<PAGE>
File Nos. 33-23351, 811-5626
Filed under Rule 497(c)
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ GOLDENSELECT DVA +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
GOLDEN AMERICAN LIFE INSURANCE COMPANY
Golden American Life Insurance Company is a stock company domiciled in Wilming-
ton, Delaware
DEFERRED VARIABLE ANNUITY PROSPECTUS
GOLDENSELECT DVA
- --------------------------------------------------------------------------------
This prospectus describes group and individual deferred variable annuity
contracts (the "contract") offered by Golden American Life Insurance Company
("Golden American" "we" "our" or "us"). The owner ("you" or "your") purchases
the contract with an initial premium and is permitted to make additional
premium payments.
The contract is funded by Separate Account B ("Account B").
Twenty-four 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") and the PIMCO Variable Insurance Trust
(the "PIMCO Trust").
This prospectus describes the contract and provides background information
regarding Account B. The prospectuses for the GCG Trust, the ESS Trust and the
PIMCO Trust (individually "a Trust," and collectively, "the Trusts"), which
must accompany this prospectus, provide information regarding investment activ-
ities and policies of the Trusts.
You may allocate your premiums among the twenty-four divisions currently avail-
able under the contract in any way you choose, subject to certain restrictions.
You may change the allocation of your accumulation value up to twelve times per
contract year free of charge.
You may surrender the contract for its cash surrender value at any time before
the annuity commencement date provided the annuitant and owner are living. The
cash surrender value will vary daily with the investment results of the
contract. We do not guarantee any minimum cash surrender value. You may make
partial withdrawals under the contract, subject to certain restrictions.
We will pay a death benefit to the beneficiary if the annuitant (when there is
no contingent annuitant) or owner dies prior to the annuity commencement date.
See Proceeds Payable to the Beneficiary.
This prospectus describes your principal rights and limitations and sets forth
the information concerning Accounts that investors should know before invest-
ing. A Statement of Additional Information dated May 1, 1998 relating to
Account B has been filed with the Securities and Exchange Commission ("SEC")
and is available without charge upon request. To obtain a copy of this document
call or write our Customer Service Center. The Table of Contents of the State-
ment of Additional Information may be found on the last page of this prospec-
tus. The Statement of Additional Information is incorporated herein by refer-
ence.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
CONTRACTS AND UNDERLYING SERIES SHARES WHICH FUND THE CONTRACTS ARE NOT INSURED
BY THE FDIC OR ANY OTHER AGENCY. THEY ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF
ANY BANK AND ARE NOT BANK GUARANTEED. THEY ARE SUBJECT TO MARKET FLUCTUATION,
REINVESTMENT RISK AND POSSIBLE LOSS OF PRINCIPAL INVESTED.
PLEASE READ THIS PROSPECTUS AND KEEP IT FOR FUTURE REFERENCE. IT IS NOT VALID
UNLESS ACCOMPANIED BY THE CURRENT PROSPECTUSES FOR THE GCG TRUST, ESS TRUST AND
THE PIMCO TRUST.
ISSUED BY: DISTRIBUTED BY: ADMINISTERED AT:
Golden American Life Directed Services, Inc. Customer Service Center
Insurance Company Wilmington, Delaware 19801 Mailing Address:
P.O. Box 8794
Wilmington, Delaware 19899-8794
1-800-366-0066
PROSPECTUS DATED: MAY 1, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
DEFINITION OF TERMS........................................................ 3
FEE TABLE.................................................................. 4
SUMMARY OF THE CONTRACT.................................................... 8
CONDENSED FINANCIAL INFORMATION............................................ 11
Index of Investment Experience
Financial Statements
Performance Related Information
INTRODUCTION............................................................... 13
FACTS ABOUT THE COMPANY AND ACCOUNT B...................................... 13
Golden American
Separate Account B
Account B Divisions
The Trusts
Changes Within Account B
FACTS ABOUT THE CONTRACT................................................... 20
The Owner
The Annuitant
The Beneficiary
Change of Owner or Beneficiary
Availability of the Contract
Types of Contracts
Your Right to Select or Change Contract Options
Premiums
Making Additional Premium Payments
Crediting Premium Payments
Restrictions on Allocation of Premium Payments
Your Right to Reallocate
Dollar Cost Averaging Option
What Happens if a Division is Not Available
Your Accumulation Value
Accumulation Value in Each Division
Measurement of Investment Experience
Cash Surrender Value
Surrendering to Receive the Cash Surrender Value
Partial Withdrawals
Proceeds Payable to the Beneficiary
Reports to Owners
When We Make Payments
</TABLE>
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO PERSON IS AUTHORIZED TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS.
<TABLE>
<CAPTION>
PAGE
<S> <C>
CHARGES AND FEES........................................................... 28
Charge Deduction Division
Charges Deducted from the Accumulation Value
Charges Deducted from the Divisions
Trust Expenses
CHOOSING AN INCOME PLAN.................................................... 30
The Income Plan
Annuity Commencement Date Selection
Frequency Selection
The Annuity Options
Payment When Named Person Dies
OTHER INFORMATION.......................................................... 32
Other Contract Provisions
Contract Changes -- Applicable Tax Law
Your Right to Cancel or Exchange Your Contract
Other Contract Changes
Group or Sponsored Arrangements
Selling the Contract
Reinsurance
REGULATORY INFORMATION..................................................... 33
Voting Rights
State Regulation
Legal Proceedings
Legal Matters
Experts
FEDERAL TAX CONSIDERATIONS................................................. 34
Introduction
Golden American Tax Status
Taxation of Non-Qualified Annuities
Taxation of Individual Retirement Annuities
ADDITIONAL CONSIDERATIONS.................................................. 38
Distribution-at-Death Rules
Taxation of Death Benefit Proceeds
Transfer of Annuity Contracts
(S)1035 Exchanges
Assignments
Multiple Contracts Rule
STATEMENT OF ADDITIONAL INFORMATION........................................ 40
Table of Contents
</TABLE>
2
<PAGE>
DEFINITION OF TERMS
ACCOUNT
Separate Account B.
ACCUMULATION VALUE
The amount that the contract provides for investment at any time. Initially,
this amount is equal to the premium paid. Thereafter, the accumulation value
will reflect the premiums paid, investment experience, charges deducted and
partial withdrawals taken.
ANNUITANT
The person designated by the owner to receive the annuity payments and whose
death initiates payment of the death benefit.
ANNUITY COMMENCEMENT DATE
The date on which annuity payments begin.
ANNUITY OPTIONS
Options the owner selects that determine the form and amount of annuity
payments.
ANNUITY PAYMENT
The periodic payment an annuitant receives. It may be either a fixed or a vari-
able amount based on the annuity option chosen.
ATTAINED AGE
The issue age of the annuitant plus the number of full years elapsed since the
contract date.
BENEFICIARY
The person designated to receive benefits in the case of the death of the annu-
itant (when there is no contingent annuitant) or owner.
BUSINESS DAY
Any day the New York Stock Exchange ("NYSE") is open for trading, exclusive of
Federal holidays, or any other day on which the SEC requires that mutual funds,
unit investment trusts or other investment portfolios be valued.
CASH SURRENDER VALUE
The amount the owner receives if the owner surrenders the contract.
CHARGE DEDUCTION DIVISION
The Liquid Asset Division, which is the division from which all charges are
deducted if so designated on the application or enrollment form, or later
elected by the owner.
CONTINGENT ANNUITANT
The person designated by the owner who, upon the annuitant's death prior to the
annuity commencement date, becomes the annuitant.
CONTRACT
The entire contract consisting of the basic contract, the application or
enrollment form and any riders or endorsements.
CONTRACT ANNIVERSARY
The anniversary of the contract date.
CONTRACT DATE
The date on which we have received the initial premium and upon which we begin
determining the contract values. It may or may not be the same as the issue
date. This date is used to determine contract months, processing dates, years
and anniversaries.
CONTRACT PROCESSING DATES
The days when we deduct certain charges from the accumulation value. If the
contract processing date is not a valuation date, it will be on the next
succeeding valuation date. The contract processing dates will be once each year
on the contract anniversary.
CONTRACT PROCESSING PERIOD
The period between successive contract processing dates unless it is the first
contract processing period. In that case, it is the period from the contract
date to the first contract processing date.
CONTRACT YEAR
The period between contract anniversaries.
CUSTOMER SERVICE CENTER
Where service is provided to our contract owners. The mailing address and tele-
phone number of the Customer Service Center are shown on the cover.
DEFERRED ANNUITY
A contract which provides for the accumulation of funds that will reflect
investment experience. These funds may be applied under an annuity option at
the annuity commencement date.
ENDORSEMENTS
An endorsement changes or adds provisions to the contract.
EXPERIENCE FACTOR
The factor which reflects the investment experience of the portfolio in which a
division invests and also reflects the charges assessed against the division
for a valuation period.
3
<PAGE>
DEFINITION OF TERMS (CONTINUED)
FEE TABLE
FREE LOOK PERIOD
The period of time within which the contract owner may examine the contract and
return it for a refund.
GENERAL ACCOUNT
The account which contains all of our assets other than those held in our sepa-
rate accounts.
INDEX OF INVESTMENT EXPERIENCE
The index that measures the performance of a separate account division.
INITIAL PREMIUM
The payment amount required to put a contract into effect.
ISSUE AGE
The annuitant's age on his or her last birthday on or before the contract date.
ISSUE DATE
The date the contract is issued at our Customer Service Center.
OWNER
The person who owns the contract and is entitled to exercise all rights under
the contract. This person's death also initiates payment of the death benefit.
RIDER
A rider adds benefits to the contract.
SPECIALLY DESIGNATED DIVISION
The Liquid Asset Division. Distributions from a portfolio underlying a division
in which reinvestment is not available will be allocated to this division
unless you specify otherwise.
VALUATION DATE
The day at the end of a valuation period when each division is valued.
VALUATION PERIOD
Each business day together with any non-business days before it.
OWNER TRANSACTION EXPENSE (deducted from accumulation value)
<TABLE>
<S> <C> <C>
DISTRIBUTION FEE (ANNUAL SALES LOAD) AS A PERCENTAGE OF THE INITIAL
AND EACH ADDITIONAL PREMIUM, deducted at the end of each contract
processing period following receipt of each premium over a six year
period from the date we receive and accept each premium payment.... 1.00%(/1/)
<CAPTION>
DURING YEAR
-----------
<S> <C> <C>
SURRENDER CHARGE AS A PERCENTAGE OF THE INITIAL OR
ADDITIONAL PREMIUM deducted upon surrender as measured
from the date the premium is accepted................. 1......... 6.00%
2......... 5.00
3......... 4.00
4......... 3.00
5......... 2.00
6......... 1.00
7+........ 0.00
</TABLE>
<TABLE>
<S> <C>
EXCESS ALLOCATION CHARGE............................................. $0(/2/)
PARTIAL WITHDRAWAL CHARGE (2.0% of the withdrawal for each additional
conventional partial withdrawal after the first in a contract year)
not to exceed........................................................ $25
ANNUAL CONTRACT FEES (deducted from the accumulation value)
ADMINISTRATIVE CHARGE
If total premiums paid in the first contract year are less than
$100,000............................................................. $40
If total premiums paid in the first contract year are $100,000 or
more................................................................. $0
SEPARATE ACCOUNT ANNUAL EXPENSES (percentage of assets in each separate account
division)
MORTALITY AND EXPENSE RISK CHARGE.................................... 0.90%
ASSET BASED ADMINISTRATIVE CHARGE.................................... 0.10%
----
Total Separate Account Annual Expenses............................... 1.00%
</TABLE>
4
<PAGE>
FEE TABLE (CONTINUED)
THE GCG TRUST ANNUAL EXPENSES (as a percentage of the average daily net assets
of a Series or on the combined average daily net assets of the indicated groups
of Series)
<TABLE>
<CAPTION>
MANAGEMENT OTHER TOTAL
SERIES AVAILABLE CURRENTLY FEES(/3/) EXPENSES(/4/) EXPENSES
- -------------------------- ---------- ------------- --------
<S> <C> <C> <C>
Multiple Allocation, Fully Managed, Capital
Appreciation, Rising Dividends, All-Growth,
Real Estate, Hard Assets, Value Equity,
Strategic Equity, and Small Cap Series:..... 0.98% 0.01% 0.99%
Growth Opportunities Series(/5/):............ 1.10% 0.01% 1.11%
Managed Global Series:....................... 1.25% 0.11% 1.36%
Emerging Markets and 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>
OTHER EXPENSES TOTAL EXPENSES
SERIES ADDED TO THE GCG TRUST AND MANAGEMENT AFTER EXPENSE AFTER EXPENSE
AVAILABLE AFTER TRUST CONSOLIDATION(/6/) FEES(/3/) REIMBURSEMENT(/7/) REIMBURSEMENT(/7/)
- ---------------------------------------- ---------- ------------------ ------------------
<S> <C> <C> <C>
Mid-Cap Growth
Series(/8/)(/9/):............. 0.96% 0.01% 0.97%
Research Series(/8/):......... 0.96% 0.00% 0.96%
Total Return Series(/8/):..... 0.96% 0.01% 0.97%
Growth & Income and
Value + Growth Series(/5/):... 1.09% 0.01% 1.10%
Global Fixed Income
Series(/10/):................. 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>
MANAGEMENT OTHER TOTAL
SERIES FEES(/3/) EXPENSES EXPENSES
- ------ ---------- -------- --------
<S> <C> <C> <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 PIMCO TRUST ANNUAL EXPENSES (as a percentage of the average daily net
assets of a Series)
<TABLE>
<CAPTION>
ADVISORY OTHER TOTAL
SERIES FEES EXPENSES(/11/) EXPENSES
- ------ -------- ---------------- --------
<S> <C> <C> <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>
- -------------------
(1) Contracts with a contract date prior to May 3, 1993 and the prospectus
delivered in connection with such contracts described the sales load as a
deferred load, which is equivalent to the combination of the distribution
fee and surrender charge described above. Limited Edition contracts
purchased through Golden American Separate Account D and the prospectus
delivered in connection with such contracts also described the sales load
as a deferred load.
(2) 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.
(3) Fees decline as combined assets increase (see Account B Divisions and the
Trust prospectuses for details).
(4) 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.
(5) After Trust Consolidation (see The Trusts, Proposed Trust Consolidation),
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.
(6) See Facts about the Company and the Contracts, The Trusts for more infor-
mation regarding Trust Consolidation.
(7) 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.
(8) After Trust Consolidation (see The Trusts), the assets of the Research,
the Total Return and the Mid-Cap Growth Series will be combined to deter-
mine the actual fee payable to DSI.
(9) The OTC Portfolio prior to Trust Consolidation.
(10) The International Fixed Income Portfolio prior to Trust Consolidation.
(11) 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.
5
<PAGE>
FEE TABLE (CONTINUED)
Examples:
If you surrender your contract at the end of the applicable time period, you
would pay the following expenses for each $1,000 of initial premium assuming a
5% annual return on assets:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DIVISION ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
<S> <C> <C> <C> <C>
Multiple Allocation.................. $90.81 $133.64 $178.13 $327.36
Fully Managed........................ 90.81 133.64 178.13 327.36
Capital Appreciation................. 90.81 133.64 178.13 327.36
Rising Dividends..................... 90.81 133.64 178.13 327.36
All-Growth........................... 90.81 133.64 178.13 327.36
Real Estate.......................... 90.81 133.64 178.13 327.36
Hard Assets.......................... 90.81 133.64 178.13 327.36
Value Equity......................... 90.81 133.64 178.13 327.36
Strategic Equity..................... 90.81 133.64 178.13 327.36
Small Cap............................ 90.81 133.64 178.13 327.36
Emerging Markets..................... 98.92 157.74 217.91 404.62
Managed Global....................... 94.53 144.72 196.51 363.51
Growth Opportunities................. 92.02 137.25 184.13 339.24
Developing World..................... 98.92 157.74 217.91 404.62
OTC.................................. 90.81 133.64 178.13 327.36
Research............................. 90.51 132.73 176.62 324.36
Total Return......................... 90.61 133.03 177.13 325.36
Growth & Income...................... 92.12 137.55 184.63 340.23
Value + Growth....................... 92.92 139.94 188.61 348.05
Global Fixed Income.................. 99.22 158.63 219.35 407.35
High Yield Bond...................... 88.40 126.38 166.02 303.12
StocksPLUS Growth and Income......... 87.39 123.34 160.93 292.83
Limited Maturity Bond................ 86.99 122.12 158.89 288.69
Liquid Asset......................... 86.99 122.12 158.89 288.69
- -------------------------------------------------------------------------------
<CAPTION>
DIVISION AFTER TRUST CONSOLIDATION ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
<S> <C> <C> <C> <C>
Mid-Cap Growth*...................... $90.61 $133.03 $177.13 $325.36
Research............................. 90.51 132.73 176.62 324.36
Total Return......................... 90.61 133.03 177.13 325.36
Growth & Income...................... 91.92 136.95 183.63 338.26
Value + Growth....................... 91.92 136.95 183.63 338.26
Global Fixed Income**................ 96.93 151.85 208.24 386.18
- -------------------------------------------------------------------------------
- -------------------
*The OTC Portfolio prior to Trust Consolidation.
**The International Fixed Income Portfolio prior to Trust Consolidation.
If you do not surrender your contract or if you annuitize, you would pay the
following expenses for each $1,000 of initial premium assuming a 5% annual
return on assets:
- -------------------------------------------------------------------------------
<CAPTION>
DIVISION ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
<S> <C> <C> <C> <C>
Multiple Allocation.................. $30.81 $ 93.64 $158.13 $327.36
Fully Managed........................ 30.81 93.64 158.13 327.36
Capital Appreciation................. 30.81 93.64 158.13 327.36
Rising Dividends..................... 30.81 93.64 158.13 327.36
All-Growth........................... 30.81 93.64 158.13 327.36
Real Estate.......................... 30.81 93.64 158.13 327.36
Hard Assets.......................... 30.81 93.64 158.13 327.36
Value Equity......................... 30.81 93.64 158.13 327.36
Strategic Equity..................... 30.81 93.64 158.13 327.36
Small Cap............................ 30.81 93.64 158.13 327.36
Emerging Markets..................... 38.92 117.74 197.91 404.62
Managed Global....................... 34.53 104.72 176.51 363.51
Growth Opportunities................. 32.02 97.25 164.13 339.24
Developing World..................... 38.92 117.74 197.91 404.62
OTC.................................. 30.81 93.64 158.13 327.36
</TABLE>
6
<PAGE>
FEE TABLE (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DIVISION ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
<S> <C> <C> <C> <C>
Research............................. $30.51 $92.73 $156.62 $324.36
Total Return......................... 30.61 93.03 157.13 325.36
Growth & Income...................... 32.12 97.55 164.63 340.23
Value + Growth....................... 32.92 99.94 168.61 348.05
Global Fixed Income.................. 39.22 118.63 199.35 407.35
High Yield Bond...................... 28.40 86.38 146.02 303.12
StocksPLUS Growth and Income......... 27.39 83.34 140.93 292.83
Limited Maturity Bond................ 26.99 82.12 138.89 288.69
Liquid Asset......................... 26.99 82.12 138.89 288.69
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DIVISION AFTER TRUST CONSOLIDATION ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
<S> <C> <C> <C> <C>
Mid-Cap Growth*...................... $30.61 $ 93.03 $157.13 $325.36
Research............................. 30.51 92.73 156.62 324.36
Total Return......................... 30.61 93.03 157.13 325.36
Growth & Income...................... 31.92 96.95 163.63 338.26
Value + Growth....................... 31.92 96.95 163.63 338.26
Global Fixed Income**................ 36.93 111.85 188.24 386.18
</TABLE>
- --------------------------------------------------------------------------------
- -------------------
*The OTC Portfolio prior to Trust Consolidation.
**The International Fixed Income Portfolio prior to Trust Consolidation.
For purposes of computing the annual per contract administrative charge, the
dollar amounts shown in the examples are based on an initial premium of
$65,000.
The purpose of the fee table is to assist you in understanding the various
costs and expenses that you may bear directly or indirectly. The fee table
reflects expenses of Account B as well as the Trusts. Premium taxes may also be
applicable. See Charges and Fees, Premium Taxes. For a complete description of
contract costs and expenses, see the section titled Charges and Fees. For a
more complete description of the costs and expenses of the Trusts, see the
Trust prospectuses.
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN, SUBJECT TO
THE GUARANTEES UNDER THE CONTRACT.
7
<PAGE>
SUMMARY OF THE CONTRACT
This prospectus has been designed to provide you with information regarding the
contract and Account B which funds the contract. Information concerning the
Series underlying the divisions of Account B is set forth in the Trust prospec-
tuses.
This summary is intended to provide only a very brief overview of the more
significant aspects of the contract. Further detail is provided in this
prospectus and in the contract. The contract, together with its attached appli-
cation or enrollment form and any riders or endorsements, constitutes the
entire agreement between you and us and should be retained.
This prospectus has been designed to provide you with the necessary information
to make a decision on purchasing the contract offered by Golden American and
funded by Account B.
You have a choice of investments. We do not promise that your accumulation
value will increase. Depending on the contract's investment experience for
funds invested in the Accounts, the accumulation value, cash surrender value
and death benefit may increase or decrease on any day. You bear the investment
risk.
DESCRIPTION OF THE CONTRACT
The contract is designed to establish retirement benefits for two types of
purchasers. The first type of purchaser is one who is eligible to participate
in, and purchases a contract for use with a "qualified plan." A qualified plan
is an individual retirement annuity ("IRA") meeting the requirements of section
408(b) of the Internal Revenue Code of 1986, as amended (the "Code"), an indi-
vidual 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, except a Roth IRA, distribu-
tion must commence not later than April 1st of the calendar year following the
calendar year in which you attain age 70 1/2. The second type of purchaser is
one who purchases a contract outside of a qualified plan ("non-qualified
plan").
The contract also offers a choice of annuity options to which you may apply the
accumulation value on the annuity commencement date or the cash surrender value
upon surrender of the contract. See Choosing an Income Plan.
AVAILABILITY
We can issue a contract if both the annuitant and the owner are not older than
age 85 and accept additional premium payments until either the annuitant or
owner reaches the attained age of 85 for non-qualified plans (age 70 1/2 for
qualified plans, except for rollover contributions 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 Group or
Sponsored Arrangements.
The minimum additional premium payment we will accept is $500 for a non-quali-
fied plan and $250 for a qualified plan. We will take under consideration and
may refuse to accept a premium payment if the sum of all premium payments
received under the contract totals more than $1,500,000.
THE DIVISIONS
There are twenty-four divisions of Account B currently available under the
contract. Each of the twenty-four divisions offered under this prospectus
invests in a mutual fund portfolio with its own distinct investment objectives
and policies. Each division of Account B invests in a corresponding Series of
the GCG Trust, a corresponding Series of the ESS Trust or a corresponding
Series of the PIMCO Trust. The GCG and the ESS Trusts are each managed by
Directed Services, Inc. ("DSI"). From its inception through December 31, 1997,
the ESS Trust was managed by Equitable Investment Services, Inc. ("EISI"), an
affiliate of DSI. As of January 1, 1998, DSI assumed EISI's responsibilities to
the ESS Trust. The Trusts and DSI have retained several portfolio managers to
manage the assets of each Series. The PIMCO Trust is managed by Pacific Invest-
ment Management Company ("PIMCO"). See Facts About the Company and the Account
B and Account B Divisions.
HOW THE ACCUMULATION VALUE VARIES
The accumulation value varies each day based on investment results. You bear
the risk of poor investment performance and you receive the benefits from
favorable investment performance. The accumulation value also reflects premium
payments, charges deducted and partial withdrawals. See Accumulation Value in
Each Division.
SURRENDERING YOUR CONTRACT
The cash surrender value varies each day depending on investment results. We do
not guarantee any minimum cash surrender value. You may surrender the contract
and receive its cash
8
<PAGE>
SUMMARY OF THE CONTRACT (CONTINUED)
surrender value at any time while both the annuitant and owner are living and
before the annuity commencement date. See Cash Surrender Value and Surren-
dering 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 accumula-
tion value of the contract. You may take conventional partial withdrawals once
per contract year without charge. Alternatively, you may elect in advance to
take systematic partial withdrawals on a monthly or quarterly basis. If you
have an IRA contract or a Roth IRA contract, you may elect IRA partial with-
drawals on a monthly, quarterly or annual basis.
Partial withdrawals are subject to certain restrictions as defined in this
prospectus and partial withdrawals above a specified percentage of your accu-
mulated value may be subject to a surrender charge. See Partial Withdrawals.
DOLLAR COST AVERAGING
Under this option, you may choose to have a specified dollar amount trans-
ferred from either the Limited Maturity Bond Division or Liquid Asset Division
to the other divisions on a monthly basis with the objective of shielding your
investment from short-term price fluctuations. See Dollar Cost Averaging
Option.
YOUR RIGHT TO CANCEL THE CONTRACT
You may cancel your contract within the free look period which is a ten day
period of time beginning when you receive the contract. For purposes of admin-
istering our allocation and certain other administrative rules, we deem this
period to end 15 days after the contract is mailed from our Customer Service
Center. Some states may require that we provide a longer free look period. In
some states we restrict the initial premium allocation during the free look
period. See Your Right to Cancel or Exchange Your Contract.
YOUR RIGHT TO CHANGE THE CONTRACT
The contract may be changed to another annuity plan subject to our rules at
the time of the change. See Other Contract Changes.
DEATH BENEFIT PROCEEDS
The contract provides a death benefit to the beneficiary if the annuitant
(when there is no contingent annuitant) or an owner dies prior to the annuity
commencement date. See Proceeds Payable to the Beneficiary. We may reduce the
death benefit proceeds payable under certain group or sponsored arrangements.
See Group or Sponsored Arrangements.
CONTRACT PROCESSING PERIODS
The first contract processing period begins with the contract date and ends at
the close of business on the first contract processing date. All subsequent
contract processing periods begin at the close of business on the most recent
contract processing date and extend to the close of business on the next
contract processing date. There is one contract processing period each year.
DEDUCTIONS FOR CHARGES AND FEES
We invest the entire amount of the initial and any additional premium payments
in the divisions you select, subject to certain restrictions we impose. See
Restrictions on Allocation of Premium Payments. We then periodically deduct
certain amounts from your accumulation value. See Charges and Fees. We may
reduce certain charges under group or sponsored arrangements. See Group or
Sponsored Arrangements. We may also reduce certain charges for contracts
purchased in combination with certain flexible premium variable life products
that we offer. Charges are deducted proportionately from all divisions in
which you are invested, unless you have elected the Charge Deduction Division.
The charges we deduct are:
DISTRIBUTION FEE
We deduct a sales load in an annual amount of 1.00% of each premium at the
end of each contract processing period for a period of six years from the
date we receive and accept each premium payment.
We also offer through other prospectuses other DVAs which are contracts with
different charging structures.
SURRENDER CHARGE
A surrender charge is imposed as a percentage of premium if the contract is
surrendered or an excess partial withdrawal is taken during the six year
period from the date we receive and accept each premium payment. The
percentage imposed at the time of surrender or excess partial withdrawal
depends on the distribution fee collected to the time the contract is surren-
dered or the excess partial withdrawal is taken.
9
<PAGE>
SUMMARY OF THE CONTRACT (CONTINUED)
The surrender charge in the first contract year is 6.00% and reduces by 1.00%
each year during the six year period from the date we receive and accept each
premium payment.
Contracts with a contract date prior to May 3, 1993 and the prospectus deliv-
ered in connection with such contracts, described the sales load as a
deferred load, which is equivalent to the combination of the distribution fee
and surrender charge described above. GoldenSelect Limited Edition contracts
purchased through Golden American Separate Account D and the prospectus
delivered in connection with such contracts also described the sales load as
a deferred load.
MORTALITY AND EXPENSE RISK CHARGE
We charge each division of Account B with a daily asset based charge for
mortality and expense risks equivalent to an annual rate of 0.90%.
PREMIUM TAXES
Generally, premium taxes are incurred on the annuity commencement date, and a
charge for premium taxes is then deducted from the accumulation value on such
date. Some jurisdictions impose a premium tax at the time the initial or
additional premiums are paid, regardless of the annuity commencement date.
ADMINISTRATIVE CHARGE
The amount deducted is $40 per contract year if total premiums paid in the
first contract year are less than $100,000. If the total premiums paid in the
first contract year equals $100,000 or more, the charge is zero.
EXCESS ALLOCATION CHARGE
The first twelve allocation changes in any contract year may be made without
charge. Each subsequent allocation change is subject to a $25 excess alloca-
tion charge.
PARTIAL WITHDRAWAL CHARGE
If you take more than one conventional partial withdrawal during a contract
year, we impose a charge of the lesser of $25 and 2.0% of the amount with-
drawn for each additional conventional partial withdrawal. See Partial With-
drawals, Conventional Partial Withdrawal Option.
ASSET BASED ADMINISTRATIVE CHARGE
We charge each division of Account B with a daily asset based charge to cover
a portion of contract administration equivalent to an annual rate of 0.10%.
TRUST EXPENSES
There are fees and expenses deducted from each Series. The investment perfor-
mance of the Series and deductions for fees and expenses from the Trusts will
affect your accumulation value. Please read the Trust prospectuses for
details.
TAX PENALTIES
The ultimate effect of Federal income taxes on the amounts held under an
annuity contract, on annuity payments and on the economic benefits to the
owner, annuitant or beneficiary depends on Golden American's tax status and
upon the tax status of the individuals concerned. In general, an owner is not
taxed on increases in value under an annuity contract until some form of
distribution is made under it. There may be tax penalties if you make a with-
drawal or surrender the contract before reaching age 59 1/2. See Federal Tax
Considerations.
10
<PAGE>
CONDENSED FINANCIAL INFORMATION
INDEX OF INVESTMENT EXPERIENCE
The upper table gives the index of investment experience for each division of
Account B on their respective commencement of operations and on December 31,
1989, 1990, 1991, 1992, 1993, 1994, 1995, 1996 and 1997, as applicable. The
index of investment experience is equal to the value of a unit for each divi-
sion of the Account B. The total value of each division as of the end of each
period indicated is shown in the lower table.
<TABLE>
<CAPTION>
INDEX OF INVESTMENT EXPERIENCE
-------------------------------------------------------------------------------------------------------
1/24/89 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95
------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Multiple Allocation..... $10.00 $10.82 $11.19 $13.30 $13.41 $14.75 $14.43 $17.00
Fully Managed........... 10.00 10.38 9.87 12.59 13.24 14.11 12.95 15.48
Capital Appreciation.... --(/1/) --(/1/) --(/1/) --(/1/) 11.01 11.81 11.50 14.83
Rising Dividends........ --(/3/) --(/3/) --(/3/) --(/3/) --(/3/) 10.29 10.25 13.30
All-Growth.............. 10.00 10.71 9.74 13.16 12.69 13.39 11.83 14.34
Real Estate............. 10.00 9.90 7.68 10.19 11.48 13.33 14.04 16.20
Hard Assets............. 10.00 11.86 10.05 10.42 9.30 13.81 14.02 15.36
Value Equity............ --(/4/) --(/4/) --(/4/) --(/4/) --(/4/) --(/4/) --(/4/) 13.39
Strategic Equity........ --(/5/) --(/5/) --(/5/) --(/5/) --(/5/) --(/5/) --(/5/) 10.01
Small Cap............... --(/6/) --(/6/) --(/6/) --(/6/) --(/6/) --(/6/) --(/6/) --(/6/)
Emerging Markets........ --(/3/) --(/3/) --(/3/) --(/3/) --(/3/) 12.41 10.42 9.27
OTC..................... --(/7/) --(/7/) --(/7/) --(/7/) --(/7/) --(/7/) --(/7/) --(/7/)
Research................ --(/8/) --(/8/) --(/8/) --(/8/) --(/8/) --(/8/) --(/8/) --(/8/)
Total Return............ --(/8/) --(/8/) --(/8/) --(/8/) --(/8/) --(/8/) --(/8/) --(/8/)
Growth & Income......... --(/7/) --(/7/) --(/7/) --(/7/) --(/7/) --(/7/) --(/7/) --(/7/)
Value + Growth.......... --(/8/) --(/8/) --(/8/) --(/8/) --(/8/) --(/8/) --(/8/) --(/8/)
Managed Global.......... --(/2/) --(/2/) --(/2/) --(/2/) 10.01 10.52 9.09 9.66
Limited Maturity Bond... 10.00 10.88 11.61 12.78 13.27 13.95 13.65 15.10
Liquid Asset............ 10.00 10.68 11.38 11.90 12.15 12.35 12.68 13.24
<CAPTION>
12/31/96 12/31/97
------------ --------
<S> <C> <C>
Multiple Allocation..... $18.30 $21.28
Fully Managed........... 17.83 20.36
Capital Appreciation.... 17.65 22.53
Rising Dividends........ 15.88 20.41
All-Growth.............. 14.11 14.79
Real Estate............. 21.70 26.38
Hard Assets............. 20.26 21.30
Value Equity............ 14.66 18.48
Strategic Equity........ 11.83 14.42
Small Cap............... 11.89 12.99
Emerging Markets........ 9.85 8.84
OTC..................... 15.86 18.79
Research................ --(/8/) 19.11
Total Return............ --(/8/) 16.31
Growth & Income......... 12.52 15.51
Value + Growth.......... --(/8/) 13.12
Managed Global.......... 10.74 11.93
Limited Maturity Bond... 15.59 16.45
Liquid Asset............ 13.76 14.32
</TABLE>
<TABLE>
<CAPTION>
TOTAL ACCUMULATION VALUE
--------------------------------------------------------------------------------------------------------
12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94
----------- ----------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Multiple Alloca-
tion........... $15,556,366 $23,963,356 $57,739,245 $115,124,744 $273,158,122 $297,507,994
Fully Managed... 5,333,885 5,414,160 9,834,436 37,352,585 108,290,963 98,836,207
Capital Appreci-
ation.......... --(/1/) --(/1/) --(/1/) 18,366,222 86,798,642 88,344,684
Rising Divi-
dends.......... --(/3/) --(/3/) --(/3/) --(/3/) 14,387,382 50,384,765
All-Growth...... 3,077,542 4,528,380 11,159,814 23,418,811 56,055,565 70,623,784
Real Estate..... 650,003 309,556 696,180 3,600,461 28,772,896 36,936,728
Hard Assets..... 2,320,696 2,460,399 2,646,183 2,882,417 21,436,544 32,746,767
Value Equity.... --(/4/) --(/4/) --(/4/) --(/4/) --(/4/) --(/4/)
Strategic Equi-
ty............. --(/5/) --(/5/) --(/5/) --(/5/) --(/5/) --(/5/)
Small Cap....... --(/6/) --(/6/) --(/6/) --(/6/) --(/6/) --(/6/)
Emerging
Markets........ --(/3/) --(/3/) --(/3/) --(/3/) 30,488,589 59,747,048
OTC............. --(/7/) --(/7/) --(/7/) --(/7/) --(/7/) --(/7/)
Research........ --(/8/) --(/8/) --(/8/) --(/8/) --(/8/) --(/8/)
Total Return.... --(/8/) --(/8/) --(/8/) --(/8/) --(/8/) --(/8/)
Growth &
Income......... --(/7/) --(/7/) --(/7/) --(/7/) --(/7/) --(/7/)
Value + Growth.. --(/8/) --(/8/) --(/8/) --(/8/) --(/8/) --(/8/)
Managed Global.. --(/2/) --(/2/) --(/2/) 38,699,402 88,477,493 86,208,555
Limited Maturity
Bond........... 2,595,966 8,009,970 15,935,184 39,861,202 71,622,231 71,573,009
Liquid Asset.... 2,190,649 8,419,953 9,224,303 12,769,536 16,497,588 45,364,989
<CAPTION>
12/31/95 12/31/96 12/31/97
----------------- ----------------- ------------
<S> <C> <C> <C>
Multiple Alloca-
tion........... $305,499,995 $270,427,444 $261,869,397
Fully Managed... 117,325,242 134,430,861 158,649,823
Capital Appreci-
ation.......... 121,047,204 145,988,538 187,816,136
Rising Divi-
dends.......... 80,341,660 123,572,620 215,943,237
All-Growth...... 91,960,166 76,841,848 71,737,696
Real Estate..... 34,814,825 50,680,643 74,699,801
Hard Assets..... 26,991,780 43,301,050 45,503,011
Value Equity.... 28,447,742 42,860,704 77,024,935
Strategic Equi-
ty............. 8,030,333 29,858,001 50,436,707
Small Cap....... --(/6/) 33,055,763 52,724,836
Emerging
Markets........ 36,887,958 37,153,421 34,501,769
OTC............. --(/7/) 4,571,461 20,360,656
Research........ --(/8/) --(/8/) 34,401,569
Total Return.... --(/8/) --(/8/) 26,231,305
Growth &
Income......... --(/7/) 8,274,883 44,922,265
Value + Growth.. --(/8/) --(/8/) 23,177,591
Managed Global.. 72,375,222 86,266,168 104,681,379
Limited Maturity
Bond........... 67,838,218 54,334,320 52,467,741
Liquid Asset.... 36,490,508 37,475,760 57,254,109
</TABLE>
- ------------
(1) The Capital Appreciation Division became available for investment on May
4, 1992, starting with an index of investment experience of $10.00.
(2) The index of investment experience for the Managed Global Division is
based on the actual experience of its predecessor for accounting purposes,
the Managed Global Account of Golden American's Separate Account D. The
Managed Global Account became available for investment on October 21,
1992, starting with an index of investment experience of $10.00.
(3) The Rising Dividends and Emerging Markets Divisions became available for
investment on October 4, 1993, starting with an index of investment
experience of $10.00.
(4) The Value Equity Division became available for investment on January 1,
1995, starting with an index of investment experience of $10.00.
(5) The Strategic Equity Division became available for investment in October
2, 1995, starting with an index of investment experience of $10.00.
(6) The Small Cap Division became available for investment on January 2, 1996,
starting with an index of investment experience of $10.00.
(7) The OTC and the Growth & Income Divisions became available for investment
on September 3, 1996, starting with an index of investment experience of
$14.79 and $10.97, respectively.
(8) The Research, Total Return and Value + Growth Divisions became available
for investment on January 20, 1997, starting with indices of investment
experience of $16.64, $13.93, and $12.05, respectively.
In order to provide for continuity in results, the above table is based on
charges for the contract described in this prospectus. Contracts issued prior
to May 1, 1991, were based on lower asset charges and, thus, would have
higher values for the indices of investment experience.
11
<PAGE>
CONDENSED FINANCIAL INFORMATION (CONTINUED)
FINANCIAL STATEMENTS
The audited financial statements of Separate Account B (as well as the audi-
tors' 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,
1996 and 1995 (as well as the auditors' report thereon) are contained in the
Statement of Additional Information.
PERFORMANCE RELATED INFORMATION
Performance information for the divisions of Account B, including the yields,
standard annual total returns and other nonstandard measures of performance may
appear in reports and promotional literature to current or prospective owners.
Such performance date will be computed, or accompanied by performance data
computed in accordance with standards defined by the SEC.
Current yield for the Liquid Asset Division will be based on income received by
a hypothetical investment over a given 7-day period (less expenses accrued
during the period), and then "annualized" (i.e., assuming that the 7-day yield
would be received for 52 weeks, stated in terms of an annual percentage return
on the investment). "Effective yield" for the Liquid Asset Division is calcu-
lated in a manner similar to that used to calculate yield, but when annualized,
the income earned by the investment is assumed to be reinvested. The "effective
yield" will be slightly higher than the "yield" because of the compounding
effect of
earnings.
For the remaining divisions, quotations of yield will be based on all invest-
ment income per unit (accumulation value divided by the index of investment
experience -- see Measurement of Investment Experience, Index of Investment
Experience and Unit Value) earned during a given 30-day period, less expenses
accrued during the period ("net investment income"). Quotations of average
annual total return for any division will be expressed in terms of the average
annual compounded rate of return on a hypothetical investment in a contract
over a period of one, five, and ten years (or, if less, up to the life of the
divi- sion), and will reflect the deduction of the applicable distribution fee
and/or surrender charge, the administrative charge and the mortality and
expense risk charge. Quotations of total return may simultaneously be shown for
other periods that do not take into account certain contractual charges, such
as the distribution fee and surrender charge. Quotations of yield and average
annual total return for the Managed Global Division take into account the
period prior to September 3, 1996, during which it was maintained as a division
of Account D.
Performance information for a division may be compared, in reports and promo-
tional literature, to: (i) the Standard & Poor's 500 Stock Index ("S&P 500"),
Dow Jones Industrial Average ("DJIA"), Donoghue Money Market Institutional
Averages, or other indices measuring performance of a pertinent group of secu-
rities so that investors may compare a division's results with those of a group
of securities widely regarded by investors as representative of the securities
markets in general; (ii) other variable annuity separate accounts or other
investment products tracked by Lipper Analytical Services, a widely used inde-
pendent research firm which ranks mutual funds and other investment companies
by overall performance, investment objectives, and assets, or tracked by other
ratings services, including VARDS, companies, publications, or persons who rank
separate accounts or other investment products on overall performance or other
criteria; and (iii) the Consumer Price Index (measure for inflation) to assess
the real rate of return from an investment in the contract. Unmanaged indices
may assume the reinvestment of dividends but generally do not reflect deduc-
tions for administrative and management costs and expenses.
Performance information for any division reflects only the performance of a
hypothetical contract under which the accumulation value is allocated to a
division during a particular time period on which the calculations are based.
Performance information should be considered in light of the investment objec-
tives and policies, characteristics and quality of the portfolio of the Series
of the respective Trust in which the division invests and the market conditions
during the given time period, and should not be considered as a representation
of what may be achieved in the future. For a description of the methods used to
determine yield and total return for the divisions, see the Statement of Addi-
tional Information.
Reports and promotional literature may also contain other information including
the ranking of any division derived from rankings of variable annuity separate
accounts or other investment 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.
12
<PAGE>
INTRODUCTION
FACTS ABOUT THE COMPANY AND ACCOUNT B
The following information describes the contract and Account B. Account B
invests in mutual fund portfolios of the GCG Trust, the ESS Trust and the PIMCO
Trust.
GOLDEN AMERICAN
Golden American Life Insurance Company ("Golden American" or the "Company") is
a stock life insurance company organized under the laws of the State of Dela-
ware and is a wholly owned subsidiary of Equitable of Iowa Companies, Inc.
("Equitable of Iowa") which, in turn, is a wholly owned subsidiary of ING
Groep, N.V. ("ING"). Prior to December 30, 1993, Golden American was a Minne-
sota corporation. Prior to August 13, 1996, Golden American was a wholly owned
indirect subsidiary of Bankers Trust Company. We are authorized to do business
in all states, except New York, and the District of Columbia. In May 1996, we
established a subsidiary, First Golden American Life Insurance Company of New
York, which is authorized to do business in New York. We offer variable annui-
ties 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." 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 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.
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 sepa-
rate accounts of insurance companies, including Golden American, for both vari-
able annuity contracts and variable life insurance policies and by qualified
pension and retirement plans.
Golden American does not anticipate any inherent difficulties arising from the
mixed and/or shared funding or sales to pension or retirement plans by the GCG
Trust or the PIMCO Trust. However, there is a possibility that, due to differ-
ences in tax treatment or other considerations, the interests of Contractowners
of various contracts participating in the Trusts may conflict. The Board of
Trustees of the GCG Trust and the PIMCO Trust, DSI, PIMCO and we and any other
insurance companies participating in the Trusts are required to monitor events
to identify any material conflicts that arise from the use of the GCG Trust
and/or the PIMCO Trust for mixed and/or shared funding between various policy
owners and pension and retirement plans. In the event of a material conflict,
Golden American will take the necessary steps, including removing the Separate
Account from that Trust, to resolve the matter. See the GCG Trust and PIMCO
Trust prospectuses for more information.
You will find complete information about the GCG Trust, the ESS Trust and the
PIMCO Trust, including the risks associated with each Series, in the accompa-
nying 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.
Proposed Trust Consolidation. 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 (the "Companies"),
filed an application with the SEC requesting permission via an order to substi-
tute shares of each Series of the ESS Trust with shares of similar Series of
the GCG Trust (the "Substitu-
13
<PAGE>
FACTS ABOUT THE COMPANY AND ACCOUNT B (CONTINUED)
tion"). The table below identifies the ESS Portfolios currently available under
the contract and the new GCG Series substituted for each. 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.
<TABLE>
<CAPTION>
ESS TRUST REPLACED PORTFOLIO GCG TRUST SUBSTITUTE SERIES
- ---------------------------- ---------------------------
<S> <C>
OTC Portfolio Mid-Cap Growth Series
Research Portfolio Research Series
Total Return Portfolio Total Return Series
Growth & Income Portfolio Growth & Income Series
Value + Growth Portfolio Value + Growth Portfolio
International Fixed Income Portfolio Global Fixed Income Series
</TABLE>
Upon obtaining the requested order for substitution from the SEC, and subject
to any required prior approval by applicable insurance authorities, the Compa-
nies 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.
SEPARATE ACCOUNT B
All obligations under the contract are general obligations of Golden American.
Account B is a separate investment account used to support our variable annuity
contracts and for other purposes as permitted by applicable laws and regula-
tions. The assets of Account B are kept separate from our general account and
any other separate accounts we may have. We may offer other variable annuity
contracts investing in Account B which are not discussed in this prospectus.
Account B may also invest in other series which are not available to the
contract described in this prospectus.
We own all the assets in Account B. Income and realized and unrealized gains or
losses from assets in Account B are credited to or charged against that account
without regard to other income, gains or losses in our other investment
accounts. As required, the assets in Account B are at least equal to the
reserves and other liabilities of that account. These assets may not be charged
with liabilities from any other business we conduct.
They may, however, be subject to liabilities arising from divisions of Account
B whose assets are attributable to other variable annuity contracts supported
by Account B. If the assets exceed the required reserves and other liabilities,
we may transfer the excess to our general account.
Account B was established on July 14, 1988 to invest in mutual funds, unit
investment trusts or other investment portfolios which we determine to be suit-
able for the contract's purposes. Account B is treated as a unit investment
trust under Federal securities laws. It is registered with the SEC under the
Investment Company Act of 1940 (the "1940 Act") as an investment company. It is
governed by the laws of Delaware, our state of domicile, and may also be
governed by the laws of other states in which we do business. Registration with
the SEC does not involve any supervision by the SEC of the management or
investment policies or practices of Account B.
ACCOUNT B DIVISIONS
Account B is divided into divisions. The Managed Global Series was formerly the
Managed Global Account of Golden American's Separate Account D from October 12,
1992 until September 3, 1996 when it was converted to a division of Account B.
Currently, each Division of Account B offered under this prospectus invests in
a portfolio of the GCG Trust, the ESS Trust or the PIMCO Trust. DSI serves as
the Manager to each Series of the GCG Trust and the ESS Trust, and PIMCO serves
as the adviser to each Series of the PIMCO Trust. See the Trusts' prospectuses
for details. The GCG and the ESS Trusts and DSI have retained several portfolio
managers to manage the assets of each Series as indicated below. There may be
restrictions on the amount of the allocation to certain Divisions based on
state laws and regulations. The investment objectives of the various Series in
the Trusts are described below. There is no guarantee that any portfolio or
Series will meet its investment objectives. Meeting objectives depends on
various factors, including, in certain cases, how well the portfolio managers
anticipate changing economic and market conditions. Account B 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 serv-
ices necessary for the Series' operation and provide or procure the services
and information necessary to the proper conduct of the business of the Series.
See the Trusts' prospectuses for details.
DSI 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
14
<PAGE>
FACTS ABOUT THE COMPANY AND ACCOUNT B (CONTINUED)
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 borrow-
ing, 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 ESS Trust, each pay DSI for its services a fee, payable monthly,
based on the annual rates of the average daily net assets of the Series shown
in the tables below. DSI (and not the Trusts) pays each portfolio manager a
monthly fee for managing the assets of the Series.
THE GCG TRUST
<TABLE>
<CAPTION>
FEES (based on combined assets of the indicated groups
SERIES AVAILABLE CURRENTLY of Series)
- ------------------------------------------------- ------------------------------------------------------
<S> <C>
Multiple Allocation, Fully Managed, Capital 1.00% of first $750 million;
Appreciation, Rising Dividends, All-Growth, 0.95% of next $1.250 billion;
Real Estate, Hard Assets, Value Equity, 0.90% of next $1.5 billion; and
Strategic 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
Managed Global Series: 1.25% of first $500 million;
1.05% of amount in excess of $500 million
Emerging Markets and Developing World Series: 1.75% of average daily net assets
Limited Maturity Bond and Liquid Asset Series: 0.60% of first $200 million;
0.55% of next $300 million; and
0.50% of amount in excess of $500 million
<CAPTION>
SERIES ADDED TO THE GCG TRUST AND FEES (based on combined assets of the indicated groups
AVAILABLE AFTER TRUST CONSOLIDATION of Series)
- ------------------------------------------------- ------------------------------------------------------
<S> <C>
Growth & Income and Value + Growth 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
Mid-Cap Growth, Total Return, and Research
Series: 1.00% of first $250 million;
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%
- --------------------------------------------------------------------------------------------------------
(1) After Trust Consolidation, the assets of the Growth Opportunities, the
Growth & Income and Value + Growth Series will be combined for the
purposes of determining fees.
THE ESS TRUST
<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; and
0.40% of amount in excess of $2.0 billion
- --------------------------------------------------------------------------------------------------------
The PIMCO Trust pays PIMCO, an advisory fee (see table following) and an
administrative fee of 0.25%, each payable monthly, based on the average daily
net assets of each of the Series for managing the assets of the Series and for
administering the Trust.
THE PIMCO TRUST:
<CAPTION>
SERIES ADVISORY FEE
- ------------------------------------------------- ------------------------------------------------------
<S> <C>
PIMCO High Yield Bond Portfolio: 0.50%
PIMCO StocksPLUS Growth and Income Portfolio: 0.40%
</TABLE>
- -------------------------------------------------------------------------------
15
<PAGE>
FACTS ABOUT THE COMPANY AND ACCOUNT B (CONTINUED)
The following divisions invest in shares of the designated Series of the GCG
Trust.
MULTIPLE ALLOCATION DIVISION
MULTIPLE ALLOCATION SERIES
OBJECTIVE - The highest total return, consisting of capital appreciation and
current income, consistent with the preservation of capital and elimination of
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 allo-
cated among various categories of stocks referred to as "components" which
consist of the following: (i) The Growth Component -- Securities that the port-
folio manager believes have the following characteristics: stability and
quality of earnings and positive earnings momentum; dominant competitive posi-
tions; and demonstrate above-average growth rates as compared to published
Standard & Poor's 500 Stock Index ("S&P 500") earnings projections; and (ii)
The Value Component-Securities that the portfolio manager regards as fundamen-
tally undervalued, i.e., securities selling at a discount to asset value and
securities with a relatively low price/earnings ratio. The securities eligible
for this component may include real estate stocks, such as securities of
publicly-owned companies that, in the portfolio manager's judgement, offer an
optimum combination of current dividend yield, expected dividend growth, and
discount to current real estate value.
PORTFOLIO MANAGER - Chancellor LGT Asset Management, Inc.
RISING DIVIDENDS DIVISION
RISING DIVIDENDS SERIES
OBJECTIVE - Capital appreciation, with dividend income as a secondary objec-
tive.
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 Asso-
ciation of Securities Dealers Automated Quotation System.
PORTFOLIO MANAGER - EII Realty Securities, Inc.
HARD ASSETS DIVISION (FORMERLY NATURAL RESOURCES)
HARD ASSETS SERIES
OBJECTIVE - Long-term capital appreciation.
INVESTMENTS - Investment in equity and debt securities of companies engaged in
the 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
16
<PAGE>
FACTS ABOUT THE COMPANY AND ACCOUNT B (CONTINUED)
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 equi-
ties 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.
EMERGING MARKETS DIVISION
EMERGING MARKETS SERIES
OBJECTIVE - Long-term growth of capital.
INVESTMENTS - Investment primarily in equity securities of companies that are
considered to be in emerging market countries in the Pacific Basin, Latin
America and elsewhere. Income is not an objective, and any production of
current income is considered incidental to the objective of growth of capital.
PORTFOLIO MANAGER - Putnam Investment Management, Inc.
MANAGED GLOBAL DIVISION
MANAGED GLOBAL SERIES
OBJECTIVE - Capital appreciation.
INVESTMENTS - Investment primarily in common stocks of both domestic and
foreign issuers.
PORTFOLIO MANAGER - Putnam Investment Management, Inc.
GROWTH OPPORTUNITIES DIVISION
GROWTH OPPORTUNITIES SERIES
OBJECTIVE - Capital appreciation.
INVESTMENTS - Investment primarily in equity securities of domestic companies
emphasizing compa-
|
nies 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 coun-
tries 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 matu-
rity 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 instru-
mentalities; 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
17
<PAGE>
FACTS ABOUT THE COMPANY AND ACCOUNT B (CONTINUED)
The following Divisions invest currently 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 pros-
pects 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.
INVESTMENTS - Investment primarily in common stocks or securities convert-
ible 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 capi-
tal.
INVESTMENTS - Investment primarily in equity securities.
PORTFOLIO MANAGER - Massachusetts Financial Services Company
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 compa-
nies are those with market capitalizations ranging from $750 million to
approximately $2 billion.
PORTFOLIO MANAGER - Robertson, Stephens & Company Investment Management, L.P.
18
<PAGE>
FACTS ABOUT THE COMPANY AND ACCOUNT B (CONTINUED)
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 favor-
able 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.
GLOBAL FIXED INCOME DIVISION
INTERNATIONAL FIXED INCOME PORTFOLIO
OBJECTIVE - High total return.
INVESTMENTS - Investment 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 posi-
tions.
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 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 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 port-
folio in which a division invests. A substitution may become necessary if, in
our judgment, a portfolio no longer suits the purposes of the contract. This
may happen due to a change in laws or regulations, or a change in a portfo-
lio's investment objectives or restrictions, or because the portfolio is no
longer available for investment, or for some other reason. In addition, we
reserve the right to transfer assets of Account B, which we determine to be
associated with the class of contracts to which your contract belongs, to
another account. If necessary, we will get prior approval from the insurance
department of our state of domicile before making such a substitution or
transfer. We will also get any required approval from the SEC and any other
required approvals before making such a substitution or transfer. We will
notify you as soon as practicable of any proposed changes.
When permitted by law, we reserve the right to:
(1) deregister an Account B under the 1940 Act;
(2) operate an Account B as a management company under the 1940 Act if it is
operating as a unit investment trust;
(3) operate an Account B as a unit investment trust under the 1940 Act if it
is operating as a managed separate account;
(4) restrict or eliminate any voting rights as to Account B; and
(5) combine Account B with other accounts.
19
<PAGE>
FACTS ABOUT THE CONTRACT
THE OWNER
You are the owner. You are also the annuitant unless another annuitant is
named in the application or enrollment form. You have the rights and options
described in the contract. One or more persons may own the contract.
Death of an owner activates the death benefit provision. In the case of a sole
owner who dies prior to the annuity commencement date, we will pay the benefi-
ciary the death benefit then due. The sole owner's estate will be the benefi-
ciary if no beneficiary designation is in effect, or if the designated benefi-
ciary has predeceased the owner. In the case of a joint owner of the contract
dying prior to the annuity commencement date, we will designate the surviving
owner(s) as the beneficiary(ies). This supersedes any previous beneficiary
designation. In the case where the owner is a trust, the beneficial owner of
the trust will be treated as the owner of the contract solely for the purpose
of activating the death benefit provision. See Contracts Owned by Non-Natural
Persons.
THE ANNUITANT
The annuitant will receive the annuity benefits of the contract if living on
the annuity commencement date. If the annuitant dies before the annuity
commencement date, and a contingent annuitant has been named, the contingent
annuitant becomes the annuitant. Once named, neither the annuitant nor the
contingent annuitant, if any, may be changed at any time.
If there is no contingent annuitant when the annuitant dies prior to the
annuity commencement date, we will pay the beneficiary the death benefit then
due. The beneficiary will be as provided in the beneficiary designation then
in effect. If no beneficiary designation is in effect, or if there is no
designated beneficiary living, the owner will be the beneficiary. If the annu-
itant was the sole owner and there is no beneficiary designation, the
annuitant's estate will be the beneficiary.
THE BENEFICIARY
The beneficiary is the person to whom we pay death benefit proceeds if the
annuitant (when there is no contingent annuitant) or owner dies prior to the
annuity commencement date. We pay death benefit proceeds to the primary bene-
ficiary. See Proceeds Payable to the Beneficiary.
If the beneficiary dies before the annuitant or owner, the death benefit
proceeds are paid to the contingent beneficiary, if any. If there is no
surviving beneficiary, we pay the death benefit proceeds to the owner (if
other than the annuitant). If the owner was the annuitant, we pay any death
benefit proceeds to the annuitant's estate.
One or more persons who must be individuals may be named as beneficiary or
contingent beneficiary. In the case of more than one beneficiary, we will
assume any death benefit proceeds are to be paid in equal shares to the
surviving beneficiaries. You may specify other than equal shares.
You have the right to change beneficiaries during the annuitant's lifetime
unless you have designated an irrevocable beneficiary. When an irrevocable
beneficiary has been designated, you and the irrevocable beneficiary must act
together to exercise the rights and options under the contract.
CHANGE OF OWNER OR BENEFICIARY
During the annuitant's lifetime and while the contract is in effect, you may
transfer ownership of the contract (if purchased in connection with a non-
qualified plan) subject to our published rules at the time of the change. You
may also change the beneficiary. To make either of these changes, you must
send us written notice of the change in a form satisfactory to us. The change
will take effect as of the day the notice is signed. The change will not
affect any payment made or action taken by us before recording the change at
our Customer Service Center. See Additional Considerations, Transfer of
Annuity Contracts, and Assignments.
AVAILABILITY OF THE CONTRACT
We can issue a contract if both the annuitant and the owner are not older than
age 85.
TYPES OF CONTRACTS
QUALIFIED CONTRACTS
The contract may be issued as an Individual Retirement Annuity or in connec-
tion with an individual retirement account. In the latter case, the contract
will be issued without an Individual Retirement Annuity endorsement, and the
rights of the participant under the contract will be affected by the terms
and conditions of the particular individual retirement trust or custodial
account, and by provisions of the Code and the regulations thereunder. For
example, the individual retirement trust or custodial account will impose
minimum distribution rules, which require distributions to commence not later
than April 1st of the calendar year following the calendar year in which you
attain age 70 1/2. For both Individual Retirement Annuities and indi-
20
<PAGE>
FACTS ABOUT THE CONTRACT (CONTINUED)
vidual 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.
NON-QUALIFIED CONTRACTS
The contract may fund any non-qualified plan. Non-qualified contracts do not
qualify for any tax-favored treatment other than the benefits provided for by
annuities.
YOUR RIGHT TO SELECT OR CHANGE CONTRACT OPTIONS
Before the annuity commencement date, you may change the annuity commencement
date, frequency of annuity payments or the annuity option by sending a written
request to the Customer Service Center. The annuitant named on the application
or enrollment form may not be changed at any time.
PREMIUMS
You purchase the contract with an initial premium. After the end of the free
look period, you may make additional premium payments. See Making Additional
Premium Payments. The minimum initial premium is $10,000 for a non-qualified
contract and $1,500 for a qualified contract. If your initial premium will be
$25,000 or more, we also offer DVA Series 100 through another prospectus,
which is a contract with a different charging structure.
We may refuse a premium payment if an initial premium or the sum of all
premium payments is more than $1,500,000. We may change the minimum initial or
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 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 quali-
fied 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 of a completed application or enrollment form. We may retain the
initial premium for up to five days while attempting to complete an incomplete
application or enrollment form. If the application or enrollment form cannot
be made complete within five valuation days, the applicant or enrollee will be
informed of the reasons for the delay and the initial premium will be returned
immediately unless the applicant or enrollee specifically consents to our
retaining the initial premium until the application or enrollment form is made
complete. Thereafter, all premiums will be accepted on the day received.
We will accept, by agreement with broker-dealers who use wire transmittals,
transmittal of initial and additional premium payments by wire order from the
broker-dealer to the Customer Service Center. Such transmittals must be accom-
panied by a simultaneous telephone facsimile transmission
21
<PAGE>
FACTS ABOUT THE CONTRACT (CONTINUED)
containing the essential information we require to open an account and allo-
cate the premium payment.
Premium payments accepted via wire order and accompanying facsimile transmis-
sions will be invested at the value next determined following receipt. Wire
orders not accompanied by facsimile transmissions, or accompanied by facsimile
transmissions which do not contain the essential information we require to
open an account and allocate the premium payment, may be retained for a period
not exceeding five business days while an attempt is made to obtain the
required facsimile transmission. If the required facsimile transmission cannot
be obtained within five business days, the Customer Service Center will inform
the broker-dealer, on behalf of the applicant/enrollee, of the reasons for the
delay and return the premium payment immediately to the broker-dealer for
return to the applicant/enrollee, unless the applicant/enrollee specifically
consents to allow us to retain the premium payment until the required
facsimile transmission is received by the Customer Service Center.
We will issue the contract; however, until we have received and accepted at
the Customer Service Center a properly completed application or enrollment
form, we reserve the right to rescind the contract. If an application or
enrollment form is not received within ten days of receipt of the initial
premium via wire order, or if an incomplete application or enrollment form is
received and cannot be completed within ten days of receipt of the initial
premium, the amount of the initial premium, with any gain, will be returned to
the broker-dealer for return to the applicant/enrollee. In no event will less
than the full amount of the initial premium be returned to the
applicant/enrollee.
On the date we receive and accept your initial or additional premium payment:
(1) We allocate the initial premium among the divisions according to your
instructions, subject to any restrictions. See Restrictions on Allocation
of Premium Payments. For additional premium payments, the accumulation
value will increase by the amount of the premium. If we do not receive
instructions from you, the increase in the accumulation value will be
allocated among the divisions in proportion to the amount of accumulation
value in each division as of the date we receive and accept the additional
premium payment.
(2) For an initial premium, we calculate the distribution fee and any charge
for premium taxes, if applicable. When an additional premium payment is
made we increase any distribution fee and any charge for premium taxes, if
applicable. These charges will be collected by us from the contract's
accumulation value. HOWEVER, WE CURRENTLY WAIVE THE DEDUCTION OF THE
CHARGE FOR PREMIUM TAXES. (See Charges and Fees, Premium Taxes).
(3) For an initial premium, we calculate the guaranteed death benefit. When an
additional premium payment is made we increase the guaranteed death bene-
fit.
ELECTRONIC DATA TRANSMISSION OF APPLICATION INFORMATION
In certain states, we will also accept, by agreement with broker-dealers who
use electronic data transmissions of application information, wire
transmittals of initial premium payments from the broker-dealer to the
Customer Service Center for purchase of the contract. Contact the Customer
Service Center to find out about state availability.
Upon receipt of the electronic data and wire transmittal, we will open an
account and allocate the premium payment according to the client's instruc-
tions. Based on the information provided, we will generate an application or
enrollment form and contract to be forwarded to the applicant/enrollee for
signature.
During the period from receipt of the initial premium until the signed appli-
cation or enrollment form is received, the owner may not execute any finan-
cial transactions with respect to the contract unless such transactions are
requested in writing and signature guaranteed.
RESTRICTIONS ON ALLOCATION OF PREMIUM PAYMENTS
We may require that the initial premium be allocated to the Specially Desig-
nated Division during the free look period for initial premiums received from
some states. After the free look period, if your initial premium was allocated
to the Specially Designated Division, we will transfer the accumulation value
to the divisions you previously selected based on the index of investment
experience next computed for each division. See Measurement of Investment
Experience, Index of Investment Experience and Unit Value.
22
<PAGE>
FACTS ABOUT THE CONTRACT (CONTINUED)
YOUR RIGHT TO REALLOCATE
You may reallocate your accumulation value among the divisions of Account B at
the end of the free look period. You are allowed five allocation changes per
contract year without charge. There will be a charge of $25 deducted from the
accumulation value for each additional allocation change. When a reallocation
is made, we redeem shares of the Series underlying the divisions you are trans-
ferring from at their net asset value. Reinvestment is then made in shares of
the Series of the divisions you are transferring to at their net asset value.
To make a reallocation change, you must provide us with satisfactory notice at
our Customer Service Center.
RESTRICTIONS ON REALLOCATIONS
Some restrictions may apply based on the free look provisions of the state
where the contract is issued. See Your Right to Cancel or Exchange Your
Contract.
DOLLAR COST AVERAGING OPTION
If you have at least $10,000 of accumulation value in the Limited Maturity Bond
Division or the Liquid Asset Division, you may choose to have a specified
dollar amount transferred from this division to other divisions in Account B on
a monthly basis. The main objective of dollar cost averaging is to attempt to
shield your investment from short- term price fluctuations. Since the same
dollar amount is transferred to other divisions each month, more units are
purchased in a division if the value per unit is low and less units are
purchased if the value per unit is high.
Therefore, a lower than average value per unit may be achieved over the long
term. This plan of investing allows investors to take advantage of market fluc-
tuations but does not assure a profit or protect against a loss in declining
markets. See Measurement of Investment Experience, Index of Investment Experi-
ence and Unit Value.
This dollar cost averaging option may be elected at the time the application or
enrollment form is completed or at a later date. The minimum amount that may be
transferred each month is $250. The maximum amount which may be transferred is
equal to the accumulation value in the Limited Maturity Bond Division or the
Liquid Asset Division when elected, divided by 12.
The transfer date will be the same calendar day each month as the contract
date. The dollar amount will be allocated to the divisions in which you are
invested in proportion to your accumulation value in each division unless you
specify otherwise. If, on any transfer date, the accumulation value is equal to
or less than the amount you have elected to have transferred, the entire amount
will be transferred and the option will end. You may change the transfer amount
once each contract year, or cancel this option by sending us satisfactory
notice to the Customer Service Center at least seven days before the next
transfer date. Any allocation under this option will not be included in deter-
mining if the excess allocation charge will apply.
WHAT HAPPENS IF A DIVISION IS NOT AVAILABLE
When a distribution is made from an investment portfolio supporting a division
of Account B in which reinvestment is not available, we will allocate the
distribution, unless you specify otherwise, to the Specially Designated Divi-
sion.
Such a distribution can occur when (a) an investment portfolio matures, or (b)
a distribution from a portfolio or division cannot be reinvested in the port-
folio or division due to the unavailability of securities for acquisition. When
an investment portfolio matures, we will notify you in writing 30 days in
advance of that date. To elect an allocation to other than the Specially Desig-
nated Division, you must provide satisfactory notice to us at least seven days
prior to the date the portfolio matures. Such allocations are not counted as an
allocation change of the accumulation value for purposes of the number of free
allocation changes permitted. When a distribution from a portfolio or division
cannot be reinvested in the portfolio due to the unavailability of securities
for acquisition, we will notify you promptly after the allocation has occurred.
If within 30 days you allocate the accumulation value from the Specially Desig-
nated Division to other divisions of your choice, such allocations are not
counted as an allocation change of the accumulation value for purposes of the
number of free allocation changes permitted.
YOUR ACCUMULATION VALUE
Your accumulation value is the sum of the amounts in each of the divisions in
which you are invested, and is the amount available for investment at any time.
You select the divisions to which to allocate the accumulation value. We adjust
your accumulation value on each Valuation Date to reflect the divisions'
investment performance and on each contract processing date to reflect the
removal of any charges. The accumulation value is applied to your choice of an
annuity option on the annuity commencement date. See Choosing an Income Plan.
23
<PAGE>
FACTS ABOUT THE CONTRACT (CONTINUED)
You may choose up to sixteen divisions and allocate your accumulation value
among them in any way you choose.
ACCUMULATION VALUE IN EACH DIVISION
ON THE CONTRACT DATE
On the contract date, the accumulation value is allocated to each division as
specified on the application or enrollment form, unless the contract is
issued in a state that requires the return of premium payments during the
free look period, in which case, your initial premium will be allocated to
the Specially Designated Division during the free look period. See Your Right
to Cancel or Exchange Your Contract.
ON EACH VALUATION DATE
At the end of each subsequent valuation period, the amount of accumulation
value in each division will be calculated as follows:
(1) We take the accumulation value in the division at the end of the
preceding valuation period.
(2) We multiply (1) by the division's net rate of return for the current
valuation period.
(3)We add (1) and (2).
(4) We add to (3) any additional premium payments allocated to the division
during the current valuation period.
(5) We add or subtract allocations to or from that division during the
current valuation period.
(6) We subtract from (5) any partial withdrawals and any associated charges
allocated to that division during the current valuation period.
(7) We subtract from (6) the amounts allocated to that division for:
(a) any contract fees; and
(b) any distribution fee and any charge for premium taxes. HOWEVER, WE
CURRENTLY WAIVE THE DEDUCTION OF THE CHARGE FOR PREMIUM TAXES. (See
Charges and Fees, Premium Taxes.)
All amounts in (7) are allocated to each division in the proportion that (6)
bears to the accumulation value, unless the Charge Deduction Division has
been specified.
MEASUREMENT OF INVESTMENT EXPERIENCE
INDEX OF INVESTMENT EXPERIENCE AND UNIT VALUE
The investment experience of a division is determined on each valuation date.
We use an index to measure changes in each division's experience during a
valuation period. We set the index at $10 when the first investments in a
division are made, except for the OTC, Research, Total Return, Growth and
Income, and Value + Growth Divisions which started with indices of $14.79,
$16.64, $13.93, $10.97 and $12.05, respectively. The index for a current
valuation period equals the index for the preceding valuation period multi-
plied by the experience factor for the current valuation period.
We may express the value of amounts allocated to the divisions in terms of
units. We determine the number of units for a given amount on a valuation
date by dividing the dollar value of that amount by the index of investment
experience for that date. The index of investment experience is equal to the
value of a unit.
HOW WE DETERMINE THE
EXPERIENCE FACTOR
For divisions of Account B the experience factor reflects the investment
experience of the Series in which a division invests as well as the charges
assessed against the division for a valuation period. The factor is calcu-
lated as follows:
(1) We take the net asset value of the portfolio in which the division
invests at the end of the current valuation period.
(2) We add to (1) the amount of any dividend or capital gains distribution
declared for the investment portfolio and reinvested in such portfolio
during the current valuation period. We subtract from that amount a
charge for our taxes, if any.
(3) We divide (2) by the net asset value of the portfolio at the end of the
preceding valuation period.
(4) We subtract the daily mortality and expense risk charge from each divi-
sion for each day in the valuation period.
(5) We subtract the daily asset based administrative charge from each divi-
sion for each day in the valuation period.
Calculations for divisions investing in a Series are made on a per share
basis.
24
<PAGE>
FACTS ABOUT THE CONTRACT (CONTINUED)
NET RATE OF RETURN FOR A DIVISION
OF ACCOUNT B
The net rate of return for a division during a valuation period is the expe-
rience factor for that valuation period minus one.
CASH SURRENDER VALUE
Your contract's cash surrender value fluctuates daily with the investment
results of the divisions you have selected. We do not guarantee any minimum.
On any date before the annuity commencement date while the contract is in
effect, the cash surrender value is calculated as follows:
(1) We take the contract's accumulation value;
(2) We deduct any surrender charge and any unrecovered charge for premium
taxes. (See Charges and Fees, Premium Taxes):
(3) We deduct any charges incurred but not yet deducted. (See Charges and
Fees, Administrative Charge, Excess Allocation Charge, Partial Withdrawal
Charge).
SURRENDERING TO RECEIVE THE
CASH SURRENDER VALUE
The contract may be surrendered by the owner at any time while the annuitant
is living and before the annuity commencement date.
A surrender will be effective on the date your written request and the
contract are received by us at our Customer Service Center and the cash
surrender value is determined accordingly as of that date. All benefits under
the contract will then be terminated as of that date. You may receive the cash
surrender value in a single sum payment or apply it under one or more annuity
options. See The Annuity Options. We will usually pay the cash surrender value
within seven days but we may delay payment as described in the When We Make
Payments provision.
PARTIAL WITHDRAWALS
Prior to the annuity commencement date, while the annuitant is living and the
contract is in effect, you may take partial withdrawals from the accumulation
value by sending satisfactory notice to the Customer Service Center. Unless
you specify otherwise, the amount of the withdrawal will be taken in propor-
tion to the amount of accumulation value in each division in which you are
invested.
There are three options available for selecting partial withdrawals, the
Conventional Partial Withdrawal Option, the Systematic Partial Withdrawal
Option and the IRA Partial Withdrawal Option. All three options are described
below. Partial withdrawals may not be repaid, and in no event may a withdrawal
amount be greater than 90% of the cash surrender value.
CONVENTIONAL PARTIAL WITHDRAWAL OPTION
After the free look period, you may take a conventional partial withdrawal
once each contract year without charge. If you take more than one conven-
tional partial withdrawal in a contract year, we impose a charge of the
lesser of $25 and 2.0% of the amount withdrawn. The minimum amount you may
withdraw under this option is $1,000 and the maximum amount that may be with-
drawn without incurring a surrender charge (assuming no systematic or IRA
partial withdrawals are in place during that contract year) is 15% of the
accumulation value. See Surrender Charges for Excess Partial Withdrawals,
below.
SYSTEMATIC PARTIAL WITHDRAWAL OPTION
This option may be elected at the time the application or enrollment form is
completed, or at a later date. This option may be elected to commence in a
contract year where a conventional partial withdrawal has been taken.
However, it may not be elected while the IRA partial withdrawal option is in
effect.
You may choose to receive systematic partial withdrawals on a monthly or
quarterly basis from the accumulation value in the divisions of Account B.
The commencement of payments under this option may not be elected to start
sooner than 28 days after the contract issue date. You select the date of the
quarter or month when the withdrawals will be made but no later than the 28th
day of the month. If no date is selected, the withdrawals will be made on the
same calendar day of each month as the contract date. You may select a dollar
amount or a percentage of the accumulation value as the amount of your with-
drawal subject to the following maximums, but in no event can a payment be
less than $100:
<TABLE>
<CAPTION>
FREQUENCY MAXIMUM PERCENTAGE
--------- ------------------
<S> <C>
Monthly 1.25%
Quarterly 3.75%
</TABLE>
If a dollar amount is selected and the amount to be systematically withdrawn
would exceed the applicable maximum percentage of the accumulation value on
the withdrawal date, the amount withdrawn will be reduced so that it equals
such percentage. For example, if a $500 monthly with-
25
<PAGE>
FACTS ABOUT THE CONTRACT (CONTINUED)
drawal was elected and on the withdrawal date 1.25% 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 1.0% to be systematically withdrawn on a monthly
basis and that amount equaled $90, and since $100 is less than 1.25% of the
accumulation value, we would send $100. If 1.0% equaled $75, since $100 is
more than 1.25% of the accumulation value we would send $75 and then cancel
the option. In such a case, in order to receive systematic partial with-
drawals in the future, you would be required to submit a new notice to our
Customer Service Center.
You may change the amount or percentage of your withdrawal once each contract
year or cancel this option at any time by sending satisfactory notice to us
at our Customer Service Center at least seven days prior to the next sched-
uled withdrawal date. However, you may not change the amount or percentage of
your withdrawals in any contract year during which you have previously taken
a conventional partial withdrawal.
There may be a surrender charge associated with a partial withdrawal in any
contract year in which you receive systematic partial withdrawals and also
take a conventional partial withdrawal. See Surrender Charges for Excess
Partial Withdrawals, below.
IRA PARTIAL WITHDRAWAL OPTION
If you have an IRA contract and will attain age 70 1/2 in the current
calendar year, distributions will be made to you to satisfy requirements
imposed by Federal tax law. IRA partial withdrawals provide payout of amounts
required to be distributed by the Internal Revenue Service rules governing
mandatory distributions under qualified plans. See Federal Tax Considera-
tions, Taxation of Individual Retirement Annuities. We will send you a notice
before your distributions must commence, and you may elect this option at
that time, or at a later date. You may not elect IRA partial withdrawals
while the systematic partial withdrawal option is in effect. If you do not
elect the IRA partial withdrawal option, and distributions are required by
Federal tax law, distributions adequate to satisfy the requirements imposed
by Federal tax law will be made. Thus, if the systematic partial withdrawal
option is in effect, distribution under that option must be adequate to
satisfy the mandatory distribution rules imposed by Federal tax law.
You may choose to receive IRA partial withdrawals on a monthly, quarterly or
annual frequency. You select the day of the month when the withdrawals will
be made, but it cannot be later than the 28th day of the month. If no date is
selected, the withdrawals will be made on the same calendar day of the month
as the contract date.
We will determine the amount that is required to be withdrawn from your
contract each year based on the information you give us and various choices
you make. For information regarding the calculation and choices you have to
make, see the Statement of Additional Information. The minimum dollar amount
you can withdraw is $100. At the time we determine the required partial with-
drawal amount for a taxable year based on the frequency you select, if that
amount is less than $100, we will pay $100. At any time where the partial
withdrawal amount is greater than the accumulation value, we will cancel the
contract and send you the amount of the cash surrender value.
You may change the payment frequency of your withdrawals once each contract
year or cancel this option at any time by sending us satisfactory notice to
our Customer Service Center at least seven days prior to the next scheduled
withdrawal date.
There may be a surrender charge associated with a partial withdrawal in any
contract year during which you receive IRA partial withdrawals and take a
conventional partial withdrawal. See Surrender Charges for Excess Partial
Withdrawals, below.
SURRENDER CHARGES FOR EXCESS PARTIAL WITHDRAWALS
An excess partial withdrawal is the amount by which annualized partial with-
drawals for a contract year exceed 15% of the accumulation value on the date
of the withdrawal. Any partial withdrawal and any combination of partial
withdrawals either taken during a contract year or expected to be received in
a contract year will be taken into account in determining the amount of the
excess partial withdrawal. An excess partial
26
<PAGE>
FACTS ABOUT THE CONTRACT (CONTINUED)
withdrawal will be considered a partial surrender of the contract and we will
impose a surrender charge applicable to the accumulation value. Such amount
will be deducted from the accumulation value in proportion to the accumula-
tion value in each division from which the excess partial withdrawal was
taken.
An excess partial withdrawal will result in the imposition of a surrender
charge and a corresponding reduction in the remaining surrender charge that
subsequently can be imposed under the contract. For example the following
assumes a conventional partial withdrawal of $17,200 is taken at the begin-
ning of the fourth contract year. A contract with a current surrender charge
of $3,000 (an initial surrender charge of $6,000 reducing at the rate of
$1,000 per contract year for six years), has an accumulation value of
$100,000.
In this example, $15,000 (15% of accumulation value) may be withdrawn during
the contract year without the imposition of a surrender charge. The excess
partial withdrawal is the amount by which the withdrawal is in excess of the
maximum ($17,200 - $15,000 = $2,200). The excess is calculated as a
percentage of the accumulation value ($2,200/$100,000 = .022). Applying this
percentage to the current amount of the surrender charge ($3,000 X .022 =
$66) determines the amount to be deducted from the accumulation value as of
the date of the withdrawal.
If the contract were surrendered following the partial withdrawal, the
surrender charge would be $2,934 ($3,000 - $66). If instead, the contract
were surrendered at the beginning of the fifth year assuming no further
partial withdrawals, the surrender charge would be $1,934 ($2,000 - $66).
Contracts with a contract date prior to May 3, 1993 and the prospectus deliv-
ered in connection with such contracts, described this provision as accelera-
tion of recovery of deferred loading, which is the functional equivalent of
the assessment of a surrender charge for excess partial withdrawals. Limited
Edition contracts purchased through Golden American Separate Account D and
the prospectus delivered in connection with such contracts also described
this provision as acceleration of recovery of deferred loading.
PARTIAL WITHDRAWALS IN GENERAL
CONSULT YOUR TAX ADVISOR REGARDING THE TAX CONSEQUENCES ASSOCIATED WITH
TAKING PARTIAL WITHDRAWALS. A partial withdrawal made before the taxpayer
reaches age 59 1/2 may result in imposition of a tax penalty of 10% of the
taxable portion withdrawn. Please refer to Federal Tax Considerations for
more details.
PROCEEDS PAYABLE TO THE BENEFICIARY
If either the annuitant (when there is no contingent annuitant) or owner dies
prior to the annuity commencement date, we will pay the beneficiary the death
benefit proceeds under the contract. Such amount may be received in a single
sum or applied to any of the annuity options. See The Annuity Options. If we do
not receive a request to apply the death benefit proceeds to an annuity option,
a single sum distribution will be made. We may reduce the death benefit
proceeds payable under certain group or sponsored arrangements. See Group or
Sponsored Arrangements.
If the annuitant and owner are both age 75 or younger at issue (age 80 or
younger for contracts with a contract date before November 6, 1992) the death
benefit is the greater of the accumulation value and the guaranteed death bene-
fit.
MAXIMUM GUARANTEED DEATH BENEFIT
This amount is calculated as follows:
(1)We determine the total premiums paid;
(2)We multiply (1) by two;
(3) We determine the total partial withdrawals taken; and
(4) We subtract (3) from (2).
GUARANTEED DEATH BENEFIT
On the contract date the guaranteed death benefit is equal to the initial
premium. On subsequent valuation dates, the guaranteed death benefit is
calculated as follows:
(1) We take the guaranteed death benefit from the prior valuation date;
(2) We calculate interest on (1) for the current valuation period at an
annual rate of 7% (the guaranteed death benefit interest rate), except
that with respect to amounts in the Liquid Asset Division, the interest
rate applied to such amounts will be the net rate of return for the
Liquid Asset Division during the current valuation period, if it is less
than 7%; (Under contracts with a contract date before November 6, 1992,
the
27
<PAGE>
FACTS ABOUT THE CONTRACT (CONTINUED)
7% test for the Liquid Asset Division does not apply.);
(3) We add (1) and (2);
(4) We add to (3) any additional premiums paid during the current valuation
period; and,
(5) We subtract from (4) any partial withdrawals made during the current
valuation period.
If (5) is greater than the maximum guaranteed death benefit, we will pay
the maximum guaranteed death benefit.
If the annuitant or owner is age 76 or older at issue (age 81 or older for
contracts with a contract date before November 6, 1992), the death benefit is
the greater of:
(1) The cash surrender value; and
(2) The sum of the premiums paid, less any partial withdrawals.
DEATH BENEFIT FOR CONTRACTS PURCHASED IN NORTH CAROLINA WITH A CONTRACT DATE
BEFORE NOVEMBER 6, 1992
If the annuitant and owner are both age 80 or younger at issue the death
benefit is the greater of:
(1) The accumulation value; and
(2) The sum of the premiums paid, less any partial withdrawals.
If the annuitant or owner is age 81 or older at issue, the death benefit is
the greater of:
(1) The cash surrender value; and
(2) The sum of the premiums paid, less any partial withdrawals.
HOW TO CLAIM PAYMENTS TO BENEFICIARY
We must receive due proof of the death of the annuitant or owner (such as an
official death certificate) at our Customer Service Center before we will
make any payments to the beneficiary. We will calculate the death benefit as
of the date we receive due proof of death. The beneficiary should contact our
Customer Service Center for instructions.
REPORTS TO OWNERS
We will send you a report once each contract quarter within 31 days after the
end of each contract quarter. The report will show the accumulation value, the
cash surrender value, and the death benefit as of the end of the contract quar-
ter.
The report will also show the allocation of the accumulation value as of such
date and the amounts deducted from or added to the accumulation value since the
last report. The report will also include any other information that may be
currently required by the insurance supervisory official of the jurisdiction in
which the contract is delivered. We will also send you copies of any share-
holder reports of the portfolios or securities in which Account B invests, as
well as any other reports, notices or documents required by law to be furnished
to contract owners.
WHEN WE MAKE PAYMENTS
We will pay death benefit proceeds and the cash surrender value within seven
days after our Customer Service Center receives all the information needed to
process the payment.
However, we may delay payment of amounts derived from the divisions if it is
not practical for us to value or dispose of shares of Account B because:
(1)The NYSE is closed for trading;
(2) The SEC determines that a state of emergency exists;
(3) An order or pronouncement of the SEC permits a delay for the protection of
contract owners; or,
(4) The check used to pay the premium has not cleared through the banking
system. This may take up to 15 days.
During such times, as to amounts allocated to the divisions, we may delay:
(1) Determination and payment of any cash surrender value;
(2) Determination and payment of any death benefit if death occurs before the
annuity commencement date;
(3) Allocation changes of the accumulation value; or,
(4) Application under an annuity option of the accumulation value.
CHARGES AND FEES
We deduct the charges described below to cover our costs and expenses, 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 there-
under. The amount of a charge will not necessarily correspond to the costs
associ-
28
<PAGE>
CHARGES AND FEES (CONTINUED)
ated 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. In the event there are any profits
from fees and charges deducted under the contract, including but not limited to
mortality and expense risk charges, such profits could be used to finance
distribution of contracts.
CHARGE DEDUCTION DIVISION
You may specify on the application or enrollment form if you wish to use the
Charge Deduction Division Option. If you so specify, all charges against the
accumulation value will be deducted from the Liquid Asset Division. If the
amount of the charge is greater than the amount in the division, the charge
will be deducted proportionately from all the divisions in which you are
invested. You may also choose to elect or cancel this option while the contract
is in force by sending us satisfactory notice to our Customer Service Center.
If you do not elect this option, the charges will be deducted proportionately
from all the divisions in which you are invested.
CHARGES DEDUCTED FROM THE ACCUMULATION VALUE
We invest the entire amount of the initial and any additional premium payments
in the divisions you select, subject to certain restrictions. See Restrictions
on Allocation of Premium Payments. We then periodically deduct certain amounts
from your accumulation value. We may reduce certain fees and charges, including
any distribution fees, surrender, administration, and mortality and expense
risk charges, under group or sponsored arrangements. See Group or Sponsored
Arrangements. Charges are deducted proportionately from all divisions in which
you are invested, unless you have elected the Charge Deduction Division. The
charges we deduct are:
DISTRIBUTION FEE
We deduct a sales load in an annual amount of 1.00% of each premium at the
end of each contract processing period for a period of six years from the
date we receive and accept each premium payment.
SURRENDER CHARGE
A surrender charge is imposed as a percentage of premium if the contract is
surrendered or an excess partial withdrawal is taken during the six year
period from the date we receive and accept each premium payment. The
percentage imposed at the time of surrender or excess partial withdrawal
depends on the distribution fee collected to the time the contract is surren-
dered or the excess partial withdrawal is taken. The surrender charge in the
first contract year is 6.00% and reduces by 1.00% each year during the six
year period from the date we receive and accept each premium payment.
Contracts with a contract date prior to May 3, 1993 and the prospectus deliv-
ered in connection with such contracts, described the sales load as a
deferred load, which is equivalent to the combination of the distribution fee
and surrender charge described above. Limited Edition contracts purchased
through Golden American Separate Account D and the prospectus delivered in
connection with such contracts also described the sales load as a deferred
load.
If your initial premium will be $25,000 or more, we also offer DVA Series 100
through another prospectus, which is a contract with a different charging
structure.
PREMIUM TAXES
We make a charge for state and local premium taxes in certain states which
can range from 0% to 3.5% of premium. The charge depends on the annuitant's
or owner's state of residence, as applicable. We reserve the right to change
this amount to conform with changes in the law or if the annuitant changes
state of residence.
Premium taxes are generally incurred on the annuity commencement date and a
charge for such premium taxes is then deducted from your accumulation value
on such date. However, some jurisdictions impose a premium tax at the time
the initial and additional premiums are paid, regardless of the annuity
commencement date. In those states we initially advance the amount of the
charge for premium taxes to your accumulation value and then deduct it in
equal installments on each contract processing date over a six year period.
CURRENTLY, IN THOSE STATES WHERE WE ADVANCE THE CHARGE FOR PREMIUM TAXES, WE
WILL WAIVE THE DEDUCTION OF THE APPLICABLE INSTALLMENTS OF THE CHARGE FOR
PREMIUM TAXES ON EACH CONTRACT PROCESSING DATE. HOWEVER, WE WILL DEDUCT THE
UNRECOVERED CHARGE FOR PREMIUM TAXES (NOT INCLUDING INSTALLMENTS WHICH WERE
WAIVED) WHEN DETERMINING THE CASH SURRENDER VALUE PAYABLE IF YOU SURRENDER
YOUR CONTRACT. WE RESERVE THE RIGHT TO DEDUCT THE TOTAL AMOUNT OF THE CHARGE
FOR
29
<PAGE>
CHARGES AND FEES (CONTINUED)
PREMIUM TAXES PREVIOUSLY WAIVED AND UNRECOVERED ON THE ANNUITY COMMENCEMENT
DATE.
In those cases when we advance the charge for premium taxes, since the charge
for premium taxes is advanced to the accumulation value, a positive net rate
of return will give a higher cash surrender value and a negative net rate of
return will give a lower cash surrender value than would be the case had the
charge for premium taxes been deducted from your premium payment.
ADMINISTRATIVE CHARGE
The administrative charge is incurred at the beginning of the contract
processing period and deducted at the end of each contract processing period.
We deduct this charge when determining the cash surrender value payable if
you surrender the contract prior to the end of a contract processing period.
The amount deducted is $40 per contract year if total premiums paid in the
first contract year are less than $100,000. If the total premium paid in the
first contract year equals $100,000 or more, the charge is zero. See Asset
Based Administration Charge below.
EXCESS ALLOCATION CHARGE
We currently do not assess a charge for allocation changes made during a
Contract Year. We reserve the right, however, to assess a $25 charge for each
allocation change after the twelfth allocation change in a Contract Year.
This amount represents the maximum we will charge. The charge would be
deducted from the division(s) from which each such reallocation is made in
proportion to the amount being transferred from each such division unless you
have chosen to use the Charge Deduction Division. Any allocation(s) or trans-
fer(s) due to the election of the Dollar Cost Averaging Option and realloca-
tion under the provision What Happens if a Division is Not Available will not
be included in determining if the excess allocation charge should apply.
PARTIAL WITHDRAWAL CHARGE
If you take more than one conventional partial withdrawal during a contract
year, we impose a charge of the lesser of $25 and 2.0% of the amount with-
drawn for each additional conventional partial withdrawal. The charge is
deducted from the division(s) from which each such partial withdrawal is made
in proportion to the amount being withdrawn from each division unless you
have chosen to use the Charge Deduction Division. See Partial Withdrawals,
Conventional Partial Withdrawal Option.
CHARGES DEDUCTED FROM THE DIVISIONS
MORTALITY AND EXPENSE RISK CHARGE
The daily charge is at the rate of 0.002477% (equivalent to an annual rate of
0.90%) on the assets in each division.
ASSET BASED ADMINISTRATIVE CHARGE
We will deduct a daily administrative charge from the assets in each division
of the Accounts. The daily charge is at a rate of 0.000276% (equivalent to an
annual rate of 0.10%) on the assets in each division.
TRUST EXPENSES
There are fees and charges deducted from each Series of the Trusts. Please
read the respective Trust prospectus for details.
CHOOSING AN INCOME PLAN
THE INCOME PLAN
If the annuitant and owner are living on the annuity commencement date, we
will begin making payments to the annuitant under an income plan. We will make
these payments under the annuity option chosen in the application or enroll-
ment form or as subsequently changed. You may change an annuity option by
making a written request to us at least 30 days prior to the annuity commence-
ment date of the contract. The amount of the payments will be determined by
applying the accumulation value on the annuity commencement date in accordance
with The Annuity Options section below. See When We Make Payments.
You may also elect an annuity option on surrender of the contract for its cash
surrender value or, you may choose one or more annuity options for the payment
of death benefit proceeds while it is in effect and before the annuity
commencement date. If, at the time of the annuitant's or owner's death, no
option has been chosen for paying death benefit proceeds, the beneficiary may
choose an option within one year.
The minimum monthly annuity income payment that we will make is $20. We may
require that a single sum payment be made if the accumulation value is less
than $2,000 or if the calculated monthly annuity income payment is less than
$20.
For each option we will issue a separate written agreement putting the option
into effect. Before we
30
<PAGE>
CHOOSING AN INCOME PLAN (CONTINUED)
pay any annuity benefits, we require the return of the contract. If your
contract has been lost, we will require that you complete and return the
applicable lost contract form. Various factors will affect the level of
annuity benefits including the annuity option chosen, the assumed interest
rate used and the investment results of the division(s) in which the accumula-
tion value has been invested.
Fixed annuity payments are regular payments, the amount of which is fixed and
guaranteed by us. The amount of the payments will depend only on the form and
duration of payments chosen, the age of the annuitant or beneficiary (and sex,
where appropriate), the total accumulation value applied to purchase the fixed
option, and the applicable payment rate.
Our approval is needed for any option where:
(1) The person named to receive payment is other than the owner or benefi-
ciary;
(2) The person named is not a natural person, such as a corporation; or
(3) Any income payment would be less than the minimum annuity income payment
allowed.
ANNUITY COMMENCEMENT DATE SELECTION
You select the annuity commencement date in the application or enrollment
form. You may select any date following the third contract anniversary but
before the contract processing date in the month following the annuitant's
90th birthday. If you do not select a date, the annuity commencement date will
be in the month following the annuitant's 90th birthday. However, in the state
of Pennsylvania the annuity commencement date may not be later than in the
month following the annuitant's 85th birthday for annuitants with an issue age
of 80 and under. For contracts with contract dates before May 3, 1993,
different annuity commencement date limitations may apply. If the annuity
commencement date occurs when the annuitant is at an advanced age, such as
over age 85, it is possible that the contract will not be considered an
annuity for Federal tax purposes. See Federal Tax Considerations. For a
contract purchased in connection with a qualified plan 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.
FREQUENCY SELECTION
You choose the frequency of the annuity payments. They may be monthly, quar-
terly, semi-annually or annually. If we do not receive written notice from
you, the payments will be made monthly. There may be certain restrictions on
minimum payments that we will allow.
THE ANNUITY OPTIONS
There are four options to choose from as shown below. Options 1 through 3 are
fixed and option 4 is variable. For a fixed option, the accumulation value is
transferred to the general account.
OPTION 1. INCOME FOR A FIXED PERIOD
Payment is made in equal installments for a fixed number of years based on
the accumulation value as of the annuity commencement date. We guarantee that
each monthly payment will be at least the amount set forth in the contract.
Guaranteed amounts for annual, semi-annual and quarterly payments are avail-
able upon request. Illustrations are available upon request. If the cash
surrender value or accumulation value is applied under this option, a 10%
penalty tax may apply to the taxable portion of each income payment until the
annuitant reaches age 59 1/2.
OPTION 2. INCOME FOR LIFE
Payment is made in equal monthly installments and guaranteed for at least a
period certain. The period certain can be 10 or 20 years. Other periods
certain are available on request. A refund certain may be chosen instead.
Under this arrangement, income is guaranteed until payments equal the amount
applied. If the person named lives beyond the guaranteed period, payments
continue until his or her death. We guarantee that each payment will be at
least the amount set forth in the contract corresponding to the person's age
on his or her last birthday before the option's effective date. Amounts for
ages not shown in the contract are available upon request.
OPTION 3. JOINT LIFE INCOME
This option is available if there are two persons named to receive payments.
At least one of the persons named must be either the owner or beneficiary of
the contract. Monthly payments are guaranteed and are made as long as at
least one of the named persons is living. There is no minimum number of
payments. Monthly payment amounts are available upon request.
OPTION 4. ANNUITY PLAN
An amount can be used to buy any single premium annuity we offer on the
option's effective date.
31
<PAGE>
CHOOSING AN INCOME PLAN (CONTINUED)
PAYMENT WHEN NAMED PERSON DIES
When the person named to receive payment dies, we will pay any amounts still
due as provided by the option agreement. The amounts still due are determined
as follows:
(1) For options 1, 2, or any remaining guaranteed payments, payments will be
continued. Under options 1 and 2, the discounted values of the remaining
guaranteed payments may be paid in a single sum. This means we deduct the
amount of the interest each remaining guaranteed payment would have earned
had it not been paid out early. The discount interest rate is 3% for option
1 and 3.50% for option 2 per year. We will however, base the discount
interest rate on the interest rate used to calculate the payments for
options 1 and 2 if such payments were not based on the tables in the
contract.
(2) For option 3, no amounts are payable after both named persons have died.
(3) For option 4, the annuity agreement will state the amount due, if any.
OTHER INFORMATION
OTHER CONTRACT PROVISIONS
IN CASE OF ERRORS ON THE APPLICATION OR ENROLLMENT FORM
If an age or sex given in the application or enrollment form is misstated,
the amounts payable or benefits provided by the contract shall be those that
the premium payment would have bought at the correct age or sex.
SENDING NOTICE TO US
Any written notices, inquiries or requests should be sent to our Customer
Service Center. Please include your name, your contract number and, if you
are not the annuitant, the name of the
annuitant.
ASSIGNING THE CONTRACT AS COLLATERAL
You may assign a non-qualified contract as collateral security for a loan or
other obligation. This does not change the ownership. However, your rights
and any beneficiary's rights are subject to the terms of the assignment. See
Additional Considerations, Transfer of Annuity Contracts, and Assignments. An
assignment may have Federal tax consequences. See Federal Tax Considerations.
You must give us satisfactory written notice at our Customer Service Center
in order to make or release an assignment. We are not responsible for the
validity of any assignment.
NON-PARTICIPATING
The contract does not participate in the divisible surplus of Golden Ameri-
can.
AUTHORITY TO MAKE AGREEMENTS
All agreements made by us must be signed by our president or a vice president
and by our secretary or an assistant secretary. No other person, including an
insurance agent or broker, can change any of the contract's terms, make any
agreements binding on us or extend the time for premium payments.
CONTRACT CHANGES -- APPLICABLE TAX LAW
We reserve the right to make changes in the contract to the extent we deem it
necessary to continue to qualify the contract as an annuity. Any such changes
will apply uniformly to all contracts that are affected. You will be given
advance written notice of such changes.
YOUR RIGHT TO CANCEL OR EXCHANGE YOUR CONTRACT
CANCELLING YOUR CONTRACT
You may cancel your contract within your free look period, which is ten days
after you receive your contract. For purposes of administering our allocation
and administrative rules, we deem this period to expire 15 days after the
contract is mailed to you. Some states may require a longer free look period.
If you decide to cancel, you may mail or deliver the contract to us at our
Customer Service Center. We will refund the accumulation value plus any
charges we deducted, and the contract will be voided as of the date we
receive the contract and your request. Some states require that we return the
premium paid. In these states, we require that your premium be allocated to
the Specially Designated Division during the free look period. If you exer-
cise your right to cancel, we will return the greater of (a) the premium
invested and (b) the accumulation value of your contract plus any amounts
deducted under the contract or by the Trust for taxes, charges or fees. If
you do not choose to exercise your right to cancel during the free look
period, then at the end of the free look period your money will be invested
in the division(s) chosen by you, based on the index of investment experience
next computed for each division. See Measurement of Investment Experience,
Index of Experience and Unit Value.
32
<PAGE>
OTHER INFORMATION (CONTINUED)
EXCHANGING YOUR CONTRACT
For information regarding exchanges under Section 1035, of the Internal
Revenue Code of 1986, as amended, see Federal Tax Considerations.
OTHER CONTRACT CHANGES
You may change the contract to another annuity plan subject to our rules at
the time of the change.
GROUP OR SPONSORED ARRANGEMENTS
For certain group or sponsored arrangements, we may reduce any distribution
fee, surrender, administration, and mortality and expense risk charges. We may
also change the minimum initial and additional premium requirements, or reduce
the death benefit proceeds payable. Group arrangements include those in which
a trustee or an employer, for example, purchases contracts covering a group of
individuals on a group basis. Sponsored arrangements include those in which an
employer allows us to sell contracts to its employees on an individual basis.
Our costs for sales, administration, and mortality generally vary with the
size and stability of the group among other factors. We take all these factors
into account when reducing charges. To qualify for reduced charges, a group or
sponsored arrangement must meet certain requirements, including our require-
ments for size and number of years in existence. Group or sponsored arrange-
ments that have been set up solely to buy contracts or that have been in
existence less than six months will not qualify for reduced charges.
We will make these and any similar reductions according to our rules in effect
when an application or enrollment form for a contract is approved. We may
change these rules from time to time. Any variation in the distribution fee or
administrative charge will reflect differences in costs or services and will
not be unfairly discriminatory.
SELLING THE CONTRACT
DSI is principal underwriter and distributor of the contract as well as for
other contracts issued through Account B and other separate accounts of Golden
American. We pay DSI for acting as principal underwriter under a distribution
agreement. The offering of the contract will be continuous.
DSI has entered into and will continue to enter into sales agreements with
broker-dealers to solicit for the sale of the contract through registered
representatives who are licensed to sell securities and variable insurance
products including variable annuities. These agreements provide that applica-
tions for contracts may be solicited by registered representatives of the
broker-dealers appointed by Golden American to sell its variable life insur-
ance and variable annuities. These broker-dealers are registered with the SEC
and are members of the National Association of Securities Dealers, Inc.
("NASD"). The registered representatives are authorized under applicable state
regulations to sell variable life insurance and variable annuities. The
writing agent will receive commissions of up to 6% of any initial or addi-
tional premium payments made.
REINSURANCE
Golden American reinsures its mortality risk associated 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.
REGULATORY INFORMATION
VOTING RIGHTS
We will vote the shares of the Trusts owned by Account B according to your
instructions. However, if the Investment Company Act of 1940 or any related
regulations should change, or if interpretations of it or related regulations
should change, and we decide that we are permitted to vote the shares of the
Trusts in our own right, we may decide to do so.
We determine the number of shares that you have in a division by dividing the
contract's accumulation value in that division by the net asset value of one
share of the portfolio in which a division invests. Fractional votes will be
counted. We will determine the number of shares you can instruct us to vote
180 days or less before a Trust's meeting. We will ask you for voting instruc-
tions by mail at least 10 days before the meeting.
If we do not get your instructions in time, we will vote the shares in the
same proportion as the instructions received from all contracts in that divi-
sion. We will also vote shares we hold in Account B which are not attributable
to owners in the same proportion.
STATE REGULATION
We are regulated and supervised by the Insurance Department of the State of
Delaware, which periodically examines our financial condition and operations.
We are also subject to the insurance laws
33
<PAGE>
REGULATORY INFORMATION (CONTINUED)
and regulations of all jurisdictions where we do business. The variable
contract offered by this prospectus has been approved by the Insurance Depart-
ment of the State of Delaware and by the Insurance Departments of other juris-
dictions.
We are required to submit annual statements of our operations, including finan-
cial statements, to the Insurance Departments of the various jurisdictions in
which we do business to determine solvency and compliance with state insurance
laws and regulations.
LEGAL PROCEEDINGS
The Company and its subsidiaries, like other insurance companies, are involved
in lawsuits, including class action lawsuits. In some class action and other
lawsuits involving insurers, substantial damages have been sought and/or mate-
rial settlement payments have been made. Although the outcome of any litigation
cannot be predicted with certainty, the Company believes that at the present
time, there are no pending or threatened lawsuits that are reasonably likely to
have a material adverse impact on Separate Account B or the Company.
LEGAL MATTERS
The legal validity of the contract described in this prospectus has been passed
on by Myles R. Tashman, Executive Vice President, General Counsel and Secretary
of Golden American. Sutherland, Asbill & Brennan LLP of Washington, D.C. has
provided advice on certain matters relating to Federal securities laws.
EXPERTS
The financial statements of Golden American Life Insurance Company, Separate
Account B appearing or incorporated by reference in the Statement of Additional
Information and in the 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 Informa-
tion and in the Registration Statement and are included in reliance upon such
reports given upon the authority of such firm as experts in accounting and
auditing.
FEDERAL TAX CONSIDERATIONS
INTRODUCTION
The contract is designed for use by individuals or groups in retirement plans
which are qualified under Section 408 or non-qualified under the provisions of
the Internal Revenue Code of 1986, as amended (the "Code"). The ultimate effect
of Federal income taxes on the amounts paid for the contract, on the investment
return on assets held under the contract, on annuity payments and on the
economic benefits to the owner, annuitant or beneficiary depends upon the terms
of the contract, upon Golden American's tax status and upon the tax status of
the individuals concerned.
The following discussion is general in nature and is not intended as tax
advice. Each person concerned should consult a competent tax advisor. No
attempt is made to consider any applicable state or other tax laws. Moreover,
the discussion is based upon Golden American's understanding of the Federal
income tax laws as they are currently interpreted. No representation is made
regarding the likelihood of continuation of the Federal income tax laws, the
Treasury Regulations, or the current interpretations by the Internal Revenue
Service (the "IRS"). For a discussion of Federal income taxes as they relate to
the Trusts, please see the accompanying prospectus for the respective Trust.
GOLDEN AMERICAN TAX STATUS
Golden American is taxed as a life insurance company under Part I of Subchapter
L of the Code. Since Account B is not a separate entity from Golden American
and its operations form a part of Golden American, it will not be taxed sepa-
rately as a "regulated investment company" under Subchapter M of the Code.
Investment income and realized capital gains on the assets of Account B are
reinvested and taken into account in determining the accumulation value. Under
existing Federal income tax law, Golden American does not incur tax on Account
B's investment income, including realized net capital gains. Golden American
reserves the right to make a deduction for taxes should they be imposed with
respect to such items in the future.
TAXATION OF NON-QUALIFIED ANNUITIES
1. IN GENERAL
Code (S)72 generally governs the taxation of non-qualified annuities. Under
this provision, except as described below, any increase in the contract's
value is generally not taxable to the owner until a distribution is made from
the contract, either in the form of annuity payments as contemplated by the
contract, or in some other form of distribution. (For purposes of this rule,
the amount of any indebtedness that is secured by a pledge or assignment of
the contract is treated as a payment received on account of a partial with-
drawal from the contract.) However, this rule applies only if (1) the invest-
ments of Account B are "adequately diversified" in accordance with Treasury
Depart-
34
<PAGE>
FEDERAL TAX CONSIDERATIONS (CONTINUED)
ment regulations, (2) Golden American, rather than the owner, is considered
the owner of the assets of Account B for Federal income tax purposes, and (3)
the owner is an individual.
Diversification Requirements. Treasury Department regulations ("Regulations")
issued under Code (S)817 (h) prescribe the manner in which the investments of
a segregated asset account, such as Account B, are to be "adequately diversi-
fied." The Regulations generally require that on the last day of each quarter
of a calendar year (i) no more than 55% of the value of each segregated asset
account is represented by any one investment; (ii) no more than 70% is repre-
sented by any two investments; (iii) no more than 80% is represented by any
three investments; and (iv) no more than 90% is represented by any four
investments. For purposes of complying with these requirements, all securi-
ties of the same issuer are treated as a single investment, and each U.S.
government agency or instrumentality will be treated as a separate issuer. In
addition, where a segregated asset account invests in other regulated invest-
ment companies or certain other entities (e.g., the divisions of Account B
do), a "look-through" rule applies and, as a result, each division of an
account must be tested for compliance with the percentage limitations by
looking through to the assets of that division.
If Account B failed to comply with these diversification standards, the
contract would not be treated as an annuity contract for Federal income tax
purposes and the owner would generally be taxable currently on the income on
the contract (as defined in the tax law) beginning with the first period of
non-diversification. Golden American expects that Account B, including each
of the divisions, will comply with the diversification requirements
prescribed by the Regulations.
Ownership Treatment. In certain circumstances, variable annuity contract
owners may be considered the owners, for Federal income tax purposes, of the
assets of the segregated asset account, such as Account B, used to support
their contracts. In those circumstances, income and gains from the segregated
asset account would be includible in the contract owners' gross income. The
IRS has stated in published rulings that a variable contract owner will be
considered the owner of the assets of the segregated asset account if the
owner possesses incidents of ownership in those assets, such as the ability
to exercise investment control over the assets. In addition, the Treasury
Department announced, in connection with the issuance of regulations
concerning investment diversification, that those regulations "do not provide
guidance concerning the circumstances in which investor control of the
investments of a segregated asset account may cause the investor, rather than
the insurance company, to be treated as the owner of the assets in the
account." This announcement also stated that guidance would be issued by way
of regulations or rulings on the "extent to which policyholders may direct
their investments to particular sub-accounts of a segregated asset account]
without being treated as owners of the underlying assets." As of the date of
this prospectus, no such guidance has been issued.
The ownership rights under the contract are similar to, but different in
certain respects from, those described by the IRS in rulings in which it was
determined that contract owners were not owners of the assets of a segregated
asset account. For example, the owner of this contract has the choice of more
investment options to which to allocate premium payments and accumulation
values, and may be able to transfer among investment options more frequently,
than in such rulings. In addition, the owner of this contract has the choice
of certain investment options which may be more similar to each other in
their investment objectives than in such rulings. These differences could
result in the owner being treated as the owner of a portion of the assets of
Account B. In addition, Golden American does not know what standards will be
set forth in the regulations or rulings which the Treasury Department has
stated it expects to issue. Golden American therefore reserves the right to
modify the contract as necessary to attempt to prevent contract owners from
being considered the owners of the assets of Account B.
Frequently, if the IRS or the Treasury Department sets forth a new position
which is adverse to taxpayers, the position is applied on a prospective basis
only. Thus, if the IRS or the Treasury Department were to issue regulations
or a ruling which treated an owner of this contract as the owner of Account
B, that treatment might apply on a prospective basis. However, if the ruling
or regulations were not considered to set forth a new position, an owner
might retroactively be determined to be the owner of the assets of Account B.
35
<PAGE>
FEDERAL TAX CONSIDERATIONS (CONTINUED)
Non-Natural Owner. As a general rule, contracts held by "non-natural persons"
such as a corporation, trust or other similar entity, as opposed to a natural
person, are not treated as annuity contracts for Federal tax purposes. The
income on such contracts (as defined in the tax law) is taxed as ordinary
income that is received or accrued by the owner of the contract during the
taxable year. There are several exceptions to this general rule for non-
natural owners. First, contracts will generally be treated as held by a
natural person if the nominal owner is a trust or other entity which holds
the contract as an agent for a natural person. However, this special excep-
tion will not apply in the case of any employer who is the nominal owner of a
contract under a non-qualified deferred compensation arrangement for its
employees.
In addition, exceptions to the general rule for non-natural owners will apply
with respect to (1) contracts acquired by an estate of a decedent by reason
of the death of the decedent, (2) contracts issued in connection with certain
qualified plans, including certain Roth IRA contracts, (3) contracts
purchased by employers upon the termination of certain qualified 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 is no later than a year from purchase of the contract and
substantially equal periodic payments are made, not less frequently than
annually, during the annuity period.
In addition to the foregoing, if the contract's annuity commencement date
occurs at a time when the annuitant is at an advanced age, such as over age
85, it is possible that the owner will be taxable currently on the annual
increase in the accumulation value. The remainder of this discussion assumes
that the contract will be treated as an annuity contract for Federal income
tax purposes.
2. WITHDRAWALS PRIOR TO THE ANNUITY COMMENCEMENT DATE
Code (S)72 provides that the proceeds of a total surrender of a contract
prior to the annuity commencement date will be taxed to the extent that the
amount distributed exceeds the "investment in the contract" and that any
conventional or systematic partial withdrawal from a contract prior to the
annuity commencement date will be treated as taxable income to the extent the
amount held under the contract immediately before the withdrawal occurs
exceeds the "investment in the contract." The "investment in the contract" is
defined in the Code as that portion, if any, of premium payments by or on
behalf of an individual under a contract which was not excluded from the
individual's gross income at the time of such payment less any amounts previ-
ously received under the contract which were excluded from the individual's
gross income at the time of their receipt. The taxable portion of any distri-
bution received prior to the annuity commencement date will be subject to tax
at ordinary income tax rates. For purposes of this rule, a pledge or assign-
ment of a contract is treated as a payment received on account of a partial
withdrawal of a contract.
In the case of systematic partial withdrawals, the amount of each withdrawal
should be considered as a distribution and taxed in the same manner as a
partial withdrawal prior to the annuity commencement date, as described
above. However, there is some uncertainty regarding the tax treatment of
systematic partial withdrawals, and it is possible that additional amounts
may be includible in income.
In addition, the contract provides a death benefit that in certain circum-
stances may exceed the greater of the premium payments and the accumulation
value. As described elsewhere in this prospectus, Golden American imposes
certain charges with respect to, among other things, the death benefit. It is
possible that some portion of those charges could be treated for Federal tax
purposes as a partial withdrawal from the contract.
3. ANNUITY PAYMENTS AND WITHDRAWALS ON OR AFTER THE ANNUITY COMMENCEMENT DATE
Proceeds of a total surrender of the contract after the annuity commencement
date are taxable to the extent the proceeds exceed the investment in the
contract. In addition, proceeds of a partial withdrawal after the annuity
commencement date are fully taxable. Also, a portion of each annuity payment
under the contract is taxable if the value of the contract exceeds the
investment in the contract. The taxable portion of an annuity payment will be
subject to tax at ordinary income tax rates.
For fixed annuity payments, the taxable portion of each payment is determined
by using a formula known as the "exclusion ratio," which establishes the
ratio that the investment in the contract (allocated to the fixed annuity
option) bears to the total expected amount of fixed
36
<PAGE>
FEDERAL TAX CONSIDERATIONS (CONTINUED)
annuity payments for the term of the contract. That ratio is then applied to
each payment to determine the non-taxable portion of the payment. The
remaining portion of each payment is taxed at ordinary income rates.
For variable annuity payments, in general, the taxable portion is determined
by a formula which establishes a specific dollar amount of each payment that
is not taxed. The dollar amount is determined by dividing the investment in
the contract (allocated to the variable annuity option) by the total number
of expected periodic payments. The remaining portion of each payment is taxed
at ordinary income rates.
Once the excludable portion of annuity payments to date equals the investment
in the contract, the balance of the annuity payments will be fully taxable.
If amounts have become payable under the contract (such as where the owner
elects to surrender an amount) and if the distribution-at-death rules do not
apply to such amount, the amount will be treated as a partial or full
surrender for Federal income tax purposes if applied under an annuity option
later than 60 days after the time when the amount became payable. Thus, if
such an amount is applied under an annuity option after the 60 day period, it
will be treated as a partial or full surrender, even if the full amount has
not been distributed from the contract.
4. WITHHOLDING AND REPORTING REQUIREMENTS
Golden American will withhold and remit to the U.S. government a part of the
taxable portion of each distribution made under a contract unless the
taxpayer notifies Golden American at or before the time of the distribution
that he or she elects not to have any amounts withheld. The withholding rates
applicable to the taxable portion of periodic annuity payments typically are
the same as the withholding rates generally applicable to payments of wages.
In addition, the withholding rate applicable to the taxable portion of non-
periodic payments (including surrenders prior to the annuity commencement
date) is 10%. Golden American also has tax reporting obligations with respect
to distributions from the contract.
5. PENALTY TAX ON CERTAIN WITHDRAWALS
With respect to amounts withdrawn or distributed before the taxpayer reaches
age 59 1/2, a penalty tax is imposed equal to 10% of the taxable portion of
amounts withdrawn or distributed. However, the penalty tax will not apply to
withdrawals: (i) made on or after the death of the owner, or where the owner
is not an individual, the death of the "primary annuitant" (i.e., the indi-
vidual the events in whose life are of primary importance in affecting the
timing or amount of the payout under the contract); (ii) attributable to the
taxpayer's becoming totally disabled within the meaning of Code (S)72(m)(7);
(iii) which are part of a series of substantially equal periodic payments
made at least annually for the life (or life expectancy) of the taxpayer, or
the joint lives (or joint life expectancies) of the taxpayer and his benefi-
ciary; (iv) from a qualified plan; (v) allocable to investment in the
contract before August 14, 1982; (vi) under a qualified funding asset (as
defined in Code (S)130(d)); (vii) under an immediate annuity contract, or
(viii) which are purchased by an employer on termination of certain types of
qualified plans and which are held by the employer until the employee sepa-
rates from service.
If the penalty tax does not apply to a withdrawal as a result of the applica-
tion of item (iii) above, and the series of payments is subsequently modified
(other than by reason of death or disability), the tax for the year when the
modification occurs will be increased by an amount (as determined by regula-
tions) equal to the tax that would have been imposed but for item (iii)
above, plus interest for the deferral period, if the modification takes place
(a) before the close of the period which is within five years of the date of
the first payment and after the taxpayer attains age 59 1/2, or (b) before
the taxpayer reaches age 59 1/2.
In the case of systematic withdrawals, it is unclear whether such withdrawals
will qualify for exception (iii) above.
TAXATION OF INDIVIDUAL RETIREMENT ANNUITIES
Code (S)408 permits individuals or their employers to contribute to an indi-
vidual retirement program known as an Individual Retirement Annuity. If the
contract is used for this purpose, the owner must be the annuitant. In addi-
tion, distributions from certain other types of qualified retirement plans may
be placed into an Individual Retirement Annuity on a tax deferred basis.
Individual Retirement Annuities are subject to limitations on the amount which
may be contributed and the time when distributions may commence. Tax penalties
may apply to contributions in excess of specified limits, loans or assign-
37
<PAGE>
FEDERAL TAX CONSIDERATIONS (CONTINUED)
ments, distributions in excess of a specified amount annually or that do not
meet specified requirements, and in certain other circumstances.
Under the Internal Revenue Code, distributions from qualified retirement
plans, including Individual Retirement Annuities, Simplified Employee
Pensions, and Tax Sheltered Annuities, generally must begin not later than
April 1st of the calendar year following the calendar year in which an owner
attains age 70 1/2. If the required minimum distribution is not withdrawn,
there may be a penalty tax in an amount equal to 50% of the difference between
the amount required to be withdrawn and the amount actually withdrawn. See the
Statement of Additional Information for a discussion of the various special
rules concerning the minimum distribution requirements.
If all premium payments made to an Individual Retirement Annuity were deduct-
ible, all amounts distributed from the contract are included in the recipi-
ent's income when distributed. However, if nondeductible premium payments were
made to the Individual Retirement Annuity (within the limits allowed by the
tax law), a portion of each distribution from the contract typically is
included in income when it is distributed. In such a case, any amount distrib-
uted as an annuity payment or in a lump sum upon death or a full surrender is
taxed as described above in connection with such a distribution from a non-
qualified contract, treating the investment in the contract as the sum of the
non-deductible premium payments at the end of the taxable year in which the
distribution commences or is made (less any amounts previously distributed
that were excluded from income). Also in such a case, any amount distributed
upon a partial surrender is partially includible in income. The includible
amount is the excess of the distribution over the exclusion amount, which in
turn equals the distribution multiplied by the ratio of the investment in the
contract to the amount held under the contract. The amount includible in
income may be subject to a 10% penalty tax if the recipient is under age 59
1/2.
Individual Retirement Annuities generally may not provide life insurance
coverage, but they may provide a death benefit that equals the greater of the
premiums paid and the contract value. The contract provides a death benefit
that in certain circumstances may exceed the greater of the premium payments
and the accumulation value. It is possible that the death benefit could be
viewed as violating the prohibition on investment in life insurance contracts
with the result that the contract would not be viewed as satisfying the
requirements of an IRA.
Subject to certain direct rollover and mandatory withholding requirements
(discussed below), amounts generally may be "rolled over" from a qualified
retirement plan to an Individual Retirement Annuity (or from an Individual
Retirement Annuity or individual retirement account to an Individual Retire-
ment Annuity) without incurring tax if certain conditions are met. Only
certain types of distributions from qualified retirement plans or Individual
Retirement Annuities may be rolled over.
In the case of annuity contracts used in connection with a pension, profit-
sharing, or annuity plan qualified under Code (S)401(a) or (S)403(a), or in
the case of a Code (S)403(b) "Tax Sheltered Annuity," any "eligible rollover
distribution" from the contract will be subject to direct rollover and manda-
tory withholding requirements. An eligible rollover distribution generally is
any taxable distribution from a qualified pension plan under Code (S)401(a),
qualified annuity plan under Code (S)403(a), or Code (S)403(b) Tax Sheltered
Annuity or custodial account, excluding certain amounts (such as minimum
distributions required under Code (S)401 (a) (9) and distributions which are
part of a "series of substantially equal periodic payments" made for life or a
specified period of 10 years or more. Under these requirements, withholding at
a rate of 20 percent will be imposed on any eligible rollover distribution. In
addition, the participant in these qualified retirement plans cannot elect out
of withholding with respect to an eligible rollover distribution. However,
this 20 percent withholding will not apply if, instead of receiving the
eligible rollover distribution, the participant elects to have amounts
directly transferred to certain qualified retirement plans (such as to this
contract when issued as an Individual Retirement Annuity).
It is important that you consult your tax advisor before purchasing an Indi-
vidual Retirement
Annuity.
ADDITIONAL CONSIDERATIONS
DISTRIBUTION-AT-DEATH RULES
In order to be treated as an annuity contract for Federal tax purposes, a non-
qualified contract must provide the following two distribution rules: (a) if
any holder dies on or after the annuity commencement date, and before the
entire interest
38
<PAGE>
ADDITIONAL CONSIDERATIONS (CONTINUED)
in the contract has been distributed, the remainder of his or her interest will
be distributed at least as quickly as under the method of distribution in
effect on the holder's death; and (b) if any holder dies before the annuity
commencement date, the entire interest in the contract must generally be
distributed within five years after the date of death, or to the extent such
interest is payable to a designated beneficiary, such interest must be distrib-
uted over the life of that designated beneficiary or over a period not
extending beyond the life expectancy of that beneficiary, so long as the
distributions begin within one year after the date of death. If the beneficiary
is the surviving spouse of the holder, the contract (together with the deferral
of tax on the accrued and future income thereunder) may be continued in the
name of the spouse. Before the annuity commencement date, the holder will
generally be the owner, and after the annuity commencement date, the holder
generally may be the annuitant and the owner.
Where the holder is not an individual, solely for the purpose of the distribu-
tion at death rules, the primary annuitant is considered the holder. The
primary annuitant is the individual the events in the life of whom are of
primary importance in affecting the timing or amount of payment under a
contract. Finally, in the case of joint holders, the distribution will be
required at the death of the first of the holders to die.
TAXATION OF DEATH BENEFIT PROCEEDS
Amounts may be distributed from a non- qualified contract because of the death
of an owner or annuitant. Generally, such amounts are includible in the income
of the recipient as follows: (a) if distributed in a lump sum, they are taxed
in the same manner as a full surrender of the contract, as described above, or
(b) if distributed under an annuity option, they are taxed in the same manner
as annuity payments, as described above.
TRANSFER OF ANNUITY CONTRACTS
Transfers of non-qualified annuity contracts for less than the full and
adequate consideration will trigger tax on the gain in the contract, at the
time of such transfer, with the transferee getting a step-up in basis for the
amount included in the owner's income. Such a transfer could result on the
annuity commencement date if the annuitant is not the owner or the owner's
spouse. This provision does not apply to transfers between spouses or incident
to a divorce.
(S)1035 EXCHANGES
Code (S)1035 provides that no gain or loss shall be recognized on the exchange
of an annuity contract for another. If the exchanged contract was issued prior
to August 14, 1982, the tax rules which formerly provided that the surrender
was taxable only to the extent the amount received exceeds the owner's invest-
ment in the contract, will continue to apply to the new contract. In contrast,
contracts issued on or after January 19, 1985, in a Code (S)1035 exchange are
treated as new contracts for purposes of the penalty tax and distribution-at-
death rules. Special rules and procedures apply to Code (S)1035 transactions.
Prospective owners wishing to take advantage of Code (S)1035 should consult
their tax advisors.
ASSIGNMENTS
A transfer of ownership, a collateral assignment, or the designation of an
annuitant or other beneficiary who is not also the owner may result in tax
consequences to the owner, annuitant or beneficiary that are not discussed
herein. An owner contemplating such a transfer or assignment of a contract
should contact a competent tax advisor with respect to the potential tax
effects of such a transaction.
MULTIPLE CONTRACTS RULE
For purposes of determining the amount of any distribution under Code (S)72(e)
(amounts not received as annuities) that is includible in gross income, all
non-qualified deferred annuity contracts issued by the same (or affiliate)
insurer to the same owner during any calendar year are to be aggregated and
treated as one contract. Thus, any amount received under any such contract
prior to the contract's annuity starting date (as defined in the tax law), such
as a partial surrender, dividend, or loan, will be taxable (and possibly
subject to the 10% penalty tax) to the extent of the combined income in all
such contracts. The Treasury Department has specific authority to issue regula-
tions that prevent the avoidance of (S)72(e) through the serial purchase of
annuity contracts or otherwise. In addition, there may be other situations in
which the Treasury Department may conclude that it would be appropriate to
aggregate two or more contracts purchased by the same owner. Accordingly, an
owner should consult a competent tax advisor before purchasing more than one
annuity contract.
39
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM PAGE
<S> <C>
INTRODUCTION............................................................... 1
Description of Golden American Life Insurance Company...................... 1
Safekeeping of Assets...................................................... 1
The Administrator.......................................................... 1
Independent Auditors....................................................... 1
Distribution of Contracts.................................................. 2
Performance Information.................................................... 2
IRA Partial Withdrawal Option.............................................. 9
Other Information.......................................................... 9
Financial Statements of Separate Account B................................. 10
Financial Statements of Golden American Life Insurance Company............. 10
Appendix -- Description of Bond Ratings.................................... A-1
</TABLE>
40
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION (CONTINUED)
- --------------------------------------------------------------------------------
PLEASE TEAR OFF, COMPLETE AND RETURN THE FORM BELOW TO ORDER A FREE STATEMENT
OF ADDITIONAL INFORMATION FOR THE CONTRACTS OFFERED UNDER THE PROSPECTUS.
ADDRESS THE FORM TO OUR CUSTOMER SERVICE CENTER, THE ADDRESS IS SHOWN ON THE
COVER.
................................................................................
PLEASE SEND ME A FREE COPY OF THE STATEMENT OF ADDITIONAL INFORMATION FOR SEPA-
RATE ACCOUNT B
PLEASE PRINT OR TYPE
-------------------------------------
NAME
-------------------------------------
SOCIAL SECURITY NUMBER
-------------------------------------
STREET ADDRESS
-------------------------------------
CITY, STATE, ZIP
(DVA 5/98 6%)
................................................................................
41
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
Golden American Life Insurance Company is a stock
company domiciled in Wilmington, Delaware
G 3107 5/98
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
GOLDENSELECT DVA
DEFERRED COMBINATION VARIABLE
AND FIXED ANNUITY CONTRACT
issued by
SEPARATE ACCOUNT B ("Account B")
of
GOLDEN AMERICAN LIFE INSURANCE COMPANY
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS. THE INFORMATION
CONTAINED HEREIN SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUS FOR THE
GOLDEN AMERICAN LIFE INSURANCE COMPANY DEFERRED VARIABLE ANNUITY CONTRACT WHICH
IS REFERRED TO HEREIN.
THE PROSPECTUS SETS FORTH INFORMATION THAT A PROSPECTIVE INVESTOR OUGHT TO KNOW
BEFORE INVESTING. FOR A COPY OF THE PROSPECTUS, SEND A WRITTEN REQUEST TO
GOLDEN AMERICAN LIFE INSURANCE COMPANY, CUSTOMER SERVICE CENTER, P.O. BOX 8794,
WILMINGTON, DE 19899-8794 OR TELEPHONE 1-800-366-0066.
DATE OF PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION: May 1, 1998
<PAGE>
TABLE OF CONTENTS
ITEM PAGE
---- ----
Introuction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Description of Golden American Life Insurance Company. . . . . . . . . . . . 1
Safekeeping of Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
The Administrator. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Distribution of Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . 2
Performance Information. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
IRA Partial Withdrawal Option. . . . . . . . . . . . . . . . . . . . . . . . 6
Other Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Financial Statements of Separate Account B . . . . . . . . . . . . . . . . . 7
Financial Statements of Golden American Life Insurance Company . . . . . . . 7
Appendix - Description of Bond Ratings
<PAGE>
INTRODUCTION
This Statement of Additional Information provides background information
regarding Account B.
DESCRIPTION OF GOLDEN AMERICAN LIFE INSURANCE COMPANY
Golden American Life Insurance Company ("Golden American") is a stock
life insurance company organized under the laws of the State of Delaware.
Prior to December 30, 1993, Golden American was a Minnesota corporation.
From January 2, 1973 through December 31, 1987, the name of the company
was St. Paul Life Insurance Company. On December 31, 1987, after all of
St. Paul Life Insurance Company's business was sold, the name was changed
to Golden American. On March 7, 1988, all of the stock of Golden American
was acquired by The Golden Financial Group, Inc. ("GFG"), a financial
services holding company. On October 19, 1990, GFG merged with and into
MBL Variable, Inc. ("MBLV"), a wholly owned direct subsidiary of The
Mutual Benefit Life Insurance Company ("MBL"). On January 1, 1991, MBLV
became a wholly owned indirect subsidiary of MBL and Golden American
became a wholly owned direct subsidiary of MBL. Golden American's name
had been changed to MB Variable Life Insurance Company in the state of
Minnesota but subsequently has been changed back to Golden American.
In a transaction that closed on September 30, 1992, Golden American was
acquired by a subsidiary of Bankers Trust Company. 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, ING Groep, N.V. ("ING") acquired all
interest in EIC, and EIC became a wholly owned subsidiary of ING. ING,
based 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
<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 are sold primarily
through two broker/dealer institutions. For the years ended 1997, 1996
and 1995 commissions paid by Golden American to DSI aggregated
$35,944,000, $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 charges DSI for such expenses and all other
general and administrative costs,
2
<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 parentheses.
Performance information for measures other than total return do not reflect
sales load which can have a maximum level of 6.5% of premium, and any
applicable premium tax that can range from 0% to 3.5%.
SEC STANDARD MONEY MARKET DIVISION YIELDS
Current yield for the Liquid Asset Division will be based on the change in
the value of a hypothetical investment (exclusive of capital changes 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:
2
<PAGE>
Effective Yield = [(Base Period Return) +1) ^ (365/7)] - 1
For the 7-day period December 25, 1997 to December 31, 1997, the current
yield of the Liquid Asset Division was 3.72% and the effective yield of the
Division was 3.79%.
SEC STANDARD 30-DAY YIELD FOR NON-MONEY MARKET DIVISIONS
Quotations of yield for the remaining divisions will be based on all
investment income per Unit (accumulation value divided by the index of
investment experience) earned during a particular 30-day period, less expenses
accrued during the period ("net investment income"), and will be computed by
dividing net investment income by the value of an accumulation unit on the last
day of the period, according to the following formula:
6
YIELD = 2 [ ( a - b +1) - 1]
-----
cd
Where:
[a] equals the net investment income earned during the
period by the Series attributable to shares owned by
a division
[b] equals the expenses accrued for the period (net of
reimbursements)
[c] equals the average daily number of Units outstanding
during the period based on the index of investment
experience
[d] equals the value (maximum offering price) per index
of investment experience on the last day of the
period
Yield on divisions of Account B is earned from the increase in net asset
value of shares of the Series in which the Division invests and from dividends
declared and paid by the Series, which are automatically reinvested in shares of
the Series.
SEC STANDARD AVERAGE ANNUAL TOTAL RETURN ALL DIVISIONS
Quotations of average annual total return for any division will be
expressed in terms of the average annual compounded rate of return of a
hypothetical investment in a contract over a period of one, five and 10 years
(or, if less, up to the life of the division), calculated pursuant to the
formula:
n
P(1+T) =ERV
Where:
(1) [P] equals a hypothetical initial premium payment of
$1,000
(2) [T] equals an average annual total return
(3) [n] equals the number of years
(4) [ERV] equals the ending redeemable value of a
hypothetical $1,000 initial premium payment made at
the beginning of the period (or fractional portion
thereof)
All total return figures reflect the deduction of the maximum sales load,
the administrative charges, and the mortality and expense risk charges. The SEC
requires that an assumption be made that the contract owner surrenders the
entire contract at the end of the one, five and 10 year periods (or, if less, up
to the life of the division) for which performance is required to be calculated.
This assumption may not be consistent with the typical contract owner's
intentions in purchasing a contract and may adversely affect returns.
Quotations of total return may simultaneously be shown for other periods, as
well as quotations of total return that do not take into account certain
contractual charges such as sales load.
3
<PAGE>
Average Annualized Total Return for 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
- ----------------------------------------------------------------------------
One Year Period Five Year Period Inception to
Division Ending 12/31/97 Ending 12/31/97 12/31/97 Inception Date
- -------- --------------- ---------------- ------------ --------------
<S> <C> <C> <C> <C>
Multiple Allocation 10.20% 8.58%* 8.18%* 1/25/89
Fully Managed 8.13% 7.84%* 7.61%* 1/25/89
Capital Appreciation 21.60% 14.34% 12.52%* 5/4/92
Rising Dividends 22.46% N/A 17.34% 10/4/93
All-Growth -1.25% 1.88%* 3.81%* 1/25/89
Real Estate 15.50% 17.13%* 10.70%* 1/25/89
Hard Assets -1.00% 17.19%* 8.10%* 1/25/89
Value Equity 19.95% N/A 21.00% 1/1/95
Strategic Equity 15.92% N/A 4.69% 10/2/95
Small Cap 2.52% N/A -3.55% 1/2/96
Emerging Markets -16.34% N/A -4.13% 10/4/93
Managed Global ** 4.99% 2.66 2.21%* 10/21/92
Limited Maturity Bond -0.46% 3.22%* 5.97%* 1/25/89
Liquid Assets -2.02% 1.94%* 3.45%* 1/25/89
OTC 12.40%* N/A 10.79%* 10/7/94
Total Return 10.71% N/A 2.17%* 10/7/94
Research 12.86% N/A 15.50%* 10/7/94
Growth & Income 17.83% N/A 25.62%* 4/1/96
Value + Growth 8.55% N/A 13.67%* 4/1/96
</TABLE>
- ----------------------
* Total return calculation reflects partial waiver of fees and expenses.
** From its inception date until September 3, 1996, the Managed Global
Account of Separate Account D was a registered management investment
company. On that date it was reorganized into two entities: the
Managed Global Division of Separate Account B and the Managed Global
Series of The GCG Trust. The historical performance of the Managed
Global Division remains unchanged by the reorganization.
NON-STANDARD AVERAGE ANNUAL TOTAL RETURN FOR ALL DIVISIONS
Quotations of non-standard average annual total return for any division will be
expressed in terms of the average annual compounded rate of return of a
hypothetical investment in a contract over a period of one, five and 10 years
(or, if less, up to the life of the division), calculated pursuant to the
formula:
n
[P(1+T) ]=ERV
Where:
(1) [P] equals a hypothetical initial premium
payment of $1,000
(2) [T] equals an average annual total return
(3) [n] equals the number of years
(4) [ERV] equals the ending redeemable value of a
hypothetical $1,000 initial premium payment made at the
beginning of the period (or fractional portion thereof)
assuming certain loading and charges are zero.
All total return figures reflect the deduction of the mortality and expense risk
charge and the administrative charges, but not the deduction of the maximum
sales load and the annual contract fee.
Average Annualized Total Return for 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 Periods Ending 12/31/97 -- Non-Standardized
- -------------------------------------------------------------------------------
One Year Period Five Year Period Inception to
Division Ending 12/31/97 Ending 12/31/97 12/31/97 Inception Date
- -------- --------------- ---------------- ------------ --------------
<S> <C> <C> <C> <C>
Multiple Allocation 16.26% 9.67%* 8.81%* 1/25/89
Fully Managed 14.20% 8.98%* 8.28%* 1/25/89
Capital Appreciation 27.67% 15.38% 15.40%* 5/4/92
Rising Dividends 28.53% N/A 18.31% 10/4/93
All-Growth 4.81% 3.10%* 4.47%* 1/25/89
Real Estate 21.56% 18.08%* 11.46%* 1/25/89
Hard Assets 5.10% 18.00%* 8.83%* 1/25/89
Value Equity 26.01% N/A 22.76% 1/1/95
Strategic Equity 21.92% N/A 17.68% 10/2/95
Small Cap 9.22% N/A 14.00% 1/2/96
Emerging Markets -10.28% N/A -2.87% 10/4/93
Managed Global ** 11.05%* 3.57% 3.45%* 10/21/92
Limited Maturity Bond 5.60% 4.40%* 5.74%* 1/25/89
Liquid Assets 4.04% 3.33%* 4.10%* 1/25/89
OTC 18.46%* N/A 21.52%* 10/7/94
Total Return 19.65% N/A 16.32%* 10/7/94
Research 18.92% N/A 22.15%* 10/7/94
Growth & Income 23.89% N/A 28.52%* 4/1/96
Value Growth 14.61% N/A 16.78%* 4/1/96
</TABLE>
- ---------------------------------------------------------------------------
* Total return calculation reflects partial waiver of fees and expenses.
** From its inception date until September 3, 1996, the Managed Global
Account of Separate Account D was a registered management investment
company. On that date it was reorganized into two entities: the
Managed Global Division of Separate Account B and the Managed Global
Series of The GCG Trust. The historical performance of the Managed
Global Division remains unchanged by the reorganization.
4
<PAGE>
Performance information for a division may be compared, in reports and
promotional literature, to: (i) the Standard & Poor's 500 Stock Index ("S&P
500"), Dow Jones Industrial Average ("DJIA"), Donoghue Money Market
Institutional Averages, or other indices that measure performance of a pertinent
group of securities so that investors may compare a division's results with
those of a group of securities widely regarded by investors as representative of
the securities markets in general; (ii) other groups of variable annuity
separate accounts or other investment products tracked by Lipper Analytical
Services, a widely used independent research firm which ranks mutual funds and
other investment companies by overall performance, investment objectives, and
assets, or tracked by other services, companies, publications, or persons who
rank such investment companies on overall performance or other criteria; and
(iii) the Consumer Price Index (measure for inflation) to assess the real rate
of return from an investment in the contract. Unmanaged indices may assume the
reinvestment of dividends but generally do not reflect deductions for
administrative and management costs and expenses.
Performance information for any division reflects only the performance of a
hypothetical contract under which accumulation value is allocated to a division
during a particular time period on which the calculations are based.
Performance information should be considered in light of the investment
objectives and policies, characteristics and quality of the portfolio of the
Series of the Trust in which the Account B divisions invest, and the market
conditions during the given time period, and should not be considered as a
representation of what may be achieved in the future.
Reports and promotional literature may also contain other information
including the ranking of any division derived from rankings of variable annuity
separate accounts or other investment products tracked by Lipper Analytical
Services or by other rating services, companies, publications, or other persons
who rank separate accounts or other investment products on overall performance
or other criteria.
PUBLISHED RATINGS
From time to time, the rating of Golden American as an insurance company by
A.M. Best may be referred to in advertisements or in reports to contract owners.
Each year the A.M. Best Company reviews the financial status of thousands of
insurers, culminating in the assignment of Best's Ratings. These ratings
reflect their current opinion of the relative financial strength and operating
performance of an insurance company in comparison to the norms of the
life/health insurance industry. Best's ratings range from A++ to F. An A++
and A+ rating means, in the opinion of A.M. Best, that the insurer has demon-
strated the strongest ability to meet its respective policyholder and other
contractual obligations.
INDEX OF INVESTMENT EXPERIENCE
The calculation of the Index of Investment Experience ("IIE") is discussed
in the prospectus for the Contracts under Measurement of Investment Experience.
The following illustrations show a calculation of a new IIE and the purchase of
Units (using hypothetical examples):
5
<PAGE>
ILLUSTRATION OF CALCULATION OF IIE
EXAMPLE 1.
1. IIE, beginning of period . . . . . . . . . . . . . . . . . . $1.80000000
2. Value of securities, beginning of period . . . . . . . . . . . . .$21.20
3. Change in value of securities. . . . . . . . . . . . . . . . . . . .$.50
4. Gross investment return (3) divided by (2) . . . . . . . . . . .02358491
5. Less daily mortality and expense charge. . . . . . . . . . . . .00002477
6. Less asset based administrative charge . . . . . . . . . . . . .00000276
7. Net investment return (4) minus (5) minus (6). . . . . . . . . .02355738
8. Net investment factor (1.000000) plus (7). . . . . . . . . . .1.02355738
9. IIE, end of period (1) multiplied by (8) . . . . . . . . . . $1.84240328
ILLUSTRATION OF PURCHASE OF UNITS (ASSUMING NO STATE PREMIUM TAX)
EXAMPLE 2.
1. Initial Premium Payment. . . . . . . . . . . . . . . . . . . . . $100.00
2. IIE on effective date of purchase (see Example 1) . . . . . .$1.8000000
3. Number of Units purchased [(1) divided by (2)] . . . . . . . . .55.55556
4. IIE for valuation date following purchase (see Example 1). . $1.84240328
5. Accumulation Value in account for valuation date
following purchase [(3) multiplied by (4)]. . . . . . . . . . . $102.36
IRA PARTIAL WITHDRAWAL OPTION
If the contract owner has an IRA contract and will attain age 70 1/2 in the
current calendar year, distributions will be made in accordance with the
requirements of Federal tax law. This option is available to assure that the
required minimum distributions from qualified plans under the Internal Revenue
Code (the "Code") are made. Under the Code, distributions must begin no later
than April 1st of the calendar year following the calendar year in which the
contract owner attains age 70 1/2. If the required minimum distribution is not
withdrawn, there may be a penalty tax in an amount equal to 50% of the
difference between the amount required to be withdrawn and the amount actually
withdrawn. Even if the IRA Partial Withdrawal Option is not elected,
distributions must nonetheless be made in accordance with the requirements of
Federal tax law.
Golden American notifies the contract owner of these regulations with a
letter mailed on January 1st of the calendar year in which the contract owner
reaches age 70 1/2 which explains the IRA Partial Withdrawal Option and supplies
an election form. If electing this option, the owner specifies whether the
withdrawal amount will be based on a life expectancy calculated on a single life
basis (contract owner's life only) or, if the contract owner is married, on a
joint life basis (contract owner's and spouse's lives combined). The contract
owner selects the payment mode on a monthly, quarterly or annual basis. If the
payment mode selected on the election form is more frequent than annually, the
payments in the first calendar year in which the option is in effect will be
based on the amount of payment modes remaining when Golden American receives the
completed election form.
Golden American calculates the IRA Partial Withdrawal amount each year
based on the minimum distribution rules. We do this by dividing the
accumulation value by the life expectancy. In the first year withdrawals begin,
we use the accumulation value as of the date of the first payment. Thereafter,
we use the accumulation value on December 31st of each year. The life
expectancy is recalculated each year. Certain minimum distribution rules govern
payouts if the designated beneficiary is other than the contract owner's spouse
and the beneficiary is more than ten years younger than the contract owner.
6
<PAGE>
OTHER INFORMATION
Registration statements have been filed with the Securities and Exchange
Commission under the Securities Act of 1933 as amended, with respect to the
Contracts discussed in this Statement of Additional Information. Not all of the
information set forth in the registration statements, amendments and exhibits
thereto has been included in this Statement of Additional Information.
Statements contained in this Statement of Additional Information concerning the
content of the Contracts and other legal instruments are intended to be
summaries. For a complete statement of the terms of these documents, reference
should be made to the instruments filed with the Securities and Exchange
Commission.
FINANCIAL STATEMENTS OF SEPARATE ACCOUNT B
The audited financial statements of Separate Account B are listed below and
are included in this Statement of Additional Information:
Report of Independent Auditors
Audited Financial Statements
Statement of Assets and Liability as of December 31, 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
FINANCIAL STATEMENTS OF GOLDEN AMERICAN LIFE INSURANCE COMPANY
The audited financial statements of Golden American Life Insurance Company
listed below are prepared in accordance with generally accepted accounting
principles ("GAAP") and appear in the Annual Report of the Golden American
Life Insurance Company which was filed with the SEC and are included in
this Statement of Additional Information.
Report of Independent Auditors
Audited Financial Statements -- GAAP
Consolidated Balance Sheets -- Post-Merger as of December 31,
1997 and Post-Acquisition as of December 31, 1996
Consolidated Statements of Income -- Post-Merger for the period
October 25, 1997 through December 31, 1997, Post-Acquisition
for the periods January 1, 1997 through October 24, 1997, and
August 14, 1996 through December 31, 1996 and Pre-Acquisition
for the period January 1, 1996 through August 13, 1996 and for
the year ended December 31, 1995
Consolidated Statements of Changes in Stockholder's Equity -- Post-
Merger for the period October 25, 1997 through December 31,
1997, Post-Acquisition for the periods January 1, 1997 through
October 24, 1997, and August 14, 1996 through December 31, 1996
and Pre-Acquisition for the period January 1, 1996 through
August 13, 1996 and for the year ended December 31, 1995
Consolidated Statements of Cash Flows -- Post-Merger for the period
October 25, 1997 through December 31, 1997, Post-Acquisition
for the periods January 1, 1997 through October 24, 1997, and
August 14, 1996 through December 31, 1996 and Pre-Acquisition
for the period January 1, 1996 through August 13, 1996 and for
the year ended December 31, 1995
Notes to Consolidated Financial Statements --December 31, 1997
<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.
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.
______________________________________________________________________________
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.
7
<PAGE>
APPENDIX: DESCRIPTION OF BOND RATINGS
Excerpts from Moody's Investors Service, Inc. ("Moody's) description of its
bond ratings:
Aaa: Judged to be the best quality; they carry the smallest degree of
investment risk.
Aa: Judged to be of high quality by all standards; together with the Aaa
group, they comprise what are generally known as high grade bonds.
A: Possess many favorable investment attributes and are to be considered
as "upper medium grade obligations."
Baa: Considered as medium grade obligations, i.e., they are neither highly
protected nor poorly secured; interest payments and principal security
appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of
time.
Ba: Judged to have speculative elements; their future cannot be considered
as well assured.
B: Generally lack characteristics of the desirable investment.
Caa: Are of poor standing; such issues may be in default or there may be
present elements of danger with respect to principal or interest.
Ca: Speculative in a high degree; often in default.
C: Lowest rate class of bonds; regarded as having extremely poor
prospects.
Moody's also applies numerical indicators 1, 2 and 3 to rating categories. The
modifier 1 indicates that the security is in the higher end of its rating
category; 2 indicates a mid-range ranking; and 3 indicates a ranking toward the
lower end of the category.
Excerpts from Standard & Poor's Rating Group ("Standard & Poor's") description
of its bond ratings:
AAA: Highest grade obligations; capacity to pay interest and repay
principal is extremely strong.
AA: Also qualify as high grade obligations; a very strong capacity to pay
interest and repay principal and differs from AAA issues only in small
degree.
A: Regarded as upper medium grade; they have a strong capacity to pay
interest and repay principal although it is somewhat more susceptible to
the adverse effects of changes in circumstances and economic conditions
than debt in higher rated categories.
BBB: Regarded as having an adequate capacity to pay interest and repay
principal; whereas it normally exhibits adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to
lead to a weakened capacity than in higher rated categories -- this group
is the lowest which qualifies for commercial bank investment.
BB, B,
CCC,
CC: Predominantly speculative with respect to capacity to pay interest and
repay principal in accordance with terms of the obligation: BB indicates
the lowest degree of speculation and CC the highest.
Standard & Poor's applies indicators "+," no character, and "-" to its rating
categories. The indicators show relative standing within the major rating
categories.
<PAGE>
