIO FEES EXPENSES(13) TOTAL EXPENSES
- --------- ---------- ---------------- --------------
<S><C>
PIMCO High Yield Bond Portfolio: 0.50% 0.25% 0.75%
PIMCO StocksPLUS Growth and Income
Portfolio: 0.40% 0.25% 0.65%
</TABLE>
6
<PAGE>
<PAGE>
- ------------------------------
(1) A Market Value Adjustment, which may increase or decrease your Accumulation
Value, may apply to certain transactions. See Market Value Adjustment.
(2) We also deduct a charge for premium taxes (which can range from 0% to 3.5%
of premium) from your Accumulation Value upon surrender, excess partial
withdrawals or on the Annuity Commencement Date. See Premium Taxes.
(3) For purposes of calculating the surrender charge for the excess partial
withdrawal, (i) we treat premium payments as being withdrawn on a first-in
first-out basis, and (ii) amounts withdrawn which are not considered an
excess partial withdrawal are not treated as a withdrawal of any premium
payments. See Charges Deducted from the Accumulation Value, Surrender
Charge for Excess Partial Withdrawals.
(4) We reserve the right to impose a charge in the future at a maximum of $25
for each allocation change in excess of twelve per Contract Year. See
Excess Allocation Charge.
(5) See Facts About the Contract, Death Benefit Options, for a description of
the Contract's Standard and Enhanced Death Benefit Options.
(6) Management Fees decline as combined assets increase (see Account B
Divisions and the Trust prospectuses for details).
(7) Other Expenses generally consist of independent trustees fees and expenses
and certain expenses associated with investing in international markets.
Other Expenses are estimated for the Growth Opportunities and Developing
World Series, since as of December 31, 1997, these Series had not yet
commenced operations.
(8) After Trust Consolidation (see The GCG Trust and the ESS Trust), the assets
of the Growth Opportunities, the Growth & Income and the Value + Growth
Series will be combined to determine the actual fee payable to Directed
Services, Inc. ("DSI"), the manager of the GCG Trust.
(9) See Facts about the Company and the Contracts, The GCG Trust and the ESS
Trust for more information.
(10) DSI has agreed voluntarily to reimburse expenses and waive management fees,
if necessary, to maintain total expenses at the levels shown for the
Research and the Global Fixed Income Series. This agreement will remain in
place through December 31, 1999, and after that time may be terminated at
any time. Without this agreement and based on current estimates, Total
Expenses would be 0.97%, and 1.65%, for the Research and the Global Fixed
Income Series, respectively.
(11) After Trust Consolidation (see The GCG Trust and the ESS Trust), the assets
of the Research, the Total Return and the Mid-Cap Growth Series will be
combined to determine the actual fee payable to DSI.
(12) Total Expenses are based on actual expenses for the fiscal year ended
December 31, 1997. Expenses for the Portfolio were reduced by 0.1% for the
fiscal year ended December 31, 1997 as a result of certain arrangements
that served to offset portions of the Portfolio's transfer agent expense.
After reflecting these arrangements, "Total Expenses (after fee waivers)"
for the Portfolio were 1.35% for the fiscal year ended December 31, 1997.
(13) Other Expenses are estimated for the PIMCO High Yield Bond and PIMCO
StocksPLUS Growth and Income Portfolios, since as of December 31, 1997,
these Series had not yet commenced operations.
7
<PAGE>
<PAGE>
EXAMPLES:
The examples do not take into account any deduction for premium taxes. Premium
taxes currently range from 0% to 3.5% of premium payments. There may be
surrender charges if you choose to annuitize within the first five Contract
Years.
If at issue you elect the 7% Solution Enhanced Death Benefit Option and you
surrender your Contract at the end of the applicable time period, you would pay
the following expenses for each $1,000 of Initial Premium assuming a 5% annual
return on assets:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DIVISION ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
<S><C>
Multiple Allocation................................... $108.91 $168.67 $ 221.09 $319.65
Fully Managed......................................... $108.91 $168.67 $ 221.09 $319.65
Capital Appreciation.................................. $108.91 $168.67 $ 221.09 $319.65
Rising Dividends...................................... $108.91 $168.67 $ 221.09 $319.65
All-Growth............................................ $108.91 $168.67 $ 221.09 $319.65
Real Estate........................................... $108.91 $168.67 $ 221.09 $319.65
Hard Assets........................................... $108.91 $168.67 $ 221.09 $319.65
Value Equity.......................................... $108.91 $168.67 $ 221.09 $319.65
Strategic Equity...................................... $108.91 $168.67 $ 221.09 $319.65
Small Cap............................................. $108.91 $168.67 $ 221.09 $319.65
Growth Opportunities.................................. $110.16 $172.38 $ 227.23 $331.64
Developing World...................................... $117.29 $193.46 $ 261.81 $397.64
OTC................................................... $108.91 $168.67 $ 221.09 $319.65
Research.............................................. $108.60 $167.74 $ 219.55 $316.62
Total Return.......................................... $108.71 $168.05 $ 220.06 $317.63
Growth & Income....................................... $110.26 $172.69 $ 227.74 $332.63
Value + Growth........................................ $111.09 $175.16 $ 231.81 $340.54
International Fixed Income............................ $117.60 $194.36 $ 263.28 $400.40
International Equity.................................. $112.75 $180.07 $ 239.90 $356.13
High Yield Bond....................................... $106.42 $161.21 $ 208.69 $295.18
StocksPLUS Growth and Income.......................... $105.38 $158.08 $ 203.48 $284.80
Limited Maturity Bond................................. $104.96 $156.83 $ 201.39 $280.62
Liquid Asset.......................................... $104.96 $156.83 $ 201.39 $280.62
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DIVISION AFTER TRUST CONSOLIDATION ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
<S><C>
Research.............................................. $108.60 $167.74 $ 219.55 $316.62
Total Return.......................................... $108.71 $168.05 $ 220.06 $317.63
Mid-Cap Growth........................................ $108.71 $168.05 $ 220.06 $317.63
Growth & Income....................................... $110.06 $172.07 $ 226.72 $330.65
Value + Growth........................................ $110.06 $172.07 $ 226.72 $330.65
Global Fixed Income................................... $115.23 $187.39 $ 251.91 $379.02
</TABLE>
8
<PAGE>
<PAGE>
If at issue you elect the 7% Solution Enhanced Death Benefit Option and you do
not surrender your Contract or if you annuitize on the Annuity Commencement
Date, you would pay the following expenses for each $1,000 of initial premium
assuming a 5% annual return on assets:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DIVISION ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
<S><C>
Multiple Allocation................................... $28.91 $ 88.67 $ 151.09 $319.65
Fully Managed......................................... $28.91 $ 88.67 $ 151.09 $319.65
Capital Appreciation.................................. $28.91 $ 88.67 $ 151.09 $319.65
Rising Dividends...................................... $28.91 $ 88.67 $ 151.09 $319.65
All-Growth............................................ $28.91 $ 88.67 $ 151.09 $319.65
Real Estate........................................... $28.91 $ 88.67 $ 151.09 $319.65
Hard Assets........................................... $28.91 $ 88.67 $ 151.09 $319.65
Value Equity.......................................... $28.91 $ 88.67 $ 151.09 $319.65
Strategic Equity...................................... $28.91 $ 88.67 $ 151.09 $319.65
Small Cap............................................. $28.91 $ 88.67 $ 151.09 $319.65
Growth Opportunities.................................. $30.16 $ 92.38 $ 157.23 $331.64
Developing World...................................... $37.29 $113.46 $ 191.81 $397.64
OTC................................................... $28.91 $ 88.67 $ 151.09 $319.65
Research.............................................. $28.60 $ 87.74 $ 149.55 $316.62
Total Return.......................................... $28.71 $ 88.05 $ 150.06 $317.63
Growth & Income....................................... $30.26 $ 92.69 $ 157.74 $332.63
Value + Growth........................................ $31.09 $ 95.16 $ 161.81 $340.54
International Fixed Income............................ $37.60 $114.36 $ 193.28 $400.40
International Equity.................................. $32.75 $100.07 $ 169.90 $356.13
High Yield Bond....................................... $26.42 $ 81.21 $ 138.69 $295.18
StocksPLUS Growth and Income.......................... $25.38 $ 78.08 $ 133.48 $284.80
Limited Maturity Bond................................. $24.96 $ 76.83 $ 131.39 $280.62
Liquid Asset.......................................... $24.96 $ 76.83 $ 131.39 $280.62
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DIVISION AFTER TRUST CONSOLIDATION ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
<S><C>
Research.............................................. $28.60 $ 87.74 $ 149.55 $316.62
Total Return.......................................... $28.71 $ 88.05 $ 150.06 $317.63
Mid-Cap Growth........................................ $28.71 $ 88.05 $ 150.06 $317.63
Growth & Income....................................... $30.06 $ 92.07 $ 156.72 $330.65
Value + Growth........................................ $30.06 $ 92.07 $ 156.72 $330.65
Global Fixed Income................................... $35.23 $107.39 $ 181.91 $379.02
</TABLE>
The purpose of the Fee Table is to assist you in understanding the various costs
and expenses that you will bear directly or indirectly. For purposes of
computing the annual per Contract administrative charge, the dollar amounts
shown in the examples are based on an Initial Premium of $65,000.
The examples reflect the election at issue of the 7% Solution Enhanced Death
Benefit Option. If the Standard Death Benefit Option or the Annual Ratchet
Enhanced Death Benefit Option is elected, the actual expenses incurred will be
less than those represented in the Examples.
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN, SUBJECT TO
THE GUARANTEES UNDER THE CONTRACT.
9
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
CONDENSED FINANCIAL AND OTHER INFORMATION
INDEX OF INVESTMENT EXPERIENCE
The following table gives the index of investment experience for each Division
of Account B available under the Contract for each death benefit option.
Information for the Growth Opportunities, Developing World, High Yield Bond and
StocksPLUS Growth and Income Divisions is not available because they had not
commenced operations as of December 31, 1997. The Divisions became available on
October 1, 1997, and started with the index of investment experience as shown
below, except for the Growth Opportunities and Developing World Divisions which
became available for investment on February 19, 1998 and the High Yield Bond and
StocksPLUS Growth and Income Divisions which became available for investment on
May 1, 1998. The index of investment experience is equal to the value of a unit
for each Division of the Accounts. The total investment value of each Division
as of the end of 1997 is shown in the right hand columns.
<TABLE>
<CAPTION>
TOTAL INVESTMENT VALUE
-------------------------------
INDEX OF INVESTMENT EXPERIENCE IN THOUSANDS
----------------------------------------------------------------- -------------------------------
ANNUAL 7%
DIVISION STANDARD ANNUAL RATCHET 7% SOLUTION STANDARD RATCHET SOLUTION
- --------------------------- ------------------- ------------------- ------------------- -------- ------- --------
10/1/97 12/31/97 10/1/97 12/31/97 10/1/97 12/31/97 12/31/97 12/31/97 12/31/97
------- -------- ------- -------- ------- -------- -------- ------- --------
<S><C>
Multiple Allocation........ $ 20.55 $20.55 $ 20.29 $20.28 $ 19.99 $19.97 $ 542 $ 269 $ 699
Fully Managed.............. $ 19.49 $19.66 $ 19.24 $19.40 $ 18.96 $19.11 $ 725 $ 552 $2,064
Capital
Appreciation............. $ 21.95 $22.05 $ 21.78 $21.87 $ 21.57 $21.65 $ 267 $ 449 $1,449
Rising Dividends........... $ 19.30 $20.09 $ 19.19 $19.96 $ 19.05 $19.81 $1,105 $ 686 $3,360
All-Growth................. $ 15.42 $14.28 $ 15.22 $14.09 $ 15.00 $13.88 $ 725 $ 551 $ 563
Real Estate................ $ 25.25 $25.48 $ 24.92 $25.14 $ 24.56 $24.76 $ 272 $ 204 $1,102
Hard Assets................ $ 24.00 $20.57 $ 23.68 $20.29 $ 23.34 $19.99 $ 88 $ 98 $ 213
Value Equity............... $ 18.85 $18.28 $ 18.78 $18.20 $ 18.67 $18.09 $ 517 $ 737 $2,117
Strategic Equity........... $ 14.14 $14.31 $ 14.10 $14.26 $ 14.04 $14.20 $ 188 $ 229 $ 704
Small Cap.................. $ 13.85 $12.88 $ 13.82 $12.84 $ 13.78 $12.81 $ 754 $ 259 $1,280
Growth
Opportunities............ -- -- -- -- -- -- -- -- --
Developing World........... -- -- -- -- -- -- -- -- --
OTC........................ $ 18.94 $18.52 $ 18.88 $18.45 $ 18.79 $18.36 $ 666 $ 253 $ 885
Research................... $ 19.33 $18.87 $ 19.24 $18.77 $ 19.15 $18.67 $1,106 $ 561 $2,892
Total Return............... $ 15.82 $16.10 $ 15.75 $16.02 $ 15.68 $15.94 $ 874 $ 415 $2,354
Growth & Income............ $ 15.99 $15.41 $ 15.95 $15.36 $ 15.92 $15.32 $1,569 $2,472 $3,772
Value + Growth............. $ 15.18 $13.03 $ 15.14 $12.99 $ 15.10 $12.96 $1,274 $ 447 $2,938
Limited Maturity
Bond..................... $ 15.72 $15.91 $ 15.52 $15.70 $ 15.29 $15.47 $ 268 $ 159 $ 195
Liquid Asset............... $ 13.71 $13.83 $ 13.53 $13.65 $ 13.33 $13.44 $1,818 $ 846 $4,009
International Fixed
Income................... $ 11.99 $11.87 $ 11.93 $11.81 $ 11.87 $11.75 $ 41 $ 4 $ 76
International
Equity................... $ 11.57 $ 9.90 $ 11.62 $ 9.95 $ 11.60 $ 9.92 $ 381 $ 359 $ 724
High Yield Bond............ -- -- -- -- -- -- -- -- --
StocksPLUS
Growth and Income........ -- -- -- -- -- -- -- -- --
</TABLE>
FINANCIAL STATEMENTS
The audited financial statements of Separate Account B for the years ended
December 31, 1997 and 1996 (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, 1997 and 1996 (as well as the
auditors' report thereon) are contained in the Prospectus.
PERFORMANCE RELATED INFORMATION
Performance information for the Divisions of Account B, including the yield and
effective yield of the Liquid Asset Division, the yield of the remaining
Divisions, and the total return of all Divisions may appear in reports and
promotional literature to current or prospective Owners.
10
<PAGE>
<PAGE>
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
calculated 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 investment
income per unit (Accumulation Value divided by the index of investment
experience, see Facts About the Contract, 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 Division), and will reflect the deduction of the
applicable surrender charge, the administrative charge and the applicable
mortality and expense risk charge. See Charges and Fees. Quotations of total
return may simultaneously be shown for other periods that do not take into
account certain contractual charges, such as the surrender charge.
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 measuring 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 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 ratings services, including VARDS, companies, publications, or persons
who rank separate accounts or other investment products on overall performance
or other criteria; and (iii) the Consumer Price Index (measure for inflation) to
assess the real rate of return from an investment in the Contract. Unmanaged
indices may assume the reinvestment of dividends but generally do not reflect
deductions for administrative and management costs and expenses. Performance
information for any Division reflects only the performance of a hypothetical
Contract under which the Accumulation Value is allocated to a 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
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
Additional 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 products tracked by
Lipper Analytical Services or by rating services, companies, 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 THE ACCOUNTS WHICH FUND THE
CONTRACT, ACCOUNT B AND THE FIXED ACCOUNT. ACCOUNT B INVESTS IN MUTUAL FUND
PORTFOLIOS OF THE TRUSTS. THE FIXED ACCOUNT CONTAINS ALL OF THE ASSETS THAT
SUPPORT OWNER FIXED ALLOCATIONS WHICH WE CREDIT WITH GUARANTEED INTEREST RATES
FOR THE GUARANTEE PERIODS YOU SELECT.
- --------------------------------------------------------------------------------
FACTS ABOUT THE COMPANY AND THE ACCOUNTS
GOLDEN AMERICAN
Golden American Life Insurance Company ("Golden American" or the "Company") is a
stock life insurance company organized under the laws of the State of Delaware
and is a wholly owned subsidiary of Equitable of Iowa Companies, Inc.
("Equitable of Iowa") which, in turn, is a wholly owned subsidiary of ING Groep,
N.V. ("ING"). Prior to December 30, 1993, Golden American was a Minnesota
corporation. Prior to August 13, 1996, Golden American was a wholly owned
indirect subsidiary of Bankers Trust Company. We are authorized to do business
in all States, except New York, and the District of Columbia. In May 1996, we
established a subsidiary,
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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.
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 of Iowa Securities Network, Inc., Directed
Services, Inc. ("DSI"), and Golden American. On October 24, 1997, ING acquired
all interest in Equitable of Iowa and its subsidiaries including Golden
American. ING, based in the Netherlands, is a global financial services holding
company with over $307.6 billion in assets. Equitable of Iowa and another ING
affiliate own ING Investment Management, LLC, who assumed EISI's portfolio
management responsibilities for the GCG Trust and the ESS Trust as of January 1,
1998.
THE TRUSTS
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 difficulties
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, DSI, and we and any
other insurance companies participating in the GCG Trust are required to monitor
events to identify any material conflicts that arise from the use of the GCG
Trust for mixed and/or shared funding or between various policy Owners and
pension and retirement plans. For more information about the risks of mixed and
shared funding, please refer to the GCG Trust prospectus.
The ESS Trust is also an open-end management investment company. Currently, the
ESS Trust's shares are not available to separate accounts of other insurance
companies other than insurance companies affiliated with Equitable of Iowa such
as Golden American.
In an effort to consolidate the operations of the GCG Trust and the ESS Trust
("Trust Consolidation"), the affiliated insurance companies of Equitable of
Iowa, including Golden American, filed an application with the SEC requesting
permission via an order to substitute shares of each Series of the ESS Trust
with shares of similar Series of the GCG Trust (the "Substitution"). The
Substitution of shares will reduce operating expenses and create larger
economies of scale from which a further reduction of expenses is anticipated.
Contractholders will benefit directly from any reduction of Trust expenses.
CONTRACTHOLDERS WILL NOT BEAR ANY EXPENSE ASSOCIATED WITH THE SUBSTITUTION.
Upon obtaining the requested order for substitution from the SEC, and subject to
any required prior approval by applicable insurance authorities, the Companies
will effect the Substitution by simultaneously placing an order for each
Division to redeem the shares of the Series of the ESS Trust and an order for
each Division to purchase shares of the designated respective Series of the GCG
Trust. After the Trust Consolidation has occurred, Customer Service will send
affected contractholders a notice within five days.
The WP Trust is also an open-end management investment company. The WP Trust's
shares are available to separate accounts of life insurance companies including
that of Golden American and Equitable Life Insurance Company of Iowa and to
certain qualified pension and retirement plans.
The PIMCO Trust is also an open-end management investment company. The Series of
the PIMCO Trust were designated to be used as investment vehicles by separate
accounts of insurance companies, including Golden American, for both variable
annuity contracts and variable life insurance policies and by qualified pension
and retirement plans.
You will find complete information about the Trusts, including the risks
associated with each Series, in the accompanying Trusts' prospectuses. You
should read them carefully in conjunction with this prospectus before investing.
Additional copies of the Trusts' prospectuses may be obtained by contacting our
Customer Service Center.
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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
regulations. 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 the account are credited to or charged against that
account without regard to other income, gains or losses in our other investment
accounts. As required, the assets in Account B are at least equal to the
reserves and other liabilities of that account. These assets may not be charged
with liabilities from any other business we conduct.
They may, however, be subject to liabilities arising from Divisions whose 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
suitable for the Contract's purposes. Account B is treated as a unit investment
trust under Federal securities laws. It is registered with the SEC under the
Investment Company Act of 1940 (the "1940 Act") as an investment company and
meets the definition of a separate account under the Federal securities laws. It
is governed by the laws of Delaware, our state of domicile, and may also be
governed by the laws of other states in which we do business. Registration with
the SEC does not involve any supervision by the SEC of the management or
investment policies or practices of Account B.
ACCOUNT B DIVISIONS
Account B is divided into Divisions. Currently, each Division of Account B
offered under this prospectus invests in a portfolio of the GCG Trust, the ESS
Trust, the WP Trust or the PIMCO Trust. DSI serves as the Manager to each Series
of the GCG Trust and the ESS Trust, Warburg serves as the investment adviser to
the WP Trust, and PIMCO serves as Adviser to each Series of the PIMCO Trust. See
the Trusts' prospectuses for details. The GCG Trust, the ESS Trust and DSI have
retained several portfolio managers to manage the assets of the respective
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 also has other Divisions investing in other series which
are not available to the Contract described in this prospectus.
DSI and PIMCO provide the overall business management and administrative
services necessary for the Series' operation and provide or procure the services
and information necessary to the proper conduct of the business of the Series.
See the Trusts' prospectuses for details.
DSI and PIMCO are responsible for providing or procuring, at their own expense,
the services reasonably necessary for the ordinary operation of the Series of
the GCG and PIMCO Trusts. The ESS Trust pays its own expenses. DSI and PIMCO do
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 or the PIMCO Trust,
interest on borrowing, fees and expenses of the independent trustees, and
extraordinary expenses, such as litigation or indemnification expenses. See the
GCG and PIMCO Trusts prospectuses for details.
The GCG and the ESS Trusts each pay DSI for its services a fee, payable monthly,
based on the annual rates of the average daily net assets of the respective
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 respective
Series. The WP Trust pays Warburg a fee for managing the International Equity
Portfolio of the WP Trust. The PIMCO Trust pays PIMCO an advisory fee and an
administrative fee, each payable monthly, based on the average daily net assets
of each of the Series (see the table following) for managing the assets of the
Series.
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THE GCG TRUST
<TABLE>
<CAPTION>
SERIES AVAILABLE CURRENTLY FEES (based on combined assets of the indicated groups of Series)
- --------------------------------------------------- -------------------------------------------------------------------
<S><C>
Multiple Allocation, Fully Managed, Capital 1.00% of first $750 million;
Appreciation, Rising Dividends, All-Growth, Real 0.95% of next $1.250 billion;
Estate, Hard Assets, Value Equity, Strategic 0.90% of next $1.5 billion; and
Equity, and Small Cap Series: 0.85% of amount in excess of $3.5 billion
Growth Opportunities Series(1): 1.10% of first $250 million;
1.05% of next $400 million;
1.00% of next $450 million; and
0.95% of amount in excess of $1.1 billion
Developing World Series: 1.75% of average daily net assets
Limited Maturity Bond and 0.60% of first $200 million;
Liquid Asset Series: 0.55% of next $300 million; and
0.50% of amount in excess of $500 million
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ------------------------------
(1) After Trust Consolidation, the assets of the Growth Opportunity, the Growth
& Income and the Value + Growth Series will be combined for the purposes of
determining fees.
<TABLE>
<CAPTION>
SERIES AVAILABLE WITH TRUST CONSOLIDATION FEES (based on combined assets of the indicated groups of Series)
- --------------------------------------------------- -------------------------------------------------------------------
<S><C>
Growth & Income and Value + Growth Series1: 1.10% of first $250 million in combined assets of these Series;
1.05% of next $400 million;
1.00% of next $450 million; and
0.95% of amount in excess of $1.1 billion
Mid-Cap Growth, Total Return, 1.00% of first $250 million in combined assets of these Series;
and Research Series: 0.95% of next $400 million;
0.90% of next $450 million; and
0.85% of amount in excess of $1.1 billion
Global Fixed Income Series: 1.60%
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ------------------------------
(1) After Trust Consolidation, the assets of the Growth Opportunity, the Growth
& Income and the Value + Growth Series will be combined for the purposes of
determining fees.
THE ESS TRUST
<TABLE>
<CAPTION>
SERIES FEES
- --------------------------------------------------- -------------------------------------------------------------------
<S><C>
OTC, Research, and Total Return Portfolios: 0.80% of first $300 million;
0.55% of amount in excess of $300 million
Growth & Income Portfolio: 0.95% of first $200 million;
0.75% of amount in excess of $200 million
Value + Growth Portfolio: 0.95% of first $500 million;
0.75% of amount in excess of $500 million
International Fixed Income Portfolio: 0.85% of first $200 million;
0.75% of next $300 million;
0.60% of next $500 million;
0.55% of next $1.0 billion;
0.40% of amount in excess of $2.0 billion
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
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<TABLE>
<S><C>
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE WP TRUST
<TABLE>
<CAPTION>
SERIES FEES
- --------------------------------------------------- -------------------------------------------------------------------
<S><C>
International Equity Portfolio: 1.00% of average daily net assets
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE PIMCO TRUST:
<TABLE>
<CAPTION>
SERIES ADVISORY FEE
- --------------------------------------------------- -------------------------------------------------------------------
<S><C>
PIMCO High Yield Bond Portfolio: 0.50%
PIMCO StocksPLUS Growth and Income Portfolio: 0.40%
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
The following Divisions invest in designated Series of the GCG Trust.
MULTIPLE ALLOCATION DIVISION
MULTIPLE ALLOCATION SERIES
OBJECTIVE -- The highest total return, consisting of capital appreciation and
current income, consistent with the preservation of capital and elimination of
unnecessary 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 preservation of capital and prudent investment risk.
INVESTMENTS -- Pursues an active asset allocation strategy whereby investments
are allocated, based upon an evaluation of economic and market trends and the
anticipated relative total return available, among three asset classes -- debt
securities, equity securities and money market instruments.
PORTFOLIO MANAGER -- T. Rowe Price Associates, Inc.
CAPITAL APPRECIATION DIVISION
CAPITAL APPRECIATION SERIES
OBJECTIVE -- Long-term capital growth.
INVESTMENTS -- Invests in common stocks and preferred stock that will be
allocated among various categories of stocks referred to as "components" which
consist of the following: (i) The Growth Component -- Securities that the
portfolio manager believes have the following characteristics: stability and
quality of earnings and positive earnings momentum; dominant competitive
positions; and demonstrate above-average growth rates as compared to published
S&P 500 earnings projections; and (ii) The Value Component-Securities that the
portfolio 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 judgment, offer an optimum combination of current dividend yield,
expected dividend growth, and discount to current real estate value.
PORTFOLIO MANAGER -- Chancellor LGT Asset Management, Inc.
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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, LLC.
ALL-GROWTH DIVISION
ALL-GROWTH SERIES
OBJECTIVE -- Capital appreciation.
INVESTMENTS -- Investment in securities selected for their long-term growth
prospects.
PORTFOLIO MANAGER -- Pilgrim, Baxter & Associates, Ltd.
REAL ESTATE DIVISION
REAL ESTATE SERIES
OBJECTIVE -- Capital appreciation, with current income as a secondary objective.
INVESTMENTS -- Investment in publicly traded equity securities of companies in
the real estate industry listed on national exchanges or on the National
Association of Securities Dealers Automated Quotation System.
PORTFOLIO MANAGER -- EII Realty Securities, Inc.
HARD ASSETS DIVISION
HARD ASSETS SERIES
OBJECTIVE -- Long-term capital appreciation.
INVESTMENTS -- Investment in equity and debt securities of companies engaged in
the exploration, development, production, management, and distribution of hard
assets.
PORTFOLIO MANAGER -- Van Eck Associates Corporation
VALUE EQUITY DIVISION
VALUE EQUITY SERIES
OBJECTIVE -- Capital appreciation with a secondary objective of dividend income.
INVESTMENTS -- Investment primarily in equity securities of U.S. and foreign
issuers which, when purchased, meet quantitative standards believed by the
Portfolio Manager to indicate above average financial soundness and high
intrinsic value relative to price.
PORTFOLIO MANAGER -- Eagle Asset Management, Inc.
STRATEGIC EQUITY DIVISION
STRATEGIC EQUITY SERIES
OBJECTIVE -- Long-term capital appreciation.
INVESTMENTS -- Investment primarily in equity securities based on various equity
market 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.
PORTFOLIO MANAGER -- Fred Alger Management, Inc.
GROWTH OPPORTUNITIES DIVISION
GROWTH OPPORTUNITIES SERIES
OBJECTIVE -- Capital appreciation.
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INVESTMENTS -- Investment primarily in equity securities of domestic companies
emphasizing companies with market capitalizations of $1 billion or more.
PORTFOLIO MANAGER -- Montgomery Asset Management, LLC
DEVELOPING WORLD DIVISION
DEVELOPING WORLD SERIES
OBJECTIVE -- Capital appreciation.
INVESTMENTS -- Investment primarily in equity securities of companies in
countries having economies and markets generally considered to be emerging or
developing.
PORTFOLIO MANAGER -- Montgomery Asset Management, LLC
LIMITED MATURITY BOND DIVISION
LIMITED MATURITY BOND SERIES
OBJECTIVE -- Highest current income consistent with low risk to principal and
liquidity. Also seeks to enhance its total return through capital appreciation
when 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 -- ING Investment Management, LLC
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 -- ING Investment Management, LLC
The following Divisions invest in designated Series of the ESS Trust. After
Trust Consolidation, they will invest in designated Series of the GCG Trust.
OTC DIVISION (At the time of Trust Consolidation, the OTC Division will be
renamed the Mid-Cap Growth Division, and it will then invest in
the Mid-Cap Growth Series of the GCG Trust.)
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
After Trust Consolidation: MID-CAP GROWTH DIVISION
MID-CAP GROWTH SERIES OF THE GCG TRUST
OBJECTIVE -- Long-term growth of capital.
INVESTMENTS -- Investment primarily in equity
securities with medium market capitalization.
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
After Trust Consolidation: RESEARCH DIVISION
RESEARCH SERIES OF THE GCG TRUST
OBJECTIVE -- Long-term growth of capital and future
income.
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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
After Trust Consolidation: TOTAL RETURN DIVISION
TOTAL RETURN SERIES OF THE GCG TRUST
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.
After Trust Consolidation: GROWTH & INCOME DIVISION
GROWTH & INCOME SERIES OF THE GCG TRUST
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.
After Trust Consolidation: VALUE + GROWTH DIVISION
VALUE + GROWTH SERIES OF THE GCG TRUST
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 $2.0
billion.
PORTFOLIO MANAGER -- Robertson, Stephens & Company
Investment Management, L.P.
INTERNATIONAL FIXED INCOME DIVISION (At the time of Trust Consolidation, the
International Fixed Income Division will be
renamed the Global Fixed Income Division,
and it will then invest in the Global Fixed
Income Series of the GCG Trust.)
INTERNATIONAL FIXED INCOME PORTFOLIO
OBJECTIVE -- High total return.
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INVESTMENTS -- Investment in both foreign and domestic debt securities and
related foreign currency transactions. The total return will be sought through a
combination of current income, capital gains and gains in currency positions.
PORTFOLIO MANAGER -- Baring International Investment Limited
After Trust Consolidation: GLOBAL FIXED INCOME DIVISION
GLOBAL FIXED INCOME SERIES OF THE GCG TRUST
OBJECTIVE -- High Total Return.
INVESTMENTS -- Investment primarily in both domestic
and foreign debt securities and related foreign
currency transactions. The total return will be
sought through a combination of current income,
capital gains and gains in currency positions.
PORTFOLIO MANAGER -- Baring International Investment
Limited
The following Division invests in the designated Series of the WP Trust.
INTERNATIONAL EQUITY DIVISION
INTERNATIONAL EQUITY PORTFOLIO
OBJECTIVE -- Long-term capital appreciation.
INVESTMENTS -- Investment primarily in a broadly diversified portfolio of equity
securities of companies that have their principal business activities and
interests outside of the United States.
PORTFOLIO MANAGER -- Warburg Pincus Asset Management, Inc.
The following Divisions invest in designated Series of the PIMCO Trust.
HIGH YIELD BOND DIVISION
PIMCO HIGH YIELD BOND PORTFOLIO
OBJECTIVE -- Maximize total return.
INVESTMENTS -- Invests in at least 65% of its assets in a diversified portfolio
of junk bonds rated at least B by Moody's Investor Services, Inc. or Standard &
Poor's Rating Services, a Division of the McGraw Hill Cos., Inc., or, if
unrated, determined by the Adviser to be of comparable quality.
PORTFOLIO MANAGER -- PIMCO
STOCKSPLUS GROWTH AND INCOME DIVISION
PIMCO STOCKSPLUS GROWTH AND INCOME PORTFOLIO
OBJECTIVE -- Total return that exceeds the total return of the S&P 500.
INVESTMENTS -- Invests in common stocks, options, futures, options on futures
and swaps consistent with its portfolio management strategy to attempt to equal
or exceed the performance of the S&P 500.
PORTFOLIO MANAGER -- PIMCO
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 portfolio in which a
Division invests. A substitution may become necessary if, in our judgment, a
portfolio no longer suits the purposes of the Contract. This may happen due to a
change in laws or regulations, or a change in a portfolio's investment
objectives or restrictions, or because the portfolio is no longer available for
investment, or for some other reason. In addition, we reserve the right to
transfer assets of Account B, which we determine to be associated with the class
of Contracts to which your Contract belongs, to another 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 Account B under the 1940 Act;
(2) operate Account B as a management company under the 1940 Act if it is
operating as a unit investment trust;
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(3) operate 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.
THE FIXED ACCOUNT
Premium payments and Credits may be allocated to the Fixed Account at the time
of the Initial Premium payment or as subsequently made. Note certain
restrictions may apply; see Crediting Premium Payments. In addition, all or part
of your Accumulation Value may be transferred to the Fixed Account. Assets
supporting amounts allocated to the Fixed Account are available to fund the
claims of all classes of our customers, Owners and other creditors. Interests
under your Contract relating to the Fixed Account are registered under the
Securities Act of 1933 but the Fixed Account is not registered under the 1940
Act.
SELECTING A GUARANTEE PERIOD. You may select one or more Fixed Allocations with
specified Guarantee Periods for investment. We currently offer Guarantee Periods
with durations of 1, 3, 5, 7 and 10 years. We reserve the right at any time to
decrease or increase the number of Guarantee Periods offered. Not all Guarantee
Periods may be available for new allocations. Each Fixed Allocation will have a
Maturity Date corresponding to the last day of the calendar month of the
applicable Guarantee Period.
Your Accumulation Value in the Fixed Account equals the sum of your Fixed
Allocations, plus Credits, plus the interest credited thereto, as adjusted for
any partial withdrawals, reallocations or other charges we may impose. Your
Fixed Allocation will be credited with the Guaranteed Interest Rate in effect on
the date we receive and accept your premium or reallocation of Accumulation
Value. The Guaranteed Interest Rate will be credited daily to yield the quoted
Guaranteed Interest Rate.
GUARANTEED INTEREST RATES. Each Guarantee Period will have an interest rate
that is guaranteed. We do not have a specific formula for establishing the
Guaranteed Interest Rates for the different Guarantee Periods. The determination
made will be influenced by, but not necessarily correspond to, interest rates
available on fixed income investments which we may acquire with the amounts we
receive as premium payments or reallocations of Accumulation Value under the
Contracts. These amounts will be invested primarily in investment-grade fixed
income securities including: securities issued by the United States Government
or its agencies or instrumentalities, which issues may or may not be guaranteed
by the United States Government; debt securities that have an investment grade
rating, at the time of purchase, within the four highest grades assigned by
Moody's Investor Services, Inc. (Aaa, Aa, A or Baa), Standard & Poor's Ratings
Group (AAA, AA, A or BBB) or any other nationally recognized rating service;
mortgage-backed securities collateralized by the Federal Home Loan Mortgage
Association, the Federal National Mortgage Association or the Government
National Mortgage Association, or that have an investment grade rating at the
time of purchase within the four highest grades described above; other debt
investments; commercial paper; and cash or cash equivalents. You will have no
direct or indirect interest in these investments. We will also consider other
factors in determining the Guaranteed Interest Rates, including regulatory and
tax requirements, sales commissions and administrative expenses borne by us,
general economic trends and competitive factors. We cannot predict or guarantee
the level of future interest rates. However, no Fixed Allocation will ever have
a Guaranteed Interest Rate of less than 3% per year.
We may offer interest rate specials from time to time during which times the
interest rates declared for new premiums are higher than the base rate supported
by current investment yields. Renewal rates for such rate specials will be
derived from the base rate not the special rates initially declared. Such rate
specials are offered at our discretion and only if you have a Fixed Allocation.
While the foregoing generally describes our investment strategy with respect to
the Fixed Account, we are not obligated to invest according to any particular
strategy, except as may be required by Delaware and other state insurance laws.
TRANSFERS FROM A FIXED ALLOCATION. You may transfer your Accumulation Value
from a Fixed Allocation to one or more new Fixed Allocations with new Guarantee
Periods of any length offered by us or to the Divisions of Account B. Unless you
specify in writing the Fixed Allocations from which such transfers will be made,
we will transfer amounts from the Fixed Allocations starting with the Guarantee
Period nearest its Maturity Date, until we have honored your transfer request.
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Transfers from a Fixed Allocation made within 30 days prior to the Maturity Date
of the applicable Guarantee Period or pursuant to the dollar cost averaging
program will not be subject to a Market Value Adjustment. All other transfers
from your Fixed Allocations will be subject to a Market Value Adjustment. The
minimum amount that can be transferred to or from any Fixed Allocation is $100.
If a transfer request would reduce the Accumulation Value remaining in your
Fixed Allocation to less than $100, we will treat such transfer request as a
request to transfer the entire Accumulation Value in such Fixed Allocation.
At the end of a Fixed Allocation's Guarantee Period, you may transfer amounts in
that Fixed Allocation to the Divisions and one or more new Fixed Allocations
with Guarantee Periods of any length then offered by us. You may not, however,
transfer amounts to any Fixed Allocation with a Guarantee Period that extends
beyond your Annuity Commencement Date.
At least 30 calendar days prior to a Maturity Date of any of your Fixed
Allocations, or earlier if required by state law, we will send you a notice of
the Guarantee Periods then available. Prior to the Maturity Date of your Fixed
Allocations you must notify us as to which Division or new Guarantee Period you
have selected. If timely instructions are not received, we will transfer your
Accumulation Value in the maturing Fixed Allocation to a Fixed Allocation with a
Guarantee Period equal in length to the expiring Guarantee Period. If such
Guarantee Period is not available or extends beyond your Annuity Commencement
Date, we will transfer your Accumulation Value in the maturing Fixed Allocation
to the next shortest Guarantee Period which does not extend beyond the Annuity
Commencement Date. If no such Guarantee Period is available, we will transfer
your Accumulation Value to the Specially Designated Division.
PARTIAL WITHDRAWALS FROM A FIXED ALLOCATION. Prior to the Annuity Commencement
Date and while your Contract is in effect, you may take partial withdrawals from
the Accumulation Value in a Fixed Allocation by sending satisfactory notice to
our Customer Service Center. You may make systematic withdrawals of interest
earnings only from a Fixed Allocation under our Systematic Partial Withdrawal
Option. (See, Partial Withdrawals, Systematic Partial Withdrawal Option.)
Systematic withdrawals from a Fixed Allocation are not permitted if such Fixed
Allocation participates in the dollar cost averaging program. Withdrawals from a
Fixed Allocation taken within 30 days prior to the Maturity Date and systematic
withdrawals are not subject to a Market Value Adjustment; however, a surrender
charge may be imposed. Withdrawals may have federal income tax consequences,
including a 10% penalty tax. See Surrender Charge, Surrender Charge for Excess
Partial Withdrawals and Federal Tax Considerations.
If you specify a Fixed Allocation from which your partial withdrawal will be
made, we will assess the partial withdrawal against that Fixed Allocation. If
you do not specify the investment option from which the partial withdrawal will
be taken, we will not assess your partial withdrawal against any Fixed
Allocations unless the partial withdrawal exceeds the Accumulation Value in the
Divisions of Account B. If there is no Accumulation Value in those Divisions,
partial withdrawals will be deducted from your Fixed Allocations starting with
the Guarantee Periods nearest their Maturity Dates until we have honored your
request.
MARKET VALUE ADJUSTMENT. We will apply a Market Value Adjustment, determined by
application of the formula described below, in the following circumstances: (i)
whenever you make a withdrawal or transfer from a Fixed Allocation, other than
withdrawals or transfers made within 30 days prior to the Maturity Date of the
applicable Guarantee Period, systematic partial withdrawals, or pursuant to the
dollar cost averaging program; and (ii) on the Annuity Commencement Date with
respect to any Fixed Allocation having a Guarantee Period that does not end on
or within 30 days after the Annuity Commencement Date.
The Market Value Adjustment is determined by multiplying the amount withdrawn,
transferred or annuitized by the following factor:
( 1+I ) N/365
(---------) -1
(1+J+.0050)
Where "I" is the Index Rate for a Fixed Allocation as of the first day of the
applicable Guarantee Period; "J" is the Index Rate for new Fixed Allocations
with Guarantee Periods equal to the number of years (fractional years are
rounded up to the next full year except in Pennsylvania) remaining in the
Guarantee Period at the time of the withdrawal, transfer or annuitization; and
"N" is the remaining number of days in the Guarantee Period at the time of the
withdrawal, transfer or annuitization.
The Index Rate is the average of the Ask Yields for U.S. Treasury Strips as
reported by a national quoting service for the applicable maturity. The average
currently is based on the period from the 22nd day of the
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calendar month two months prior to the calendar month of the Index Rate
determination to the 21st day of the calendar month immediately prior to the
month of determination. The applicable maturity is the maturity date for these
U.S. Treasury Strips on or next following the last day of the Guarantee Period.
If the Ask Yields are no longer available, the Index Rate will be determined
using a suitable replacement method approved where required.
We currently calculate the Index Rate once each calendar month. However, we
reserve the right to calculate the Index Rate more frequently than monthly, but
in no event will such Index Rate be based upon a period of less than 28 days.
The Market Value Adjustment may result in either an increase or decrease in the
Accumulation Value of your Fixed Allocation. If a full surrender, transfer or
annuitization from the Fixed Allocation has been requested, the balance of the
Market Value Adjustment will be added to or subtracted from the amount
surrendered, transferred or annuitized. If a partial withdrawal, transfer or
annuitization has been requested, the Market Value Adjustment will be calculated
on the total amount that must be withdrawn, transferred or annuitized in order
to provide the amount requested. If a negative Market Value Adjustment exceeds
the Accumulation Value in the Fixed Allocation, such transaction will be
considered a full surrender, transfer or annuitization. The Appendix contains
several examples which illustrate the application of the Market Value
Adjustment.
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FACTS ABOUT THE CONTRACT
THE OWNER
You are the Owner. You are also the Annuitant unless another Annuitant is named
in the application or enrollment form. You have the rights and options described
in the Contract. One or more persons may own the Contract. If there are multiple
Owners named, the age of the oldest Owner shall determine the applicable death
benefit.
Death of an Owner activates the death benefit provision. In the case of a sole
Owner who dies prior to the Annuity Commencement Date, we will pay the
Beneficiary the death benefit when due. The sole Owner's estate will be the
Beneficiary if no Beneficiary designation is in effect, or if the designated
Beneficiary has predeceased the Owner. In the case of a joint Owner of the
Contract dying prior to the Annuity Commencement Date, we will designate the
surviving Owner(s) as the Beneficiary(ies). This supersedes any previous
Beneficiary designation.
In the case where the Owner is a trust and a beneficial Owner of the trust has
been designated, the beneficial Owner will be treated as the Owner of the
Contract solely for the purpose of determining the death benefit provisions. If
a beneficial Owner is changed or added after the Contract Date, this will be
treated as a change of Owner for purposes of determining the death benefit. See
Change of Owner or Beneficiary. If no beneficial Owner of the Trust has been
designated, the availability of enhanced death benefits will be determined by
the age of the Annuitant at issue.
THE ANNUITANT
The Annuitant is the person designated by the Owner to be the measuring life in
determining Annuity Payments. The Owner will receive the annuity benefits of the
Contract if the Annuitant is living on the Annuity Commencement Date. If the
Annuitant dies before the Annuity Commencement Date, and a contingent Annuitant
has been named, the contingent Annuitant becomes the Annuitant (unless the Owner
is not an individual, in which case the death benefit becomes payable). Once
named, the Annuitant may not be changed at any time.
If there is no contingent Annuitant when the Annuitant dies prior to the Annuity
Commencement Date, the Owner will become the Annuitant. The Owner may designate
a new Annuitant within 60 days of the death of the Annuitant.
If there is no contingent Annuitant when the Annuitant dies prior to the Annuity
Commencement Date and the Owner is not an individual, 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 Annuitant was the sole Owner and there is no Beneficiary
designation, the Annuitant's estate will be the Beneficiary.
Regardless of whether a death benefit is payable, if the Annuitant dies and any
Owner is not an individual, such death will trigger application of the
distribution rules imposed by Federal tax law.
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THE BENEFICIARY
The Beneficiary is the person to whom we pay death benefit proceeds and who
becomes the successor Owner if the Owner dies prior to the Annuity Commencement
Date. We pay death benefit proceeds to the primary Beneficiary (unless there are
joint Owners, in which case death proceeds are payable to the surviving
Owner(s)). See Proceeds Payable to the Beneficiary.
If the Beneficiary dies before the Annuitant or Owner, the death benefit
proceeds are paid to the contingent Beneficiary, if any. If there is no
surviving Beneficiary, we pay the death benefit proceeds to the Owner's estate.
One or more persons may be named as Beneficiary or contingent Beneficiary. In
the case of more than one Beneficiary, unless otherwise specified, we will
assume any death benefit proceeds are to be paid in equal shares to the
surviving beneficiaries.
You have the right to change beneficiaries during the Annuitant's lifetime
unless you have designated an irrevocable Beneficiary. When an irrevocable
Beneficiary has been designated, you and the irrevocable Beneficiary may have to
act together to exercise certain rights and options under the Contract.
CHANGE OF OWNER OR BENEFICIARY
During the Annuitant's lifetime and while your Contract is in effect, you may
transfer ownership of the Contract (if purchased in connection with a
non-qualified plan) subject to our published rules at the time of the change. A
change in Ownership may affect the amount of the death benefit and the
guaranteed death benefit. You may also change the Beneficiary. To make either of
these changes, you must send us written notice of the change in a form
satisfactory to us. The change will take effect as of the day the notice is
signed. The change will not affect any payment made or action taken by us before
recording the change at our Customer Service Center. See Federal Tax
Considerations, Assignments, Pledges and Gratuitous Transfers.
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 connection with an individual retirement account or other
qualified plan. In the latter cases, 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 may require distributions to commence not later than April 1st of the
calendar year following the calendar year in which you attain age 70 1/2. For
both Individual Retirement Annuities and individual retirement accounts, the
minimum Initial Premium is $1,500.
IF THE CONTRACT IS PURCHASED TO FUND A QUALIFIED PLAN OTHER THAN A ROTH IRA,
DISTRIBUTION MUST COMMENCE NOT LATER THAN APRIL 1ST OF THE CALENDAR YEAR
FOLLOWING THE CALENDAR YEAR IN WHICH YOU ATTAIN AGE 70 1/2. IF YOU OWN MORE THAN
ONE QUALIFIED PLAN, YOU SHOULD CONSULT YOUR TAX ADVISOR.
NON-QUALIFIED CONTRACTS. The Contract may fund any non-qualified plan.
Non-qualified Contracts do not qualify for any tax-favored treatment other than
the benefits provided for by annuities.
YOUR RIGHT TO SELECT OR CHANGE CONTRACT OPTIONS
Before the Annuity Commencement Date, you may change the Annuity Commencement
Date, frequency of Annuity Payments or the Annuity Option by sending a written
request to our Customer Service Center. The Annuitant may not be changed at any
time.
PREMIUMS
You purchase the Contract with an Initial Premium. After the end of the Free
Look Period, you may make additional premium payments. See Making Additional
Premium Payments. The minimum Initial Premium is $10,000 for a non-qualified
Contract and $1,500 for a qualified Contract.
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You must receive our prior approval before making a premium payment that causes
the Accumulation Value of all annuities that you maintain with us to exceed
$1,000,000. We may change the minimum initial or additional premium 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.
For Roth IRA Contracts, the annual premium on behalf of any individual Contract,
together with the total amount of any contributions you have made to any
non-Roth IRAs (except for rollover contributions), may not exceed the lesser of
$2,000 or 100% of your compensation. Contributions to a Roth IRA are subject to
income limits. See IRA Contracts and Other Qualified Retirement Plans.
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 qualified plans,
no contributions may be made to an IRA Contract other than a Roth IRA 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 if accompanied by information sufficient to permit us to determine
if we are able to issue a Contract. We may retain an Initial Premium for up to
five business days while attempting to obtain information sufficient to enable
us to issue the Contract. If we are unable to do so within five business 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
consents to our retaining the Initial Premium until we have received the
information we require. Thereafter, all additional premiums will be accepted on
the day received.
In certain states we will also accept, by agreement with broker-dealers,
transmittal of initial and additional premium payments by wire order from the
broker-dealer to our Customer Service Center. Such transmittals must be
accompanied by a simultaneous telephone facsimile or other electronic data
transmission containing the essential information we require to open an account
and allocate the premium payment. Contact our Customer Service Center to find
out about state availability and broker-dealer requirements.
Upon our acceptance of premium payments received via wire order and accompanied
by sufficient electronically transmitted data, we will issue the Contract,
allocate the premium payment and Credit according to your instructions, and
invest the payment at the value next determined following receipt. See
Restrictions on Allocation of Premium Payments. Wire orders not accompanied by
sufficient data to enable us to accept the premium payment may be retained for
up to five business days while we attempt to obtain information sufficient to
enable us to issue the Contract. If we are unable to do so, our Customer Service
Center will inform the broker-dealer, on behalf of the applicant or enrollee, of
the reasons for the delay and return the premium payment immediately to the
broker-dealer for return to the applicant or enrollee, unless the applicant or
enrollee specifically consents to allow us to retain the premium payment until
our Customer Service Center receives the required information.
On the date we receive and accept your initial or additional premium payment:
(1) We allocate the Initial Premium and any Credit among the Divisions and Fixed
Allocations 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
and any Credit. If we do not receive instructions from you, the increase in
the Accumulation Value will be allo-
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cated among the Divisions in proportion to the amount of Accumulation Value
in each Division as of the date we receive and accept the additional premium
payment. If there is no Accumulation Value in the Divisions, the increase in
the Accumulation Value will be allocated to a Fixed Allocation with the
shortest Guarantee Period then available.
(2) For an Initial Premium, we calculate your applicable death benefit. When an
additional premium payment is made, we increase your applicable death
benefit in accordance with the death benefit option in effect for your
Contract.
Following receipt and acceptance of the wire order and accompanying data, and
investment of the premium payment, we will follow one of the two procedures set
forth below. The one we follow is determined by state availability and the
procedures of the broker-dealer which submitted the wire order.
(1) We will issue the Contract. However, until we have received and accepted a
properly completed application or enrollment form, we reserve the right to
rescind the Contract. If the form is not received within fifteen days of
receipt of the premium payment, we will refund the Accumulation Value
adjusted for any applicable Market Value Adjustment less any Credit plus any
charges we deducted, and the Contract will be voided. Some states require
that we return the premium paid. In these states, different rules will
apply.
(2) Based on the information provided, we will issue the Contract. We will mail
the Contract to you, together with an Application Acknowledgment Statement.
You must execute the Application Acknowledgment Statement and return it to
us at our Customer Service Center. Until we receive the executed Application
Acknowledgment Statement, neither you nor the broker-dealer may execute any
financial transactions with respect to the Contract unless such transactions
are appropriately requested in writing by you.
RESTRICTIONS ON ALLOCATION OF PREMIUM PAYMENTS
We may require that an Initial Premium plus Credit designated for a Division of
Account B or the Fixed Account be allocated to the Specially Designated Division
during the Free Look Period for Initial Premiums received from some states.
After the Free Look Period, if your Initial Premium plus Credit was allocated to
the Specially Designated Division, we will transfer the Accumulation Value to
the Divisions you previously selected based on the index of investment
experience next computed for each Division. See Facts About the Contract,
Measurement of Investment Experience, Index of Investment Experience and Unit
Value. Initial premiums designated for the Fixed Account will be allocated to a
Fixed Allocation with the Guarantee Period you have chosen; however, we reserve
the right to allocate to the Specially Designated Division for the Free Look
Period, then to your selected Fixed Allocations.
YOUR RIGHT TO REALLOCATE
You may reallocate your Accumulation Value among the Divisions and Fixed
Allocations at the end of the Free Look Period. We currently do not assess a
charge for allocation changes made during a Contract Year. We reserve the right,
however, to assess a $25 charge for each allocation change after the twelfth
allocation change in a Contract Year. We require that each reallocation of your
Accumulation Value equal at least $100 or, if less, your entire Accumulation
Value within a Division or Fixed Allocation. We reserve the right to limit, upon
notice, the maximum number of reallocations you may make within a Contract Year.
In addition, we reserve the right to defer the reallocation privilege at any
time we are unable to purchase or redeem shares of a Trust. We also reserve
the right to modify or terminate your right to reallocate your Accumulation
Value at any time in accordance with applicable law. Reallocations from the
Fixed Account are subject to the Market Value Adjustment unless taken as part of
the dollar cost averaging program or within 30 days prior to the Maturity Date
of the applicable Guarantee Period. To make a reallocation change, you must
provide us with satisfactory notice at our Customer Service Center. All
reallocation changes must be submitted by the earlier of 4:00 p.m. eastern time
or the close of the New York Stock Exchange.
We reserve the right to limit the number of reallocations of your Accumulation
Value among the Divisions and Fixed Allocations or refuse any reallocation
request if we believe that: (a) excessive trading by you or a specific
reallocation request may have a detrimental effect on unit values or the share
prices of the underlying Series; or (b) we are informed by a Trust that the
purchase or redemption of shares is to be restricted because of excessive
trading or a specific reallocation or group of reallocations is deemed to have a
detrimental effect on share prices of the respective Trust.
Where permitted by law, we may accept your authorization of third party
reallocation on your behalf, subject to our rules. We may suspend or cancel such
acceptance at any time. We will notify you of any such suspension or
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cancellation. We may restrict the Divisions and Fixed Allocations that will be
available to you for reallocations of premiums during any period in which you
authorize such third party to act on your behalf. We will give you prior
notification of any such restrictions. However, we will not enforce such
restrictions if we are provided evidence satisfactory to us that: (a) such third
party has been appointed by a court of competent jurisdiction to act on your
behalf; or (b) such third party has been appointed by you to act on your behalf
for all your financial affairs.
Some restrictions may apply based on the free look provisions of the state where
the Contract is issued. See Your Right to Cancel or Exchange Your Contract.
DOLLAR COST AVERAGING
If you have at least $1,200 of Accumulation Value in the Limited Maturity Bond
Division, the Liquid Asset Division or a Fixed Allocation with a one year
Guarantee Period, you may elect the dollar cost averaging program and have a
specified dollar amount transferred from those Divisions or such Fixed
Allocation 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
fluctuations but does not assure a profit or protect against a loss in declining
markets.
Dollar cost averaging may be elected at issue or at a later date. The minimum
amount that may be transferred each month is $100. The maximum amount which may
be transferred is equal to your Accumulation Value in the Limited Maturity Bond
Division, the Liquid Asset Division or a Fixed Allocation with a one year
Guarantee Period when you elect the dollar cost averaging program, divided by
12.
The transfer date will be the same calendar day each month as the Contract Date.
The dollar amount will be allocated to the Divisions in which you are invested
in proportion to your Accumulation Value in each Division unless you specify
otherwise. If, on any transfer date, your Accumulation Value is equal to or less
than the amount you have elected to have transferred, the entire amount will be
transferred and the program will end. You may change the transfer amount once
each Contract Year, or cancel this program by sending satisfactory notice to our
Customer Service Center at least seven days before the next transfer date. Any
allocation under this program will not be included in determining if the excess
allocation charge will apply. We currently do not permit transfers under the
dollar cost averaging program from Fixed Allocations with other than one year
Guarantee Periods. Transfers from a Fixed Allocation under the dollar cost
averaging program will not be subject to a Market Value Adjustment. See, Market
Value Adjustment. A Fixed Allocation may not participate simultaneously in both
the dollar cost averaging program and the Systematic Partial Withdrawal Option.
WHAT HAPPENS IF A DIVISION IS NOT AVAILABLE
When a distribution is made from an investment portfolio supporting a Division
of Account B in which reinvestment is not available, we will allocate the
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 portfolio
or Division due to the unavailability of securities for acquisition. When an
investment portfolio matures, we will notify you in writing 30 days in advance
of that date. To elect an allocation of the distribution to other than the
Specially Designated Division, you must provide satisfactory notice to us at
least seven days prior to the date the portfolio matures. Such allocations are
not counted for purposes of the number of free allocation changes 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 Designated Division to other
Divisions or Fixed Allocations of your choice, such allocations will not be
included in determining if the excess allocation charge will apply.
ADDITIONAL CREDIT TO PREMIUM
A Credit will be added to each premium payment applied to the Accumulation
Value. The Credit will be applied pro rata to each Division or Fixed Allocation
in the same ratio as the premium payment is allocated. The Credit
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is equal to 4% of the premium payment applied to the Accumulation Value. In any
of the following circumstances, the Credit may not be payable:
(1) If you return your Contract within your Free Look Period, any Credit will be
deducted from the refund amount;
(2) If a death benefit becomes payable, any Credit based on any premium payment
received within one year prior to the date of death of the Owner or
Annuitant (when the Owner is other than an individual) may reduce the death
benefit payable; and
(3) If any surrender charge is waived under the Waiver of Surrender Charge
Rider: (i) the Accumulation Value will be reduced for all Credits applied
within one year prior to the date such surrender charges are waived; and
(ii) no Credit will be applied to any premium payment received after the
earliest date on which any surrender charges are waived.
Any gains or losses attributable to a Credit will not be considered part of any
credit deducted from any refund amount or death benefit.
YOUR ACCUMULATION VALUE
Your Accumulation Value is the sum of the amounts in each of the Divisions and
the Fixed Allocations in which you are invested, and is the amount available for
investment at any time. You select the Divisions and Fixed Allocations to which
to allocate your Accumulation Value. We adjust your Accumulation Value on each
Valuation Date to reflect the Divisions' investment performance and interest
credited to your Fixed Allocations, any additional premium payments and Credits
or partial withdrawals since the previous Valuation Date, and on each Contract
processing date to reflect any deduction of the annual Contract fee. Your
Accumulation Value is applied to your choice of an Annuity Option on the Annuity
Commencement Date subject to our published rules at such time. See Choosing an
Income Plan.
ACCUMULATION VALUE IN EACH DIVISION
ON THE CONTRACT DATE. On the Contract Date, your Accumulation Value is
allocated to each Division as you have specified, unless the Contract is issued
in a state that requires the return of premium payments during the Free Look
Period, in which case, the portion of your Initial Premium not allocated to a
Fixed Allocation, and any Credit thereon, 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 and Credits 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 charge for premium taxes.
All amounts in (7) are allocated to each Division in the proportion that (6)
bears to the Accumulation Value in Account B, unless the Charge Deduction
Division has been specified. See Charges Deducted from the Accumulation Value.
MEASUREMENT OF INVESTMENT EXPERIENCE
INDEX OF INVESTMENT EXPERIENCE AND UNIT VALUE. The investment experience of a
Division is determined on each Valuation Date. We use an index to measure
changes in each Division's experience during a Valuation
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Period. We set the index at $10 when the first investments in a Division are
made, unless the underlying Series in which the Division invests has been
available under other contracts for some period of time. See Condensed Financial
Information, Index of Investment Experience, for the initial index value for
each Division when the Division became available under the Contract. The index
for a current Valuation Period equals the index for the preceding Valuation
Period multiplied by the experience factor for the current Valuation Period.
We may express the value of amounts allocated to the Divisions in terms of
units. We determine the number of units for a given amount on a Valuation Date
by dividing the dollar value of that amount by the index of investment
experience for that date. The index of investment experience is equal to the
value of a unit.
HOW WE DETERMINE THE EXPERIENCE FACTOR. For Divisions of Account B the
experience factor reflects the investment experience of the Series of the Trust
in which a Division invests as well as the charges assessed against the Division
for a Valuation Period. The factor is calculated as follows:
(1) We take the net asset value of the portfolio in which the Division 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 applicable daily mortality and expense risk charge from each
Division for each day in the Valuation Period.
(5) We subtract the daily asset based administrative charge from each Division
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. The net rate of return for a Division during
a valuation period is the experience 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, interest credited to Fixed Allocations and any Market
Value Adjustment. We do not guarantee any minimum Cash Surrender Value. On any
date before the Annuity Commencement Date while the Contract is in effect, the
Cash Surrender Value is calculated as follows:
(1) We take the Contract's Accumulation Value;
(2) We adjust (1) for any Market Value Adjustment;
(3) We deduct from (2) any surrender charge and any charge for premium taxes;
and
(4) We deduct from (3) any charges incurred but not yet deducted.
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 at our Customer Service Center. The Cash Surrender Value is
determined and all benefits under the Contract will then be terminated, as of
that date. For administrative purposes, we will reallocate your funds to the
Specially Designated Division prior to processing the surrender. This
reallocation will have no effect on the Cash Surrender Value. 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. See When We Make Payments.
PARTIAL WITHDRAWALS
Prior to the Annuity Commencement Date, while the Annuitant is living and the
Contract is in effect, you may take partial withdrawals from the Accumulation
Value by sending satisfactory notice to our Customer Service Center. Unless you
specify otherwise, the amount of the withdrawal, including any surrender charge
and Market Value Adjustment, will be taken in proportion to the amount of
Accumulation Value in each Division in
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which you are invested. If there is no Accumulation Value in those Divisions,
partial withdrawals will be deducted from your Fixed Allocations starting with
the Guarantee Periods nearest their Maturity Dates until we have honored your
request.
There are three options available for selecting partial withdrawals, the
Conventional Partial Withdrawal Option, the Systematic Partial Withdrawal Option
and the IRA Partial Withdrawal Option. All three options are described below.
The maximum amount you may withdraw each Contract Year without incurring a
surrender charge is 10% of your Accumulation Value. See Surrender Charge for
Excess Partial Withdrawals. Partial withdrawals may not be repaid. A partial
withdrawal request for an amount in excess of 90% of the Cash Surrender Value
will be treated as a request to surrender the Contract.
CONVENTIONAL PARTIAL WITHDRAWAL OPTION. After the Free Look Period, you may
take conventional partial withdrawals. The minimum amount you may withdraw under
this option is $100. A conventional partial withdrawal from a Fixed Allocation
may be subject to a Market Value Adjustment.
SYSTEMATIC PARTIAL WITHDRAWAL OPTION. This option may be elected at the time
you apply for a Contract, or at a later date. This option may be elected to
commence in a Contract Year where a conventional partial withdrawal has been
taken. However, it may not be elected while the IRA Partial Withdrawal Option is
in effect.
You may choose to receive systematic partial withdrawals on a monthly,
quarterly, or annual basis from your Accumulation Value in the Divisions or the
Fixed Allocations. The commencement of payments under this option may not be
elected to start sooner than 28 days after the Contract Issue Date. You select
the date when the withdrawals will be made but no later than the 28th day of the
month. If no date is selected, the withdrawals will be made on the same calendar
day of each month as the Contract Date.
You may select a dollar amount or a percentage of the Accumulation Value from
the Divisions in which you are invested as the amount of your withdrawal subject
to the following maximums, but in no event can a payment be less than $100:
FREQUENCY MAXIMUM
--------- -------
Monthly 0.833%
Quarterly 2.50%
Annual 10.00%
If a dollar amount is selected and the amount to be systematically withdrawn
would exceed the applicable maximum percentage of your Accumulation Value on the
withdrawal date, the amount withdrawn will be reduced so that it equals such
percentage. For example, if a $500 monthly withdrawal was elected and on the
withdrawal date 0.833% of the Accumulation Value equaled $300, the withdrawal
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 0.67% to be
systematically withdrawn on a monthly basis and that amount equaled $90, and
since $100 is less than 0.833% of the Accumulation Value, we would send $100. If
0.67% equaled $75, and since $100 is more than 0.833% 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.
Systematic Partial Withdrawals from Fixed Allocations are limited to interest
earnings during the prior month, quarter, or year, depending on the frequency
chosen. Systematic withdrawals are not subject to a Market Value Adjustment. A
Fixed Allocation, however, may not participate simultaneously in both the dollar
cost averaging program and the Systematic Partial Withdrawal Option.
You may change the amount or percentage of your withdrawal once each Contract
Year or cancel this option at any time by sending satisfactory notice to our
Customer Service Center at least seven days prior to the next scheduled
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.
IRA PARTIAL WITHDRAWAL OPTION. If you have an IRA Contract and will attain age
70 1/2 in the current calendar year, distributions may be made to you to satisfy
requirements imposed by Federal tax law. IRA partial withdrawals provide payout
of amounts required to be distributed by the Internal Revenue Service rules
gov-
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erning mandatory distributions under qualified plans. See Federal Tax
Considerations. We will send you a notice before your distributions commence,
and you may elect this option at that time, or at a later date. You may not
elect IRA partial 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 may be made. Thus, if the Systematic
Partial Withdrawal Option is in effect, distributions under that option must be
adequate to satisfy the mandatory distribution rules imposed by Federal tax law.
You may choose to receive IRA partial withdrawals on a monthly, quarterly or
annual frequency. You select the day of the month when the withdrawals will be
made, but it cannot be later than the 28th day of the month. If no date is
selected, the withdrawals will be made on the same calendar day of the month as
the Contract Date.
At your request, we will determine the amount that is required to be withdrawn
from your Contract each year based on the information you give us and various
choices you make. For information regarding the calculation and choices you have
to make, see the Statement of Additional Information. The minimum dollar amount
you can withdraw is $100. At the time we determine the required partial
withdrawal amount for a taxable year based on the frequency you select, if that
amount is less than $100, we will pay $100. At any time where the partial
withdrawal amount is greater than the Accumulation Value, we will cancel the
Contract and send you the amount of the Cash Surrender Value.
You may change the payment frequency of your withdrawals once each Contract Year
or cancel this option at any time by sending us satisfactory notice to our
Customer Service Center at least seven days prior to the next scheduled
withdrawal date.
An IRA partial withdrawal in excess of the amount allowed under the Systematic
Partial Withdrawal Option may be subject to a Market Value Adjustment.
PARTIAL WITHDRAWALS IN GENERAL. CONSULT YOUR TAX ADVISOR REGARDING THE TAX
CONSEQUENCES ASSOCIATED WITH 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. See Federal Tax Considerations
for more details.
AUTOMATIC REBALANCING
If you have at least $10,000 of Accumulation Value invested in the Divisions,
you may elect to participate in our automatic rebalancing program. Automatic
rebalancing provides you with an easy way to maintain the particular asset
allocation that you and your financial advisor have determined are most suitable
for your individual long-term investment goals. We do not charge a fee for
participating in our automatic rebalancing program.
Under the program you may elect to have all your allocations among the Divisions
rebalanced on a quarterly, semi-annual, or annual calendar basis. The minimum
size of an allocation to a Division must be in full percentage points.
Rebalancing does not affect any amounts that you have allocated to the Fixed
Account. The program may be used in conjunction with the systematic partial
withdrawal option only where such withdrawals are taken pro rata. Automatic
rebalancing is not available if you participate in dollar cost averaging.
Automatic rebalancing will not take place during the Free Look Period.
To participate in automatic rebalancing you must submit to our Customer Service
Center written notice in a form satisfactory to us. We will begin the program on
the last Valuation Date of the applicable calendar period in which we receive
the notice. You may cancel the program at any time. The program will
automatically terminate if you choose to reallocate your Accumulation Value
among the Divisions or if you make an additional premium payment or partial
withdrawal on other than a pro rata basis. Additional premium payments and
partial withdrawals effected on a pro rata basis will not cause the automatic
rebalancing program to terminate.
PROCEEDS PAYABLE TO THE BENEFICIARY
If the Owner or the Annuitant (when the Owner is other than an individual) dies
prior to the Annuity Commencement Date, we will pay the Beneficiary the death
benefit proceeds under the Contract. Such amount may be received in a single sum
or applied to any of the Annuity Options. See The Annuity Options. If we do not
receive a request to apply the death benefit proceeds to an Annuity Option, a
single sum distribution will be made. Any Credit based on any premium received
within one year prior to the date of death of the Owner or Annuitant (when the
Owner is other than an individual) may be deducted from the death benefit
proceeds payable. Any gains or losses attributable to a Credit will not be
considered part of any Credit deducted from any
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refund amount or death benefit. Any distributions from non-qualified Contracts
must comply with applicable Federal tax law distribution requirements.
DEATH BENEFIT OPTIONS
Subject to our rules, there are three death benefit options that may be elected
by you at issue under the Contract: the Standard Death Benefit Option; the 7%
Solution Enhanced Death Benefit Option; and the Annual Ratchet Enhanced Death
Benefit Option.
The 7% Solution Enhanced Death Benefit Option may only be elected at issue and
only if the Owner or Annuitant (when the Owner is other than an individual) is
age 80 or younger at issue. The 7% Solution Enhanced Death Benefit Option may
not be available where a Contract is held by joint Owners. The Annual Ratchet
Enhanced Death Benefit Option may only be elected at issue and only if the Owner
or Annuitant (when the Owner is other than an individual) is age 79 or younger
at issue.
If an enhanced death benefit is elected, the death benefit under the Contract is
equal to the greatest of: (i) the Accumulation Value less an amount equal to all
Credits applied within one year prior to the date of death; (ii) total premium
payments less any partial withdrawals; (iii) the Cash Surrender Value; and (iv)
the enhanced death benefit less an amount equal to all Credits applied within
one year prior to the date of death (see below).
We may offer a reduced death benefit under certain group and sponsored
arrangements. See Other Contract Provisions, Group or Sponsored Arrangements.
STANDARD DEATH BENEFIT OPTION. You will automatically receive the Standard
Death Benefit Option unless you elect one of the enhanced death benefits. The
Standard Death Benefit Option for the Contract is equal to the greatest of: (i)
your Accumulation Value less an amount equal to all Credits applied within one
year prior to the date of death; (ii) total premiums less any partial
withdrawals; and (iii) the Cash Surrender Value.
7% SOLUTION ENHANCED DEATH BENEFIT OPTION.
(1) We take the enhanced death benefit from the prior Valuation Date. On the
Contract Date, the enhanced death benefit is equal to the Initial Premium
plus any Credits.
(2) We calculate interest on (1) for the current Valuation Period at the
enhanced death benefit interest rate, which rate is an annual rate of 7%;
except that with respect to amounts in the Liquid Asset Division and Limited
Maturity Bond Division, the interest rate applied to such amounts will be
the respective net rate of return for such Divisions during the current
Valuation Period, if it is less than an annual rate of 7%; and except with
respect to amounts in a Fixed Allocation, the interest rate applied to such
amounts will be the interest credited to such Fixed Allocation during the
current Valuation Period, if it is less than an annual rate of 7%.
Each accumulated initial or additional premium payment and Credit reduced by
any partial withdrawals (including any associated Market Value Adjustment
and surrender charge incurred) allocated to such premium will continue to
grow at the enhanced death benefit interest rate until reaching the maximum
enhanced death benefit. Such maximum enhanced death benefit is equal to two
times the cumulative premiums paid plus two times the cumulative Credits
applied, less an adjustment to reflect partial withdrawals. Each partial
withdrawal reduces the maximum enhanced death benefit as follows: first, the
maximum enhanced death benefit is reduced by any partial withdrawal of
earnings; second, the maximum enhanced death benefit is reduced in
proportion to the reduction in the Accumulation Value for other partial
withdrawals of premium (in each case, including any associated market value
adjustment and surrender charge incurred). To the extent that partial
withdrawals in a contract year do not exceed 7% of cumulative premiums and
did not exceed 7% of cumulative premiums in any prior contract year, such
withdrawals will be treated as withdrawals of earnings for the purpose of
calculating the maximum enhanced death benefit. Once partial withdrawals in
any contract year exceed 7% of the cumulative premiums, partial withdrawals
will reduce the enhanced death benefit in proportion to the reduction in
Accumulation Value.
(3) We add (1) and (2).
(4) We add to (3) any additional premiums paid and any Credits applied during
the current Valuation Period.
(5) We subtract from (4) any partial withdrawals (including any Market Value
Adjustments and surrender charges incurred) made during the current
Valuation Period.
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ANNUAL RATCHET ENHANCED DEATH BENEFIT OPTION.
(1) We take the enhanced death benefit from the prior Valuation Date. On the
Contract Date, the enhanced death benefit is equal to the Initial Premium
plus any Credits.
(2) We add to (1) any additional premiums paid and any Credits applied since the
prior Valuation Date and subtract from (1) any partial withdrawals
(including any Market Value Adjustments and surrender charges incurred)
taken since the prior Valuation Date.
(3) On a Valuation Date that occurs on or prior to the Owner's Attained Age 80
which is also a Contract Anniversary, we set the enhanced death benefit
equal to the greater of (2) or the Accumulation Value as of such date.
On all other Valuation Dates, the enhanced death benefit is equal to (2).
HOW TO CLAIM PAYMENTS TO BENEFICIARY. We must receive due proof of the death of
the Owner or the Annuitant (if the Owner is other than an individual) (such as
an official death certificate) at our Customer Service Center before we will
make any payments to the 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 calendar quarter within
31 days after the end of each calendar quarter. The report will show the
Accumulation Value, the Cash Surrender Value, and the death benefit as of the
end of the calendar quarter. The report will also show the allocation of your
Accumulation Value as of such date and the amounts deducted from or added to the
Accumulation Value since the last report. The report will also include any other
information that may be currently required by the insurance supervisory official
of the jurisdiction in which the Contract is delivered.
We will also send you copies of any shareholder reports of the portfolios or
securities in which Account B invests, as well as any other reports, notices or
documents required by law to be furnished to Owners.
WHEN WE MAKE PAYMENTS
We will generally pay death benefit proceeds and the Cash Surrender Value within
seven days after our Customer Service Center receives all the 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
Owners; or,
(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.
We reserve the right to delay payment of amounts from the Fixed Account for up
to six months.
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CHARGES AND FEES
We deduct the charges described below to cover our cost and expenses, services
provided and risks assumed under the Contracts. We incur certain costs and
expenses for the distribution and administration of the Contracts, for providing
the benefits payable thereunder and for bearing various risks thereunder. The
amount of a charge will not necessarily correspond to the costs associated with
providing the services or benefits indicated by the designation of the charge.
For example, the surrender charge collected may not fully cover all of the
distribution expenses incurred by us.
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CHARGE DEDUCTION DIVISION
You may specify at issue if you wish to have all charges against the
Accumulation Value deducted from the Liquid Asset Division. We call this the
Charge Deduction Division Option, and within this context refer to the Liquid
Asset Division as the Charge Deduction Division. If you do not elect this
option, or if the amount of the charges is greater than the amount in the
Division, the charges will be deducted as discussed below. You may also choose
to elect or cancel this option while the Contract is in force by sending
satisfactory notice to our Customer Service Center.
CHARGES DEDUCTED FROM THE ACCUMULATION VALUE
We invest the entire amount of the initial and any additional premium payments
and Credits in the Divisions and the Fixed Allocations you select, subject to
certain restrictions. See Restrictions on Allocation of Premium Payments. We
then may deduct certain amounts from your Accumulation Value. We may reduce
certain fees and charges, including any surrender, administration, and mortality
and expense risk charges, under group or sponsored arrangements. See Group or
Sponsored Arrangements. Unless you have elected the Charge Deduction Division,
charges are deducted proportionately from all affected Divisions in which you
are invested. If there is no Accumulation Value in those Divisions, we will
deduct charges from your Fixed Allocations starting with the Guarantee Periods
nearest their Maturity Dates until such charges have been paid. The charges we
deduct are:
SURRENDER CHARGE. A contingent deferred sales charge ("Surrender Charge") is
imposed as a percentage of each premium payment if the Contract is surrendered
or an excess partial withdrawal is taken during the nine year period from the
date we receive and accept such premium payment. The percentage of premium
payments deducted at the time of surrender or excess partial withdrawal depends
upon the number of complete years that have elapsed since that premium payment
was made. We determine the surrender charge as a percentage of each premium
payment as follows:
COMPLETE YEARS
ELAPSED SURRENDER
SINCE PREMIUM PAYMENT CHARGE
--------------------- ----------
0 8%
1 8%
2 8%
3 8%
4 7%
5 6%
6 5%
7 3%
8 1%
9+ 0%
Subject to our rules and as described in the Contract, the surrender charge
arising from a surrender or excess partial withdrawal will be waived in the
following events:
(1) you begin receiving qualified extended medical care on or after the first
Contract anniversary for at least 45 days during any continuous 60-day
period, and your request for the surrender or withdrawal, together with all
required proof of such qualified extended medical care, must be received at
our Customer Service Center during the term of such care or within ninety
days after the last day upon which you received such care.
(2) you are first diagnosed by a qualifying medical professional, on or after
the first Contract Anniversary, as having a Qualifying Terminal Illness.
Written proof of terminal illness, satisfactory to us, must be received at
our Customer Service Center. We reserve the right to require an examination
by a physician of our choice.
See Additional Credit to Premium. See your Contract for more information. The
waiver of surrender charge may not be available in all states.
SURRENDER CHARGE FOR EXCESS PARTIAL WITHDRAWALS. There is considered to be an
excess partial withdrawal in any Contract Year in which the amount withdrawn
exceeds 10% of your Accumulation Value on the date of the withdrawal minus any
amount withdrawn during that Contract Year. Where you are receiving systematic
partial withdrawals, any combination of conventional partial withdrawals taken
and any systematic partial withdrawals expected to be received in a Contract
Year will be considered in determining the amount of
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the excess partial withdrawal. Such a withdrawal will be considered a partial
surrender of the Contract and we will impose a surrender charge and any
associated premium tax. See Facts About the Contract, The Fixed Account, Market
Value Adjustment. Such charges will be deducted from the Accumulation Value in
proportion to the Accumulation Value in each Division or Fixed Allocation from
which the excess partial withdrawal was taken. In instances where the excess
partial withdrawal equals the entire Accumulation Value in each such Division or
Fixed Allocation, charges will be deducted proportionately from all other
Divisions and Fixed Allocations in which you are invested.
For purposes of calculating the surrender charge for the excess partial
withdrawal, (i) we treat premium payments as being withdrawn on a first-in
first-out basis, and (ii) amounts withdrawn which are not considered an excess
partial withdrawal are not treated as a withdrawal of any premium payments.
Although we treat premium payments as being withdrawn before earnings for
purposes of calculating the surrender charge for excess partial withdrawals, the
Federal income tax law treats earnings as withdrawn first. See Federal Tax
Considerations, Taxation of Non-Qualified Annuities.
For example, the following assumes an Initial Premium payment of $10,000 and
additional premium payments of $10,000 in each of the second and third Contract
Years, for total premium payments under the Contract of $30,000. It also assumes
a partial withdrawal at the beginning of the fifth Contract Year of 15% of the
Accumulation Value of $35,000.
In this example, $3,500 ($35,000 x .10) is the maximum partial withdrawal that
may be withdrawn during the Contract Year without the imposition of a surrender
charge. The total partial withdrawal would be $5,250 ($35,000 x .15). Therefore,
$1,750 ($5,250-$3,500) is considered an excess partial withdrawal of a part of
the Initial Premium payment of $10,000 and would be subject to a 7% surrender
charge of $122.50 ($1,750 x .07). This example does not take into account any
Market Value Adjustment or deduction of any premium taxes.
PREMIUM TAXES. We make a charge for state and local premium taxes in certain
states which can range from 0% to 3.5% of premium. The charge depends on the
Owner's state of residence. We reserve the right to change this amount to
conform with changes in the law or if the Owner changes state of residence.
Premium taxes are generally incurred on the Annuity Commencement Date and a
charge for such premium taxes is then deducted from your Accumulation Value on
such date. However, some jurisdictions impose a premium tax at the time that
initial and additional premiums are paid, regardless of the Annuity Commencement
Date. In those states we may initially defer collection of the amount of the
charge for premium taxes from your Accumulation Value and deduct it against
Accumulation Value on surrender of the Contract, excess partial withdrawals or
on the Annuity Commencement Date.
ADMINISTRATIVE CHARGE. The administrative charge is incurred at the beginning
of the Contract processing period and deducted at the end of each Contract
processing period. We deduct this charge when determining the Cash Surrender
Value payable if you surrender the Contract prior to the end of a Contract
processing period. If the Accumulation Value at the end of the Contract
processing period equals or exceeds $100,000 or the sum of the premiums paid
equals or exceeds $100,000, the charge is zero. Otherwise, the amount deducted
is $40 per Contract Year.
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 Divisions and the Fixed Allocations from which each
such reallocation is made in proportion to the amount being transferred from
each such Division and Fixed Allocation unless you have chosen to use the Charge
Deduction Division. Any allocations or transfers due to the election of dollar
cost averaging and reallocation under the provision What Happens if a Division
is Not Available will not be included in determining if the excess allocation
charge should apply.
CHARGES DEDUCTED FROM THE DIVISIONS
MORTALITY AND EXPENSE RISK CHARGE. The amount of the mortality and expense risk
charge depends on the death benefit option that has been elected. If the
Standard Death Benefit Option is elected, the charge is equivalent, on an annual
basis, to 1.25% of the assets in each Division. The charge is deducted on each
Valuation Date at the rate of .003446% for each day in the Valuation Period. If
an enhanced death benefit is elected, the charge is equivalent, on an annual
basis, to 1.40% for the Annual Ratchet Death Benefit Option, or 1.55% for the 7%
Solution Death Benefit Option, of the assets in each Division. The charge is
deducted on each Valuation Date at the rate of .003863% or .004280%,
respectively, for each day in the Valuation Period.
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ASSET BASED ADMINISTRATIVE CHARGE. We will deduct a daily charge from the
assets in each Division, to compensate us for a portion of the administrative
expenses under the Contract. The daily charge is at a rate of 0.000411%
(equivalent to an annual rate of 0.15%) on the assets in each Division.
TRUST EXPENSES
There are fees and charges deducted from each Series of the GCG Trust, the ESS
Trust, the WP Trust and the PIMCO Trust. Please read the respective Trust
prospectus for details.
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CHOOSING YOUR ANNUITIZATION OPTIONS
ANNUITIZATION OF YOUR CONTRACT
If the Annuitant and Owner are living on the Annuity Commencement Date, we will
begin making payments to the Owner under an income plan. We will make these
payments under the Annuity Option chosen. You may change an Annuity 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 your Accumulation Value adjusted for any applicable Market Value
Adjustment on the Annuity Commencement Date in accordance with The Annuity
Options section below, subject to our published rules at such time. See When We
Make Payments.
You may also elect an Annuity Option on surrender of the Contract for its Cash
Surrender Value or you may choose one or more Annuity Options for the payment of
death benefit proceeds while it is in effect and before the Annuity Commencement
Date. If, at the time of the Owner's death or the Annuitant's death (if the
Owner is not an individual), no option has been chosen for paying death benefit
proceeds, the Beneficiary may choose an option within 60 days. In all events,
payments of death benefit proceeds must comply with the distribution
requirements of applicable Federal tax law.
The minimum monthly annuity income payment that we will make is $20. We may
require that a single sum payment be made if the Accumulation Value is less than
$2,000 or if the calculated monthly annuity income payment is less than $20.
For each option we will issue a separate written agreement putting the option
into effect. Before we pay any annuity benefits, we require the return of the
Contract. If your Contract has been lost, we will require that you complete and
return the applicable Contract form. Various factors will affect the level of
annuity benefits including the Annuity Option chosen, the applicable payment
rate used and the investment results of the Divisions and interest credited to
the Fixed Allocations in which the Accumulation Value has been invested.
Some annuity options may provide only for fixed payments. 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 Beneficiary;
(2) The person named is not a natural person, such as a corporation; or
(3) Any income payment would be less than the minimum annuity income payment
allowed.
ANNUITY COMMENCEMENT DATE SELECTION
You select the Annuity Commencement Date. You may select any date following the
fifth Contract Anniversary but before the Contract Processing Date in the month
following the Annuitant's 90th birthday, or 10 years from the contract date, if
later. If, on the Annuity Commencement Date, a Surrender Charge remains, the
elected Annuity Option must include a period certain of at least five years
duration. If you do not select a date, the Annuity Commencement Date will be in
the month following the Annuitant's 90th birthday, or 10 years from the contract
date, if later. If 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
other than a Roth IRA, 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.
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<PAGE>
FREQUENCY SELECTION
You choose the frequency of the Annuity Payments. They may be monthly,
quarterly, semi-annually or annually. If we do not receive written notice from
you, the payments will be made monthly. There may be certain restrictions on
minimum payments that we will allow.
THE ANNUITIZATION OPTIONS
There are four options to choose from as shown below. Options 1 through 3 are
fixed and option 4 may be fixed or variable. For a fixed option, the
Accumulation Value in the Divisions is transferred to the general account.
OPTION 1. INCOME FOR A FIXED PERIOD. Payment is made in equal installments for
a fixed number of years based on the Accumulation Value as of the Annuity
Commencement Date. We guarantee that each monthly payment will be at least the
amount set forth in the Contract. Guaranteed amounts for annual, semi-annual and
quarterly payments are available 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 Owner reaches age 59 1/2.
OPTION 2. INCOME FOR LIFE. Payment is made in equal monthly installments and
guaranteed for at least a period certain. The period certain can be 10 or 20
years. Other periods certain may be 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 choose to offer as an annuitization option 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 option 1, or any remaining guaranteed payments under option 2, 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
never less than 3% for option 1 and option 2 per year. We will, however,
base the discount interest rate on the interest rate used to calculate the
payments for options 1 and 2 if such payments were not based on the tables
in the Contract.
(2) For option 3, no amounts are payable after both named persons have died.
(3) For option 4, the annuity agreement will state the amount due, if any.
- --------------------------------------------------------------------------------
OTHER CONTRACT PROVISIONS
IN CASE OF ERRORS IN APPLICATION INFORMATION
If an age or sex given in the application or enrollment form is misstated, the
amounts payable or benefits provided by the Contract shall be those that the
premium payment would have bought at the correct age or sex.
SENDING NOTICE TO US. Any written notices, inquiries or requests should be sent
to our Customer Service Center. Please include your name, your Contract number
and, if you are not the Annuitant, the name of the Annuitant.
ASSIGNING THE CONTRACT AS COLLATERAL. You may assign a non-qualified Contract
as collateral security for a loan or other obligation. This does not change the
Ownership. However, your rights and any Beneficiary's
36
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<PAGE>
rights are subject to the terms of the assignment. See Assignments, Pledges and
Gratuitous Transfers. 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 American.
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 change to 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.
YOUR RIGHT TO CANCEL OR EXCHANGE YOUR CONTRACT
CANCELLING YOUR CONTRACT. You may cancel your Contract within your Free Look
Period, which is ten days after you receive your Contract. For purposes of
administering our allocation and administrative rules, we deem this period to
expire 15 days after the Contract is mailed to you. Some states may require a
longer Free Look Period. If you decide to cancel, you may mail or deliver the
Contract to our Customer Service Center. We will refund the Accumulation Value
adjusted for any Market Value Adjustment less any Credit plus any charges we
deducted, and the Contract will be voided as of the date we receive the Contract
and your request. Any gains or losses attributable to a Credit will not be
considered part of any credit deducted from any refund amount or death benefit.
Some states require that we return the premium paid. In these states, we require
your premiums designated for investment in the Divisions of Account B be
allocated to the Specially Designated Division during the Free Look Period.
Premiums designated for the Fixed Account will be allocated to a Fixed
Allocation with the Guarantee Period you have chosen; however, we reserve the
right to require such premiums to allocate to the Specially Designated Division
during the Free Look Period. 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 Divisions chosen by you, based on the index of
investment experience next computed for each Division. See Facts About the
Contract, 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 surrender,
administration, and mortality and expense risk charges. We may also change the
minimum initial and additional premium requirements, or offer a reduced death
benefit. Group arrangements include those in which a trustee or an employer, for
example, purchases Contracts covering a group of individuals on a group basis.
Sponsored arrangements include those in which an employer allows us to sell
Contracts to its employees on an individual basis.
Our costs for sales, administration, and mortality generally vary with the size
and stability of the group among other factors. We take all these factors into
account when reducing charges. To qualify for reduced charges, a group or
sponsored arrangement must meet certain requirements, including our 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 may credit additional amounts to Contracts owned by persons who meet certain
criteria established by us, which may include employees of U.S. ING affiliates,
their spouses and their immediate family members, registered representatives
appointed with Golden American and their spouses, and Trustees of The GCG Trust
and their spouses. We will credit additional amounts to these Contracts if such
Contracts are purchased directly
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through Directed Services, Inc., and the contract owner will not be afforded the
benefit of services of any other broker-dealer nor will commissions be payable
to any broker-dealer in connection with such purchases. The additional amount
credited to these Contracts will equal the reduction in our costs that we
experience by not incurring brokerage commissions in selling the Contracts.
We will make these and any similar reductions and arrangements according to our
rules in effect when an application or enrollment form for a Contract is
approved. We may change these rules from time to time. Any variation in the
administrative charge will reflect differences in costs or services and will not
be unfairly discriminatory.
SELLING THE CONTRACT
DSI is principal underwriter and distributor of the Contract as well as for
other Contracts issued through Account B and other separate accounts of Golden
American. We pay DSI for acting as principal underwriter under a distribution
agreement. The offering of the Contract will be continuous.
DSI has entered into and will continue to enter into sales agreements with
broker-dealers to solicit for the sale of the Contract through registered
representatives who are licensed to sell securities and variable insurance
products including variable annuities. These agreements provide that
applications for Contracts may be solicited by registered representatives of the
broker-dealers appointed by Golden American to sell its variable life insurance
and variable annuities. These broker-dealers are registered with the SEC and are
members of the National Association of Securities Dealers, Inc. ("NASD"). The
registered representatives are authorized under applicable state regulations to
sell variable life insurance and variable annuities. The writing agent normally
will receive commissions the equivalent of up to 5.50% of any initial or
additional premium payments made. Certain sales agreements may provide for a
combination of a certain percentage of commission at the time of sale and an
annual trail commission (which when combined could exceed 5.50% of total premium
payments).
- --------------------------------------------------------------------------------
REGULATORY INFORMATION
VOTING RIGHTS
ACCOUNT B. We will vote the shares of a Trust owned by Account B according to
your instructions. However, if the Investment Company Act of 1940 or any related
regulations should change, or if interpretations of it or related regulations
should change, and we decide that we are permitted to vote the shares of a Trust
in our own right, we may decide to do so.
We determine the number of shares that you have in a Division by dividing the
Contract's Accumulation Value in that Division by the net asset value of one
share of the portfolio in which a Division invests. Fractional votes will be
counted. We will determine the number of shares you can instruct us to vote 180
days or less before a Trust's meeting. We will ask you for voting instructions
by mail at least 10 days before the meeting.
If we do not get your instructions in time, we will vote the shares in the same
proportion as the instructions received from all Contracts in that Division. We
will also vote shares we hold in Account B which are not attributable to Owners
in the same proportion.
STATE REGULATION
We are regulated and supervised by the Insurance Department of the State of
Delaware, which periodically examines our financial condition and operations. We
are also subject to the insurance laws and regulations of all jurisdictions
where we do business. The variable Contract offered by this prospectus has been
approved by the Insurance Department of the State of Delaware and by the
Insurance Departments of other jurisdictions. We are required to submit annual
statements of our operations, including financial statements, to the Insurance
Departments of the various jurisdictions in which we do business to determine
solvency and compliance with state insurance laws and regulations.
LEGAL PROCEEDINGS
Golden American, as an insurance company, is ordinarily involved in litigation.
We do not believe that any current litigation is material and we do not expect
to incur significant losses from such actions.
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LEGAL MATTERS
The legal validity of the Contract described in this prospectus has been passed
on by Myles R. Tashman, Esquire, Executive Vice President, General Counsel and
Secretary of Golden American. Sutherland, Asbill & Brennan LLP of Washington,
D.C. has provided advice on certain matters relating to Federal securities laws.
EXPERTS
The audited financial statements of Golden American Life Insurance Company and
Separate Account B appearing or incorporated by reference in the Statement of
Additional Information and Registration Statement have been audited by Ernst &
Young LLP, independent auditors, as set forth in their reports thereon appearing
or incorporated by reference in the Statement of Additional Information and in
the Registration Statement and are included or incorporated by reference in
reliance upon such reports given upon the authority of such firm as experts in
accounting and auditing.
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<PAGE>
MORE INFORMATION ABOUT GOLDEN AMERICAN LIFE INSURANCE COMPANY
SELECTED FINANCIAL DATA
The following selected financial data prepared in accordance with
generally accepted accounting principles ("GAAP") for Golden American
should be read in conjunction with the financial statements and notes
thereto included in this Prospectus.
On October 24, 1997, PFHI Holding, Inc. ("PFHI"), a Delaware
Corporation, acquired all of the outstanding capital stock of Equitable
of Iowa Companies ("Equitable of Iowa"), pursuant to a merger agreement
among Equitable of Iowa, PFHI and ING Groep, N.V. On August 13, 1996,
Equitable of Iowa acquired all of the outstanding capital stock of BT
Variable, Inc., the parent of Golden American. For GAAP financial
statement purposes, the merger was accounted for as a purchase
effective October 25, 1997 and the change in control of Golden American
through the acquisition of BT Variable, Inc. was accounted for as a
purchase acquisition effective August 14, 1996. As a result, the GAAP
financial data presented below for the period subsequent to October 24,
1997, are presented as the Post-Merger new basis of accounting, for the
period August 14, 1996 through October 24, 1997, are presented as the
Post-Acquisition basis of accounting, and for August 13, 1997 and prior
periods are presented as the Pre-Acquisition basis of accounting.
SELECTED GAAP BASIS FINANCIAL DATA
(IN THOUSANDS)
POST-MERGER POST-ACQUISITION
--------------|---------------- ---------------
FOR THE PERIOD| FOR THE PERIOD FOR THE PERIOD
OCTOBER 25, | JANUARY 1, AUGUST 14,
1997 THROUGH | 1997 THROUGH 1996 THROUGH
DECEMBER 31, | OCTOBER 24, DECEMBER 31,
1997 | 1997 1996
--------------|---------------- ---------------
|
Annuity and Interest |
Sensitive Life |
Product Charges ............. $ 3,834 | $18,288 $ 8,768
Net Income before |
Federal Income Tax .......... $ (279) | $ (608) $ 570
Net Income (Loss) ............ $ (425) | $ 729 $ 350
Total Assets ................. $ 2,445,835 | N/A $1,677,899
Total Liabilities ............ $ 2,218,522 | N/A $1,537,415
Total Stockholder's Equity ... $ 227,313 | N/A $ 140,484
PRE-ACQUISITION
-------------------------------------------------------
FOR THE PERIOD
JANUARY 1, 1996
THROUGH FOR THE FISCAL YEARS ENDED DECEMBER 31
------------------------------------------
AUGUST 13, 1996 1995 1994 1993 1992(a)
--------------- ------ ------ ------ --------
Annuity and
Interest
Sensitive Life
Product Charges ...... $12,259 $ 18,388 $ 17,519 $ 10,192 $ 694
Net Income before
Federal Income Tax ... $ 1,736 $ 3,364 $ 2,222 $ (1,793) $ (508)
Net Income (Loss) ...... $ 3,199 $ 3,364 $ 2,222 $ (1,793) $ (508)
Total Assets ........... N/A $1,203,057 $1,044,760 $886,155 $320,539
Total Liabilities ...... N/A $1,104,932 $ 955,254 $857,558 $306,197
Total Stockholder's
Equity ............... N/A $ 98,125 $ 89,506 $ 28,597 $ 14,342
(a) Results for 1992 are for the period September 30, 1992 (date of
acquisition) to December 31, 1992.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The purpose of this section is to discuss and analyze the Company's
consolidated results of operations. In addition, some analysis and
information regarding financial condition and liquidity and capital
resources has also been provided. This analysis should be read in
conjunction with the consolidated financial statements and related
notes which appear elsewhere in this report. The Company reports
financial results on a consolidated basis. The consolidated financial
statements include the accounts of Golden American Life Insurance
Company ("Golden American") and its wholly owned subsidiary, First
Golden American Life Insurance Company of New York ("First Golden," and
collectively with Golden American, the "Company").
<PAGE>
<PAGE>
BUSINESS ENVIRONMENT. The current business and regulatory environment
remains challenging for the insurance industry. The variable annuity
competitive environment is intense and is dominated by a number of
large variable product companies with strong distribution, name
recognition and wholesaling capabilities. Increasing competition from
traditional insurance carriers as well as banks and mutual fund
companies offer consumers many choices. However, overall demand for
variable products remains strong for several reasons including: strong
stock market performance over the last four years; relatively low
interest rates; an aging U. S. population that is increasingly
concerned about retirement and estate planning, as well as maintaining
their standard of living in retirement; and potential reductions in
government and employer-provided benefits at retirement as well as
lower public confidence in the adequacy of those benefits.
In 1995, Golden American experienced a significant decline in sales,
due to a number of factors. First, some portfolio managers performed
poorly in 1993 and 1994. Second, as more products came to market the
cost structure of the DVA product became less competitive. Third,
because no fixed interest rate options were available in 1994 during
the time of rising interest rates and flat or declining equity markets,
market share was lost. Consequently, the Company took steps to respond
to these business challenges. Several portfolio managers were replaced
and new funds were added to give contractholders more options. In
October of 1995, the Company introduced the Combination Deferred
Variable and Fixed Annuity (GoldenSelect DVA Plus) and the GoldenSelect
Genesis I and Genesis Flex life insurance products, and sales increased
substantially. In October of 1997, Golden American introduced three
new variable annuity products (GoldenSelect Access, GoldenSelect ES II
and GoldenSelect Premium Plus), which have already contributed
significantly to sales.
RESULTS OF OPERATIONS
MERGER. On October 23, 1997, Equitable of Iowa shareholders approved
the Agreement and Plan of Merger ("Merger Agreement") dated as of July
7, 1997, among Equitable of Iowa, PFHI Holdings, Inc. ("PFHI"), and ING
Groep, N.V. ("ING"). On October 24, 1997, PFHI, a Delaware
corporation, acquired all of the outstanding capital stock of Equitable
of Iowa pursuant to the Merger Agreement. PFHI is a wholly owned
subsidiary of ING, a global financial services holding company based in
The Netherlands. Equitable of Iowa, an Iowa corporation, in turn owned
all the outstanding capital stock of Equitable Life Insurance Company
of Iowa ("Equitable Life") and Golden American and their wholly owned
subsidiaries. Equitable of Iowa also owned all the outstanding capital
stock of Locust Street Securities, Inc., Equitable Investment Services,
Inc., Directed Services, Inc.("DSI"), Equitable of Iowa Companies
Capital Trust, Equitable of Iowa Companies Capital Trust II and
Equitable of Iowa Securities Network, Inc. In exchange for the
outstanding capital stock of Equitable of Iowa, ING paid total
consideration of approximately $2.1 billion in cash and stock plus the
assumption of approximately $400 million in debt according to the
Merger Agreement. As a result of the merger, Equitable of Iowa was
merged into PFHI which was simultaneously renamed Equitable of Iowa
Companies, Inc. ("EIC" or "Parent").
For financial statement purposes, the change in control of the Company
through the ING merger with EIC, was accounted for as a purchase
effective October 25, 1997. This merger resulted in a new basis of
accounting reflecting estimated fair values of assets and liabilities
at that date. As a result, the Company's financial statements for the
period subsequent to October 24, 1997, are presented on the Post-Merger
new basis of accounting.
The purchase price was allocated to the companies mentioned previously.
Goodwill of $1.4 billion was established for the excess of the merger
cost over the fair value of the assets and liabilities of EIC with
$151.1 million pushed down to the Company. The allocation of the
purchase price to the Company was $227.5 million. The cost of the
acquisition is preliminary as it relates to estimated expenses, and as
a result, the allocation of the purchase price to the Company may
change. Goodwill resulting from the merger is being amortized over 40
years on a straight-line basis. The carrying value will be reviewed
periodically for any indication of impairment in value.
CHANGE IN CONTROL - Acquisition. On August 13, 1996, Equitable of Iowa
acquired all of the outstanding capital stock of BT Variable, Inc. ("BT
Variable") and its wholly owned subsidiaries Golden American and DSI.
Subsequent to the acquisition, the BT Variable, Inc. name was changed
to EIC Variable, Inc. On April 30, 1997, EIC Variable, Inc. was
liquidated and its investments in Golden American and DSI were
transferred to Equitable of Iowa while the remainder of its net assets
were contributed to Golden American. On December 30, 1997, EIC
Variable, Inc. was dissolved.
For financial statement purposes, the change in control of Golden
American through the acquisition of BT Variable was accounted for as a
purchase acquisition effective August 14, 1996. This acquisition
resulted in a new
<PAGE>
<PAGE>
basis of accounting reflecting estimated fair values of assets and
liabilities at that date. As a result, the Company's
financial statements for the period August 14, 1996 through October 24,
1997, are presented on the Post-Acquisition basis of accouting, while
the financial statements for August 13, 1996 and prior periods are
presented on the Pre-Acquisition historical cost basis of accounting.
The purchase price was allocated to the three companies purchased - BT
Variable, DSI, and Golden American. Goodwill of $41.1 million was
established for the excess of the acquisition cost over the fair value
of the assets and liabilities and pushed down to Golden American. The
acquisition cost was preliminary with respect to the final settlement
of taxes with Bankers Trust Company and estimated expenses. At June 30,
1997, goodwill was increased by $1.8 million to adjust the value of a
receivable existing at that date. The allocation of the purchase price
to Golden American was approximately $139.9 million. Goodwill
resulting from the acquisition was being amortized over 25 years on a
straight-line basis.
1997 COMPARED TO 1996
The following analysis combines Post-Merger and Post-Acquisition
activity for 1997 and Post-Acquisition and Pre-Acquisition activity for
1996 for comparison purposes. Such a comparison does not recognize the
impact of the purchase accounting and goodwill amortization except for
the periods after August 13, 1996.
PREMIUMS
<TABLE>
<CAPTION>
POST-MERGER COMBINED POST-ACQUISITION
__________________________________________________________
For the period | For the year | For the period
October 25, 1997 | ended | January 1, 1997
through | December 31, 1997 | through
December 31, 1997 | Combined | October 24, 1997
_________________________________________| __________________| _________________
(Dollars in millions)
<S> <C> | <C> | <C>
Variable annuity | |
premiums: | |
Separate account $111.0 | $291.2 | $180.2
Fixed account 60.9 | 318.0 | 257.1
___________________| __________________| _________________
171.9 | 609.2 | 437.3
Variable life premiums 1.2 | 15.6 | 14.4
___________________| __________________| _________________
Total premiums $173.1 | $624.8 | $451.7
==========================================================
</TABLE>
<TABLE>
<CAPTION>
POST-ACQUISITION COMBINED PRE-ACQUISITION
__________________________________________________________
For the period | For the year | For the period
August 14, 1996 | ended | January 1, 1996
through | December 31, 1996 | through
December 31, 1996 | Combined | August 13, 1996
_________________________________________| __________________| _________________
(Dollars in millions)
<S> <C> | <C> | <C>
Variable annuity | |
premiums: | |
Separate account $51.0 | $182.4 | $131.4
Fixed account 118.3 | 245.3 | 127.0
___________________| __________________| _________________
169.3 | 427.7 | 258.4
Variable life premiums 3.6 | 14.1 | 10.5
___________________| __________________| _________________
Total premiums $172.9 | $441.8 | $268.9
==========================================================
</TABLE>
Variable annuity separate account and variable life premiums increased
59.6% and 10.1%, respectively in 1997. During 1997, stock market
returns, a relatively low interest rate environment and flat yield
curve have made returns provided by variable annuities and mutual funds
more attractive than fixed rate products such as certificates of
deposits and fixed annuities. The fixed account portion of the
Company's variable annuity premiums increased 29.7% in 1997 due to the
Company's marketing emphasis on fixed rates during the second and third
quarters. Premiums, net of reinsurance, for variable products from six
significant broker/dealers for the year ended December 31, 1997,
totaled $445.3 million, or 71% of premiums ($298.0 million or 67% from
two significant broker/dealers for the year ended December 31, 1996).
<PAGE>
<PAGE>
REVENUES
<TABLE>
<CAPTION>
POST-MERGER COMBINED POST-ACQUISITION
__________________________________________________________
For the period | For the year| For the period
October 25, 1997 | ended| January 1, 1997
through | December 31, 1997| through
December 31, 1997 | Combined| October 24, 1997
_________________________________________| _________________| __________________
(Dollars in millions)
<S> <C> | <C> | <C>
Annuity and interest | |
sensitive life | |
product charges $3.8 | $22.1 | $18.3
Management fee revenue 0.5 | 2.8 | 2.3
Net investment income 5.1 | 26.8 | 21.7
Realized gains (losses) | |
on investments -- | 0.1 | 0.1
Other income 0.3 | 0.7 | 0.4
___________________| _________________| __________________
$9.7 | $52.5 | $42.8
==========================================================
</TABLE>
<TABLE>
<CAPTION>
POST-ACQUISITION COMBINED PRE-ACQUISITION
__________________________________________________________
For the period | For the year| For the period
August 14, 1996 | ended| January 1, 1996
through | December 31, 1996| through
December 31, 1996 | Combined| August 13, 1996
_________________________________________| _________________| __________________
(Dollars in millions)
<S> <C> | <C> | <C>
Annuity and interest | |
sensitive life | |
product charges $8.8 | $21.0 | $12.2
Management fee revenue 0.9 | 2.3 | 1.4
Net investment income 5.8 | 10.8 | 5.0
Realized gains (losses) | |
on investments -- | (0.4)| (0.4)
Other income 0.5 | 0.6 | 0.1
___________________| _________________| __________________
$16.0 | $34.3 | $18.3
==========================================================
</TABLE>
Total revenues increased 53.3%, or $18.2 million, to $52.5 million in
1997. Annuity and interest sensitive life product charges increased
5.2%, or $1.1 million in 1997 due to additional fees earned from the
increasing block of business under management in the Separate Accounts
and an increase in the collection of surrender charges.
Golden American provides certain managerial and supervisory services to
DSI. This fee, calculated as a percentage of average assets in the
variable separate accounts, was $2.8 million for 1997 and $2.3 million
for 1996.
Net investment income increased 148.3%, or $16.0 million, to $26.8
million in 1997 from $10.8 million in 1996 due to growth in invested
assets. During 1997, the Company had net realized gains on the
disposal of investments, which were the result of voluntary sales, of
$0.1 million compared to net realized losses of $0.4 million in 1996.
<PAGE>
<PAGE>
EXPENSES
<TABLE>
<CAPTION>
POST-MERGER COMBINED POST-ACQUISITION
_______________________________________________________
For the period| For the year| For the period
October 25, 1997| ended| January 1, 1997
through| December 31, 1997| through
December 31, 1997| Combined| October 24, 1997
_________________________________________| _________________| _________________
(Dollars in millions)
<S> <C> | <C> | <C>
Insurance benefits | |
and expenses: | |
Annuity and interest | |
sensitive life benefits: | |
Interest credited to | |
account balances $7.4 | $26.7 | $19.3
Benefit claims incurred | |
in excess of account | |
balances -- | 0.1 | 0.1
Underwriting, acquisition | |
and insurance expenses: | |
Commissions 9.4 | 36.3 | 26.9
General expenses 3.4 | 17.3 | 13.9
Insurance taxes 0.5 | 2.3 | 1.8
Policy acquisition costs | |
deferred (13.7)| (42.7)| (29.0)
Amortization: | |
Deferred policy | |
acquisition costs 0.9 | 2.6 | 1.7
Present value of in | |
force acquired 0.9 | 6.1 | 5.2
Goodwill 0.6 | 2.0 | 1.4
_________________| _________________| _________________
$9.4 | $50.7 | $41.3
=======================================================
</TABLE>
<TABLE>
<CAPTION>
POST-ACQUISITION COMBINED PRE-ACQUISITION
_______________________________________________________
For the period| For the year| For the period
August 14, 1996| ended| January 1, 1996
through| December 31, 1996| through
December 31, 1996| Combined| August 13, 1996
_________________________________________| _________________| _________________
(Dollars in millions)
<S> <C> | <C> | <C>
Insurance benefits | |
and expenses: | |
Annuity and interest | |
sensitive life benefits: | |
Interest credited to | |
account balances $5.7 | $10.1 | $4.4
Benefit claims incurred | |
in excess of account | |
balances 1.3 | 2.2 | 0.9
Underwriting, acquisition | |
and insurance expenses: | |
Commissions 9.9 | 26.5 | 16.6
General expenses 5.9 | 15.3 | 9.4
Insurance taxes 0.7 | 1.9 | 1.2
Policy acquisition costs | |
deferred (11.7)| (31.0)| (19.3)
Amortization: | |
Deferred policy | |
acquisition costs 0.2 | 2.6 | 2.4
Present value of in | |
force acquired 2.7 | 3.7 | 1.0
Goodwill 0.6 | 0.6 | --
_________________| _________________| _________________
$15.3 | $31.9 | $16.6
=======================================================
</TABLE>
Total insurance benefits and expenses increased 59.3%, or $18.8
million, in 1997 from $31.9 million in 1996. Interest credited to
account balances increased 164.4%, or $16.6 million, in 1997 as a
result of higher account balances associated with the Company's fixed
account option within its variable products.
Commissions increased 37.3%, or $9.8 million, in 1997 from $26.5
million in 1996. Insurance taxes increased 23.3%, or $0.4 million, in
1997 from $1.9 million in 1996. Increases and decreases in commissions
and insurance taxes are generally related to changes in the level of
variable product sales. Insurance taxes are also impacted by several
other factors which include an increase in FICA taxes primarily due to
bonuses and an increase in state licenses and fees. Most costs incurred
as the result of new sales have been deferred, thus having very little
impact on earnings.
<PAGE>
<PAGE>
General expenses increased 12.6%, or $2.0 million, in 1997 from $15.3
million in 1996 due in part to certain expenses associated with the
merger occurring on October 24, 1997. In addition, the Company uses a
network of wholesalers to distribute its products and the salaries of
these wholesalers are included in general expenses. The portion of
these salaries and related expenses which vary with sales production
levels are deferred, thus having little impact on earnings. This
increase in general expenses was partially offset by reimbursements
received from Equitable Life, an affiliate, for certain advisory,
computer and other resources and services provided by Golden American.
Management expects general expenses to continue to increase in 1998 as
a result of the emphasis on expanding the salaried wholesaler
distribution network.
During the second quarter of 1997, present value of in force acquired
("PVIF") was unlocked by $2.3 million to reflect narrower current
spreads than the gross profit model assumed. The Company's deferred
policy acquisition costs ("DPAC"), previous balance of PVIF and
unearned revenue reserve, as of the merger date, were eliminated and an
asset of $44.3 million representing PVIF was established for all
policies in force at the merger date. The amortization of PVIF and
DPAC increased $2.4 million, or 37.1%, in 1997. Based on current
conditions and assumptions as to the impact of future events on
acquired policies in force, the expected approximate net amortization
for the next five years, relating to the PVIF as of December 31, 1997,
is $6.2 million in 1998, $6.0 million in 1999, $5.6 million in 2000,
$5.0 million in 2001 and $4.2 million in 2002. Certain expense
estimates inherent in the cost of the merger may change resulting in
changes of the allocation of the purchase price. If changes occur, the
impact could result in changes to PVIF and the related amortization and
deferred taxes. Actual amortization may vary based upon changes in
assumptions and experience. The elimination of the unearned revenue
reserve related to in force acquired at the merger/acquisition dates
will result in lower annuity and interest sensitive life product
charges compared to pre-merger/pre-acquisition levels.
Amortization of goodwill for the year ended December 31, 1997 totaled
$2.0 million compared to $0.6 million for the year ended December 31,
1996. Goodwill resulting from the merger is being amortized on a
straight-line basis over 40 years and is expected to total
approximately $3.8 million annually.
Interest expense on the $25 million surplus note issued December 1996
was $2.0 million for the year ended December 31, 1997. Interest on any
line of credit borrowings was charged at the rate of Equitable of
Iowa's monthly average aggregate cost of short-term funds plus 1.00%.
During 1997, the Company paid $0.6 million to Equitable of Iowa for
interest on the line of credit.
NET INCOME. Net income on a combined basis for 1997 was $0.3 million,
a decrease of $3.2 million, or 91.4%, from 1996.
1996 Compared to 1995
The following analysis combines the Post-Acquisition and
Pre-Acquisition activity for 1996 in order to compare the results to
1995. Such a comparison does not recognize the impact of the purchase
accounting and goodwill amortization except for the period after August
13, 1996.
PREMIUMS
<TABLE>
<CAPTION>
POST- |
ACQUISITION | COMBINED | PRE-ACQUISITION
--------------- | ------------ | ----------------------------
FOR THE PERIOD | FOR THE YEAR |
AUGUST 14, 1996 | ENDED | FOR THE PERIOD FOR THE YEAR
THROUGH | DECEMBER 31, | JANUARY 1,1996 ENDED
DECEMBER 31, | 1996 | THROUGH DECEMBER 31,
1996 | COMBINED | AUGUST 13, 1996 1995
--------------- | ------------ | --------------- ------------
| (DOLLARS IN | MILLIONS)
<S> <C> | <C> | <C> <C>
Variable annuity | |
premiums............... $169.3 | $427.6 | $258.4 $110.6
Variable life premiums.. 3.6 | 14.1 | 10.5 5.1
------ | -------- | ------ ------
Total premiums......... $172.9 | $441.7 | $268.9 $115.7
====== | ======== | ====== ======
</TABLE>
Variable annuity premiums increased 286.4%, or $317.0 million, in 1996,
and variable life premiums increased 176.2%, or $9.0 million, in 1996.
Strong stock market returns, a relatively low interest rate environment
and flat yield curve have made returns provided by variable annuities and
mutual funds more attractive than fixed rate products such as
certificates of deposits and fixed annuities. During 1995, the fund
offerings underlying Golden American's variable products were improved
and a fixed account option was added. These changes and the current
environment have contributed to the significant growth in the Company's
variable annuity premiums from 1995. Premiums, net of reinsurance, for
variable products from two significant sellers for the year ended
December 31, 1996, totaled $298.0 million, or 67% of premiums.
<PAGE>
<PAGE>
REVENUES
<TABLE>
<CAPTION>
POST- |
ACQUISITION | COMBINED | PRE-ACQUISITION
--------------- | ------------ | ----------------------------
FOR THE PERIOD | FOR THE YEAR |
AUGUST 14, 1996 | ENDED | FOR THE PERIOD FOR THE YEAR
THROUGH | DECEMBER 31, | JANUARY 1, 1996 ENDED
DECEMBER 31, | 1996 | THROUGH DECEMBER 31,
1996 | COMBINED | AUGUST 13, 1996 1995
--------------- | ------------ | --------------- ------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Annuity and interest | |
sensitive life product | |
charges................ $ 8.8 | $21.0 | $12.2 $18.4
Management fee revenue.. 0.9 | 2.2 | 1.4 1.0
Net investment income... 5.8 | 10.8 | 5.0 2.8
Realized gains (losses) | |
on investments......... -- | (0.4) | (0.4) 0.3
Other income............ 0.5 | 0.6 | 0.1 0.1
----- | ----- | ---- ----
$16.0 | $34.3 | $18.3 $22.6
===== | ===== | ==== =====
</TABLE>
Total revenues increased 51.9%, or $11.7 million, to $34.3 million in
1996. Annuity and interest sensitive life product charges increased
14.4%, or $2.6 million in 1996. The increase is due to additional fees
earned from the increasing block of business under management in the
Separate Accounts and an increase in the collection of surrender
charges partially offset by a decrease in the revenue recognition of
net distribution fees.
Golden American provides certain managerial and supervisory services to
DSI. This fee, calculated as a percentage of average assets in the
variable separate accounts, was $2.3 million for 1996 and $1.0 million
for 1995.
Net investment income increased 282.7%, or $8.0 million, to $10.8
million in 1996 from $2.8 million in 1995. This increase resulted from
growth in invested assets. During 1996, the Company had realized losses
on the disposal of investments, which were the result of voluntary
sales, of $0.4 million compared to realized gains of $0.3 million in
1995.
EXPENSES
<TABLE>
<CAPTION>
POST- |
ACQUISITION | COMBINED | PRE-ACQUISITION
--------------- | ------------ | -----------------------------
FOR THE PERIOD | FOR THE YEAR | FOR THE PERIOD
AUGUST 14, 1996 | ENDED | JANUARY 1, 1996 FOR THE YEAR
THROUGH | DECEMBER 31, | THROUGH ENDED
DECEMBER 31, | 1996 | AUGUST 13, DECEMBER 31,
1996 | COMBINED | 1996 1995
--------------- | ------------ | --------------- -------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Insurance benefits and expenses: | |
Annuity and interest sensitive | |
life benefits: | |
Interest credited to account balances.... $ 5.7 | $ 10.0 | $ 4.4 $ 1.3
Benefit claims incurred in excess of | |
account balances....................... 1.3 | 2.2 | 0.9 1.8
Underwriting, acquisition, and insurance | |
expenses: | |
Commissions.............................. 9.9 | 26.4 | 16.55 8.0
General expenses......................... 5.9 | 15.3 | 9.4 12.7
Insurance taxes.......................... 0.7 | 1.9 | 1.2 0.9
Policy acquisition costs deferred........ (11.7) | (31.0) | (19.3) (9.8)
Amortization: | |
Deferred policy acquisition costs....... 0.2 | 2.7 | 2.4 2.7
Present value of in force acquired...... 2.7 | 3.7 | 1.0 1.6
Goodwill................................ 0.6 | 0.6 | -- --
------ | ------ | ------ -----
$ 15.3 | $ 31.8 | $ 16.5 $19.2
====== | ====== | ====== =====
<PAGE>
<PAGE>
Total insurance benefits and expenses increased 66.1%, or $12.7
million, in 1996 from $19.2 million in 1995. Interest credited to
account balances increased 663.6%, or $8.8 million, in 1996 as a result
of higher account balances associated with the Company's fixed account
option within its variable products. Benefit claims incurred in excess
of account balances increased 19.4%, or $0.4 million, in 1996 from $1.8
million in 1995.
Commissions increased 230.9%, or $18.4 million, in 1996 from $8.0
million in 1995. Insurance taxes increased 99.3%, or $0.9 million, in
1996 from $1.0 million in 1995. Increases and decreases in commissions
and insurance taxes are generally related to changes in the level of
variable product sales. Most costs incurred as the result of new sales
have been deferred, thus having very little impact on earnings.
General expenses increased 21.2%, or $2.7 million, in 1996 from $12.7
million in 1995. The Company uses a network of wholesalers to
distribute its products and the salaries of these wholesalers are
included in general expenses. The portion of these salaries and related
expenses which vary with sales production levels are deferred, thus
having little impact on earnings. Management expects general expenses
to continue to increase in 1997 as a result of the emphasis on
expanding the salaried wholesaler distribution network.
The Company's deferred policy acquisition costs ("DPAC"), previous
balance of present value of in force acquired ("PVIF") and unearned
revenue reserve, as of the purchase date, were eliminated and an asset
of $85.8 million representing the PVIF was established for all policies
in force at the acquisition date. The amortization of PVIF and DPAC
increased $2.1 million, or 49.6%, in 1996. Based on current conditions
and assumptions as to the impact of future events on acquired policies
in force, amortization of PVIF is expected to be approximately $9.7
million in 1997, $10.1 million in 1998, $9.2 million in 1999, $7.9
million in 2000 and $6.8 million in 2001. The elimination of the
unearned revenue reserve, related to in force acquired at the
acquisition date, will result in lower annuity and interest sensitive
life product charges compared to 1995 levels.
Amortization of goodwill during the period from the acquisition date to
December 31, 1996 totaled $0.6 million. Goodwill resulting from the
acquisition is being amortized on a straight-line basis over 25 years
and is expected to total $1.6 million annually.
NET INCOME. Net income on a combined basis for 1996 was $3.5 million,
an increase of $0.2 million, or 5.5%, from 1995.
FINANCIAL CONDITION
RATINGS. During 1997, the Company's ratings were upgraded by A.M. Best
from A to A+ and by Duff & Phelps from AA to AA+.
INVESTMENTS. The financial statement carrying value and amortized cost
basis of the Company's total investments each increased 65.1% in 1997.
All of the Company's investments, other than mortgage loans, are
carried at fair value in the Company's financial statements. As such,
growth in the carrying value of the Company's investment portfolio
included changes in unrealized appreciation and depreciation of fixed
maturity and equity securities as well as growth in the cost basis of
these securities. Growth in the cost basis of the Company's investment
portfolio resulted from the investment of premiums from the sale of the
Company's fixed account option and the effect of purchase accounting
establishing a new cost basis at market value at the merger date. The
Company manages the growth of its insurance operations in order to
maintain adequate capital ratios.
To support the fixed account option of the Company's variable insurance
products, cash flow was invested primarily in fixed maturity securities
and mortgage loans. At December 31, 1997, the Company's investment
portfolio at amortized cost was $519.6 million with a yield of 6.7% and
carrying value of $520.2 million.
Fixed Maturity Securities: At December 31, 1997, the Company had fixed
maturities with an amortized cost of $413.3 million and an estimated
fair value of $414.4 million. The individual securities in the
Company's fixed maturities portfolio (at amortized cost) include
investment grade securities ($368.0 million or 89.1%), which include
securities issued by the U.S. Government, its agencies and corporations
that are rated at least BBB- by Standard & Poor's Rating Services, a
Division of the McGraw Hill Cos., Inc. ("Standard & Poor's"), and below
investment grade securities ($41.4 million or 10.0%), which are
securities issued by corporations that are rated BB+ to B- by Standard
& Poor's. Securities not rated by Standard & Poor's had a National
Association of Insurance Commissioners ("NAIC") rating of 1, 3 or 4
($3.9 million or 0.9%).
<PAGE>
<PAGE>
The Company classifies 100% of its securities as available for sale.
Net unrealized appreciation of fixed maturity securities of $1.1
million was comprised of gross appreciation of $1.4 million and gross
depreciation of $0.3 million. Net unrealized holding gains on these
securities, net of adjustments to DPAC, PVIF and deferred income taxes,
increased stockholder's equity by $0.6 million at December 31, 1997.
The Company began investing in below investment grade securities during
1996. At December 31, 1997, the amortized cost value of the Company's
total investment in below investment grade securities was $41.4
million, or 8.0%, of the Company's investment portfolio. The Company
intends to purchase additional below investment grade securities, but
it does not expect the percentage of its portfolio invested in such
securities to exceed 10% of its investment portfolio. At December 31,
1997, the yield at amortized cost on the Company's below investment
grade portfolio was 7.9% compared to 6.3% for the Company's investment
grade corporate bond portfolio. The Company estimates the fair value of
its below investment grade portfolio was $41.3 million, or 99.9% of
amortized cost value, at December 31, 1997.
Below investment grade securities have different characteristics than
investment grade corporate debt securities. Risk of loss upon default
by the borrower is significantly greater with respect to below
investment grade securities than with other corporate debt securities.
Below investment grade securities are generally unsecured and are often
subordinated to other creditors of the issuer. Also, issuers of below
investment grade securities usually have higher levels of debt and are
more sensitive to adverse economic conditions, such as recession or
increasing interest rates, than are issuers of investment grade
securities. The Company attempts to reduce the overall risk in its
below investment grade portfolio, as in all of its investments, through
careful credit analysis, strict investment policy guidelines, and
diversification by company and by industry.
The Company analyzes its investment portfolio, including below
investment grade securities, at least quarterly in order to determine
if its ability to realize its carrying value on any investment has been
impaired. For debt and equity securities, if impairment in value is
determined to be other than temporary (i.e. if it is probable the
Company will be unable to collect all amounts due according to the
contractual terms of the security), the cost basis of the impaired
security is written down to fair value, which becomes the security's
new cost basis. The amount of the write-down is included in earnings as
a realized loss. Future events may occur, or additional or updated
information may be received, which may necessitate future write-downs
of securities in the Company's portfolio. Significant write-downs in
the carrying value of investments could materially adversely affect the
Company's net income in future periods.
In 1997, fixed maturity securities designated as available for sale
with a combined amortized cost of $49.3 million were called or repaid
by their issuers. In total, net pre-tax gains from sales, calls and
repayments of fixed maturity investments amounted to $0.2 million in
1997.
At December 31, 1997, no fixed maturity securities were deemed to have
impairments in value that are other than temporary. The Company's
fixed maturity investment portfolio had a combined yield at amortized
cost of 6.7% at December 31, 1997.
Equity Securities: At December 31, 1997, the Company owned equity
securities with a combined cost of $4.4 million and an estimated fair
value of $3.9 million. Gross unrealized depreciation of equity
securities totaled $0.5 million. Equity securities are comprised
primarily of the Company's investment in shares of the mutual funds
underlying the Company's registered separate accounts.
Mortgage Loans: Mortgage loans represent 16.4% of the Company's
investment portfolio at amoritized cost. Mortgages outstanding were
$85.1 million at December 31, 1997 with an estimated fair value of
$86.3 million. The Company's mortgage loan portfolio includes 50 loans
with an average size of $1.7 million and average seasoning of 1.1 years
if weighted by the number of loans, and 1.2 years if weighted by
mortgage loan carrying values. The Company's mortgage loans are
typically secured by occupied buildings in major metropolitan locations
and not speculative developments, and are diversified by type of
property and geographic location. At December 31, 1997, the yield on
the Company's mortgage loan portfolio was 7.4%.
At December 31, 1997, no mortgage loans were delinquent by 90 days or
more. The Company does not expect to incur material losses from its
mortgage loan portfolio. The Company's loan investment strategy is
consistent with other life insurance subsidiaries of its ultimate
parent, EIC. EIC has experienced a historically low default rate in
its mortgage loan portfolio and has been able to recover 95.9% of the
principal amount of problem mortgages resolved in the last three years.
<PAGE>
<PAGE>
At December 31, 1997, the Company had no investments in default. The
Company estimates its total investment portfolio, excluding policy
loans, had a fair value approximately equal to 100.4% of its amortized
cost value for accounting purposes at December 31, 1997.
OTHER ASSETS. Accrued investment income increased $2.3 million during
1997 due to an increase in the overall size of the portfolio resulting
from the investment of premiums allocated to the fixed account option
of the Company's variable products.
DPAC represents certain deferred costs of acquiring new insurance
business, principally commissions and other expenses related to the
production of new business subsequent to the merger. The Company's
DPAC and previous balance of PVIF, were eliminated as of the merger and
acquisition dates, and an asset representing PVIF was established for
all policies in force at the merger and acquisition dates. PVIF is
amortized into income in proportion to the expected gross profits of
the in force acquired in a manner similar to DPAC amortization. At
December 31, 1997, the Company had DPAC and PVIF balances of $12.8
million and $43.2 million, respectively.
Goodwill totaling $151.1 million and $41.1 million as adjusted,
representing the excess of the acquisition cost over the fair value of
net assets acquired, was established at the merger and acquisition
dates, respectively. At June 30, 1997, goodwill was increased by $1.8
million to adjust the value of a receivable existing at the acquisition
date.
At December 31, 1997, the Company had $1.6 billion of separate account
assets compared to $1.2 billion at December 31, 1996. The increase in
separate account assets is due to growth in sales of the Company's
variable separate account products and market appreciation.
At December 31, 1997, the Company had total assets of $2.4 billion, an
increase of 45.8% over total assets at December 31, 1996.
LIABILITIES. In conjunction with the volume of variable insurance
sales, the Company's total liabilities increased $681.1 million, or
44.3%, during 1997 and totaled $2.2 billion at December 31, 1997.
Future policy benefits for annuity and interest sensitive life products
increased $220.0 million, or 77.1%, to $505.3 million reflecting
premium growth in the Company's fixed account option of its variable
products. Premium growth and market appreciation, net of redemptions,
also accounted for the $438.9 million, or 36.4%, increase in separate
account liabilities to $1.6 billion at December 31, 1997. As of the
merger and acquisition dates, the Company's existing unearned revenue
reserves were eliminated. This treatment corresponds with the
treatment of PVIF.
Golden American maintained a line of credit agreement with Equitable of
Iowa to facilitate the handling of unusual and/or unanticipated
short-term cash requirements. Under the agreement, which became
effective December 1, 1996 and expired on December 31, 1997, Golden
American could borrow up to $25 million. At December 31, 1997, $24.1
million was outstanding under this agreement. The outstanding balance
was repaid by a capital contribution.
On December 17, 1996, Golden American issued a $25 million, 8.25%
surplus note to Equitable of Iowa which matures on December 17, 2026.
Equity. Additional paid-in capital increased $87.6 million, or 63.8%
to $225.0 million at December 31, 1997 primarily due to the revaluation
of net assets as a result of the merger.
The effects of inflation and changing prices on the Company are not
material since insurance assets and liabilities are both primarily
monetary and remain in balance. An effect of inflation, which has been
low in recent years, is a decline in purchasing power when monetary
assets exceed monetary liabilities.
LIQUIDITY AND CAPITAL RESOURCES
The liquidity requirements of the Company are met by cash flow from
variable insurance premiums, investment income and maturities of fixed
maturity investments and mortgage loans. The Company primarily uses
funds for the payment of insurance benefits, commissions, operating
expenses and the purchase of new investments.
The Company's home office operations are currently housed in leased
locations in Wilmington, Delaware and New York, New York. The Company
intends to spend approximately $5.6 million on capital needs for 1998.
<PAGE>
<PAGE>
The Company intends to continue growing its operations. Future growth
in the Company's operations will require additional capital. The
Company believes it will be able to fund the capital required for
projected new business primarily with future capital contributions from
its Parent. On February 28, 1998, Golden American received a capital
contribution from EIC of $18.75 million.
The ability of Golden American to pay dividends to its Parent is
restricted because prior approval of insurance regulatory authorities
is required for payment of dividends to the stockholder which exceed an
annual limitation. During 1998, Golden American cannot pay dividends to
its Parent 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.
Under the provisions of the insurance laws of the State of New York,
First Golden cannot distribute any dividends to its stockholders unless
a notice of its intention to declare a dividend and amount of the
dividend has been filed not less than thirty days in advance of the
proposed declaration. The superintendent may disapprove the
distribution by giving written notice to First Golden within thirty
days after the filing should the superintendent find that the financial
condition of First Golden does not warrant the distribution.
The NAIC's risk-based capital requirements require insurance companies
to calculate and report information under a risk-based capital formula.
These requirements are intended to allow insurance regulators to
identify inadequately capitalized insurance companies based upon the
type and mixture of risks inherent in the Company's operations. The
formula includes components for asset risk, liability risk, interest
rate exposure and other factors. The Company has complied with the
NAIC's risk-based capital reporting requirements. Amounts reported
indicate that the Company has total adjusted capital well above all
required capital levels.
Year 2000 Project: Based on a study of its computer software and
hardware, the Company has determined its exposure to the Year 2000
change of the century date issue. Management believes the Company's
systems are or will be substantially compliant by Year 2000 and has
engaged external consultants to validate this assumption. Golden
American has spent approximately $2,000 in 1997 related to the external
consultants' analysis. The projected cost for the external consultants
analysis is approximately $130,000 to $170,000. The only system known
to be affected by this issue is a system maintained by an affiliate who
will incur the related costs to make the system compliant. To mitigate
the effect of outside influences and other dependencies relative to the
Year 2000, the Company will continue to contact significant customers,
suppliers and other third parties. To the extent these third parties
would be unable to transact business in the Year 2000 and thereafter,
the Company's operations could be adversely affected.
Surplus Note: On December 17, 1996, Golden American issued a surplus
note in the amount of $25 million to Equitable of Iowa. 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 million to First Golden acquiring
200,000 shares of common stock (100% of shares outstanding) of First
Golden.
Reciprocal Loan Agreement: Golden American maintains a reciprocal loan
agreement with ING America Insurance Holdings, Inc. ("ING America"), a
Delaware corporation and affiliate of EIC, to facilitate the handling
of unusual and/or unanticipated short-term cash requirements. Under
this agreement, which became effective January 1, 1998 and expires on
December 31, 2007, Golden American and ING America can borrow up to $65
million from one another.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING SATEMENTS
Any forward-looking statement contained herein or in any other oral or
written statement by the Company or any of its officers, directors or
employees is qualified by the fact that actual results of the Company
may differ materially from such statement due to the following
important factors, among other risks and uncertainties inherent in the
Company's business:
(1) Prevailing interest rate levels and stock market performance
which may affect the ability of the Company to sell its products,
the market value of the Company's investments and the lapse rate
of the Company's policies, notwithstanding product design features
intended to enhance persistency of the Company's products.
<PAGE>
<PAGE>
(2) Changes in the federal income tax laws and regulations which may
affect the relative tax advantages of the Company's products.
(3) Changes in the regulation of financial services, including bank
sales and underwriting of insurance products, which may affect
the competitive environment for the Company's products.
(4) Increasing competition in the sale of the Company's products.
(5) Other factors affecting the performance of the Company, including,
but not limited to, potential market conduct claims, litigation,
insurance industry insolvencies, investment performance of the
underlying portfolios of the variable products, variable product
design and sales volume by significant sellers of the Company's
variable products.
OTHER INFORMATION
SEGMENT INFORMATION. During the period since the acquisition by
Bankers Trust, September 30, 1992 to date of this Prospectus, Golden
American's operations consisted of one business segment, the sale of
annuity and life insurance products. Golden American and its affiliate
DSI are party to in excess of 140 sales agreements with broker-dealers,
two of whom, Locust Street Securities, Inc. and Vestax Securities
Corporation, are affiliates of Golden American. Six broker-dealers,
including Locust Street Securities, Inc., sell a substantial portion of
its business.
REINSURANCE. Golden American reinsures its mortality risk associated
with the Contract's guaranteed death benefit with one or more
appropriately licensed insurance companies. Golden American also,
effective June 1, 1994, entered into a reinsurance agreement on a
modified coinsurance basis with an affiliate of a broker-dealer which
distributes Golden American's products with respect to 25% of the
business produced by that broker-dealer.
RESERVES. In accordance with the life insurance laws and regulations
under which Golden American operates, it is obligated to carry on its
books, as liabilities, actuarially determined reserves to meet its
obligations on outstanding Contracts. Reserves, based on valuation
mortality tables in general use in the United States, where applicable,
are computed to equal amounts which, together with interest on such
reserves computed annually at certain assumed rates, make adequate
provision according to presently accepted actuarial standards of
practice, for the anticipated cash flows required by the contractual
obligations and related expenses of Golden American.
COMPETITION. Golden American is engaged in a business that is highly
competitive because of the large number of stock and mutual life
insurance companies and other entities marketing insurance products
comparable to those of Golden American. There are approximately 2,350
stock, mutual and other types of insurers in the life insurance
business in the United States, a substantial number of which are
significantly larger than Golden American.
SERVICE AGREEMENTS. Beginning in 1994 and continuing until August 13,
1996, Bankers Trust (Delaware), a subsidiary of Bankers Trust New York
Corporation ("BT New York Corporation"), and Golden American became
parties to a service agreement pursuant to which Bankers Trust
(Delaware) agreed to provide certain accounting, actuarial, tax,
underwriting, sales, management and other services to Golden American.
Expenses incurred by Bankers Trust (Delaware) in relation to this
service agreement were reimbursed by Golden American on an allocated
cost basis. Charges billed to Golden American by Bankers Trust
(Delaware) pursuant to the service agreement for 1996 through its
termination as of August 13, 1996 and 1995 were $0.5 million and $0.8
million, respectively.
Pursuant to a service agreement between Golden American and Equitable
Life, Equitable Life provides certain administrative, financial and
other services to Golden American.
Golden American provides to DSI certain of its personnel to perform
management, administrative and clerical services and the use of certain
facilities. Golden American charges DSI for such expenses and all other
general and administrative costs, first on the basis of direct charges
when identifiable, and the remainder allocated based on the estimated
amount of time spent by Golden American's employees on behalf of DSI.
In the opinion of management, this method of cost allocation is
reasonable. In 1995, the service agreement between DSI and Golden
American was amended to provide for a management fee from DSI to Golden
American for managerial and supervisory services provided by Golden
American. This fee, calculated as a percentage of average assets in the
variable separate accounts, was $2.8 million, $2.3 million and $1.0
million for the years of 1997, 1996 and 1995, respectively.
<PAGE>
<PAGE>
DISTRIBUTION AGREEMENT. Under a distribution agreement, DSI acts as
the principal underwriter (as defined in the Securities Act of 1933 and
the Investment Company Act of 1940, as amended) of the variable
insurance products issued by Golden American which as of December 31,
1997, are sold primarily through six broker/dealer institutions. For
the years 1997, 1996 and 1995, commissions paid by Golden American to
DSI aggregated $36.4 million, $27.1 million and $8.4 million,
respectively.
EMPLOYEES. Golden American, as a result of its Service Agreement with
Bankers Trust (Delaware) and EIC Variable, had very few direct
employees. Instead, various management services were provided by
Bankers Trust (Delaware), EIC Variable and Bankers Trust New York
Corporation, as described above under "Service Agreement." The cost of
these services were allocated to Golden American. Since August 14,
1996, Golden American has looked to Equitable of Iowa and its
affiliates for management services.
Certain officers of Golden American are also officers of DSI, and their
salaries are allocated among both companies. Certain officers of Golden
American are also officers of other Equitable of Iowa subsidiaries. See
"Directors and Executive Officers."
PROPERTIES. Golden American's principal office is located at 1001
Jefferson Street, Suite 400, Wilmington, Delaware 19801, where all of
Golden American's records are maintained. This office space is leased.
STATE REGULATION. Golden American is subject to the laws of the State
of Delaware governing insurance companies and to the regulations of the
Delaware Insurance Department (the "Insurance Department"). A detailed
financial statement in the prescribed form (the "Annual Statement") is
filed with the Insurance Department each year covering Golden
American's operations for the preceding year and its financial
condition as of the end of that year. Regulation by the Insurance
Department includes periodic examination to determine contract
liabilities and reserves so that the Insurance Deparmtent may certify
that these items are correct. Golden American's books and accounts are
subject to review by the Insurance Department at all times. A full
examination of Golden American's operations is conducted periodically
by the Insurance Department and under the auspices of the NAIC.
In addition, Golden American is subject to regulation under the
insurance laws of all jurisdictions in which it operates. The laws of
the various jurisdictions establish supervisory agencies with broad
administrative powers with respect to various matters, including
licensing to transact business, overseeing trade practices, licensing
agents, approving contract forms, establishing reserve requirements,
fixing maximum interest rates on life insurance contract loans and
minimum rates for accumulation of surrender values, prescribing the
form and content of required financial statements and regulating the
type and amounts of investments permitted. Golden American is required
to file the Annual Statement with supervisory agencies in each of the
jurisdictions in which it does business, and its operations and
accounts are subject to examination by these agencies at regular
intervals.
The NAIC has adopted several regulatory intitiatives designed to
improve the surveillance and financial analysis regarding the solvency
of insurance companies in general. These inititatives include the
development and implementation of a risk-based capital formula for
determining adequate levels of capital and surplus. Insurance
companies are required to calculate their risk-based capital in
accordance with this formula and to include the results in their Annual
Statement. It is anticipated that these standards will have no
significant effect upon Golden American. For additional information
about the Risk-Based Capital adequacy monitoring system and Golden
American, see "Manangement's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital Resources."
In addition, many states regulate affiliated groups of insurers, such
as Golden American, and its affilaites, under insurance holding company
legislation. Under such laws, inter-company transfers of assets and
dividend payments from insurance subsidiaries may be subject to prior
notice or approval, depending on the size of the transfers and payments
in relation to the financial positions of the companies involved.
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Under insurance guaranty fund laws in most states, insurers doing
business therein can be assessed (up to prescribed limits) for contract
owner losses incurred by other insurance companies which have become
insolvent. Most of these laws provide that an assessment may be
excused or deferred if it would threaten an insurer's own financial
strength. For information regarding Golden American's estimated
liability for future guaranty fund assessments, see Note 10 of Notes to
Financial Statements.
Although the federal government generally does not directly regulate
the business of insurance, federal initiatives often have an impact on
the business in a variety of ways. Certain insurance products of
Golden American are subject to various federal securities laws and
regulations. In addition, current and proposed federal measures which
may significantly affect the insurance business include regulation of
insurance company solvency, employee benefit regulation, removal of
barriers preventing banks from engaging in the insurance business, tax
law changes affecting the taxation of insurance companies and the tax
treatment of insurance products and its impact on the relative
desirability of various personal investment vehicles.
DIRECTORS AND EXECUTIVE OFFICERS
Name (Age) Position(s) with the Company
Barnett Chernow (48) President and Director
Myles R. Tashman (55) Director, Executive Vice President, General
Counsel and Secretary
Susan B. Watson (31) Director, Senior Vice President and Chief
Financial Officer
Frederick S. Hubbell (47) Director and Chairman
Paul E. Larson (45) Director
Keith T. Glover (47) Executive Vice President
James R. McInnis (49) Executive Vice President
Dennis D. Hargens (55) Treasurer
David L. Jacobson (48) Senior Vice President and Assistant Secretary
Stephen J. Preston (40) Senior Vice President and Chief Actuary
William B. Lowe (33) Senior Vice President
Edward M. Syring, Jr. (59) Senior Vice President
Each director is elected to serve for one year or until the next annual
meeting of shareholders or until his or her successor is elected. Most
directors are directors of insurance company subsidiaries of Golden
American's parent, Equitable of Iowa. The principal positions of
Golden American's directors and senior executive officers for the past
five years are listed below:
Mr. Barnett Chernow became President and Director of Golden American
Life Insurance Company ("Golden American") and President of First
Golden American Life Insurance Company of New York ("First Golden") in
April, 1998. From 1993 to 1998, Mr Chernow served as Executive Vice
President of Golden American. He was elected to serve as Executive
Vice President and Director of First Golden in June, 1996. From 1977
through 1993, he held various positions with Reliance Insurance
Companies and was Senior Vice President and Chief Financial Officer of
United Pacific Life Insurance Company from 1984 through 1993.
Mr. Myles R. Tashman joined Golden American in August, 1994 as Senior
Vice President and was named Executive Vice President, General Counsel
and Secretary effective January 1, 1996. He was elected to serve as a
director of Golden American in January, 1998. From 1986 through 1993,
he was Senior Vice President and General Counsel of United Pacific Life
Insurance Company.
Ms. Susan B. Watson joined Equitable Life Insurance Company of Iowa in
1991 as an Assistant Vice President and Corporate Actuary and is
currently Senior Vice President and Chief Financial Officer for
Equitable of Iowa and many of its subsidiaries. She was elected to
serve as a director of Golden American in January, 1998.
Mr. Frederick S. Hubbell is a Director of Golden American since August,
1996 and Chairman since September, 1996. He also serves as a Director
and Chairman of First Golden, having been first appointed as a Director
in December, 1997 and as Chairman in April, 1998. He was appointed
General Manager of FSI-US, an ING affiliate, in October, 1997 and
General Manager, President and Chief Executive Officer of ING USG
Annuities & Life Companies in April 1998. Mr. Hubbell served as
Chairman, President and Chief Executive Officer of Equitable of Iowa
from 1991 until October, 1997. He also has served as Chairman and
President of Equitable Life Insurance Company of Iowa from 1987 until
October, 1997.
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<PAGE>
Mr. Paul E. Larson joined Equitable of Iowa in 1977 and is currently
President of Equitable Life. He was elected to serve as a director of
Golden American in August, 1996. He also served as Executive Vice
President, CFO, and Assistant Secretary of Golden American from
December, 1996 through December, 1997.
Mr. Keith T. Glover became Executive Vice President of Golden American
Life Insurance Company ("Golden American") and First Golden American
Life Insurance Company of New York ("First Golden") in February, 1998.
From 1991 to 1998, Mr. Glover served as Executive Vice President of
several Golden American affiliates; from 1996 to 1998, Southland Life
Insurance Company; from 1995 to 1996, ING FSI North America; and from
1991 to 1994, Security Life of Denver. From 1994 to 1995, Mr. Glover
served as President of ING Insurance Services - ING American life,
another Golden American affiliate.
Mr. James R. McInnis joined Golden American in December, 1997 as
Executive Vice President. From 1982 through November, 1997, he was with
the Endeavor Group and was President upon leaving.
Mr. Dennis D. Hargens was elected Treasurer of Golden American in
December, 1996. He joined Equitable Life Insurance Company of Iowa in
1961 and is currently Treasurer and was elected Treasurer of USG
Annuity & Life Company in 1996.
Mr. David L. Jacobson joined Golden American in November, 1993 as
Senior Vice President and Assistant Secretary. From April, 1974 through
November, 1993, he held various positions with United Pacific Life
Insurance Company and was Vice President upon leaving.
Mr. Stephen J. Preston joined Golden American in December, 1993 as
Senior Vice President, Chief Actuary and Controller. He currently
serves as Senior Vice President and Chief Actuary. From September, 1993
through November, 1993, he was Senior Vice President and Actuary for
Mutual of America Insurance Company. From July, 1987 through August,
1993, he held various positions with United Pacific Life Insurance
Company and was Vice President and Actuary upon leaving.
Mr. William B. Lowe joined Equitable Life as Vice President, Sales &
Marketing in January, 1994. He became a Senior Vice President, Sales &
Marketing, of Golden American in August, 1997. He is also President of
Equitable of Iowa Securities Network, Inc. Prior to joining Equitable
Life, he was an Associate Vice President of Lincoln BenefitLife from
July, 1990 through December, 1993.
Mr. Edward Syring, Jr. joined Golden American in February as a Senior
Vice President, Sales & Marketing. Prior to joining Golden American, he
was with Putnam Mutual Funds form April, 1991 through February, 1995.
<PAGE>
<PAGE>
COMPENSATION TABLES AND OTHER INFORMATION
The following sets forth information with respect to the Chief
Executive Officer of Golden American as well as the annual salary and
bonus for the next five highly compensated executive officers for the
fiscal year ended December 31, 1997. Certain executive officers of
Golden American are also officers of DSI. The salaries of such
individuals are allocated between Golden American and DSI. Executive
officers of Golden American are also officers of DSI. The salaries of
such individuals are allocated between Golden American and DSI pursuant
to an arrangement among these companies. Throughout 1995 and until
August 13, 1996, Terry L. Kendall served as a Managing Director at
Bankers Trust New York Corporation. Compensation amounts for Terry L.
Kendall which are reflected throughout these tables prior to August 14,
1996 were not charged to Golden American, but were instead absorbed by
Bankers Trust New York Corporation.
EXECUTIVE COMPENSATION TABLE
The following table sets forth information with respect to the annual
salary and bonus for Golden American's Chief Executive Officer and the
five other most highly compensated executive officers for the fiscal
year ended December 31, 1997.
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</TABLE>
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
-------------------- ------------------------
RESTRICTED SECURITIES
NAME AND STOCK AWARDS UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS (/1/) OPTIONS (/2/) OPTIONS COMPENSATION
- ------------------ ---- -------- ----------- ------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Terry L. Kendall,...... 1997 $362,833 $ 80,365 $ 644,844 16,000 $ 10,000(/4/)
President and Chief 1996 $288,298 $400,000 $ 11,535(/5/)
Executive Officer(/3/) 1995 $250,000 $400,000 8,000 $ 6,706(/5/)
Paul R. Schlaack,..... 1997 $351,000 $249,185 $1,274,518 19,000 $ 15,000
Chairman, Director 1996 $327,875 $249,185 $ 245,875 19,000 $ 15,000
and Vice President 1995 $311,750 $165,890 $ 19,594 23,000 $ 9,000(/4/)
Paul E. Larson,....... 1997 $327,667 $128,540 $ 971,036 16,000 $ 15,000
Executive Vice 1996 $267,791 $128,540 $ 319,935 26,000 $ 15,000
President, Chief 1995 $242,833 $ 70,760 $ 73,396 20,000 $ 12,000(/4/)
Financial Officer
and Assistant Secretary
Barnett Chernow,....... 1997 $234,167 $ 31,859 $ 277,576 4,000 $ 5,000(/4/)
Executive Vice 1996 $207,526 $150,000 $ 7,755(/5/)
President 1995 $190,000 $165,000 $ 15,444(/5/)(/6/)
Edward C. Wilson,...... 1997 $ 80,383 $137,700 5,000
Executive Vice 1996 $190,582 $327,473
President
Myles R. Tashman,...... 1997 $181,417 $ 25,000 $ 165,512 5,000 $ 5,000(/4/)
Executive Vice 1996 $176,138 $ 90,000 $ 5,127(/5/)
President, General 1995 $160,000 $ 25,000
Counsel and Secretary
</TABLE>
________________
(1) The amount shown relates to bonuses paid in 1997, 1996 and 1995.
$50,000 of Mr. Wilson's bonus paid in 1996 represents a signing bonus.
(2) Restricted stock awards granted to executive officers vested on October
24, 1997 with the change in control of Equitable of Iowa.
(3) Awards comprised of qualified and non-qualified stock options. All
options were granted with an exercise price equal to the then fair
market value of the underlying stock. All options vested with the
change in Equitable of Iowa and were cashed out for the difference
between $68.00 and the exercise price.
(4) For 1997, this compensation includes payment to each named executive
as perquisite payments which are classified as taxable income and are
required to be applied to specific business expenses of the named
executive.
(5) Contributions were made by the Company on behalf of the employee
to PartnerShare, the deferred compensation plan sponsored by Bankers
Trust New York Corporation and its affiliates for the benefit of all
Bankers Trust employees, in February of the current year to employees
on record as of December 31 of the previous year, after the employee
completes one year of service with the company. This contribution
may be in the form of deferred compensation and/or a cash payment.
In 1996, Mr. Kendall received $9,000 of deferred compensation and
$2,535 of cash payment from the plan; Mr. Chernow received $6,000
of deferred compensation and $1,755 of cash payment from the plan;
Mr. Tashman received $4,000 of deferred compensation and $1,127 of
cash payment from the plan; Mr. Wilson was not eligible for
contributions to the Partnershare Plan in 1996. In 1995, Mr.
Kendall received $2,956 of deferred compensation and $3,750 of cash
payment from the plan; Mr. Chernow received $1,013 of deferred
compensation and $1,267 of cash payment from the plan; Mr. Wilson
and Mr. Tashman were not eligible for contributions to the
PartnerShare Plan in 1995.
(6) Amount shown for 1995 represents relocation expenses paid on behalf
of the employee.
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<PAGE>
Option Grants in Last Fiscal Year (1997)
On October 24, 1997, in conjunction with the acquisition of Equitable of
Iowa, all outstanding options vested and were cashed out for the
difference between $68.00 and the exercise price. The table below
represents the options granted in 1997.
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE AT
ASSUMED ANNUAL
% OF TOTAL RATES OF STOCK
NUMBER OF OPTIONS PRICE APPRECIATION
SECURITIES GRANTED TO FOR OPTION
UNDERLYING EMPLOYEES TERM (/4/)
OPTIONS IN FISCAL EXERCISE EXPIRATION -------------------
NAME GRANTED (/1/) YEAR PRICE (/2/) DATE (/3/) 5% 10%
- ---- ------------- ---------- ----------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Terry L. Kendall........ 16,000 5.26 $47.875 2/12/2007 $481,733 $1,220,807
Pual R. Schlaack........ 8,000 6.25 $47.875 2/12/2007 $572,058 $1,449,708
Paul E. Larsen.......... 8,000 6.25 $47.875 2/12/2007 $782,817 $1,983,811
Barnett Chernow......... 4,000 1.32 $47.875 2/12/2007 $120,433 $ 305,202
Edward C. Wilson........ 5,000 1.64 $47.875 2/12/2007 $150,542 $ 381,502
Myles Tashman........... 5,000 1.64 $47.875 2/12/2007 $150,542 $ 381,502
</TABLE>
________________
(1) Stock options granted on February 12, 1997 by Equitable of Iowa
to the officers of Golden American had a five-year vesting period
with 20% exercisable after 3rd year, an additional 30% after 4th year,
and the final 50% after 5th year. The options vested with the change
of control of Equitable of Iowa.
(2) The exercise price was equal to the fair market value of the Common
Stock on the date of grant.
(3) Incentive Stock Options have a term of ten years. They are subject
to earlier termination in certain events related to termination of
employment.
(4) Total dollar gains based on indicated rates of appreciation of share
price over a ten-year term.
Directors of Golden American receive no additional compensation for serving
as a director.
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- --------------------------------------------------------------------------------
FEDERAL TAX CONSIDERATIONS
INTRODUCTION
The following discussion of the federal income tax treatment of the Contract is
not exhaustive, does not purport to cover all situations, and is not intended as
tax advice. The federal income tax treatment of the Contract is unclear in
certain circumstances, and a qualified tax adviser should always be consulted
with regard to the application of the tax law to individual circumstances. This
discussion is based on the Internal Revenue Code of 1986, as amended (the
"Code"), Treasury Department regulations, and interpretations existing on the
date of this prospectus. These authorities, however, are subject to change by
Congress, the Treasury Department, and judicial decisions.
This discussion does not address state or local tax consequences associated with
the purchase of the contract. In addition, GOLDEN AMERICAN MAKES NO GUARANTEE
REGARDING ANY TAX TREATMENT -- FEDERAL, STATE OR LOCAL -- OF ANY CONTRACT OR OF
ANY TRANSACTION INVOLVING A CONTRACT.
TAX STATUS OF GOLDEN AMERICAN
Golden American is taxed as a life insurance company under the Code. Since the
operations of Account B are a part of, and are taxed with, the operations of
Golden American, Account B is not separately taxed as a "regulated investment
company" under the Code. Under existing federal income tax laws, investment
income and capital gains of Account B are not taxed to Golden American to the
extent they are applied to increase reserves under a contract. Since, under the
contracts, investment income and realized capital gains of Account B
attributable to contract obligations are automatically applied to increase
reserves, Golden American does not anticipate that it will incur any federal
income tax liability in Account B attributable to contract obligations, and
therefore Golden American does not intend to make provision for any such taxes.
If Golden American is taxed on investment income or capital gains of Account B,
then Golden American may impose a charge against Account B, as appropriate, in
order to make provision for such taxes.
TAXATION OF NON-QUALIFIED ANNUITIES
TAX DEFERRAL DURING ACCUMULATION PERIOD. Under existing provisions of the Code,
except as described below, any increase in an owner's Accumulation Value is
generally not taxable to the owner until amounts are received from the Contract,
either in the form of annuity payments as contemplated by the Contract, or in
some other form of distribution. However, this rule allowing deferral applies
only if (1) the investments of Account B are "adequately diversified" in
accordance with Treasury Department regulations, (2) Golden American, rather
than the owner, is considered the owner of the assets of Account B for federal
income tax purposes, and (3) the owner is an individual. In addition to the
foregoing, if the Contract's Annuity Commencement Date occurs at a time when the
annuitant is at an advanced age, such as over age 85, it is possible that the
owner will be taxable currently on the annual increase in the Accumulation
Value.
DIVERSIFICATION REQUIREMENTS. The Code and Treasury Department regulations
prescribe the manner in which the investments of a segregated asset account,
such as the Divisions of Account B, are to be "adequately diversified." If a
Division of Account B failed to comply with these diversification standards,
contracts based on that segregated asset account would not be treated as an
annuity contract for federal income tax purposes and the Owner would generally
be taxable currently on the income on the contract (as defined in the tax law)
beginning with the period of non-diversification. Golden American expects that
the Divisions of Account B will comply with the diversification requirements
prescribed by the Code and Treasury Department regulations.
OWNERSHIP TREATMENT. In certain circumstances, variable annuity contract owners
may be considered the owners, for federal income tax purposes, of the assets of
a segregated asset account, such as the Divisions of Account B, used to support
their contracts. In those circumstances, income and gains from the segregated
asset account would be includible in the contract owners' gross income. The
Internal Revenue Service (the "IRS") has stated in published rulings that a
variable contract owner will be considered the owner of the assets of a
segregated asset account if the owner possesses incidents of ownership in those
assets, such as the ability to exercise investment control over the assets. In
addition, the Treasury Department announced, in connection with the issuance of
regulations concerning investment diversification, that those regulations "do
not provide guidance concerning the circumstances in which investor control of
the investments of a segregated asset account may cause the investor, rather
than the insurance company, to be treated as the owner of the assets in the
account." This announcement also stated that guidance would be issued by way of
regulations or rulings on
52
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the "extent to which policyholders may direct their investments to particular
sub-accounts (of a segregated asset account) without being treated as owners of
the underlying assets." As of the date of this prospectus, no such guidance has
been issued.
The ownership rights under the Contract are similar to, but different in certain
respects from, those described by the IRS in rulings in which it was determined
that contract owners were not owners of the assets of a segregated asset
account. For example, the Owner of this Contract has the choice of more
investment options to which to allocate purchase payments and the Accumulation
Value, and may be able to transfer among investment options more frequently,
than in such rulings. These differences could result in the Owner being treated
as the owner of all or a portion of the assets of Account B. In addition, Golden
American does not know what standards will be set forth in the regulations or
rulings which the Treasury Department has stated it expects to issue. Golden
American therefore reserves the right to modify the Contract as necessary to
attempt to prevent Contract Owners from being considered the owners of the
assets of Account B. However, there is no assurance that such efforts would be
successful.
Frequently, if the IRS or the Treasury Department sets forth a new position
which is adverse to taxpayers, the position is applied on a prospective basis
only. Thus, if the IRS or the Treasury Department were to issue regulations or a
ruling which treated an Owner of this Contract as the owner of Account B, that
treatment might apply on a prospective basis. However, if the regulations or
ruling were not considered to set forth a new position, an owner might
retroactively be determined to be the owner of the assets of Account B.
NON-NATURAL OWNER. As a general rule, contracts held by "non-natural persons"
such as a corporation, trust or other similar entity, as opposed to a natural
person, are not treated as annuity contracts for federal tax purposes. The
income on such contracts (as defined in the tax law) is taxed as ordinary income
that is received or accrued by the Owner of the Contract during the taxable
year. There are several exceptions to this general rule for non-natural Owners.
First, contracts will generally be treated as held by a natural person if the
nominal Owner is a trust or other entity which holds the Contract as an agent
for a natural person. However, this special exception will not apply in the case
of any employer who is the nominal Owner of a contract under a non-qualified
deferred compensation arrangement for its employees.
In addition, exceptions to the general rule for non-natural Owners will apply
with respect to (1) Contracts acquired by an estate of a decedent by reason of
the death of the decedent, (2) certain Contracts issued in connection with
qualified retirement plans, including certain Roth IRA Contracts, (3) certain
Contracts purchased by employers upon the termination of certain qualified
retirement plans, (4) certain Contracts used in connection with structured
settlement agreements, and (5) Contracts purchased with a single purchase
payment when the annuity starting date (as defined in the tax law) is no later
than a year from purchase of the Contract and substantially equal periodic
payments are made, not less frequently than annually, during the annuity period.
The remainder of this discussion assumes that the Contract will be treated as an
annuity contract for federal income tax purposes.
TAXATION OF PARTIAL WITHDRAWALS AND SURRENDERS. In the case of a partial
withdrawal prior to the Annuity Commencement Date, amounts received generally
are includible in income to the extent the Owner's Accumulation Value
(determined without regard to any surrender charge, within the meaning of the
tax law) before the surrender exceeds his or her "investment in the contract."
In the case of a surrender of the Contract for the Cash Surrender Value, amounts
received are includible in income to the extent they exceed the "investment in
the contract." For these purposes, the investment in the Contract at any time
equals the total of the premium payments made under the Contract to that time
(to the extent such payments were neither deductible when made nor excludable
from income as, for example, in the case of certain contributions to IRAs and
other qualified retirement plans) less any amounts previously received from the
Contract which were not includible in income.
In the case of systematic partial withdrawals, the amount of each withdrawal
will generally be taxed in the same manner as a partial withdrawal made prior to
the Annuity Commencement Date, as described above. However, there is some
uncertainty regarding the tax treatment of systematic partial withdrawals, and
it is possible that additional amounts may be includible in income.
The Contract provides a death benefit that in certain circumstances may exceed
the greater of the premium payments and the Accumulation Value. As described
elsewhere in this prospectus, Golden American imposes
53
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<PAGE>
certain charges with respect to the death benefit. It is possible that some
portion of those charges could be treated for federal tax purposes as a partial
withdrawal from the Contract.
In certain circumstances, surrender charges may be waived because of the Owner's
need for extended medical care or because of the Owner's terminal illness.
Distributions made in respect of which surrender charges are waived are treated
as partial withdrawals or surrenders, as the case may be, for income tax
purposes.
TAXATION OF ANNUITY PAYMENTS. Normally, the portion of each annuity payment
taxable as ordinary income is equal to the excess of the payment over the
exclusion amount. In the case of fixed annuity payments, the exclusion amount is
the amount determined by multiplying (1) the fixed annuity payment by (2) the
ratio of the "investment in the contract" (defined above), adjusted for any
period certain or refund feature, allocated to the fixed annuity option to the
total expected amount of fixed annuity payments for the period of the Contract
(determined under Treasury Department regulations). In the case of variable
annuity payments, the exclusion amount for each variable annuity payment is a
specified dollar amount equal to the investment in the Contract allocated to the
variable annuity option when payments begin divided by the number of variable
payments expected to be made (determined by Treasury Department regulations).
Once the total amount of the investment in the Contract is excluded using these
formulas, annuity payments will be fully taxable. If annuity payments cease
because of the death of the Annuitant and before the total amount of the
investment in the Contract is recovered, the unrecovered amount generally will
be allowed as a deduction to the annuitant or beneficiary (depending upon the
circumstances).
TAXATION OF DEATH BENEFIT PROCEEDS. Prior to the Annuity Commencement Date,
amounts may be distributed from a Contract because of the death of an Owner or,
in certain circumstances, the death of the Annuitant. Such death benefit
proceeds are includible in income as follows: (1) if distributed in a lump sum,
they are taxed in the same manner as a surrender, as described above, or (2) if
distributed under an annuity option, they are taxed in the same manner as
annuity payments, as described above. After the Annuity Commencement Date, where
a guaranteed period exists under an annuity option and the Annuitant dies before
the end of that period, payments made to the Beneficiary for the remainder of
that period are includible in income as follows: (1) if received in a lump sum,
they are includible in income to the extent that they exceed the unrecovered
investment in the contract at that time, or (2) if distributed in accordance
with the existing annuity option selected, they are fully excludable from income
until the remaining investment in the contract is deemed to be recovered, and
all annuity payments thereafter are fully includible in income.
If certain amounts become payable in a lump sum from a Contract, such as the
death benefit, it is possible that such amounts might be viewed as
constructively received and thus subject to tax, even though not actually
received. A lump sum will not be constructively received if it is applied under
an annuity option within 60 days after the date on which it becomes payable.
(Any annuity option selected must comply with applicable minimum distribution
requirements imposed by the Code.)
ASSIGNMENTS, PLEDGES, AND GRATUITOUS TRANSFERS. Other than in the case of
Contracts issued as IRAs or in connection with certain other qualified
retirement plans (which generally cannot be assigned or pledged), any assignment
or pledge (or agreement to assign or pledge) of any portion of the value of the
Contract is treated for federal income tax purposes as a partial withdrawal of
such amount or portion. The investment in the Contract is increased by the
amount includible as income with respect to such assignment or pledge, though it
is not affected by any other aspect of the assignment or pledge (including its
release). If an Owner transfers a Contract without adequate consideration to a
person other than the Owner's spouse (or to a former spouse incident to
divorce), the Owner will be taxed on the difference between the cash surrender
value (within the meaning of the tax law) and the investment in the contract at
the time of transfer. In such case, the transferee's investment in the contract
will be increased to reflect the increase in the transferor's income.
SECTION 1035 EXCHANGES. Code section 1035 provides that no gain or loss is
recognized when an annuity contract is received in exchange for a life,
endowment, or annuity contract, provided that no cash or other property is
received in the exchange transaction. Special rules and procedures apply in
order for an exchange to meet the requirements of section 1035. Also, there are
additional tax considerations involved when the contracts are issued in
connection with qualified retirement plans. Prospective Owners of this Contract
should consult a tax advisor before entering into a section 1035 exchange (with
respect to non-qualified annuity contracts) or a trustee-to-trustee transfer or
rollover (with respect to qualified annuity contracts).
54
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<PAGE>
PENALTY TAX ON PREMATURE DISTRIBUTIONS. Where a contract has not been issued as
an IRA or in connection with another qualified retirement plan, there generally
is a 10% penalty tax on the taxable amount of any payment from the Contract
unless the payment is: (a) received on or after the Owner reaches age 59 1/2;
(b) attributable to the Owner's becoming disabled (as defined in the tax law);
(c) made on or after the death of the Owner or, if the Owner is not an
individual, on or after the death of the primary annuitant (as defined in the
tax law); (d) made as a series of substantially equal periodic payments (not
less frequently than annually) for the life (or life expectancy) of the Owner or
the joint lives (or joint life expectancies) of the Owner and a designated
beneficiary (as defined in the tax law), or (e) made under a Contract purchased
with a single purchase payment when the annuity starting date (as defined in the
tax law) is no later than a year from purchase of the Contract and substantially
equal periodic payments are made, not less frequently than annually, during the
annuity period.
In the case of systematic partial withdrawals, it is unclear whether such
withdrawals will qualify for exception (d) above. (For reporting purposes, we
currently treat such withdrawals as if they do not qualify for this exception).
In addition, if withdrawals are of interest amounts only, as is the case with
systematic partial withdrawals from a Fixed Allocation, exception (d) will not
apply.
AGGREGATION OF CONTRACTS. In certain circumstances, the amount of an annuity
payment, withdrawal or surrender from a Contract that is includible in income is
determined by combining some or all of the annuity contracts owned by an
individual not issued in connection with qualified retirement plans. For
example, if a person purchases two or more deferred annuity contracts from the
same insurance company (or its affiliates) during any calendar year, all such
contracts will be treated as one contract for purposes of determining whether
any payment not received as an annuity (including withdrawals and surrenders
prior to the Annuity Commencement Date) is includible in income. In addition, if
a person purchases a Contract offered by this prospectus and also purchases at
approximately the same time an immediate annuity, the IRS may treat the two
contracts as one contract. The effects of such aggregation are not clear,
however, it could affect the time when income is taxable and the amount which
might be subject to the 10% penalty tax described above.
IRA CONTRACTS AND OTHER QUALIFIED RETIREMENT PLANS
IN GENERAL. In addition to issuing the Contracts as non-qualified annuities,
Golden American also currently issues the Contracts as IRAs. (As indicated above
in this prospectus, IRAs are referred to as "qualified plans.") Golden American
may also issue the Contracts in connection with certain other types of qualified
retirement plans which receive favorable treatment under the Code. Numerous
special tax rules apply to the owners under IRAs and other qualified retirement
plans and to the contracts used in connection with such plans. These tax rules
vary according to the type of plan and the terms and conditions of the plan
itself. For example, for both surrenders and annuity payments under certain
contracts issued in connection with qualified retirement plans, there may be no
"investment in the contract" and the total amount received may be taxable. Also,
special rules apply to the time at which distributions must commence and the
form in which the distributions must be paid. Therefore, no attempt is made to
provide more than general information about the use of Contracts with the
various types of qualified retirement plans. A qualified tax advisor should be
consulted before purchase of a Contract in connection with a qualified
retirement plan.
When issued in connection with a qualified retirement plan, a Contract will be
amended as necessary to conform to the requirements of the plan. However,
Owners, Annuitants, and Beneficiaries are cautioned that the rights of any
person to any benefits under qualified retirement plans may be subject to the
terms and conditions of the plans themselves, regardless of the terms and
conditions of the Contract. In addition, Golden American is not bound by terms
and conditions of qualified retirement plans to the extent such terms and
conditions contradict the Contract, unless Golden American consents.
INDIVIDUAL RETIREMENT ANNUITIES. As indicated above, Golden American currently
issues the Contract as an IRA. If the Contract is used for this purpose, the
Owner must be the Annuitant.
PREMIUM PAYMENTS. Both the premium payments that may be paid, and the tax
deduction that the owner may claim for such premium payments, are limited under
an IRA. In general, the premium payments that may be made for an IRA for any
year are limited to the lesser of $2,000 or 100% of the individual's earned
income for the year. Also, in the case of an individual who has less income than
his or her spouse, premium payments may be made by that individual into an IRA
to the extent of (1) $2,000, or (2) the sum of (i) the compensation includible
in the gross income of the individual's spouse for the taxable year and (ii) the
compensation includible in the gross income of the individual's spouse for the
taxable year reduced by the amount allowed as a
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<PAGE>
deduction for IRA contributions to such spouse. An excise tax is imposed on IRA
contributions that exceed the law's limits.
The deductible amount of the premium payments made for an IRA for any taxable
year (including a contract for a noncompensated spouse) is limited to the amount
of premium payments that may be paid for the contract for that year, or a lesser
amount where the individual or his or her spouse is an active participant in
certain qualified retirement plans. For a single person who is an active
participant in a qualified retirement plan (including a qualified pension,
profit-sharing, or annuity plan, a simplified employee pension plan, or a
"section 403(b)" annuity plan, as discussed below) and who has adjusted gross
income in excess of $35,000 may not deduct premium payments, and such a person
with adjusted gross income between $25,000 and $35,000 may deduct only a portion
of such payments. Also, married persons who file a joint return, one of whom is
an active participant in a qualified retirement plan, and who have adjusted
gross income in excess of $50,000 may not deduct premium payments, and those
with adjusted gross income between $40,000 and $50,000 may deduct only a portion
of such payments. Married persons filing separately may not deduct premium
payments if either the taxpayer or the taxpayer's spouse is an active
participant in a qualified retirement plan.
In applying these and other rules applicable to an IRA, all individual
retirement accounts and IRAs owned by an individual are treated as one contract,
and all amounts distributed during any taxable year are treated as one
distribution.
TAX DEFERRAL DURING ACCUMULATION PERIOD. Until distributions are made from an
IRA, increases in the Accumulation Value of the Contract are not taxed.
IRAs and individual retirement accounts (that may invest in this contract)
generally may not invest in life insurance contracts, but an annuity contract
that is issued as an IRA (or that is purchased by an individual retirement
account) may provide a death benefit that equals the greater of the premiums
paid and the contract's cash value. The Contract provides a death benefit that
in certain circumstances may exceed the greater of the premium payments and the
Accumulation Value. It is possible that an enhanced 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 and would not be a permissible investment for an
individual retirement account.
TAXATION OF DISTRIBUTIONS AND ROLLOVERS. If all premium payments made to an IRA
were deductible, all amounts distributed from the Contract are included in the
recipient's income when distributed. However, if nondeductible premium payments
were made to an IRA (within the limits allowed by the tax laws), a portion of
each distribution from the Contract typically is includible in income when it is
distributed. In such a case, any amount distributed as an annuity payment or in
a lump sum upon death or surrender is taxed as described above in connection
with such a distribution from a non-qualified contract, treating as the
investment in the contract the sum of the nondeductible premium payments at the
end of the taxable year in which the distribution commences or is made (less any
amounts previously distributed that were excluded from income). Also, in such a
case, any amount distributed upon a partial withdrawal is partially includible
in income. The includible amount is the excess of the distribution over the
exclusion amount, which in turn generally equals the distribution multiplied by
the ratio of the investment in the Contract to the Accumulation Value.
In any event, subject to the direct rollover and mandatory withholding
requirements (discussed below), amounts may be "rolled over" from certain
qualified retirement plans to an IRA (or from one IRA or individual retirement
account to an IRA) without incurring current income tax if certain conditions
are met. Only certain types of distributions to eligible individuals from
qualified retirement plans, individual retirement accounts, and IRAs may be
rolled over.
PENALTY TAXES. Subject to certain exceptions, a penalty tax is imposed on
distributions from an IRA equal to 10% of the amount of the distribution
includible in income. (Amounts rolled over from an IRA generally are excludable
from income.) The exceptions provide, however, that this penalty tax does not
apply to distributions made to the Owner (1) on or after age 59 1/2, (2) on or
after death or because of disability (as defined in the tax law), or (3) as part
of a series of substantially equal periodic payments over the life (or life
expectancy) of the Owner or the joint lives (or joint life expectancies) of the
Owner and his or her beneficiary (as defined in the tax law). In addition to the
foregoing, failure to comply with a minimum distribution requirement will result
in the imposition of a penalty tax of 50% of the amount by which a minimum
required distribution exceeds the actual distribution from an IRA. Under this
requirement, distributions of minimum amounts from an IRA as specified in the
tax law must generally commence by April 1 of the calendar year following the
calendar year in which the Owner attains age 70 1/2.
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<PAGE>
OTHER TYPES OF QUALIFIED RETIREMENT PLANS. The following sections describe tax
considerations of Contracts used in connection with various types of qualified
retirement plans other than IRAs. Golden American does not currently offer all
of the types of qualified retirement plans described and may not offer them in
the future. Prospective purchasers of Contracts for use in connection with such
qualified retirement plans should therefore contact Golden American's Customer
Service Center to ascertain the availability of the Contract for qualified
retirement plans at any given time.
SIMPLIFIED EMPLOYEE PENSIONS (SEP-IRAS). Section 408(k) of the Code allows
employers to establish simplified employee pension plans for their employees,
using the employees' IRAs for such purposes, if certain criteria are met. Under
these plans the employer may, within specified limits, make deductible
contributions on behalf of the employees to IRAs. As discussed above (see
Individual Retirement Annuities), there is some uncertainty regarding the
treatment of the Contract's enhanced death benefit for purposes of certain tax
rules governing IRAs (which would include SEP-IRAs). Employers intending to use
the contract in connection with such plans should seek competent advice.
SIMPLE IRAS. Section 408(p) of the Code permits certain small employers to
establish "SIMPLE retirement accounts," including SIMPLE IRAs, for their
employees. Under SIMPLE IRAs, certain deductible contributions are made by both
employees and employers. SIMPLE IRAs are subject to various requirements,
including limits on the amounts that may be contributed, the persons who may be
eligible, and the time when distributions may commence. As discussed above (see
Individual Retirement Annuities), there is some uncertainty regarding the proper
characterization of the Contract's enhanced death benefit for purposes of
certain tax rules governing IRAs (which would include SIMPLE IRAs). Employers
intending to use the Contract in connection with a SIMPLE retirement account
should seek competent advice.
ROTH INDIVIDUAL RETIREMENT ANNUITY (ROTH IRA). Golden American currently issues
the Contract as a Roth IRA. If the contract is used for this purpose, the Owner
must be the Annuitant.
PREMIUM PAYMENTS. All premium payments to a Roth IRA are limited and are
non-deductible. In general, premium payments to a Roth IRA in a taxable year are
limited to the lesser of $2,000 or 100% of an individual's earned income less
any contributions made to other IRAs, including both Roth and non-Roth IRAs, but
excluding any rollover contributions to IRAs. Subject to coordinated IRA
contribution limits, contributions to a Roth IRA for an individual and a spouse
cannot exceed $4,000 or 100% of the individual's and spouse's earned income, if
less. The maximum contribution can be made if either of the following applies:
(a) for joint tax filers, their adjusted gross income is $150,000 or less, or
(b) for individual tax filers, their adjusted gross income is $95,000 or less.
For amounts over these adjusted gross incomes, the contribution limit is reduced
as follows: (a) for a joint tax filer, the maximum is reduced by 20% of the
excess adjusted gross income over $150,000 (no contributions over $160,000); (b)
for an individual tax filer, the maximum is reduced by 13.3% of the excess
adjusted gross income over $95,000 (no contributions over $110,000).
CONVERSIONS OF NON-ROTH IRA TO A ROTH IRA. A Roth IRA may be purchased with
amounts received as a qualified rollover ("Rollover Roth IRA") if the following
conditions are met: (a) when a rollover is from a non-Roth IRA, the taxpayer
must not be a married individual filing separately and the taxpayer's adjusted
gross income must not exceed $100,000; (b) rollovers must be made within 60 days
of receipt of the taxpayer; (c) minimum distributions from a non-Roth IRA cannot
be contributed to a Rollover Roth IRA; (d) an asset received in a distribution
may be sold and the proceeds put in a Rollover Roth IRA; (e) all or part of a
non-Roth IRA may be contributed to a Rollover Roth IRA except an inherited IRA
or a SIMPLE IRA; (f) a rollover contribution must be designated in writing as
such by the Owner at the time the rollover is made. Any distribution from a non-
Roth IRA made within 60 days to a Roth IRA is taxable in the year of the
distribution. For rollovers or conversions completed in 1998, taxable income due
to the distribution may be included evenly over 1998-2001 tax years.
ROLLOVERS FROM A ROTH IRA TO A ROTH IRA. A rollover from a Roth IRA to a Roth
IRA may be accomplished if the following conditions are met: (a) the rollover
must be a direct rollover for the five year holding period of the original Roth
IRA to be preserved; (b) the rollover may be made for all or a portion of the
Roth IRA; (c) a rollover contribution must be designated as such in writing at
the time the rollover is made.
TAXATION OF ROTH IRA DISTRIBUTIONS. A distribution from a Roth IRA is not
subject to income tax or to the additional 10% penalty tax on premature
distributions if it is a "qualified distribution." A qualified distribution is
any payment or distribution from a Roth IRA which is made: (a) following the
end of the fifth taxable period (year) after a contribution or rollover is made
to a Roth IRA, and (b) on or after the Owner attains age 59 1/2, or made to a
beneficiary on or after the Owner's death, or as a result of the Owner becoming
disabled, or
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qualified first-time home buyer distribution (subject to a $10,000 lifetime
limit). Distributions not meeting these definitions are "non-qualified
distributions." Non-qualified distributions are treated as being made from
contributions to a Roth IRA to the extent the distribution, when added to all
previous distributions from a Roth IRA, does not exceed the sum of contributions
to a Roth IRA. A non-qualified distribution in excess of the sum of
contributions is subject to ordinary income tax in the year a distribution is
made. Such taxable distribution is also subject to a 10% penalty tax unless the
distribution is made under certain limited circumstances.
Roth IRAs are not subject to required distributions at age 70 1/2.
CORPORATE AND SELF-EMPLOYED ("H.R. 10" OR "KEOGH") PENSION AND PROFIT-SHARING
PLANS. Sections 401(a) and 403(a) of the Code permit corporate employers to
establish various types of tax-favored retirement plans for employees. The
Self-Employed Individuals' Tax Retirement Act of 1962, as amended, commonly
referred to as "H.R. 10" or "Keogh," permits self-employed individuals also to
establish such tax-favored retirement plans for themselves and their employees.
Such retirement plans may permit the purchase of the Contract in order to
provide benefits under the plans. The Contract provides a death benefit that in
certain circumstances may exceed the greater of the premium payments and the
Accumulation Value. It is possible that such death benefit could be
characterized as an incidental death benefit. There are limitations on the
amount of incidental benefits that may be provided under pension and profit
sharing plans. In addition, the provision of such benefits may result in
currently taxable income to participants. Employers intending to use the
Contract in connection with such plans should seek competent advice.
SECTION 403(B) ANNUITY CONTRACTS. Section 403(b) of the Code permits public
school employees, employees of certain types of charitable, educational and
scientific organizations exempt from tax under section 501(c)(3) of the Code,
and employees of certain types of State educational organizations specified in
section 170(b)(l)(A)(ii), to have their employers purchase annuity contracts for
them and, subject to certain limitations, to exclude the amount of premium
payments from gross income for federal income tax purposes. Purchasers of the
contracts for use as a "Section 403(b) Annuity Contract" should seek competent
advice as to eligibility, limitations on permissible amounts of premium payments
and other tax consequences associated with such contacts. In particular,
purchasers and their advisors should consider that this Contract provides a
death benefit that in certain circumstances may exceed the greater of the
premium payments and the Accumulation Value. It is possible that such death
benefit could be characterized as an incidental death benefit. If the death
benefit were so characterized, this could result in currently taxable income to
purchasers. In addition, there are limitations on the amount of incidental death
benefits that may be provided under a Section 403(b) Annuity Contract. Even if
the death benefit under the contract were characterized as an incidental death
benefit, it is unlikely to violate those limits unless the purchaser also
purchases a life insurance contract as part of his or her Section 403(b) Annuity
Contract.
Section 403(b) Annuity Contracts contain restrictions on withdrawals of (i)
contributions made pursuant to a salary reduction agreement in years beginning
after December 31, 1988, (ii) earnings on those contributions, and (iii)
earnings after 1988 on amounts attributable to salary reduction contributions
(and earnings on those contributions) held as of the last year beginning before
January 1, 1989. These amounts can be paid only if the employee has reached age
59 1/2, separated from service, died, become disabled (within the meaning of the
tax law), or in the case of hardship. Amounts permitted to be distributed in the
event of hardship are limited to actual contributions; earnings thereon cannot
be distributed on account of hardship. (These limitations on withdrawals do not
apply to the extent Golden American is directed to transfer some or all of the
Accumulation Value as a tax-free direct transfer to the issue of another Section
403(b) Annuity Contract or into a section 403(b)(7) custodial account subject to
withdrawal restrictions which are at least as stringent.)
ELIGIBLE DEFERRED COMPENSATION PLANS OF STATE AND LOCAL GOVERNMENTS AND
TAX-EXEMPT ORGANIZATIONS. Section 457 of the Code permits employees of state
and local governments and tax-exempt organizations to defer a portion of their
compensation without paying current federal income taxes. The employees must be
participants in an eligible deferred compensation plan. Generally, a Contract
purchased by a state or local government or a tax-exempt organization will not
be treated as an annuity contract for federal income tax purposes. Those who
intend to use the contracts in connection with such plans should seek competent
advice.
DIRECT ROLLOVERS AND FEDERAL INCOME TAX WITHHOLDING FOR "ELIGIBLE ROLLOVER
DISTRIBUTIONS." In the case of an annuity contract used in connection with a
pension, profit-sharing, or annuity plan qualified under sections 401(a) or
403(a) of the Code, or that is a Section 403(b) Annuity Contract, any "eligible
rollover distribution" from the contract will be subject to direct rollover and
mandatory withholding requirements. An eligible rollover distribution generally
is the taxable portion of any distribution from a qualified pension plan
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under section 401(a) of the Code, qualified annuity plan under Section 403(a) of
the Code, or Section 403(b) Annuity or custodial account, excluding certain
amounts (such as minimum distributions required under section 401(a)(9) of the
Code and distributions which are part of a "series of substantially equal
periodic payments" made for the life (or life expectancy) of the employee, or
for the joint lives (or joint life expectancies) of the employee and the
employee's designated beneficiary (within the meaning of the tax law), or for a
specified period of 10 years or more).
Under these new requirements, federal income tax equal to 20% of the eligible
rollover distribution will be withheld from the amount of the distribution.
Unlike withholding on certain other amounts distributed from the Contract,
discussed below, the taxpayer cannot elect out of withholding with respect to an
eligible rollover distribution. However, this 20% withholding will not apply to
that portion of the eligible rollover distribution which, instead of receiving,
the taxpayer elects to have directly transferred to certain eligible retirement
plans (such as to this Contract when issued as an IRA).
If this Contract is issued in connection with a pension, profit-sharing, or
annuity plan qualified under sections 401(a) or 403(a) of the Code, or is a
Section 403(b) Annuity Contract, then, prior to receiving an eligible rollover
distribution, the owner will receive a notice (from the plan administrator or
Golden American) explaining generally the direct rollover and mandatory
withholding requirements and how to avoid the 20% withholding by electing a
direct transfer.
FEDERAL INCOME TAX WITHHOLDING
Golden American will withhold and remit to the federal government a part of the
taxable portion of each distribution made under the Contract unless the
distributee notifies Golden American at or before the time of the distribution
that he or she elects not to have any amounts withheld. In certain
circumstances, Golden American may be required to withhold tax, as explained
above. The withholding rates applicable to the taxable portion of periodic
annuity payments (other than eligible rollover distributions) are the same as
the withholding rates generally applicable to payments of wages. In addition,
the withholding rate applicable to the taxable portion of non-periodic payments
(including surrenders prior to the Annuity Commencement Date) is 10%. Regardless
of whether you elect to have federal income tax withheld, you are still liable
for payment of federal income tax on the taxable portion of the payment. As
discussed above, the withholding rate applicable to eligible rollover
distributions is 20%.
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<PAGE>
______________________________________________________________________________
FINANCIAL STATEMENTS OF GOLDEN AMERICAN LIFE INSURANCE COMPANY
For the year ended December 31, 1997
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, 1997 and 1996, and the
related consolidated statements of income, changes in stockholder's equity,
and cash flows for the periods from October 25, 1997 through December 31,
1997, January 1, 1997 through October 24, 1997, August 14, 1996 through
December 31, 1996, and January 1, 1996 through August 13, 1996, and the year
ended December 31, 1995. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion
on these financial statements and schedules based on our audits.
We conducted our audits in accordance with 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, 1997 and 1996, and
the consolidated results of their operations and their cash flows for the
periods from October 25, 1997 through December 31, 1997, January 1, 1997
through October 24, 1997, August 14, 1996 through December 31, 1996, and
January 1, 1996 through August 13, 1996, and the year ended December 31,
1995, in conformity with generally accepted accounting principles.
s/Ernst & Young LLP
Des Moines, Iowa
February 12, 1998
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
POST-MERGER POST-ACQUISITION
______________________________________
December 31, 1997 | December 31, 1996
___________________| _________________
<S> <C> | <C>
ASSETS |
|
Investments: |
Fixed maturities, available for sale, |
at fair value (cost: 1997 - $413,288; |
1996 - $275,153) $414,401 | $275,563
Equity securities, at fair value |
(cost: 1997 - $4,437; 1996 - $36) 3,904 | 33
Mortgage loans on real estate 85,093 | 31,459
Policy loans 8,832 | 4,634
Short-term investments 14,460 | 12,631
___________________| _________________
Total investments 526,690 | 324,320
|
Cash and cash equivalents 21,039 | 5,839
|
Due from affiliates 827 | --
|
Accrued investment income 6,423 | 4,139
|
Deferred policy acquisition costs 12,752 | 11,468
|
Present value of in force acquired 43,174 | 83,051
|
Current income taxes recoverable 272 | --
|
Deferred income tax asset 36,230 | --
|
Property and equipment, less allowances |
for depreciation of $97 in 1997 and |
$63 in 1996 1,567 | 699
|
Goodwill, less accumulated amortization |
of $630 in 1997 and $589 in 1996 150,497 | 38,665
|
Other assets 195 | 2,471
|
Separate account assets 1,646,169 | 1,207,247
___________________| _________________
Total assets $2,445,835 | $1,677,899
===================| =================
</TABLE>
<TABLE>
<CAPTION>
POST-MERGER POST-ACQUISITION
______________________________________
December 31, 1997 | December 31, 1996
___________________| _________________
<S> <C> | <C>
LIABILITIES AND STOCKHOLDER'S EQUITY |
|
Policy liabilities and accruals: |
Future policy benefits: |
Annuity and interest sensitive life |
products $505,304 | $285,287
Unearned revenue reserve 1,189 | 2,063
Other policy claims and benefits 10 | --
___________________| _________________
506,503 | 287,350
|
Deferred income tax liability -- | 365
Line of credit with affiliate 24,059 | --
Surplus note 25,000 | 25,000
Due to affiliates 80 | 1,504
Other liabilities 16,711 | 15,949
Separate account liabilities 1,646,169 | 1,207,247
___________________| _________________
2,218,522 | 1,537,415
|
Commitments and contingencies |
|
Stockholder's equity: |
Common stock, par value $10 per share, |
authorized, issued and outstanding |
250,000 shares 2,500 | 2,500
Additional paid-in capital 224,997 | 137,372
Unrealized appreciation (depreciation) |
of securities at fair value 241 | 262
Retained earnings (deficit) (425)| 350
___________________| _________________
Total stockholder's equity 227,313 | 140,484
___________________| _________________
Total liabilities and stockholder's |
equity $2,445,835 | $1,677,899
===================| =================
</TABLE>
See accompanying notes.
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands)
<TABLE>
<CAPTION>
POST-MERGER POST-ACQUISITION
___________________________________
For the period | For the period
October 25, 1997 | January 1, 1997
through | through
December 31, 1997 |October 24, 1997
__________________|________________
|
<S> <C> | <C>
Revenues: |
Annuity and interest sensitive life |
product charges $3,834 | $18,288
Management fee revenue 508 | 2,262
Net investment income 5,127 | 21,656
Realized gains (losses) on investments 15 | 151
Other income 236 | 426
__________________|________________
9,720 | 42,783
|
|
Insurance benefits and expenses: |
Annuity and interest sensitive life benefits: |
Interest credited to account balances 7,413 | 19,276
Benefit claims incurred in excess of |
account balances -- | 125
Underwriting, acquisition and insurance |
expenses: |
Commissions 9,437 | 26,818
General expenses 3,350 | 13,907
Insurance taxes 450 | 1,889
Policy acquisition costs deferred (13,678)| (29,003)
Amortization: |
Deferred policy acquisition costs 892 | 1,674
Present value of in force acquired 948 | 5,225
Goodwill 630 | 1,398
__________________|________________
9,442 | 41,309
|
Interest expense 557 | 2,082
__________________|________________
9,999 | 43,391
__________________|________________
Income (loss) before income taxes (279)| (608)
|
Income taxes 146 | (1,337)
__________________|________________
|
Net income (loss) ($425)| $729
==================|================
</TABLE>
<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
__________________| ________________
Income (loss) before income taxes 570 | 1,736
|
Income taxes 220 | (1,463)
__________________| ________________
|
Net income (loss) $350 | $3,199
==================| ================
</TABLE>
<TABLE>
<CAPTION>
PRE-ACQUISITION
__________________
For the year ended
December 31, 1995
__________________
<S> <C>
Revenues:
Annuity and interest sensitive life
product charges $18,388
Management fee revenue 987
Net investment income 2,818
Realized gains (losses) on investments 297
Other income 63
__________________
22,553
Insurance benefits and expenses:
Annuity and interest sensitive life benefits:
Interest credited to account balances 1,322
Benefit claims incurred in excess of
account balances 1,824
Underwriting, acquisition and insurance
expenses:
Commissions 7,983
General expenses 12,650
Insurance taxes 952
Policy acquisition costs deferred (9,804)
Amortization:
Deferred policy acquisition costs 2,710
Present value of in force acquired 1,552
Goodwill --
__________________
19,189
Interest expense --
__________________
19,189
__________________
Income (loss) before income taxes 3,364
Income taxes --
__________________
Net income (loss) $3,364
==================
</TABLE>
See accompanying notes.
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
(Dollars in thousands)
<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, 1995 $2,500 $50,000 $37,086 ($1) ($79) $89,506
Contribution of
capital -- -- 7,944 -- -- 7,944
Net income -- -- -- -- 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 -- -- -- -- 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>
<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 -- -- -- -- $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
Contribution of
capital -- -- 1,121 -- -- 1,121
Net income -- -- -- -- 729 729
Unrealized apprecia-
tion of securities
at fair value -- -- -- 1,543 -- 1,543
__________________________________________________________
Balance at
October 24, 1997 $2,500 -- $138,493 $1,805 $1,079 $143,877
==========================================================
POST-MERGER
__________________________________________________________
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
__________________________________________________________
Balance at
October 25, 1997 $2,500 -- $224,997 -- -- $227,497
Net loss -- -- -- -- ($425) (425)
Unrealized apprecia-
tion of securities
at fair value -- -- -- $241 -- 241
__________________________________________________________
Balance at
December 31, 1997 $2,500 -- $224,997 $241 ($425) $227,313
==========================================================
</TABLE>
See accompanying notes.
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
POST-MERGER POST-ACQUISITION
________________________________________
For the period | For the period
October 25, 1997 | January 1, 1997
through | through
December 31, 1997 | October 24, 1997
___________________| ___________________
<S> <C> | <C>
OPERATING ACTIVITIES |
Net income (loss) ($425)| $729
Adjustments to reconcile net income (loss) |
to net cash provided by (used in) |
operations: |
Adjustments related to annuity and |
interest sensitive life products: |
Change in annuity and interest |
sensitive life product reserves 7,361 | 19,177
Change in unearned revenues 1,189 | 3,292
Decrease (increase) in accrued |
investment income 1,205 | (3,489)
Policy acquisition costs deferred (13,678)| (29,003)
Amortization of deferred policy |
acquisition costs 892 | 1,674
Amortization of present value of in |
force acquired 948 | 5,225
Change in other assets, other |
liabilities and accrued income taxes 4,205 | (8,944)
Provision for depreciation and |
amortization 1,299 | 3,203
Provision for deferred income taxes 146 | 316
Realized (gains) losses on investments (15)| (151)
___________________| ___________________
Net cash provided by (used in) |
operating activities 3,127 | (7,971)
|
INVESTING ACTIVITIES |
Sale, maturity or repayment of |
investments: |
Fixed maturities - available for sale 9,871 | 39,622
Mortgage loans on real estate 1,644 | 5,828
Short-term investments - net -- | 11,415
___________________| ___________________
11,515 | 56,865
Acquisition of investments: |
Fixed maturities - available for sale (29,596)| (155,173)
Equity securities (1)| (4,865)
Mortgage loans on real estate (14,209)| (44,481)
Policy loans - net (328)| (3,870)
Short-term investments - net (13,244)| --
___________________| ___________________
(57,378)| (208,389)
</TABLE>
See accompanying notes.
<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 (loss) $350 | $3,199
Adjustments to reconcile net income (loss) |
to net cash provided by (used in) |
operations: |
Adjustments related to annuity and |
interest sensitive life products: |
Change in annuity and interest |
sensitive life product reserves 5,106 | 4,472
Change in unearned revenues 2,063 | 2,084
Decrease (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
Mortgage loans on real estate 40 | --
Short-term investments - net 2,629 | 354
___________________| ___________________
50,122 | 55,445
Acquisition of investments: |
Fixed maturities - available for sale (147,170)| (184,589)
Equity securities (5)| --
Mortgage loans on real estate (31,499)| --
Policy loans - net (637)| (1,977)
Short-term investments - net -- | --
___________________| ___________________
(179,311)| (186,566)
</TABLE>
See accompanying notes.
<TABLE>
<CAPTION>
PRE-ACQUISITION
_________________
For the year
ended
December 31, 1995
_________________
<S> <C>
OPERATING ACTIVITIES
Net income (loss) $3,364
Adjustments to reconcile net income (loss)
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
Change in unearned revenues 4,949
Decrease (increase) in accrued
investment income (676)
Policy acquisition costs deferred (9,804)
Amortization of deferred policy
acquisition costs 2,710
Amortization of present value of in
force acquired 1,552
Change in other assets, other
liabilities and accrued income taxes 4,686
Provision for depreciation and
amortization (142)
Provision for deferred income taxes --
Realized (gains) losses on investments (297)
_________________
Net cash provided by (used in)
operating activities 11,006
INVESTING ACTIVITIES
Sale, maturity or repayment of
investments:
Fixed maturities - available for sale 24,026
Mortgage loans on real estate --
Short-term investments - net --
_________________
24,026
Acquisition of investments:
Fixed maturities - available for sale (61,723)
Equity securities (10)
Mortgage loans on real estate --
Policy loans - net (1,508)
Short-term investments - net (1,681)
_________________
(64,922)
</TABLE>
See accompanying notes.
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS -(CONTINUED)
(Dollars in thousands)
<TABLE>
<CAPTION>
POST-MERGER POST-ACQUISITION
________________________________________
For the period | For the period
October 25, 1997 | January 1, 1997
through | through
December 31, 1997 | October 24, 1997
___________________| ___________________
<S> <C> | <C>
Funds held in escrow pursuant to |
an Exchange Agreement -- | --
Purchase of property and equipment ($252)| ($875)
___________________| ___________________
Net cash used in investing activities (46,115)| (152,399)
|
FINANCING ACTIVITIES |
Proceeds from issuance of surplus note -- | --
Proceeds from line of credit borrowings 10,119 | 97,124
Repayment of line of credit borrowings (2,207)| (80,977)
Receipts from annuity and interest |
sensitive life policies credited |
to policyholder account balances 62,306 | 261,549
Return of policyholder account balances |
on annuity and interest sensitive |
life policies (6,350)| (13,931)
Net reallocations to Separate |
Accounts (17,017)| (93,069)
Contributions of capital by Parent -- | 1,011
Dividends paid on preferred stock -- | --
___________________| ___________________
Net cash provided by financing |
activities 46,851 | 171,707
___________________| ___________________
Increase (decrease) in cash and |
cash equivalents 3,863 | 11,337
|
Cash and cash equivalents at |
beginning of period 17,176 | 5,839
___________________| ___________________
Cash and cash equivalents at end |
of period $21,039 | $17,176
===================| ===================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid during the period for:
Interest $295 $1,912
Income taxes -- 283
Non-cash financing activities:
Contribution of property, plant and equipment
from EIC Variable, Inc. net of $353 of
accumulated depreciation -- 110
</TABLE>
See accompanying notes.
<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 |
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 |
Proceeds from issuance of surplus note 25,000 | --
Proceeds from line of credit borrowings -- | --
Repayment of line of credit borrowings -- | --
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 Separate |
Accounts (10,237)| (8,286)
Contributions of capital by Parent -- | --
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
==================| =================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid during the period for:
Interest -- --
Income taxes -- --
Non-cash financing activities:
Contribution of property, plant and equipment
from EIC Variable, Inc. net of $353 of
accumulated depreciation -- --
</TABLE>
See accompanying notes.
<TABLE>
<CAPTION>
PRE-ACQUISITION
_________________
For the year
ended
December 31, 1995
_________________
<S> <C>
INVESTING ACTIVITIES - CONTINUED
Funds held in escrow pursuant to
an Exchange Agreement ($1,242)
Purchase of property and equipment --
_________________
Net cash used in investing activities (42,138)
FINANCING ACTIVITIES
Proceeds from issuance of surplus note --
Proceeds from line of credit borrowings --
Repayment of line of credit borrowings --
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 Separate
Accounts --
Contributions of capital by Parent 7,944
Dividends paid on preferred stock (3,348)
_________________
Net cash provided by financing
activities 32,554
_________________
Increase (decrease) in cash and
cash equivalents 1,422
Cash and cash equivalents at
beginning of period 3,624
_________________
Cash and cash equivalents at end
of period $5,046
=================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid during the period for:
Interest --
Income taxes --
Non-cash financing activities:
Contribution of property, plant and equipment
from EIC Variable, Inc. net of $353 of
accumulated depreciation --
</TABLE>
See accompanying notes.
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997
1. SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION
The consolidated financial statements include Golden American Life Insurance
Company ("Golden American") and its wholly owned subsidiary, First Golden
American Life Insurance Company of New York ("First Golden," and with Golden
American collectively, the "Company"). All significant intercompany accounts
and transactions have been eliminated.
ORGANIZATION
Golden American, a wholly owned subsidiary of Equitable of Iowa Companies,
Inc., offers variable insurance products and is licensed as a life insurance
company in the District of Columbia and all states except New York. On January
2, 1997 and December 23, 1997, First Golden became licensed to sell insurance
products in New York and Delaware, respectively. The Company's products are
marketed by broker/dealers, financial institutions and insurance agents. The
Company's primary customers are individuals and families.
On October 24, 1997, PFHI Holding, Inc. ("PFHI"), a Delaware corporation,
acquired all of the outstanding capital stock of Equitable of Iowa Companies
("Equitable"), pursuant to the terms of the Agreement and Plan of Merger
("Merger Agreement") among Equitable, PFHI, and ING Groep N.V. ("ING"). PFHI
is a wholly owned subsidiary of ING, a global financial services holding
company based in The Netherlands. As a result of the merger, Equitable was
merged into PFHI which was simultaneously renamed Equitable of Iowa Companies,
Inc. ("EIC" or the "Parent"), a Delaware corporation. See Note 5 for
additional information regarding the merger.
On August 13, 1996, Equitable acquired all of the outstanding capital stock of
EIC Variable, Inc. (formerly known as BT Variable, Inc.) 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"). On April 30, 1997, EIC Variable, Inc. was liquidated and its
investments in Golden American and DSI were transferred to Equitable, while
the remainder of its net assets were contributed to Golden American. On
December 30, 1997, EIC Variable, Inc. was dissolved. See Note 6 for additional
information regarding the acquisition.
For financial statement purposes, the merger was accounted for as a purchase
effective October 25, 1997 and the change in control of Golden American through
the acquisition of BT Variable was accounted for as a purchase effective August
14, 1996. The merger and acquisition resulted in new bases of accounting
reflecting estimated fair values of assets and liabilities at their respective
dates. As a result, the Company's financial statements for the period
subsequent to October 24, 1997, are presented on the Post-Merger new basis of
accounting, for the period August 14, 1996 through October 24, 1997, are
presented on the Post-Acquisition basis of accounting, and for August 13, 1996
and prior periods are presented on the Pre-Acquisition basis of accounting.
INVESTMENTS
FIXED MATURITIES: 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 ("DPAC"), present value of in force acquired ("PVIF"), policy reserves
and deferred income
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
December 31, 1997
taxes. At December 31, 1997 and 1996, 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 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.
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. The change in unrealized appreciation and depreciation of
marketable equity securities (net of related deferred income taxes, if any) is
included directly in stockholder's equity. Equity securities determined to
have a decline in value that is other than temporary are written down to
estimated fair value which becomes the 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 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.
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
December 31, 1997
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 variable life products are being
amortized generally in proportion to the present value (using the assumed
crediting rate) of expected future gross profits. This amortization is
"unlocked" when the Company revises its estimate of current or future gross
profits to be realized from a group of products. DPAC is adjusted to reflect
the pro forma impact of unrealized gains and losses on fixed 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 merger and the acquisition, a portion of the acquisition
cost related to each transaction was allocated to the right to receive
future cash flows from existing insurance contracts. This allocated cost
represents the PVIF which reflects the value of those purchased policies
calculated by discounting actuarially determined expected future cash flows
at the discount rate determined by the purchaser. Amortization of PVIF is
charged to expense in proportion to expected gross profits. This
amortization is "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. See Notes 5 and 6 for additional
information on PVIF resulting from the merger and acquisition.
PROPERTY AND EQUIPMENT
Property and equipment primarily represent leasehold improvements, 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 the straight-line
method over the estimated useful lives of the assets.
GOODWILL
Goodwill was established as a result of the merger discussed previously and is
being amortized over 40 years on a straight-line basis. Goodwill established
as a result of the acquisition discussed above was being amortized over 25
years on a straight-line basis. See Notes 5 and 6 for additional information
on the merger and acquisition.
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 3.30% to 8.25% during 1997. 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.
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
December 31, 1997
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 Statements 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
The Company'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 1998,
Golden American cannot pay dividends to its parent 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.
Under the provisions of the insurance laws of the State of New York, First
Golden cannot distribute any dividends to its stockholders unless a notice of
its intention to declare a dividend and amount of the dividend has been filed
not less than thirty days in advance of the proposed declaration. The
superintendent may disapprove the distribution by giving written notice to
First Golden within thirty days after the filing should the superintendent
find that the financial condition of First Golden does not warrant the
distribution.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
affecting the amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates.
Management is required to utilize historical experience and assumptions about
future events and circumstances in order to develop estimates of material
reported amounts and disclosures. Included among the material (or potentially
material) reported amounts and disclosures that require extensive use of
estimates and assumptions are (1) estimates of fair values of investments in
securities and other financial instruments, as well as fair values of
policyholder liabilities, (2) policyholder liabilities, (3) deferred policy
acquisition costs and present value of in force acquired, (4) fair values of
assets and liabilities recorded as a result of merger and acquisition
transactions, (5) asset valuation
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
December 31, 1997
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.
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 the merger/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), present value of
in force acquired 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 Statement 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; (11) the financial statements of Golden
American's wholly owned subsidiary are consolidated rather than recorded at the
equity in net assets; (12) surplus notes are reported as liabilities rather
than as surplus; and (13) assets and liabilities are restated to fair values
when a change in ownership occurs, with provisions for goodwill and other
intangible assets, rather than continuing to be presented at historical cost.
Net loss for Golden American as determined in accordance with statutory
accounting practices was $428,000 in 1997, $9,188,000 in 1996 and $4,117,000
in 1995. Total statutory capital and surplus was $76,914,000 at December 31,
1997 and $80,430,000 at December 31, 1996.
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
December 31, 1997
3. INVESTMENT OPERATIONS
INVESTMENT RESULTS
Major categories of net investment income are summarized below:
<TABLE>
<CAPTION>
POST-MERGER POST-ACQUISITION
________________________________________________________
For the period| For the period For the period
October 25, 1997| January 1, 1997 August 14, 1996
through| through through
December 31, 1997| October 24, 1997 December 31, 1996
__________________| ____________________________________
(Dollars in thousands)
<S> <C> | <C> <C>
Fixed maturities $4,443 | $18,488 $5,083
Equity securities 3 | -- 103
Mortgage loans on real |
estate 879 | 3,070 203
Policy loans 59 | 482 78
Short-term investments 129 | 443 441
Other, net (154)| 24 2
Funds held in escrow -- | -- --
__________________| ____________________________________
Gross investment income 5,359 | 22,507 5,910
Less investment expenses (232)| (851) (115)
__________________| ____________________________________
Net investment income $5,127 | $21,656 $5,795
==================| ====================================
</TABLE>
<TABLE>
<CAPTION>
PRE-ACQUISITION
_____________________________________
For the period |
January 1, 1996 | For the year
through | ended
August 13, 1996 | December 31, 1995
__________________| _________________
(Dollars in thousands)
<S> <C> | <C>
Fixed maturities $4,507 | $1,610
Equity securities -- | --
Mortgage loans on real |
estate -- | --
Policy loans 73 | 56
Short-term investments 341 | 899
Other, net 22 | 148
Funds held in escrow 145 | 166
__________________| _________________
Gross investment income 5,088 | 2,879
Less investment expenses (98)| (61)
__________________| _________________
Net investment income $4,990 | $2,818
==================| =================
</TABLE>
Realized gains (losses) on investments are as follows:
<TABLE>
<CAPTION>
POST-MERGER POST-ACQUISITION
________________________________________________________
For the period| For the period For the period
October 25, 1997| January 1, 1997 August 14, 1996
through| through through
December 31, 1997| October 24, 1997 December 31, 1996
__________________| ____________________________________
(Dollars in thousands)
<S> <C> | <C> <C>
Fixed maturities, |
available for sale $25 | $151 $42
Mortgage loans (10)| -- --
__________________| ____________________________________
Realized gains (losses) |
on investments $15 | $151 $42
========================================================
</TABLE>
<TABLE>
<CAPTION>
PRE-ACQUISITION
_____________________________________
For the period |
January 1, 1996 | For the year
through | ended
August 13, 1996 | December 31, 1995
__________________| _________________
(Dollars in thousands)
<S> <C> | <C>
Fixed maturities, |
available for sale ($420)| $297
Mortgage loans -- | --
__________________| _________________
Realized gains (losses) |
on investments ($420)| $297
=====================================
</TABLE>
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
December 31, 1997
The change in unrealized appreciation (depreciation) on securities at
fair value is as follows:
<TABLE>
<CAPTION>
POST-MERGER POST-ACQUISITION
________________________________________________________
For the period | For the period For the period
October 25, 1997 | January 1, 1997 August 14, 1996
through | through through
December 31, | October 24, December 31,
1997 | 1997 1996
__________________| ____________________________________
(Dollars in thousands)
<S> <C> | <C> <C>
Fixed maturities: |
Available for sale $1,113 | $4,607 $410
Held for investment -- | -- --
Equity securities (533)| (465) (3)
__________________| ____________________________________
Unrealized appreciation |
(depreciation) of |
securities $580 | $4,142 $407
========================================================
</TABLE>
<TABLE>
<CAPTION>
PRE-ACQUISITION
_____________________________________
For the period |
January 1, 1996 | For the year
through | ended
August 13, 1996 | December 31, 1995
__________________| _________________
(Dollars in thousands)
<S> <C> | <C>
Fixed maturities: |
Available for sale ($2,087)| $958
Held for investment -- | 90
Equity securities 1 | 3
__________________| _________________
Unrealized appreciation |
(depreciation) of |
securities ($2,086)| $1,051
=====================================
</TABLE>
At December 31, 1997 and December 31, 1996, amortized cost, gross unrealized
gains and losses and estimated fair values of fixed maturity securities, all
of which are designated as available for sale, are as follows:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
_______________________________________________
(Dollars in thousands)
December 31, 1997 POST-MERGER
______________________________________________________________________________
<S> <C> <C> <C> <C>
U.S. government and
governmental agencies
and authorities:
Mortgage-backed securities $62,988 $155 ($10) $63,133
Other 5,705 5 (1) 5,709
Foreign governments 2,062 -- (9) 2,053
Public utilities 25,899 49 (4) 25,944
Investment grade corporate 219,526 926 (32) 220,420
Below investment grade
corporate 41,355 186 (210) 41,331
Mortgage-backed securities 55,753 78 (20) 55,811
_______________________________________________
Total $413,288 $1,399 ($286) $414,401
===============================================
December 31, 1996 POST-ACQUISITION
______________________________________________________________________________
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>
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
December 31, 1997
At December 31, 1997, net unrealized investment gains on fixed maturities
designated as available for sale totaled $1,113,000. This appreciation caused
an increase to stockholder's equity of $587,000 at December 31, 1997 (net of
deferred income taxes of $316,000, an adjustment of $35,000 to DPAC and PVIF
of $175,000). Short-term investments with maturities of 30 days or less have
been excluded from the above schedules. Amortized cost approximates fair value
for these securities.
Amortized cost and estimated fair value of fixed maturities designated as
available for sale, by contractual maturity, at December 31, 1997, are shown
below. Expected maturities will differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or without
call or prepayment penalties.
<TABLE>
<CAPTION>
POST-MERGER
_____________________________
Estimated
Amortized Fair
December 31, 1997 Cost Value
_____________________________________________________________________________
(Dollars in thousands)
<S> <C> <C>
Due within one year $26,261 $26,239
Due after one year through five years 198,249 198,781
Due after five years through ten years 70,037 70,437
_____________ _____________
294,547 295,457
Mortgage-backed securities 118,741 118,944
_____________ _____________
Total $413,288 $414,401
============= =============
</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 October 25,
1997 through
December 31, 1997:
Scheduled principal
repayments, calls and
tenders $6,708 $2 -- $6,710
Sales 3,138 23 -- 3,161
______________________________________________________
Total $9,846 $25 -- $9,871
======================================================
For the period January 1,
1997 through October 24,
1997:
Scheduled principal
repayments, calls and
tenders $25,419 -- -- $25,419
Sales 14,052 $153 ($2) 14,203
______________________________________________________
Total $39,471 $153 ($2) $39,622
======================================================
For the period August 14,
1996 through
December 31, 1996:
Scheduled principal
repayments, calls and
tenders $1,612 -- -- $1,612
Sales 45,799 $115 ($73) 45,841
______________________________________________________
Total $47,411 $115 ($73) $47,453
======================================================
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
======================================================
</TABLE>
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
December 31, 1997
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 1997 and
1996, no investments were identified as having an impairment other than
temporary.
INVESTMENTS ON DEPOSIT: At December 31, 1997 and 1996, affidavits of deposits
covering bonds with a par value of $6,605,000 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. The following percentages relate to holdings at
December 31, 1997 and December 31, 1996. Fixed maturity investments included
investments in basic industrials (30% in 1997 and 1996), financial companies
(24% in 1997, 18% in 1996), various government bonds and government or agency
mortgage-backed securities (17% in 1997 and 27% in 1996) and public utilities
(7% in 1997, 13% in 1996). Mortgage loans on real estate have been analyzed
by geographical location with concentrations by state identified as Utah (13%
in 1997, 4% in 1996), California (12% in 1997, 7% in 1996), and Georgia (11%
in 1997, 17% in 1996). There are no other concentrations of mortgage loans in
any state exceeding ten percent at December 31, 1997 and 1996. Mortgage loans
on real estate have also been analyzed by collateral type with significant
concentrations identified in office buildings (43% in 1997, 36% in 1996),
industrial buildings (33% in 1997, 31% in 1996), retail facilities (15% in
1997, 6% in 1996) and multi-family residential buildings (9% in 1997, 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, 1997.
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, investment contracts and debt
fall within the standards' definition of a financial instrument. Fair values
for the Company's insurance contracts other than investment contracts are not
required to be disclosed. In cases where quoted market prices are not
available, estimated fair values are based on estimates using present value or
other valuation techniques. Those techniques are significantly affected by
the assumptions used, including the discount rate and estimates of future cash
flows. Accounting, actuarial and regulatory bodies are continuing to study the
methodologies to be used in developing fair value information, particularly as
it relates to such things as liabilities for insurance contracts. Accordingly,
care should be exercised in deriving conclusions about the 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 be-
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
December 31, 1997
low, 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 1997 1996
_______________________________________________________________________________
(Dollars in thousands) |
Estimated | Estimated
Carrying Fair | Carrying Fair
Value Value | Value Value
___________ ___________| ___________ ___________
<S> <C> <C> | <C> <C>
ASSETS |
Fixed maturities, available |
for sale $414,401 $414,401 | $275,563 $275,563
Equity securities 3,904 3,904 | 33 33
Mortgage loans on real estate 85,093 86,348 | 31,459 30,979
Policy loans 8,832 8,832 | 4,634 4,634
Short-term investments 14,460 14,460 | 12,631 12,631
Cash and cash equivalents 21,039 21,039 | 5,839 5,839
Separate account assets 1,646,169 1,646,169 | 1,207,247 1,207,247
|
LIABILITIES |
Annuity products 493,181 431,859 | 280,076 253,012
Surplus note 25,000 28,837 | 25,000 28,878
Separate account liabilities 1,646,169 1,443,458 | 1,207,247 1,119,158
|
</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.
POLICY LOANS: Carrying values approximate the estimated fair value for
policy loans.
SHORT-TERM INVESTMENTS AND CASH AND CASH EQUIVALENTS: Carrying values
reported in the Company's historical cost basis balance sheet approximate
estimated fair value for these instruments, due to their short-term nature.
SEPARATE ACCOUNT ASSETS: Separate account assets are based upon the quoted
fair values of the individual securities in the separate accounts.
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
December 31, 1997
ANNUITY PRODUCTS: Estimated fair values of the Company's liabilities for
future policy benefits for the fixed interest division of the variable annuity
products and for supplemental contracts without life contingencies 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.
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.
5. MERGER
TRANSACTION: On October 23, 1997, Equitable shareholders approved the Merger
Agreement dated as of July 7, 1997, among Equitable, PFHI and ING. On October
24, 1997, PFHI, a Delaware corporation, acquired all of the outstanding
capital stock of Equitable pursuant to the Merger Agreement. PFHI is a wholly
owned subsidiary of ING, a global financial services holding company based in
The Netherlands. Equitable, an Iowa corporation, in turn, owned all the
outstanding capital stock of Equitable Life Insurance Company of Iowa
("Equitable Life") and Golden American and their wholly owned subsidiaries.
Equitable also owned all the outstanding capital stock of Locust Street
Securities, Inc. ("LSSI"), Equitable Investment Services, Inc., DSI, Equitable
of Iowa Companies Capital Trust, Equitable of Iowa Companies Capital Trust II
and Equitable of Iowa Securities Network, Inc. In exchange for the outstanding
capital stock of Equitable, ING paid total consideration of approximately $2.1
billion in cash and stock plus the assumption of approximately $400 million
in debt according to the Merger Agreement. As a result of the merger,
Equitable was merged into PFHI which was simultaneously renamed Equitable of
Iowa Companies, Inc. ("EIC" or the "Parent"), a Delaware corporation. All
costs of the merger, including expenses to terminate certain benefit plans,
were paid by the Parent.
ACCOUNTING TREATMENT: The merger was accounted for as a purchase resulting
in a new basis of accounting, reflecting estimated fair values for assets
and liabilities at October 24, 1997. The purchase price was allocated to EIC
and its subsidiaries. Goodwill was established for the excess of the merger
cost over the fair value of the net assets and pushed down to EIC and its
subsidiaries including Golden American and First Golden. The merger cost is
preliminary with respect to estimated expenses and, as a result, the PVIF and
related amortization and deferred taxes may change. The allocation of the
purchase price to the Company was approximately $227,497,000. The amount of
goodwill allocated to the Company relating to the merger was $151,127,000 at
the merger date and is being amortized over 40 years on a straight-line basis.
The carrying value of goodwill will be reviewed periodically for any
indication of impairment in value. The Company's DPAC, previous balance of
PVIF and unearned revenue reserve, as of the merger date, were eliminated
and an asset of $44,297,000 representing PVIF was established for all policies
in force at the merger date.
PRESENT VALUE OF IN FORCE ACQUIRED: As part of the merger, a portion of the
acquisition cost was allocated to the right to receive future cash flows from
insurance contracts existing with the Company at the date of merger. This
allocated cost represents the present value of in force acquired reflecting
the value of those purchased policies calculated by discounting the
actuarially determined expected future cash flow at the discount rate
determined by ING.
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
December 31, 1997
An analysis of the PVIF asset is as follows:
<TABLE>
<CAPTION>
POST-MERGER
________________________
For the period
October 25, 1997
through
December 31, 1997
________________________
(Dollars in thousands)
<S> <C>
Beginning balance $44,297
Imputed interest 1,004
Amortization (1,952)
Adjustment for unrealized gains
on available for sale securities (175)
________________________
Ending balance $43,174
========================
</TABLE>
Interest is imputed on the unamortized balance of PVIF at a rate of 7.03% for
the period October 25, 1997 through December 31, 1997. The amortization of
PVIF net of imputed interest is charged to expense. PVIF is also adjusted for
the unrealized gains (losses) on available for sale securities; such changes
are included directly in stockholder's equity. Based on current conditions
and assumptions as to the impact of future events on acquired policies in
force, the expected approximate net amoritization for the next five years,
relating to the PVIF as of December 31, 1997, is $6,200,000 in 1998,
$6,000,000 in 1999, $5,600,000 in 2000, $5,000,000 in 2001 and $4,200,000 in
2002. Actual amortization may vary based upon final purchase price allocation
and changes in assumptions and experience.
6. ACQUISITION
TRANSACTION: On August 13, 1996, Equitable acquired all of the outstanding
capital stock of BT Variable from Whitewood, a wholly owned subsidiary of
Bankers Trust Company ("Bankers Trust"), 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. At April 30,
1997, EIC Variable, Inc. was liquidated and its investments in Golden American
and DSI were transferred to Equitable, while the remainder of its net assets
were contributed to Golden American. On December 30, 1997, EIC Variable, Inc.
was dissolved.
ACCOUNTING TREATMENT: The acquisition was accounted for as a purchase
resulting in a new basis of accounting, which reflected estimated fair
values for assets and liabilities at August 13, 1996. The purchase price
was allocated to the three companies purchased - BT Variable, DSI and Golden
American. 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 allocation of the purchase price to the Company was
approximately $139,872,000. The amount of goodwill relating to the
acquisition was $41,113,000 and was amortized over 25 years on a straight-line
basis until the October 24, 1997 merger with ING. The Company's DPAC, previous
balance of PVIF and unearned revenue reserve, as of the merger date, were
eliminated and an asset of $85,796,000 representing PVIF was established for
all policies in force at the acquisition date.
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
December 31, 1997
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 the Company at the date of
acquisition. This allocated cost represents the present value of in force
acquired reflecting the value of those purchased policies calculated by
discounting the actuarially determined expected future cash flows at the
discount rate determined by Equitable.
An analysis of the PVIF asset is as follows:
<TABLE>
<CAPTION>
POST-ACQUISITION PRE-ACQUISITION
_________________________________________________
For the For the | For the
period period | period
January August | January For the
1, 1997 14, 1996 | 1, 1996 year
through through | through ended
October December | August December
24, 1997 31, 1996 | 13, 1996 31, 1995
_______________________| ________________________
(Dollars in thousands)
<S> <C> <C> | <C> <C>
Beginning balance $83,051 $85,796 | $6,057 $7,620
Imputed interest 5,138 2,465 | 273 548
Amortization (10,363) (5,210)| (1,224) (2,100)
Adjustment for unrealized |
gains (losses) on available |
for sale securities (373) -- | 11 (11)
_______________________| ________________________
Ending balance $77,453 $83,051 | $5,117 $6,057
=================================================
</TABLE>
Pre-Acquisition PVIF represents the remaining value assigned to in force
contracts when Bankers Trust purchased Golden American from Mutual Benefit
Life Insurance Company in Rehabilitation ("Mutual Benefit") on September
30, 1992.
Interest was imputed on the unamortized balance of PVIF at rates of 7.70%
to 7.80% for the period August 14, 1996 through October 24, 1997. The
amortization of PVIF net of imputed interest was charged to expense. PVIF
was also adjusted for the unrealized gains (losses) on available for sale
securities; such changes were included directly in stockholder's equity.
7. INCOME TAXES
The Company will file a consolidated federal income tax return with its wholly
owned life insurance subsidiary. Under the Internal Revenue Code, a newly
acquired insurance company cannot file as part of its parent's consolidated
tax return for 5 years.
At December 31, 1997, Golden American has net operating loss ("NOL")
carryforwards for federal income tax purposes of approximately $8,697,000.
Approximately $5,094,000 and $3,603,000 of these NOL carryforwards are
available to offset future taxable income of the Company through the years 2011
and 2012, respectively.
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
December 31, 1997
INCOME TAX EXPENSE
Income tax expense (benefit) included in the consolidated financial statements
is as follows:
<TABLE>
<CAPTION>
POST-MERGER POST-ACQUISITION PRE-ACQUISITION
_____________________________________________________________________
For the | For the For the | For the
period | period period | period
October 25, | January 1, August 14, | January 1,
1997 | 1997 1996 | 1996 For the
through | through through | through year ended
December 31, | October 24, December 31, | August 13, December 31,
1997 | 1997 1996 | 1996 1995
_____________| __________________________| __________________________
(Dollars in thousands)
<S> <C> | <C> <C> | <C> <C>
Current -- | $12 -- | -- --
Deferred $146 | (1,349) $220 | ($1,463) --
_____________| __________________________| __________________________
$146 | ($1,337) $220 | ($1,463) --
=====================================================================
</TABLE>
The effective tax rate on income (loss) before income taxes is different from
the prevailing federal income tax rate. A reconciliation of this difference
is as follows:
<TABLE>
<CAPTION>
POST-MERGER POST-ACQUISITION PRE-ACQUISITION
_______________________________________________________
For the | For the For the | For the
period | period period | period
October | January August | January
25, 1997 | 1, 1997 14, 1996 | 1, 1996 For the
through | through through | through year ended
December | October December | August December
31, 1997 | 24, 1997 31, 1996 | 13, 1996 31, 1995
___________| ____________________| ____________________
(Dollars in thousands)
<S> <C> | <C> <C> | <C> <C>
Income (loss) | |
before income taxes ($279)| ($608) $570 | $1,736 $3,364
===========| ====================| ====================
Income tax | |
(benefit) at federal | |
statutory rate ($98)| ($213) $200 | $607 $1,177
Tax effect (decrease) of: | |
Realization of NOL | |
carryforwards -- | -- -- | (1,214) --
Dividends received | |
deduction -- | -- -- | -- (350)
Goodwill amortization 220 | -- -- | -- --
Compensatory stock | |
option and restricted | |
stock expense -- | (1,011) -- | -- --
Other items 24 | (113) 20 | -- 17
Valuation allowance -- | -- -- | (856) (844)
___________| ____________________| ____________________
Income tax expense | |
(benefit) $146 | ($1,337) $220 | ($1,463) $--
=======================================================
</TABLE>
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
December 31, 1997
DEFERRED INCOME TAXES
The tax effect of temporary differences giving rise to the Company's deferred
income tax assets and liabilities at December 31, 1997 and 1996 is as follows:
<TABLE>
<CAPTION>
POST-MERGER POST-ACQUISITION
___________________________________
December 31 1997 | 1996
____________________________________________________________ | ________________
(Dollars in thousands)
<S> <C> | <C>
Deferred tax assets: |
Future policy benefits $27,399 | $19,102
Deferred policy acquisition costs 4,558 | 1,985
Goodwill 17,620 | 5,918
Net operating loss carryforwards 3,044 | 1,653
Other 1,548 | 235
________________ | ________________
54,169 | 28,893
Deferred tax liabilities: |
Unrealized appreciation (depreciation) |
of securities at fair value (130) | (145)
Fixed maturity securities (1,665) | --
Present value of in force acquired (15,172) | (29,068)
Other (972) | (45)
________________ | ________________
(17,939) | (29,258)
________________ | ________________
Deferred income tax asset (liability) $36,230 | ($365)
===================================
</TABLE>
The Company is required to establish a "valuation allowance" for any portion
of the deferred tax assets that management believes will not be realized. In
the opinion of management, it is more likely than not that the Company will
realize the benefit of the deferred tax assets, and, therefore, no such
valuation allowance has been established.
8. RETIREMENT PLANS
DEFINED BENEFIT PLANS
In 1997, the Company was allocated their share of the pension liability
associated with their employees. The Company's employees are covered by the
employee retirement plan of an affiliate, Equitable Life. The benefits are
based on years of service and the employee's average annual compensation
during the last five years of employment. Further, Equitable Life sponsors a
defined contribution plan that is qualified under Internal Revenue Code Section
401(k). The Company's funding and accounting policies are consistent with the
funding requirements of Federal law and regulations.
The following table sets forth the plan's funded status and amounts recognized
in the Company's consolidated balance sheet:
<TABLE>
<CAPTION>
POST-MERGER
_______________________
December 31, 1997
_______________________
(Dollars in thousands)
<S> <C>
Accumulated benefit obligation $579
=======================
Plan assets at fair value, primarily bonds, common
stocks, mortgage loans and short-term investments --
Projected benefit obligation for service rendered to date $956
_______________________
Pension liability $956
=======================
</TABLE>
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
December 31, 1997
Net periodic pension cost included the following components:
<TABLE>
<CAPTION>
POST-MERGER POST-ACQUISITION
______________________________________
For the period | For the period
October 25, 1997 | January 1, 1997
through | through
December 31, 1997 | October 24, 1997
__________________| __________________
(Dollars in thousands)
<S> <C> | <C>
Service cost-benefits earned |
during the period $114 | $568
Interest cost on projected |
benefit obligation 10 | 15
Net amortization and deferral -- | 1
__________________| __________________
Net periodic pension cost $124 | $584
======================================
</TABLE>
The discount rate and rate of increase in future compensation levels used in
determining the actuarial present value of the projected benefit obligation
were 7.25% and 5.00%, respectively, at December 31, 1997. The average
expected long term rate of return on plan assets was 9.00% in 1997.
9. RELATED PARTY TRANSACTIONS
DSI acts as the principal underwriter (as defined in the Securities Act of
1933 and the Investment Company Act of 1940, as amended) of the variable
insurance products issued by the Company which as of December 31, 1997 are
sold primarily through six broker/dealer institutions. For the periods
October 25, 1997, through December 31, 1997 and January 1, 1997 through
October 24, 1997, the Company paid commissions to DSI totaling $9,931,000
and $26,419,000, respectively ($9,995,000 for the period August 14, 1996
through December 31, 1996 and $17,070,000 for the period January 1, 1996
through August 13, 1996). For the year ended December 31, 1995 commissions
paid by Golden American to DSI aggregated $8,440,000.
Golden American provides certain managerial and supervisory services to DSI.
Beginning in 1995, this fee was calculated as a percentage of average assets
in the variable separate accounts. For the periods October 25, 1997 through
December 31, 1997 and January 1, 1997 through October 24, 1997, the fee was
$508,000 and $2,262,000, respectively. For the periods August 14, 1996
through December 31, 1996 and January 1, 1996 through August 13, 1996 the
fee was $877,000 and $1,390,000, respectively. This fee was $987,000 for 1995.
The Company has a service agreement with Equitable Investment Services, Inc.
("EISI"), an affiliate, in which EISI provides investment management services.
Payments for these services totaled $200,000, $768,000 and $72,000 for the
periods October 25, 1997 through December 31, 1997, January 1, 1997 through
October 24, 1997 and August 14, 1996 through December 31, 1996, respectively.
Golden American has a guaranty agreement with Equitable Life. In consideration
of an annual fee, payable June 30, Equitable Life guarantees to Golden American
that it will make funds available, if needed, to Golden American to pay the
contractual claims made under the provisions of Golden American's life
insurance and annuity contracts. The agreement is not, and nothing contained
therein or done pursuant thereto by Equitable Life shall be deemed to
constitute, a direct or indirect guaranty by Equitable Life of the payment of
any debt or other obligation, indebtedness or liability, of any kind or
character whatsoever, of Golden American. The agreement does not guarantee the
value of the underlying assets held in separate accounts in which funds of
variable life insurance and variable annuity policies have been invested. The
calculation of the annual fee is based on risk based capital. As Golden
American's risk based capital level was above required amounts, no annual fee
was payable.
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
December 31, 1997
Golden American provides certain advisory, computer and other resources and
services to Equitable Life. Revenues for these services which reduced general
expenses incurred by Golden American totaled $1,338,000 and $2,992,000 for
the periods October 25, 1997 through December 31, 1997 and January 1, 1997
through October 24, 1997, respectively. No services were provided by Golden
American in 1996.
The Company has a service agreement with Equitable Life in which Equitable Life
provides administrative and financial related services. For the period October
25, 1997 through December 31, 1997 and January 1, 1997 through October 24,
1997, the Company incurred expenses of $13,000 and $16,000, respectively,
under this agreement.
The Company had premiums, net of reinsurance, for variable products from six
significant broker/dealers for the year ended December 31, 1997, that
totaled $445,300,000, or 71% of premiums ($298,000,000 or 67% from two
significant broker/dealers for the year ended December 31, 1996). Included in
these amounts are premiums for 1997 of $26.2 million from LSSI, an affiliate.
SURPLUS NOTE: On December 17, 1996, Golden American issued an 8.25% surplus
note in the amount of $25,000,000 to Equitable. The note matures on December
17, 2026. The note and 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. Golden American incurred interest totaling $344,000 and
$1,720,000 for the period October 25, 1997 through December 31, 1997 and
January 1, 1997 through October 24, 1997, respectively. On December 17, 1996,
Golden American contributed the $25,000,000 to First Golden acquiring 200,000
shares of common stock (100% of outstanding stock) of First Golden.
RECIPROCAL LOAN AGREEMENT: Golden American maintains a reciprocal loan
agreement with ING America Insurance Holdings, Inc. ("ING America"), a
Delaware corporation, and affiliate of EIC, to facilitate the handling of
unusual and/or unanticipated short-term cash requirements. Under this
agreement, which became effective January 1, 1998 and expires December 31,
2007, Golden American and ING America can borrow up to $65,000,000 from one
another. Interest on any Golden American borrowings is charged at the rate of
ING America's cost of funds for the interest period plus 0.15%. Interest
on any ING America borrowings is charged at a rate based on the prevailing
interest rate of U.S. commercial paper available for purchase with a similar
arrangement.
LINE OF CREDIT: Golden American maintained a line of credit agreement with
Equitable to facilitate the handling of unusual and/or unanticipated short-term
cash requirements. Under this agreement which became effective December 1, 1996
and expired December 31, 1997, Golden American could borrow up to $25,000,000.
Interest on any borrowings was charged at the rate of Equitable's monthly
average aggregate cost of short-term funds plus 1.00%. Under this agreement,
the Company incurred interest expense of $213,000 for the period October 25,
1997 through December 31, 1997, $362,000 for the period January 1, 1997 through
October 24, 1997, and $85,000 for the period August 14, 1996 through December
31, 1996. At December 31, 1997, $24,059,000 was outstanding under this
agreement. The outstanding balance was repaid by a capital contribution.
STOCKHOLDER'S EQUITY: On September 23, 1996, EIC Variable, Inc. contributed
$50,000,000 of Preferred Stock to the Company's additional paid-in capital.
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
December 31, 1997
10. COMMITMENTS AND CONTINGENCIES
CONTINGENT LIABILITY: In a transaction that closed on September 30, 1992,
Bankers Trust acquired from Mutual Benefit, in accordance with the terms of an
Exchange Agreement, all of the issued and outstanding capital stock of Golden
American and DSI and certain related assets for consideration with an
aggregate value of $13,200,000 and contributed them to BT Variable. The
transaction involved settlement of pre-existing claims of Bankers Trust
against Mutual Benefit. The ultimate value of these claims has not yet been
determined by the Superior Court of New Jersey and, prior to August 13, 1996,
was contingently supported by a $5,000,000 note payable from Golden American
and a $6,000,000 letter of credit from Bankers Trust. Bankers Trust had
estimated that the contingent liability due from Golden American amounted to
$439,000 at August 13, 1996. At August 13, 1996 the balance of the escrow
account established to fund the contingent liability was $4,293,000.
On August 13, 1996, Bankers Trust made a cash payment to Golden American in
an amount equal to the balance of the escrow account less the $439,000
contingent liability discussed above. In exchange, Golden American
irrevocably assigned to Bankers Trust all of Golden American's rights to
receive any amounts to be disbursed from the escrow account in accordance
with the terms of the Exchange Agreement. Bankers Trust also irrevocably
agreed to make all payments becoming due under the Golden American note and
to indemnify Golden American for any liability arising from the note.
REINSURANCE: At December 31, 1997, the Company had reinsurance treaties with
five unaffiliated reinsurers covering a significant portion of the mortality
risks under its variable contracts. The Company remains liable to the extent
its reinsurers do not meet their obligations under the reinsurance agreements.
Reinsurance in force for life mortality risks were $96,686,000 and $58,368,000
at December 31, 1997 and 1996. At December 31, 1997, the Company has a net
payable of $11,000 for reserve credits, reinsurance claims or other receivables
from these reinsurers comprised of $240,000 for claims recoverable from
reinsurers and a payable of $251,000 for reinsurance premiums. Included in the
accompanying financial statements are net considerations to reinsurers of
$326,000, $1,871,000, $875,000, $600,000 and $2,800,000 and net policy benefits
recoveries of $461,000, $1,021,000, $654,000, $1,267,000 and $3,500,000 for the
periods October 25, 1997 through December 31, 1997, January 1, 1997 through
October 24, 1997, August 14, 1996 through December 31, 1996, and January 1,
1996 through August 13, 1996 and the year ended 1995, 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 $265,000, $335,000, $10,000 and $56,000 for the periods October
25, 1997 through December 31, 1997, January 1, 1997 through October 24, 1997,
August 14, 1996 through December 31, 1996 and January 1, 1996 through
August 13, 1996, respectively. In 1995, net income was reduced by $109,000.
GUARANTY FUND ASSESSMENTS: Assessments are levied on the Company by life and
health guaranty associations in most states in which the Company is licensed
to cover losses of policyholders of insolvent or rehabilitated insurers. In
some states, these assessments can be partially recovered through a reduction
in future premium taxes. The Company cannot predict whether and to what
extent legislative initiatives may affect the right to offset. 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
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
December 31, 1997
state premium levels
as well as its potential for premium tax offset. Accordingly, the Company
accrued and charged to expense an additional $141,000 for the period October
25, 1997 through December 31, 1997, $446,000 for the period January 1, 1997
through October 24, 1997, $291,000 for the period August 14, 1996 through
December 31, 1996 and $480,000 for the period January 1, 1996 through August
13, 1996. At December 31, 1997, the Company has an undiscounted reserve of
$1,358,000 to cover estimated future assessments (net of related anticipated
premium tax credits) and has established an asset totaling $238,000 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 premiums, 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 is
generated by six broker/dealers. Substantial changes in tax laws that would
make these products less attractive to consumers, extreme fluctuations in
interest rates or stock market returns which may result in higher lapse
experience than assumed, could cause a severe impact to the Company's
financial condition.
OTHER COMMITMENTS: At December 31, 1997, outstanding commitments to fund
mortgage loans on real estate totaled $1,825,000.
YEAR 2000 (UNAUDITED): Based on a study of its computer software and
hardware, the Company has determined its exposure to the Year 2000 change of
the century date issue. Management believes the Company's systems are or
will be substantially compliant by Year 2000 and has engaged external
consultants to validate this assumption. Golden American has spent
approximately $2,000 in 1997 related to the external consultants' analysis.
The projected cost to the Company for the external consultants' analysis is
approximately $130,000 to $170,000. The only system known to be affected by
this issue is a system maintained by an affiliate who will incur the related
costs to make the system compliant. To mitigate the effect of outside
influences and other dependencies relative to the Year 2000, the Company will
be contacting significant customers, suppliers and other third parties. To
the extent these third parties would be unable to transact business in the
Year 2000 and thereafter, the Company's operations could be adversely affected.
<PAGE>
<PAGE>
[This Page is Intentionally Left Blank]
92
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
ITEM PAGE
Introduction.......................................................... 1
Description of Golden American Life Insurance Company................. 1
Safekeeping of Assets................................................. 1
The Administrator..................................................... 1
Independent Auditors.................................................. 2
Distribution of Contracts............................................. 2
Performance Information............................................... 3
IRA Partial Withdrawal Option......................................... 9
Other Information..................................................... 9
Financial Statements of Separate Account B............................ 10
Appendix -- Description of Bond Ratings............................... A-1
- --------------------------------------------------------------------------------
PLEASE TEAR OFF, COMPLETE AND RETURN THE FORM BELOW TO ORDER A FREE STATEMENT OF
ADDITIONAL INFORMATION FOR THE CONTRACTS OFFERED UNDER THE PROSPECTUS. ADDRESS
THE FORM TO OUR CUSTOMER SERVICE CENTER; THE ADDRESS IS SHOWN ON THE COVER.
...............................................................................
PLEASE SEND ME A FREE COPY OF THE STATEMENT OF ADDITIONAL INFORMATION FOR
SEPARATE ACCOUNT B
PLEASE PRINT OR TYPE:
__________________________________________________
NAME
__________________________________________________
SOCIAL SECURITY NUMBER
__________________________________________________
STREET ADDRESS
__________________________________________________
CITY, STATE, ZIP
G3760 PREMIUM PLUS SAI (5/98)
...............................................................................
93
<PAGE>
<PAGE>
[This Page is Intentionally Left Blank]
<PAGE>
<PAGE>
APPENDIX A
MARKET VALUE ADJUSTMENT EXAMPLES
EXAMPLE #1: FULL SURRENDER -- EXAMPLE OF A NEGATIVE MARKET VALUE
ADJUSTMENT
Assume $100,000 was allocated to a Fixed Allocation with a
Guarantee Period of ten years, a Guaranteed Interest Rate of 7.50%,
an initial Index Rate ("I") of 7.00%; that a full surrender is
requested three years into the Guarantee Period; that the then Index
Rate for a seven year Guarantee Period ("J") is 8.0%; and that no
prior transfers or partial withdrawals affecting this Fixed
Allocation have been made.
CALCULATE THE MARKET VALUE ADJUSTMENT
1. The Accumulation Value of the Fixed Allocation on the date of
surrender is $124,230
( $100,000 X 1.075 ^ 3 )
2. N = 2,555 ( 365 X 7 )
3. Market Value Adjustment = $124,230 X
(( 1.07 / 1.0850 ) ^ ( 2,555 / 365 ) - 1 ) = $11,535
Therefore, the amount paid to you on full surrender ignoring any
surrender charge is $112,695
( $124,230 - $11,535 ).
EXAMPLE #2: FULL SURRENDER -- EXAMPLE OF A POSITIVE MARKET VALUE
ADJUSTMENT
Assume $100,000 was allocated to a Fixed Allocation with a
Guarantee Period of ten years, a Guaranteed Interest Rate of 7.5%,
an initial Index Rate ("I") of 7.00%; that a full surrender is
requested three years into the Guarantee Period; that the then Index
Rate for a seven year Guarantee Period ("J") is 6.0%; and that no
prior transfers or partial withdrawals affecting this Fixed
Allocation have been made.
CALCULATE THE MARKET VALUE ADJUSTMENT
1. The Accumulation Value of the Fixed Allocation on the date of
surrender is $124,230
( $100,000 X 1.075 ^ 3 )
2. N = 2,555 ( 365 X 7 )
3. Market Value Adjustment = $124,230 X
(( 1.07 / 1.0650 ) ^ ( 2,555 / 365 ) - 1 ) = $4,141
Therefore, the amount paid to you on full surrender
ignoring any surrender charge is $128,371
( $124,230 + $4,141 ).
EXAMPLE #3: PARTIAL WITHDRAWAL -- EXAMPLE OF A NEGATIVE MARKET VALUE
ADJUSTMENT
Assume $200,000 was allocated to a Fixed Allocation with a
Guarantee Period of ten years, a Guaranteed Interest Rate of 7.5%,
an initial Index Rate ("I") of 7.00%; that a partial withdrawal of
$112,695 is requested three years into the Guarantee period; that
the then Index Rate ("J") for a seven year Guarantee Period is 8.0%;
and that no prior transfers or partial withdrawals affecting this
Fixed Allocation have been made.
First calculate the amount that must be withdrawn from the Fixed
Allocation to provide the amount requested.
1. The Accumulation Value of the Fixed Allocation on the date of
withdrawal is $248,459
( $200,000 X 1.075 ^ 3 )
2. N = 2,555 ( 365 X 7 )
3. Amount that must be withdrawn =
(( $112,695 / ( 1.07 / 1.0850 ) ^ ( 2,555 / 365 )) = $124,230
Then calculate the Market Value Adjustment on that amount.
4. Market Value Adjustment = $124,230 X
(( 1.07 / 1.0850 ) ^ ( 2,555 / 365 ) - 1 ) = $11,535
Therefore, the amount of the partial withdrawal paid to you is
$112,695, as requested. The Fixed Allocation will be reduced by the
amount of the partial withdrawal, $112,695, and also reduced by the
Market Value Adjustment of $11,535, for a total reduction in the
Fixed Allocation of $124,230.
A1
<PAGE>
<PAGE>
EXAMPLE #4: PARTIAL WITHDRAWAL -- EXAMPLE OF A POSITIVE MARKET VALUE
ADJUSTMENT
Assume $200,000 was allocated to a Fixed Allocation with a
Guarantee Period of ten years, a Guaranteed Interest Rate of 7.5%,
an initial Index Rate of 7.0%; that a partial withdrawal of $128,371
requested three years into the Guarantee Period; that the then Index
Rate ("J") for a seven year Guarantee Period is 6.0%; and that no
prior transfers or partial withdrawals affecting this Fixed
Allocation have been made.
First calculate the amount that must be withdrawn from the Fixed
Allocation to provide the amount requested.
1. The Accumulation Value of Fixed Allocation on the date of
surrender is $248,459
( $200,000 X 1.075 ^ 3 )
2. N = 2,555 ( 365 X 7 )
3. Amount that must be withdrawn =
(( $128,371 / ( 1.07 / 1.0650 ) ^ ( 2,555 / 365 )) = $124,230
Then calculate the Market Value Adjustment on that amount.
4. Market Value Adjustment = $124,230 X
(( 1.07 / 1.0650 ) ^ ( 2,555 / 365 ) - 1 ) = $4,141
Therefore, the amount of the partial withdrawal paid to you is
$128,371, as requested. The Fixed Allocation will be reduced by the
amount of the partial withdrawal, $130,500, but increased by the
Market Value Adjustment of $4,141, for a total reduction in the
Fixed Allocation of $124,230.
A2
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
Golden American Life Insurance Company is stock company
domiciled In Wilmington, Delaware
G3760 PREMIUM PLUS 5/98
<PAGE>
<PAGE>
PART B
<PAGE>
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
GOLDENSELECT PREMIUM PLUS
DEFERRED COMBINATION VARIABLE
AND FIXED ANNUITY CONTRACT
ISSUED BY
SEPARATE ACCOUNT B
("Account B")
(or the "Account")
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, 1998
<PAGE>
<PAGE>
TABLE OF CONTENTS
ITEM PAGE
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Description of Golden American Life Insurance Company. . . . . . . 1
Safekeeping of Assets. . . . . . . . . . . . . . . . . . . . . . . 1
The Administrator. . . . . . . . . . . . . . . . . . . . . . . . . 1
Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . 2
Distribution of Contracts. . . . . . . . . . . . . . . . . . . . . 2
Performance Information. . . . . . . . . . . . . . . . . . . . . . 3
IRA Partial Withdrawal Option. . . . . . . . . . . . . . . . . . . 9
Other Information. . . . . . . . . . . . . . . . . . . . . . . . . 9
Financial Statements of Separate Account B . . . . . . . . . . . . 10
Appendix - Description of Bond Ratings . . . . . . . . . . . . . . A-1
<PAGE>
<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. On August 13, 1996,
Equitable of Iowa Companies, Inc. (formerly Equitable of Iowa Companies)
("EIC")acquired all of the interest in Golden American and Directed
Services, Inc. On October 24, 1997, Equitable of Iowa Companies and ING
Groep, N.V. ("ING") completed a merger agreement with Equitable of Iowa
becoming a wholly owned subsidiary of ING. ING, headquartered in the
Netherlands, is a global financial services holding company with over
$307.6 billion in assets.
As of December 31, 1997, Golden American had approximately $227.3 million
in stockholder's equity and approximately $2.4 billion in total assets,
including approximately $1.6 billion of separate account assets. 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 currently writes variable
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, 1997, Equitable Life Insurance Company of Iowa
("Equitable Life") and Golden American became parties to a service
agreement pursuant to which Equitable Life agreed to provide certain
accounting, actuarial, tax, underwriting, sales, management and other
services to Golden American. Expenses incurred by Equitable Life in
relation to this service agreement were reimbursed by Golden American
on an allocated cost basis. No charges were billed to Golden American
by Equitable Life pursuant to the service agreement in 1997.
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)
agreed to provide certain accounting, actuarial, tax, underwriting,
sales, management and other services to Golden
1
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<PAGE>
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 and 1995 were
$464,734 and $749,741, respectively. This service agreement
was terminated on August 14, 1996.
INDEPENDENT AUDITORS
Ernst & Young LLP, 801 Grand Avenue, Des Moines, Iowa 50309, independent
auditors, will perform annual audits of Golden American and the Account.
DISTRIBUTION OF CONTRACTS
The offering of contracts under the prospectus associated with this Statement
of Additional Information is continuous.
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, since December 31, 1994,
are sold primarily through two broker/dealer institutions. For the years
ended 1997, 1996 and 1995 commissions paid by Golden American to DSI
aggregated $36,351,000, $27,065,000 and $8,440,000, 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,
2
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<PAGE>
first on the basis of direct charges when identifiable, and the remainder
allocated based on the estimated amount of time spent by Golden American's
employees on behalf of DSI. In the opinion of management, this method of
cost allocation is reasonable. In 1995, the service agreement between DSI
and Golden American was amended to provide for a management fee from DSI to
Golden American for managerial and supervisory services provided by Golden
American. This fee, calculated as a percentage of average assets in the
variable separate accounts, was $2,770,000, $2,267,000 and $987,000 for the
years ended 1997, 1996 and 1995, respectively.
PERFORMANCE INFORMATION
Performance information for the divisions of Account B, including yields,
standard annual returns and other non standard measures of performance of
all divisions, may appear in reports or promotional literature to current
or prospective owners. Such non standard measures of performance will be
computed, or accompanied by performance data computed, in accordance with
standards defined by the SEC. Negative values are denoted by minus signs
("-"). Performance information for measures other than total return do not
reflect any applicable premium tax that can range from 0% to 3.5%. As
described in the prospectus, three death benefit options are available.
The following performance values reflect the election at issue of the 7%
Solution Enhanced Death Benefit Option providing values reflecting
the highest aggregate contract charges. If one of the other death benefit
options had been elected, the historical performance values would be higher
than those represented in the examples.
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 or
income other than investment income) 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:
EFFECTIVE YIELD = [(BASE PERIOD RETURN) +1) ^ (365/7)] - 1
The current yield and effective yield of the Liquid Asset Division for
the 7-day period December 25, 1997 to December 31, 1997 were 3.28% and
3.33%, respectively.
3
<PAGE>
<PAGE>
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:
YIELD = 2 [ ( a - b +1)^(6) - 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 FOR 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:
P(1+T)^(n)=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)
4
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<PAGE>
All total return figures reflect the deduction of the maximum sales load, the
administrative charges, and the mortality and expense risk charges. The
Securities and Exchange Commission (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 security) 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.
Average Annualized Total Return for the Divisions presented on a standardized
basis for the year ending December 31, 1997 were as follows:
<TABLE>
<CAPTION>
Average Annualized Total Return for Periods Ending 12/31/97 -- Standardized
- ----------------------------------------------------------------------------
Division One Year Period Five Year Period Inception to Inception Date
Ending 12/31/97 Ending 12/31/97 Ending 12/31/97
- -------- --------------- ---------------- --------------- --------------
<S> <C> <C> <C> <C>
Multiple Allocation 7.38% 7.98%* 7.95%* 1/25/89
Fully Managed 5.33% 7.27%* 7.42%* 1/25/89
Capital Appreciation 18.70% 13.83% 13.99% 5/4/92
Rising Dividends 19.56% n/a 16.44% 10/4/93
All-Growth -3.99% 1.20%* 3.61%* 1/25/89
Real Estate 12.64% 16.58%* 10.60%* 1/25/89
Hard Assets -3.70% 16.49%* 7.96%* 1/25/89
WP International Equity -11.98% n/a -2.89% 4/1/96
Int. Fixed Income 9.11% n/a 2.77% 10/7/94
Value Equity 17.06% n/a 20.01% 1/1/95
Strategic Equity 13.00% n/a 13.81%* 10/2/95
Small Cap 0.39% n/a 9.52% 1/2/96
OTC 9.57% n/a 18.96% 10/7/94
Research 10.02% n/a 19.61% 10/7/94
Total Return 10.75% n/a 13.62% 10/7/94
Growth & Income 14.96% n/a 23.77% 4/1/96
Value + Growth 5.74% n/a 11.79% 4/1/96
Limited Maturity Bond -3.20% 2.55%* 4.88%* 1/25/89
Liquid Asset -4.75% 1.44%* 3.23%* 1/25/89
</TABLE>
- ----------------------------------------------------------------------------
* Total return calculation reflects partial waiver of fees and expenses.
5
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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:
[P(1+T)^(n)]=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 the Divisions presented on a non-
standardized basis for the year ending December 31, 1997 were as follows:
<TABLE>
<CAPTION>
Average Annualized Total Return for Year Ending 12/31/97 -- Non-Standardized
- -------------------------------------------------------------------------------
Division One Year Period Five Year Period Inception to Inception Date
Ending 12/31/97 Ending 12/31/97 Ending 12/31/97
- -------- --------------- ---------------- --------------- --------------
<S> <C> <C> <C> <C>
Multiple Allocation 15.44% 8.89%* 8.05%* 1/25/89
Fully Managed 13.39% 8.21%* 7.52%* 1/25/89
Capital Appreciation 26.77% 14.57% 14.59%* 5/4/92
Rising Dividends 27.62% n/a 17.47% 10/4/93
All-Growth 4.07% 2.37%* 3.74%* 1/25/89
Real Estate 20.70% 17.25%* 10.68%* 1/25/89
Hard Assets 4.36% 17.17%* 8.06%* 1/25/89
WP International Equity -3.92% n/a -0.25% 4/1/96
Int. Fixed Income -1.05% n/a 5.11% 10/7/94
Value Equity 25.12% n/a 21.88% 1/1/95
Strategic Equity 21.07% n/a 16.86% 10/2/95
Small Cap 8.45% n/a 13.20% 1/2/96
OTC 17.63% n/a 20.66% 10/7/94
Research 18.08% n/a 21.29% 10/7/94
Total Return 18.81% n/a 15.50% 10/7/94
Growth & Income 23.02% n/a 27.70% 4/1/96
Value + Growth 13.80% n/a 16.01% 4/1/96
Limited Maturity Bond 4.86% 3.67%* 5.00%* 1/25/89
Liquid Asset 3.31% 2.61%* 3.36%* 1/25/89
</TABLE>
- -------------------------------------------------------------------------------
* Total return calculation reflects partial waiver of fees and expenses.
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,
7
<PAGE>
<PAGE>
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+ ratings mean, in the opinion of A.M. Best, that the insurer has
demonstrated 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). Note that the examples below are
calculated for a Contract issued with the 7% Solution Enhanced Death Benefit
Option, the death benefit option with the highest mortality and expense risk
charge. The mortality and expense risk charge associated with the Annual
Ratchet Enhanced Death Benefit Option and the Standard Death Benefit are
lower than that used in the examples and would result in higher IIE's or
Accumulation Values.
1. IIE, beginning of period. . . . . . . . . . . . . . . $ 10.00
2. Value of securities, beginning of period. . . . . . . $ 10.00
3. Change in value of securities . . . . . . . . . . . . $ 0.10
4. Gross investment return (3) divided by (2). . . . . . 0.01
5. Less daily mortality and expense charge . . . . . . . 0.00004280
6. Less asset based administrative charge. . . . . . . . 0.00000411
7. Net investment return (4) minus (5) minus (6) . . . . 0.00995309
8. Net investment factor (1.000000) plus (7) . . . . . . 1.00995309
9. IIE, end of period (1) multiplied by (8). . . . . . . $10.0995309
ILLUSTRATION OF PURCHASE OF UNITS (ASSUMING NO STATE PREMIUM TAX)
Example 2.
1. Initial Premium Payment . . . . . . . . . . . . . . . $ 1,000
2. IIE on effective date of purchase (see Example 1) . . $ 10.00
3. Number of Units purchased [(1) divided by (2)] . . . 100
4. IIE for valuation date following purchase
(see Example 1) . . . . . . . . . . . . . . . . . . . $10.0995309
5. Accumulation Value in account for valuation date
following purchase [(3) multiplied by (4)]. . . . . . $ 1,009.95
8
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<PAGE>
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.
OTHER INFORMATION
Registration statements have been filed with the SEC 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 SEC.
9
<PAGE>
<PAGE>
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, 1997
Statement of Operations for the Year ended December 31, 1997
Statements of Changes in Net Assets for the Years Ended
December 31, 1996 and 1997
Notes to Financial Statements
10
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<PAGE>
Financial Statements
Golden American Life Insurance Company
Separate Account B
Years ended December 31, 1997 and 1996
with Report of Independent Auditors
Golden American Life Insurance Company
Separate Account B
Financial Statements
Years ended December 31, 1997 and 1996
CONTENTS
Report of Independent Auditors
Audited Financial Statements
Statement of Assets and Liability
Statement 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, 1997, 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, 1997, 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, 1997, and the results of its operations for the year then
ended and the changes in its 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 12, 1998
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENT OF ASSETS AND LIABILITY
DECEMBER 31, 1997
(Dollars in thousands)
<TABLE>
<CAPTION>
Combined
____________
<S> <C>
NET ASSETS
Investments at net asset value:
The GCG Trust:
Liquid Asset Series,
57,275,780 shares (cost - $57,276) $57,276
Limited Maturity Bond Series,
5,091,118 shares (cost - $53,944) 52,489
Hard Assets Series,
3,024,920 shares (cost - $51,259) 45,525
All-Growth Series,
5,212,408 shares (cost - $68,783) 71,776
Real Estate Series,
4,090,371 shares (cost - $58,325) 74,731
Fully Managed Series,
10,090,542 shares (cost - $138,001) 158,724
Multiple Allocation Series,
20,015,834 shares (cost - $246,764) 262,006
Capital Appreciation Series,
10,645,781 shares (cost - $148,931) 187,898
Rising Dividends Series,
10,780,319 shares (cost - $154,551) 216,038
Emerging Markets Series,
3,922,730 shares (cost - $39,763) 34,520
Market Manager Series,
412,444 shares (cost - $4,478) 6,793
Value Equity Series,
4,777,402 shares (cost - $69,459) 77,059
Strategic Equity Series,
3,701,897 shares (cost - $42,935) 50,457
Small Cap Series,
3,981,210 shares (cost - $47,534) 52,751
Managed Global Series,
9,138,658 shares (cost - $101,193) 104,729
Equi-Select Series Trust:
OTC Portfolio,
1,287,578 shares (cost - $19,583) 20,370
Growth & Income Portfolio,
3,106,847 shares (cost - $43,694) 44,943
Research Portfolio,
1,918,246 shares (cost - $34,030) 34,418
Total Return Portfolio,
1,708,746 shares (cost - $25,831) 26,243
Value + Growth Portfolio,
1,754,513 shares (cost - $24,618) 23,188
International Fixed Income Portfolio,
19,798 shares (cost - $216) 206
</TABLE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENT OF ASSETS AND LIABILITY
DECEMBER 31, 1997
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Combined
____________
<S> <C>
NET ASSETS
Investments at net asset value:
Greenwich Street Series Fund:
Appreciation Portfolio,
14,037 shares (cost - $272) $263
Travelers Series Fund, Inc.:
Smith Barney High Income Portfolio,
15,500 shares (cost - $206) 209
Smith Barney Income and Growth Portfolio,
11,307 shares (cost - $209) 216
Smith Barney International Equity Portfolio,
7,460 shares (cost - $101) 96
Smith Barney Money Market Portfolio,
181,453 shares (cost - $182) 182
Warburg Pincus Trust:
International Equity Portfolio,
188,938 shares (cost - $2,075) 1,982
____________
TOTAL ASSETS (cost - $1,434,213) 1,605,088
LIABILITY
Payable to Golden American Life Insurance Company
for charges and fees 817
____________
TOTAL NET ASSETS $1,604,271
============
NET ASSETS
For Variable Annuity Insurance Contracts $1,587,262
Retained in Separate Account B by Golden American
Life Insurance Company 17,009
____________
TOTAL NET ASSETS $1,604,271
============
</TABLE>
See accompanying notes.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENT OF OPERATIONS
For the year ended December 31, 1997, Except as Noted
(Dollars in thousands)
<TABLE>
<CAPTION>
Limited
Liquid Maturity Hard
Asset Bond Assets
Division Division Division
________________________________
<S> <C> <C> <C>
INVESTMENT INCOME (LOSS)
Income:
Dividends $2,290 $3,854 $4,545
Capital gains distributions -- -- 4,923
________________________________
TOTAL INVESTMENT INCOME 2,290 3,854 9,468
Expenses:
Mortality and expense risk and other charges (528) (559) (527)
Annual administrative charges (24) (20) (21)
Minimum death benefit guarantee charges (7) (1) (3)
Contingent deferred sales charges (256) (34) (45)
Other contract charges (5) (1) (4)
Amortization of deferred charges related to:
Deferred sales load (503) (540) (302)
Premium taxes (3) (9) (6)
________________________________
TOTAL EXPENSES BEFORE WAIVER (1,326) (1,164) (908)
Fees waived by Golden American 6 13 10
________________________________
NET EXPENSES (1,320) (1,151) (898)
________________________________
NET INVESTMENT INCOME (LOSS) 970 2,703 8,570
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss) on investments -- 139 3,106
Net unrealized appreciation
(depreciation) of investments -- (690) (9,738)
________________________________
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $970 $2,152 $1,938
================================
<FN>
(a) Commencement of operations, February 3, 1997
(b) Commencement of operations, February 4, 1997
(c) Commencement of operations, August 26, 1997
(d) Commencement of operations, September 18, 1997
(e) Commencement of operations, September 24, 1997
(f) Commencement of operations, October 9, 1997
(g) Commencement of operations, October 24, 1997
</TABLE>
See accompanying notes.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENT OF OPERATIONS
For the year ended December 31, 1997, 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 $163 $2,740 $5,106
Capital gains distributions 1,877 2,326 7,461
________________________________
TOTAL INVESTMENT INCOME 2,040 5,066 12,567
Expenses:
Mortality and expense risk and other charges (809) (710) (1,632)
Annual administrative charges (37) (31) (75)
Minimum death benefit guarantee charges (2) (3) (3)
Contingent deferred sales charges (40) (41) (80)
Other contract charges (3) (3) (5)
Amortization of deferred charges related to:
Deferred sales load (662) (380) (1,145)
Premium taxes (19) (7) (30)
________________________________
TOTAL EXPENSES BEFORE WAIVER (1,572) (1,175) (2,970)
Fees waived by Golden American 22 10 35
________________________________
NET EXPENSES (1,550) (1,165) (2,935)
________________________________
NET INVESTMENT INCOME (LOSS) 490 3,901 9,632
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss) on investments 556 2,621 2,407
Net unrealized appreciation
(depreciation) of investments 1,550 5,391 5,898
________________________________
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $2,596 $11,913 $17,937
================================
<FN>
(a) Commencement of operations, February 3, 1997
(b) Commencement of operations, February 4, 1997
(c) Commencement of operations, August 26, 1997
(d) Commencement of operations, September 18, 1997
(e) Commencement of operations, September 24, 1997
(f) Commencement of operations, October 9, 1997
(g) Commencement of operations, October 24, 1997
</TABLE>
See accompanying notes.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENT OF OPERATIONS
For the year ended December 31, 1997, 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 $18,237 $5,745 $1,396
Capital gains distributions 8,909 11,398 3,628
________________________________
TOTAL INVESTMENT INCOME 27,146 17,143 5,024
Expenses:
Mortality and expense risk and other charges (2,812) (1,850) (2,007)
Annual administrative charges (140) (85) (97)
Minimum death benefit guarantee charges (13) (2) (3)
Contingent deferred sales charges (137) (82) (145)
Other contract charges (11) (8) (10)
Amortization of deferred charges related to:
Deferred sales load (2,613) (1,298) (1,052)
Premium taxes (58) (43) (17)
________________________________
TOTAL EXPENSES BEFORE WAIVER (5,784) (3,368) (3,331)
Fees waived by Golden American 57 44 33
________________________________
NET EXPENSES (5,727) (3,324) (3,298)
________________________________
NET INVESTMENT INCOME (LOSS) 21,419 13,819 1,726
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss) on investments 5,773 8,242 3,602
Net unrealized appreciation
(depreciation) of investments 9,866 16,323 33,738
________________________________
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $37,058 $38,384 $39,066
================================
<FN>
(a) Commencement of operations, February 3, 1997
(b) Commencement of operations, February 4, 1997
(c) Commencement of operations, August 26, 1997
(d) Commencement of operations, September 18, 1997
(e) Commencement of operations, September 24, 1997
(f) Commencement of operations, October 9, 1997
(g) Commencement of operations, October 24, 1997
</TABLE>
See accompanying notes.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENT OF OPERATIONS
For the year ended December 31, 1997, 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 $42 $138 $5,449
Capital gains distributions -- 329 1,347
________________________________
TOTAL INVESTMENT INCOME 42 467 6,796
Expenses:
Mortality and expense risk and other charges (470) -- (746)
Annual administrative charges (19) (2) (36)
Minimum death benefit guarantee charges (2) -- (1)
Contingent deferred sales charges (31) -- (54)
Other contract charges (2) -- (2)
Amortization of deferred charges related to:
Deferred sales load (346) (42) (266)
Premium taxes (4) -- (3)
________________________________
TOTAL EXPENSES BEFORE WAIVER (874) (44) (1,108)
Fees waived by Golden American 6 1 8
________________________________
NET EXPENSES (868) (43) (1,100)
________________________________
NET INVESTMENT INCOME (LOSS) (826) 424 5,696
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss) on investments (1,134) 238 898
Net unrealized appreciation
(depreciation) of investments (2,698) 1,127 5,129
________________________________
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ($4,658) $1,789 $11,723
================================
<FN>
(a) Commencement of operations, February 3, 1997
(b) Commencement of operations, February 4, 1997
(c) Commencement of operations, August 26, 1997
(d) Commencement of operations, September 18, 1997
(e) Commencement of operations, September 24, 1997
(f) Commencement of operations, October 9, 1997
(g) Commencement of operations, October 24, 1997
</TABLE>
See accompanying notes.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENT OF OPERATIONS
For the year ended December 31, 1997, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Strategic Small Managed
Equity Cap Global
Division Division Division
_________________________________
<S> <C> <C> <C>
INVESTMENT INCOME (LOSS)
Income:
Dividends $2,496 -- $8,296
Capital gains distributions 58 -- 394
_________________________________
TOTAL INVESTMENT INCOME 2,554 -- 8,690
Expenses:
Mortality and expense risk and other charges (512) ($556) (1,151)
Annual administrative charges (20) (26) (47)
Minimum death benefit guarantee charges (1) (1) (1)
Contingent deferred sales charges (150) (42) (69)
Other contract charges (2) (3) (5)
Amortization of deferred charges related to:
Deferred sales load (123) (130) (779)
Premium taxes (2) (1) (15)
_________________________________
TOTAL EXPENSES BEFORE WAIVER (810) (759) (2,067)
Fees waived by Golden American 8 5 17
_________________________________
NET EXPENSES (802) (754) (2,050)
_________________________________
NET INVESTMENT INCOME (LOSS) 1,752 (754) 6,640
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss) on investments 1,180 (174) 2,841
Net unrealized appreciation
(depreciation) of investments 4,847 4,543 (883)
_________________________________
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $7,779 $3,615 $8,598
=================================
<FN>
(a) Commencement of operations, February 3, 1997
(b) Commencement of operations, February 4, 1997
(c) Commencement of operations, August 26, 1997
(d) Commencement of operations, September 18, 1997
(e) Commencement of operations, September 24, 1997
(f) Commencement of operations, October 9, 1997
(g) Commencement of operations, October 24, 1997
</TABLE>
See accompanying notes.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENT OF OPERATIONS
For the year ended December 31, 1997, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Growth & Research
OTC Income Division
Division Division (b)
________________________________
<S> <C> <C> <C>
INVESTMENT INCOME (LOSS)
Income:
Dividends $809 $3,477 $681
Capital gains distributions 9 6 327
________________________________
TOTAL INVESTMENT INCOME 818 3,483 1,008
Expenses:
Mortality and expense risk and other charges (146) (298) (156)
Annual administrative charges (10) (23) (17)
Minimum death benefit guarantee charges -- -- --
Contingent deferred sales charges (14) (29) (12)
Other contract charges (2) (1) (2)
Amortization of deferred charges related to:
Deferred sales load (35) (76) (21)
Premium taxes -- (2) --
________________________________
TOTAL EXPENSES BEFORE WAIVER (207) (429) (208)
Fees waived by Golden American 1 3 1
________________________________
NET EXPENSES (206) (426) (207)
________________________________
NET INVESTMENT INCOME (LOSS) 612 3,057 801
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss) on investments 57 177 19
Net unrealized appreciation
(depreciation) of investments 912 980 388
________________________________
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $1,581 $4,214 $1,208
================================
<FN>
(a) Commencement of operations, February 3, 1997
(b) Commencement of operations, February 4, 1997
(c) Commencement of operations, August 26, 1997
(d) Commencement of operations, September 18, 1997
(e) Commencement of operations, September 24, 1997
(f) Commencement of operations, October 9, 1997
(g) Commencement of operations, October 24, 1997
</TABLE>
See accompanying notes.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENT OF OPERATIONS
For the year ended December 31, 1997, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Inter-
national
Total Value + Fixed
Return Growth Income
Division Division Division
(a) (b) (g)
________________________________
<S> <C> <C> <C>
INVESTMENT INCOME (LOSS)
Income:
Dividends $589 $3 $8
Capital gains distributions 240 -- 1
________________________________
TOTAL INVESTMENT INCOME 829 3 9
Expenses:
Mortality and expense risk and other charges (104) (98) --
Annual administrative charges (12) (11) --
Minimum death benefit guarantee charges -- (1) --
Contingent deferred sales charges (3) (5) --
Other contract charges (1) -- --
Amortization of deferred charges related to:
Deferred sales load (22) (25) --
Premium taxes -- -- --
________________________________
TOTAL EXPENSES BEFORE WAIVER (142) (140) --
Fees waived by Golden American -- -- --
________________________________
NET EXPENSES (142) (140) --
________________________________
NET INVESTMENT INCOME (LOSS) 687 (137) 9
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss) on investments 18 515 (1)
Net unrealized appreciation
(depreciation) of investments 412 (1,430) (10)
________________________________
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $1,117 ($1,052) ($2)
================================
<FN>
(a) Commencement of operations, February 3, 1997
(b) Commencement of operations, February 4, 1997
(c) Commencement of operations, August 26, 1997
(d) Commencement of operations, September 18, 1997
(e) Commencement of operations, September 24, 1997
(f) Commencement of operations, October 9, 1997
(g) Commencement of operations, October 24, 1997
</TABLE>
See accompanying notes.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENT OF OPERATIONS
For the year ended December 31, 1997, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Smith Smith
Barney Barney
Appre- High Income and
ciation Income Growth
Division Division Division
(c) (c) (c)
________________________________
<S> <C> <C> <C>
INVESTMENT INCOME (LOSS)
Income:
Dividends $3 -- --
Capital gains distributions 13 -- --
________________________________
TOTAL INVESTMENT INCOME 16 -- --
Expenses:
Mortality and expense risk and other charges (1) ($1) ($1)
Annual administrative charges -- -- --
Minimum death benefit guarantee charges -- -- --
Contingent deferred sales charges -- -- --
Other contract charges -- -- --
Amortization of deferred charges related to:
Deferred sales load -- -- --
Premium taxes -- -- --
________________________________
TOTAL EXPENSES BEFORE WAIVER (1) (1) (1)
Fees waived by Golden American -- -- --
________________________________
NET EXPENSES (1) (1) (1)
________________________________
NET INVESTMENT INCOME (LOSS) 15 (1) (1)
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss) on investments 1 1 --
Net unrealized appreciation
(depreciation) of investments (9) 3 7
________________________________
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $7 $3 $6
================================
<FN>
(a) Commencement of operations, February 3, 1997
(b) Commencement of operations, February 4, 1997
(c) Commencement of operations, August 26, 1997
(d) Commencement of operations, September 18, 1997
(e) Commencement of operations, September 24, 1997
(f) Commencement of operations, October 9, 1997
(g) Commencement of operations, October 24, 1997
</TABLE>
See accompanying notes.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENT OF OPERATIONS
For the year ended December 31, 1997, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Smith
Barney Smith
Inter- Barney Inter-
national Money national
Equity Market Equity
Division Division Division
(d) (e) (f)
________________________________
<S> <C> <C> <C>
INVESTMENT INCOME (LOSS)
Income:
Dividends -- $1 $43
Capital gains distributions -- -- 41
________________________________
TOTAL INVESTMENT INCOME -- 1 84
Expenses:
Mortality and expense risk and other charges -- (1) (2)
Annual administrative charges -- -- (1)
Minimum death benefit guarantee charges -- -- --
Contingent deferred sales charges -- -- --
Other contract charges -- -- --
Amortization of deferred charges related to:
Deferred sales load -- -- --
Premium taxes -- -- --
________________________________
TOTAL EXPENSES BEFORE WAIVER -- (1) (3)
Fees waived by Golden American -- -- --
________________________________
NET EXPENSES -- (1) (3)
________________________________
NET INVESTMENT INCOME (LOSS) -- -- 81
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss) on investments -- -- (12)
Net unrealized appreciation
(depreciation) of investments ($5) -- (93)
________________________________
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ($5) $-- ($24)
================================
<FN>
(a) Commencement of operations, February 3, 1997
(b) Commencement of operations, February 4, 1997
(c) Commencement of operations, August 26, 1997
(d) Commencement of operations, September 18, 1997
(e) Commencement of operations, September 24, 1997
(f) Commencement of operations, October 9, 1997
(g) Commencement of operations, October 24, 1997
</TABLE>
See accompanying notes.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENT OF OPERATIONS
For the year ended December 31, 1997, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Combined
__________
<S> <C>
INVESTMENT INCOME (LOSS)
Income:
Dividends $66,111
Capital gains distributions 43,287
__________
TOTAL INVESTMENT INCOME 109,398
Expenses:
Mortality and expense risk and other charges (15,677)
Annual administrative charges (754)
Minimum death benefit guarantee charges (44)
Contingent deferred sales charges (1,269)
Other contract charges (70)
Amortization of deferred charges related to:
Deferred sales load (10,360)
Premium taxes (219)
__________
TOTAL EXPENSES BEFORE WAIVER (28,393)
Fees waived by Golden American 280
__________
NET EXPENSES (28,113)
__________
NET INVESTMENT INCOME (LOSS) 81,285
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss) on investments 31,070
Net unrealized appreciation
(depreciation) of investments 75,558
__________
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $187,913
==========
<FN>
(a) Commencement of operations, February 3, 1997
(b) Commencement of operations, February 4, 1997
(c) Commencement of operations, August 26, 1997
(d) Commencement of operations, September 18, 1997
(e) Commencement of operations, September 24, 1997
(f) Commencement of operations, October 9, 1997
(g) Commencement of operations, October 24, 1997
</TABLE>
See accompanying notes.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1996 and 1997, Except as Noted
(Dollars in thousands)
<TABLE>
<CAPTION>
Liquid
Asset
Division
__________
<S> <C>
NET ASSETS AT JANUARY 1, 1996 $36,491
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>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1996 and 1997, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Liquid
Asset
Division
__________
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) $970
Net realized gain (loss) on investments --
Net unrealized appreciation (depreciation) of investments --
__________
Net increase (decrease) in net assets resulting from operations 970
Changes from principal transactions:
Purchase payments 29,455
Contract distributions and terminations (18,096)
Transfer payments from (to) Fixed Accounts and other Divisions 7,253
Addition to (reallocation from) assets retained in the Account
by Golden American Life Insurance Company 196
__________
Increase (decrease) in net assets derived from principal
transactions 18,808
__________
Total increase (decrease) 19,778
__________
NET ASSETS AT DECEMBER 31, 1997 $57,254
==========
<FN>
(a) Commencement of operations, January 3, 1996
(b) Commencement of operations, September 3, 1996
(c) Commencement of operations, September 23, 1996
(d) Commencement of operations, February 3, 1997
(e) Commencement of operations, February 4, 1997
(f) Commencement of operations, August 26, 1997
(g) Commencement of operations, September 18, 1997
(h) Commencement of operations, September 24, 1997
(i) Commencement of operations, October 9, 1997
(j) Commencement of operations, October 24, 1997
</TABLE>
See accompanying notes.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1996 and 1997, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Limited
Maturity
Bond
Division
__________
<S> <C>
NET ASSETS AT JANUARY 1, 1996 $67,837
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>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1996 and 1997, 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) $2,703
Net realized gain (loss) on investments 139
Net unrealized appreciation (depreciation) of investments (690)
__________
Net increase (decrease) in net assets resulting from operations 2,152
Changes from principal transactions:
Purchase payments 5,847
Contract distributions and terminations (8,648)
Transfer payments from (to) Fixed Accounts and other Divisions (1,150)
Addition to (reallocation from) assets retained in the Account
by Golden American Life Insurance Company (68)
__________
Increase (decrease) in net assets derived from principal
transactions (4,019)
__________
Total increase (decrease) (1,867)
__________
NET ASSETS AT DECEMBER 31, 1997 $52,467
==========
<FN>
(a) Commencement of operations, January 3, 1996
(b) Commencement of operations, September 3, 1996
(c) Commencement of operations, September 23, 1996
(d) Commencement of operations, February 3, 1997
(e) Commencement of operations, February 4, 1997
(f) Commencement of operations, August 26, 1997
(g) Commencement of operations, September 18, 1997
(h) Commencement of operations, September 24, 1997
(i) Commencement of operations, October 9, 1997
(j) Commencement of operations, October 24, 1997
</TABLE>
See accompanying notes.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1996 and 1997, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Hard
Assets
Division
__________
<S> <C>
NET ASSETS AT JANUARY 1, 1996 $26,990
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>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1996 and 1997, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Hard
Assets
Division
__________
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) $8,570
Net realized gain (loss) on investments 3,106
Net unrealized appreciation (depreciation) of investments (9,738)
__________
Net increase (decrease) in net assets resulting from operations 1,938
Changes from principal transactions:
Purchase payments 6,936
Contract distributions and terminations (5,699)
Transfer payments from (to) Fixed Accounts and other Divisions (886)
Addition to (reallocation from) assets retained in the Account
by Golden American Life Insurance Company (87)
__________
Increase (decrease) in net assets derived from principal
transactions 264
__________
Total increase (decrease) 2,202
__________
NET ASSETS AT DECEMBER 31, 1997 $45,503
==========
<FN>
(a) Commencement of operations, January 3, 1996
(b) Commencement of operations, September 3, 1996
(c) Commencement of operations, September 23, 1996
(d) Commencement of operations, February 3, 1997
(e) Commencement of operations, February 4, 1997
(f) Commencement of operations, August 26, 1997
(g) Commencement of operations, September 18, 1997
(h) Commencement of operations, September 24, 1997
(i) Commencement of operations, October 9, 1997
(j) Commencement of operations, October 24, 1997
</TABLE>
See accompanying notes.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1996 and 1997, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
All-Growth
Division
__________
<S> <C>
NET ASSETS AT JANUARY 1, 1996 $91,956
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>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1996 and 1997, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
All-Growth
Division
__________
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) $490
Net realized gain (loss) on investments 556
Net unrealized appreciation (depreciation) of investments 1,550
__________
Net increase (decrease) in net assets resulting from operations 2,596
Changes from principal transactions:
Purchase payments 7,441
Contract distributions and terminations (10,832)
Transfer payments from (to) Fixed Accounts and other Divisions (4,053)
Addition to (rellocation from) assets retained in the Account
by Golden American Life Insurance Company (256)
__________
Increase (decrease) in net assets derived from principal
transactions (7,700)
__________
Total increase (decrease) (5,104)
__________
NET ASSETS AT DECEMBER 31, 1997 $71,738
==========
<FN>
(a) Commencement of operations, January 3, 1996
(b) Commencement of operations, September 3, 1996
(c) Commencement of operations, September 23, 1996
(d) Commencement of operations, February 3, 1997
(e) Commencement of operations, February 4, 1997
(f) Commencement of operations, August 26, 1997
(g) Commencement of operations, September 18, 1997
(h) Commencement of operations, September 24, 1997
(i) Commencement of operations, October 9, 1997
(j) Commencement of operations, October 24, 1997
</TABLE>
See accompanying notes.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1996 and 1997, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Real
Estate
Division
__________
<S> <C>
NET ASSETS AT JANUARY 1, 1996 $34,813
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>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1996 and 1997, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Real
Estate
Division
__________
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) $3,901
Net realized gain (loss) on investments 2,621
Net unrealized appreciation (depreciation) of investments 5,391
__________
Net increase (decrease) in net assets resulting from operations 11,913
Changes from principal transactions:
Purchase payments 14,095
Contract distributions and terminations (5,798)
Transfer payments from (to) Fixed Accounts and other Divisions 3,766
Addition to (reallocation from) assets retained in the Account
by Golden American Life Insurance Company 43
__________
Increase (decrease) in net assets derived from principal
transactions 12,106
__________
Total increase (decrease) 24,019
__________
NET ASSETS AT DECEMBER 31, 1997 $74,700
==========
<FN>
(a) Commencement of operations, January 3, 1996
(b) Commencement of operations, September 3, 1996
(c) Commencement of operations, September 23, 1996
(d) Commencement of operations, February 3, 1997
(e) Commencement of operations, February 4, 1997
(f) Commencement of operations, August 26, 1997
(g) Commencement of operations, September 18, 1997
(h) Commencement of operations, September 24, 1997
(i) Commencement of operations, October 9, 1997
(j) Commencement of operations, October 24, 1997
</TABLE>
See accompanying notes.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1996 and 1997, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Fully
Managed
Division
__________
<S> <C>
NET ASSETS AT JANUARY 1, 1996 $117,327
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>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1996 and 1997, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Fully
Managed
Division
__________
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) $9,632
Net realized gain (loss) on investments 2,407
Net unrealized appreciation (depreciation) of investments 5,898
__________
Net increase (decrease) in net assets resulting from operations 17,937
Changes from principal transactions:
Purchase payments 19,633
Contract distributions and terminations (17,687)
Transfer payments from (to) Fixed Accounts and other Divisions 4,389
Addition to (reallocation from) assets retained in the Account
by Golden American Life Insurance Company (53)
__________
Increase (decrease) in net assets derived from principal
transactions 6,282
__________
Total increase (decrease) 24,219
__________
NET ASSETS AT DECEMBER 31, 1997 $158,650
==========
<FN>
(a) Commencement of operations, January 3, 1996
(b) Commencement of operations, September 3, 1996
(c) Commencement of operations, September 23, 1996
(d) Commencement of operations, February 3, 1997
(e) Commencement of operations, February 4, 1997
(f) Commencement of operations, August 26, 1997
(g) Commencement of operations, September 18, 1997
(h) Commencement of operations, September 24, 1997
(i) Commencement of operations, October 9, 1997
(j) Commencement of operations, October 24, 1997
</TABLE>
See accompanying notes.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1996 and 1997, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Multiple
Allocation
Division
__________
<S> <C>
NET ASSETS AT JANUARY 1, 1996 $305,502
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>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1996 and 1997, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Multiple
Allocation
Division
__________
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) $21,419
Net realized gain (loss) on investments 5,773
Net unrealized appreciation (depreciation) of investments 9,866
__________
Net increase (decrease) in net assets resulting from operations 37,058
Changes from principal transactions:
Purchase payments 9,404
Contract distributions and terminations (45,162)
Transfer payments from (to) Fixed Accounts and other Divisions (9,649)
Addition to (reallocation from) assets retained in the Account
by Golden American Life Insurance Company (209)
__________
Increase (decrease) in net assets derived from principal
transactions (45,616)
__________
Total increase (decrease) (8,558)
__________
NET ASSETS AT DECEMBER 31, 1997 $261,869
==========
<FN>
(a) Commencement of operations, January 3, 1996
(b) Commencement of operations, September 3, 1996
(c) Commencement of operations, September 23, 1996
(d) Commencement of operations, February 3, 1997
(e) Commencement of operations, February 4, 1997
(f) Commencement of operations, August 26, 1997
(g) Commencement of operations, September 18, 1997
(h) Commencement of operations, September 24, 1997
(i) Commencement of operations, October 9, 1997
(j) Commencement of operations, October 24, 1997
</TABLE>
See accompanying notes.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1996 and 1997, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Capital
Appreciation
Division
____________
<S> <C>
NET ASSETS AT JANUARY 1, 1996 $121,049
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>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1996 and 1997, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Capital
Appreciation
Division
____________
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) $13,819
Net realized gain (loss) on investments 8,242
Net unrealized appreciation (depreciation) of investments 16,323
____________
Net increase (decrease) in net assets resulting from operations 38,384
Changes from principal transactions:
Purchase payments 17,440
Contract distributions and terminations (20,143)
Transfer payments from (to) Fixed Accounts and other Divisions 5,915
Addition to (reallocation from) assets retained in the Account
by Golden American Life Insurance Company 232
____________
Increase (decrease) in net assets derived from principal
transactions 3,444
____________
Total increase (decrease) 41,828
____________
NET ASSETS AT DECEMBER 31, 1997 $187,817
============
<FN>
(a) Commencement of operations, January 3, 1996
(b) Commencement of operations, September 3, 1996
(c) Commencement of operations, September 23, 1996
(d) Commencement of operations, February 3, 1997
(e) Commencement of operations, February 4, 1997
(f) Commencement of operations, August 26, 1997
(g) Commencement of operations, September 18, 1997
(h) Commencement of operations, September 24, 1997
(i) Commencement of operations, October 9, 1997
(j) Commencement of operations, October 24, 1997
</TABLE>
See accompanying notes.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1996 and 1997, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Rising
Dividends
Division
__________
<S> <C>
NET ASSETS AT JANUARY 1, 1996 $80,342
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>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1996 and 1997, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Rising
Dividends
Division
__________
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) $1,726
Net realized gain (loss) on investments 3,602
Net unrealized appreciation (depreciation) of investments 33,738
__________
Net increase (decrease) in net assets resulting from operations 39,066
Changes from principal transactions:
Purchase payments 45,995
Contract distributions and terminations (18,620)
Transfer payments from (to) Fixed Accounts and other Divisions 25,458
Addition to (reallocation from) assets retained in the Account
by Golden American Life Insurance Company 471
__________
Increase (decrease) in net assets derived from principal
transactions 53,304
__________
Total increase (decrease) 92,370
__________
NET ASSETS AT DECEMBER 31, 1997 $215,943
==========
<FN>
(a) Commencement of operations, January 3, 1996
(b) Commencement of operations, September 3, 1996
(c) Commencement of operations, September 23, 1996
(d) Commencement of operations, February 3, 1997
(e) Commencement of operations, February 4, 1997
(f) Commencement of operations, August 26, 1997
(g) Commencement of operations, September 18, 1997
(h) Commencement of operations, September 24, 1997
(i) Commencement of operations, October 9, 1997
(j) Commencement of operations, October 24, 1997
</TABLE>
See accompanying notes.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1996 and 1997, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Emerging
Markets
Division
__________
<S> <C>
NET ASSETS AT JANUARY 1, 1996 $36,887
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>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1996 and 1997, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Emerging
Markets
Division
__________
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) ($826)
Net realized gain (loss) on investments (1,134)
Net unrealized appreciation (depreciation) of investments (2,698)
__________
Net increase (decrease) in net assets resulting from operations (4,658)
Changes from principal transactions:
Purchase payments 5,427
Contract distributions and terminations (5,304)
Transfer payments from (to) Fixed Accounts and other Divisions 2,002
Addition to (reallocation from) assets retained in the Account
by Golden American Life Insurance Company (119)
__________
Increase (decrease) in net assets derived from principal
transactions 2,006
__________
Total increase (decrease) (2,652)
__________
NET ASSETS AT DECEMBER 31, 1997 $34,501
==========
<FN>
(a) Commencement of operations, January 3, 1996
(b) Commencement of operations, September 3, 1996
(c) Commencement of operations, September 23, 1996
(d) Commencement of operations, February 3, 1997
(e) Commencement of operations, February 4, 1997
(f) Commencement of operations, August 26, 1997
(g) Commencement of operations, September 18, 1997
(h) Commencement of operations, September 24, 1997
(i) Commencement of operations, October 9, 1997
(j) Commencement of operations, October 24, 1997
</TABLE>
See accompanying notes.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1996 and 1997, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Market
Manager
Division
__________
<S> <C>
NET ASSETS AT JANUARY 1, 1996 $5,206
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>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1996 and 1997, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Market
Manager
Division
__________
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) $424
Net realized gain (loss) on investments 238
Net unrealized appreciation (depreciation) of investments 1,127
__________
Net increase (decrease) in net assets resulting from operations 1,789
Changes from principal transactions:
Purchase payments (59)
Contract distributions and terminations (189)
Transfer payments from (to) Fixed Accounts and other Divisions (303)
Addition to (reallocation from) assets retained in the Account
by Golden American Life Insurance Company (1)
__________
Increase (decrease) in net assets derived from principal
transactions (552)
__________
Total increase (decrease) 1,237
__________
NET ASSETS AT DECEMBER 31, 1997 $6,716
==========
<FN>
(a) Commencement of operations, January 3, 1996
(b) Commencement of operations, September 3, 1996
(c) Commencement of operations, September 23, 1996
(d) Commencement of operations, February 3, 1997
(e) Commencement of operations, February 4, 1997
(f) Commencement of operations, August 26, 1997
(g) Commencement of operations, September 18, 1997
(h) Commencement of operations, September 24, 1997
(i) Commencement of operations, October 9, 1997
(j) Commencement of operations, October 24, 1997
</TABLE>
See accompanying notes.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1996 and 1997, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Value
Equity
Division
__________
<S> <C>
NET ASSETS AT JANUARY 1, 1996 $28,447
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
</TABLE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1996 and 1997, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Value
Equity
Division
__________
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) $5,696
Net realized gain (loss) on investments 898
Net unrealized appreciation (depreciation) of investments 5,129
__________
Net increase (decrease) in net assets resulting from operations 11,723
Changes from principal transactions:
Purchase payments 16,881
Contract distributions and terminations (5,181)
Transfer payments from (to) Fixed Accounts and other Divisions 10,573
Addition to (reallocation from) assets retained in the Account
by Golden American Life Insurance Company 168
__________
Increase (decrease) in net assets derived from principal
transactions 22,441
__________
Total increase (decrease) 34,164
__________
NET ASSETS AT DECEMBER 31, 1997 $77,025
==========
<FN>
(a) Commencement of operations, January 3, 1996
(b) Commencement of operations, September 3, 1996
(c) Commencement of operations, September 23, 1996
(d) Commencement of operations, February 3, 1997
(e) Commencement of operations, February 4, 1997
(f) Commencement of operations, August 26, 1997
(g) Commencement of operations, September 18, 1997
(h) Commencement of operations, September 24, 1997
(i) Commencement of operations, October 9, 1997
(j) Commencement of operations, October 24, 1997
</TABLE>
See accompanying notes.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1996 and 1997, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Strategic
Equity
Division
__________
<S> <C>
NET ASSETS AT JANUARY 1, 1996 $8,031
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
</TABLE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1996 and 1997, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Strategic
Equity
Division
__________
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) $1,752
Net realized gain (loss) on investments 1,180
Net unrealized appreciation (depreciation) of investments 4,847
__________
Net increase (decrease) in net assets resulting from operations 7,779
Changes from principal transactions:
Purchase payments 9,853
Contract distributions and terminations (4,107)
Transfer payments from (to) Fixed Accounts and other Divisions 6,920
Addition to (reallocation from) assets retained in the Account
by Golden American Life Insurance Company 134
__________
Increase (decrease) in net assets derived from principal
transactions 12,800
__________
Total increase (decrease) 20,579
__________
NET ASSETS AT DECEMBER 31, 1997 $50,437
==========
<FN>
(a) Commencement of operations, January 3, 1996
(b) Commencement of operations, September 3, 1996
(c) Commencement of operations, September 23, 1996
(d) Commencement of operations, February 3, 1997
(e) Commencement of operations, February 4, 1997
(f) Commencement of operations, August 26, 1997
(g) Commencement of operations, September 18, 1997
(h) Commencement of operations, September 24, 1997
(i) Commencement of operations, October 9, 1997
(j) Commencement of operations, October 24, 1997
</TABLE>
See accompanying notes.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1996 and 1997, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Small Cap
Division
(a)
__________
<S> <C>
NET ASSETS AT JANUARY 1, 1996 --
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
</TABLE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1996 and 1997, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Small Cap
Division
(a)
__________
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) ($754)
Net realized gain (loss) on investments (174)
Net unrealized appreciation (depreciation) of investments 4,543
__________
Net increase (decrease) in net assets resulting from operations 3,615
Changes from principal transactions:
Purchase payments 13,691
Contract distributions and terminations (3,143)
Transfer payments from (to) Fixed Accounts and other Divisions 5,487
Addition to (reallocation from) assets retained in the Account
by Golden American Life Insurance Company 19
__________
Increase (decrease) in net assets derived from principal
transactions 16,054
__________
Total increase (decrease) 19,669
__________
NET ASSETS AT DECEMBER 31, 1997 $52,725
==========
<FN>
(a) Commencement of operations, January 3, 1996
(b) Commencement of operations, September 3, 1996
(c) Commencement of operations, September 23, 1996
(d) Commencement of operations, February 3, 1997
(e) Commencement of operations, February 4, 1997
(f) Commencement of operations, August 26, 1997
(g) Commencement of operations, September 18, 1997
(h) Commencement of operations, September 24, 1997
(i) Commencement of operations, October 9, 1997
(j) Commencement of operations, October 24, 1997
</TABLE>
See accompanying notes.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1996 and 1997, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Managed
Global
Division
(b)
__________
<S> <C>
NET ASSETS AT JANUARY 1, 1996 --
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
</TABLE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1996 and 1997, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Managed
Global
Division
(b)
__________
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) $6,640
Net realized gain (loss) on investments 2,841
Net unrealized appreciation (depreciation) of investments (883)
__________
Net increase (decrease) in net assets resulting from operations 8,598
Changes from principal transactions:
Purchase payments 17,472
Contract distributions and terminations (12,081)
Transfer payments from (to) Fixed Accounts and other Divisions 4,438
Addition to (reallocation from) assets retained in the Account
by Golden American Life Insurance Company (12)
__________
Increase (decrease) in net assets derived from principal
transactions 9,817
__________
Total increase (decrease) 18,415
__________
NET ASSETS AT DECEMBER 31, 1997 $104,681
==========
<FN>
(a) Commencement of operations, January 3, 1996
(b) Commencement of operations, September 3, 1996
(c) Commencement of operations, September 23, 1996
(d) Commencement of operations, February 3, 1997
(e) Commencement of operations, February 4, 1997
(f) Commencement of operations, August 26, 1997
(g) Commencement of operations, September 18, 1997
(h) Commencement of operations, September 24, 1997
(i) Commencement of operations, October 9, 1997
(j) Commencement of operations, October 24, 1997
</TABLE>
See accompanying notes.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1996 and 1997, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
OTC
Division
(c)
__________
<S> <C>
NET ASSETS AT JANUARY 1, 1996 --
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
</TABLE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1996 and 1997, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
OTC
Division
(c)
__________
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) $612
Net realized gain (loss) on investments 57
Net unrealized appreciation (depreciation) of investments 912
__________
Net increase (decrease) in net assets resulting from operations 1,581
Changes from principal transactions:
Purchase payments 8,980
Contract distributions and terminations (580)
Transfer payments from (to) Fixed Accounts and other Divisions 5,763
Addition to (reallocation from) assets retained in the Account
by Golden American Life Insurance Company 46
__________
Increase (decrease) in net assets derived from principal
transactions 14,209
__________
Total increase (decrease) 15,790
__________
NET ASSETS AT DECEMBER 31, 1997 $20,361
==========
<FN>
(a) Commencement of operations, January 3, 1996
(b) Commencement of operations, September 3, 1996
(c) Commencement of operations, September 23, 1996
(d) Commencement of operations, February 3, 1997
(e) Commencement of operations, February 4, 1997
(f) Commencement of operations, August 26, 1997
(g) Commencement of operations, September 18, 1997
(h) Commencement of operations, September 24, 1997
(i) Commencement of operations, October 9, 1997
(j) Commencement of operations, October 24, 1997
</TABLE>
See accompanying notes.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1996 and 1997, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Growth &
Income
Division
(c)
__________
<S> <C>
NET ASSETS AT JANUARY 1, 1996 --
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
</TABLE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1996 and 1997, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Growth &
Income
Division
(c)
__________
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) $3,057
Net realized gain (loss) on investments 177
Net unrealized appreciation (depreciation) of investments 980
__________
Net increase (decrease) in net assets resulting from operations 4,214
Changes from principal transactions:
Purchase payments 22,706
Contract distributions and terminations (1,861)
Transfer payments from (to) Fixed Accounts and other Divisions 11,481
Addition to (reallocation from) assets retained in the Account
by Golden American Life Insurance Company 107
__________
Increase (decrease) in net assets derived from principal
transactions 32,433
__________
Total increase (decrease) 36,647
__________
NET ASSETS AT DECEMBER 31, 1997 $44,922
==========
<FN>
(a) Commencement of operations, January 3, 1996
(b) Commencement of operations, September 3, 1996
(c) Commencement of operations, September 23, 1996
(d) Commencement of operations, February 3, 1997
(e) Commencement of operations, February 4, 1997
(f) Commencement of operations, August 26, 1997
(g) Commencement of operations, September 18, 1997
(h) Commencement of operations, September 24, 1997
(i) Commencement of operations, October 9, 1997
(j) Commencement of operations, October 24, 1997
</TABLE>
See accompanying notes.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1996 and 1997, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Research
Division
(e)
__________
<S> <C>
NET ASSETS AT JANUARY 1, 1996 --
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) --
Net realized gain (loss) on investments --
Net unrealized appreciation (depreciation) 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, 1996 --
</TABLE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1996 and 1997, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Research
Division
(e)
__________
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) $801
Net realized gain (loss) on investments 19
Net unrealized appreciation (depreciation) of investments 388
__________
Net increase (decrease) in net assets resulting from operations 1,208
Changes from principal transactions:
Purchase payments 19,514
Contract distributions and terminations (534)
Transfer payments from (to) Fixed Accounts and other Divisions 14,044
Addition to (reallocation from) assets retained in the Account
by Golden American Life Insurance Company 170
__________
Increase (decrease) in net assets derived from principal
transactions 33,194
__________
Total increase (decrease) 34,402
__________
NET ASSETS AT DECEMBER 31, 1997 $34,402
==========
<FN>
(a) Commencement of operations, January 3, 1996
(b) Commencement of operations, September 3, 1996
(c) Commencement of operations, September 23, 1996
(d) Commencement of operations, February 3, 1997
(e) Commencement of operations, February 4, 1997
(f) Commencement of operations, August 26, 1997
(g) Commencement of operations, September 18, 1997
(h) Commencement of operations, September 24, 1997
(i) Commencement of operations, October 9, 1997
(j) Commencement of operations, October 24, 1997
</TABLE>
See accompanying notes.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1996 and 1997, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Total
Return
Division
(d)
__________
<S> <C>
NET ASSETS AT JANUARY 1, 1996 --
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) --
Net realized gain (loss) on investments --
Net unrealized appreciation (depreciation) 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, 1996 --
</TABLE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1996 and 1997, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Total
Return
Division
(d)
__________
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) $687
Net realized gain (loss) on investments 18
Net unrealized appreciation (depreciation) of investments 412
__________
Net increase (decrease) in net assets resulting from operations 1,117
Changes from principal transactions:
Purchase payments 15,427
Contract distributions and terminations (602)
Transfer payments from (to) Fixed Accounts and other Divisions 10,193
Addition to (reallocation from) assets retained in the Account
by Golden American Life Insurance Company 96
__________
Increase (decrease) in net assets derived from principal
transactions 25,114
__________
Total increase (decrease) 26,231
__________
NET ASSETS AT DECEMBER 31, 1997 $26,231
==========
<FN>
(a) Commencement of operations, January 3, 1996
(b) Commencement of operations, September 3, 1996
(c) Commencement of operations, September 23, 1996
(d) Commencement of operations, February 3, 1997
(e) Commencement of operations, February 4, 1997
(f) Commencement of operations, August 26, 1997
(g) Commencement of operations, September 18, 1997
(h) Commencement of operations, September 24, 1997
(i) Commencement of operations, October 9, 1997
(j) Commencement of operations, October 24, 1997
</TABLE>
See accompanying notes.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1996 and 1997, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Value +
Growth
Division
(e)
__________
<S> <C>
NET ASSETS AT JANUARY 1, 1996 --
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) --
Net realized gain (loss) on investments --
Net unrealized appreciation (depreciation) 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, 1996 --
</TABLE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1996 and 1997, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Value +
Growth
Division
(e)
__________
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) ($137)
Net realized gain (loss) on investments 515
Net unrealized appreciation (depreciation) of investments (1,430)
__________
Net increase (decrease) in net assets resulting from operations (1,052)
Changes from principal transactions:
Purchase payments 15,158
Contract distributions and terminations (431)
Transfer payments from (to) Fixed Accounts and other Divisions 9,404
Addition to (reallocation from) assets retained in the Account
by Golden American Life Insurance Company 99
__________
Increase (decrease) in net assets derived from principal
transactions 24,230
__________
Total increase (decrease) 23,178
__________
NET ASSETS AT DECEMBER 31, 1997 $23,178
==========
<FN>
(a) Commencement of operations, January 3, 1996
(b) Commencement of operations, September 3, 1996
(c) Commencement of operations, September 23, 1996
(d) Commencement of operations, February 3, 1997
(e) Commencement of operations, February 4, 1997
(f) Commencement of operations, August 26, 1997
(g) Commencement of operations, September 18, 1997
(h) Commencement of operations, September 24, 1997
(i) Commencement of operations, October 9, 1997
(j) Commencement of operations, October 24, 1997
</TABLE>
See accompanying notes.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1996 and 1997, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Inter-
national
Fixed
Income
Division
(j)
__________
<S> <C>
NET ASSETS AT JANUARY 1, 1996 --
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) --
Net realized gain (loss) on investments --
Net unrealized appreciation (depreciation) 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, 1996 --
</TABLE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1996 and 1997, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Inter-
national
Fixed
Income
Division
(j)
__________
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) $9
Net realized gain (loss) on investments (1)
Net unrealized appreciation (depreciation) of investments (10)
__________
Net increase (decrease) in net assets resulting from operations (2)
Changes from principal transactions:
Purchase payments 190
Contract distributions and terminations --
Transfer payments from (to) Fixed Accounts and other Divisions 18
Addition to (reallocation from) assets retained in the Account
by Golden American Life Insurance Company --
__________
Increase (decrease) in net assets derived from principal
transactions 208
__________
Total increase (decrease) 206
__________
NET ASSETS AT DECEMBER 31, 1997 $206
==========
<FN>
(a) Commencement of operations, January 3, 1996
(b) Commencement of operations, September 3, 1996
(c) Commencement of operations, September 23, 1996
(d) Commencement of operations, February 3, 1997
(e) Commencement of operations, February 4, 1997
(f) Commencement of operations, August 26, 1997
(g) Commencement of operations, September 18, 1997
(h) Commencement of operations, September 24, 1997
(i) Commencement of operations, October 9, 1997
(j) Commencement of operations, October 24, 1997
</TABLE>
See accompanying notes.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1996 and 1997, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Appre-
ciation
Division
(f)
__________
<S> <C>
NET ASSETS AT JANUARY 1, 1996 --
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) --
Net realized gain (loss) on investments --
Net unrealized appreciation (depreciation) 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, 1996 --
</TABLE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1996 and 1997, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Appre-
ciation
Division
(f)
__________
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) $15
Net realized gain (loss) on investments 1
Net unrealized appreciation (depreciation) of investments (9)
__________
Net increase (decrease) in net assets resulting from operations 7
Changes from principal transactions:
Purchase payments 256
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 256
__________
Total increase (decrease) 263
__________
NET ASSETS AT DECEMBER 31, 1997 $263
==========
<FN>
(a) Commencement of operations, January 3, 1996
(b) Commencement of operations, September 3, 1996
(c) Commencement of operations, September 23, 1996
(d) Commencement of operations, February 3, 1997
(e) Commencement of operations, February 4, 1997
(f) Commencement of operations, August 26, 1997
(g) Commencement of operations, September 18, 1997
(h) Commencement of operations, September 24, 1997
(i) Commencement of operations, October 9, 1997
(j) Commencement of operations, October 24, 1997
</TABLE>
See accompanying notes.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1996 and 1997, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Smith
Barney
High
Income
Division
(f)
__________
<S> <C>
NET ASSETS AT JANUARY 1, 1996 --
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) --
Net realized gain (loss) on investments --
Net unrealized appreciation (depreciation) 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, 1996 --
</TABLE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1996 and 1997, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Smith
Barney
High
Income
Division
(f)
__________
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) ($1)
Net realized gain (loss) on investments 1
Net unrealized appreciation (depreciation) of investments 3
__________
Net increase (decrease) in net assets resulting from operations 3
Changes from principal transactions:
Purchase payments 206
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 206
__________
Total increase (decrease) 209
__________
NET ASSETS AT DECEMBER 31, 1997 $209
==========
<FN>
(a) Commencement of operations, January 3, 1996
(b) Commencement of operations, September 3, 1996
(c) Commencement of operations, September 23, 1996
(d) Commencement of operations, February 3, 1997
(e) Commencement of operations, February 4, 1997
(f) Commencement of operations, August 26, 1997
(g) Commencement of operations, September 18, 1997
(h) Commencement of operations, September 24, 1997
(i) Commencement of operations, October 9, 1997
(j) Commencement of operations, October 24, 1997
</TABLE>
See accompanying notes.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1996 and 1997, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Smith
Barney
Income and
Growth
Division
(f)
__________
<S> <C>
NET ASSETS AT JANUARY 1, 1996 --
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) --
Net realized gain (loss) on investments --
Net unrealized appreciation (depreciation) 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, 1996 --
</TABLE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1996 and 1997, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Smith
Barney
Income and
Growth
Division
(f)
__________
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) ($1)
Net realized gain (loss) on investments --
Net unrealized appreciation (depreciation) of investments 7
__________
Net increase (decrease) in net assets resulting from operations 6
Changes from principal transactions:
Purchase payments 204
Contract distributions and terminations --
Transfer payments from (to) Fixed Accounts and other Divisions 5
Addition to (reallocation from) assets retained in the Account
by Golden American Life Insurance Company --
__________
Increase (decrease) in net assets derived from principal
transactions 209
__________
Total increase (decrease) 215
__________
NET ASSETS AT DECEMBER 31, 1997 $215
==========
<FN>
(a) Commencement of operations, January 3, 1996
(b) Commencement of operations, September 3, 1996
(c) Commencement of operations, September 23, 1996
(d) Commencement of operations, February 3, 1997
(e) Commencement of operations, February 4, 1997
(f) Commencement of operations, August 26, 1997
(g) Commencement of operations, September 18, 1997
(h) Commencement of operations, September 24, 1997
(i) Commencement of operations, October 9, 1997
(j) Commencement of operations, October 24, 1997
</TABLE>
See accompanying notes.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1996 and 1997, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Smith
Barney
Inter-
national
Equity
Division
(g)
__________
<S> <C>
NET ASSETS AT JANUARY 1, 1996 --
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) --
Net realized gain (loss) on investments --
Net unrealized appreciation (depreciation) 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, 1996 --
</TABLE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1996 and 1997, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Smith
Barney
Inter-
national
Equity
Division
(g)
__________
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) --
Net realized gain (loss) on investments --
Net unrealized appreciation (depreciation) of investments ($5)
__________
Net increase (decrease) in net assets resulting from operations (5)
Changes from principal transactions:
Purchase payments 99
Contract distributions and terminations --
Transfer payments from (to) Fixed Accounts and other Divisions 2
Addition to (reallocation from) assets retained in the Account
by Golden American Life Insurance Company --
__________
Increase (decrease) in net assets derived from principal
transactions 101
__________
Total increase (decrease) 96
__________
NET ASSETS AT DECEMBER 31, 1997 $96
==========
<FN>
(a) Commencement of operations, January 3, 1996
(b) Commencement of operations, September 3, 1996
(c) Commencement of operations, September 23, 1996
(d) Commencement of operations, February 3, 1997
(e) Commencement of operations, February 4, 1997
(f) Commencement of operations, August 26, 1997
(g) Commencement of operations, September 18, 1997
(h) Commencement of operations, September 24, 1997
(i) Commencement of operations, October 9, 1997
(j) Commencement of operations, October 24, 1997
</TABLE>
See accompanying notes.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1996 and 1997, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Smith
Barney
Money
Market
Division
(h)
__________
<S> <C>
NET ASSETS AT JANUARY 1, 1996 --
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) --
Net realized gain (loss) on investments --
Net unrealized appreciation (depreciation) 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, 1996 --
</TABLE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1996 and 1997, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Smith
Barney
Money
Market
Division
(h)
__________
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) --
Net realized gain (loss) on investments --
Net unrealized appreciation (depreciation) of investments --
__________
Net increase (decrease) in net assets resulting from operations --
Changes from principal transactions:
Purchase payments $183
Contract distributions and terminations (1)
Transfer payments from (to) Fixed Accounts and other Divisions (1)
Addition to (reallocation from) assets retained in the Account
by Golden American Life Insurance Company --
__________
Increase (decrease) in net assets derived from principal
transactions 181
__________
Total increase (decrease) 181
__________
NET ASSETS AT DECEMBER 31, 1997 $181
==========
<FN>
(a) Commencement of operations, January 3, 1996
(b) Commencement of operations, September 3, 1996
(c) Commencement of operations, September 23, 1996
(d) Commencement of operations, February 3, 1997
(e) Commencement of operations, February 4, 1997
(f) Commencement of operations, August 26, 1997
(g) Commencement of operations, September 18, 1997
(h) Commencement of operations, September 24, 1997
(i) Commencement of operations, October 9, 1997
(j) Commencement of operations, October 24, 1997
</TABLE>
See accompanying notes.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1996 and 1997, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Inter-
national
Equity
Division
(i)
__________
<S> <C>
NET ASSETS AT JANUARY 1, 1996 --
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) --
Net realized gain (loss) on investments --
Net unrealized appreciation (depreciation) 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, 1996 --
</TABLE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1996 and 1997, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Inter-
national
Equity
Income
Division
(i)
__________
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) $81
Net realized gain (loss) on investments (12)
Net unrealized appreciation (depreciation) of investments (93)
__________
Net increase (decrease) in net assets resulting from operations (24)
Changes from principal transactions:
Purchase payments 1,825
Contract distributions and terminations (2)
Transfer payments from (to) Fixed Accounts and other Divisions 182
Addition to (reallocation from) assets retained in the Account
by Golden American Life Insurance Company --
__________
Increase (decrease) in net assets derived from principal
transactions 2,005
__________
Total increase (decrease) 1,981
__________
NET ASSETS AT DECEMBER 31, 1997 $1,981
==========
<FN>
(a) Commencement of operations, January 3, 1996
(b) Commencement of operations, September 3, 1996
(c) Commencement of operations, September 23, 1996
(d) Commencement of operations, February 3, 1997
(e) Commencement of operations, February 4, 1997
(f) Commencement of operations, August 26, 1997
(g) Commencement of operations, September 18, 1997
(h) Commencement of operations, September 24, 1997
(i) Commencement of operations, October 9, 1997
(j) Commencement of operations, October 24, 1997
</TABLE>
See accompanying notes.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1996 and 1997, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Combined
____________
<S> <C>
NET ASSETS AT JANUARY 1, 1996 $960,878
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>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1996 and 1997, Except as Noted
(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Combined
____________
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) 81,285
Net realized gain (loss) on investments 31,070
Net unrealized appreciation (depreciation) of investments 75,558
____________
Net increase (decrease) in net assets resulting from operations 187,913
Changes from principal transactions:
Purchase payments 304,259
Contract distributions and terminations (184,701)
Transfer payments from (to) Fixed Accounts and other Divisions 111,251
Addition to (reallocation from) assets retained in the Account
by Golden American Life Insurance Company 976
____________
Increase (decrease) in net assets derived from principal
transactions 231,785
____________
Total increase (decrease) 419,698
____________
NET ASSETS AT DECEMBER 31, 1997 $1,604,271
============
<FN>
(a) Commencement of operations, January 3, 1996
(b) Commencement of operations, September 3, 1996
(c) Commencement of operations, September 23, 1996
(d) Commencement of operations, February 3, 1997
(e) Commencement of operations, February 4, 1997
(f) Commencement of operations, August 26, 1997
(g) Commencement of operations, September 18, 1997
(h) Commencement of operations, September 24, 1997
(i) Commencement of operations, October 9, 1997
(j) Commencement of operations, October 24, 1997
</TABLE>
See accompanying notes.
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
NOTE 1 - ORGANIZATION
Separate Account B (the "Account") was established by Golden American Life
Insurance Company ("Golden American") to support the operations of variable
annuity contracts ("Contracts"). 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. 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, 1997, the Account had, under GoldenSelect Contracts, twenty-
two investment divisions: the Liquid Asset, the Limited Maturity Bond, the
Hard Assets (formerly 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, the Strategic Equity, the Small Cap, the Managed
Global, the OTC, the Growth & Income, the Research, the Total Return, the
Value + Growth, the International Equity and the International Fixed Income
Divisions ("Divisions"). The Account also had, under Granite PrimElite
Contracts, eight investment divisions: the OTC, the Research, the Total
Return, the Appreciation, the Smith Barney High Income, the Smith Barney
Income and Growth, the Smith Barney International Equity and the Smith Barney
Money Market Divisions (collectively with the divisions noted above,
"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, the Equi-Select Series Trust, Travelers
Series Fund, Inc., the Greenwich Street Series Fund (formerly the Smith
Barney Series Fund) or the Warburg Pincus Trust (the "Trusts"). 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.
NOTE 3 - CHARGES AND FEES
Contracts currently being sold include the DVA 100, DVA Series 100, DVA
PLUS, Granite PrimElite, ACCESS, ES II and the PREMIUM PLUS. The DVA PLUS,
ACCESS and the PREMIUM PLUS each have three different death benefit options
referred to as Standard, Annual Ratchet and 7% Solution; however, in the
state of Washington, the 5.5% Solution is offered instead of the 7%
Solution. Granite PrimElite has two death benefit options referred to as
Standard and Annual Ratchet. Golden American discontinued external sales
of DVA 80 in May 1991. In December 1995, Golden American also discontinued
external sales of DVA 100, however, both the DVA 80 and DVA 100 contracts
continue 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.
NOTE 3 - CHARGES AND FEES - CONTINUED
Daily charges deducted at annual rates to cover these risks are as follows:
<TABLE>
<CAPTION>
Series Annual Rates
__________________________________ __________________
<S> <C>
DVA 80 .80%
DVA 100 .90
DVA Series 100 1.25
DVA PLUS - Standard 1.10
DVA PLUS - Annual Ratchet 1.25
DVA PLUS - 5.5% Solution 1.25
DVA PLUS - 7% Solution 1.40
ACCESS - Standard 1.25
ACCESS - Annual Ratchet 1.40
ACCESS - 5.5% Solution 1.40
ACCESS - 7% Solution 1.55
PREMIUM PLUS - Standard 1.25
PREMIUM PLUS - Annual Ratchet 1.40
PREMIUM PLUS - 5.5% Solution 1.40
PREMIUM PLUS - 7% Solution 1.55
ES II 1.25
Granite PrimElite - Standard 1.10
Granite PrimElite - Annual Ratchet 1.25
</TABLE>
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 the DVA PLUS, Granite
PrimElite, ACCESS, ES II and the PREMIUM PLUS Contracts.
ANNUAL ADMINISTRATIVE CHARGES: An administrative charge of $40 per
Contract year for every Contract except ES II Contracts and DVA PLUS,
PREMIUM PLUS and ACCESS Contracts in the state of Washington which charge
$30. This charge 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.
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.
NOTE 3 - CHARGES AND FEES - CONTINUED
CONTINGENT DEFERRED SALES CHARGES: Under DVA PLUS, ES II and PREMIUM PLUS
Contracts, 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 period
reflected in the following table, from the date a premium payment is
received.
<TABLE>
<CAPTION>
Complete Years Elapsed Since
Premium Payment Surrender Charge
____________________________ _____________________________________________
DVA PLUS ES II PREMIUM PLUS
___________ _________________ _____________
<S> <C> <C> <C>
0 7% 8% 8%
1 7 7 8
2 6 6 8
3 5 5 8
4 4 4 7
5 3 3 6
6 1 2 5
7 -- 1 3
8 -- -- 1
9+ -- -- --
</TABLE>
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 7.5% 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.
NOTE 3 - CHARGES AND FEES - CONTINUED
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. 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
___________________________________
1997 1996
_______________ _________________
(Dollars in thousands)
<S> <C> <C>
Balance at beginning of period $26,612 $35,980
Sales load advanced 616 380
Premium tax advanced 7 11
Net transfer from Separate Account D,
Fixed Account and other Divisions 353 2,672
Amortization of deferred sales load
and premium tax (10,579) (12,431)
_______________ _________________
Balance at end of period $17,009 $26,612
=============== =================
</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>
Year Ended December 31,
_________________________
1997
_________________________
Purchases Sales
_________________________
(Dollars in thousands)
<S> <C> <C>
The GCG Trust:
Liquid Asset Series $94,848 $75,062
Limited Maturity Bond Series 12,572 13,891
Hard Assets Series 21,526 12,693
All-Growth Series 7,468 14,683
Real Estate Series 24,254 8,239
Fully Managed Series 27,691 11,768
Multiple Allocation Series 30,819 55,031
Capital Appreciation Series 41,409 24,135
Rising Dividends Series 63,949 8,887
Emerging Markets Series 8,023 6,846
Market Manager Series 467 623
Value Equity Series 32,557 4,409
Strategic Equity Series 19,475 4,918
Small Cap Series 25,870 10,563
Managed Global Series 37,985 21,524
Equi-Select Series Trust:
OTC Portfolio 18,373 3,328
Growth & Income Portfolio 37,291 1,763
Research Portfolio 34,430 419
Total Return Portfolio 26,167 354
Value + Growth Portfolio 30,053 5,950
International Fixed Income Portfolio 224 7
Greenwich Street Series Fund:
Appreciation Portfolio 283 12
Travelers Series Fund, Inc.:
Smith Barney High Income Portfolio 216 11
Smith Barney Income and Growth Porfolio 210 1
Smith Barney International Equity Portfolio 103 2
Smith Barney Money Market Portfolio 194 12
Warburg Pincust Trust:
International Equity Portfolio 2,146 59
_________________________
$598,603 $285,190
=========================
</TABLE>
NOTE 4 - PURCHASES AND SALES OF INVESTMENT SECURITIES - CONTINUED
<TABLE>
<CAPTION>
Year Ended December 31,
_________________________
1996
_________________________
Purchases Sales
_________________________
(Dollars in thousands)
<S> <C> <C>
The GCG Trust:
Liquid Asset Series $64,148 $63,169
Limited Maturity Bond Series 13,202 23,196
Hard Assets Series 22,965 11,706
All-Growth Series 10,482 22,833
Real Estate Series 12,388 5,777
Fully Managed Series 22,506 14,263
Multiple Allocation Series 28,625 62,678
Capital Appreciation Series 32,609 21,360
Rising Dividends Series 41,303 14,500
Emerging Markets Series 11,043 13,496
Market Manager Series 449 1,388
Value Equity Series 20,546 8,015
Strategic Equity Series 20,731 1,702
Small Cap Series 47,577 15,201
Managed Global Series 85,923 4,148
Equi-Select Series Trust:
OTC Portfolio 4,644 164
Growth & Income Portfolio 8,037 49
Research Portfolio -- --
Total Return Portfolio -- --
Value + Growth Portfolio -- --
International Fixed Income Portfolio -- --
Greenwich Street Series Fund:
Appreciation Portfolio -- --
Travelers Series Fund, Inc.:
Smith Barney High Income Portfolio -- --
Smith Barney Income and Growth Porfolio -- --
Smith Barney International Equity Portfolio -- --
Smith Barney Money Market Portfolio -- --
Warburg Pincust Trust:
International Equity Portfolio -- --
_________________________
$447,178 $283,645
=========================
</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 Contract to a DVA PLUS Contract. Updates to DVA PLUS Contracts
resulted 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>
Year Ended December 31,
_________________________
1997
_________________________
Purchases Sales
_________________________
<S> <C> <C>
Liquid Asset Division 8,859,035 7,508,736
Limited Maturity Bond Division 814,102 1,099,923
Hard Assets Division 955,532 934,748
All-Growth Division 902,597 1,467,510
Real Estate Division 1,165,038 633,059
Fully Managed Division 1,588,523 1,271,492
Multiple Allocation Division 858,882 3,296,283
Capital Appreciation Division 1,899,517 1,801,059
Rising Dividends Division 4,263,972 1,391,248
Emerging Markets Division 1,231,916 1,082,071
Market Manager Division -- 31,196
Value Equity Division 1,792,574 522,420
Strategic Equity Division 1,539,555 551,638
Small Cap Division 3,022,647 1,720,403
Managed Global Division 3,674,935 2,873,007
OTC Division 1,166,129 357,910
Growth & Income Division 2,623,649 368,883
Research Division 1,962,393 137,427
Total Return Division 1,683,989 52,603
Value + Growth Division 2,598,824 818,375
International Fixed Income Division 18,902 1,482
Appreciation Division 19,581 822
Smith Barney High Income Division 15,972 739
Smith Barney Income and Growth Division 12,176 39
Smith Barney International Equity Division 7,216 138
Smith Barney Money Market Division 17,685 1,114
International Equity Division 208,851 9,015
</TABLE>
NOTE 5 - SUMMARY OF CHANGES FROM UNIT TRANSACTIONS - CONTINUED
<TABLE>
<CAPTION>
Year Ended December 31,
_________________________
1996
_________________________
Purchases Sales
_________________________
<S> <C> <C>
Liquid Asset Division 5,982,248 6,003,930
Limited Maturity Bond Division 829,366 1,824,946
Hard Assets Division 1,374,569 978,096
All-Growth Division 1,228,512 2,169,543
Real Estate Division 754,585 552,462
Fully Managed Division 1,450,300 1,450,120
Multiple Allocation Division 1,330,139 4,486,173
Capital Appreciation Division 2,032,074 1,900,755
Rising Dividends Division 3,448,184 1,678,751
Emerging Markets Division 1,573,766 1,768,185
Market Manager Division 7,958 106,893
Value Equity Division 1,834,937 1,024,120
Strategic Equity Division 2,083,197 353,766
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
Research Division -- --
Total Return Division -- --
Value + Growth Division -- --
International Fixed Income Division -- --
Appreciation Division -- --
Smith Barney High Income Division -- --
Smith Barney Income and Growth Division -- --
Smith Barney International Equity Division -- --
Smith Barney Money Market Division -- --
International Equity Division -- --
</TABLE>
NOTE 6 - NET ASSETS
Net assets at December 31, 1997 consisted of the following:
<TABLE>
<CAPTION>
Limited
Liquid Maturity Hard All-
Asset Bond Assets Growth
Division Division Division Division
_____________________________________________________
(Dollars in thousands)
<S> <C> <C> <C> <C>
Unit transactions $51,246 $38,691 $29,328 $59,765
Accumulated net investment
income (loss) 6,008 15,231 21,909 8,980
Net unrealized appreciation
(depreciation) of
investments -- (1,455) (5,734) 2,993
_____________________________________________________
$57,254 $52,467 $45,503 $71,738
=====================================================
</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 $44,230 $106,702 $138,528 $99,633
Accumulated net investment
income (loss) 14,064 31,225 108,099 49,217
Net unrealized appreciation
(depreciation) of
investments 16,406 20,723 15,242 38,967
_____________________________________________________
$74,700 $158,650 $261,869 $187,817
=====================================================
</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 $144,386 $50,608 $2,775 $59,096
Accumulated net
investment income (loss) 10,070 (10,864) 1,626 10,329
Net unrealized appreciation
(depreciation) of
investments 61,487 (5,243) 2,315 7,600
_____________________________________________________
$215,943 $34,501 $6,716 $77,025
=====================================================
</TABLE>
NOTE 6 - NET ASSETS - CONTINUED
<TABLE>
<CAPTION>
Strategic Small Managed
Equity Cap Global OTC
Division Division Division Division
_____________________________________________________
(Dollars in thousands)
<S> <C> <C> <C> <C>
Unit transactions $39,540 $48,780 $91,898 $18,700
Accumulated net
investment income (loss) 3,375 (1,272) 9,247 874
Net unrealized appreciation
(depreciation) of
investments 7,522 5,217 3,536 787
_____________________________________________________
$50,437 $52,725 $104,681 $20,361
=====================================================
</TABLE>
<TABLE>
<CAPTION>
Growth & Total Value +
Income Research Return Growth
Division Division Division Division
_____________________________________________________
(Dollars in thousands)
<S> <C> <C> <C> <C>
Unit transactions $40,438 $33,194 $25,114 $24,230
Accumulated net
investment income (loss) 3,235 820 705 378
Net unrealized appreciation
(depreciation) of
investments 1,249 388 412 (1,430)
_____________________________________________________
$44,922 $34,402 $26,231 $23,178
=====================================================
</TABLE>
<TABLE>
<CAPTION>
Inter- Smith Smith
national Barney Barney
Fixed Appre- High Income and
Income ciation Income Growth
Division Division Division Division
_____________________________________________________
(Dollars in thousands)
<S> <C> <C> <C> <C>
Unit transactions $208 $256 $206 $209
Accumulated net
investment income (loss) 8 16 -- (1)
Net unrealized appreciation
(depreciation) of
investments (10) (9) 3 7
_____________________________________________________
$206 $263 $209 $215
=====================================================
</TABLE>
NOTE 6 - NET ASSETS - CONTINUED
<TABLE>
<CAPTION>
Smith
Barney Smith
Inter- Barney Inter-
national Money national
Equity Market Equity
Division Division Division Combined
__________________________ __________________________
(Dollars in thousands)
<S> <C> <C> <C> <C>
Unit transactions $101 $181 $2,005 $1,150,048
Accumulated net
investment income (loss) -- -- 69 283,348
Net unrealized appreciation
(depreciation) of
investments (5) -- (93) 170,875
__________________________ __________________________
$96 $181 $1,981 $1,604,271
========================== ==========================
</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, 1997 was as follows:
<TABLE>
<CAPTION>
Unit Total Unit
Series Units Value Value
_______________________________________________________________________________
(in thousands)
<S> <C> <C> <C>
LIQUID ASSET
Currently payable annuity products:
DVA 80 4,190 $14.58 $61
DVA 100 3,369 14.32 48
Contracts in accumulation period:
DVA 80 363,377 14.58 5,298
DVA 100 1,595,580 14.32 22,846
DVA Series 100 37,946 13.87 526
DVA PLUS - Standard 227,427 14.02 3,188
DVA PLUS - Annual Ratchet & 5.5% Solution,
ACCESS - Standard, PREMIUM PLUS - Standard,
ES II 353,076 13.83 4,883
DVA PLUS - 7% Solution,
ACCESS - Annual Ratchet & 5.5% Solution,
PREMIUM PLUS - Annual Ratchet &
5.5% Solution 1,132,057 13.65 15,447
ACCESS - 7% Solution,
PREMIUM PLUS - 7% Solution 370,411 13.44 4,979
____________
57,276
LIMITED MATURITY BOND
Currently payable annuity products:
DVA 80 12,043 16.76 202
DVA 100 20,397 16.46 336
Contracts in accumulation period:
DVA 80 58,275 16.76 977
DVA 100 2,349,902 16.46 38,684
DVA Series 100 22,582 15.95 360
DVA PLUS - Standard 139,323 16.13 2,247
DVA PLUS - Annual Ratchet & 5.5% Solution,
ACCESS - Standard, PREMIUM PLUS - Standard,
ES II 133,461 15.91 2,124
DVA PLUS - 7% Solution,
ACCESS - Annual Ratchet & 5.5% Solution,
PREMIUM PLUS - Annual Ratchet &
5.5% Solution 462,583 15.70 7,263
ACCESS - 7% Solution,
PREMIUM PLUS - 7% Solution 19,171 15.47 296
____________
52,489
</TABLE>
NOTE 7 - UNIT VALUES - CONTINUED
<TABLE>
<CAPTION>
Unit Total Unit
Series Units Value Value
_______________________________________________________________________________
(in thousands)
<S> <C> <C> <C>
HARD ASSETS
Currently payable annuity products:
DVA 80 2,001 $21.68 $44
DVA 100 13,390 21.30 285
Contracts in accumulation period:
DVA 80 107,103 21.68 2,322
DVA 100 1,123,746 21.30 23,932
DVA Series 100 32,428 20.63 669
DVA PLUS - Standard 154,417 20.85 3,219
DVA PLUS - Annual Ratchet & 5.5% Solution,
ACCESS - Standard, PREMIUM PLUS - Standard,
ES II 90,379 20.57 1,859
DVA PLUS - 7% Solution,
ACCESS - Annual Ratchet & 5.5% Solution,
PREMIUM PLUS - Annual Ratchet &
5.5% Solution 637,191 20.29 12,932
ACCESS - 7% Solution,
PREMIUM PLUS - 7% Solution 13,179 19.99 263
___________
45,525
ALL-GROWTH
Currently payable annuity products:
DVA 80 3,037 15.06 46
DVA 100 22,962 14.79 340
Contracts in accumulation period:
DVA 80 107,041 15.06 1,612
DVA 100 3,135,493 14.79 46,368
DVA Series 100 26,286 14.33 377
DVA PLUS - Standard 213,900 14.48 3,097
DVA PLUS - Annual Ratchet & 5.5% Solution,
ACCESS - Standard, PREMIUM PLUS - Standard,
ES II 263,462 14.28 3,763
DVA PLUS - 7% Solution,
ACCESS - Annual Ratchet & 5.5% Solution,
PREMIUM PLUS - Annual Ratchet &
5.5% Solution 1,107,672 14.09 15,610
ACCESS - 7% Solution,
PREMIUM PLUS - 7% Solution 40,567 13.88 563
___________
71,776
</TABLE>
NOTE 7 - UNIT VALUES - CONTINUED
<TABLE>
<CAPTION>
Unit Total Unit
Series Units Value Value
_______________________________________________________________________________
(in thousands)
<S> <C> <C> <C>
REAL ESTATE
Currently payable annuity products:
DVA 80 5,216 $26.86 $140
DVA 100 28,837 26.38 761
Contracts in accumulation period:
DVA 80 83,412 26.86 2,240
DVA 100 1,493,690 26.38 39,399
DVA Series 100 22,395 25.55 572
DVA PLUS - Standard 173,241 25.82 4,473
DVA PLUS - Annual Ratchet & 5.5% Solution,
ACCESS - Standard, PREMIUM PLUS - Standard,
ES II 135,993 25.48 3,465
DVA PLUS - 7% Solution,
ACCESS - Annual Ratchet & 5.5% Solution,
PREMIUM PLUS - Annual Ratchet &
5.5% Solution 897,320 25.14 22,556
ACCESS - 7% Solution,
PREMIUM PLUS - 7% Solution 45,472 24.76 1,125
____________
74,731
FULLY MANAGED
Currently payable annuity products:
DVA 80 8,128 20.73 168
DVA 100 71,911 20.36 1,464
Contracts in accumulation period:
DVA 80 122,182 20.73 2,533
DVA 100 4,960,237 20.36 100,987
DVA Series 100 36,340 19.72 717
DVA PLUS - Standard 418,686 19.93 8,345
DVA PLUS - Annual Ratchet & 5.5% Solution,
ACCESS - Standard, PREMIUM PLUS - Standard,
ES II 414,805 19.66 8,157
DVA PLUS - 7% Solution,
ACCESS - Annual Ratchet & 5.5% Solution,
PREMIUM PLUS - Annual Ratchet &
5.5% Solution 1,766,390 19.40 34,271
ACCESS - 7% Solution,
PREMIUM PLUS - 7% Solution 108,930 19.11 2,082
____________
158,724
</TABLE>
NOTE 7 - UNIT VALUES - CONTINUED
<TABLE>
<CAPTION>
Unit Total Unit
Series Units Value Value
_______________________________________________________________________________
(in thousands)
<S> <C> <C> <C>
MULTIPLE ALLOCATION
Currently payable annuity products:
DVA 80 26,732 $21.66 $579
DVA 100 107,200 21.28 2,280
Contracts in accumulation period:
DVA 80 524,945 21.66 11,371
DVA 100 9,544,200 21.28 203,061
DVA Series 100 86,050 20.61 1,773
DVA PLUS - Standard 328,740 20.83 6,847
DVA PLUS - Annual Ratchet & 5.5% Solution,
ACCESS - Standard, PREMIUM PLUS - Standard,
ES II 255,396 20.55 5,248
DVA PLUS - 7% Solution,
ACCESS - Annual Ratchet & 5.5% Solution,
PREMIUM PLUS - Annual Ratchet &
5.5% Solution 1,485,966 20.28 30,129
ACCESS - 7% Solution,
PREMIUM PLUS - 7% Solution 35,953 19.97 718
____________
262,006
CAPITAL APPRECIATION
Currently payable annuity products:
DVA 80 12,559 22.79 286
DVA 100 56,444 22.53 1,272
Contracts in accumulation period:
DVA 80 112,987 22.79 2,575
DVA 100 5,668,379 22.53 127,717
DVA Series 100 46,932 22.08 1,036
DVA PLUS - Standard 353,774 22.24 7,868
DVA PLUS - Annual Ratchet & 5.5% Solution,
ACCESS - Standard, PREMIUM PLUS - Standard,
ES II 312,229 22.05 6,885
DVA PLUS - 7% Solution,
ACCESS - Annual Ratchet & 5.5% Solution,
PREMIUM PLUS - Annual Ratchet &
5.5% Solution 1,772,316 21.87 38,752
ACCESS - 7% Solution,
PREMIUM PLUS - 7% Solution 69,624 21.65 1,507
____________
187,898
</TABLE>
NOTE 7 - UNIT VALUES - CONTINUED
<TABLE>
<CAPTION>
Unit Total Unit
Series Units Value Value
_______________________________________________________________________________
(in thousands)
<S> <C> <C> <C>
RISING DIVIDENDS
Currently payable annuity products:
DVA 80 8,045 $20.58 $166
DVA 100 21,073 20.41 430
Contracts in accumulation period:
DVA 80 177,812 20.58 3,660
DVA 100 4,864,305 20.41 99,278
DVA Series 100 85,890 20.11 1,727
DVA PLUS - Standard 795,321 20.22 16,079
DVA PLUS - Annual Ratchet & 5.5% Solution,
ACCESS - Standard, PREMIUM PLUS - Standard,
ES II 853,473 20.09 17,146
DVA PLUS - 7% Solution,
ACCESS - Annual Ratchet & 5.5% Solution,
PREMIUM PLUS - Annual Ratchet &
5.5% Solution 3,706,709 19.96 73,999
ACCESS - 7% Solution,
PREMIUM PLUS - 7% Solution 179,402 19.81 3,553
____________
216,038
EMERGING MARKETS
Currently payable annuity products:
DVA 80 1,431 8.91 13
DVA 100 19,625 8.84 173
Contracts in accumulation period:
DVA 80 83,108 8.91 741
DVA 100 2,194,303 8.84 19,393
DVA Series 100 34,350 8.71 299
DVA PLUS - Standard 249,197 8.75 2,182
DVA PLUS - Annual Ratchet & 5.5% Solution,
ACCESS - Standard, PREMIUM PLUS - Standard,
ES II 222,368 8.70 1,934
DVA PLUS - 7% Solution,
ACCESS - Annual Ratchet & 5.5% Solution,
PREMIUM PLUS - Annual Ratchet &
5.5% Solution 1,131,392 8.64 9,780
ACCESS - 7% Solution,
PREMIUM PLUS - 7% Solution 616 8.58 5
____________
34,520
</TABLE>
NOTE 7 - UNIT VALUES - CONTINUED
<TABLE>
<CAPTION>
Unit Total Unit
Series Units Value Value
_______________________________________________________________________________
(in thousands)
<S> <C> <C> <C>
MARKET MANAGER
Contracts in accumulation period:
DVA 100 342,383 $19.40 $6,641
DVA PLUS - 7% Solution,
ACCESS - Annual Ratchet & 5.5% Solution,
PREMIUM PLUS - Annual Ratchet &
5.5% Solution 7,958 19.04 152
____________
6,793
VALUE EQUITY
Currently payable annuity products:
DVA 80 469 18.59 9
DVA 100 6,299 18.48 116
Contracts in accumulation period:
DVA 80 57,796 18.59 1,074
DVA 100 1,362,952 18.48 25,185
DVA Series 100 24,986 18.28 457
DVA PLUS - Standard 372,681 18.36 6,843
DVA PLUS - Annual Ratchet & 5.5% Solution,
ACCESS - Standard, PREMIUM PLUS - Standard,
ES II 469,649 18.28 8,586
DVA PLUS - 7% Solution,
ACCESS - Annual Ratchet & 5.5% Solution,
PREMIUM PLUS - Annual Ratchet &
5.5% Solution 1,793,172 18.20 32,639
ACCESS - 7% Solution,
PREMIUM PLUS - 7% Solution 118,902 18.09 2,150
____________
77,059
STRATEGIC EQUITY
Currently payable annuity products:
DVA 100 33,665 14.42 485
Contracts in accumulation period:
DVA 80 102,523 14.49 1,485
DVA 100 977,705 14.42 14,102
DVA Series 100 34,778 14.31 498
DVA PLUS - Standard 406,747 14.36 5,840
DVA PLUS - Annual Ratchet & 5.5% Solution,
ACCESS - Standard, PREMIUM PLUS - Standard,
ES II 554,068 14.31 7,929
DVA PLUS - 7% Solution,
ACCESS - Annual Ratchet & 5.5% Solution,
PREMIUM PLUS - Annual Ratchet &
5.5% Solution 1,361,070 14.26 19,414
ACCESS - 7% Solution,
PREMIUM PLUS - 7% Solution 49,579 14.20 704
____________
50,457
</TABLE>
NOTE 7 - UNIT VALUES - CONTINUED
<TABLE>
<CAPTION>
Unit Total Unit
Series Units Value Value
_______________________________________________________________________________
(in thousands)
<S> <C> <C> <C>
SMALL CAP
Currently payable annuity products:
DVA 100 11,327 $12.99 $147
Contracts in accumulation period:
DVA 80 42,479 13.04 554
DVA 100 884,375 12.99 11,485
DVA Series 100 38,537 12.90 497
DVA PLUS - Standard 401,090 12.92 5,183
DVA PLUS - Annual Ratchet & 5.5% Solution,
ACCESS - Standard, PREMIUM PLUS - Standard,
ES II 559,014 12.88 7,202
DVA PLUS - 7% Solution,
ACCESS - Annual Ratchet & 5.5% Solution,
PREMIUM PLUS - Annual Ratchet &
5.5% Solution 2,049,765 12.84 26,326
ACCESS - 7% Solution,
PREMIUM PLUS - 7% Solution 106,014 12.81 1,357
____________
52,751
MANAGED GLOBAL
Currently payable annuity products:
DVA 80 3,304 12.05 40
DVA 100 25,036 11.93 299
Contracts in accumulation period:
DVA 80 48,012 12.05 578
DVA 100 5,030,071 11.93 59,991
DVA Series 100 76,803 11.72 900
DVA PLUS - Standard 525,356 11.76 6,180
DVA PLUS - Annual Ratchet & 5.5% Solution,
ACCESS - Standard, PREMIUM PLUS - Standard,
ES II 443,665 11.67 5,179
DVA PLUS - 7% Solution,
ACCESS - Annual Ratchet & 5.5% Solution,
PREMIUM PLUS - Annual Ratchet &
5.5% Solution 2,721,529 11.58 31,522
ACCESS - 7% Solution,
PREMIUM PLUS - 7% Solution 3,479 11.47 40
____________
104,729
</TABLE>
NOTE 7 - UNIT VALUES - CONTINUED
<TABLE>
<CAPTION>
Unit Total Unit
Series Units Value Value
_______________________________________________________________________________
(in thousands)
<S> <C> <C> <C>
OTC
Contracts in accumulation period:
DVA 80 14,078 $18.91 $266
DVA 100 239,052 18.79 4,492
DVA Series 100 10,361 18.57 193
DVA PLUS - Standard 85,870 18.64 1,600
DVA PLUS - Annual Ratchet & 5.5% Solution,
ACCESS - Standard, PREMIUM PLUS - Standard,
ES II 177,125 18.52 3,280
DVA PLUS - 7% Solution,
ACCESS - Annual Ratchet & 5.5% Solution,
PREMIUM PLUS - Annual Ratchet &
5.5% Solution 518,640 18.45 9,571
Granite PrimElite - Standard 202 18.64 4
Granite PrimElite - Annual Ratchet 4,122 18.52 76
ACCESS - 7% Solution,
PREMIUM PLUS - 7% Solution 48,346 18.36 888
____________
20,370
GROWTH & INCOME
Contracts in accumulation period:
DVA 80 41,266 15.57 643
DVA 100 559,791 15.51 8,685
DVA Series 100 9,355 15.42 144
DVA PLUS - Standard 325,440 15.45 5,027
DVA PLUS - Annual Ratchet & 5.5% Solution,
ACCESS - Standard, PREMIUM PLUS - Standard,
ES II 438,636 15.41 6,758
DVA PLUS - 7% Solution,
ACCESS - Annual Ratchet & 5.5% Solution,
PREMIUM PLUS - Annual Ratchet &
5.5% Solution 1,288,333 15.36 19,795
ACCESS - 7% Solution,
PREMIUM PLUS - 7% Solution 253,936 15.32 3,891
____________
44,943
</TABLE>
NOTE 7 - UNIT VALUES - CONTINUED
<TABLE>
<CAPTION>
Unit Total Unit
Series Units Value Value
_______________________________________________________________________________
(in thousands)
<S> <C> <C> <C>
RESEARCH
Contracts in accumulation period:
DVA 80 22,953 $19.23 $441
DVA 100 310,066 19.11 5,924
DVA Series 100 10,225 18.89 193
DVA PLUS - Standard 223,067 18.95 4,227
DVA PLUS - Annual Ratchet & 5.5% Solution,
ACCESS - Standard, PREMIUM PLUS - Standard,
ES II 268,126 18.87 5,058
DVA PLUS - 7% Solution,
ACCESS - Annual Ratchet & 5.5% Solution,
PREMIUM PLUS - Annual Ratchet &
5.5% Solution 816,216 18.77 15,317
Granite PrimElite - Standard 102 18.95 2
Granite PrimElite - Annual Ratchet 11,534 18.87 218
ACCESS - 7% Solution,
PREMIUM PLUS - 7% Solution 162,677 18.67 3,038
____________
34,418
TOTAL RETURN
Contracts in accumulation period:
DVA 80 4,765 16.42 78
DVA 100 206,943 16.31 3,375
DVA Series 100 4,909 16.12 79
DVA PLUS - Standard 224,763 16.18 3,636
DVA PLUS - Annual Ratchet & 5.5% Solution,
ACCESS - Standard, PREMIUM PLUS - Standard,
ES II 286,032 16.10 4,606
DVA PLUS - 7% Solution,
ACCESS - Annual Ratchet & 5.5% Solution,
PREMIUM PLUS - Annual Ratchet &
5.5% Solution 746,754 16.02 11,962
Granite PrimElite - Standard 63 16.18 1
Granite PrimElite - Annual Ratchet 4,893 16.10 79
ACCESS - 7% Solution,
PREMIUM PLUS - 7% Solution 152,264 15.94 2,427
____________
26,243
</TABLE>
NOTE 7 - UNIT VALUES - CONTINUED
<TABLE>
<CAPTION>
Unit Total Unit
Series Units Value Value
_______________________________________________________________________________
(in thousands)
<S> <C> <C> <C>
VALUE + GROWTH
Contracts in accumulation period:
DVA 80 41,904 $13.17 $552
DVA 100 230,798 13.12 3,028
DVA Series 100 2,137 13.04 28
DVA PLUS - Standard 161,235 13.06 2,106
DVA PLUS - Annual Ratchet & 5.5% Solution,
ACCESS - Standard, PREMIUM PLUS - Standard,
ES II 343,006 13.03 4,470
DVA PLUS - 7% Solution,
ACCESS - Annual Ratchet & 5.5% Solution,
PREMIUM PLUS - Annual Ratchet &
5.5% Solution 763,169 12.99 9,917
ACCESS - 7% Solution,
PREMIUM PLUS - 7% Solution 238,200 12.96 3,087
____________
23,188
INTERNATIONAL FIXED INCOME
Contracts in accumulation period:
DVA PLUS - Annual Ratchet & 5.5% Solution,
ACCESS - Standard, PREMIUM PLUS - Standard,
ES II 10,655 11.87 126
DVA PLUS - 7% Solution,
ACCESS - Annual Ratchet & 5.5% Solution,
PREMIUM PLUS - Annual Ratchet &
5.5% Solution 310 11.81 4
ACCESS - 7% Solution,
PREMIUM PLUS - 7% Solution 6,455 11.75 76
____________
206
APPRECIATION
Contracts in accumulation period:
Granite PrimElite - Annual Ratchet 18,759 14.01 263
____________
263
SMITH BARNEY HIGH INCOME
Contracts in accumulation period:
Granite PrimElite - Standard 73 13.77 1
Granite PrimElite - Annual Ratchet 15,160 13.72 208
____________
209
SMITH BARNEY INCOME AND GROWTH
Contracts in accumulation period:
Granite PrimElite - Annual Ratchet 12,137 17.77 216
____________
216
</TABLE>
NOTE 7 - UNIT VALUES - CONTINUED
<TABLE>
<CAPTION>
Unit Total Unit
Series Units Value Value
_______________________________________________________________________________
(in thousands)
<S> <C> <C> <C>
SMITH BARNEY INTERNATIONAL EQUITY
Contracts in accumulation period:
Granite PrimElite - Standard 130 $13.65 $2
Granite PrimElite - Annual Ratchet 6,948 13.59 94
____________
96
SMITH BARNEY MONEY MARKET
Contracts in accumulation period:
Granite PrimElite - Annual Ratchet 16,571 10.97 182
____________
182
INTERNATIONAL EQUITY
Contracts in accumulation period:
DVA PLUS - Annual Ratchet & 5.5% Solution,
ACCESS - Standard, PREMIUM PLUS - Standard,
ES II 90,783 9.90 899
DVA PLUS - 7% Solution,
ACCESS - Annual Ratchet & 5.5% Solution,
PREMIUM PLUS - Annual Ratchet &
5.5% Solution 36,098 9.95 359
ACCESS - 7% Solution,
PREMIUM PLUS - 7% Solution 72,955 9.92 724
____________
1,982
</TABLE>
NOTE 8 - YEAR 2000 (Unaudited)
Based on a study of its computer software and hardware,Golden American has
determined its exposure to the Year 2000 change of the century date issue.
Management believes systems are substantially compliant and has engaged
external consultants to validate this assumption. The only system known to
be affected by this issue is a system maintained by an affiliate who will
incur the related costs. To mitigate the effect of the outside influences
and other dependencies relative to Year 2000, Golden American will be
contacting significant customers, suppliers and other third parties. To the
extent these third parties would be unable to transact business in the year
2000 and thereafter, Golden American's operations could be adversely affected.
<PAGE>
<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.
A-1
<PAGE>
<PAGE>
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.
A-2
<PAGE>
<PAGE>
PART C -- OTHER INFORMATION
ITEM 24: FINANCIAL STATEMENTS AND EXHIBITS
FINANCIAL STATEMENTS
(a) (1) All financial statements are included in either the Prospectuses
or the Statements of Additional Information, as indicated therein.
(2) Schedules I, III, IV follow:
SCHEDULE I
SUMMARY OF INVESTMENTS
OTHER THAN INVESTMENTS IN RELATED PARTIES
(Dollars in thousands)
<TABLE>
<CAPTION>
Balance
Sheet
December 31, 1997 Cost 1 Value Amount
_______________________________________________________________________________
<S> <C> <C> <C>
TYPE OF INVESTMENT
Fixed maturities, available for sale:
Bonds:
United States government and govern-
mental agencies and authorities $68,693 $68,842 $68,842
Foreign governments 2,062 2,053 2,053
Public utilities 25,899 25,944 25,944
Investment grade corporate 219,526 220,420 220,420
Below investment grade corporate 41,355 41,331 41,331
Mortgage-backed securities 55,753 55,811 55,811
___________ ___________ ___________
Total fixed maturities, available
for sale 413,288 414,401 414,401
Equity securities:
Common stocks: industrial, mis-
cellaneous and all other 4,437 3,904 3,904
Mortgage loans on real estate 85,093 85,093
Policy loans 8,832 8,832
Short-term investments 14,460 14,460
___________ ___________
Total investments $526,110 $526,690
=========== ===========
<FN>
Note 1: Cost is defined as original cost for stocks and other invested assets,
amortized cost for bonds and unpaid principal for policy loans and
mortgage loans on real estate, adjusted for amortization of premiums
and accrual of discounts.
</TABLE>
SCHEDULE III
SUPPLEMENTARY INSURANCE INFORMATION
(Dollars in thousands)
<TABLE>
<CAPTION>
Column Column Column Column Column Column
A B C D E F
________________________________________________________________________________
Future
Policy Other
De- Benefits, Policy
ferred Losses, Claims Insur-
Policy Claims Un- and ance
Acqui- and earned Bene- Premiums
sition Loss Revenue fits and
Segment Costs Expenses Reserve Payable Charges
________________________________________________________________________________
POST-MERGER
________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Period October 25, 1997
through December 31, 1997:
Life insurance $12,752 $505,304 $1,189 $10 $3,834
POST-ACQUISITION
________________________________________________________________________________
Period January 1, 1997
through October 24, 1997:
Life insurance N/A N/A N/A N/A 18,288
Period August 14, 1996
through December 31, 1996:
Life insurance 11,468 285,287 2,063 -- 8,768
PRE-ACQUISITION
________________________________________________________________________________
Period January 1, 1996
through August 13, 1996:
Life insurance N/A N/A N/A N/A 12,259
Year ended December 31, 1995:
Life insurance 67,314 33,673 6,556 -- 18,388
</TABLE>
SCHEDULE III
SUPPLEMENTARY INSURANCE INFORMATION - CONTINUED
(Dollars in thousands)
<TABLE>
<CAPTION>
Column Column Column Column Column Column
A G H I J K
________________________________________________________________________________
Amorti-
Benefits zation
Claims, of
Losses Deferred
Net and Policy Other
Invest- Settle- Acqui- Operat-
ment ment sition ing Premiums
Segment Income Expenses Costs Expenses Written
________________________________________________________________________________
POST-MERGER
________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Period October 25, 1997
through December 31, 1997:
Life insurance $5,127 $7,413 $892 $1,137 --
POST-ACQUISITION
________________________________________________________________________________
Period January 1, 1997
through October 24, 1997:
Life insurance 21,656 19,401 1,674 20,234 --
Period August 14, 1996
through December 31, 1996:
Life insurance 5,795 7,003 244 8,066 --
PRE-ACQUISITION
________________________________________________________________________________
Period January 1, 1996
through August 13, 1996:
Life insurance 4,990 5,270 2,436 8,847 --
Year ended December 31, 1995:
Life insurance 2,818 3,146 2,710 13,333 --
</TABLE>
SCHEDULE IV
REINSURANCE
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E Column F
_______________________________________________________________________________
Assumed Percentage
Ceded to from of Amount
Gross Other Other Net Assumed
Amount Companies Companies Amount to Net
_______________________________________________________________________________
<S> <C> <C> <C> <C> <C>
At December 31, 1997:
Life insurance in
force $149,842,000 $96,686,000 -- $53,156,000 --
============= ============ ========= ============ ==========
At December 31, 1996:
Life insurance in
force $86,192,000 $58,368,000 -- $27,824,000 --
============= ============ ========= ============ ==========
At December 31, 1995:
Life insurance in
force $38,383,000 $24,709,000 -- $13,674,000 --
============= ============ ========= ============ ==========
</TABLE>
EXHIBITS
(b) (1) Resolution of the board of directors of Depositor authorizing the
establishment of the Registrant (1)
(2) N/A
(3) (a) Form of Distribution Agreement between the Depositor and
Directed Services, Inc. (1)
(b) Form of Dealers Agreement (1)
(c) Organizational Agreement (1)
(d) (i) Addendum to Organizational Agreement (1)
(ii) Expense Reimbursement Agreement (1)
(e) Form of Assignment Agreement for Organizational Agreement (1)
(4) (a) Individual Deferred Combination Variable and Fixed Annuity
Contract (2)
(b) Group Deferred Combination Variable and Fixed
Annuity Contract (2)
(c) Individual Deferred Variable Annuity Contract (2)
(d) Individual Retirement Annuity Rider Page (1)
(e) ROTH Individual Retirement Annuity Rider (2)
(5) (a) Individual Deferred Combination Variable and Fixed Annuity
Application
(b) Group Deferred Combination Variable and Fixed Annuity Enrollment
Form
(c) Individual Deferred Variable Annuity Application
(6) (a) (i) Articles of Incorporation of Golden American Life Insurance
Company (1)
(ii) Certificate of Amendment of the Restated Articles of
Incorporation of Golden American Life Insurance Company (1)
(iii) Certificate of Amendment of the Restated Articles of
Incorporation of MB Variable Life Insurance Company (1)
(iv) Certificate of Amendment of the Restated Articles of
Incorporation of Golden American Life Insurance Company
(12/28/93) (1)
(b) (i) By-Laws of Golden American Life Insurance Company (1)
(ii) By-Laws of Golden American Life Insurance Company, as
amended (1)
(iii) Certificate of Amendment of the By-Laws of MB Variable Life
Insurance Company, as amended (1)
(iv) By-Laws of Golden American, as amended (12/21/93) (1)
<PAGE>
<PAGE>
(7) Not applicable
(8) (a) Participation Agreement between Golden American
and Warburg Pincus Trust
(8) (b) Participation Agreement between Golden American and PIMCO
Variable Insurance Trust
(8) (c) Administrative Services Agreement between Golden American
and Equitable Life Insurance Company of Iowa
(8) (d) Service Agreement between Golden American and Directed
Services, Inc.
(8) (e) Service Agreement between Golden American and EISI
(9) Opinion and Consent of Myles R. Tashman (1)
(10) (a) Consent of Sutherland, Asbill & Brennan LLP
(b) Consent of Ernst & Young LLP, Independent Auditors
(c) Consent of Myles R. Tashman
(11) Not applicable
(12) Not applicable
(13) Schedule of Performance Data (1)
(14) Not applicable
(15) Powers of Attorney
(1) Incorporated herein by reference to Pre-Effective Amendment No. 1 to a
Registration Statement on Form N-4 for Separate Account B filed with
the Securities and Exchange Commission on September 24, 1997 (File No.
333-28755).
(2) Incorporated herein by reference to Post-Effective Amendment No. 2 to a
Registration Statement on Form N-4 for Separate Account B filed with
the Securities and Exchange Commission on February 12, 1998 (File No.
333-28755).
ITEM 25: DIRECTORS AND OFFICERS OF THE DEPOSITOR
Principal Position(s)
Name Business Address with Depositor
Barnett Chernow Golden American Life Ins. Co. President and
1001 Jefferson Street Director
Wilmington, DE 19801
Paul E. Larson Equitable of Iowa Companies Director
909 Locust Street
Des Moines, IA 50309
Susan B. Watson Equitable of Iowa Companies Director, Senior Vice
909 Locust Street President and Chief
Des Moines, IA 50309 Financial Officer
<PAGE>
<PAGE>
Myles R. Tashman Golden American Life Ins. Co. Director, Executive
1001 Jefferson Street Vice President, General
Wilmington, DE 19801 Counsel and Secretary
Keith Glover Golden American Life Ins. Co. Executive Vice
1001 Jefferson Street President
Wilmington, DE 19801
James R. McInnis Golden American Life Ins. Co. Executive Vice
1001 Jefferson Street President
Wilmington, DE 19801
Stephen J. Preston Golden American Life Ins. Co. Senior Vice President
1001 Jefferson Street, and Chief Actuary
Wilmington, DE 19801
David L. Jacobson Golden American Life Ins. Co. Senior Vice President
1001 Jefferson Street and Assistant Secretary
Wilmington, DE 19801
William L. Lowe Equitable of Iowa Companies Senior Vice President,
909 Locust Street Sales & Marketing
Des Moines, IA 50309
Edward Syring, Jr. Equitable of Iowa Companies Senior Vice President,
909 Locust Street Sales & Marketing
Des Moines, IA 50309
Dennis D. Hargens Equitable of Iowa Companies Treasurer
909 Locust Street
Des Moines, IA 50309
Lawrence W. Porter, M.D. Equitable of Iowa Companies Medical Director
909 Locust Street
Des Moines, IA 50309
ITEM 26: PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT
The Depositor owns 100% of the stock of a newly formed New York company, First
Golden American Life Insurance Company of New York ("First Golden"). The
primary purpose for the formation of First Golden is to offer variable products
in the state of New York.
The following persons control or are under common control with the Depositor:
DIRECTED SERVICES, INC. ("DSI") - This corporation is a general business
corporation organized under the laws of the State of New York, and is wholly
owned by ING Groep, N.V. The primary purpose of DSI is to act as
a broker-dealer in securities. It acts as the principal underwriter and
distributor of variable insurance products including variable annuities as
required by the SEC. The contracts are issued by the Depositor. DSI also has
the power to carry on a general financial, securities, distribution, advisory
or investment advisory business; to act as a general agent or broker for
insurance companies and to render advisory, managerial, research and
consulting services for maintaining and improving managerial efficiency and
operation. DSI is also registered with the SEC as an investment adviser.
<PAGE>
<PAGE>
The registrant is a segregated asset account of the Company and is
therefore owned and controlled by the Company. All of the Company's
outstanding stock is owned and controlled by ING. Various companies
and other entities controlled by ING may therefore be considered to be
under common control with the registrant or the Company. Such other
companies and entities, together with the identity of their controlling
persons (where applicable), are set forth on the following organizational
chart.
As of December 31, 1997, the subsidiaries of ING are as follows:
ING GROUP - U.S.A. Holding Company System
As of December 31, 1997
ING Groep, N.V. (The Netherlands) - No FEIN (non-insurer)
ING Bank N.V. (The Netherlands) - No FEIN (non-insurer)
ING Verzekeringen N.V. (The Netherlands) - No FEIN (non-insurer)
ING Insurance International B.V. (The Netherlands) - No FEIN
(non-insurer)
Nederlands Reassurantie Groep Holding N.V. (The Netherlands)
(non-insurer)
NRG America Holding Company (Pennsylvania) (non-insurer)
(23-2074221)
NRG America Syndicate (New York) (non-insurer) (22-2281839)
NRG America Management Corporation (Pennsylvania) (23-1667532)
Philadelphia Reinsurance Corporation (Pennsylvania) (23-1620930)
Nationale-Nederlanden Intertrust B.V. (The Netherlands) (non-insurer)
NNUS Realty Corporation (Delaware) (non-insurer) (13-3062172)
ING America Insurance Holdings, Inc. (Delaware) (non-insurer)
(02-0333654)
Equitable of Iowa Companies, Inc. (Delaware) (non-insurer)
Directed Services, Inc. (New York) (non-insurer)
Equitable Investment Services, Inc. (Iowa) (non-insurer)
Equitable Life Insurance Company of Iowa (Iowa) (insurer)
Equitable American Insurance Company(Iowa) (insurer)
Equitable Creative Services, Ltd. (Iowa) (non-insurer)
Equitable Companies (Iowa) (non-insurer)
CLC, Ltd. (75%) (Iowa) (non-insurer)
Equitable American Marketing Services, Inc. (Iowa)
(non-insurer)
Equitable Marketing Services, Inc. (Iowa)
(non-insurer)
Younkers Insurance & Investments, Ltd. (Iowa)
(non-insurer)
USG Annuity & Life Company (Oklahoma) (insurer)
USGL Service Corporation (Iowa) (non-insurer)
Equitable of Iowa Companies Capital Trust (Delaware)
(non-insurer)
Equitable of Iowa Companies Capital Trust II (Massachusetts)
(non-insurer)
Equitable of Iowa Securities Network, Inc. (Iowa) (non-insurer)
Golden American Life Insurance Company (Delaware) (insurer)
First Golden American Life Insurance Company of New York
(New York) (insurer)
Locust Street Securities, Inc. (Iowa) (non-insurer)
Shiloh Farming Company (Louisiana) (non-insurer)
Tower Locust, Ltd. (Iowa) (non-insurer)
ING America Life Corporation (Georgia) (non-insurer) (58-1360182)
GAC Capital, Inc. (Delaware) (non-insurer) (51-0266924)
Life Insurance Company of Georgia (Georgia) (insurer)
(58-0298930)
Southland Life Insurance Company (Texas) (insurer)
(75-0572420)
Springstreet Associates, Inc. (Georgia) (non-insurer)
(58-1822054)
Security Life of Denver Insurance Company (Colorado) (insurer)
(84-0499703)
First ING Life Insurance Company of New York (New York)
(13-2740556)
First Secured Mortgage Deposit Corporation (Colorado)
(non-insurer) (84-1086427)
ING America Equities, Inc. (Colorado) (non-insurer)
(84-0499703)
Midwestern United Life Insurance Company (Indiana) (insurer)
(35-0838945)
Wilderness Associates (Colorado) (non-insurer)
Afore Bital ING, S. A. de C. V. (Mexico) (non-insurer)
Columbine Life Insurance Company (Colorado) (insurer) (52-1222820)
ING Investment Management LLC (Delaware) (non-insurer)
(58-1515059)
ING North America Insurance Corporation (Delaware)
(non-insurer) (52-1317217)
ING Seguros Sociedad Anonima de Capital Variable (Mexico)
(insurer)
Lion Custom Investments LLC (Delaware) (non-insurer)
MIA Office Americas, Inc. (Georgia) (non-insurer)
Orange Investment Enterprises, Inc. (Delaware) (non-insurer)
Security Life Assignment Corp. (Colorado) (insurer)
Security Life of Denver International, Ltd. (Bermuda) (insurer)
SLR Management, Ltd. (Bermuda) (non-insurer)
VESTAX Capital Corporation (Ohio) (non-insurer)
PMG Agency, Inc. (Ohio) (non-insurer)
VESTAX Securities Corp. (Ohio) (non-insurer)
VTX Agency Inc. (Ohio) (non-insurer)
VTX Agency of Michingan, Inc. (Michigan) (non-insurer)
ING U S P&C Corporation, Inc. (Delaware) (non-insurer) (51-0290450)
Alabama First Insurance Company (Alabama) (insurer) (63-0830057)
America First Insurance Company (New Hampshire) (insurer)
(58-0953149)
Cooling Grumme Mumford Company, Inc. (Indiana) (non-insurer)
(35-6018566)
Diversified Settlements, Inc. (New Hampshire) (non-insurer)
(02-0424648)
Excelsior Insurance Company (New Hampshire) (insurer)
(15-0302550)
Indiana Insurance Company (Indiana) (insurer) (35-0410010)
Consolidated Insurance Company (Indiana) (insurer)
(35-6018568)
Peerless Insurance Company (New Hampshire) (insurer)
(02-0177030)
The Netherlands Insurance Company (New Hampshire) (insurer)
(02-0342937)
<PAGE>
<PAGE>
Item 27: Number of Contract Owners
34,658 contract owners as of March 31, 1998
ITEM 28: INDEMNIFICATION
Golden American shall indemnify (including therein the prepayment of expenses)
any person who is or was a director, officer or employee, or who is or was
serving at the request of Golden American as a director, officer or employee
of another corporation, partnership, joint venture, trust or other enterprise
for expenses (including attorney's fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him with respect to any
threatened, pending or completed action, suit or proceedings against him by
reason of the fact that he is or was such a director, officer or employee to
the extent and in the manner permitted by law.
Golden American may also, to the extent permitted by law, indemnify any other
person who is or was serving Golden American in any capacity. The Board of
Directors shall have the power and authority to determine who may be
indemnified under this paragraph and to what extent (not to exceed the extent
provided in the above paragraph) any such person may be indemnified.
Golden American or its parents may purchase and maintain insurance on behalf
of any such person or persons to be indemnified under the provision in the
above paragraphs, against any such liability to the extent permitted by law.
Insofar as indemnification for liabilities arising under the Securities Act of
1933, as amended, may be permitted to directors, officers and controlling
persons of the Registrant, as provided above or otherwise, the Registrant has
been advised that in the opinion of the SEC such indemnification by the
Depositor is against public policy, as expressed in the Securities Act of 1933,
and therefore may be unenforceable. In the event that a claim of such
indemnification (except insofar as it provides for the payment by the Depositor
of expenses incurred or paid by a director, officer or controlling person in
the successful defense of any action, suit or proceeding) is asserted against
the Depositor by such director, officer or controlling person and the SEC is
still of the same opinion, the Depositor or Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether such
indemnification by the Depositor is against public policy as expressed by the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
<PAGE>
<PAGE>
ITEM 29: PRINCIPAL UNDERWRITER
(a) At present, Directed Services, Inc., the Registrant's Distributor, also
serves as principal underwriter for all contracts issued by Golden American.
DSI is the principal underwriter for Separate Account A, Separate Account B
and Alger Separate Account A of Golden American.
(b) The following information is furnished with respect to the principal
officers and directors of Directed Services, Inc., the Registrant's
Distributor:
Name and Principal Positions and Offices Positions and Offices
Business Address with Underwriter with Registrant
- ------------------ --------------------- ---------------------
Beth B. Neppl Director Director and Vice
Equitable of Iowa Companies President
909 Locust Street
Des Moines, IA 50309
R. Lawrence Roth Director None
VESTAX Capital Corporation
1931 Georgetown Road
Hudson, OH 44236
Myles R. Tashman Director, Executive Vice Director, Executive Vice
Directed Services, Inc. President, General President, General
1001 Jefferson Street Counsel and Secretary Counsel and Secretary
Wilmington, DE 19801
James R. McInnis President Executive Vice President
Directed Services, Inc.
1001 Jefferson Street
Wilmington, DE 19801
Barnett Chernow Executive Vice President Director and Executive
Directed Services, Inc. Vice President
1001 Jefferson Street
Wilmington, DE 19801
Stephen J. Preston Senior Vice President Senior Vice President
Directed Services, Inc. and Chief Actuary
1001 Jefferson Street
Wilmington, DE 19801
<PAGE>
<PAGE>
David L. Jacobson Senior Vice President Senior Vice President
Directed Services, Inc.
1001 Jefferson Street
Wilmington, DE 19801
Susan K. Wheat Treasurer None
Equitable of Iowa Companies
909 Locust Street
Des Moines, IA 50309
(c)
1997 Net
Name of Underwriting Compensation
Principal Discounts and on Brokerage
Underwriter Commissions Redemption Commissions Compensation
----------- ----------- ---------- ----------- ------------
DSI $35,944,000 $0 $0 $0
ITEM 30: LOCATION OF ACCOUNTS AND RECORDS
Accounts and records are maintained by Golden American Life Insurance Company
at 1001 Jefferson Street, Suite 400, Wilmington, DE 19801 and by Equitable
Life Insurance Company of Iowa, an affiliate, at 909 Locust Street,
Des Moines, IA 50309.
ITEM 31: MANAGEMENT SERVICES
None.
<PAGE>
<PAGE>
ITEM 32: UNDERTAKINGS
(a) Registrant hereby undertakes to file a post-effective amendment to this
registration statement as frequently as it is necessary to ensure that the
audited financial statements in the registration statement are never
more that 16 months old so long as payments under the variable annuity
contracts may be accepted.
(b) Registrant hereby undertakes to include either (1) as part of any
application to purchase a contract offered by the prospectus, a space that an
applicant can check to request a Statement of Additional Information, or (2) a
post card or similar written communication affixed to or included in the
prospectus that the applicant can remove to send for a Statement of Additional
Information; and,
(c) Registrant hereby undertakes to deliver any Statement of Additional
Information and any financial statements required to be made available under
this Form promptly upon written or oral request.
REPRESENTATIONS
1. The account meets definition of a "separate account" under federal
securities laws.
2. Golden American Life Insurance Company hereby represents that the fees
and charges deducted under the Contract described in the Prospectus, in
the aggregate, are reasonable in relation to the services rendered, the
expenses to be incurred and the risks assumed by the Company.
<PAGE>
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act
of 1940, the Registrant certifies that it meets the requirements of
Securities Act Rule 485(b) for effectiveness of this Registration Statement
and has caused this Registration Statement to be signed on its behalf in
the City of Wilmington, and State of Delaware, on the 29th day of
April, 1998.
SEPARATE ACCOUNT B
(Registrant)
By: GOLDEN AMERICAN LIFE
INSURANCE COMPANY
(Depositor)
By:
--------------------
Barnett Chernow*
President
Attest: /s/ Marilyn Talman
------------------------
Marilyn Talman
Vice President, Associate General Counsel
and Assistant Secretary of Depositor
As required by the Securities Act of 1933, this Registration Statement has
been signed below by the following persons in the capacities indicated on
April 29, 1998.
Signature Title
President and Director
- -------------------- of Depositor
Barnett Chernow*
Senior Vice President,
- -------------------- Director and Chief
Susan B. Watson* Financial Officer
DIRECTORS OF DEPOSITOR
- ----------------------
Frederick S. Hubbell*
- ----------------------
Paul E. Larson*
- ----------------------
Myles R. Tashman*
By: /s/ Marilyn Talman Attorney-in-Fact
-----------------------
Marilyn Talman
_______________________
*Executed by Marilyn Talman on behalf of those indicated pursuant
to Power of Attorney.
<PAGE>
<PAGE>
5(a) Individual Deferred Combination Variable and Fixed EX-99.B5A
Annuity Application
5(b) Group Deferred Combination Variable and Fixed EX-99.B5B
Enrollment Form
5(c) Individual Deferred Variable Annuity Application EX-99.B5C
8(a) Participation Agreement between Golden American EX-99.B8A
and Warburg Pincus Trust
8(b) Participation Agreement between Golden American EX-99.B8B
and PIMCO Variable Insurance Trust
8(c) Administrative Services Agreement between Golden EX-99.B8C
American and Equitable Life Insurance Company of
Iowa
8(d) Service Agreement between Golden American and EX-99.B8D
Directed Services, Inc.
8(e) Service Agreement between Golden American and EISI EX-99.B8E
10(a) Consent of Sutherland, Asbill & Brennan LLP EX-99.B10A
10(b) Consent of Ernst & Young LLP, Independent Auditors EX-99.B10B
10(c) Consent of Myles R. Tashman, Esq. EX-99.B10C
15 Powers of Attorney EX-99.B15
<PAGE>
<PAGE>
EXHIBIT (5)(a)
<PAGE>
<PAGE>
EXHIBIT 5(a)
GOLDEN AMERICAN
LIFE INSURANCE COMPANY DEFERRED VARIABLE ANNUITY
APPLICATION
Customer Service Center, PO Box 8794, Wilmington, DE 19899-8794
- --------------------------------------------------------------------------
1. (a) OWNER(S)
- --------------------------------------------------------------------------
Name Male Female Soc. Sec. # or Tax ID.#
/ / / /
- --------------------------------------------------------------------------
Permanent Address Phone ( )
- --------------------------------------------------------------------------
City State Zip Date of Birth
1. (b) JOINT OWNER
- --------------------------------------------------------------------------
Name Male Female Soc. Sec. # or Tax ID.#
/ / / /
- --------------------------------------------------------------------------
Permanent Address Date of Birth
- --------------------------------------------------------------------------
2. ANNUITANT (IF OTHER THAN OWNER)
- --------------------------------------------------------------------------
Name Male Female Soc. Sec. # or Tax ID.#
/ / / /
- --------------------------------------------------------------------------
Permanent Address Phone ( )
- --------------------------------------------------------------------------
City State Zip Date of Birth Relation
to Owner
- --------------------------------------------------------------------------
3. PLAN (CHECK ONE)
- --------------------------------------------------------------------------
(a)/ / DVA PLUS (b)/ / PREMIUM PLUS (c)/ / ES II (d)/ / ACCESS
(e)/ / Other _________________
- --------------------------------------------------------------------------
4. DEATH BENEFIT OPTIONS
- --------------------------------------------------------------------------
(a) / / 7% Solution-Enhanced #1 (b) / / Annual Ratchet-Enhanced #2
(Not available with ES II) (Not available with ES II)
(c) / / Standard
- --------------------------------------------------------------------------
5. INITIAL PREMIUM AND ALLOCATION INFORMATION
- --------------------------------------------------------------------------
(A) INITIAL PREMIUM PAID $__________ MAKE CHECK PAYABLE TO GOLDEN
AMERICAN LIFE INSURANCE COMPANY
Fill in percentages for premium allocation below (see (A)
INITIAL)
(B) DOLLAR COST AVERAGING (DCA): Optional. Please check box to elect.
/ /
Amount to be transferred monthly $_________
Division or Allocation Transferred From:
/ / Limited Maturity Bond Division / / Liquid Asset Division
/ / 1-Year Fixed Allocation
Divisions Transferred To: Fill in percentages for allocation
of DCA below (see (B) DCA)
<TABLE>
<CAPTION>
ACCOUNT DIVISION INVESTMENT ADVISER (A)INITIAL (B) DCA
<S> <C> <C> <C>
RESEARCH MASSACHUSETTS FINANCIAL SERVICES % %
COMPANY (MFS)
MID-CAP GROWTH MASSACHUSETTS FINANCIAL SERVICES % %
COMPANY (MFS)
TOTAL RETURN MASSACHUSETTS FINANCIAL SERVICES % %
COMPANY (MFS)
SMALL CAP FRED ALGER MANAGEMENT, INC. % %
GROWTH & INCOME ROBERTSON, STEPHENS & COMPANY % %
INVESTMENT MGMT, L.P.
VALUE + GROWTH ROBERTSON, STEPHENS & COMPANY % %
INVESTMENT MGMT, L.P.
ALL-GROWTH PILGRIM, BAXTER & ASSOCIATES, LTD. % %
FULLY MANAGED T. ROWE PRICE ASSOCIATES INC. % %
STRATEGIC EQUITY ZWEIG ADVISORS INC. % %
MULTIPLE ALLOCATION ZWEIG ADVISORS INC. % %
RISING DIVIDENDS KAYNE ANDERSON INV. MGMT., LLC % %
CAPITAL APPRECIATION CHANCELLOR LGT ASSET MANAGEMENT, INC. % %
VALUE EQUITY EAGLE ASSET MANAGEMENT, INC. % %
INTERNATIONAL
EQUITY/1/ WARBURG PINCUS ASSET MANAGEMENT, INC. % %
MANAGED GLOBAL /2/ PUTNAM INVESTMENT MANAGEMENT, INC. % %
EMERGING MARKETS /2/ PUTNAM INVESTMENT MANAGEMENT, INC. % %
HARD ASSETS VAN ECK ASSOCIATES CORP. % %
REAL ESTATE EII REALTY SECURITIES, INC. % %
GLOBAL FIXED
INCOME /3/ BARING INTERNATIONAL INVESTMENT LIMITED % %
LIMITED MATURITY BOND ING INVESTMENT MANAGEMENT, LLC % %
LIQUID ASSET ING INVESTMENT MANAGEMENT, LLC % %
DEVELOPING WORLD MONTGOMERY ASSET MANAGEMENT, LLC % %
GROWTH OPPORTUNITIES MONTGOMERY ASSET MANAGEMENT, LLC % %
HIGH YIELD BOND PACIFIC INVESTMENT MANAGEMENT
COMPANY (PIMCO) % %
STOCKSPLUS GROWTH AND
INCOME PACIFIC INVESTMENT MANAGEMENT
COMPANY (PIMCO) % %
FIXED ALLOCATION
ELECTION / / 1-YEAR / / 3-YEAR / / 5-YEAR
/ / 7-Year / / 10-YEAR % %
FIXED ALLOCATION
ELECTION / / ___________YEAR % %
TOTAL 100% 100%
</TABLE>
/1/ NOT AVAILABLE WITH DVA PLUS OR ACCESS /2/ AVAILABLE ONLY WITH
DVAPLUS AND ACCESS /3/ NOT AVAILABLE WITH DVA PLUS
GA-AA-1032-6/97<PAGE>
- --------------------------------------------------------------------------
6. BENEFICIARY(IES) (IF MORE THAN ONE INDICATE %)
- --------------------------------------------------------------------------
Primary Relationship
Name: to Owner
- --------------------------------------------------------------------------
Primary Relationship
Name: to Owner
- --------------------------------------------------------------------------
Contingent
Name:
- --------------------------------------------------------------------------
7. OPTIONAL SYSTEMATIC PARTIAL WITHDRAWALS
- --------------------------------------------------------------------------
If you want to receive Systematic Partial Withdrawals, your request
must be received in writing. For the appropriate form, please call our
Customer Service Center: 1-800-366-0066.
- --------------------------------------------------------------------------
8. TELEPHONE REALLOCATION AUTHORIZATION ________________ OWNER'S INITIALS
- --------------------------------------------------------------------------
I authorize Golden American to act upon reallocation instructions
given by telephone from _______________ (name of your registered
representative) upon furnishing his/her social security number.
Neither Golden American nor any person authorized by Golden American
will be responsible for any claim, loss, liability or expense in
connection with reallocation instructions received by telephone from
such person if Golden American or such other person acted on such
telephone instructions in good faith in reliance upon this
authorization. Golden American will continue to act upon this
authorization until such time as the person indicated above
is no longer affiliated with the broker/dealer under which my contract
was purchased or until such time that I notify Golden American
otherwise in writing.
- --------------------------------------------------------------------------
9. TAX-QUALIFIED PLANS If you are funding a qualified plan, please
specify type:
- --------------------------------------------------------------------------
/ / IRA / / IRA Rollover / / SEP/IRA / /Roth IRA
/ / Other ________________________
- --------------------------------------------------------------------------
10. REPLACEMENT
- --------------------------------------------------------------------------
Will the coverage applied for replace any existing annuity or life
insurance coverage?
/ / Yes (If yes, please complete following) / / No
- --------------------------------------------------------------------------
Company Name Policy Number Face Amount
- --------------------------------------------------------------------------
11. READ THE FOLLOWING STATEMENTS CAREFULLY AND SIGN BELOW:
- --------------------------------------------------------------------------
- BY SIGNING BELOW, I ACKNOWLEDGE RECEIPT OF THE PROSPECTUS. I AGREE
THAT, TO THE BEST OF MY KNOWLEDGE AND BELIEF, ALL STATEMENTS AND
ANSWERS IN THIS APPLICATION ARE COMPLETE AND TRUE AND MAY BE RELIED
UPON IN DETERMINING WHETHER TO ISSUE THE CONTRACT. MY ANSWERS WILL FORM
A PART OF ANY CONTRACT TO BE ISSUED, AND ONLY THE OWNER AND GOLDEN
AMERICAN HAVE THE AUTHORITY TO MODIFY THIS APPLICATION.
- CONTRACTS AND POLICIES AND UNDERLYING SERIES SHARES OR SECURITIES
WHICH FUND CONTRACTS AND POLICIES ARE NOT INSURED BY THE FDIC OR ANY
OTHER AGENCY. THEY ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF ANY BANK
AND ARE NOT BANK GUARANTEED. ALSO, THEY ARE SUBJECT TO MARKET
FLUCTUATION, INVESTMENT RISK AND POSSIBLE LOSS OF PRINCIPAL INVESTED.
- I UNDERSTAND THAT THE CONTRACT'S CASH SURRENDER VALUE, WHEN BASED
ON THE INVESTMENT EXPERIENCE OF A SEPARATE ACCOUNT DIVISION, MAY
INCREASE OR DECREASE ON ANY DAY AND THAT NO MINIMUM VALUE IS GUARANTEED.
THE CONTRACT'S COVERAGE IS IN ACCORD WITH MY ANTICIPATED FINANCIAL NEEDS.
- I UNDERSTAND THAT ANY AMOUNT ALLOCATED TO THE FIXED ACCOUNT MAY BE
SUBJECT TO A MARKET VALUE ADJUSTMENT, WHICH MAY CAUSE THE VALUES TO
INCREASE OR DECREASE, PRIOR TO A SPECIFIED DATE OR DATES AS SPECIFIED
IN THE CONTRACT.
______________________________________ _____________________________
Signature of Owner Signed at (City, State) Date
______________________________________ _____________________________
Signature of Joint Owner (if applicable) Signed at (City, State) Date
______________________________________ _____________________________
Signature of Annuitant (if other than Signed at (City, State) Date
Owner)
Client Account No. (if applicable)_____________________
- --------------------------------------------------------------------------
FOR AGENT USE ONLY
- --------------------------------------------------------------------------
DO YOU HAVE REASON TO BELIEVE THAT THE CONTRACT APPLIED FOR WILL REPLACE
ANY EXISTING ANNUITY OR LIFE INSURANCE COVERAGE?
/ / YES / / NO
__________________________ ________________________ ___________________
Agent Signature Print Agent Name & No. Social Security No.
__________________________________
Broker/Dealer/Branch
- --------------------------------------------------------------------------
Commission Alternative (select one): / / A / / B / / C / / D
- --------------------------------------------------------------------------
Golden American Life Insurance Company, Customer Service Center,
PO Box 8794, Wilmington, DE 19899-8794
1-800-366-0066
GA-AA-1032-6/97
<PAGE>
<PAGE>
<PAGE>
<PAGE>
EXHIBIT (5)(b)
<PAGE>
<PAGE>
EXHIBIT 5(b)
GOLDEN AMERICAN
LIFE INSURANCE COMPANY DEFERRED VARIABLE ANNUITY
ENROLLMENT FORM
Customer Service Center, PO Box 8794, Wilmington, DE 19899-8794
- --------------------------------------------------------------------------
1. (a) OWNER(S)
- --------------------------------------------------------------------------
Name Male Female Soc. Sec. # or Tax ID.#
/ / / /
- --------------------------------------------------------------------------
Permanent Address Phone ( )
- --------------------------------------------------------------------------
City State Zip Date of Birth
1. (b) JOINT OWNER
- --------------------------------------------------------------------------
Name Male Female Soc. Sec. # or Tax ID.#
/ / / /
- --------------------------------------------------------------------------
Permanent Address Date of Birth
- --------------------------------------------------------------------------
2. ANNUITANT (IF OTHER THAN OWNER)
- --------------------------------------------------------------------------
Name Male Female Soc. Sec. # or Tax ID.#
/ / / /
- --------------------------------------------------------------------------
Permanent Address Phone ( )
- --------------------------------------------------------------------------
City State Zip Date of Birth Relation
to Owner
- --------------------------------------------------------------------------
3. PLAN (CHECK ONE)
- --------------------------------------------------------------------------
(a) / / DVA PLUS (b) / / PREMIUM PLUS (c) / / ES II (d) / / ACCESS
(e) / / Other _________________
- --------------------------------------------------------------------------
4. DEATH BENEFIT OPTIONS
- --------------------------------------------------------------------------
(a) / / 7% Solution -- Enhanced #1 (b) / / Annual Ratchet -- Enhanced #2
(Not available with ES II) (Not available with ES II)
(c) / / Standard
- --------------------------------------------------------------------------
5. INITIAL PREMIUM AND ALLOCATION INFORMATION
- --------------------------------------------------------------------------
(A) INITIAL PREMIUM PAID $__________ MAKE CHECK PAYABLE TO GOLDEN
AMERICAN LIFE INSURANCE COMPANY
Fill in percentages for premium allocation below (see (A) INITIAL)
(B) DOLLAR COST AVERAGING (DCA): Optional. Please check box to elect.
/ /
Amount to be transferred monthly $_________
Division or Allocation Transferred From:
/ / Limited Maturity Bond Division / / Liquid Asset Division
/ / 1-Year Fixed Allocation
Divisions Transferred To: Fill in percentages for allocation of DCA
below (see (B) DCA)
<TABLE>
<CAPTION>
ACCOUNT DIVISION INVESTMENT ADVISER (A)INITIAL (B) DCA
<S> <C> <C> <C>
RESEARCH MASSACHUSETTS FINANCIAL SERVICES % %
COMPANY (MFS)
MID-CAP GROWTH MASSACHUSETTS FINANCIAL SERVICES % %
COMPANY (MFS)
TOTAL RETURN MASSACHUSETTS FINANCIAL SERVICES % %
COMPANY (MFS)
SMALL CAP FRED ALGER MANAGEMENT, INC. % %
GROWTH & INCOME ROBERTSON, STEPHENS & COMPANY % %
INVESTMENT MGMT, L.P.
VALUE + GROWTH ROBERTSON, STEPHENS & COMPANY % %
INVESTMENT MGMT, L.P.
ALL-GROWTH PILGRIM, BAXTER & ASSOCIATES, LTD. % %
FULLY MANAGED T. ROWE PRICE ASSOCIATES INC. % %
STRATEGIC EQUITY ZWEIG ADVISORS INC. % %
MULTIPLE ALLOCATION ZWEIG ADVISORS INC. % %
RISING DIVIDENDS KAYNE ANDERSON INV. MGMT., LLC % %
CAPITAL APPRECIATION CHANCELLOR LGT ASSET MANAGEMENT, INC. % %
VALUE EQUITY EAGLE ASSET MANAGEMENT, INC. % %
INTERNATIONAL
EQUITY/1/ WARBURG PINCUS ASSET MANAGEMENT, INC. % %
MANAGED GLOBAL /2/ PUTNAM INVESTMENT MANAGEMENT, INC. % %
EMERGING MARKETS /2/ PUTNAM INVESTMENT MANAGEMENT, INC. % %
HARD ASSETS VAN ECK ASSOCIATES CORP. % %
REAL ESTATE EII REALTY SECURITIES, INC. % %
GLOBAL FIXED
INCOME /3/ BARING INTERNATIONAL INVESTMENT LIMITED % %
LIMITED MATURITY BOND ING INVESTMENT MANAGEMENT, LLC % %
LIQUID ASSET ING INVESTMENT MANAGEMENT, LLC % %
DEVELOPING WORLD MONTGOMERY ASSET MANAGEMENT, LLC % %
GROWTH OPPORTUNITIES MONTGOMERY ASSET MANAGEMENT, LLC % %
HIGH YIELD BOND PACIFIC INVESTMENT MANAGEMENT
COMPANY (PIMCO) % %
STOCKSPLUS GROWTH AND
INCOME PACIFIC INVESTMENT MANAGEMENT
COMPANY (PIMCO) % %
FIXED ALLOCATION
ELECTION / / 1-YEAR / / 3-YEAR / / 5-YEAR
/ / 7-Year / / 10-YEAR % %
FIXED ALLOCATION
ELECTION / / ____________YEAR % %
TOTAL 100% 100%
</TABLE>
/1/ NOT AVAILABLE WITH DVA PLUS OR ACCESS /2/ AVAILABLE ONLY WITH
DVA PLUS AND ACCESS /3/ NOT AVAILABLE WITH DVA PLUS
ANY PERSON WHO KNOWINGLY AND WITH INTENT TO DEFRAUD ANY INSURANCE COMPANY
OR OTHER PERSON FILES AN APPLICATION FOR INSURANCE CONTAINING ANY
MATERIALLY FALSE INFORMATION, OR CONCEALS FOR THE PURPOSE OF MISLEADING
INFORMATION CONCERNING ANY FACT MATERIAL THERE TO, COMMITS A FRAUDULENT
INSURANCE ACT, WHICH IS A CRIME.
GA-EA-1032-6/97
<PAGE>
- -------------------------------------------------------------------------
6. BENEFICIARY(IES) (IF MORE THAN ONE 4INDICATE %)
- -------------------------------------------------------------------------
Primary Relationship
Name: to Owner
- --------------------------------------------------------------------------
Primary Relationship
Name: to Owner
- --------------------------------------------------------------------------
Contingent
Name:
- --------------------------------------------------------------------------
7. OPTIONAL SYSTEMATIC PARTIAL WITHDRAWALS
- --------------------------------------------------------------------------
If you want to receive Systematic Partial Withdrawals, your request
must be received in writing. For the appropriate form, please call our
Customer Service Center: 1-800-366-0066.
- --------------------------------------------------------------------------
8. TELEPHONE REALLOCATION AUTHORIZATION ________________ OWNER'S INITIALS
- --------------------------------------------------------------------------
I authorize Golden American to act upon reallocation instructions
given by telephone from _______________ (name of your registered
representative) upon furnishing his/her social security number.
Neither Golden American nor any person authorized by Golden American
will be responsible for any claim, loss, liability or expense in
connection with reallocation instructions received by telephone from
such person if Golden American or such other person acted on such
telephone instructions in good faith in reliance upon this
authorization. Golden American will continue to act upon this
authorization until such time as the person indicated above
is no longer affiliated with the broker/dealer under which my contract
was purchased or until such time that I notify Golden American
otherwise in writing.
- --------------------------------------------------------------------------
9. TAX-QUALIFIED PLANS If you are funding a qualified plan, please
specify type.
- --------------------------------------------------------------------------
/ / IRA / / IRA Rollover / / SEP/IRA / / Roth IRA
/ / Other ________________________
- --------------------------------------------------------------------------
10. REPLACEMENT
- --------------------------------------------------------------------------
Will the coverage applied for replace any existing annuity or life
insurance coverage?
/ / Yes (If yes, please complete following) / / No
- --------------------------------------------------------------------------
Company Name Policy Number Face Amount
- --------------------------------------------------------------------------
11. READ THE FOLLOWING STATEMENTS CAREFULLY AND SIGN BELOW:
- --------------------------------------------------------------------------
- BY SIGNING BELOW, I ACKNOWLEDGE RECEIPT OF THE PROSPECTUS. I AGREE
THAT, TO THE BEST OF MY KNOWLEDGE AND BELIEF, ALL STATEMENTS AND
ANSWERS IN THIS ENROLLMENT FORM ARE COMPLETE AND TRUE AND MAY BE RELIED
UPON IN DETERMINING WHETHER TO ISSUE THE CERTIFICATE. MY ANSWERS WILL
FORM A PART OF ANY CERTIFICATE TO BE ISSUED, AND ONLY THE OWNER AND
GOLDEN AMERICAN HAVE THE AUTHORITY TO MODIFY THIS ENROLLMENT FORM.
- CONTRACTS AND POLICIES AND UNDERLYING SERIES SHARES OR SECURITIES
WHICH FUND CONTRACTS AND POLICIES ARE NOT INSURED BY THE FDIC OR ANY
OTHER AGENCY. THEY ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF ANY BANK
AND ARE NOT BANK GUARANTEED. ALSO, THEY ARE SUBJECT TO MARKET
FLUCTUATION, INVESTMENT RISK AND POSSIBLE LOSS OF PRINCIPAL INVESTED.
- I UNDERSTAND THAT THE CERTIFICATE'S CASH SURRENDER VALUE, WHEN
BASED ON THE INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT DIVISION, MAY
INCREASE OR DECREASE ON ANY DAY AND THAT NO MINIMUM VALUE IS GUARANTEED.
THE CERTIFICATE'S COVERAGE IS IN ACCORD WITH MY ANTICIPATED FINANCIAL
NEEDS.
- I UNDERSTAND THAT ANY AMOUNT ALLOCATED TO THE FIXED ACCOUNT MAY BE
SUBJECT TO A MARKET VALUE ADJUSTMENT, WHICH MAY CAUSE THE VALUES
TO INCREASE OR DECREASE, PRIOR TO A SPECIFIED DATE OR DATES AS SPECIFIED
IN THE CERTIFICATE.
______________________________________ _____________________________
Signature of Owner Signed at (City, State) Date
______________________________________ _____________________________
Signature of Joint Owner (if applicable) Signed at (City, State) Date
______________________________________ _____________________________
Signature of Annuitant (if other than Signed at (City, State) Date
Owner)
Client Account No. (if applicable)_____________________
- --------------------------------------------------------------------------
FOR AGENT USE ONLY
- --------------------------------------------------------------------------
DO YOU HAVE REASON TO BELIEVE THAT THE CONTRACT APPLIED FOR WILL REPLACE
ANY EXISTING ANNUITY OR LIFE INSURANCE COVERAGE?
/ / YES / / NO
__________________________ ________________________ ___________________
Agent Signature Print Agent Name & No. Social Security No.
__________________________________
Broker/Dealer/Branch
- --------------------------------------------------------------------------
Commission Alternative (select one): / / A / / B / / C / / D
- --------------------------------------------------------------------------
Golden American Life Insurance Company, Customer Service Center,
PO Box 8794, Wilmington, DE 19899-8794
1-800-366-0066
GA-EA-1032-6/97
<PAGE>
<PAGE>
<PAGE>
<PAGE>
EXHIBIT (5)(c)
<PAGE>
<PAGE>
GOLDEN AMERICAN
LIFE INSURANCE COMPANY DEFERRED VARIABLE ANNUITY
APPLICATION
Customer Service Center, PO Box 8794, Wilmington, DE 19899-8794
- --------------------------------------------------------------------------
1. (a) OWNER(S)
- --------------------------------------------------------------------------
Name Male Female Soc. Sec. # or Tax ID.#
/ / / /
- --------------------------------------------------------------------------
Permanent Address Phone ( )
- --------------------------------------------------------------------------
City State Zip Date of Birth
1. (b) JOINT OWNER
- --------------------------------------------------------------------------
Name Male Female Soc. Sec. # or Tax ID.#
/ / / /
- --------------------------------------------------------------------------
Permanent Address Date of Birth
- --------------------------------------------------------------------------
2. ANNUITANT (IF OTHER THAN OWNER)
- --------------------------------------------------------------------------
Name Male Female Soc. Sec. # or Tax ID.#
/ / / /
- --------------------------------------------------------------------------
Permanent Address Phone ( )
- --------------------------------------------------------------------------
City State Zip Date of Birth Relation
to Owner
- --------------------------------------------------------------------------
3. PLAN (CHECK ONE)
- --------------------------------------------------------------------------
(a) / / DVA PLUS (b) / / PREMIUM PLUS (c) / / ES II (d) / / ACCESS
(e) / / Other _________________
- --------------------------------------------------------------------------
4. DEATH BENEFIT OPTIONS
- --------------------------------------------------------------------------
(a) / / 7% Solution -- Enhanced #1 (b) / / Annual Ratchet -- Enhanced #2
(Not available with ES II) (Not available with ES II)
(c) / / Standard
- --------------------------------------------------------------------------
5. INITIAL PREMIUM AND ALLOCATION INFORMATION
- --------------------------------------------------------------------------
(A) INITIAL PREMIUM PAID $__________ MAKE CHECK PAYABLE TO GOLDEN
AMERICAN LIFE INSURANCE COMPANY
Fill in percentages for premium allocation below (see (A) INITIAL)
(B) DOLLAR COST AVERAGING (DCA): Optional. Please check box to elect.
/ /
Amount to be transferred monthly $_________
Division or Allocation Transferred From:
/ / Limited Maturity Bond Division / / Liquid Asset Division
/ / 1-Year Fixed Allocation
Divisions Transferred To: Fill in percentages for allocation of DCA
below (see (B) DCA)
<TABLE>
<CAPTION>
ACCOUNT DIVISION INVESTMENT ADVISER (A) INITIAL (B) DCA
<S> <C> <C> <C>
RESEARCH MASSACHUSETTS FINANCIAL SERVICES % %
COMPANY (MFS)
MID-CAP GROWTH MASSACHUSETTS FINANCIAL SERVICES % %
COMPANY (MFS)
TOTAL RETURN MASSACHUSETTS FINANCIAL SERVICES % %
COMPANY (MFS)
SMALL CAP FRED ALGER MANAGEMENT, INC. % %
GROWTH & INCOME ROBERTSON, STEPHENS & COMPANY % %
INVESTMENT MGMT, L.P.
VALUE + GROWTH ROBERTSON, STEPHENS & COMPANY % %
INVESTMENT MGMT, L.P.
ALL-GROWTH PILGRIM, BAXTER & ASSOCIATES, LTD. % %
FULLY MANAGED T. ROWE PRICE ASSOCIATES INC. % %
STRATEGIC EQUITY ZWEIG ADVISORS INC. % %
MULTIPLE ALLOCATION ZWEIG ADVISORS INC. % %
RISING DIVIDENDS KAYNE ANDERSON INV. MGMT., LLC % %
CAPITAL APPRECIATION CHANCELLOR LGT ASSET MANAGEMENT, INC. % %
VALUE EQUITY EAGLE ASSET MANAGEMENT, INC. % %
INTERNATIONAL
EQUITY/1/ WARBURG PINCUS ASSET MANAGEMENT, INC. % %
MANAGED GLOBAL /2/ PUTNAM INVESTMENT MANAGEMENT, INC. % %
EMERGING MARKETS /2/ PUTNAM INVESTMENT MANAGEMENT, INC. % %
HARD ASSETS VAN ECK ASSOCIATES CORP. % %
REAL ESTATE EII REALTY SECURITIES, INC. % %
GLOBAL FIXED
INCOME /3/ BARING INTERNATIONAL INVESTMENT LIMITED % %
LIMITED MATURITY BOND ING INVESTMENT MANAGEMENT, LLC % %
LIQUID ASSET ING INVESTMENT MANAGEMENT, LLC % %
DEVELOPING WORLD MONTGOMERY ASSET MANAGEMENT, LLC % %
GROWTH OPPORTUNITIES MONTGOMERY ASSET MANAGEMENT, LLC % %
HIGH YIELD BOND PACIFIC INVESTMENT MANAGEMENT
COMPANY (PIMCO) % %
STOCKSPLUS GROWTH AND
INCOME PACIFIC INVESTMENT MANAGEMENT
COMPANY (PIMCO) % %
GUARANTEED INTEREST
DIVISION / / 1-YEAR / / 3-YEAR / / 5-YEAR
/ / 7-YEAR % %
GUARANTEED INTEREST
DIVISION / / ____________YEAR % %
TOTAL 100% 100%
</TABLE>
/1/ NOT AVAILABLE WITH DVA PLUS OR ACCESS /2/ AVAILABLE ONLY WITH DVA
PLUS AND ACCESS /3/ NOT AVAILABLE WITH DVA PLUS
GA-AA-1033-6/97
<PAGE>
- --------------------------------------------------------------------------
6. BENEFICIARY(IES) (IF MORE THAN ONE - INDICATE %)
- --------------------------------------------------------------------------
Primary Relationship
Name: to Owner
- --------------------------------------------------------------------------
Primary Relationship
Name: to Owner
- --------------------------------------------------------------------------
Contingent
Name:
- --------------------------------------------------------------------------
7. OPTIONAL SYSTEMATIC PARTIAL WITHDRAWALS
- --------------------------------------------------------------------------
If you want to receive Systematic Partial Withdrawals, your request
must be received in writing. For the appropriate form, please call our
Customer Service Center: 1-800-366-0066.
- --------------------------------------------------------------------------
8. TELEPHONE REALLOCATION AUTHORIZATION ________________ OWNER'S INITIALS
- --------------------------------------------------------------------------
I authorize Golden American to act upon reallocation instructions
given by telephone from _______________ (name of your registered
representative) upon furnishing his/her social security number.
Neither Golden American nor any person authorized by Golden American
will be responsible for any claim, loss, liability or expense in
connection with reallocation instructions received by telephone from
such person if Golden American or such other person acted on such
telephone instructions in good faith in reliance upon this
authorization. Golden American will continue to act upon this
authorization until such time as the person indicated above
is no longer affiliated with the broker/dealer under which my contract
was purchased or until such time that I notify Golden American
otherwise in writing.
- --------------------------------------------------------------------------
9. TAX-QUALIFIED PLANS If you are funding a qualified plan, please
specify type:
- --------------------------------------------------------------------------
/ / IRA / / IRA Rollover / / SEP/IRA / / Roth IRA
/ / Other ________________________
- --------------------------------------------------------------------------
10. REPLACEMENT
- --------------------------------------------------------------------------
Will the coverage applied for replace any existing annuity or life
insurance coverage?
/ / Yes (If yes, please complete following) / / No
- --------------------------------------------------------------------------
Company Name Policy Number Face Amount
- --------------------------------------------------------------------------
11. READ THE FOLLOWING STATEMENTS CAREFULLY AND SIGN BELOW:
- --------------------------------------------------------------------------
- BY SIGNING BELOW, I ACKNOWLEDGE RECEIPT OF THE PROSPECTUS. I AGREE
THAT, TO THE BEST OF MY KNOWLEDGE AND BELIEF, ALL STATEMENTS AND
ANSWERS IN THIS APPLICATION ARE COMPLETE AND TRUE AND MAY BE RELIED
UPON IN DETERMINING WHETHER TO ISSUE THE CONTRACT. MY ANSWERS WILL FORM
A PART OF ANY CONTRACT TO BE ISSUED, AND ONLY THE OWNER AND GOLDEN
AMERICAN HAVE THE AUTHORITY TO MODIFY THIS APPLICATION.
- CONTRACTS AND POLICIES AND UNDERLYING SERIES SHARES OR SECURITIES
WHICH FUND CONTRACTS AND POLICIES ARE NOT INSURED BY THE FDIC OR ANY
OTHER AGENCY. THEY ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF ANY BANK
AND ARE NOT BANK GUARANTEED. ALSO, THEY ARE SUBJECT TO MARKET
FLUCTUATION, INVESTMENT RISK AND POSSIBLE LOSS OF PRINCIPAL INVESTED.
- I UNDERSTAND THAT THE CONTRACT'S CASH SURRENDER VALUE, WHEN BASED
ON THE INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT DIVISION, MAY
INCREASE OR DECREASE ON ANY DAY AND THAT NO MINIMUM VALUE IS GUARANTEED.
THE CONTRACT'S COVERAGE IS IN ACCORD WITH MY ANTICIPATED FINANCIAL NEEDS.
______________________________________ _____________________________
Signature of Owner Signed at (City, State) Date
______________________________________ _____________________________
Signature of Joint Owner (if applicable) Signed at (City, State) Date
______________________________________ _____________________________
Signature of Annuitant (if other than Signed at (City, State) Date
Owner)
Client Account No. (if applicable)_____________________
- --------------------------------------------------------------------------
FOR AGENT USE ONLY
- --------------------------------------------------------------------------
DO YOU HAVE REASON TO BELIEVE THAT THE CONTRACT APPLIED FOR WILL REPLACE
ANY EXISTING ANNUITY OR LIFE INSURANCE COVERAGE?
/ / YES / / NO
__________________________ ________________________ ___________________
Agent Signature Print Agent Name & No. Social Security No.
__________________________________
Broker/Dealer/Branch
- --------------------------------------------------------------------------
Commission Alternative (select one): / / A / / B / / C / / D
- --------------------------------------------------------------------------
Golden American Life Insurance Company, Customer Service Center,
PO Box 8794, Wilmington, DE 19899-8794
1-800-366-0066
GA-AA-1033-6/97
<PAGE>
<PAGE>
<PAGE>
<PAGE>
EXHIBIT (8)(a)
PARTICIPATION AGREEMENT
BY AND AMONG
GOLDEN AMERICAN LIFE INSURANCE COMPANY OF IOWA
AND
WARBURG, PINCUS TRUST
AND
WARBURG, PINCUS COUNSELLORS, INC.
AND
COUNSELLORS SECURITIES INC.
THIS AGREEMENT, made and entered into this ____ day of
________, 1997, and effective as of the ____ day of ________,
1997, by and among Golden American Life Insurance Company,
organized under the laws of the State of Delaware (the
"Company"), on its own behalf and on behalf of each separate
account of the Company named in Schedule 1 to this Agreement as
may be amended from time to time (each account collectively
referred to as the "Account"), Warburg, Pincus Trust, an open-end
management investment company and business trust organized under
the laws of the Commonwealth of Massachusetts (the "Fund");
Warburg, Pincus Counsellors, Inc. a corporation organized under
the laws of the State of Delaware (the "Adviser"); and
Counsellors Securities Inc., a corporation organized under the
laws of the State of New York ("CSI").
WHEREAS, the Fund engages in business as an open--end
management investment company and was established for the purpose
of serving as the investment vehicle for separate accounts
established for variable life insurance contracts and variable
annuity contracts to be offered by insurance companies that have
entered into participation agreements similar to this Agreement
(the "Participating Insurance Companies"), and
WHEREAS, beneficial interests in the Fund are divided into
several series of shares, each representing the interest in a
particular managed portfolio of securities and other assets (the
"Portfolios"); and
WHEREAS, the Fund has received an order from the Securities
& Exchange Commission (the "SEC") granting Participating
Insurance Companies and variable annuity separate accounts and
variable life insurance separate accounts relief from the
provisions of Sections 9(a), 13(a), 15(a), and 15(b) of the
Investment Company Act of 1940, as amended, (the "1940 Act") and
Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent
necessary to permit shares of the Fund to be sold to and held by
variable annuity separate accounts and variable life insurance
separate accounts of both affiliated and unaffiliated
Participating Insurance Companies and qualified pension and
retirement plans outside of the separate account context (the
"Mixed and Shared Funding Exemptive Order"). The parties to this
Agreement agree that the conditions or undertakings specified in
the Mixed and
<PAGE>
<PAGE>
Shared Funding Exemptive Order and that may be imposed on the
Company, the Fund, the Adviser and/or CSI by virtue of the
receipt of such order by the SEC will be incorporated herein by
reference, and such parties agree to comply with such conditions
and undertakings to the extent applicable to each such party; and
WHEREAS, the Fund is registered as an open-end management
investment company under the 1940 Act and its shares are
registered under the Securities Act of 1933, as amended (the
"1933 Act"); and
WHEREAS, the Company has registered or will register
certain variable annuity contracts (the "Contracts") under the
1933 Act; and
WHEREAS, the Account is a duly organized, validly existing
segregated asset account, established by resolution of the Board
of Directors of the Company under the insurance laws of the State
of Delaware, to set aside and invest assets attributable to the
Contracts; and
WHEREAS, the Company has registered the Account as a unit
investment trust under the 1940 Act; and
WHEREAS, CSI, the Fund's distributor, is registered as a
broker-dealer with the SEC under the Securities Exchange Act of
1934, as amended (the "1934 Act"), and is a member in good
standing of the National Association of Securities Dealers, Inc.
(the "NASD"); and
WHEREAS, to the extent permitted by applicable insurance
laws and regulations, the Company intends to purchase shares of
the Portfolios named in Schedule 2, as such schedule may be
amended from time to time (the "Designated Portfolios") on behalf
of the Account to fund the Contracts, and the Fund is authorized
to sell such shares to unit investment trusts such as the Account
at net asset value;
NOW, THEREFORE, in consideration of their mutual promises,
the Company, the Fund, the Adviser and CSI agree as follows:
ARTICLE I. SALE OF FUND SHARES
1.1. The Fund agrees to sell to the Company those shares of
the Designated Portfolios that each Account orders, executing
such orders on a daily basis at the net asset value next computed
after receipt and acceptance by the Fund or its designee of the
order for the shares of the Fund. For purposes of this Section
1.1, the Company will
2
<PAGE>
<PAGE>
be the designee of the Fund for receipt of such orders
from each Account and receipt by such designee will
constitute receipt by the Fund; provided that the Fund
receives notice of such order by 10:00 a.m. Eastern Time
on the next following business day ("T+1"). "Business
Day" will mean any day on which the New York Stock
Exchange is open for trading and on which the Fund
calculates its net asset value pursuant to the rules of
the SEC.
1.2. The Company will pay for Fund shares on T+1 that an order
to purchase Fund shares is made in accordance with Section
1.1 above. Payment will be in federal funds transmitted
by wire. This wire transfer will be initiated by 12:00
p.m. Eastern Time.
1.3. The Fund agrees to make shares of the Designated
Portfolios available indefinitely for purchase at the
applicable net asset value per share by Participating
Insurance Companies and their separate accounts on those
days on which the Fund calculates its Designated Portfolio
net asset value pursuant to rules of the SEC and the Fund
shall use reasonable efforts to calculate such net asset
value on each day the New York Stock Exchange is open for
trading; provided, however, that the Board of Trustees of
the Fund (the "Fund Board") may refuse to sell shares of
any Portfolio to any person, or suspend or terminate the
offering of shares of any Portfolio if such action is
required by law or by regulatory authorities having
jurisdiction or is, in the sole discretion of the Fund
Board, acting in good faith and in light of its fiduciary
duties under federal and any applicable state laws,
necessary in the best interests of the shareholders of
such Portfolio.
1.4. On each Business Day on which the Fund calculates its net
asset value, the Company will aggregate and calculate the
net purchase or redemption orders for each Account
maintained by the Fund in which contract owner assets are
invested. Net orders will only reflect orders that the
Company has received prior to the close of regular trading
on the New York Stock Exchange, Inc. (the "NYSE")
(currently 4:00 p.m., Eastern Time) on that Business Day.
Orders that the Company has received after the close of
regular trading on the NYSE will be treated as though
received on the next Business Day. Each communication of
orders by the Company will constitute a representation
that such orders were received by it prior to the close of
regular trading on the NYSE on the Business Day on which
the purchase or redemption order is priced in accordance
with Rule 22c-1 under the 1940 Act. Other procedures
relating to the handling of orders will be in accordance
with the prospectus and statement of information of the
relevant Designated Portfolio or with oral or written
instructions that CSI or the Fund will forward to the
Company from time to time.
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1.5. The Fund agrees that shares of the Fund will be sold only
to Participating Insurance Companies and their separate
accounts, qualified pension and retirement plans or such
other persons as are permitted under applicable provisions
of the Internal Revenue Code of 1986, as amended, (the
"Internal Revenue Code"), and regulations promulgated
thereunder, the sale to which will not impair the tax
treatment currently afforded the Contracts. No shares of
any Portfolio will be sold to the general public except as
set forth in this Section 1.5.
1.6. The Fund agrees to redeem for cash, upon the Company's
request, any full or fractional shares of the Fund held by
the Company, executing such requests on a daily basis at
the net asset value next computed after receipt and
acceptance by the Fund or its agent of the request for
redemption. For purposes of this Section 1.6, the Company
will be the designee of the Fund for receipt of requests
for redemption from each Account and receipt by such
designee will constitute receipt by the Fund, provided the
Fund receives notice of request for redemption by 10:00
a.m. Eastern Time on the next following Business Day.
Payment will be in federal funds transmitted by wire to
the Company's account as designated by the Company in
writing from time to time, on the same Business Day the
Fund receives notice of the redemption order from the
Company. The Fund reserves the right to delay payment of
redemption proceeds, but in no event may such payment be
delayed longer than the period permitted by the 1940 Act.
The Fund will not bear any responsibility whatsoever for
the proper disbursement or crediting of redemption
proceeds; the Company alone will be responsible for such
action. If notification of redemption is received after
10:00 a.m. Eastern Time, payment for redeemed shares will
be made on the next following Business Day.
1.7. The Company agrees to purchase and redeem the shares of
the Designated Portfolios offered by the then current
prospectus of the Fund in accordance with the provisions
of such prospectus.
1.8. Issuance and transfer of the Fund's shares will be by book
entry only. Stock certificates will not be issued to the
Company or any Account. Purchase and redemption orders
for Fund shares will be recorded in an appropriate title
for each Account or the appropriate subaccount of each
Account.
1.9. The Fund will furnish same day notice (by telecopier,
followed by written confirmation) to the Company of the
declaration of any income, dividends or capital gain
distributions payable on each Designated Portfolio's shares. The
Company hereby elects to receive all such dividends and
distributions as are payable on the Designated Portfolio shares
in the form of additional shares of that Designated Portfolio.
The Fund will notify the Company of the number of shares so
issued as
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payment of such dividends and distributions. The Company
reserves the right to revoke this election upon reasonable
prior notice to the Fund and to receive all such dividends
and distributions in cash.
1.10. The Fund will make the net asset value per share for each
Designated Portfolio available to the Company on a daily
basis as soon as reasonably practical after the net asset
value per share is calculated and will use its best
efforts to make such net asset value per share available
by 6:00 p.m., Eastern Time, but in no event later than
7:00 p.m., Eastern Time, each business day.
1.11. In the event adjustments are required to correct any error
in the computation of the net asset value of the Fund's
shares, the Fund or CSI will notify the Company as soon as
practicable after discovering the need for those
adjustments that result in an aggregate reimbursement of
$150 or more to any one Account maintained by a Designated
Portfolio unless notified otherwise by the Company (or, if
greater, results in an adjustment of $10 or more to each
contractowner's account). Any such notice will state for
each day for which an error occurred the incorrect price,
the correct price and, to the extent communicated to the
Fund's shareholders, the reason for the price change. The
Company may send this notice or a derivation thereof (so
long as such derivation is approved in advance by CSI or
the Adviser) to contractowners whose accounts are affected
by the price change. The parties will negotiate in good
faith to develop a reasonable method for effecting such
adjustments. The Fund shall provide the Company, on
behalf of the Account, with a prompt adjustment to the
number of shares purchased or redeemed to reflect the
correct share net asset value.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1. The Company represents and warrants that the Contracts
are or will be registered under the 1933 Act and that the
Contracts will be issued and sold in compliance with all
applicable federal and state laws, including state insurance
suitability requirements. The Company further represents and
warrants that it is an insurance company duly organized and in
good standing under applicable law and that it has legally and
validly established each Account as a separate account under
applicable state law and has registered the Account as a unit
investment trust in accordance with the provisions of thin 1940
Act to serve as a segregated investment account for the
Contracts, and that it will maintain such registration for so
long as any Contracts are outstanding. The Company will amend
the registration statement under the 1933 Act for the Contracts
and the registration statement under the 1940 Act for the Account
from time to time as required in order to effect the continuous
offering of the Contracts or as may otherwise be required by
applicable law. The Company
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will register and qualify the Contracts for sale in
accordance with the securities laws of the various states
only if and to the extent deemed necessary by the Company.
2.2. The Company represents that the Contracts are currently
and at the time of issuance will be treated as endowment,
annuity or life insurance contracts under applicable
provisions of the Internal Revenue Code, and that it will
make every effort to maintain such treatment and that it
will notify the Fund and the Adviser immediately upon
having a reasonable basis for believing that the Contracts
have ceased to be so treated or that they might not be so
treated in the future.
2.3. The Company represents and warrants that it will not
purchase shares of the Designated Portfolios with assets
derived from tax-qualified retirement plans except,
indirectly, through Contracts purchased in connection with
such plans.
2.4. The Fund represents and warrants that Fund shares of the
Designated Portfolios sold pursuant to this Agreement will
be registered under the 1933 Act and duly authorized for
issuance in accordance with applicable law and that the
Fund is and will remain registered under the 1940 Act for
as long as such shares of the Designated Portfolios are
outstanding. The Fund will amend the registration
statement for its shares under the 1933 Act and the 1940
Act from time to time as required in order to effect the
continuous offering of its shares. The Fund will register
and qualify the shares of the Designated Portfolios for
sale in accordance with the laws of the various states
only if and to the extent deemed advisable by the Fund.
2.5. The Fund represents that it is currently qualified as a
Regulated Investment Company under Subchapter M of the
Internal Revenue Code, and that it will make every effort
to maintain such qualification (under Subchapter M or any
successor or similar provision) and that it will notify
the Company immediately upon having a reasonable basis for
believing that it has ceased to so qualify or that it
might not so qualify in the future.
2.6. The Fund represents and warrants that in performing the
services described in this Agreement, the Fund will comply
with all applicable laws, rules and regulations. The Fund
makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and
expenses and investment policies, objectives and
restrictions) complies with the insurance laws and
regulations of any state. The Fund and CSI agree that
upon request they will use their best efforts to furnish
the information required by state insurance laws so that
the Company can obtain the authority needed to issue the
Contracts in the various states.
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2.7. The Fund currently does not intend to make any payments to
finance distribution expenses pursuant to Rule 12b-1 under
the 1940 Act, although it reserves the right to make such
payments in the future. To the extent that it decides to
finance distribution expenses pursuant to Rule 12b-1 the
Fund undertakes to have its Fund Board formulate and
approve any plan under Rule 12b-1 to finance distribution
expenses in accordance with the 1940 Act.
2.8. CSI represents and warrants that it will distribute the
Fund shares of the Designated Portfolios in accordance
with all applicable federal and state securities laws
including, without limitation, the 1933 Act, the 1934 Act
and the 1940 Act.
2.9. The Fund represents that it is lawfully organized and
validly existing under the laws of the Commonwealth of
Massachusetts and that it does and will comply in all
material respects with applicable provisions of the 1940
Act.
2.10. CSI represents and warrants that it is and will remain
duly registered under all applicable federal and state
securities laws and that it will perform its obligations
for the Fund in accordance in all material respects with
any applicable state and federal securities laws.
2.11. The Fund and CSI represent and warrant that all of their
trustees, officers, employees, investment advisers, and
other individuals/entities having access to the funds
and/or securities of the Fund are and continue to be at
all times covered by a blanket fidelity bond or similar
coverage for the benefit of the Fund in an amount not less
than the minimal coverage as required currently by Rule
17g-(1) of the 1940 Act or related provisions as may be
promulgated from time to time. The aforesaid bond
includes coverage for larceny and embezzlement and is
issued by a reputable bonding company.
ARTICLE III. PROSPECTUSES AND PROXY STATEMENTS; VOTING
3.1. The Fund or CSI will provide the Company, at the Fund's
or its affiliate's expense, with as many copies of the current
Fund prospectus for the Designated Portfolios as the Company may
reasonably request for distribution, at the Company's expense, to
prospective contractowners and applicants. The Fund or CSI will
provide, at the Fund's or its affiliate's expense, as many copies
of said prospectus as necessary for distribution, at the
Company's expense, to existing contractowners. The Fund or CSI
will provide the copies of said prospectus to the Company or to
its mailing agent. If requested by the Company in lieu thereof,
the Fund or CSI will provide such documentation, including a
computer diskette or a final copy of a current
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prospectus set in type at the Fund's or its affiliate's
expense, and such other assistance as is reasonably
necessary in order for the Company at least annually (or
more frequently if the Fund prospectus is amended more
frequently) to have the Fund's prospectus and the
prospectuses of other mutual funds in which assets
attributable to the Contracts may be invested printed
together in one document, in which case the Fund or its
affiliate will bear its reasonable share of expenses as
described above, allocated based on the proportionate
number of pages of the Fund's and other fund's respective
portions of the document.
3.2. The Fund or CSI will provide the Company, at the Fund's or
its affiliate's expense, with as many copies of the
statement of additional information as the Company may
reasonably request for distribution, at the Company's
expense, to prospective contractowners and applicants.
The Fund or CSI will provide, at the Fund's or its
affiliate's expense, as many copies of said statement of
additional information as necessary for distribution, at
the Company's expense, to any existing contractowner who
requests such statement or whenever state or federal law
otherwise requires that such statement be provided. The
Fund or CSI will provide the copies of said statement of
additional information to the Company or to its mailing
agent.
3.3. The Fund or CSI, at the Fund's or its affiliate's expense,
will provide the Company or its mailing agent with copies
of its proxy material, if any, reports to shareholders and
other communications to shareholders in such quantity as
the Company will reasonably require. The Company will
distribute this proxy material, reports and other
communications to existing contract owners and tabulate
the votes.
3.4. If and to the extent required by law the Company will:
(a) solicit voting instructions from
contractowners;
(b) vote the shares of the Designated
Portfolios held in the Account in accordance with
instructions received from contractowners; and
(c) vote shares of the Designated Portfolios
held in the Account for which no timely
instructions have been received, as well as shares
it owns, in the same proportion as shares of such
Designated Portfolio for which instructions have
been received from the Company's contractowners;
so long as and to the extent that the SEC continues to
interpret the 1940 Act to require pass-through voting
privileges for variable contractowners. Except as set
forth above, the Company reserves the right to vote Fund
shares held in any segregated asset account in its own
right, to the extent permitted by law. The
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Company will be responsible for assuring that each of its
separate accounts participating in the Fund calculates
voting privileges in a manner consistent with all legal
requirements, including the Mixed and Shared Funding
Exemptive Order.
3.5. The Fund will comply with all provisions of the 1940 Act
requiring voting by shareholders, and in particular, the
Fund either will provide for annual meetings (except
insofar as the SEC may interpret Section 16 of the 1940
Act not to require such meetings) or, as the Fund
currently intends to comply with Section 16(c) of the 1940
Act (although the Fund is not one of the trusts described
in Section 16(c) of that Act) as well as with
Sections 16(a) and, if and when applicable, 16(b).
Further, the Fund will act in accordance with the SEC's
interpretation of the requirements of Section 16(a) with
respect to periodic elections of trustees and with
whatever rules the SEC may promulgate with respect
thereto.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. CSI will provide the Company on a timely basis with
investment performance information for each Designated
Portfolio in which the Company maintains an Account,
including total return for the preceding calendar month
and calendar quarter, the calendar year to date, and the
prior one-year, five-year, and ten year (or life of the
Fund) periods. The Company may, based on the SEC mandated
information supplied by CSI, prepare communications for
contractowners ("Contractowner Materials"). The Company
will provide copies of all Contractowner Materials
concurrently with their first use for CSI's internal
recordkeeping purposes. It is understood that neither CSI
nor any Designated Portfolio will be responsible for
errors or omissions in, or the content of, Contractowner
Materials except to the extent that the error or omission
resulted from information provided by or on behalf of CSI
or the Designated Portfolio. Any printed information that
is furnished to the Company pursuant to this Agreement
other than each Designated Portfolio's prospectus or
statement of additional information (or information
supplemental thereto), periodic reports and proxy
solicitation materials is CSI's sole responsibility and
not the responsibility of any Designated Portfolio or the
Fund. The Company agrees that the Portfolios, the
shareholders of the Portfolios and the officers and
governing Board of the Fund will have no liability or
responsibility to the Company in these respects.
4.2. The Company will not give any information or make any
representations or statements on behalf of the Fund or concerning
the Fund in connection with the sale of the Contracts other than
the information or representations contained in the registration
statement, prospectus or statement of additional information for
Fund shares, as such registration statement, prospectus and
statement of additional information
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may be amended or supplemented from time to time, or in
reports or proxy statements for the Fund, or in published
reports for the Fund which are in the public domain or
approved by the Fund or CSI for distribution, or in sales
literature or other material provided by the Fund, Adviser
or by CSI, except with permission of CSI. Any piece of
sales literature or other promotional material intended to
be used by the Company which requires the permission of
CSI prior to use will be furnished by Company to CSI, or
its designee, at least ten (10) business days prior to its
use. No such material will be used if CSI reasonably
objects to such use within five (5) business days after
receipt.
Nothing in this Section 4.2 will be construed as
preventing the Company or its employees or agents from
giving advice on investment in the Fund.
4.3. The Fund, the Adviser or CSI will furnish, or will cause
to be furnished, to the Company or its designee, each
piece of sales literature or other promotional material in
which the Company or its Account is named, at least ten
(10) business days prior to its use. No such material
will be used if the Company reasonably objects to such use
within five (5) business days after receipt of such
material.
4.4. The Fund, the Adviser and CSI will not give any
information or make any representations or statements on
behalf of the Company or concerning the Company, each
Account, or the Contracts other than the information or
representations contained in a registration statement,
prospectus or statement of additional information for the
Contracts, as such registration statement, prospectus and
statement of additional information may be amended or
supplemented from time to time, or in published reports
for each Account or the Contracts which are in the public
domain or approved by the Company for distribution to
contractowners, or in sales literature or other material
provided by the Company, except with permission of the
Company. The Company agrees to respond to any request for
approval on a prompt and timely basis.
4.5. The Fund will provide to the Company at least one complete
copy of all registration statements, prospectuses,
statements of additions information, reports, proxy
statements, sales literature and other promotional
materials, applications for exemptions, requests for
no-action letters, and all amendments to any of the above,
that relate to the Fund or its shares, contemporaneously
with the filing of such document with the SEC, the NASD or
other regulatory authority.
4.6. The Company will provide to the Fund at least one
complete copy of all registration statements, prospectuses,
statements of additional information, reports, solicitations for
voting instructions, sales literature and other promotional
materials, applications
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for exemptions, requests for no action letters, and all
amendments to any of the above, that relate to the
Contracts or each Account, contemporaneously with the
filing of such document with the SEC, the NASD or other
regulatory authority.
4.7. For purposes of this Article IV, the phrase "sales
literature or other promotional material" includes, but is
not limited to, advertisements (such as material
published, or designed for use in, a newspaper, magazine,
or other periodical, radio, television, telephone or tape
recording, videotape display, signs or billboards, motion
pictures, or other public media, (e.g., on-line networks
such as the Internet or other electronic messages), sales
literature (i.e., any written communication distributed or
made generally available to customers or the public,
including brochures, circulars, research reports, market
letters, form letters, seminar texts, reprints or excerpts
of any other advertisements sales literature, or published
article), educational or training materials or other
communications distributed or made generally available to
some or all agents or employees, registration statements,
prospectuses, statements of additional information,
shareholder reports, and proxy materials and any other
material constituting sales literature or advertising
under the NASD rules, the 1933 Act or the 1940 Act.
4.8. The Fund and CSI hereby consent to the Company's use of
the names Warburg, Pincus Trust - International Equity
Portfolio, or other Designated Portfolio, and Warburg,
Pincus Counsellors, Inc. in connection with the marketing
of the Contracts, subject to the terms of Sections 4.1 and
4.2 of this Agreement. Such consent will terminate with
the termination of this Agreement.
ARTICLE V. FEES AND EXPENSES
5.1. The Fund, the Adviser and CSI will pay no fee or other
compensation to the Company under this Agreement except if
the Fund or any Designated Portfolio adopts and implements
a plan pursuant to Rule 12b-1 under the 1940 Act to
finance distribution expenses, then, subject to obtaining
any required exemptive orders or other regulatory
approvals, the Fund may make payments to the Company or to
the underwriter for the Contracts if and in such amounts
agreed to by the Fund in writing.
5.2. All expenses incident to performance by the Fund of
this Agreement will be paid by the Fund to the extent permitted
by law. The Fund will bear the expenses for the cost of
registration and qualification of the Fund's shares; preparation
and filing of the Fund's prospectus, statement of additional
information and registration statement, proxy materials and
reports; setting in type and printing the Fund's prospectus;
setting in type and printing proxy materials and reports by it to
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contractowners (including the costs of printing a Fund
prospectus that constitutes an annual report); the
preparation of all statements and notices required by any
federal or state law; all taxes on the issuance or
transfer of the Fund's shares; any expenses permitted to
be paid or assumed by the Fund pursuant to a plan, if any,
under Rule 12b-1 under the 1940 Act; and all other
expenses set forth in Article III of this Agreement.
ARTICLE VI. DIVERSIFICATION
6.1. The Adviser will ensure that the Fund will at all times
invest money from the Contracts in such a manner as to
ensure that the Contracts will be treated as variable
annuity contracts under the Internal Revenue Code and the
regulations issued thereunder. Without limiting the scope
of the foregoing, the Fund will comply with Section 817(h)
of the Internal Revenue Code and Treasury Regulation
1.817-5, as amended from time to time, relating to the
diversification requirements for variable annuity,
endowment, or life insurance contracts and any amendments
or other modifications to such Section or Regulation. In
the event of a breach of this Article VI by the Fund, it
will take all reasonable steps: (a) to notify the Company
of such breach; and (b) to adequately diversify the Fund
so as to achieve compliance within the grace period
afforded by Treasury Regulation 1.817-5.
ARTICLE VII. POTENTIAL CONFLICTS
7.1. The Fund Board will monitor the Fund for the existence of
any irreconcilable material conflict among the interests
of the contractowners of all separate accounts investing
in the Fund. An irreconcilable material conflict may
arise for a variety of reasons, including: (a) an action
by any state insurance regulatory authority; (b) a change
in applicable federal or state insurance, tax, or
securities laws or regulations, or a public ruling,
private letter ruling, no-action or interpretative letter,
or any similar action by insurance, tax, or securities
regulatory authorities; (c) an administrative or judicial
decision in any relevant proceeding; (d) the manner in
which the investments of any Portfolio are being managed;
(e) a difference in voting instructions given by
Participating Insurance Companies or by variable annuity
and variable life insurance contractowners; or (f) a
decision by an insurer to disregard the voting
instructions of contractowners. The Fund Board will
promptly inform the Company if it determines that an
irreconcilable material conflict exists and the
implications thereof.
7.2. The Company will report any potential or existing
conflicts of which it is aware to the Fund Board. The Company
agrees to assist the Fund Board in carrying out its
responsibilities, as delineated in the Mixed and Shared Funding
Exemptive Order,
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by providing the Fund Board with all information
reasonably necessary for the Fund Board to consider any
issues raised. This includes, but is not limited to, an
obligation by the Company to inform the Fund Board
whenever contractowner voting instructions are to be
disregarded. The Company's responsibilities hereunder
will be carried out with a view only to the interest of
contractowners.
7.3. If it is determined by a majority of the Fund Board, or a
majority of its disinterested directors, that an
irreconcilable material conflict exists, the Company will,
at its expense and to the extent reasonably practicable
(as determined by a majority of the disinterested
directors), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and
including: (a) withdrawing the assets allocable to some
or all of the Accounts from the Fund or any Portfolio and
reinvesting such assets in a different investment medium,
including (but not limited to) another Portfolio of the
Fund, or submitting the question whether such segregation
should be implemented to a vote of all affected
contractowners and, as appropriate, segregating the assets
of any appropriate group (i.e., variable annuity
contractowners or variable life insurance contractowners
of one or more Participating Insurance Companies) that
votes in favor of such segregation, or offering to the
affected contractowners the option of making such a
change; and (b) establishing a new registered management
investment company or managed separate account.
7.4. If a material irreconcilable conflict arises because of a
decision by the Company to disregard contractowner voting
instructions, and the Company's judgment represents a
minority position or would preclude a majority vote, the
Company may be required, at the Fund's election, to
withdraw the affected subaccount of the Account's
investment in the Fund and terminate this Agreement with
respect to such subaccount; provided, however, that such
withdrawal and termination will be limited to the extent
required by the foregoing irreconcilable material conflict
as determined by a majority of the disinterested directors
of the Fund Board. No charge or penalty will be imposed
as a result of such withdrawal.
7.5. If a material irreconcilable conflict arises because a
particular state insurance regulator's decision applicable
to the Company conflicts with the majority of other state
insurance regulators, then the Company will withdraw the
affected subaccount of the Account's investment in the
Fund and terminate this Agreement with respect to such
subaccount; provided, however, that such withdrawal and
termination will be limited to the extent required by the
foregoing irreconcilable material conflict as determined
by a majority of the disinterested directors of the Fund
Board. No charge or penalty will be imposed as a result
of such withdrawal.
7.6. For purposes of Sections 7.3 through 7.6 of this
Agreement, a majority of the disinterested members of the
Fund Board will determine whether any proposed action
adequately remedies any irreconcilable material conflict,
but in no event will the Fund or the Adviser (or any other
investment adviser to the Fund) be required to establish a
new funding medium for the Contracts. The Company will
not be required by Section 7.3 to establish a new funding
medium for the Contracts if an offer to do so has been
declined by vote of a majority of contractowners
materially affected by the irreconcilable material
conflict.
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7.7. The Company will at least annually submit to the Fund
Board such reports, materials or data as the Fund Board
may reasonably request so that the Fund Board may fully
carry out the duties imposed upon it as delineated in the
Mixed and Shared Funding Exemptive Order, and said
reports, materials and data will be submitted more
frequently if deemed appropriate by the Fund Board.
7.8. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are
amended, or Rule 6e-3 is adopted, to provide exemptive
relief from any provision of the 1940 Act or the rules
promulgated thereunder with respect to mixed or shared
funding (as defined in the Mixed and Shared Funding
Exemptive Order) on terms and conditions materially
different from those contained in the Mixed and Shared
Funding Exemptive Order, then: (a) the Fund and/or the
Participating Insurance Companies, as appropriate, will
take such steps as may be necessary to comply with Rules
6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted,
to the extent such rules are applicable; and (b) Sections
3.4, 3.5, 7.1, 7.2, 7.3, 7.4, and 7.5 of this Agreement
will continue in effect only to the extent that terms and
conditions substantially identical to such Sections are
contained in such Rule(s) as so amended or adopted.
ARTICLE VIII. INDEMNIFICATION
8.1. Indemnification By The Company
(a) The Company agrees to indemnify and hold harmless the Fund,
the Adviser, CSI, and each person, if any, who controls or is
associated with the Fund, the Adviser or CSI within the meaning
of such terms under the federal securities laws and any director,
trustee, officer, partner, employee or agent of the foregoing
(collectively, the "Indemnified Parties" for purposes of this
Section 8.1) against any and all losses, claims, expenses,
damages, liabilities (including amounts paid in settlement with
the written consent of the Company) or litigation (including
reasonable legal and other expenses), to which the Indemnified
Parties may become subject under any statute,
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regulation, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or expenses
(or actions in respect thereof) or settlements:
(1) arise out of or are based upon any
untrue statements or alleged untrue statements of
any material fact contained in the registration
statement, prospectus or statement of additional
information for the Contracts or contained in the
Contracts or sales literature or other promotional
material for the Contracts (or any amendment or
supplement to any of the foregoing), or arise out
of or are based upon the omission or the alleged
omission to state therein a material fact required
to be stated or necessary to make such statements
not misleading in light of the circumstances in
which they were made; provided that this agreement
to indemnify will not apply as to any Indemnified
Party if such statement or omission or such
alleged statement or omission was made in reliance
upon and in conformity with written information
furnished to the Company by the Fund, the Adviser
or CSI for use in the registration statement,
prospectus or statement of additional information
for the Contracts or in the Contracts or sales
literature (or any amendment or supplement) or
otherwise for use in connection with the sale of
the Contracts or Fund shares; or
(2) arise out of or as a result of
statements or representations by or on behalf of
the Company or wrongful conduct of the Company or
persons under its control, with respect to the
sale or distribution of the Contracts or Fund
shares; or
(3) arise out of any untrue statement
or alleged untrue statement of a material fact
contained in the Fund registration statement,
prospectus, statement of additional information or
sales literature or other promotional material of
the Fund (or amendment or supplement) or the
omission or alleged omission to state therein a
material fact required to be stated therein or
necessary to make such statements not misleading
in light of the circumstances in which they were
made, if such a statement or omission was made in
reliance upon and in conformity with information
furnished to the Fund by or on behalf of the
Company or persons under its control; or
(4) arise as a result of any failure by
the Company to provide the services and furnish
the materials under the terms of this Agreement;
or
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(5) arise out of any material breach of
any representation and/or warranty made by the
Company in this Agreement or arise out of or
result from any other material breach by the
Company of this Agreement;
except to the extent provided in Sections 8.1(b)
and 8.4 hereof. This indemnification will be in
addition to any liability that the Company otherwise
may have.
(b) No party will be entitled to indemnification
under Section 8.1(a) to the extent such loss, claim,
damage, liability or litigation is due to the willful
misfeasance, bad faith, or gross negligence in the
performance of such party's duties under this
Agreement, or by reason of such party's reckless
disregard of its obligations or duties under this
Agreement by the party seeking indemnification.
(c) The Indemnified Parties promptly will notify the
Company of the commencement of any litigation,
proceedings, complaints or actions by regulatory
authorities against them in connection with the
issuance or sale of the Fund shares or the Contracts or
the operation of the Fund.
8.2. Indemnification By The Adviser, the Fund and CSI
(a) The Adviser, the Fund and CSI, in each case
solely to the extent relating to such party's
responsibilities hereunder, agree to indemnify and hold
harmless the Company and each person, if any, who
controls or is associated with the Company within the
meaning of such terms under the federal securities laws
and any director, trustee, officer, partner, employee
or agent of the foregoing (collectively, the
"Indemnified Parties" for purposes of this Section 8.2)
against any and all losses, claims, expenses, damages,
liabilities (including amounts paid in settlement with
the written consent of the Adviser) or litigation
(including reasonable legal and other expenses) to
which the Indemnified Parties may become subject under
any statute, regulation, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof) or
settlements:
(1) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained
in the registration statement, prospectus or statement
of additional information for the Fund or sales literature
or other promotional material of the Fund (or any amend-
ment or supplement to any of the foregoing), or arise out
of or are based upon the omission or the alleged omission
to state therein a material
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fact required to be stated or necessary to make
such statements not misleading in light of the
circumstances in which they were made; provided
that this agreement to indemnify will not apply
as to any Indemnified Party if such statement or
omission or such alleged statement or omission
was made in reliance upon and in conformity with
information furnished to the Adviser, CSI or the
Fund by or on behalf of the Company for use in
the registration statement, prospectus or
statement of additional information for the Fund
or in sales literature of the Fund (or any
amendment or supplement thereto) or otherwise for
use in connection with the sale of the Contracts
or Fund shares; or
(2) arise out of or as a result of
statements or representations or wrongful conduct
of the Adviser, the Fund or CSI or persons under
the control of the Adviser, the Fund or CSI
respectively, with respect to the sale of the Fund
shares; or
(3) arise out of any untrue statement
or alleged untrue statement of a material fact
contained in a registration statement, prospectus,
statement of additional information or sales
literature or other promotional material covering
the Contracts (or any amendment or supplement
thereto), or the omission or alleged omission to
state therein a material fact required to be
stated or necessary to make such statement or
statements not misleading in light of the
circumstances in which they were made, if such
statement or omission was made in reliance upon
and in conformity with written information
furnished to the Company by the Adviser, the Fund
or CSI or persons under the control of the
Adviser, the Fund or CSI; or
(4) arise as a result of any failure by the
Fund, the Adviser or CSI to provide the services
and furnish the materials under the terms of this
Agreement (including a failure, whether
unintentional or in good faith or otherwise, to
comply with the diversification requirements and
procedures related thereto specified in Article VI
of this Agreement); or
(5) arise out of or result from any
material breach of any representation and/or
warranty made by the Adviser, the Fund or CSI in
this Agreement, or arise out of or result from any
other material breach of this Agreement by the
Adviser the Fund or CSI;
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except to the extent provided in Sections 8.2(b)
and 8.4 hereof. This indemnification will be in
addition to any liability that the Fund, Adviser or CSI
otherwise may have.
(b) No party will be entitled to indemnification under
Section 8.2(a) to the extent such loss, claim, damage,
liability or litigation is due to the willful
misfeasance, bad faith, or gross negligence in the
performance of such party's duties under this
Agreement, or by reason of such party's reckless
disregard of its obligations or duties under this
Agreement by the party seeking indemnification.
(c) The Indemnified Parties will promptly notify the
Adviser, the Fund and CSI of the commencement of any
litigation, proceedings, complaints or actions by
regulatory authorities against them in connection with
the issuance or sale of the Contracts or the operation
of the account.
8.4. Indemnification Procedure
Any person obligated to provide indemnification under this
Article VIII ("Indemnifying Party" for the purpose of this
Section 8.4) will not be liable under the indemnification
provisions of this Article VIII with respect to any claim
made against a party entitled to indemnification under
this Article VIII ("Indemnified Party" for the purpose of
this Section 8.4) unless such Indemnified Party will have
notified the Indemnifying Party in writing within a
reasonable time after the summons or other first legal
process giving information of the nature of the claim will
have been served upon such Indemnified Party (or after
such party will have received notice of such service on
any designated agent), but failure to notify the
Indemnifying Party of any such claim will not relieve the
Indemnifying Party from any liability which it may have to
the Indemnified Party against whom such action is brought
otherwise than on account of the indemnification provision
of this Article VIII, except to the extent that the
failure to notify results in the failure of actual notice
to the Indemnifying Party and such Indemnifying Party is
damaged solely as a result of failure to give such notice.
In case any such action is brought against the Indemnified
Party, the Indemnifying Party will be entitled to
participate, at its own expense, in the defense thereof.
The Indemnifying Party also will be entitled to assume the
defense thereof, with counsel satisfactory to the party
named in the action. After notice from the Indemnifying
Party to the Indemnified Party of the Indemnifying Party's
election to assume the defense thereof, the Indemnified
Party will bear the fees and expenses of any additional
counsel retained by it, and the Indemnifying Party will
not be liable to such party under this Agreement for any
legal or other expenses subsequently incurred by such
party independently in
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connection with the defense thereof other than reasonable
costs of investigation, unless: (a) the Indemnifying Party
and the Indemnified Party will have mutually agreed to the
retention of such counsel; or (b) the named parties to any
such proceeding (including any impleaded parties) include
both the Indemnifying Party and the Indemnified Party and
representation of both parties by the same counsel would
be inappropriate due to actual or potential differing
interests between them. The Indemnifying Party will not be
liable for any settlement of any proceeding effected
without its written consent but if settled with such
consent or if there is a final judgment for the plaintiff,
the Indemnifying Party agrees to indemnify the Indemnified
Party from and against any loss or liability by reason of
such settlement or judgment. A successor by law of the
parties to this Agreement will be entitled to the benefits
of the indemnification contained in this Article VIII.
The indemnification provisions contained in this Article
VIII will survive any termination of this Agreement.
ARTICLE IX. APPLICABLE LAW
9.1. This Agreement will be construed and the provisions hereof
interpreted under and in accordance with the laws of the
State of Delaware.
9.2. This Agreement will be subject to the provisions of the
1933 Act, the 1934 Act and the 1940 Act, and the rules
and regulations and rulings thereunder, including such
exemptions from those statutes, rules and regulations as
the SEC may grant (including, but not limited to, the
Mixed and Shared Funding Exemptive Order) and the terms
hereof will be interpreted and construed in accordance
therewith.
ARTICLE X. TERMINATION
10.1. This Agreement will terminate:
(a) at the option of any party, with or without cause,
with respect to some or all of the Designated
Portfolios, upon one hundred eighty (180) days' advance
written notice to the other parties or, if later, upon
receipt of any required exemptive relief or orders from
the SEC, unless otherwise agreed in a separate written
agreement Strong the parties; or
(b) at the option of the Company, upon receipt of the
Company's written notice by the other parties, with
respect to any Designated Portfolio if shares of the
Designated Portfolio are not reasonably available to
meet the requirements of the Contracts as determined in
good faith by the Company; or
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(c) at the option of the Company, upon receipt of the
Company's written notice by the other parties, with
respect to any Designated Portfolio in the event any of
the Designated Portfolio's shares are not registered,
issued or sold in accordance with applicable state
and/or Federal law or such law precludes the use of
such shares as the underlying investment media of the
Contracts issued or to be issued by Company; or
(d) at the option of the Fund, upon receipt of the
Fund's written notice by the other parties, upon
institution of formal proceedings against the Company
by the NASD, the SEC, the insurance commission of any
state or any other regulatory body regarding the
Company's duties under this Agreement or related to the
sale of the Contracts, the administration of the
Contracts, the operation of the Account, or the
purchase of the Fund shares, provided that the Fund
determines in its sole judgment, exercised in good
faith, that any such proceeding would have a material
adverse effect on the Company's ability to perform its
obligations under this Agreement; or
(e) at the option of the Company, upon receipt of the
Company's written notice by the other parties, upon
institution of formal proceedings against the Fund,
Adviser or CSI by the NASD, the SEC, or any state
securities or insurance department or any other
regulatory body, provided that the Company determines
in its sole judgment, exercised in good faith, that any
such proceeding would have a material adverse effect on
the Fund's or CSI's ability to perform its obligations
under this Agreement; or
(f) at the option of the Company, upon receipt of the
Company's written notice by the other parties, if the
Fund ceases to qualify as a Regulated Investment
Company under Subchapter M of the Internal Revenue
Code, or under any successor or similar provision, or
if the Company reasonably and in good faith believes
that the Fund may fail to so qualify; or
(g) at the option of the Company, upon receipt of the
Company's written notice by the other parties, with
respect to any Designated Portfolio if the Fund fails
to meet the diversification requirements specified in
Article VI hereof or if the Company reasonably and in
good faith believes the Fund may fail to meet such
requirements; or
(h) at the option of any party to this Agreement, upon
written notice to the other parties, upon another
party's material breach of any provision of this
Agreement which material breach is not cured within
thirty (30) days of said notice; or
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(i) at the option of the Company, if the Company
determines in its sole judgment exercised in good
faith, that either the Fund, the Adviser or CSI has
suffered a material adverse change in its business,
operations or financial condition since the date of
this Agreement or is the subject of material adverse
publicity which is likely to have a material adverse
impact upon the business and operations of the Company,
such termination to be effective sixty (60) days' after
receipt by the other parties of written notice of the
election to terminate; or
(j) at the option of the Fund or CSI, if the Fund or
CSI respectively, determines in its sole judgment
exercised in good faith, that the Company has suffered
a material adverse change in its business, operations
or financial condition since the date of this Agreement
or is the subject of material adverse publicity which
is likely to have a material adverse impact upon the
business and operations of the Fund or the Adviser,
such termination to be effective sixty (60) days' after
receipt by the other parties of written notice of the
election to terminate; or
(k) at the option of the Company or the Fund upon
receipt of any necessary regulatory approvals and/or
the vote of the contractowners having an interest in
the Account (or any subaccount) to substitute the
shares of another investment company for the
corresponding Designated Portfolio shares of the Fund
in accordance with the terms of the Contracts for which
those Designated Portfolio shares had been selected to
serve as the underlying investment media. The Company
will give sixty (60) days' prior written notice to the
Fund of the date of any proposed vote or other action
taken to replace the Fund's shares; or
(l) at the option of the Company or the Fund upon a
determination by a majority of the Fund Board, or a
majority of the disinterested Fund Board members, that
an irreconcilable material conflict exists among the
interests of: (1) all contractowners of variable
insurance products of all separate accounts; or (2) the
interests of the Participating Insurance Companies
investing in the Fund as set forth in Article VII of
this Agreement; or
(m) at the option of the Fund in the event any of the
Contracts are not issued or sold in accordance with
applicable federal and/or state law. Termination will
be effective immediately upon such occurrence without
notice.
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10.2. Notice Requirement
No termination of this Agreement will be effective unless
and until the party terminating this Agreement gives prior
written notice to all other parties of its intent to
terminate, which notice will set forth the basis for the
termination.
10.3. Effect of Termination
Notwithstanding any termination of this Agreement, the
Fund and CSI will, at the option of the Company, continue
to make available additional shares of the Fund pursuant
to the terms and conditions of this Agreement, for all
Contracts in effect on the effective date of termination
of this Agreement ( hereinafter referred to as "Existing
Contracts.") . Specifically, without limitation, the
owners of the Existing Contracts will be permitted to
reallocate investments in the Portfolios (as in effect on
such date), redeem investments in the Portfolios and/or
invest in the Portfolios upon the making of additional
purchase payments under the Existing Contracts.
10.4. Surviving Provisions
Notwithstanding any termination of this Agreement, each
party's obligations under Article VIII to indemnify other
parties will survive and not be affected by any
termination of this Agreement. In addition, each party's
obligations under Section 12.7 will survive and not be
affected by any termination of this Agreement. Finally,
with respect to Existing Contracts, all provisions of this
Agreement also will survive and not be affected by any
termination of this Agreement.
ARTICLE XI. NOTICES
11.1. Any notice will be deemed duly given when sent by
registered or certified mail to the other party at the
address of such party set forth below or at such other
address as such party may from time to time specify in
writing to the other parties.
If to the Company: If to the Fund, the Adviser and/or CSI:
Golden American Life 466 Lexington Avenue
Insurance Company New York, NY 10017
1001 Jefferson Street Attn: Eugene P. Grace
Wilmington, DE 19801 Senior Vice President
Attn: Myles R. Tashman
General Counsel
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ARTICLE XII. MISCELLANEOUS
12.1. All persons dealing with the Fund must look solely to the
property of the Fund for the enforcement of any claims
against the Fund as neither the directors, trustees,
officers, partners, employees, agents or shareholders
assume any personal liability for obligations entered into
on behalf of the Fund. No Portfolio or series of the Fund
will be liable for the obligations or liabilities of any
other Portfolio or series.
12.2. The Fund, the Adviser and CSI acknowledge that the
identities of the customers of the Company or any of its
affiliates (collectively the "Company Protected Parties" for
purposes of this Section 12.2), information maintained regarding
those customers, and all computer programs and procedures or
other information developed or used by the Company Protected
Parties or any of their employees or agents in connection with
the Company's performance of its duties under this Agreement are
the valuable property of the Company Protected Parties. The
Fund, the Adviser and CSI agree that if they come into possession
of any list or compilation of the identities of or other
information about the Company Protected Parties' customers, or
any other information or property of the Company Protected
Parties, other than such information as is publicly available or
as may be independently developed or compiled by the Fund, the
Adviser or CSI from information supplied to them by the Company
Protected Parties' customers who also maintain accounts directly
with the Fund, the Adviser or CSI, the Fund, the Adviser and CSI
will hold such information or property in confidence and refrain
from using, disclosing or distributing any of such information or
other property except: (a) with the Company's prior written
consent; or (b) as required by law or judicial process. The
Company acknowledges that the identities of the customers of the
Fund, the Adviser, CSI or any of their affiliates (collectively
the "Adviser Protected Parties" for purposes of this
Section 12.2), information maintained regarding those customers,
and all computer programs and procedures or other information
developed or used by the Adviser Protected Parties or any of
their employees or agents in connection with the Fund's, the
Adviser's or CSI's performance of their respective duties under
this Agreement are the valuable property of the Adviser Protected
Parties. The Company agrees that if it comes into possession of
any list or compilation of the identities of or other information
about the Adviser Protected Parties' customers, or any other
information or property of the Adviser Protected Parties, other
than such information as is publicly available or as may be
independently developed or compiled by the Company from
information supplied to them by the Adviser Protected Parties'
customers who also maintain accounts directly with the Company,
the Company will hold such information or property in confidence
and refrain from using, disclosing or distributing any of such
information or other property except: (a) with the Fund's, the
Adviser's or CSI's
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prior written consent; or (b) as required by law or
judicial process. Each party acknowledges that any breach
of the agreements in this Section 12.2 would result in
immediate and irreparable harm to the other parties for
which there would be no adequate remedy at law and agree
that in the event of such a breach, the other parties will
be entitled to equitable relief by way of temporary and
permanent injunctions, as well as such other relief as any
court of competent jurisdiction deems appropriate.
12.3. The captions in this Agreement are included for
convenience of reference only and in no way define or
delineate any of the provisions hereof or otherwise affect
their construction or effect.
12.4. This Agreement may be executed simultaneously in two or
more counterparts, each of which taken together will
constitute one and the same instrument.
12.5. If any provision of this Agreement will be held or made
invalid by a court decision, statute, rule or otherwise,
the remainder of the Agreement will not be affected
thereby.
12.6. This Agreement will not be assigned by any party hereto
without the prior written consent of all the parties.
12.7. Each party to this Agreement will maintain all records
required by law, including records detailing the services
it provides. Such records will be preserved, maintained
and made available to the extent required by law and in
accordance with the 1940 Act and the rules thereunder.
Each party to this Agreement will cooperate with each
other party and all appropriate governmental authorities
(including without limitation the SEC, the NASD and state
insurance regulators) and will permit each other and such
authorities reasonable access to its books and records in
connection with any investigation or inquiry relating to
this Agreement or the transactions contemplated hereby.
Upon request by the Fund or CSI, the Company agrees to
promptly make copies or, if required, originals of all
records pertaining to the performance of services under
this Agreement available to the Fund or CSI, as the case
may be. The Fund agrees that the Company will have the
right to inspect, audit and copy all records pertaining to
the performance of services under this Agreement pursuant
to the requirements of any state insurance department.
Each party also agrees to promptly notify the other
parties if it experiences any difficulty in maintaining
the records in an accurate and complete manner. This
provision will survive termination of this Agreement.
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12.8. Each party represents that the execution and delivery of
this Agreement and the consummation of the transactions
contemplated herein have been duly authorized by all
necessary corporate or board action, as applicable, by
such party and when so executed and delivered this
Agreement will be the valid and binding obligation of such
party enforceable in accordance with its terms.
12.9. The parties to this Agreement acknowledge and agree that
all liabilities of the Fund arising, directly or
indirectly, under this agreement, will be satisfied solely
out of the assets of the Fund and that no trustee,
officer, agent or holder of shares of beneficial interest
of the Fund will be personally liable for any such
liabilities.
12.10.The parties to this Agreement may amend the schedules to
this Agreement from time to time to reflect changes in or
relating to the Contracts, the Accounts or the Designated
Portfolios of the Fund or other applicable terms of this
Agreement.
12.11.The rights, remedies and obligations contained in this
Agreement are cumulative and are in addition to any and
all rights.
IN WITNESS WHEREOF, each of the parties hereto has caused
this Agreement to be executed in its name and behalf by its duly
authorized representative and its seal to be hereunder affixed
hereto as of the date specified below.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEAL
By:_________________________________________
Terry L. Kendall, President and
Chief Executive Officer
ATTEST: By: ________________________________
Myles R.Tashman, General Counsel
and Secretary
SEAL WARBURG, PINCUS TRUST
By:_________________________________________
Name:________________________________
Title:_______________________________
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SEAL WARBURG, PINCUS COUNSELLORS, INC.
By:_________________________________________
Name:________________________________
Title:_______________________________
SEAL COUNSELLORS SECURITIES, INC.
By:_________________________________________
Name:________________________________
Title:_______________________________
ATTEST:
26
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SCHEDULE 1
PARTICIPATION AGREEMENT
BY AND AMONG
GOLDEN AMERICAN LIFE INSURANCE COMPANY
AND
WARBURG, PINCUS TRUST
AND
WARBURG, PINCUS COUNSELLORS, INC.
AND
COUNSELLORS SECURITIES INC.
The following separate accounts of Golden American Life Insurance
Company are permitted in accordance with the provisions of this
Agreement to invest in Designated Portfolios of the Fund shown in
Schedule 2:
Golden American Life Insurance Company Separate Account A,
established July 14, 1988.
Golden American Life Insurance Company Separate Account B,
established July 14, 1988.
_______________, 1997
<PAGE>
<PAGE>
SCHEDULE 2
PARTICIPATION AGREEMENT
BY AND AMONG
GOLDEN AMERICAN LIFE INSURANCE COMPANY
WARBURG, PINCUS TRUST
AND
WARBURG, PINCUS COUNSELLORS, INC.
AND
COUNSELLORS SECURITIES INC.
The Separate Accounts shown on Schedule 1 may invest in the
following Designated Portfolios of the Warburg, Pincus Trust:
International Equity Portfolio
______________, 1997
<PAGE>
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<PAGE>
<PAGE>
EXHIBIT (8)(b)
FORM OF PARTICIPATION AGREEMENT
AMONG
[INSURANCE COMPANY],
PIMCO VARIABLE INSURANCE TRUST,
AND
PIMCO FUNDS DISTRIBUTORS LLC
THIS AGREEMENT, dated as of the ___ day of , 199__ by
and among __________________, (the "Company"), an [insert state]
life insurance company, on its own behalf and on behalf of each
segregated asset account of the Company set forth on Schedule A
hereto as may be amended from time to time (each account
hereinafter referred to as the "Account"), PIMCO Variable
Insurance Trust (the "Fund"), a Delaware business trust, and
PIMCO Funds Distributors LLC (the "Underwriter"), a Delaware
limited liability company.
WHEREAS, the Fund engages in business as an open-end
management investment company and is available to act as the
investment vehicle for separate accounts established for variable
life insurance and variable annuity contracts (the "Variable
Insurance Products") to be offered by insurance companies which
have entered into participation agreements with the Fund and
Underwriter ("Participating Insurance Companies");
WHEREAS, the shares of beneficial interest of the Fund are
divided into several series of shares, each designated a
"Portfolio" and representing the interest in a particular managed
portfolio of securities and other assets;
WHEREAS, the Fund has obtained an order from the Securities
and Exchange Commission (the "SEC") granting Participating
Insurance Companies and variable annuity and variable life
insurance separate accounts exemptions from the provisions of
sections 9(a), 13(a), 15(a), and 15(b) of the Investment Company
Act of 1940, as amended, (the "1940 Act") and Rules 6e-2(b)(15)
and 6e-3(T)(b)(15) thereunder, if and to the extent necessary to
permit shares of the Fund to be sold to and held by variable
annuity and variable life insurance separate accounts of both
affiliated and unaffiliated life insurance companies (the "Mixed
and Shared Funding Exemptive Order");
WHEREAS, the Fund is registered as an open-end management
investment company under the 1940 Act and shares of the
Portfolios are registered under the Securities Act of 1933, as
amended (the "1933 Act");
WHEREAS, Pacific Investment Management Company (the
"Adviser"), which serves as investment adviser to the Fund, is
duly registered as an investment adviser under the federal
Investment Advisers Act of 1940, as amended;
WHEREAS, the Company has issued or will issue certain
variable life insurance and/or variable annuity contracts
supported wholly or partially by the Account (the "Contracts"),
and said Contracts are listed in Schedule A hereto, as it may be
amended from time to time by mutual written agreement;
WHEREAS, the Account is duly established and maintained as a
segregated asset account, duly established by the Company, on the
date shown for such Account on Schedule A hereto, to set aside
and invest assets attributable to the aforesaid Contracts;
WHEREAS, the Underwriter, which serves as distributor to the
Fund, is registered as a broker dealer with the SEC under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and
is a member in good standing of the National Association of
Securities Dealers, Inc. (the "NASD"); and
WHEREAS, to the extent permitted by applicable insurance
laws and regulations, the Company intends to purchase shares in
the Portfolios listed in Schedule A hereto, as it may be amended
from time to time by mutual written agreement (the "Designated
Portfolios") on behalf of the Account to fund the aforesaid
Contracts, and the Underwriter is authorized to sell such shares
to the Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises,
the Company, the Fund and the Underwriter agree as follows:
ARTICLE I. Sale of Fund Shares
1. This text is hidden, do not remove.
1.1. The Fund has granted to the Underwriter exclusive authority
to distribute the Fund's shares, and has agreed to instruct, and
has so instructed, the Underwriter to make available to the
Company for purchase on behalf of the Account Fund shares of
those Designated Portfolios selected by the Underwriter.
Pursuant to such authority and instructions, and subject to
Article X hereof, the Underwriter agrees to make available to the
Company for purchase on behalf of the Account, shares of those
Designated Portfolios listed on Schedule A to this Agreement,
such purchases to be effected at net asset value in accordance
with Section 1.3 of this Agreement. Notwithstanding the
foregoing, (i) Fund series (other than those listed on Schedule
A) in existence now or that may be established in the future will
be made available to the Company only as the Underwriter may so
provide, and (ii) the Board of Trustees of the Fund (the "Board")
may suspend or terminate the offering of Fund shares of any
Designated Portfolio or class thereof, if such action is required
by law or by regulatory authorities having jurisdiction or if, in
the sole discretion of the Board acting in good faith and in
light of its fiduciary duties under federal and any applicable
state laws, suspension or termination is necessary in the best
interests of the shareholders of such Designated Portfolio.
1.2. The Fund shall redeem, at the Company's request, any full or
fractional Designated Portfolio shares held by the Company on
behalf of the Account, such redemptions to be effected at net
asset value in accordance with Section 1.3 of this Agreement.
Notwithstanding the foregoing, (i) the Company shall not redeem
Fund shares attributable to Contract owners except in the
circumstances permitted in Section 10.3 of this Agreement, and
(ii) the Fund may delay redemption of Fund shares of any
Designated Portfolio to the extent permitted by the 1940 Act, and
any rules, regulations or orders thereunder.
1.3. Purchase and Redemption Procedures
(a) The Fund hereby appoints the Company as an agent of the Fund
for the limited purpose of receiving purchase and redemption
requests on behalf of the Account (but not with respect to any
Fund shares that may be held in the general account of the
Company) for shares of those Designated Portfolios made available
hereunder, based on allocations of amounts to the Account or
subaccounts thereof under the Contracts and other transactions
relating to the Contracts or the Account. Receipt of any such
request (or relevant transactional information therefor) on any
day the New York Stock Exchange is open for trading and on which
the Fund calculates it net asset value pursuant to the rules of
the SEC (a "Business Day") by the Company as such limited agent
of the Fund prior to the time that the Fund ordinarily calculates
its net asset value as described from time to time in the Fund
Prospectus (which as of the date of execution of this Agreement
is 4:00 p.m. Eastern Time) shall constitute receipt by the Fund
on that same Business Day, provided that the Fund receives notice
of such request by 9:30 a.m. Eastern Time on the next following
Business Day.
(b) The Company shall pay for shares of each Designated
Portfolio on the same day that it notifies the Fund of a purchase
request for such shares. Payment for Designated Portfolio shares
shall be made in federal funds transmitted to the Fund by wire to
be received by the Fund by 4:00 p.m. Eastern Time on the day the
Fund is notified of the purchase request for Designated Portfolio
shares (unless the Fund determines and so advises the Company
that sufficient proceeds are available from redemption of shares
of other Designated Portfolios effected pursuant to redemption
requests tendered by the Company on behalf of the Account). If
federal funds are not received on time, such funds will be
invested, and Designated Portfolio shares purchased thereby will
be issued, as soon as practicable and the Company shall promptly,
upon the Fund's request, reimburse the Fund for any charges,
costs, fees, interest or other expenses incurred by the Fund in
connection with any advances to, or borrowing or overdrafts by,
the Fund, or any similar expenses incurred by the Fund, as a
result of portfolio transactions effected by the Fund based upon
such purchase request. Upon receipt of federal funds so wired,
such funds shall cease to be the responsibility of the Company
and shall become the responsibility of the Fund.
(c) Payment for Designated Portfolio shares redeemed by the
Account or the Company shall be made in federal funds transmitted
by wire to the Company or any other designated person on the next
Business Day after the Fund is properly notified of the
redemption order of such shares (unless redemption proceeds are
to be applied to the purchase of shares of other Designated
Portfolio in accordance with Section 1.3(b) of this Agreement),
except that the Fund reserves the right to redeem Designated
Portfolio shares in assets other than cash and to delay payment
of redemption proceeds to the extent permitted under Section
22(e) of the 1940 Act and any Rules thereunder, and in accordance
with the procedures and policies of the Fund as described in the
then current prospectus. The Fund shall not bear any
responsibility whatsoever for the proper disbursement or
crediting of redemption proceeds by the Company, the Company
alone shall be responsible for such action.
(d) Any purchase or redemption request for Designated Portfolio
shares held or to be held in the Company's general account shall
be effected at the net asset value per share next determined
after the Fund's receipt of such request, provided that, in the
case of a purchase request, payment for Fund shares so requested
is received by the Fund in federal funds prior to close of
business for determination of such value, as defined from time to
time in the Fund Prospectus.
1.4. The Fund shall use its best efforts to make the net asset
value per share for each Designated Portfolio available to the
Company by 6:30 p.m. Eastern Time each Business Day, and in any
event, as soon as reasonably practicable after the net asset
value per share for such Designated Portfolio is calculated, and
shall calculate such net asset value in accordance with the
Fund's Prospectus. Neither the Fund, any Designated Portfolio,
the Underwriter, nor any of their affiliates shall be liable for
any information provided to the Company pursuant to this
Agreement which information is based on incorrect information
supplied by the Company or any other Participating Insurance
Company to the Fund or the Underwriter.
1.5. The Fund shall furnish notice (by wire or telephone followed
by written confirmation) to the Company as soon as reasonably
practicable of any income dividends or capital gain distributions
payable on any Designated Portfolio shares. The Company, on its
behalf and on behalf of the Account, hereby elects to receive all
such dividends and distributions as are payable on any Designated
Portfolio shares in the form of additional shares of that
Designated Portfolio. The Company reserves the right, on its
behalf and on behalf of the Account, to revoke this election and
to receive all such dividends and capital gain distributions in
cash. The Fund shall notify the Company promptly of the number
of Designated Portfolio shares so issued as payment of such
dividends and distributions.
1.6. Issuance and transfer of Fund shares shall be by book entry
only. Stock certificates will not be issued to the Company or
the Account. Purchase and redemption orders for Fund shares
shall be recorded in an appropriate ledger for the Account or the
appropriate subaccount of the Account.
1.7. (a) The parties hereto acknowledge that the arrangement
contemplated by this Agreement is not exclusive; the Fund's
shares may be sold to other insurance companies (subject to
Section 1.8 hereof) and the cash value of the Contracts may be
invested in other investment companies, provided, however, that
until this Agreement is terminated pursuant to Article X, the
Company shall promote the Designated Portfolios on the same basis
as other funding vehicles available under the Contracts. Funding
vehicles other than those listed on Schedule A to this Agreement
may be available for the investment of the cash value of the
Contracts, provided, however, (i) any such vehicle or series
thereof, has investment objectives or policies that are
substantially different from the investment objectives and
policies of the Designated Portfolios available hereunder; (ii)
the Company gives the Fund and the Underwriter 45 days written
notice of its intention to make such other investment vehicle
available as a funding vehicle for the Contracts; and (iii)
unless such other investment company was available as a Funding
vehicle for the Contracts prior to the date of this Agreement and
the Company has so informed the Fund and the Underwriter prior to
their signing this Agreement, the Fund or Underwriter consents in
writing to the use of such other vehicle, such consent not to be
unreasonably withheld.
(a) This text is hidden, do not remove.
(b) The Company shall not, without prior notice to the
Underwriter (unless otherwise required by applicable law), take
any action to operate the Account as a management investment
company under the 1940 Act.
(c) The Company shall not, without prior notice to the
Underwriter (unless otherwise required by applicable law), induce
Contract owners to change or modify the Fund or change the Fund's
distributor or investment adviser.
(d) The Company shall not, without prior notice
to the Fund, induce Contract owners to vote on any matter
submitted for consideration by the shareholders of the Fund in a
manner other than as recommended by the Board of Trustees of the
Fund.
1.8. The Underwriter and the Fund shall sell Fund shares only to
Participating Insurance Companies and their separate accounts and
to persons or plans ("Qualified Persons") that communicate to the
Underwriter and the Fund that they qualify to purchase shares of
the Fund under Section 817(h) of the Internal Revenue Code of
1986, as amended (the "Code") and the regulations thereunder
without impairing the ability of the Account to consider the
portfolio investments of the Fund as constituting investments of
the Account for the purpose of satisfying the diversification
requirements of Section 817(h). The Underwriter and the Fund
shall not sell Fund shares to any insurance company or separate
account unless an agreement complying with Article VI of this
Agreement is in effect to govern such sales, to the extent
required. The Company hereby represents and warrants that it and
the Account are Qualified Persons. The Fund reserves the right
to cease offering shares of any Designated Portfolio in the
discretion of the Fund.
ARTICLE II. Representations and Warranties
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2.1. The Company represents and warrants that the Contracts (a)
are, or prior to issuance will be, registered under the 1933 Act,
or (b) are not registered because they are properly exempt from
registration under the 1933 Act or will be offered exclusively in
transactions that are properly exempt from registration under the
1933 Act. The Company further represents and warrants that the
Contracts will be issued and sold in compliance in all material
respects with all applicable federal securities and state
securities and insurance laws and that the sale of the Contracts
shall comply in all material respects with state insurance
suitability requirements. The Company further represents and
warrants that it is an insurance company duly organized and in
good standing under applicable law, that it has legally and
validly established the Account prior to any issuance or sale
thereof as a segregated asset account under [insert state]
insurance laws, and that it (a) has registered or, prior to any
issuance or sale of the Contracts, will register the Account as a
unit investment trust in accordance with the provisions of the
1940 Act to serve as a segregated investment account for the
Contracts, or alternatively (b) has not registered the Account in
proper reliance upon an exclusion from registration under the
1940 Act. The Company shall register and qualify the Contracts
or interests therein as securities in accordance with the laws of
the various states only if and to the extent deemed advisable by
the Company.
2.2. The Fund represents and warrants that Fund shares sold
pursuant to this Agreement shall be registered under the 1933
Act, duly authorized for issuance and sold in compliance with
applicable state and federal securities laws and that the Fund is
and shall remain registered under the 1940 Act. The Fund shall
amend the registration statement for its shares under the 1933
Act and the 1940 Act from time to time as required in order to
effect the continuous offering of its shares. The Fund shall
register and qualify the shares for sale in accordance with the
laws of the various states only if and to the extent deemed
advisable by the Fund or the Underwriter.
2.3. The Fund may make payments to finance distribution expenses
pursuant to Rule 12b-1 under the 1940 Act. Prior to financing
distribution expenses pursuant to Rule 12b-1, the Fund will have
the Board, a majority of whom are not interested persons of the
Fund, formulate and approve a plan pursuant to Rule 12b-1 under
the 1940 Act to finance distribution expenses.
2.4. The Fund makes no representations as to whether any aspect
of its operations, including, but not limited to, investment
policies, fees and expenses, complies with the insurance and
other applicable laws of the various states.
2.5. The Fund represents that it is lawfully organized and
validly existing under the laws of the State of Delaware and that
it does and will comply in all material respects with the 1940
Act.
2.6. The Underwriter represents and warrants that it is a member
in good standing of the NASD and is registered as a broker-dealer
with the SEC. The Underwriter further represents that it will
sell and distribute the Fund shares in accordance with any
applicable state and federal securities laws.
2.7. The Fund and the Underwriter represent and warrant that all
of their trustees/directors, officers, employees, investment
advisers, and other individuals or entities dealing with the
money and/or securities of the Fund are and shall continue to be
at all times covered by a blanket fidelity bond or similar
coverage for the benefit of the Fund in an amount not less than
the minimum coverage as required currently by Rule 17g-1 of the
1940 Act or related provisions as may be promulgated from time to
time. The aforesaid bond shall include coverage for larceny and
embezzlement and shall be issued by a reputable bonding company.
2.8. The Company represents and warrants that all of its
directors, officers, employees, and other individuals/entities
employed or controlled by the Company dealing with the money
and/or securities of the Account are covered by a blanket
fidelity bond or similar coverage for the benefit of the Account,
in an amount not less than $5 million. The aforesaid bond
includes coverage for larceny and embezzlement and is issued by a
reputable bonding company. The Company agrees to hold for the
benefit of the Fund and to pay to the Fund any amounts lost from
larceny, embezzlement or other events covered by the aforesaid
bond to the extent such amounts properly belong to the Fund
pursuant to the terms of this Agreement. The Company agrees to
make all reasonable efforts to see that this bond or another bond
containing these provisions is always in effect, and agrees to
notify the Fund and the Underwriter in the event that such
coverage no longer applies.
ARTICLE III. Prospectuses and Proxy Statements; Voting
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3.1. The Underwriter shall provide the Company with as many
copies of the Fund's current prospectus (describing only the
Designated Portfolios listed on Schedule A) or, to the extent
permitted, the Fund's profiles as the Company may reasonably
request. The Company shall bear the expense of printing copies
of the current prospectus and profiles for the Contracts that
will be distributed to existing Contract owners, and the Company
shall bear the expense of printing copies of the Fund's
prospectus and profiles that are used in connection with offering
the Contracts issued by the Company. If requested by the Company
in lieu thereof, the Fund shall provide such documentation
(including a final copy of the new prospectus on diskette at the
Fund's expense) and other assistance as is reasonably necessary
in order for the Company once each year (or more frequently if
the prospectus for the Fund is amended) to have the prospectus
for the Contracts and the Fund's prospectus or profile printed
together in one document (such printing to be at the Company's
expense).
3.2. The Fund's prospectus shall state that the current Statement
of Additional Information ("SAI") for the Fund is available, and
the Underwriter (or the Fund), at its expense, shall provide a
reasonable number of copies of such SAI free of charge to the
Company for itself and for any owner of a Contract who requests
such SAI.
3.3. The Fund shall provide the Company with information
regarding the Fund's expenses, which information may include a
table of fees and related narrative disclosure. for use in any
prospectus or other descriptive document relating to a Contract.
The Company agrees that it will use such information in the form
provided. The Company shall provide prior written notice of any
proposed modification of such information, which notice will
describe in detail the manner in which the Company proposes to
modify the information, and agrees that it may not modify such
information in any way without the prior consent of the Fund.
3.4. The Fund, at its expense, shall provide the Company with
copies of its proxy material, reports to shareholders, and other
communications to shareholders in such quantity as the Company
shall reasonably require for distributing to Contract owners.
3.5. The Company shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Fund shares in accordance with instructions
received from Contract owners; and
(iii) vote Fund shares for which no instructions have been
received in the same proportion as Fund shares of such portfolio
for which instructions have been received,
so long as and to the extent that the SEC continues to interpret
the 1940 Act to require pass-through voting privileges for
variable contract owners or to the extent otherwise required by
law. The Company will vote Fund shares held in any segregated
asset account in the same proportion as Fund shares of such
portfolio for which voting instructions have been received from
Contract owners, to the extent permitted by law.
3.6. Participating Insurance Companies shall be responsible for
assuring that each of their separate accounts participating in a
Designated Portfolio calculates voting privileges as required by
the Shared Funding Exemptive Order and consistent with any
reasonable standards that the Fund may adopt and provide in
writing.
ARTICLE IV. Sales Material and Information
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4.1. The Company shall furnish, or shall cause to be furnished,
to the Fund or its designee, each piece of sales literature or
other promotional material that the Company develops and in which
the Fund (or a Designated Portfolio thereof) or the Adviser or
the Underwriter is named. No such material shall be used until
approved by the Fund or its designee, and the Fund will use its
best efforts for it or its designee to review such sales
literature or promotional material within ten Business Days after
receipt of such material. The Fund or its designee reserves the
right to reasonably object to the continued use of any such sales
literature or other promotional material in which the Fund (or a
Designated Portfolio thereof) or the Adviser or the Underwriter
is named, and no such material shall be used if the Fund or its
designee so object.
4.2. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning
the Fund or the Adviser or the Underwriter in connection with the
sale of the Contracts other than the information or
representations contained in the registration statement or
prospectus or SAI for the Fund shares, as such registration
statement and prospectus or SAI may be amended or supplemented
from time to time, or in reports or proxy statements for the
Fund, or in sales literature or other promotional material
approved by the Fund or its designee or by the Underwriter,
except with the permission of the Fund or the Underwriter or the
designee of either.
4.3. The Fund and the Underwriter, or their designee, shall
furnish, or cause to be furnished, to the Company, each piece of
sales literature or other promotional material that it develops
and in which the Company, and/or its Account, is named. No such
material shall be used until approved by the Company, and the
Company will use its best efforts to review such sales literature
or promotional material within ten Business Days after receipt of
such material. The Company reserves the right to reasonably
object to the continued use of any such sales literature or other
promotional material in which the Company and/or its Account is
named, and no such material shall be used if the Company so
objects.
4.4. The Fund and the Underwriter shall not give any information
or make any representations on behalf of the Company or
concerning the Company, the Account, or the Contracts other than
the information or representations contained in a registration
statement, prospectus (which shall include an offering
memorandum, if any, if the Contracts issued by the Company or
interests therein are not registered under the 1933 Act), or SAI
for the Contracts, as such registration statement, prospectus, or
SAI may be amended or supplemented from time to time, or in
published reports for the Account which are in the public domain
or approved by the Company for distribution to Contract owners,
or in sales literature or other promotional material approved by
the Company or its designee, except with the permission of the
Company.
4.5. The Fund will provide to the Company at least one complete
copy of all registration statements, prospectuses, SAIs, reports,
proxy statements, sales literature and other promotional
materials, applications for exemptions, requests for no-action
letters, and all amendments to any of the above, that relate to
the Fund or its shares, promptly after the filing of such
document(s) with the SEC or other regulatory authorities.
4.6. The Company will provide to the Fund at least one complete
copy of all registration statements, prospectuses (which shall
include an offering memorandum, if any, if the Contracts issued
by the Company or interests therein are not registered under the
1933 Act), SAIs, reports, solicitations for voting instructions,
sales literature and other promotional materials, applications
for exemptions, requests for no-action letters, and all
amendments to any of the above, that relate to the Contracts or
the Account, promptly after the filing of such document(s) with
the SEC or other regulatory authorities. The Company shall
provide to the Fund and the Underwriter any complaints received
from the Contract owners pertaining to the Fund or the Designated
Portfolio.
4.7. The Fund will provide the Company with as much notice as is
reasonably practicable of any proxy solicitation for any
Designated Portfolio, and of any material change in the Fund's
registration statement, particularly any change resulting in a
change to the registration statement or prospectus for any
Account. The Fund will work with the Company so as to enable the
Company to solicit proxies from Contract owners, or to make
changes to its prospectus or registration statement, in an
orderly manner. The Fund will make reasonable efforts to attempt
to have changes affecting Contract prospectuses become effective
simultaneously with the annual updates for such prospectuses.
4.8. For purposes of this Article IV, the phrase "sales
literature and other promotional materials" includes, but is not
limited to, any of the following that refer to the Fund or any
affiliate of the Fund: advertisements (such as material
published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording,
videotape display, signs or billboards, motion pictures, or other
public media), sales literature (i.e., any written communication
distributed or made generally available to customers or the
public, including brochures, circulars, reports, market letters,
form letters, seminar texts, reprints or excerpts of any other
advertisement, sales literature, or published article),
educational or training materials or other communications
distributed or made generally available to some or all agents or
employees, and registration statements, prospectuses, SAIs,
shareholder reports, proxy materials, and any other
communications distributed or made generally available with
regard to the Fund.
ARTICLE V. Fees and Expenses
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5.1. The Fund and the Underwriter shall pay no fee or other
compensation to the Company under this Agreement, except that if
the Fund or any Portfolio adopts and implements a plan pursuant
to Rule 12b-1 to finance distribution expenses, then the Fund or
Underwriter may make payments to the Company or to the
underwriter for the Contracts if and in amounts agreed to by the
Underwriter in writing, and such payments will be made out of
existing fees otherwise payable to the Underwriter, past profits
of the Underwriter, or other resources available to the
Underwriter. Currently, no such payments are contemplated.
5.2. All expenses incident to performance by the Fund under this
Agreement shall be paid by the Fund. The Fund shall see to it
that all its shares are registered and authorized for issuance in
accordance with applicable federal law and, if and to the extent
deemed advisable by the Fund, in accordance with applicable state
laws prior to their sale. The Fund shall bear the expenses for
the cost of registration and qualification of the Fund's shares,
preparation and filing of the Fund's prospectus and registration
statement, proxy materials and reports, setting the prospectus in
type, setting in type and printing the proxy materials and
reports to shareholders (including the costs of printing a
prospectus that constitutes an annual report), the preparation of
all statements and notices required by any federal or state law,
and all taxes on the issuance or transfer of the Fund's shares.
5.3. The Company shall bear the expenses of distributing the
Fund's prospectus to owners of Contracts issued by the Company
and of distributing the Fund's proxy materials and reports to
such Contract owners.
ARTICLE VI. Diversification and Qualification
6. This text is hidden, do not remove.
6.1. The Fund will invest its assets in such a manner as to
ensure that the Contracts will be treated as annuity or life
insurance contracts, whichever is appropriate, under the Code and
the regulations issued thereunder (or any successor provisions).
Without limiting the scope of the foregoing, each Designated
Portfolio has complied and will continue to comply with Section
817(h) of the Code and Treasury Regulation 1.817-5, and any
Treasury interpretations thereof, relating to the diversification
requirements for variable annuity, endowment, or life insurance
contracts, and any amendments or other modifications or successor
provisions to such Section or Regulations. In the event of a
breach of this Article VI by the Fund, it will take all
reasonable steps (a) to notify the Company of such breach and (b)
to adequately diversify the Fund so as to achieve compliance
within the grace period afforded by Regulation 1.817-5.
6.2. The Fund represents that it is or will be qualified as a
Regulated Investment Company under Subchapter M of the Code, and
that it will make every effort to maintain such qualification
(under Subchapter M or any successor or similar provisions) and
that it will notify the Company immediately upon having a
reasonable basis for believing that it has ceased to so qualify
or that it might not so qualify in the future.
6.3. The Company represents that the Contracts are currently, and
at the time of issuance shall be, treated as life insurance or
annuity insurance contracts, under applicable provisions of the
Code, and that it will make every effort to maintain such
treatment, and that it will notify the Fund and the Underwriter
immediately upon having a reasonable basis for believing the
Contracts have ceased to be so treated or that they might not be
so treated in the future. The Company agrees that any prospectus
offering a contract that is a "modified endowment contract" as
that term is defined in Section 7702A of the Code (or any
successor or similar provision), shall identify such contract as
a modified endowment contract.
ARTICLE VII. Potential Conflicts
7. This text is hidden, do not remove.
The following provisions shall apply only upon issuance of the
Mixed and Shared Funding Order and the sale of shares of the Fund
to variable life insurance separate accounts, and then only to
the extent required under the 1940 Act.
7.1. The Board will monitor the Fund for the existence of any
material irreconcilable conflict between the interests of the
Contract owners of all separate accounts investing in the Fund.
An irreconcilable material conflict may arise for a variety of
reasons, including: (a) an action by any state insurance
regulatory authority; (b) a change in applicable federal or state
insurance, tax, or securities laws or regulations, or a public
ruling, private letter ruling, no-action or interpretative
letter, or any similar action by insurance, tax, or securities
regulatory authorities; (c) an administrative or judicial
decision in any relevant proceeding; (d) the manner in which the
investments of any Portfolio are being managed; (e) a difference
in voting instructions given by variable annuity contract and
variable life insurance contract owners; or (f) a decision by an
insurer to disregard the voting instructions of contract owners.
The Board shall promptly inform the Company if it determines that
an irreconcilable material conflict exists and the implications
thereof.
7.2. The Company will report any potential or existing conflicts
of which it is aware to the Board. The Company will assist the
Board in carrying out its responsibilities under the Mixed and
Shared Funding Exemptive Order, by providing the Board with all
information reasonably necessary for the Board to consider any
issues raised. This includes, but is not limited to, an
obligation by the Company to inform the Board whenever Contract
owner voting instructions are disregarded.
7.3. If it is determined by a majority of the Board, or a
majority of its disinterested members, that a material
irreconcilable conflict exists, the Company and other
Participating Insurance Companies shall, at their expense and to
the extent reasonably practicable (as determined by a majority of
the disinterested Board members), take whatever steps are
necessary to remedy or eliminate the irreconcilable material
conflict, up to and including: (1) withdrawing the assets
allocable to some or all of the separate accounts from the Fund
or any Portfolio and reinvesting such assets in a different
investment medium, including (but not limited to) another
Portfolio of the Fund, or submitting the question whether such
segregation should be implemented to a vote of all affected
contract owners and, as appropriate, segregating the assets of
any appropriate group (i.e., annuity contract owners, life
insurance contract owners, or variable contract owners of one or
more Participating Insurance Companies) that votes in favor of
such segregation, or offering to the affected contract owners the
option of making such a change; and (2) establishing a new
registered management investment company or managed separate
account.
7.4. If a material irreconcilable conflict arises because of a
decision by the Company to disregard Contract owner voting
instructions and that decision represents a minority position or
would preclude a majority vote, the Company may be required, at
the Fund's election, to withdraw the Account's investment in the
Fund and terminate this Agreement with respect to each Account;
provided, however, that such withdrawal and termination shall be
limited to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the
disinterested members of the Board. Any such withdrawal and
termination must take place within six (6) months after the Fund
gives written notice that this provision is being implemented,
and until the end of that six month period the Fund shall
continue to accept and implement orders by the Company for the
purchase (and redemption) of shares of the Fund.
7.5. If a material irreconcilable conflict arises because a
particular state insurance regulator's decision applicable to the
Company conflicts with the majority of other state regulators,
then the Company will withdraw the affected Account's investment
in the Fund and terminate this Agreement with respect to such
Account within six months after the Board informs the Company in
writing that it has determined that such decision has created an
irreconcilable material conflict; provided, however, that such
withdrawal and termination shall be limited to the extent
required by the foregoing material irreconcilable conflict as
determined by a majority of the disinterested members of the
Board. Until the end of the foregoing six month period, the Fund
shall continue to accept and implement orders by the Company for
the purchase (and redemption) of shares of the Fund.
7.6. For purposes of Section 7.3 through 7.6 of this Agreement, a
majority of the disinterested members of the Board shall
determine whether any proposed action adequately remedies any
irreconcilable material conflict, but in no event will the Fund
be required to establish a new funding medium for the Contracts.
The Company shall not be required by Section 7.3 to establish a
new funding medium for the Contract if an offer to do so has been
declined by vote of a majority of Contract owners materially
adversely affected by the irreconcilable material conflict. In
the event that the Board determines that any proposed action does
not adequately remedy any irreconcilable material conflict, then
the Company will withdraw the Account's investment in the Fund
and terminate this Agreement within six (6) months after the
Board informs the Company in writing of the foregoing
determination; provided, however, that such withdrawal and
termination shall be limited to the extent required by any such
material irreconcilable conflict as determined by a majority of
the disinterested members of the Board.
7.7. If and to the extent the Mixed and Shared Funding Exemption
Order or any amendment thereto contains terms and conditions
different from Sections 3.4, 3.5, 3.6, 7.1, 7.2, 7.3, 7.4, and
7.5 of this Agreement, then the Fund and/or the Participating
Insurance Companies, as appropriate, shall take such steps as may
be necessary to comply with the Mixed and Shared Funding
Exemptive Order, and Sections 3.4, 3.5, 3.6, 7.1, 7.2, 7.3, 7.4
and 7.5 of this Agreement shall continue in effect only to the
extent that terms and conditions substantially identical to such
Sections are contained in the Mixed and Shared Funding Exemptive
Order or any amendment thereto. If and to the extent that Rule
6e-2 and Rule 6e-3(T) are amended, or Rule 6e-3 is adopted, to
provide exemptive relief from any provision of the 1940 Act or
the rules promulgated thereunder with respect to mixed or shared
funding (as defined in the Mixed and Shared Funding Exemptive
Order) on terms and conditions materially different from those
contained in the Mixed and Shared Funding Exemptive Order, then
(a) the Fund and/or the Participating Insurance Companies, as
appropriate, shall take such steps as may be necessary to comply
with Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3, as
adopted, to the extent such rules are applicable; and
(b) Sections 3.5, 3.6, 7.1., 7.2, 7.3, 7.4, and 7.5 of this
Agreement shall continue in effect only to the extent that terms
and conditions substantially identical to such Sections are
contained in such Rule(s) as so amended or adopted.
ARTICLE VIII. Indemnification
8. This text is hidden, do not remove.
8.1. Indemnification By the Company
8.1(a). The Company agrees to indemnify and hold
harmless the Fund and the Underwriter and each of its
trustees/directors and officers, and each person, if any, who
controls the Fund or Underwriter within the meaning of Section 15
of the 1933 Act or who is under common control with the
Underwriter (collectively, the "Indemnified Parties" for purposes
of this Section 8.1) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the
written consent of the Company) or litigation (including legal
and other expenses), to which the Indemnified Parties may become
subject under any statute or regulation, at common law or
otherwise, insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof) or settlements:
(i) arise out of or are based upon any untrue statement or
alleged untrue statements of any material fact contained in the
registration statement, prospectus (which shall include a written
description of a Contract that is not registered under the 1933
Act), or SAI for the Contracts or contained in the Contracts or
sales literature for the Contracts (or any amendment or
supplement to any of the foregoing), or arise out of or are based
upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make
the statements therein not misleading, provided that this
agreement to indemnify shall not apply as to any Indemnified
Party if such statement or omission or such alleged statement or
omission was made in reliance upon and in conformity with
information furnished to the Company by or on behalf of the Fund
for use in the registration statement, prospectus or SAI for the
Contracts or in the Contracts or sales literature (or any
amendment or supplement) or otherwise for use in connection with
the sale of the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
registration statement, prospectus, SAI, or sales literature of
the Fund not supplied by the Company or persons under its
control) or wrongful conduct of the Company or its agents or
persons under the Company's authorization or control, with
respect to the sale or distribution of the Contracts or Fund
Shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration
statement, prospectus, SAI, or sales literature of the Fund or
any amendment thereof or supplement thereto or the omission or
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading if such a statement or omission was made in reliance
upon information furnished to the Fund by or on behalf of the
Company; or
(iv) arise as a result of any material failure by the Company to
provide the services and furnish the materials under the terms of
this Agreement (including a failure, whether unintentional or in
good faith or otherwise, to comply with the qualification
requirements specified in Article VI of this Agreement); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Company;
(vi) as limited by and in accordance with the provisions of
Sections 8.1(b) and 8.1(c) hereof.
8.1(b). The Company shall not be liable under
this indemnification provision with respect to any losses,
claims, damages, liabilities or litigation to which an
Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross
negligence in the performance of such Indemnified Party's duties
or by reason of such Indemnified Party's reckless disregard of
its obligations or duties under this Agreement.
8.1(c). The Company shall not be liable under
this indemnification provision with respect to any claim made
against an Indemnified Party unless such Indemnified Party shall
have notified the Company in writing within a reasonable time
after the summons or other first legal process giving information
of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have
received notice of such service on any designated agent), but
failure to notify the Company of any such claim shall not relieve
the Company from any liability which it may have to the
Indemnified Party against whom such action is brought otherwise
than on account of this indemnification provision. In case any
such action is brought against an Indemnified Party, the Company
shall be entitled to participate, at its own expense, in the
defense of such action. The Company also shall be entitled to
assume the defense thereof, with counsel satisfactory to the
party named in the action. After notice from the Company to such
party of the Company's election to assume the defense thereof,
the Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and the Company will not be
liable to such party under this Agreement for any legal or other
expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs
of investigation.
8.1(d). The Indemnified Parties will promptly
notify the Company of the commencement of any litigation or
proceedings against them in connection with the issuance or sale
of the Fund shares or the Contracts or the operation of the Fund.
8.2. Indemnification by the Underwriter
8.2(a). The Underwriter agrees to indemnify and
hold harmless the Company and each of its directors and officers
and each person, if any, who controls the Company within the
meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.2) against
any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of the
Underwriter) or litigation (including legal and other expenses)
to which the Indemnified Parties may become subject under any
statute or regulation, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or expenses (or actions
in respect thereof) or settlements:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the
registration statement or prospectus or SAI or sales literature
of the Fund (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, provided that this agreement to indemnify shall not
apply as to any Indemnified Party if such statement or omission
or such alleged statement or omission was made in reliance upon
and in conformity with information furnished to the Underwriter
or Fund by or on behalf of the Company for use in the
registration statement, prospectus or SAI for the Fund or in
sales literature (or any amendment or supplement) or otherwise
for use in connection with the sale of the Contracts or Fund
shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
registration statement, prospectus, SAI or sales literature for
the Contracts not supplied by the Underwriter or persons under
its control) or wrongful conduct of the Fund or Underwriter or
persons under their control, with respect to the sale or
distribution of the Contracts or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration
statement, prospectus, SAI or sales literature covering the
Contracts, or any amendment thereof or supplement thereto, or the
omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statement
or statements therein not misleading, if such statement or
omission was made in reliance upon information furnished to the
Company by or on behalf of the Fund or the Underwriter; or
(iv) arise as a result of any failure by the Fund or the
Underwriter to provide the services and furnish the materials
under the terms of this Agreement (including a failure of the
Fund, whether unintentional or in good faith or otherwise, to
comply with the diversification and other qualification
requirements specified in Article VI of this Agreement); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Underwriter in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Underwriter;
as limited by and in accordance with the provisions of Sections
8.2(b) and 8.2(c) hereof.
8.2(b). The Underwriter shall not be liable
under this indemnification provision with respect to any losses,
claims, damages, liabilities or litigation to which an
Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross
negligence in the performance or such Indemnified Party's duties
or by reason of such Indemnified Party's reckless disregard of
obligations and duties under this Agreement or to the Company or
the Account, whichever is applicable.
8.2(c). The Underwriter shall not be liable
under this indemnification provision with respect to any claim
made against an Indemnified Party unless such Indemnified Party
shall have notified the Underwriter in writing within a
reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have been
served upon such Indemnified Party (or after such Indemnified
Party shall have received notice of such service on any
designated agent), but failure to notify the Underwriter of any
such claim shall not relieve the Underwriter from any liability
which it may have to the Indemnified Party against whom such
action is brought otherwise than on account of this
indemnification provision. In case any such action is brought
against the Indemnified Party, the Underwriter will be entitled
to participate, at its own expense, in the defense thereof. The
Underwriter also shall be entitled to assume the defense thereof,
with counsel satisfactory to the party named in the action.
After notice from the Underwriter to such party of the
Underwriter's election to assume the defense thereof, the
Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and the Underwriter will not
be liable to such party under this Agreement for any legal or
other expenses subsequently incurred by such party independently
in connection with the defense thereof other than reasonable
costs of investigation.
The Company agrees promptly to notify the
Underwriter of the commencement of any litigation or proceedings
against it or any of its officers or directors in connection with
the issuance or sale of the Contracts or the operation of the
Account.
8.3. Indemnification By the Fund
8.3(a). The Fund agrees to indemnify and hold
harmless the Company and each of its directors and officers and
each person, if any, who controls the Company within the meaning
of Section 15 of the 1933 Act (collectively, the "Indemnified
Parties" for purposes of this Section 8.3) against any and all
losses, claims, expenses, damages, liabilities (including amounts
paid in settlement with the written consent of the Fund) or
litigation (including legal and other expenses) to which the
Indemnified Parties may be required to pay or may become subject
under any statute or regulation, at common law or otherwise,
insofar as such losses, claims, expenses, damages, liabilities or
expenses (or actions in respect thereof) or settlements, are
related to the operations of the Fund and:
(i) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this
Agreement (including a failure, whether unintentional or in good
faith or otherwise, to comply with the diversification and other
qualification requirements specified in Article VI of this
Agreement); or
(ii) arise out of or result from any material breach of any
representation and/or warranty made by the Fund in this Agreement
or arise out of or result from any other material breach of this
Agreement by the Fund;
as limited by and in accordance with the provisions of Sections
8.3(b) and 8.3(c) hereof.
8.3(b). The Fund shall not be liable under this
indemnification provision with respect to any losses, claims,
damages, liabilities or litigation to which an Indemnified Party
would otherwise be subject by reason of such Indemnified Party's
willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of
such Indemnified Party's reckless disregard of obligations and
duties under this Agreement or to the Company, the Fund, the
Underwriter or the Account, whichever is applicable.
8.3(c). The Fund shall not be liable under this
indemnification provision with respect to any claim made against
an Indemnified Party unless such Indemnified Party shall have
notified the Fund in writing within a reasonable time after the
summons or other first legal process giving information of the
nature of the claim shall have been served upon such Indemnified
Party (or after such Indemnified Party shall have received notice
of such service on any designated agent), but failure to notify
the Fund of any such claim shall not relieve the Fund from any
liability which it may have to the Indemnified Party against whom
such action is brought otherwise than on account of this
indemnification provision. In case any such action is brought
against the Indemnified Parties, the Fund will be entitled to
participate, at its own expense, in the defense thereof. The
Fund also shall be entitled to assume the defense thereof, with
counsel satisfactory to the party named in the action. After
notice from the Fund to such party of the Fund's election to
assume the defense thereof, the Indemnified Party shall bear the
fees and expenses of any additional counsel retained by it, and
the Fund will not be liable to such party under this Agreement
for any legal or other expenses subsequently incurred by such
party independently in connection with the defense thereof other
than reasonable costs of investigation.
8.3(d). The Company and the Underwriter agree
promptly to notify the Fund of the commencement of any litigation
or proceeding against it or any of its respective officers or
directors in connection with the Agreement, the issuance or sale
of the Contracts, the operation of the Account, or the sale or
acquisition of shares of the Fund.
ARTICLE IX. Applicable Law
9. This text is hidden, do not remove.
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of
California.
9.2. This Agreement shall be subject to the provisions of the
1933, 1934 and 1940 Acts, and the rules and regulations and
rulings thereunder, including such exemptions from those
statutes, rules and regulations as the SEC may grant (including,
but not limited to, any Mixed and Shared Funding Exemptive Order)
and the terms hereof shall be interpreted and construed in
accordance therewith. If, in the future, the Mixed and Shared
Funding Exemptive Order should no longer be necessary under
applicable law, then Article VII shall no longer apply.
ARTICLE X. Termination
10. This text is hidden, do not remove.
10.1. This Agreement shall continue in full force and effect
until the first to occur of:
(a) termination by any party, for any reason with respect to
some or all Designated Portfolios, by three (3) months advance
written notice delivered to the other parties; or
(b) termination by the Company by written notice to the Fund and
the Underwriter based upon the Company's determination that
shares of the Fund are not reasonably available to meet the
requirements of the Contracts; or
(c) termination by the Company by written notice to the Fund and
the Underwriter in the event any of the Designated Portfolio's
shares are not registered, issued or sold in accordance with
applicable state and/or federal law or such law precludes the use
of such shares as the underlying investment media of the
Contracts issued or to be issued by the Company; or
(d) termination by the Fund or Underwriter in the event that
formal administrative proceedings are instituted against the
Company by the NASD, the SEC, the Insurance Commissioner or like
official of any state or any other regulatory body regarding the
Company's duties under this Agreement or related to the sale of
the Contracts, the operation of any Account, or the purchase of
the Fund's shares; provided, however, that the Fund or
Underwriter determines in its sole judgment exercised in good
faith, that any such administrative proceedings will have a
material adverse effect upon the ability of the Company to
perform its obligations under this Agreement; or
(e) termination by the Company in the event that formal
administrative proceedings are instituted against the Fund or
Underwriter by the NASD, the SEC, or any state securities or
insurance department or any other regulatory body; provided,
however, that the Company determines in its sole judgment
exercised in good faith, that any such administrative proceedings
will have a material adverse effect upon the ability of the Fund
or Underwriter to perform its obligations under this Agreement;
or
(f) termination by the Company by written notice to the Fund and
the Underwriter with respect to any Designated Portfolio in the
event that such Portfolio ceases to qualify as a Regulated
Investment Company under Subchapter M or fails to comply with the
Section 817(h) diversification requirements specified in Article
VI hereof, or if the Company reasonably believes that such
Portfolio may fail to so qualify or comply; or
(g) termination by the Fund or Underwriter by written notice to
the Company in the event that the Contracts fail to meet the
qualifications specified in Article VI hereof; or
(h) termination by either the Fund or the Underwriter by written
notice to the Company, if either one or both of the Fund or the
Underwriter respectively, shall determine, in their sole judgment
exercised in good faith, that the Company has suffered a material
adverse change in its business, operations, financial condition,
or prospects since the date of this Agreement or is the subject
of material adverse publicity; or
(i) termination by the Company by written notice to the Fund and
the Underwriter, if the Company shall determine, in its sole
judgment exercised in good faith, that the Fund, Adviser, or the
Underwriter has suffered a material adverse change in its
business, operations, financial condition or prospects since the
date of this Agreement or is the subject of material adverse
publicity; or
(j) termination by the Fund or the Underwriter by written notice
to the Company, if the Company gives the Fund and the Underwriter
the written notice specified in Section 1.7(a)(ii) hereof and at
the time such notice was given there was no notice of termination
outstanding under any other provision of this Agreement;
provided, however, any termination under this Section 10.1(j)
shall be effective forty-five days after the notice specified in
Section 1.7(a)(ii) was given; or
(k) termination by the Company upon any substitution of the
shares of another investment company or series thereof for shares
of a Designated Portfolio of the Fund in accordance with the
terms of the Contracts, provided that the Company has given at
least 45 days prior written notice to the Fund and Underwriter of
the date of substitution; or
(l) termination by any party in the event that the Fund's Board
of Trustees determines that a material irreconcilable conflict
exists as provided in Article VII.
10.2. Notwithstanding any termination of this Agreement, the
Fund and the Underwriter shall, at the option of the Company,
continue to make available additional shares of the Fund pursuant
to the terms and conditions of this Agreement, for all Contracts
in effect on the effective date of termination of this Agreement
(hereinafter referred to as "Existing Contracts"), unless the
Underwriter requests that the Company seek an order pursuant to
Section 26(b) of the 1940 Act to permit the substitution of other
securities for the shares of the Designated Portfolios. The
Underwriter agrees to split the cost of seeking such an order,
and the Company agrees that it shall reasonably cooperate with
the Underwriter and seek such an order upon request.
Specifically, the owners of the Existing Contracts may be
permitted to reallocate investments in the Fund, redeem
investments in the Fund and/or invest in the Fund upon the making
of additional purchase payments under the Existing Contracts
(subject to any such election by the Underwriter). The parties
agree that this Section 10.2 shall not apply to any terminations
under Article VII and the effect of such Article VII terminations
shall be governed by Article VII of this Agreement. The parties
further agree that this Section 10.2 shall not apply to any
terminations under Section 10.1(g) of this Agreement.
10.3. The Company shall not redeem Fund shares attributable
to the Contracts (as opposed to Fund shares attributable to the
Company's assets held in the Account) except (i) as necessary to
implement Contract owner initiated or approved transactions, (ii)
as required by state and/or federal laws or regulations or
judicial or other legal precedent of general application
(hereinafter referred to as a "Legally Required Redemption"),
(iii) upon 45 days prior written notice to the Fund and
Underwriter, as permitted by an order of the SEC pursuant to
Section 26(b) of the 1940 Act, but only if a substitution of
other securities for the shares of the Designated Portfolios is
consistent with the terms of the Contracts, or (iv) as permitted
under the terms of the Contract. Upon request, the Company will
promptly furnish to the Fund and the Underwriter reasonable
assurance that any redemption pursuant to clause (ii) above is a
Legally Required Redemption. Furthermore, except in cases where
permitted under the terms of the Contacts, the Company shall not
prevent Contract owners from allocating payments to a Portfolio
that was otherwise available under the Contracts without first
giving the Fund or the Underwriter 45 days notice of its
intention to do so.
10.4. Notwithstanding any termination of this Agreement, each
party's obligation under Article VIII to indemnify the other
parties shall survive.
ARTICLE XI. Notices
11. This text is hidden, do not remove.
Any notice shall be sufficiently given when sent
by registered or certified mail to the other party at the address
of such party set forth below or at such other address as such
party may from time to time specify in writing to the other
party.
If to the Fund: PIMCO Variable Insurance
Trust
840 Newport Center Drive, Suite 360
Newport Beach, CA 92660
If to the Company:
If to Underwriter: PIMCO Funds Distributors LLC
2187 Atlantic Street
Stamford, CT 06902
ARTICLE XII. Miscellaneous
12. This text is hidden, do not remove.
12.1. All persons dealing with the Fund must look solely to
the property of the Fund, and in the case of a series company,
the respective Designated Portfolios listed on Schedule A hereto
as though each such Designated Portfolio had separately
contracted with the Company and the Underwriter for the
enforcement of any claims against the Fund. The parties agree
that neither the Board, officers, agents or shareholders of the
Fund assume any personal liability or responsibility for
obligations entered into by or on behalf of the Fund.
12.2. Subject to the requirements of legal process and
regulatory authority, each party hereto shall treat as
confidential the names and addresses of the owners of the
Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as
permitted by this Agreement, shall not disclose, disseminate or
utilize such names and addresses and other confidential
information without the express written consent of the affected
party until such time as such information has come into the
public domain.
12.3. The captions in this Agreement are included for
convenience of reference only and in no way define or delineate
any of the provisions hereof or otherwise affect their
construction or effect.
12.4. This Agreement may be executed simultaneously in two or
more counterparts, each of which taken together shall constitute
one and the same instrument.
12.5. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the
remainder of the Agreement shall not be affected thereby.
12.6. Each party hereto shall cooperate with each other party
and all appropriate governmental authorities (including without
limitation the SEC, the NASD, and state insurance regulators) and
shall permit such authorities reasonable access to its books and
records in connection with any investigation or inquiry relating
to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party
hereto further agrees to furnish the [insert state] Insurance
Commissioner with any information or reports in connection with
services provided under this Agreement which such Commissioner
may request in order to ascertain whether the variable annuity
operations of the Company are being conducted in a manner
consistent with the [insert state] variable annuity laws and
regulations and any other applicable law or regulations.
12.7. The rights, remedies and obligations contained in this
Agreement are cumulative and are in addition to any and all
rights, remedies, and obligations, at law or in equity, which the
parties hereto are entitled to under state and federal laws.
12.8. This Agreement or any of the rights and obligations
hereunder may not be assigned by any party without the prior
written consent of all parties hereto.
12.9. The Company shall furnish, or shall cause to be
furnished, to the Fund or its designee copies of the following
reports:
(a) the Company's annual statement (prepared under statutory
accounting principles) and annual report (prepared under
generally accepted accounting principles) filed with any state or
federal regulatory body or otherwise made available to the
public, as soon as practicable and in any event within 90 days
after the end of each fiscal year; and
(b) any registration statement (without exhibits) and financial
reports of the Company filed with the Securities and Exchange
Commission or any state insurance regulatory, as soon as
practicable after the filing thereof.
IN WITNESS WHEREOF, each of the parties hereto has caused
this Agreement to be executed in its name and on its behalf by
its duly authorized representative and its seal to be hereunder
affixed hereto as of the date specified below.
COMPANY:
By its authorized officer
By:
Title:
Date:
PIMCO VARIABLE INSURANCE TRUST
By its authorized officer
By:
Title:
Date:
PIMCO FUNDS DISTRIBUTORS LLC
By its authorized officer
By:
Title:
Date:
8194921.doc
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<PAGE>
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EXHIBIT (8)(c)
<PAGE>
<PAGE>
SERVICE AGREEMENT
This Service Agreement dated as of January 1, 1997, is
entered into by and between Equitable Life Insurance Company of
Iowa ("ELIC"), a corporation organized and existing under the
laws of the State of Iowa, and Golden American Life Insurance
Company ("GA"), an insurance company organized and existing under
the laws of the State of Delaware.
WHEREAS, Equitable Life Insurance Company of Iowa and Golden
American Life Insurance Company are owned or controlled directly
or indirectly by Equitable of Iowa Companies, which conducts
substantially all of its insurance and non-insurance operations
through subsidiary companies, and
WHEREAS, ELIC provides personnel, services and managerial
functions for its subsidiaries and affiliates, and directly or
indirectly leases employees and facilities to affiliates to carry
out their operations; and
WHEREAS, GA is desirous of obtaining certain advisory,
computer, and other resources ("Services") provided through ELIC
upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein, the ELIC and GA hereto agree as
follows:
1. Services. On the basis of the foregoing premises
Services shall be provided to GA as GA shall request
from time to time in furtherance of the development and
maintenance of GA's activities. Such Services may
include the following:
a.) Accounting
b.) Actuarial
c.) Advisory
d.) Claims Adjustment
e.) Computer Services
f.) Employee Services
g.) Legal
h.) Marketing (excluding commissions)
i.) Tax
j.) Underwriting
k.) Administrative Services
2. Control. All Services to be performed pursuant to this
Agreement which require the exercise of judgment shall
be performed in accordance with generally accepted
insurance practices when insurance or related activi
ties are involved.
3. Consideration. Costs shall be attributable to GA for
Services performed, in accordance with the allocation
set forth in the attached schedule ("Schedule") or in
accordance with any future schedules for payment of
costs as agreed to between the parties. Quarterly,
ELIC shall have the right to (a) adjust the allocations
set forth in the Schedule to reflect as closely as
possible the actual cost of Services rendered to GA and
(b) to allocate the difference between the actual cost
of Services rendered to GA and the amounts set forth in
the Schedule. Services provided shall be recorded
through intercompany accounts.
4. Audit. As of the last day of each year, GA shall have
the right, at its own expense, to conduct an audit of
the Services rendered and the amounts charged
hereunder.
5. Termination. This Agreement shall remain in effect
until termination by mutual agreement of the parties
hereto on 30 days written notice, with the exception of
any Computer Services being provided by ELIC to GA in
which case GA shall have the option to continue to
receive such services for six months subsequent to such
termination notice.
6. Construction. This Agreement shall be interpreted and
construed under and pursuant to the laws of the State
of Iowa.
7. This Agreement is subject to the approval of the state
insurance commissioners of the Delaware and Iowa
Departments of Insurance.
IN WITNESS WHEREOF, the parties hereto have duly executed
this Agreement as of the day and year first above written.
EQUITABLE LIFE INSURANCE
COMPANY OF IOWA
By:___________________________
Frederick S. Hubbell,
President,
Chairman of the Board
and CEO
Attest___________________________
John A. Merriman, Secretary
GOLDEN AMERICAN LIFE
INSURANCE COMPANY
By:______________________________
Terry L. Kendall,
President and CEO
Attest____________________________
Myles R. Tashman, Secretary
SCHEDULE
(January 1, 1997)
Expense Charges
GA's costs shall be computed in the Reports designated below,
prepared according to the following methodologies:
A. Individual Policies
1. Individual Life - Charges as determined per annual
expense study and quarterly allocation report.
a) Issuance - Flat amount per policy issued.
b) Maintenance - Flat amount per average in force
policy.
2. Single Premium Universal Life - Charges as determined
per annual expense analysis and Quarterly Allocation
Report.
a) Issuance - Flat amount per policy issued.
b) Maintenance - Flat amount per average in force
policy.
3. Group - Charges as set forth in the Group Allocation
Report.
a) Issuance - Flat amount per policy issued.
b) Maintenance - Flat amount per in force certificate
and/or groups in force.
B. Annuity Policies
1. Deferred Annuities - Charges as set forth in the
Annuity Internal Cost Allocation Report
a) Flat charge per contract issued
b) Maintenance - flat amount per average policy in
force.
2. Immediate Annuities - Charges as set forth in the
Annuity Internal Cost Allocation Report
a) Flat charge per contract issued
b) Maintenance charge per contract
i) Quarterly fee per in force contract
3. Other Annuities (Specialty, etc.) - Charges as set
forth in the pricing of the product.
June 13, 1997\L:\JMS\EQUITABL\AGREE\SVC-AGT.GAM
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EXHIBIT (8)(d)
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SERVICE AGREEMENT
This Service Agreement (hereinafter called
"Agreement") is made effective as of the 1st day of
January 1994, by and between Directed Services, Inc., a
New York Corporation (hereinafter called "DSI"), and
Golden American Life Insurance Company, a Delaware
Insurance Corporation (hereinafter called "Golden
American").
WHEREAS, DSI has extensive experience in the
distribution of variable insurance business; and
WHEREAS, Golden American is an affiliate of DSI and
desires DSI to perform certain marketing, sales and other
services (hereinafter called "Services") for Golden
American in its insurance operations and desires further
to make use in its day-to-day operations of certain
personnel, property, equipment, and facilities
(hereinafter called "Facilities") of DSI as Golden
American may request; and
WHEREAS, DSI desires Golden American to perform
certain managerial, supervisory, treasury, accounting,
financial reporting, systems, legal and tax-related tasks
for DSI in its securities operations and further to make
use in its day-to-day operations of certain personnel,
property, equipment, and facilities of Golden American as
DSI may request; and
WHEREAS, DSI and Golden American contemplate that
such an arrangement will achieve certain operating
economies, and improve services to the mutual benefit of
both DSI and Golden American; and
WHEREAS, DSI and Golden American wish to assure that
all charges for Services and the use of Facilities
incurred hereunder are reasonable and to the extent
practicable reflect actual costs and are arrived at in a
fair and equitable manner, and that estimated costs,
whenever used, are adjusted periodically to bring them
into alignment with actual costs; and
WHEREAS, DSI and Golden American wish to identify
the Services to be rendered to Golden American and DSI
and to provide a method of fixing bases for determining
the charges to be made.
NOW, THEREFORE, in consideration of the premises and
of the promises set forth herein, and intending to be
legally bound hereby, DSI and Golden American agree as
follows:
1. PERFORMANCE OF SERVICES
Both parties agree to the extent requested by the
other party to perform such Services for each other as
the parties determine to be reasonably necessary in the
conduct of their insurance operations and securities
operations.
Each party agrees at all times to use its best
efforts to maintain sufficient personnel and Facilities
of the kind necessary to perform the Services
contemplated under this Agreement. Each shall have the
right upon thirty (30) days prior written notice to the
other to subcontract with those parents, subsidiaries,
affiliates or unrelated third parties (hereinafter
"SUBS") accepted in writing by the other party to perform
any Services and provide any personnel and Facilities
which each is obligated to provide pursuant to this
Agreement and in strict accordance with the terms,
conditions and limitations contained in this Agreement.
In addition, each party agrees that shared personnel may
be used. Services provided by such shared personnel may
satisfy either party's obligations to perform Services
under this Agreement.
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(a) CAPACITY OF PERSONNEL
Whenever either party utilizes its personnel to
perform Services for the other pursuant to this
Agreement, such personnel shall at all times remain
employees of the employer subject solely to its direction
and control and the employer shall alone retain full
liability to such employees for their welfare, salaries,
fringe benefits, legally required employer contributions
and tax obligations.
No facility of either party used in performing
Services for or subject to use by the other party shall
be deemed to be transferred, assigned, conveyed or leased
by performance or use pursuant to this Agreement.
(b) EXERCISE OF JUDGEMENT IN RENDERING SERVICES
In providing any Services hereunder which require
the exercise of judgement, each party shall perform any
such Service in accordance with any standards and
guidelines developed and communicated to the other party.
In performing any Services hereunder, each party shall at
all times act in a manner reasonably calculated to be in,
or not opposed to, the best interest of the other party.
Neither party shall have liability for any
action taken or omitted by it, in furnishing Services and
Facilities under this Agreement, in good faith and
without gross negligence.
(c) CONTROL
The performance of Services by DSI for Golden
American or Golden American for DSI pursuant to this
Agreement shall in no way impair the absolute control of
the business and operations of DSI or Golden American by
their respective Boards of Directors. Each party shall
act hereunder so as to assure the separate operating
identity of the other party.
2. SERVICES
The performance of DSI under this Agreement with
respect to the business and operations of Golden American
shall at all times be subject to the direction and
control of the Board of Directors of Golden American.
The performance of Golden American under this Agreement
with respect to the business and operations of DSI shall
at all times be subject to the direction and control of
the Board of Directors of DSI.
2.1. Subject to the foregoing and to the
terms and conditions of this Agreement, DSI shall provide
to Golden American the Services set forth below.
(a) MARKETING
DSI shall provide marketing Services, including
recruitment and direction of internal wholesalers,
validation of agents' training allowances and development
allowances and the administration of all agency matters.
(b) ADVERTISING AND SALES PROMOTIONAL SERVICES
Under the general supervision of the Board of
Directors of Golden American and subject to the
direction, control and prior approval of the responsible
officers of Golden American, DSI shall provide sales
Services, including sales aids, rate guides, sales
brochures, solicitation materials and such other
promotional materials, information, assistance and advice
as shall assist the sales efforts of Golden American.
DSI shall also interface to the extent necessary or
appropriate with the NASD and SEC regarding marketing
materials.
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(c) DSI shall provide underwriting and related
securities Services to Golden American in its offerings
of insurance products.
(d) DSI shall provide supervisory and
regulatory expertise and support as necessary to
facilitate Golden American's offering of insurance
products, including NASD and SEC interface regarding
registered representatives and registration statements.
2.2. Subject to the foregoing and to the
terms and conditions of this Agreement, Golden American
shall provide to DSI the services set forth below.
(a) SUPERVISORY/MANAGERIAL
Golden American shall provide managerial and
supervisory services to DSI regarding insurance
operations, insurance distribution and product specific
knowledge/information or training.
(b) ACCOUNTING/FINANCIAL
Golden American shall provide treasury,
accounting, and financial reporting services, including
systems support as requested by DSI to support DSI's
investment advisory and in the performance of allocations
of salaries and expenses of the parties to this
Agreement.
(c) TAX
Golden American shall provide tax-related
consulting and related services to DSI's operations.
(d) LEGAL
Golden American shall provide legal support for
DSI.
(e) COMMISSIONS PROCESSING
Golden American shall process the payment of
commissions for DSI.
3. CHARGES
Golden American agrees to reimburse DSI and DSI
agrees to reimburse Golden American for Services provided
to each other pursuant to this Agreement. The charges
for such Services and Facilities shall include all direct
and directly allocable expenses, reasonably and equitably
determined to be attributable to each party, plus a
reasonable charge for direct overhead such as rent
expense, the amount of such charge for overhead to be
agreed upon by the parties from time to time. When
shared personnel are used to perform Services,
allocations of the cost of such personnel including
salaries and benefits shall be in proportion to the time
spent by such personnel directly relating to Services
performed for the appropriate party to this Agreement.
Each party's determination of charges hereunder
shall be presented to the other party, and if a party
objects to any such determination, it shall so advise the
other party within thirty (30) days of receipt of notice
of said determination. Unless the parties can reconcile
any such objection, they shall agree to the selection of
a firm of independent certified public accountants which
shall determine the charges properly allocable to each
party and shall, within a reasonable time, submit such
determination, together with the basis therefore, in
writing to DSI and Golden American whereupon such
determination shall be binding. The expenses of such a
determination by a firm of independent certified public
accountants shall be borne equally by DSI and Golden
American.
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4. PAYMENT
Each party shall submit to the other party within
thirty (30) days of the end of each calendar month a
written statement of the amount estimated to be owed by
the other party for Services and the use of Facilities
pursuant to this Agreement in that calendar month and
each party shall pay to the party rendering the statement
within thirty (30) days following receipt of such written
statement the amount set forth in the statement.
5. ACCOUNTING RECORDS AND DOCUMENTS
Each party shall be responsible for maintaining full
and accurate accounting records of all Services rendered
and Facilities used pursuant to this Agreement to the
other party and such additional information as each may
reasonably request for purposes of its internal
bookkeeping and accounting operations. They shall keep
such accounting records insofar as they pertain to the
computation of charges hereunder available at their
principal offices for audit, inspection and copying by
the other party or any governmental agency having
jurisdiction over each entity during all reasonable
business hours.
With respect to accounting and statistical records
prepared by reason of their performance under this
Agreement, summaries of such records shall be delivered
to the other party within thirty (30) days from the end
of the month to which the records pertain, or as soon
thereafter as practicable.
6. OTHER RECORDS AND DOCUMENTS
All books, records, and files established and
maintained by DSI by reason of its performance under this
Agreement which, absent this Agreement, would have been
held by Golden American shall be deemed the property of
Golden American, and shall be subject to examination by
Golden American and persons authorized by it at all
times, and shall be delivered to Golden American at least
quarterly. The records held by Golden American for
services provided for DSI shall be deemed property of
DSI, and shall be subject to examination by DSI and
persons authorized by it at all times.
With respect to original documents other than those
provided for in Section 5 hereof which would otherwise be
held by Golden American and which may be obtained by DSI
in performing under this Agreement, DSI shall deliver
such documents to Golden American within thirty (30) days
of their receipt by DSI except where continued custody of
such original documents is necessary to perform services
hereunder. The records held by Golden American in the
performance of services for DSI shall be delivered to DSI
within thirty (30) days of their receipt by Golden
American except where continued custody is necessary to
perform services hereunder.
7. RIGHT TO CONTRACT WITH SUBS
Nothing herein shall be deemed to grant either an
exclusive right to provide Services to the other party,
and each party retains the right to contract with any
SUB, affiliated or unaffiliated, for the performance of
Services or for the use of Facilities as are available to
or have been requested by either party pursuant to this
Agreement.
8. TERMINATION AND MODIFICATION
This Agreement shall remain in effect until
terminated by either DSI or Golden American upon giving
thirty (30) days or more advance written notice, provided
that Golden American shall have the right to elect to
continue to receive data processing Services and/or to
continue to utilize data processing Facilities and
related software for up to one year from the date of such
notice. Upon termination, each party shall promptly
deliver to the other party all books and records that
are, or are deemed by this Agreement to be, the property
of the other party.
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9. SETTLEMENT ON TERMINATION
No later than ninety (90) days after the effective
date of termination of this Agreement, each party shall
deliver to the other party a detailed written statement
of all charges incurred and not included in any previous
statement to the effective date of termination. The
amount owned hereunder shall be due and payable within
thirty (30) days of receipt of such statement.
10. ASSIGNMENT
This Agreement and any rights pursuant hereto shall
not be assignable by either party hereto, except as set
forth herein or by operation of law. Except as and to
the extent specifically provided in this Agreement,
nothing in this Agreement, expressed or implied, is
intended to confer on any person other than the parties
hereto or their respective legal successors, any rights,
remedies, obligations or liabilities, or to relieve any
person other than the parties hereto or their respective
legal successors from any obligations or liabilities that
would otherwise be applicable. The covenants and
agreements contained in this Agreement shall be binding
upon, extend to and ensure to the benefit of the parties
hereto, their and each of their successors and assigns
respectively.
11. GOVERNING LAW
This Agreement is made pursuant to and shall be
governed by, interpreted under, and the rights of the
parties determined in accordance with, the laws of the
State of Delaware.
12. ARBITRATION
Any unresolved difference of opinion between the
parties arising out of or relating to this Agreement, or
the breach thereof, except as provided in Section 3,
shall be settled by arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration
Association and the Expedited Procedures thereof, and
judgement upon the award rendered by the Arbitrator may
be entered in any Court having jurisdiction thereof. The
arbitration shall take place in Wilmington, Delaware, or
at such other place as the parties may mutually agree.
13. NOTICE
All notices, statements or requests provided for
hereunder shall be deemed to have been duly given when
delivered by hand to an officer of the other party, or
when deposited with the U.S. Postal Service as certified
or registered mail, postage prepaid, addressed:
(a) If to DSI, to:
Bernard R. Beckerlegge
General Counsel and Secretary
Directed Services, Inc.
280 Park Avenue, 14th Floor-West
New York, New York 10017
(b) If to Golden American, to:
David L. Jacobson
Senior Vice President and Assistant Secretary
Golden American Life Insurance Company
1001 Jefferson Street, Suite 400
Wilmington, Delaware 19801
or to such other person or place as each party may from
time to time designate by written notice sent as
aforesaid.
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14. ENTIRE AGREEMENT
This Agreement, together with such Amendments as may
from time to time be executed in writing by the parties,
constitutes the entire Agreement between the parties with
respect to the subject matter hereof.
IN WITNESS WHEREOF, the parties have caused this
Agreement to be executed in duplicate by their respective
officers duly authorized so to do, and their respective
corporate seals to be attached hereto this 7th day of
March 1995.
Directed Services, Inc.
By: /s/ Mary Bea Wilkenson
Golden American Life Insurance Company
By: /s/ David L. Jacobson
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The Service Agreement between Golden American Life Insurance
Company ("Golden American") and Directed Services, Inc. ("DSI")
dated March 7, 1995 is hereby amended by mutual agreement of the
parties by addition of the following provisions:
Section 2.1 Services of Directed Services, Inc. shall be
amended by adding the following:
(e) DSI shall conduct due diligence meetings and conferences to
educate third-party broker-dealers regarding Golden American's
insurance products.
Section 3. CHARGES shall be amended by adding the following
examples demonstrating equitable determination of expenses.
These examples are intended to show the intent of the parties and
are not all inclusive:
(a) Expenses relating to compensation of wholesalers -
1. Golden American shall pay the base compensation of
wholesalers. This serves as Golden American's share for
providing insurance knowledge and insurance distribution
services.
2. DSI shall pay the bonus compensation of wholesalers. This
serves as DSI's share for providing marketing services to third-
party broker-dealers.
(b) Expenses related to the production of marketing materials -
(b) Golden American pays for prospectus and marketing materials
directly related to the insurance products.
(c) DSI pays for marketing materials related to its investment
advisory functions, including brochures describing fund
performance, fund objectives and fund risks.
(c) Expenses for managerial and supervisory services payable to
Golden American 10 bp of separate account assets (Section
2.2(a)).
This amendment was executed December 18, 1995 and is effective as
of March 7, 1995.
By: /s/ Mary Bea Wilkenson By: /s/ David L. Jacobson
- -------------------------------- -------------------------------
Directed Services, Inc. Golden American Life
Insurance Company
Directed Services, Inc.
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EXHIBIT (8)(e)
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INVESTMENT MANAGEMENT AGREEMENT
Agreement for Investment Management and Administrative Services
dated as of January 1, 1997, between Equitable Investment
Services, Inc. (AInvestment@), a corporation organized and
existing under the laws of the State of Iowa, and Golden American
Life Insurance Company (GA), an insurance company organized and
existing under the laws of the State of Delaware.
1. Investment hereby agrees to act as investment manager for,
and to manage the investment assets of GA=s general account,
and certain assets in a non-unitized separate account
established and maintained by GA to support certain annuity
contracts, excluding policy loans of GA, (hereinafter
referred to as AManaged Assets@), and any other assets as
may be mutually agreed on from time to time and to provide
administrative services related thereto. Investment of
managed assets of GA shall be at all times in accordance
with the investment policies of GA. The Investment policies
of GA shall be determined from time to time by its Board of
Directors and communicated to Investment. Within such
policies, Investment shall assume responsibility for the
management of the Managed Assets of GA, and the execution of
all investment decisions for GA. Investment shall maintain
records documenting all investment decisions made on behalf
of GA, such records being the property of GA. Investment
shall report to the Board of Directors of GA, at such times
and in such manner as the Board of Directors of GA may deem
appropriate. Making and execution of investment decisions
in the intervals between GA Board meetings shall be done by
the officers of Investment who have been designated by
Investment for such purposes pursuant to authorization from
GA in the form of a board resolution.
2. Investment will receive an annual fee (payable monthly) from
GA calculated as follows: 0.25% of the value of the Managed
Assets as of the preceding month end. The monthly payment
will be due on or before the last working day of each month.
Value of the Managed Assets for purpose of this Section 2
shall be determined by the application of generally accepted
accounting principles as applied as of the end of each
month. The schedule of charges provided for in this
paragraph shall remain in full force and effect until
December 31, 1997, at which time, and annually thereafter,
the schedule of charges shall automatically renew unless the
parties hereto review and mutually agree to make appropriate
changes in said schedule in the light of experience or this
Agreement has terminated.
3. This Agreement shall automatically renew on December 31,
1997, and annually thereafter unless terminated by either
party as provided in this Section 3. This Agreement can be
terminated by either party at any time on not less than 30
days= written notice without payment of any fee or penalty
by either party. Any notice under this paragraph shall be
in writing, addressed and delivered or mailed, postage paid,
to the other party at such address as the other party may
designate for the receipt of such notice. Until further
notice to the other party, it is agreed that the address of
GA shall be 1001 Jefferson Street, Suite 400, Wilmington, DE
19801, ATTN: Barnett Chernow; and of Investment, 604 Locust
Street, Des Moines, IA 50309, ATTN: John Merriman.
4. Investment does not make any express or implied warranties
with respect to any of the advice and management of said
Managed Assets, including the making and execution of GA=s
investment decisions. Investment is not and will not be
liable for any loss or losses incurred because of its advice
given or management of said Managed Assets, including the
making and execution of GA=s investment decisions except for
Investment=s willful misconduct or gross negligence.
5. This Agreement supersedes prior agreements between the
parties and shall become effective on January 1, 1997, and
shall continue in effect until terminated under the
provisions of paragraph 3 hereof.
Executed as of the 1st day of January, 1997.
EQUITABLE INVESTMENT SERVICES, INC.
By: _____________________________
Paul R. Schlaack,
President & CEO
Attest: _________________________
John A. Merriman, Asst. Secretary
GOLDEN AMERICAN LIFE INSURANCE
COMPANY
By: _____________________________
Terry L. Kendall,
President & CEO
Attest _________________________
Myles R. Tashman, Secretary
L:\JMS\EQUITABL\AGREE\INVT-MGT.GAM SLJ - 6/11/97
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EXHIBIT 10(a)
SUTHERLAND, ASBILL & BRENNAN LLP
1275 PENNSYLVANIA AVENUE, N.W.
WASHINGTON, D.C. 20004-2404
April 29, 1998
VIA EDGAR
- ---------
Board of Directors
Golden American Life Insurance Company
1001 Jefferson Street, Suite 400
Wilmington, DE 19801
Ladies and Gentlemen:
We hereby consent to the reference to our name under the
caption "Legal Matters" in the Prospectus filed as part of
Post-Effective Amendment No. 2 to the registration statement on
Form N-4 for the Separate Account B (File No. 333-28755). In
giving this consent, we do not admit that we are in the category
of persons whose consent is required under Section 7 of the
Securities Act of 1933.
Very truly yours,
SUTHERLAND, ASBILL & BRENNAN LLP
By: /s/Susan S. Krawczyk
------------------
Susan S. Krawczyk
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EXHIBIT 10(b)
Exhibit 10(b) - Consent of Ernst & Young LLP, Independent Auditors
We consent to the reference to our firm under the captions
"Independent Auditors", "Experts" and "Financial Statements" and to
the use of our reports dated February 12, 1998, with respect to the
financial statements of Golden American Life Insurance Company,
and February 12, 1998, with respect to the financial statements of
Separate Account B, included in Post-Effective Amendment No. 2 to
the Registration Statement (Form N-4 No. 333-28755) and related
Prospectus of Separate Account B.
Our audit also included the financial statement schedules of Golden
American Life Insurance Company included in Item 24(a)(2). These
schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audit. In our
opinion, the financial statement schedules referred to above, when
considered in relation to the basic financial statements taken as
a whole, present fairly in all material respects the information
set forth therein.
/s/ Ernst & Young LLP
Des Moines, Iowa
April 24, 1998
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EXHIBIT 10(c)
GOLDEN AMERICAN LIFE INSURANCE COMPANY
1001 Jefferson Street, Suite 400, Wilmington, DE 19801
April 27, 1998
Board of Directors
Golden American Life Insurance Company
1001 Jefferson Street, Suite 400
Wilmington, DE 19801
Ladies and Gentlemen:
I consent to the reference to my name under the heading "Legal
Matters" in the prospectus. In giving this consent I do not
thereby admit that I come within the category of persons whose
consent is required under Section 7 of the Securities Act of
1933 or the Rules and Regulations of the Securities and Exchange
Commission thereunder.
Sincerely,
/s/ Myles R. Tashman
Myles R. Tashman
Executive Vice President, General Counsel
and Secretary
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EXHIBIT 15
GOLDEN AMERICAN LIFE INSURANCE COMPANY
1001 Jefferson Street, Suite 400, Wilmington, DE 19801
Phone: (302) 576-3400
Fax: (302) 576-3520
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned,
being duly elected Directors and officers of Golden American Life
Insurance Company ("Golden American"), constitute and appoint
Myles R. Tashman, and Marilyn Talman, and each of them, his or
her true and lawful attorneys-in-fact and agents with full power
of substitution and resubstitution for him or her in his or her
name, place and stead, in any and all capacities, to sign Golden
American's registration statements and applications for exemptive
relief, and any and all amendments thereto, and to file the same,
with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents full power and authority
to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as
s/he might or could do in person, hereby ratifying and affirming
all that said attorneys-in-fact and agents, or any of them, or
his or her substitute or substitutes, may lawfully do or cause to
be done by virtue thereof.
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ Frederick S. Hubbell Director and Chairman April 27, 1998
- ----------------------- --------------------
Frederick S. Hubbell
/s/ Barnett Chernow Director and President April 27, 1998
- ----------------------- --------------------
Barnett Chernow
/s/ Myles R. Tashman Director, Executive Vice April 27, 1998
- ----------------------- President, General --------------------
Myles R. Tashman Counsel and Secretary
/s/ Susan B. Watson Director, Senior Vice April 24, 1998
- -------------------- President and Chief --------------------
Susan B. Watson Financial Officer
/s/ Paul E. Larson Director April 27, 1998
- ----------------------- --------------------
Paul E. Larson
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