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File Nos. 33-59261, 811-5626
Filed under Rule 497(c)
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[LOGO OF GRANITE PRIMELITE APPEARS HERE]
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GOLDEN AMERICAN LIFE INSURANCE COMPANY
Golden American Life Insurance Company is a stock company domiciled in
Wilmington, Delaware
DEFERRED VARIABLE ANNUITY PROSPECTUS
GRANITE PRIMELITE
This prospectus describes 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" or the "Account").
Eight Divisions of Account B are currently available under the Contract
offered by this prospectus. The investments available through the Divisions of
Account B include mutual fund portfolios (the "Portfolios") of Equi-Select
Series Trust (the "ESS Trust"), Travelers Series Fund Inc. (the "Travelers
Fund") and Greenwich Street Series Fund (the "Greenwich Street Series Fund").
Upon obtaining approval of regulatory authorities, the three currently
available Portfolios of the ESS Trust will be replaced by similar Portfolios
of The GCG Trust.
This prospectus describes the Contract and provides background information
regarding Account B. The prospectuses for the ESS Trust, The GCG Trust,
Travelers Fund and Greenwich Street Series Fund (individually, a "Trust," and
collectively, the "Trusts"), which must accompany this prospectus, provide
information regarding investment activities and policies of the Trusts.
You may allocate your premiums among the eight Divisions in any way you
choose, subject to certain restrictions. You may change the allocation of your
Accumulation Value during a Contract Year free of charge. We reserve the
right, however, to assess a charge for each allocation change after the
twelfth allocation change in a Contract Year.
Your Accumulation Value in Account B will vary in accordance with the
investment performance of the Divisions selected by you. Therefore, you bear
the entire investment risk for all amounts allocated to Account B.
We will pay a death benefit to the Beneficiary if the Owner dies prior to
the Annuity Commencement Date or the Annuitant dies prior to the Annuity
Commencement Date when the Owner is other than an individual.
This prospectus describes your principal rights and limitations and sets
forth the information concerning the Account that investors should know before
investing. A Statement of Additional Information, dated May 1, 1998, about
Account B has been filed with the Securities and Exchange Commission ("SEC")
and is available without charge upon request. To obtain a copy of this
document call or write our Customer Service Center. The Table of Contents of
the Statement of Additional Information may be found on the last page of this
prospectus. The Statement of Additional Information is incorporated herein by
reference.
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 ESS TRUST, THE
GCG TRUST, THE TRAVELERS FUND AND THE GREENWICH STREET SERIES FUND.
ISSUED BY: DISTRIBUTED BY: ADMINISTERED AT:
Golden American Life Directed Services, Inc. Customer Service Center
Insurance Company Wilmington, Delaware Mailing Address:
19801 P.O. Box 8794
Wilmington, Delaware
19899-8794
1-888-354-0800
PROSPECTUS DATED: MAY 1, 1998
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
DEFINITION OF TERMS........................................................ 1
SUMMARY OF THE CONTRACT.................................................... 3
FEE TABLE.................................................................. 5
CONDENSED FINANCIAL AND OTHER INFORMATION.................................. 8
Financial Statements..................................................... 8
Performance Related Information.......................................... 8
INTRODUCTION............................................................... 9
Facts About the Company and the Account.................................. 9
Golden American.......................................................... 9
The ESS Trust, The Travelers Fund and The Greenwich Street Series Fund... 10
Proposed Trust Consolidation and The GCG Trust........................... 10
Separate Account B....................................................... 11
Account B Divisions...................................................... 12
Changes Within Account B................................................. 13
FACTS ABOUT THE CONTRACT................................................... 14
The Owner................................................................ 14
The Annuitant............................................................ 14
The Beneficiary.......................................................... 15
Change of Owner or Beneficiary........................................... 15
Availability of the Contract............................................. 15
Types of Contracts....................................................... 15
Your Right to Select or Change Contract Options.......................... 16
Premiums................................................................. 16
Qualified Plans.......................................................... 16
Where to make Payments................................................... 16
Making Additional Premium Payments....................................... 16
Crediting Premium Payments............................................... 17
Your Right to Reallocate................................................. 18
Dollar Cost Averaging.................................................... 18
What Happens If a Division Is Not Available.............................. 19
Your Accumulation Value.................................................. 19
Accumulation Value in Each Division...................................... 19
Measurement of Investment Experience..................................... 20
Cash Surrender Value..................................................... 21
Surrendering to Receive the Cash Surrender Value......................... 21
Partial Withdrawals...................................................... 21
Automatic Rebalancing.................................................... 23
Proceeds Payable to the Beneficiary...................................... 23
Death Benefit Options.................................................... 23
How to Claim Payments to Beneficiary..................................... 24
Reports to Owners........................................................ 24
When We Make Payments.................................................... 24
CHARGES AND FEES........................................................... 25
Charge Deduction Division................................................ 25
Charges Deducted from the Accumulation Value............................. 25
Surrender Charge......................................................... 25
Surrender Charge for Excess Partial Withdrawals.......................... 26
Charges Deducted from the Divisions...................................... 27
Trust Expenses........................................................... 27
</TABLE>
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<TABLE>
<S> <C>
CHOOSING YOUR ANNUITIZATION OPTIONS......................................... 27
Annuitization of Your Contract............................................ 27
Annuity Commencement Date Selection....................................... 28
Frequency Selection....................................................... 28
The Annuitization Options................................................. 29
Payment When Named Person Dies............................................ 29
OTHER CONTRACT PROVISIONS................................................... 29
In Case of Errors in Application Information.............................. 29
Sending Notice to Us ..................................................... 30
Assigning the Contract as Collateral...................................... 30
Non-Participating......................................................... 30
Authority to Make Agreements.............................................. 30
Contract Changes--Applicable Tax Law...................................... 30
Your Right to Cancel or Exchange Your Contract............................ 30
Cancelling Your Contract.................................................. 30
Exchanging Your Contract.................................................. 30
Other Contract Changes.................................................... 30
Group or Sponsored Arrangements........................................... 30
Selling the Contract...................................................... 31
REGULATORY INFORMATION...................................................... 31
Voting Rights............................................................. 31
State Regulation.......................................................... 31
Year 2000................................................................. 32
Legal Proceedings......................................................... 32
FEDERAL TAX CONSIDERATIONS.................................................. 32
Introduction.............................................................. 32
Tax Status of Golden American............................................. 33
Taxation of Non-Qualified Annuities....................................... 33
IRA Contracts and Other Qualified Retirement Plans........................ 36
Federal Income Tax Withholding............................................ 41
STATEMENT OF ADDITIONAL INFORMATION......................................... 42
Table of Contents......................................................... 42
</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.
ii
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DEFINITION OF TERMS
ACCOUNT -- Separate Account B.
ACCUMULATION VALUE -- The total amount invested under the Contract.
Initially, this amount is equal to the premium paid. Thereafter, the
Accumulation Value will reflect the premiums paid, investment experience of
the Divisions, charges deducted and any partial withdrawals.
ANNUAL RATCHET ENHANCED DEATH BENEFIT OPTION -- An enhanced death benefit
option that may be elected only at issue and only if the Owner or Annuitant
(when the Owner is other than an individual) is age 79 or younger. The
enhanced death benefit provided by this option is the highest Accumulation
Value on any Contract Anniversary on or prior to the Owner turning age 80, as
adjusted for additional premiums and partial withdrawals.
ANNUITANT -- The person designated by the Owner to be the measuring life in
determining Annuity Payments.
ANNUITY COMMENCEMENT DATE -- The date on which Annuity Payments begin.
ANNUITY OPTIONS -- Options the Owner selects that determine the form and
amount of Annuity Payments.
ANNUITY PAYMENT -- The periodic payment an Owner receives. It may be either
a fixed or a variable amount based on the Annuity Option chosen.
ATTAINED AGE -- The Issue Age of the Owner or Annuitant plus the number of
full years elapsed since the Contract Date.
BENEFICIARY -- The person designated to receive benefits in the case of the
death of the Owner or the Annuitant (when the Owner is other than an
individual).
BUSINESS DAY -- Any day the New York Stock Exchange ("NYSE") is open for
trading, exclusive of Federal holidays, or any day on which the SEC requires
that mutual funds, unit investment trusts or other investment portfolios be
valued.
CASH SURRENDER VALUE -- The amount the Owner receives upon surrender of the
Contract.
CHARGE DEDUCTION DIVISION -- The Division from which all charges are
deducted if so designated by you. The Charge Deduction Division currently is
the Smith Barney Money Market Division.
CONTINGENT ANNUITANT -- The person designated by the Owner who, upon the
Annuitant's death prior to the Annuity Commencement Date, becomes Annuitant.
CONTRACT -- The entire Contract consisting of the basic Contract and any
riders or endorsements.
CONTRACT ANNIVERSARY -- The anniversary of the Contract Date.
CONTRACT DATE -- The date on which we have received the Initial Premium and
upon which we begin determining the Contract values. It may or may not be the
same as the Issue Date. This date is used to determine Contract months,
processing dates, years and anniversaries.
CONTRACT PROCESSING DATES -- The days when we deduct certain charges from
the Accumulation Value. If the Contract Processing Date is not a Valuation
Date, it will be on the next succeeding Valuation Date. The Contract
Processing Dates will be once each year on the Contract Anniversary.
1
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CONTRACT PROCESSING PERIOD -- The first Contract processing period begins
with the Contract Date and ends at the close of business on the first Contract
Processing Date. All subsequent Contract processing periods begin at the close
of business on the most recent Contract Processing Date and extend to the
close of business on the next Contract Processing Date. There is one Contract
processing period each year.
CONTRACT YEAR -- The period between Contract anniversaries.
CUSTOMER SERVICE CENTER -- Where service is provided to you. The mailing
address and telephone number of the Customer Service Center are shown on the
cover.
DIVISIONS -- The investment options available under Account B.
ENDORSEMENTS -- An endorsement changes or adds provisions to the Contract.
EXCHANGE CONTRACTS -- Contracts issued by insurance companies not affiliated
with Golden American.
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.
FREE LOOK PERIOD -- The period of time within which the Owner may examine
the Contract and return it for a refund.
INDEX OF INVESTMENT EXPERIENCE -- The index that measures the performance of
a Division.
INITIAL PREMIUM -- The payment required to put a Contract into effect.
ISSUE AGE -- The Owner's or Annuitant's age on his or her last birthday on
or before the Contract Date.
ISSUE DATE -- The date the Contract is issued at our Customer Service
Center.
OWNER -- The person who owns the Contract and is entitled to exercise all
rights under the Contract. This person's death also initiates payment of the
death benefit.
RIDER -- A rider amends the Contract, in certain instances adding benefits.
SPECIALLY DESIGNATED DIVISION -- The Division to which distributions from a
portfolio underlying a Division in which reinvestment is not available will be
allocated unless you specify otherwise. The Specially Designated Division
currently is the Smith Barney Money Market Division.
STANDARD DEATH BENEFIT OPTION -- The death benefit option that you will
receive under the Contact unless the enhanced death benefit option is elected.
The death benefit provided by this option is equal to the greatest of (i)
Accumulation Value; (ii) total premium payments less any partial withdrawals;
and (iii) Cash Surrender Value.
VALUATION DATE -- The day at the end of a Valuation Period when each
Division is valued.
VALUATION PERIOD -- Each business day together with any non-business days
before it.
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SUMMARY OF THE CONTRACT
This prospectus has been designed to provide you with information regarding
the Contract and the Account which funds the Contract. Information concerning
the Portfolios underlying the Divisions of Account B is set forth in the
Trusts' prospectuses.
This summary is intended to provide only a very brief overview of the more
significant aspects of the Contract. Further detail is provided in this
prospectus and in the Contract. The Contract, together with any riders or
endorsements, constitutes the entire agreement between you and us and should
be retained.
This prospectus has been designed to provide you with the necessary
information to make a decision on purchasing the Contract. You have a choice
of investments. We do not promise that your Accumulation Value will increase.
Depending on the investment experience of the Divisions, your Accumulation
Value, Cash Surrender Value and death benefit may increase or decrease on any
day. You bear the investment risk.
DESCRIPTION OF THE CONTRACT
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 individual retirement annuity ("Roth IRA") meeting the requirements of
section 408A of the Code, or some other retirement plan meeting the respective
section of the Code. For a Contract funding a qualified plan, distributions
may be made to you to satisfy requirements imposed by Federal tax law. The
second type of purchaser is one who purchases a Contract outside of a
qualified plan ("non-qualified plan").
The Contract also offers a choice of Annuity Options to which you may apply
all or a portion of the Accumulation Value on the annuity commencement date or
the Cash Surrender Value upon surrender of the Contract. See Choosing Your
Annuity Options.
AVAILABILITY
We can issue a Contract if both the Annuitant and the Owner are not older
than age 85 and accept additional premium payments until either the Annuitant
or Owner reaches the Attained Age of 85 for non-qualified plans (age 70 for
qualified plans, except for rollover contributions and contributions to a Roth
IRA). The minimum Initial Premium is $5,000 for a non-qualified plan and
$1,500 for a qualified plan. We may change the minimum initial or additional
premium requirements for certain group or sponsored arrangements. See Other
Contract Provisions, Group or Sponsored Arrangements.
The minimum additional premium payment we will accept is $500 for a non-
qualified plan and $250 for a qualified plan. You must receive our prior
approval before making a premium payment that causes the Accumulation Value of
all annuities that you maintain with us to exceed $1,000,000.
The annual limits on contributions to IRAs and Roth IRAs we described under
Federal Tax Considerations.
THE DIVISIONS
Each of the eight Divisions of Account B offered under this prospectus
invests in a mutual fund portfolio with its own distinct investment objectives
and policies. Each Division of Account B invests in a corresponding Portfolio
of the ESS Trust, managed by Directed Services, Inc. ("DSI"), the Travelers
Fund, managed by Mutual Management Corp. ("MMC") or the Greenwich Street
Series Fund, also managed by MMC. DSI has retained a Portfolio Manager to
manage the assets of the Portfolios of the ESS Trust. Upon obtaining approval
of regulatory authorities, the three currently available Portfolios of the ESS
Trust will be replaced by similar Portfolios of The GCG Trust, also managed by
DSI. See Facts About the Company and the Account, Account B Divisions.
3
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HOW THE ACCUMULATION VALUE VARIES
The Accumulation Value in the Divisions varies each day based on investment
results. You bear the risk of poor investment performance and you receive the
benefits from favorable investment performance. The Accumulation Value also
reflects premium payments, charges deducted and partial withdrawals. See Facts
About the Contract, Accumulation Value in Each Division.
SURRENDERING YOUR CONTRACT
You may surrender the Contract and receive its Cash Surrender Value at any
time while both the Annuitant and Owner are living and before the Annuity
Commencement Date. See Facts About the Contract, Cash Surrender Value and
Surrendering to Receive the Cash Surrender Value.
TAKING PARTIAL WITHDRAWALS
After the Free Look Period, prior to the Annuity Commencement Date and while
the Contract is in effect, you may take partial withdrawals from the
Accumulation Value of your Contract. You may elect in advance to take
systematic partial withdrawals on a monthly, quarterly, or annual basis. If
you have an IRA Contract, you may elect IRA partial withdrawals on a monthly,
quarterly or annual basis.
Partial withdrawals are subject to certain restrictions as defined in this
prospectus, including a surrender charge. Partial withdrawals above a
specified percentage of your Accumulation Value may be subject to a surrender
charge. See Facts About the Contract, Partial Withdrawals.
DOLLAR COST AVERAGING
Under this program, you may choose to have a specified dollar amount
transferred from the Smith Barney Money Market Division to the other Divisions
of Account B on a monthly basis with the objective of shielding your
investment from short-term price fluctuations. See Facts About the Contract,
Dollar Cost Averaging.
YOUR RIGHT TO CANCEL THE CONTRACT
You may cancel your Contract within the Free Look Period which is a ten day
period of time beginning once you receive the Contract. For purposes of
administering our allocation and certain other administrative rules, we deem
this period to end 15 days after the Contract is mailed from our Customer
Service Center. Some states may require that we provide a longer free look
period. In some states we restrict the Initial Premium allocation during the
Free Look Period. See Other Contract Provisions, Your Right to Cancel or
Exchange Your Contract.
YOUR RIGHT TO CHANGE THE CONTRACT
The Contract may be changed to another annuity plan subject to our rules at
the time of the change. See Other Contract Provisions, Other Contract Changes.
DEATH BENEFIT OPTIONS
The Contract provides a death benefit to the beneficiary if the Owner dies
prior to the Annuity Commencement Date. Subject to our rules, there is a
Standard Death Benefit Option and the Annual Ratchet Enhanced Death Benefit
Option. See Facts About the Contract, Death Benefit Options. We may offer a
reduced death benefit under certain group and sponsored arrangements. See
Other Contract Provisions, Group or Sponsored Arrangements.
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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 Facts About the Contract, Restrictions on Allocation of Premium
Payments. We then may deduct an annual Contract fee from your Accumulation
Value. See Other Contract Provisions, Charges and Fees. We may reduce certain
charges under group or sponsored arrangements. See Other Contract Provisions,
Group or Sponsored Arrangements. Unless you have elected the Charge Deduction
Division, charges are deducted proportionately from all Account B Divisions in
which you are invested.
FEDERAL INCOME TAXES
The ultimate effect of Federal income taxes on the amounts held under an
annuity Contract, on Annuity Payments and on the economic benefits to the
Owner, Annuitant or Beneficiary depends on Golden American's tax status and
upon the tax status of the individuals concerned. In general, an Owner is not
taxed on increases in value under an annuity Contract until some form of
distribution is made under it. There may be tax penalties if you make a
withdrawal or surrender the contract before reaching 59 1/2. See Federal Tax
Considerations.
FEE TABLE
TRANSACTION EXPENSES
Contingent Deferred Sales Charge (/1/) (imposed as a percentage of premium
payments withdrawn upon excess partial withdrawal or surrender): (/2/)
<TABLE>
<CAPTION>
COMPLETE YEARS ELAPSED SURRENDER
SINCE PREMIUM PAYMENT CHARGE
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0............................................................ 7%
1............................................................ 7%
2............................................................ 6%
3............................................................ 5%
4............................................................ 4%
5............................................................ 3%
6............................................................ 1%
7+........................................................... 0%
</TABLE>
<TABLE>
<S> <C>
Excess Allocation Charge.............................................. $ 0(/3/)
ANNUAL CONTRACT FEES
Administrative Charge................................................. $40
</TABLE>
(Waived if the Accumulation Value equals or exceeds $100,000 at the end of the
Contract Year, or once the sum of premiums paid equals or exceeds $100,000.)
SEPARATE ACCOUNT ANNUAL EXPENSES (percentage of assets in each Division) (/4/)
<TABLE>
<CAPTION>
STANDARD ANNUAL RATCHET
DEATH BENEFIT ENHANCED DEATH BENEFIT
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<S> <C> <C>
Mortality and Expenses Risk Charge.... 1.10% 1.25%
Asset Based Administrative Charge..... 0.15% 0.15%
---- ----
Total Separate Account Expenses....... 1.25% 1.40%
</TABLE>
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THE ESS TRUST ANNUAL EXPENSES (prior to Trust Consolidation)
(as a percentage of the average daily net assets of a Portfolio)
<TABLE>
<CAPTION>
SERIES CURRENTLY MANAGEMENT
AVAILABLE FEES(/5/) OTHER EXPENSES TOTAL 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%
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)
<CAPTION>
OTHER EXPENSES TOTAL EXPENSES
SERIES ADDED UPON TRUST MANAGEMENT AFTER EXPENSE AFTER EXPENSE
CONSOLIDATION(/7/) FEES(/9/) REIMBURSEMENT (/6/)(/8/) REIMBURSEMENT(/8/)
- ----------------------- ---------- ------------------------ ------------------
<S> <C> <C> <C>
Mid-Cap Growth Series... 0.96% 0.01% 0.97%
Research Series......... 0.96% 0.00% 0.96%
Total Return Series..... 0.96% 0.01% 0.97%
TRAVELERS FUND INC.'S
ANNUAL EXPENSES (as a
percentage of the aver-
age daily net assets of
a Portfolio)
<CAPTION>
MANAGEMENT OTHER TOTAL ANNUAL
FEES EXPENSES EXPENSES
---------- ------------------------ ------------------
<S> <C> <C> <C>
Smith Barney Large Cap
Value Portfo-
lio(/1//0/)............ 0.65% 0.04% 0.69%
Smith Barney Interna-
tional Equity Portfo-
lio.................... 0.90% 0.11% 1.01%
Smith Barney High Income
Portfolio.............. 0.60% 0.10% 0.70%
Smith Barney Money Mar-
ket Portfolio(/6/)..... 0.50% 0.15% 0.65%
GREENWICH STREET SERIES
FUND'S(/1//1/) ANNUAL EXPENSES
(as a percentage of the average
daily net assets of a Portfolio)
<CAPTION>
MANAGEMENT OTHER TOTAL ANNUAL
FEES EXPENSES EXPENSES
---------- ------------------------ ------------------
<S> <C> <C> <C>
Appreciation Portfolio.. 0.55% 0.25% 0.80%
</TABLE>
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(1) We also deduct a charge for premium taxes (which can range from 0% to 3.5%
of premium) from your Accumulation Value upon surrender, excess partial
withdrawals or on the Annuity Commencement Date. See Premium Taxes.
(2) For purposes of calculating the surrender charge for the excess partial
withdrawal, (i) we treat premium payments as being withdrawn on a first-in
first-out basis, and (ii) amounts withdrawn which are not considered an
excess partial withdrawal are not treated as a withdrawal of any premium
payments. See Charges Deducted from the Accumulation Value, Surrender
Charge for Excess Partial Withdrawals.
(3) We reserve the right to impose a charge in the future at a maximum of $25
for each allocation change in excess of twelve per Contract Year. See
Excess Allocation Charge.
(4) See Facts About the Contract, Death Benefit Options, for a description of
the Contract's Standard and Enhanced Death Benefit Options.
(5) Fees decline as combined assets increase (see Trust Prospectuses for
details).
(6) Other expenses generally consist of independent trustees' fees and
expenses and certain expenses associated with investing in international
markets.
(7) See Proposed Trust Consolidation and the GCG Trust for details. Upon Trust
Consolidation, the ESS Trust will cease to exist and the GCG Trust Series
will be substituted for the ESS Trust Portfolios.
(8) Directed Services, Inc. ("DSI"), the manager of The GCG Trust ("GCG"), has
agreed voluntarily to reimburse expenses and waive management fees, if
necessary, to maintain total expenses at the levels shown for the Research
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 0.98% for the Research
Series.
(9) After Trust Consolidation, the assets of the Mid-Cap Growth Series
(formerly the OTC Portfolio), the Research Series and the Total Return
Series will be combined to determine the actual fee payable to DSI.
(10) Formerly known as the Smith Barney Income and Growth Portfolio.
(11) Formerly known as the Smith Barney Series Fund.
6
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EXAMPLES:
The examples do not take into account any deduction for premium taxes.
Premium taxes currently range from 0% to 3.5% of premium payments. There may
be surrender charges if you choose to annuitize within the first three
Contract Years.
If at issue you elect the Annual Ratchet Enhanced Death Benefit Option and
you surrender your Contract at the end of the applicable time period, you
would pay the following expenses for each $1,000 of Initial Premium assuming a
5% annual return on assets:
<TABLE>
<CAPTION>
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
------ ------- ------- -------
<S> <C> <C> <C> <C>
OTC............................................. $95.42 $138.10 $173.31 $283.33
Research........................................ $95.12 $137.19 $171.80 $280.34
Total Return.................................... $95.22 $137.49 $172.30 $281.34
Smith Barney Large Cap Value.................... $92.42 $129.04 $158.17 $252.95
Smith Barney International Equity............... $95.62 $138.70 $174.31 $285.32
Smith Barney High Income........................ $92.52 $129.34 $158.68 $253.97
Smith Barney Money Market....................... $92.01 $127.83 $156.13 $248.82
Appreciation.................................... $93.52 $132.37 $163.75 $264.20
Divisions added upon Trust Consolidation:
Mid-Cap Growth*............................... $95.22 $137.49 $172.30 $281.34
Research...................................... $95.12 $137.19 $171.80 $280.34
Total Return.................................. $95.22 $137.49 $172.30 $281.34
</TABLE>
If at issue you elect the Annual Ratchet Enhanced Death Benefit Option and
you do not surrender your Contract or if you annuitize on the Annuity
Commencement Date, you would pay the following expenses for each $1,000 of
initial premium assuming a 5% annual return on assets:
<TABLE>
<CAPTION>
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
------ ------ ------- -------
<S> <C> <C> <C> <C>
OTC.............................................. $25.42 $78.10 $133.31 $283.33
Research......................................... $25.12 $77.19 $131.80 $280.34
Total Return..................................... $25.22 $77.49 $132.30 $281.34
Smith Barney Large Cap Value..................... $22.42 $69.04 $118.17 $252.95
Smith Barney International Equity................ $25.62 $78.70 $134.31 $285.32
Smith Barney High Income......................... $22.52 $69.34 $118.68 $253.97
Smith Barney Money Market........................ $22.01 $67.83 $116.13 $248.82
Appreciation..................................... $23.52 $72.37 $123.75 $264.20
Divisions added upon Trust Consolidation:
Mid-Cap Growth*................................ $25.22 $77.49 $132.30 $281.34
Research....................................... $25.12 $77.19 $131.80 $280.34
Total Return................................... $25.22 $77.49 $132.30 $281.34
</TABLE>
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* OTC prior to Trust Consolidation
The purpose of the Fee Table is to assist you in understanding the various
costs and expenses that you will bear directly or indirectly. For purposes of
computing the annual per Contract administrative charge, the dollar amounts
shown in the examples are based on an Initial Premium of $33,000.
The examples reflect the election at issue of the Annual Ratchet Enhanced
Death Benefit Option. If the Standard Death Benefit Option is elected, the
actual expenses incurred will be less than those represented in the Examples.
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN, SUBJECT TO
THE GUARANTEES UNDER THE CONTRACT.
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CONDENSED FINANCIAL AND OTHER INFORMATION
INDEX OF INVESTMENT EXPERIENCE
The following table gives the index of investment experience for each
Division of Account B available under the Contract for each death benefit
option. The Divisions became available on May 6, 1997 and started with the
index of investment experience as shown below. The index of investment
experience is equal to the value of a unit for each Division of the Account.
The total investment value of each Division as of the end of 1997 is shown in
the right hand columns.
<TABLE>
<CAPTION>
TOTAL INVESTMENT VALUE
INDEX OF INVESTMENT EXPERIENCE IN THOUSANDS
------------------------------- -------------------------
ANNUAL ANNUAL
STANDARD RATCHET STANDARD RATCHET
--------------- --------------- ----------- -----------
DIVISION 5/6/97 12/31/97 5/6/97 12/21/97 12/31/97 12/31/97
-------- ------ -------- ------ -------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
OTC..................... $14.82 $16.84 $14.75 $18.52 $ 4 $ 76
Research................ $16.14 $18.95 $16.09 $18.87 $ 2 $ 218
Total Return............ $14.07 $16.18 $14.02 $16.10 $ 1 $ 79
Large Cap Value......... $15.20 $17.84 $15.15 $17.77 -- $ 216
International Equity.... $13.53 $13.65 $13.49 $13.59 $ 2 $ 94
High Income............. $12.46 $13.77 $12.42 $13.72 $ 1 $ 208
Money Market............ $10.74 $11.02 $10.71 $10.97 -- $ 182
Appreciation............ $12.01 $14.05 $11.99 $14.01 -- $ 263
</TABLE>
FINANCIAL STATEMENTS
The audited financial statements of Separate Account B for the years ended
December 31, 1997 and 1996 (as well as the auditors' report thereon) appear in
the Statement of Additional Information. The audited financial statements of
Golden American prepared in accordance with generally accepted accounting
principles for the years ended December 31, 1997, 1996 and 1995 (as well as
the auditors' report thereon) are also 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 data will be computed, or accompanied by
performance data computed, in accordance with standards defined by the SEC.
Current yield for the Smith Barney Money Market 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 Smith
Barney Money Market Division is calculated in a manner similar to that used to
calculate yield, but when annualized, the income earned by the investment is
assumed to be reinvested. The "effective yield" will be slightly higher than
the "yield" because of the compounding effect of earnings.
For the remaining Divisions, quotations of yield will be based on all
investment income per unit (Accumulation Value divided by the index of
investment experience, see Facts About the Contract, Measurement of Investment
Experience, Index of Investment Experience and Unit Value) earned during a
given 30 day period, less expenses accrued during the period ("net investment
income"). Quotations of average annual total return for any Division will be
expressed in terms of the average annual compounded rate of return on a
hypothetical investment in a Contract over a period of one, five, and ten
years (or, if less, up to the life of the Division), and will reflect the
deduction of the applicable surrender charge, the administrative charge and
the applicable
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mortality and expense risk charge. See Charges and Fees. Quotations of total
return may simultaneously be shown for other periods that do not take into
account certain contractual charges, such as the surrender charge.
Performance information for a Division may be compared, in reports and
promotional literature, to: (i) the Standard & Poor's 500 Stock Index ("S&P
500"), Dow Jones Industrial Average ("DJIA"), Donoghue Money Market
Institutional Averages, or other indices measuring performance of a pertinent
group of securities so that investors may compare a Division's results with
those of a group of securities widely regarded by investors as representative
of the securities markets in general; (ii) other variable annuity separate
accounts or other investment products tracked by Lipper Analytical Services, a
widely used independent research firm which ranks mutual funds and other
investment companies by overall performance, investment objectives, and
assets, or tracked by other ratings services, including VARDS, companies,
publications, or persons who rank separate accounts or other investment
products on overall performance or other criteria; and (iii) the Consumer
Price Index (measure for inflation) to assess the real rate of return from an
investment in the Contract. Unmanaged indices may assume the reinvestment of
dividends but generally do not reflect deductions for administrative and
management costs and expenses.
Performance information for any Division reflects only the performance of a
hypothetical Contract under which the Accumulation Value is allocated to a
Division during a particular time period on which the calculations are based.
Performance information should be considered in light of the investment
objectives and policies, characteristics and quality of the Portfolio of the
respective Trust in which the Division invests and the market conditions
during the given time period, and should not be considered as a representation
of what may be achieved in the future. For a description of the methods used
to determine yield and total return for the Divisions, see the Statement of
Additional Information.
Reports and promotional literature may also contain other information
including the ranking of any Division derived from rankings of variable
annuity separate accounts or other investment products tracked by Lipper
Analytical Services or by rating services, companies, publications, or other
persons who rank separate accounts or other investment products on overall
performance or other criteria.
INTRODUCTION
FACTS ABOUT THE COMPANY AND THE ACCOUNT
The following information describes the Contract and Account B. Account B
invests in mutual fund portfolios of the Trusts.
GOLDEN AMERICAN
Golden American Life Insurance Company ("Golden American" or the "Company")
is a stock life insurance company organized under the laws of the State of
Delaware and is a wholly owned subsidiary of Equitable of Iowa Companies, Inc.
("Equitable of Iowa"), which, in turn, is a wholly owned subsidiary of ING
Groep, N.V. ("ING"). Prior to December 30, 1993, Golden American was a
Minnesota corporation. Prior to August 13, 1996, Golden American was a wholly
owned indirect subsidiary of Bankers Trust Company. We are authorized to do
business in all states, except New York, and the District of Columbia. In May
1996, we established a subsidiary, First Golden American Life Insurance
Company of New York, which is authorized to do business in New York and
Delaware. We offer variable annuities and variable life insurance.
Administrative services for the Contract are provided at our Customer Service
Center, the address is shown on the cover.
Equitable of Iowa is the holding company for Equitable Life Insurance
Company of Iowa, USG Annuity & Life Company, Locust Street Securities, Inc.,
Equitable American Insurance Company, Equitable of Iowa Securities Network,
Inc., Directed Services, Inc. ("DSI"), and Golden American. On October 24,
1997, ING acquired all interest in Equitable of Iowa and its subsidiaries,
including Golden American. ING, based in the Netherlands, is a global
financial services holding company with over $307 billion in assets.
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<PAGE>
Pursuant to a service agreement between Golden American and Equitable Life
Insurance Company of Iowa ("Equitable Life"), Equitable Life provides certain
administrative, financial and other services to Golden American.
THE ESS TRUST, THE TRAVELERS FUND AND THE GREENWICH STREET SERIES FUND
The ESS Trust is 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 Travelers Fund is an open-end management investment company underlying
certain variable annuity and variable life insurance contracts. Prior to
September 3, 1996, it was known as Smith Barney/Travelers Series Fund Inc.
The Greenwich Street Series Fund, formerly known as the Smith Barney Series
Fund, is a diversified, open-end management investment company.
Shares of the Travelers Fund and Greenwich Street Series Fund are issued and
redeemed in connection with investments in and payments under certain variable
annuity contracts and variable life insurance policies of various life
insurance companies which may or may not be affiliated. The Funds do not
foresee any disadvantage to Owners arising out of the fact that they offer
their shares for products offered by life insurance companies which are not
affiliated. Nevertheless, the Boards of Trustees of the Travelers Fund and
Greenwich Street Series Fund intend to monitor events in order to identify any
material irreconcilable conflicts which may possibly arise and to determine
what action, if any, should be taken in response thereto. If such a conflict
were to occur, one or more insurance company separate accounts might withdraw
its investments in the Travelers Fund and Greenwich Street Series Fund. An
irreconcilable conflict might result in the withdrawal of a substantial amount
of a Portfolio's assets which could adversely affect such Portfolio's net
asset value per share.
You will find complete information about the ESS Trust, the Travelers Fund
and the Greenwich Street Series Fund, including the risks associated with each
Portfolio, in the accompanying Trusts' prospectuses. You should read them
carefully in conjunction with this prospectus before investing. Additional
copies of the Trusts' prospectuses may be obtained by contacting our Customer
Service Center.
PROPOSED TRUST CONSOLIDATION AND THE GCG TRUST
The ESS Trust has been established as one of the funding vehicles for the
Contracts offered. The ESS Trust is an open-end management company and is
managed by DSI, which is a wholly owned subsidiary of Equitable of Iowa. DSI
also manages The GCG Trust ("GCG"), which is also an open-end management
company. In an effort to consolidate the operations of GCG and the ESS Trust
("Trust Consolidation"), the affiliated insurance companies of Equitable of
Iowa filed an application with the Securities and Exchange Commission
requesting permission via an order to substitute shares of each Portfolio of
the ESS Trust with shares of similar Portfolio of GCG (the "Substitution").
The table below identifies the ESS Trust Portfolio currently available under
the Contract and The GCG Trust 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. Contract Owners
will benefit directly from any reduction of Trust expenses in Series offered
by the Contract. CONTRACT OWNERS WILL NOT BEAR ANY EXPENSE ASSOCIATED WITH THE
SUBSTITUTION.
EQUI-SELECT SERIES TRUST REPLACED PORTFOLIO THE GCG TRUST SUBSTITUTE SERIES
------------------------------------------- -------------------------------
OTC Portfolio Mid-Cap Growth Series
Research Portfolio Research Series
Total Return Portfolio Total Return Series
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<PAGE>
Upon obtaining the requested order for substitution form the Securities and
Exchange Commission, and subject to any required prior approval by applicable
insurance authorities, the Companies will effect the Substitution by
simultaneously placing an order for each Division to redeem the shares of the
Portfolio (which may also be referred to as a Series) of the ESS Trust and an
order for each Division to purchase shares of the designated respective Series
of GCG. After the Trust Consolidation has occurred, the Customer Service
Center will send affected Contract Owners a notice within five days.
The GCG Trust's shares may also be available to certain separate accounts
funding variable life insurance policies. 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 plans
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. However, there is a possibility that due
to differences in tax treatment or other considerations, the interests of
owners of various contracts participating in The GCG Trust may conflict. The
Board of Trustees of The GCG Trust, DSI and we and any other insurance
companies participating in the Trust are required to monitor events in order
to identify any material conflicts that arise from the use of The GCG Trust
for mixed and/or shared funding between various policy owners and pension and
retirement plans. In the event of a material conflict, the Company will take
the necessary steps including removing the Separate Account from The GCG
Trust, to resolve the matter.
You will find complete information about The GCG Trust, including the risks
associated with each Portfolio, in the accompanying Trust prospectus. You
should read it carefully in conjunction with this prospectus before investing.
Additional copies of the Trust prospectus may be obtained by contacting our
Customer Service Center.
SEPARATE ACCOUNT B
All obligations under the Contract are general obligations of Golden
American. Account B is a separate investment account used to support our
variable annuity Contracts and for other purposes as permitted by applicable
laws and regulations. The assets of Account B are kept separate from our
general account and any other separate accounts we may have. We may offer
other variable annuity Contracts investing in Account B which are not
discussed in this prospectus. Account B may also invest in other Portfolios
which are not available to the Contract described in this prospectus.
We own all the assets in Account B. Income and realized and unrealized gains
or losses from assets in the account are credited to or charged against that
account without regard to other income, gains or losses in our other
investment accounts. As required, the assets in Account B are at least equal
to the reserves and other liabilities of that account. These assets may not be
charged with liabilities from any other business we conduct.
They may, however, be subject to liabilities arising from Divisions whose
assets are attributable to other variable annuity Contracts supported by
Account B. If the assets exceed the required reserves and other liabilities,
we may transfer the excess to our general account.
Account B was established on July 14, 1988 to invest in mutual funds, unit
investment trusts or other investment portfolios which we determine to be
suitable for the Contract's purposes. Account B is treated as a unit
investment trust under Federal securities laws. It is registered with the SEC
under the Investment Company Act of 1940 (the "1940 Act") as an investment
company and meets the definition of a separate account under the Federal
securities laws. It is governed by the laws of Delaware, our state of
domicile, and may also be governed by the laws of other states in which we do
business. Registration with the SEC does not involve any supervision by the
SEC of the management or investment policies or practices of Account B.
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<PAGE>
ACCOUNT B DIVISIONS
Account B is divided into Divisions. Currently, each Division of Account B
offered under this prospectus invests in a Portfolio of the ESS Trust, the
Travelers Fund or the Greenwich Street Series Fund. Upon obtaining approval of
regulatory authorities, the three currently avaliable Portfolios of the ESS
Trust will be replaced by similar Portfolios of The GCG Trust. DSI serves as
the Manager to each Portfolio of the ESS Trust and MMC serves as the manager
to each Portfolio of both the Travelers Fund and the Appreciation Portfolio of
the Greenwich Street Series Fund. DSI has retained a Portfolio Manager to
manage the assets of the Portfolios of the ESS Trust. DSI (not the ESS Trust)
pays the Portfolio Manager a monthly fee for managing the assets of the
Portfolios. See the Trusts' prospectuses for details. There may be
restrictions on the availability and/or the amount of the allocation to
certain Divisions based on state laws and regulations. The investment
objectives of the various Portfolios in the Trusts are described below. There
is no guarantee that any Portfolio will meet its investment objectives.
Meeting objectives depends on various factors, including, in certain cases,
how well the portfolio managers anticipate changing economic and market
conditions. Account B also has other Divisions investing in other portfolios
which are not available to the Contract described in this prospectus.
Each Trust pays its respective Manager for its services a fee, payable
monthly, based on the annual rates of the average daily net assets of the
Portfolio as shown in the Fee Table. In addition, DSI (and not the Trust) pays
each Portfolio Manager a monthly fee for managing the assets of the Series.
The following Divisions invest in a designated Portfolio of the ESS 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 SERIES OF THE GCG TRUST
OBJECTIVE -- Long-term growth of capital.
INVESTMENTS -- Investment primarily in equity
securities with medium market capitalization.
PORTFOLIO MANAGER -- Massachusetts Financial Services
Company
RESEARCH DIVISION
RESEARCH PORTFOLIO
OBJECTIVE -- Long term growth of capital and future income.
INVESTMENTS -- Investment primarily in common stocks or securities
convertible into common stocks of companies believed to possess better than
average prospects for long-term growth.
PORTFOLIO MANAGER -- Massachusetts Financial Services Company
AFTER TRUST CONSOLIDATION: RESEARCH SERIES OF THE GCG TRUST
OBJECTIVE -- Long-term growth of capital and future
income.
INVESTMENTS -- Investment primarily in common stocks
or securities convertible into common stocks of
companies believed to possess better than average
prospects for long-term growth.
PORTFOLIO -- Massachusetts Financial Services Company
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TOTAL RETURN DIVISION
TOTAL RETURN PORTFOLIO
OBJECTIVE -- Above-average income consistent with prudent employment of
capital.
INVESTMENTS -- Investment primarily in equity securities.
PORTFOLIO MANAGER -- Massachusetts Financial Services Company
AFTER TRUST CONSOLIDATION: TOTAL RETURN 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
The following Divisions invest in a designated Portfolio of the Travelers
Fund.
SMITH BARNEY LARGE CAP VALUE DIVISION
SMITH BARNEY LARGE CAP VALUE PORTFOLIO
OBJECTIVE -- Current income and long-term growth of income and capital.
INVESTMENTS -- Investment primarily in common stocks offering a current
return from dividends and interest-paying debt obligations and high-quality
short-term debt obligations.
SMITH BARNEY INTERNATIONAL EQUITY DIVISION
SMITH BARNEY INTERNATIONAL EQUITY PORTFOLIO
OBJECTIVE -- Total return on its assets from growth of capital and income.
INVESTMENTS -- Diversified portfolio of equity securities of established
non-U.S. issuers.
SMITH BARNEY HIGH INCOME DIVISION
SMITH BARNEY HIGH INCOME PORTFOLIO
OBJECTIVE -- High current income.
INVESTMENTS -- High-yielding corporate debt obligations and preferred stock.
In addition, the Portfolio may invest up to 20% of its assets in the
securities of foreign issuers that are denominated in currencies other than
U.S. dollars.
SMITH BARNEY MONEY MARKET DIVISION
SMITH BARNEY MONEY MARKET PORTFOLIO
OBJECTIVE -- Maximum current income and preservation of capital.
INVESTMENTS -- Bank obligations and high quality commercial paper, corporate
obligations and municipal obligations in addition to U.S. government
securities and related repurchase agreements.
The following Division invests in a designated Portfolio of the Greenwich
Street Series Fund.
APPRECIATION DIVISION
APPRECIATION PORTFOLIO
OBJECTIVE -- Long-term appreciation of capital.
INVESTMENTS -- Primarily in equity and equity-related securities that are
believed to afford attractive opportunities for appreciation.
CHANGES WITHIN ACCOUNT B
We may from time to time make additional Divisions available. These
Divisions will invest in investment portfolios we find suitable for the
Contract. We also have the right to eliminate investment Divisions from
Account B, to combine two or more Divisions, or to substitute a new portfolio
for the portfolio in which a
13
<PAGE>
Division invests. A substitution may become necessary if, in our judgment, a
portfolio no longer suits the purposes of the Contract. This may happen due to
a change in laws or regulations, or a change in a portfolio's investment
objectives or restrictions, or because the portfolio is no longer available
for investment, or for some other reason. In addition, we reserve the right to
transfer assets of Account B, which we determine to be associated with the
class of Contracts to which your Contract belongs, to another account. If
necessary, we will get prior approval from the insurance department of our
state of domicile before making such a substitution or transfer. We will also
get any required approval from the SEC and any other required approvals before
making such a substitution or transfer. We will notify you as soon as
practicable of any proposed changes.
When permitted by law, We reserve the right to:
(1) deregister Account B under the 1940 Act;
(2) operate Account B as a management company under the 1940 Act if it is
operating as a unit investment trust;
(3) operate Account B as a unit investment trust under the 1940 Act if it
is operating as a managed separate account;
(4) restrict or eliminate any voting rights as to Account B; and
(5) combine Account B with other accounts.
FACTS ABOUT THE CONTRACT
THE OWNER
You are the Owner. You are also the Annuitant unless another Annuitant is
named in the application or enrollment form. You have the rights and options
described in the Contract. One or more persons may own the Contract. If there
are multiple Owners named, the age of the oldest Owner shall determine the
applicable death benefit.
Death of an Owner activates the death benefit provision. In the case of a
sole Owner who dies prior to the annuity commencement date, we will pay the
Beneficiary the death benefit when due. The sole Owner's estate will be the
Beneficiary if no Beneficiary designation is in effect, or if the designated
Beneficiary has predeceased the Owner. In the case of a joint Owner of the
Contract dying prior to the annuity commencement date, we will designate the
surviving Owner(s) as the Beneficiary(ies). This supersedes any previous
Beneficiary designation.
In the case where the Owner is a trust and a beneficial Owner of the trust
has been designated, the beneficial Owner will be treated as the Owner of the
Contract solely for the purpose of determining the death benefit provision. If
a beneficial Owner is changed or added after the Contract Date, this will be
treated as a change of Owner for purposes of determining the death benefit.
See Change of Owner or Beneficiary. If no beneficial Owner of the Trust has
been designated, the availability of enhanced death benefits will be
determined by the age of the Annuitant at issue.
THE ANNUITANT
The Annuitant is the person designated by the Owner to be the measuring life
in determining Annuity Payments. The Owner will receive the annuity benefits
of the Contract if the Annuitant is living on the Annuity Commencement Date.
If the Annuitant dies before the Annuity Commencement Date, and a contingent
Annuitant has been named, the contingent Annuitant becomes the Annuitant
(unless the Owner is not an individual, in which case the death benefit
becomes payable). Once named, the Annuitant may not be changed at any time.
If there is no contingent Annuitant when the Annuitant dies prior to the
Annuity Commencement Date, the Owner will become the Annuitant. The Owner may
designate a new Annuitant within 60 days of the death of the Annuitant.
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If there is no contingent Annuitant when the Annuitant dies prior to the
Annuity Commencement Date and the Owner is not an individual, we will pay the
Beneficiary the death benefit then due. The Beneficiary will be as provided in
the Beneficiary designation then in effect. If no Beneficiary designation is
in effect, or if there is no designated Beneficiary living, the Owner will be
the Beneficiary. If the Annuitant was the sole Owner and there is no
Beneficiary designation, the Annuitant's estate will be the Beneficiary.
Regardless of whether a death benefit is payable, if the Annuitant dies and
any Owner is not an individual, such death will trigger application of the
distribution rules imposed by Federal tax law.
THE BENEFICIARY
The Beneficiary is the person to whom we pay death benefit proceeds and who
becomes the successor Owner if the Owner dies prior to the annuity
commencement date. We pay death benefit proceeds to the primary Beneficiary
(unless there are joint Owners, in which case death proceeds are payable to
the surviving Owner(s)). See Proceeds Payable to the Beneficiary.
If the Beneficiary dies before the Annuitant or Owner, the death benefit
proceeds are paid to the contingent Beneficiary, if any. If there is no
surviving Beneficiary, we pay the death benefit proceeds to the Owner's
estate.
One or more persons may be named as Beneficiary or contingent Beneficiary.
In the case of more than one Beneficiary, unless otherwise specified, we will
assume any death benefit proceeds are to be paid in equal shares to the
surviving beneficiaries.
You have the right to change beneficiaries during the Annuitant's lifetime
unless you have designated an irrevocable Beneficiary. When an irrevocable
Beneficiary has been designated, you and the irrevocable Beneficiary may have
to act together to exercise certain rights and options under the Contract.
CHANGE OF OWNER OR BENEFICIARY
During the Annuitant's lifetime and while your Contract is in effect, you
may transfer ownership of the Contract (if purchased in connection with a
nonqualified plan) subject to our published rules at the time of the change. A
change in Ownership may affect the amount of the death benefit and the
guaranteed death benefit. You may also change the Beneficiary. To make either
of these changes, you must send us written notice of the change in a form
satisfactory to us. The change will take effect as of the day the notice is
signed. The change will not affect any payment made or action taken by us
before recording the change at our Customer Service Center. See Federal Tax
Considerations, 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
connection 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 may require distributions to
commence not later than April 1st of the calendar year following the calendar
year in which you attain age 70 1/2. For both Individual Retirement Annuities
and individual retirement accounts, the minimum Initial Premium is $1,500. The
annual limits on contributions to IRAs and Roth IRAs are described under
Federal Tax Considerations.
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<PAGE>
IF THE CONTRACT IS PURCHASED TO FUND A QUALIFIED PLAN OTHER THAN A ROTH IRA,
DISTRIBUTION MUST COMMENCE NOT LATER THAN APRIL 1ST OF THE CALENDAR YEAR
FOLLOWING THE CALENDAR YEAR IN WHICH YOU ATTAIN AGE 70 1/2. IF YOU OWN MORE
THAN ONE QUALIFIED PLAN, YOU SHOULD CONSULT YOUR TAX ADVISOR.
NON-QUALIFIED CONTRACTS
The Contract may fund any non-qualified plan. Non-qualified Contracts do not
qualify for any tax-favored treatment other than the benefits provided for by
annuities.
YOUR RIGHT TO SELECT OR CHANGE CONTRACT OPTIONS
Before the Annuity Commencement Date, you may change the Annuity
Commencement Date, frequency of Annuity Payments or the Annuity Option by
sending a written request to our Customer Service Center. The Annuitant may
not be changed at any time.
PREMIUMS
You purchase the Contract with an Initial Premium. After the end of the Free
Look Period, you may make additional premium payments. See Making Additional
Premium Payments. The minimum Initial Premium is $5,000 for a non-qualified
Contract and $1,500 for a qualified Contract.
You must receive our prior approval before making a premium payment that
causes the Accumulation Value of all annuities that you maintain with us to
exceed $1,000,000. We may change the minimum initial or additional premium
requirements for certain group or sponsored arrangements. See Group or
Sponsored Arrangements.
QUALIFIED PLANS
For IRA Contracts, the annual premium on behalf of any individual Contract
may not exceed $2,000. Provided your spouse does not make a contribution to an
IRA, you may set up a spousal IRA even if your spouse has earned some
compensation during the year. The maximum deductible amount for a spousal IRA
program is the lesser of $2,250 or 100% of your compensation reduced by the
contribution (if any) made by you for the taxable year to your own IRA.
However, no more than $2,000 can go to either your or your spouse's IRA in any
one year. For example, $1,750 may go to your IRA and $500 to your spouse's
IRA. These maximums are not applicable if the premium is the result of a
rollover from another qualified plan.
For Roth IRA Contracts, the annual premium on behalf of any individual
Contract, together with the total amount of any contributions you have made to
any non-Roth IRAs (except for rollover contributions), may not exceed the
lesser of $2,000 of 100% of your compensation. Contributions to a Roth IRA are
subject to income limits. See IRA Contracts and Other Qualified Retirement
Plans in General.
WHERE TO MAKE PAYMENTS
Remit premium payments to our Customer Service Center. The address is shown
on the cover. We will send you a confirmation notice.
MAKING ADDITIONAL PREMIUM PAYMENTS
You may make additional premium payments after the end of the Free Look
Period. We can accept additional premium payments until either the Annuitant
or Owner reaches the Attained Age of 85 under non-qualified plans. For
qualified plans, no contributions may be made to an IRA Contract other than a
Roth IRA for the taxable year in which you attain age 70 1/2 and thereafter
(except for rollover contributions). The minimum additional premium payment we
will accept is $500 for a non-qualified plan and $250 for a qualified plan.
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CREDITING PREMIUM PAYMENTS
The Initial Premium will be accepted or rejected within two business days of
receipt by us if accompanied by information sufficient to permit us to
determine if we are able to issue a Contract. We may retain an Initial Premium
for up to five business days while attempting to obtain information sufficient
to enable us to issue the Contract. If we are unable to do so within five
business days, the applicant or enrollee will be informed of the reasons for
the delay and the Initial Premium will be returned immediately unless the
applicant or enrollee consents to our retaining the Initial Premium until we
have received the information we require. Thereafter, all additional premiums
will be accepted on the day received.
We will also accept, by agreement with broker-dealers, transmittal of
initial and additional premium payments by wire order from the broker-dealer
to our Customer Service Center. Such transmittals must be accompanied by a
simultaneous telephone facsimile or other electronic data transmission
containing the essential information we require to open an account and
allocate the premium payment. Contact our Customer Service Center to find out
about state availability and broker-dealer requirements.
Upon our acceptance of premium payments received via wire order and
accompanied by sufficient electronically transmitted data, we will issue the
Contract, allocate the premium payment according to your instructions, and
invest the payment at the value next determined following receipt. See
Restrictions on Allocation of Premium Payments. Wire orders not accompanied by
sufficient data to enable us to accept the premium payment may be retained for
up to five business days while we attempt to obtain information sufficient to
enable us to issue the Contract. If we are unable to do so, our Customer
Service Center will inform the broker-dealer, on behalf of the applicant or
enrollee, of the reasons for the delay and return the premium payment
immediately to the broker-dealer for return to the applicant or enrollee,
unless the applicant or enrollee specifically consents to allow us to retain
the premium payment until our Customer Service Center receives the required
information.
On the date we receive and accept your initial or additional premium
payment:
(1) We allocate the Initial Premium 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 your applicable death benefit.
When an additional premium payment is made, we increase your applicable
death benefit in accordance with the death benefit option in effect for
your Contract.
Following receipt and acceptance of the wire order and accompanying data,
and investment of the premium payment, we will follow one of the two
procedures set forth below. The one we follow is determined by the procedures
of the broker-dealer which submitted the wire order.
(1) We will issue the Contract. However, until we have received and
accepted a properly completed application or enrollment form, we reserve
the right to rescind the Contract. If the form is not received within
fifteen days of receipt of the premium payment, we will refund the
Accumulation Value plus any charges we deducted, and the Contract will be
voided.
(2) Based on the information provided, we will issue the Contract. We
will mail the Contract to you, together with an Application Acknowledgement
Statement. You must execute the Application Acknowledgement Statement and
return it to us at our Customer Service Center. Until we receive the
executed Application Acknowledgement Statement, neither you nor the broker
dealer may execute any financial transactions with respect to the Contract
unless such transactions are appropriately requested in writing by you.
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<PAGE>
YOUR RIGHT TO REALLOCATE
You may reallocate your Accumulation Value among the Divisions at the end of
the free look period. We currently do not assess a charge for allocation
changes made during a Contract Year. We reserve the right, however, to assess
a $25 charge for each allocation change after the twelfth allocation change in
a Contract Year. We require that each reallocation of your Accumulation Value
equal at least $250 or, if less, your entire Accumulation Value within a
Division. We reserve the right to limit, upon notice, the maximum number of
reallocations you may make within a Contract Year. In addition, we reserve the
right to defer the reallocation privilege at any time we are unable to
purchase or redeem shares of the Trusts. We also reserve the right to modify
or terminate your right to reallocate your Accumulation Value at any time in
accordance with applicable law. To make a reallocation change, you must
provide us with satisfactory notice at our Customer Service Center.
We reserve the right to limit the number of reallocations of your
Accumulation Value among the Divisions or refuse any reallocation request if
we believe that: (a) excessive trading by you or a specific reallocation
request may have a detrimental effect on unit values or the share prices of
the underlying Portfolio; or (b) we are informed by the ESS Trust, the
Travelers Fund or the Greenwich Street Series Fund that the purchase or
redemption of shares is to be restricted because of excessive trading or a
specific reallocation or group of reallocations is deemed to have a
detrimental effect on share prices of the ESS Trust, the Travelers Fund or the
Greenwich Street Series Fund.
Where permitted by law, we may accept your authorization of third party
reallocation on your behalf, subject to our rules. We may suspend or cancel
such acceptance at any time. We will notify you of any such suspension or
cancellation. We may restrict the Divisions that will be available to you for
reallocations of premiums during any period in which you authorize such third
party to act on your behalf. We will give you prior notification of any such
restrictions. However, we will not enforce such restrictions if we are
provided evidence satisfactory to us that: (a) such third party has been
appointed by a court of competent jurisdiction to act on your behalf; or (b)
such third party has been appointed by you to act on your behalf for all your
financial affairs.
Some restrictions may apply based on the free look provisions of the state
where the Contract is issued. See Your Right to Cancel or Exchange Your
Contract.
DOLLAR COST AVERAGING
If you have at least $10,000 of Accumulation Value in the Smith Barney Money
Market Division you may elect the dollar cost averaging program and have a
specified dollar amount transferred from such Division on a monthly basis.
The main objective of dollar cost averaging is to attempt to shield your
investment from short-term price fluctuations. Since the same dollar amount is
transferred to other Divisions each month, more units are purchased in a
Division if the value per unit is low and less units are purchased if the
value per unit is high.
Therefore, a lower than average value per unit may be achieved over the long
term. This plan of investing allows investors to take advantage of market
fluctuations but does not assure a profit or protect against a loss in
declining markets.
Dollar cost averaging may be elected at issue or at a later date. The
minimum amount that may be transferred each month is $250. The maximum amount
which may be transferred is equal to your Accumulation Value in the Smith
Barney Money Market Division when you elect the dollar cost averaging program,
divided by 12.
The transfer date will be the same calendar day each month as the Contract
Date. The dollar amount will be allocated to the Divisions in which you are
invested in proportion to your Accumulation Value in each Division unless you
specify otherwise. If, on any transfer date, your Accumulation Value is equal
to or less than the amount you have elected to have transferred, the entire
amount will be transferred and the program will end.
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<PAGE>
You may change the transfer amount once each Contract Year, or cancel this
program by sending satisfactory notice to our Customer Service Center at least
seven days before the next transfer date. Any allocation under this program
will not be included in determining if the excess allocation charge will
apply.
WHAT HAPPENS IF A DIVISION IS NOT AVAILABLE
When a distribution is made from an investment portfolio supporting a
Division of Account B in which reinvestment is not available, we will allocate
the distribution, unless you specify otherwise, to the Specially Designated
Division.
Such a distribution can occur when (a) an investment portfolio matures, or
(b) a distribution from a portfolio or Division cannot be reinvested in the
portfolio or Division due to the unavailability of securities for acquisition.
When an investment portfolio matures, we will notify you in writing 30 days in
advance of that date. To elect an allocation of the distribution to other than
the Specially Designated Division, you must provide satisfactory notice to us
at least seven days prior to the date the portfolio matures. Such allocations
are not counted for purposes of the number of free allocation changes
permitted. When a distribution from a portfolio or Division cannot be
reinvested in the portfolio due to the unavailability of securities for
acquisition, we will notify you promptly after the allocation has occurred. If
within 30 days you allocate the Accumulation Value from the Specially
Designated Division to other Divisions of your choice, such allocations will
not be included in determining if the excess allocation charge will apply.
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 your Accumulation Value.
We adjust your Accumulation Value on each Valuation Date to reflect the
Divisions' investment performance, any additional premium payments or partial
withdrawals since the previous Valuation Date, and on each Contract processing
date to reflect any deduction of the annual Contract fee. Your Accumulation
Value is applied to your choice of an Annuity Option on the Annuity
Commencement Date subject to our published rules at such time. See Choosing an
Income Plan.
ACCUMULATION VALUE IN EACH DIVISION
ON THE CONTRACT DATE
On the Contract Date, your Accumulation Value is allocated to each Division
as you have specified. 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.
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<PAGE>
(7)We subtract from (6) the amounts allocated to that Division for:
(a) any Contract fees; and
(b) any charge for premium taxes.
All amounts in (7) are allocated to each Division in the proportion that (6)
bears to the Accumulation Value in Account B, unless the Charge Deduction
Division has been specified. See Charges Deducted from the Accumulation Value.
MEASUREMENT OF INVESTMENT EXPERIENCE
INDEX OF INVESTMENT EXPERIENCE AND UNIT VALUE
The investment experience of a Division is determined on each Valuation
Date. We use an index to measure changes in each Division's experience during
a Valuation Period. In most cases, we set the index at $10 when the first
investments in a division are made, unless the underlying series in which the
Division invests has been available under other contracts for some period of
time. See Condensed Financial Information, Index of Investment Experience, for
the initial index value for each Division when the Division became available
under the Contract. The index for a current Valuation Period equals the index
for the preceding Valuation Period multiplied by the experience factor for the
current Valuation Period.
We may express the value of amounts allocated to the Divisions in terms of
units. We determine the number of units for a given amount on a Valuation Date
by dividing the dollar value of that amount by the index of investment
experience for that date. The index of investment experience is equal to the
value of a unit.
HOW WE DETERMINE THE EXPERIENCE FACTOR
For Divisions of Account B the experience factor reflects the investment
experience of the Portfolio in which a Division invests as well as the charges
assessed against the Division for a Valuation Period. The factor is calculated
as follows:
(1) We take the net asset value of the portfolio in which the Division
invests at the end of the current Valuation Period.
(2) We add to (1) the amount of any dividend or capital gains
distribution declared for the investment portfolio and reinvested in such
portfolio during the current Valuation Period. We subtract from that amount
a charge for our taxes, if any.
(3) We divide (2) by the net asset value of the portfolio at the end of
the preceding Valuation Period.
(4) We subtract the applicable daily mortality and expense risk charge
from each Division for each day in the valuation period.
(5) We subtract the daily asset based administrative charge from each
Division for each day in the valuation period.
Calculations for Divisions investing in a Portfolio are made on a per share
basis.
NET RATE OF RETURN FOR A DIVISION
The net rate of return for a Division during a valuation period is the
experience factor for that Valuation Period minus one.
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<PAGE>
CASH SURRENDER VALUE
Your Contract's Cash Surrender Value fluctuates daily with the investment
results of the Divisions. We do not guarantee any minimum Cash Surrender
Value. On any date before the Annuity Commencement Date while the Contract is
in effect, the cash surrender value is calculated as follows:
(1) We take the Contract's Accumulation Value;
(2) We deduct from (1) any surrender charge and any charge for premium
taxes; and
(3) We deduct from (2) any charges incurred but not yet deducted.
SURRENDERING TO RECEIVE THE CASH SURRENDER VALUE
The Contract may be surrendered by the Owner at any time while the Annuitant
is living and before the Annuity Commencement Date.
A surrender will be effective on the date your written request and the
Contract are received at our Customer Service Center. The Cash Surrender Value
is determined and all benefits under the Contract will then be terminated, as
of that date. You may receive the Cash Surrender Value in a single sum payment
or apply it under one or more Annuity Options. See The Annuity Options. We
will usually pay the Cash Surrender Value within seven days but we may delay
payment. See When We Make Payments.
PARTIAL WITHDRAWALS
Prior to the Annuity Commencement Date, while the Annuitant is living and
the Contract is in effect, you may take partial withdrawals from the
Accumulation Value by sending satisfactory notice to our Customer Service
Center. Unless you specify otherwise, the amount of the withdrawal, including
any surrender charge, will be taken in proportion 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. The maximum amount you may withdraw each Contract Year without
incurring a surrender charge is 15% of your Accumulation Value. See Surrender
Charge for Excess Partial Withdrawals. Partial withdrawals may not be repaid.
A partial withdrawal request for an amount in excess of 90% of the Cash
Surrender Value will be treated as a request to surrender the Contract.
CONVENTIONAL PARTIAL WITHDRAWAL OPTION
After the Free Look Period, you may take conventional partial withdrawals.
The minimum amount you may withdraw under this option is $1,000.
SYSTEMATIC PARTIAL WITHDRAWAL OPTION
This option may be elected at the time you apply for a Contract, or at a
later date. This option may be elected to commence in a Contract Year where a
conventional partial withdrawal has been taken. However, it may not be elected
while the IRA Partial Withdrawal Option is in effect.
You may choose to receive systematic partial withdrawals on a monthly,
quarterly, or annual basis from your Accumulation Value in the Divisions. The
commencement of payments under this option may not be elected to start sooner
than 28 days after the Contract Issue Date. You select the date when the
withdrawals will be made but no later than the 28th day of the month. If no
date is selected, the withdrawals will be made on the same calendar day of
each month as the Contract Date.
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<PAGE>
You may select a dollar amount or a percentage of the Accumulation Value
from the Divisions in which you are invested as the amount of your withdrawal
subject to the following maximums, but in no event can a payment be less than
$100:
<TABLE>
<CAPTION>
FREQUENCY MAXIMUM PERCENTAGE
--------- ------------------
<S> <C>
Monthly................................................... 1.25%
Quarterly................................................. 3.75%
Annual.................................................... 15.00%
</TABLE>
If a dollar amount is selected and the amount to be systematically withdrawn
would exceed the applicable maximum percentage of your Accumulation Value on
the withdrawal date, the amount withdrawn will be reduced so that it equals
such percentage. For example, if a $500 monthly withdrawal was elected and on
the withdrawal date 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, and since $100 is more than 1.25% of the
Accumulation Value we would send $75 and then cancel the option. In such a
case, in order to receive systematic partial withdrawals in the future, you
would be required to submit a new notice to our Customer Service Center.
You may change the amount or percentage of your withdrawal once each
Contract Year or cancel this option at any time by sending satisfactory notice
to our Customer Service Center at least seven days prior to the next scheduled
withdrawal date. However, you may not change the amount or percentage of your
withdrawals in any Contract Year during which you have previously taken a
conventional partial withdrawal.
IRA PARTIAL WITHDRAWAL OPTION
If you have an IRA Contract and will attain age 70 1/2 in the current
calendar year, distributions may be made to you to satisfy requirements
imposed by Federal tax law. IRA partial withdrawals provide payout of amounts
required to be distributed by the Internal Revenue Service rules governing
mandatory distributions under qualified plans. See Federal Tax Considerations.
We will send you a notice before your distributions commence, and you may
elect this option at that time, or at a later date. You may not elect IRA
partial withdrawals while the Systematic Partial Withdrawal Option is in
effect. If you do not elect the IRA Partial Withdrawal Option, and
distributions are required by Federal tax law, distributions adequate to
satisfy the requirements imposed by Federal tax law may be made. Thus, if the
Systematic Partial Withdrawal Option is in effect, distributions under that
option must be adequate to satisfy the mandatory distribution rules imposed by
Federal tax law.
You may choose to receive IRA partial withdrawals on a monthly, quarterly or
annual frequency. You select the day of the month when the withdrawals will be
made, but it cannot be later than the 28th day of the month. If no date is
selected, the withdrawals will be made on the same calendar day of the month
as the Contract Date.
At your request, we will determine the amount that is required to be
withdrawn from your Contract each year based on the information you give us
and various choices you make. For information regarding the calculation and
choices you have to make, see the Statement of Additional Information. The
minimum dollar amount you can withdraw is $100. At the time we determine the
required partial withdrawal amount for a taxable year based on the frequency
you select, if that amount is less than $100, we will pay $100. At any time
where the partial withdrawal amount is greater than the Accumulation Value, we
will cancel the Contract and send you the amount of the Cash Surrender Value.
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<PAGE>
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.
PARTIAL WITHDRAWALS IN GENERAL
CONSULT YOUR TAX ADVISOR REGARDING THE TAX CONSEQUENCES ASSOCIATED WITH
TAKING PARTIAL WITHDRAWALS. A partial withdrawal made before the taxpayer
reaches age 59 1/2 may result in imposition of a tax penalty of 10% of the
taxable portion withdrawn. See Federal Tax Considerations for more details.
AUTOMATIC REBALANCING
If you have at least $10,000 of Accumulation Value invested in the
Divisions, you may elect to participate in our automatic rebalancing program.
Automatic rebalancing provides you with an easy way to maintain the particular
asset allocation that you and your financial advisor have determined are most
suitable for your individual long-term investment goals. We do not charge a
fee for participating in our automatic rebalancing program.
Under the program you may elect to have all your allocations among the
Divisions rebalanced on a quarterly, semi-annual, or annual calendar basis.
The minimum size of an allocation to a Division must be in full percentage
points. The program may be used in conjunction with the systematic partial
withdrawal option only where such withdrawals are taken pro rata. Automatic
rebalancing is not available if you participate in dollar cost averaging.
Automatic rebalancing will not take place during the free look period.
To participate in automatic rebalancing you must submit to our Customer
Service Center written notice in a form satisfactory to us. We will begin the
program on the last Valuation Date of the applicable calendar period in which
we receive the notice. You may cancel the program at any time. The program
will automatically terminate if you choose to reallocate your Accumulation
Value among the Divisions or if you make an additional premium payment or
partial withdrawal on other than a pro rata basis. Additional premium payments
and partial withdrawals effected on a pro rata basis will not cause the
automatic rebalancing program to terminate.
PROCEEDS PAYABLE TO THE BENEFICIARY
If the Owner or the Annuitant (when the Owner is other than an individual)
dies prior to the annuity commencement date, we will pay the Beneficiary the
death benefit proceeds under the Contract. Such amount may be received in a
single sum or applied to any of the Annuity Options. See The Annuity Options.
If we do not receive a request to apply the death benefit proceeds to an
Annuity Option, a single sum distribution will be made. Any distributions from
non-qualified Contracts must comply with applicable Federal tax law
distribution requirements.
DEATH BENEFIT OPTIONS
Subject to our rules, there are two death benefit options that may be
elected by you at issue under the Contract: the Standard Death Benefit Option
and the Annual Ratchet Enhanced Death Benefit Option.
The Annual Ratchet Enhanced Death Benefit Option may only be elected at
issue and only if the Owner or Annuitant (when the Owner is other than an
individual) is age 79 or younger at issue.
If the enhanced death benefit is elected, the death benefit under the
Contract is equal to the greatest of: (i) the Accumulation Value; (ii) total
premium payments less any partial withdrawals; (iii) the Cash Surrender Value;
and (iv) the enhanced death benefit (see below).
We may offer a reduced death benefit under certain group and sponsored
arrangements. See Other Contract Provisions, Group or Sponsored Arrangements.
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<PAGE>
STANDARD DEATH BENEFIT OPTION
You will automatically receive the Standard Death Benefit Option unless you
elect the enhanced death benefit. The Standard Death Benefit Option for the
Contract is equal to the greatest of: (i) your Accumulation Value; (ii) total
premiums less any partial withdrawals; and (iii) the Cash Surrender Value.
ANNUAL RATCHET ENHANCED DEATH BENEFIT OPTION
(1) We take the enhanced death benefit from the prior Valuation Date. On
the Contract Date, the enhanced death benefit is equal to the Initial
Premium.
(2) We add to (1) any additional premiums paid since the prior Valuation
Date and subtract from (1) any partial withdrawals (including surrender
charges incurred) taken since the prior Valuation Date.
(3) On a Valuation Date that occurs on or prior to the Owner's Attained Age
80 which is also a Contract Anniversary, we set the enhanced death
benefit equal to the greater of (2) or the Accumulation Value as of
such date.
On all other Valuation Dates, the enhanced death benefit is equal to (2).
HOW TO CLAIM PAYMENTS TO BENEFICIARY
We must receive due proof of the death of the Owner or the Annuitant (if the
Owner is other than an individual) (such as an official death certificate) at
our Customer Service Center before we will make any payments to the
Beneficiary. We will calculate the death benefit as of the date we receive due
proof of death. The Beneficiary should contact our Customer Service Center for
instructions.
REPORTS TO OWNERS
We will send you a report once each calendar quarter within 31 days after
the end of each calendar quarter. The report will show the Accumulation Value,
the Cash Surrender Value, and the death benefit as of the end of the calendar
quarter. The report will also show the allocation of your Accumulation Value
as of such date and the amounts deducted from or added to the Accumulation
Value since the last report. The report will also include any other
information that may be currently required by the insurance supervisory
official of the jurisdiction in which the Contract is delivered.
We will also send you copies of any shareholder reports of the portfolios or
securities in which Account B invests, as well as any other reports, notices
or documents required by law to be furnished to Owners.
WHEN WE MAKE PAYMENTS
We will generally pay death benefit proceeds and the cash surrender value
within seven days after our Customer Service Center receives all the
information needed to process the payment.
However, we may delay payment of amounts derived from the Divisions if it is
not practical for us to value or dispose of shares of Account B because:
(1) The NYSE is closed for trading;
(2) The SEC determines that a state of emergency exists;
(3) An order or pronouncement of the SEC permits a delay for the protection
of Owners; or,
(4) The check used to pay the premium has not cleared through the banking
system. This may take up to 15 days.
During such times, as to amounts allocated to the Divisions, we may delay:
(1) Determination and payment of any Cash Surrender Value;
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<PAGE>
(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
thereunder. The amount of a charge will not necessarily correspond to the
costs associated with providing the services or benefits indicated by the
designation of the charge. For example, the Surrender Charge collected may not
fully cover all of the distribution expenses incurred by us. In the event that
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 the distribution of the contracts.
CHARGE DEDUCTION DIVISION
You may specify at issue if you wish to have all charges against the
Accumulation Value deducted from the Smith Barney Money Market Division. We
call this the Charge Deduction Division Option, and within this context refer
to the Smith Barney Money Market Division as the Charge Deduction Division. If
you do not elect this option, or if the amount of the charges is greater than
the amount in the Division, the charges will be deducted as discussed below.
You may also choose to elect or cancel this option while the Contract is in
force by sending satisfactory notice to our Customer Service Center.
CHARGES DEDUCTED FROM THE ACCUMULATION VALUE
We invest the entire amount of the initial and any additional premium
payments in the Divisions you select, subject to certain restrictions. See
Restrictions on Allocation of Premium Payments. We then may deduct certain
amounts from your Accumulation Value. We may reduce certain fees and charges,
including any surrender, administration, and mortality and expense risk
charges, under group or sponsored arrangements. See Group or Sponsored
Arrangements. Unless you have elected the Charge Deduction Division, charges
are deducted proportionately from all affected Divisions in which you are
invested. The charges we deduct are:
SURRENDER CHARGE
A contingent deferred sales charge ("Surrender Charge") is imposed as a
percentage of each premium payment if the Contract is surrendered or an excess
partial withdrawal is taken during the seven year period from the date we
receive and accept such premium payment. The percentage of premium payments
deducted at the time of surrender or excess partial withdrawal depends upon
the number of complete years that have elapsed since that premium payment was
made. We determine the surrender charge as a percentage of each premium
payment as follows:
<TABLE>
<CAPTION>
COMPLETE YEARS ELAPSED SURRENDER
SINCE PREMIUM PAYMENT CHARGE
---------------------- ---------
<S> <C>
0........................................................... 7%
1........................................................... 7%
2........................................................... 6%
3........................................................... 5%
4........................................................... 4%
5........................................................... 3%
6........................................................... 1%
7+.......................................................... 0%
</TABLE>
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<PAGE>
Subject to our rules and as described in the Contract, the surrender charge
arising from a surrender or excess partial withdrawal will be waived in the
following events:
(1) you begin receiving qualified extended medical care on or after the
first Contract anniversary for at least 45 days during any continuous
sixty-day period, and your request for the surrender or withdrawal,
together with all required proof of such qualified extended medical
care, must be received at our Customer Service Center during the term
of such care or within ninety days after the last day upon which you
received such care.
(2) you are first diagnosed by a qualifying medical professional, on or
after the first Contract Anniversary, as having a Qualifying Terminal
Illness. Written proof of terminal illness, satisfactory to us, must be
received at our Customer Service Center. We reserve the right to
require an examination by a physician of our choice.
See your Contract for more information. The waiver of surrender charge may
not be available in all states.
SURRENDER CHARGE FOR EXCESS PARTIAL WITHDRAWALS
There is considered to be an excess partial withdrawal in any Contract Year
in which the amount withdrawn exceeds 15% of your Accumulation Value on the
date of the withdrawal minus any amount withdrawn during that Contract Year.
Where you are receiving systematic partial withdrawals, any combination of
conventional partial withdrawals taken and any systematic partial withdrawals
expected to be received in a Contract Year will be considered in determining
the amount of the excess partial withdrawal. Such a withdrawal will be
considered a partial surrender of the Contract and we will impose a surrender
charge and any associated premium tax. Such charges will be deducted from the
Accumulation Value in proportion to the Accumulation Value in each Division
from which the excess partial withdrawal was taken. In instances where the
excess partial withdrawal equals the entire Accumulation Value in each such
Division, charges will be deducted proportionately from all other Divisions in
which you are invested.
For purposes of calculating the surrender charge for the excess partial
withdrawal, (i) we treat premium payments as being withdrawn on a first-in
first-out basis, and (ii) amounts withdrawn which are not considered an excess
partial withdrawal are not treated as a withdrawal of any premium payments.
Although we treat premium payments as being withdrawn before earnings for
purposes of calculating the surrender charge for excess partial withdrawals,
the Federal income tax law treats earnings as withdrawn first. See Federal Tax
Considerations, Taxation of Non-Qualified Annuities.
For example, the following assumes an Initial Premium payment of $10,000 and
additional premium payments of $10,000 in each of the second and third
Contract Years, for total premium payments under the Contract of $30,000. It
also assumes a partial withdrawal at the beginning of the fourth Contract Year
of 20% of the Accumulation Value of $35,000.
In this example, $5,250 ($35,000 x .15) is the maximum partial withdrawal
that may be withdrawn during the Contract Year without the imposition of a
surrender charge. The total partial withdrawal would be $7,000 ($35,000 x .2).
Therefore, $1,750 ($7,000-$5,250) is considered an excess partial withdrawal
of a part of the Initial Premium payment of $10,000 and would be subject to a
5% surrender charge of $87.50 ($1,750 x .05). This example does not take into
account the deduction of any premium taxes.
PREMIUM TAXES
We make a charge for state and local premium taxes in certain states which
can range from 0% to 3.5% of premium. The charge depends on the Owner's state
of residence. We reserve the right to change this amount to conform with
changes in the law or if the Owner changes state of residence.
Premium taxes are generally incurred on the annuity commencement date and a
charge for such premium taxes is then deducted from your Accumulation Value on
such date. However, some jurisdictions impose a
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premium tax at the time that initial and additional premiums are paid,
regardless of the Annuity Commencement Date. In those states we may initially
defer collection of the amount of the charge for premium taxes from your
Accumulation Value and deduct it against Accumulation Value on surrender of
the Contract, excess partial withdrawals or on the Annuity Commencement Date.
ADMINISTRATIVE CHARGE
The administrative charge is incurred at the beginning of the Contract
processing period and deducted at the end of each Contract processing period.
We deduct this charge when determining the Cash Surrender Value payable if you
surrender the Contract prior to the end of a Contract processing period. If
the Accumulation Value at the end of the Contract processing period equals or
exceeds $100,000 or the sum of the premiums paid equals or exceeds $100,000,
the charge is zero. Otherwise, the amount deducted is $40 per Contract Year.
See Asset Based Administrative 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 Divisions 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. The excess allocation charge is set at a
level that is not designed to produce profit for Golden American or any
affiliate. Any allocations or transfers due to the election of dollar cost
averaging and reallocation under the provision What Happens if a Division is
Not Available will not be included in determining if the excess allocation
charge should apply.
CHARGES DEDUCTED FROM THE DIVISIONS
MORTALITY AND EXPENSE RISK CHARGE
The amount of the mortality and expense risk charge depends on the death
benefit option that is in effect. If the Standard Death Benefit Option is in
effect, the charge is equivalent, on an annual basis, to 1.10% of the assets
in each Division. The charge is deducted on each Valuation Date at the rate of
.003030% for each day in the Valuation Period. If the Annual Rachet Death
Benefit Option is in effect, the charge is equivalent, on an annual basis, to
1.25% of the assets in each Division. The charge is deducted on each Valuation
Date at the rate of .003446% for each day in the Valuation Period.
ASSET BASED ADMINISTRATIVE CHARGE
We will deduct a daily charge from the assets in each Division, to
compensate us for a portion of the administrative expenses under the Contract.
The daily charge is at a rate of 0.000411% (equivalent to an annual rate of
0.15%) on the assets in each Division.
This asset based administrative charge plus the administrative charge above
will not exceed the cost of the services to be provided over the life of the
Contract.
TRUST EXPENSES
There are fees and charges deducted from each Portfolio of the ESS Trust,
The GCG Trust, the Travelers Fund and the Greenwich Street Series Fund. Please
read the respective Trust prospectus for details.
CHOOSING YOUR ANNUITIZATION OPTIONS
ANNUITIZATION OF YOUR CONTRACT
If the Annuitant and Owner are living on the Annuity Commencement Date, we
will begin making payments to the Owner under an income plan. We will make
these payments under the Annuity Option chosen. You may
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change an Annuity Option by making a written request to us at least 30 days
prior to the Annuity Commencement Date of the Contract. The amount of the
payments will be determined by applying your Accumulation Value on the Annuity
Commencement Date in accordance with The Annuity Options section below,
subject to our published rules at such time. See When We Make Payments.
You may also elect an Annuity Option on surrender of the Contract for its
Cash Surrender Value or you may choose one or more Annuity Options for the
payment of death benefit proceeds while it is in effect and before the Annuity
Commencement Date. If, at the time of the Owner's death or the Annuitant's
death (if the Owner is not an individual), no option has been chosen for
paying death benefit proceeds, the Beneficiary may choose an option within 60
days. In all events, payments of death benefit proceeds must comply with the
distribution requirements of applicable Federal tax law.
The minimum monthly annuity income payment that we will make is $20. We may
require that a single sum payment be made if the Accumulation Value is less
than $2,000 or if the calculated monthly annuity income payment is less than
$20.
For each option we will issue a separate written agreement putting the
option into effect. Before we pay any annuity benefits, we require the return
of the Contract. If your Contract has been lost, we will require that you
complete and return the applicable Contract form. Various factors will affect
the level of annuity benefits including the Annuity Option chosen, the
applicable payment rate used and the investment results of the Divisions in
which the Accumulation Value has been invested.
Some annuity options may provide only for fixed payments. Fixed Annuity
Payments are regular payments, the amount of which is fixed and guaranteed by
us. The amount of the payments will depend only on the form and duration of
payments chosen, the age of the Annuitant or Beneficiary (and sex, where
appropriate), the total Accumulation Value applied to purchase the fixed
option, and the applicable payment rate.
Our approval is needed for any option where:
(1) The person named to receive payment is other than the Owner or
Beneficiary;
(2) The person named is not a natural person, such as a corporation; or
(3) Any income payment would be less than the minimum annuity income
payment allowed.
ANNUITY COMMENCEMENT DATE SELECTION
You select the Annuity Commencement Date. You may select any date following
the third Contract Anniversary but before the Contract Processing Date in the
month following the Annuitant's 90th birthday. If, on the Annuity Commencement
Date, a Surrender Charge remains, the elected Annuity Option must include a
period certain of at least five years duration. If you do not select a date,
the Annuity Commencement Date will be in the month following the Annuitant's
90th birthday. 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,
quarterly, semi-annually or annually. If we do not receive written notice from
you, the payments will be made monthly. There may be certain restrictions on
minimum payments that we will allow.
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THE ANNUITIZATION OPTIONS
There are four options to choose from as shown below. Options 1 through 3
are fixed and option 4 may be fixed or variable. For a fixed option, the
Accumulation Value in the Divisions is transferred to the general account.
OPTION 1. INCOME FOR A FIXED PERIOD
Payment is made in equal installments for a fixed number of years based on
the Accumulation Value as of the annuity commencement date. We guarantee that
each monthly payment will be at least the amount set forth in the Contract.
Guaranteed amounts for annual, semi-annual and quarterly payments are
available upon request. Illustrations are available upon request. If the Cash
Surrender Value or Accumulation Value is applied under this option, a 10%
penalty tax may apply to the taxable portion of each income payment until the
Owner reaches age 59 1/2.
OPTION 2. INCOME FOR LIFE
Payment is made in equal monthly installments and guaranteed for at least a
period certain. The period certain can be 10 or 20 years. Other periods
certain may be available on request. A refund certain may be chosen instead.
Under this arrangement, income is guaranteed until payments equal the amount
applied. If the person named lives beyond the guaranteed period, payments
continue until his or her death. We guarantee that each payment will be at
least the amount set forth in the Contract corresponding to the person's age
on his or her last birthday before the option's effective date. Amounts for
ages not shown in the Contract are available upon request.
OPTION 3. JOINT LIFE INCOME
This option is available if there are two persons named to receive payments.
At least one of the persons named must be either the Owner or Beneficiary of
the Contract. Monthly payments are guaranteed and are made as long as at least
one of the named persons is living. There is no minimum number of payments.
Monthly payment amounts are available upon request.
OPTION 4. ANNUITY PLAN
An amount can be used to buy any single premium annuity we offer on the
option's effective date.
PAYMENT WHEN NAMED PERSON DIES
When the person named to receive payment dies, we will pay any amounts still
due as provided by the option agreement. The amounts still due are determined
as follows:
(1) For option 1, or any remaining guaranteed payments under option 2,
payments will be continued. Under options 1 and 2, the discounted
values of the remaining guaranteed payments may be paid in a single
sum. This means we deduct the amount of the interest each remaining
guaranteed payment would have earned had it not been paid out early.
The discount interest rate is never less than 3% for option 1 and 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 CONTRACT PROVISIONS
IN CASE OF ERRORS IN APPLICATION INFORMATION
If an age or sex given in the application or enrollment form is misstated,
the amounts payable or benefits provided by the Contract shall be those that
the premium payment would have bought at the correct age or sex.
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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
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
American.
AUTHORITY TO MAKE AGREEMENTS
All agreements made by us must be signed by our president or a vice
president and by our secretary or an assistant secretary. No other person,
including an insurance agent or broker, can change any of the Contract's
terms, make any agreements binding on us or extend the time for premium
payments.
CONTRACT CHANGES -- APPLICABLE TAX LAW
We reserve the right to make changes in the Contract to the extent we deem
it necessary to continue to qualify the Contract as an annuity. Any such
changes will apply uniformly to all Contracts that are affected. You will be
given advance written notice of such changes.
YOUR RIGHT TO CANCEL OR EXCHANGE YOUR CONTRACT
CANCELLING YOUR CONTRACT
You may cancel your Contract within your Free Look Period, which is ten days
after you receive your Contract. For purposes of administering our allocation
and administrative rules, we deem this period to expire 15 days after the
Contract is mailed to you. Some states may require a longer Free Look Period.
If you decide to cancel, you may mail or deliver the Contract to our Customer
Service Center. We will refund the Accumulation Value plus any charges we
deducted, and the Contract will be voided as of the date we receive the
Contract and your request. See Facts About the Contract, Measurement of
Investment Experience, Index of Experience and Unit Value.
EXCHANGING YOUR CONTRACT
For information regarding exchanges under Section 1035 of the Internal
Revenue Code of 1986, as amended, see Federal Tax Considerations.
OTHER CONTRACT CHANGES
You may change the Contract to another annuity plan subject to our rules at
the time of the change.
GROUP OR SPONSORED ARRANGEMENTS
For certain group or sponsored arrangements, we may reduce any surrender,
administration, and mortality and expense risk charges. We may also change the
minimum initial and additional premium requirements, or
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offer a reduced death benefit. Group arrangements include those in which a
trustee or an employer, for example, purchases Contracts covering a group of
individuals on a group basis. Sponsored arrangements include those in which an
employer allows us to sell Contracts to its employees on an individual basis.
Our costs for sales, administration, and mortality generally vary with the
size and stability of the group among other factors. We take all these factors
into account when reducing charges. To qualify for reduced charges, a group or
sponsored arrangement must meet certain requirements, including our
requirements for size and number of years in existence. Group or sponsored
arrangements that have been set up solely to buy Contracts or that have been
in existence less than six months will not qualify for reduced charges. We
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 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.
Commissions will be paid to broker-dealers who sell the Contract. Broker-
dealers will be paid commissions, up to an amount currently equal to 6.5% of
premium payments, for promotional or distribution expenses associated with the
marketing of the Contract. Golden American may, by agreement with the broker-
dealer, pay commissions as a combination of a certain percentage amount at the
time of sale and a trail commission (which when combined could exceed 6.5% of
premiums). In addition, under certain circumstances, Golden American may pay
certain sellers production bonuses which will take into account, among other
things, the total premium payments which have been made under the Contract
associated with the broker-dealer. Additional payments or allowances may be
made for other services not directly related to the sale of the Contract.
REGULATORY INFORMATION
VOTING RIGHTS
ACCOUNT B
We will vote the shares of a Trust owned by Account B according to your
instructions. However, if the Investment Company Act of 1940 or any related
regulations should change, or if interpretations of it or related regulations
should change, and we decide that we are permitted to vote the shares of a
Trust in our own right, we may decide to do so.
We determine the number of shares that you have in a Division by dividing
the Contract's Accumulation Value in that Division by the net asset value of
one share of the portfolio in which a Division invests. Fractional votes will
be counted. We will determine the number of shares you can instruct us to vote
180 days or less before a Trust's meeting. We will ask you for voting
instructions by mail at least 10 days before the meeting.
If we do not get your instructions in time, we will vote the shares in the
same proportion as the instructions received from all Contracts in that
Division. We will also vote shares we hold in Account B which are not
attributable to Owners in the same proportion.
STATE REGULATION
We are regulated and supervised by the Insurance Department of the State of
Delaware, which periodically examines our financial condition and operations.
We are also subject to the insurance laws and regulations of all jurisdictions
where we do business. The Contract offered by this prospectus has been
approved by the Insurance
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Department of the State of Delaware and by the Insurance Department of New
Hampshire and any other states in which it may be offered. We are required to
submit annual statements of our operations, including financial statements, to
the Insurance Departments of the various jurisdictions in which we do business
to determine solvency and compliance with state insurance laws and
regulations.
YEAR 2000
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 the Company's systems are or will be substantially
compliant by the Year 2000, and Golden American 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 make the system compliant. To mitigate the effect of outside
influences and other dependencies relative to the Year 2000, Golden American
will continue to contact significant customers, suppliers and other third
parties. To the extent these third parties would be unable to transact
business in the Year 2000 and thereafter, the Company's operations could be
adversely affected.
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 material 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, Esquire, Executive Vice President, General
Counsel and Secretary of Golden American. Sutherland, Asbill & Brennan LLP of
Washington, D.C. has provided advice on certain matters relating to Federal
securities laws.
EXPERTS
The audited financial statements of Golden American Life Insurance Company
and Separate Account B appearing or incorporated by reference in the Statement
of Additional Information and Registration Statement have been audited by
Ernst & Young LLP, independent auditors, as set forth in their reports thereon
appearing or incorporated by reference in the Statement of Additional
Information and in the Registration Statement and are included or incorporated
by reference in reliance upon such reports given upon the authority of such
firm as experts in accounting and auditing.
FEDERAL TAX CONSIDERATIONS
INTRODUCTION
The following discussion of the federal income tax treatment of the Contract
is not exhaustive, does not purport to cover all situations, and is not
intended as tax advice. The federal income tax treatment of the Contract is
unclear in certain circumstances, and a qualified tax adviser should always be
consulted with regard to the application of the tax law to individual
circumstances. This discussion is based on the Internal Revenue Code of 1986,
as amended (the "Code"), Treasury Department regulations, and interpretations
existing on the date of this prospectus. These authorities, however, are
subject to change by Congress, the Treasury Department, and judicial
decisions.
This discussion does not address state or local tax consequences associated
with the purchase of the Contract. In addition, GOLDEN AMERICAN MAKES NO
GUARANTEE REGARDING ANY TAX
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TREATMENT -- FEDERAL, STATE OR LOCAL -- OF ANY CONTRACT OR OF ANY TRANSACTION
INVOLVING A CONTRACT.
TAX STATUS OF GOLDEN AMERICAN
Golden American is taxed as a life insurance company under the Code. Since
the operations of Account B are a part of, and are taxed with, the operations
of Golden American, Account B is not separately taxed as a "regulated
investment company" under the Code. Under existing federal income tax laws,
investment income and capital gains of Account B are not taxed to Golden
American to the extent they are applied under a Contract. Golden American does
not anticipate that it will incur any federal income tax liability in Account
B attributable to Contract obligations, and therefore Golden American does not
intend to make provision for any such taxes. If Golden American is taxed on
investment income or capital gains of Account B, then Golden American may
impose a charge against Account B, as appropriate, in order to make provision
for such taxes.
TAXATION OF NON-QUALIFIED ANNUITIES
TAX DEFERRAL DURING ACCUMULATION PERIOD
Under existing provisions of the Code, except as described below, any
increase in an Owner's Accumulation Value is generally not taxable to the
Owner until amounts are received from the Contract, either in the form of
annuity payments as contemplated by the Contract, or in some other form of
distribution. However, this rule allowing deferral applies only if (1) the
investments of Account B are "adequately diversified" in accordance with
Treasury Department regulations, (2) Golden American, rather than the Owner,
is considered the owner of the assets of Account B for federal income tax
purposes, and (3) the Contract is owned by an individual (or is treated as
owned by an individual). In addition to the foregoing, if the Contract's
annuity commencement date occurs at a time when the Annuitant is at an
advanced age, such as over age 85, it is possible that the Owner will be
taxable currently on the annual increase in the Accumulation Value.
Diversification Requirements. The Code and Treasury Department regulations
prescribe the manner in which the investments of a segregated asset account,
such as the Divisions of Account B, are to be "adequately diversified." If a
Division of Account B failed to comply with these diversification standards,
contracts based on that segregated asset account would not be treated as an
annuity contract for federal income tax purposes and the Owner would generally
be taxable currently on the income on the contract (as defined in the tax law)
beginning with the period of non-diversification. Golden American expects that
the Divisions of Account B will comply with the diversification requirements
prescribed by the Code and Treasury Department regulations.
Ownership Treatment. In certain circumstances, variable annuity contract
owners may be considered the owners, for federal income tax purposes, of the
assets of a segregated asset account, such as the Divisions of Account B, used
to support their contracts. In those circumstances, income and gains from the
segregated asset account would be includible in the contract owners' gross
income. The Internal Revenue Service (the "IRS") has stated in published
rulings that a variable contract owner will be considered the owner of the
assets of a segregated asset account if the owner possesses incidents of
ownership in those assets, such as the ability to exercise investment control
over the assets. In addition, the Treasury Department announced, in connection
with the issuance of regulations concerning investment diversification, that
those regulations "do not provide guidance concerning the circumstances in
which investor control of the investments of a segregated asset account may
cause the investor, rather than the insurance company, to be treated as the
owner of the assets in the account." This announcement also stated that
guidance would be issued by way of regulations or rulings on 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.
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The ownership rights under the Contract are similar to, but different in
certain respects from, those described by the IRS in rulings in which it was
determined that contract owners were not owners of the assets of a segregated
asset account. For example, the Owner of this Contract has the choice of more
investment options to which to allocate purchase payments and the Accumulation
Value, and may be able to transfer among investment options more frequently,
than in such rulings. These differences could result in the Owner being
treated as the owner of all or a portion of the assets of Account B. In
addition, Golden American does not know what standards will be set forth in
the regulations or rulings which the Treasury Department has stated it expects
to issue. Golden American therefore reserves the right to modify the Contract
as necessary to attempt to prevent Contract Owners from being considered the
owners of the assets of Account B. However, there is no assurance that such
efforts would be successful.
Frequently, if the IRS or the Treasury Department sets forth a new position
which is adverse to taxpayers, the position is applied on a prospective basis
only. Thus, if the IRS or the Treasury Department were to issue regulations or
a ruling which treated an Owner of this Contract as the owner of Account B,
that treatment might apply on a prospective basis. However, if the regulations
or ruling were not considered to set forth a new position, an Owner might
retroactively be determined to be the owner of the assets of Account B.
Non-Natural Owner. As a general rule, Contracts held by "non-natural
persons" such as a corporation, trust or other similar entity, as opposed to a
natural person, are not treated as annuity contracts for federal tax purposes.
The income on such Contracts (as defined in the tax law) is taxed as ordinary
income that is received or accrued by the Owner of the Contract during the
taxable year. There are several exceptions to this general rule for non-
natural Owners. First, Contracts will generally be treated as held by a
natural person if the nominal Owner is a trust or other entity which holds the
Contract as an agent for a natural person. However, this special exception
will not apply in the case of any employer who is the nominal Owner of a
Contract under a non-qualified deferred compensation arrangement for its
employees.
In addition, exceptions to the general rule for non-natural Owners will
apply with respect to (1) Contracts acquired by an estate of a decedent by
reason of the death of the decedent, (2) certain Contracts issued in
connection with qualified retirement plans, including certain Roth IRA
contracts, (3) certain Contracts purchased by employers upon the termination
of certain qualified retirement plans, (4) certain Contracts used in
connection with structured settlement agreements, and (5) Contracts purchased
with a single purchase payment when the annuity starting date (as defined in
the tax law) is no later than a year from purchase of the Contract and
substantially equal periodic payments are made, not less frequently than
annually, during the annuity period.
The remainder of this discussion assumes that the Contract will be treated
as an annuity contract for federal income tax purposes.
TAXATION OF PARTIAL WITHDRAWALS AND SURRENDERS
In the case of a partial withdrawal prior to the annuity commencement date,
amounts received generally are includible in income to the extent the Owner's
Accumulation Value (determined without regard to any surrender charge, within
the meaning of the tax law) before the surrender exceeds his or her
"investment in the contract." In the case of a surrender of the Contract for
the cash surrender value, amounts received are includible in income to the
extent they exceed the "investment in the contract." For these purposes, the
investment in the contract at any time equals the total of the premium
payments made under the Contract to that time (to the extent such payments
were neither deductible when made nor excludable from income as, for example,
in the case of certain contributions to IRAs and other qualified retirement
plans) less any amounts previously received from the Contract which were not
includible in income.
In the case of systematic partial withdrawals, the amount of each withdrawal
will generally be taxed in the same manner as a partial withdrawal made prior
to the annuity commencement date, as described above. However, there is some
uncertainty regarding the tax treatment of systematic partial withdrawals, and
it is possible that additional amounts may be includible in income.
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The Contract provides a death benefit that in certain circumstances may
exceed the greater of the premium payments and the Accumulation Value. As
described elsewhere in this prospectus, Golden American imposes certain
charges with respect to the death benefit. It is possible that some portion of
those charges could be treated for federal tax purposes as a partial
withdrawal from the Contract.
In certain circumstances, surrender charges may be waived because of the
Owner's need for extended medical care or because of the Owner's terminal
illness. Distributions made in respect of which surrender charges are waived
are treated as partial withdrawals or surrenders, as the case may be, for
income tax purposes.
TAXATION OF ANNUITY PAYMENTS
Normally, the portion of each annuity payment taxable as ordinary income is
equal to the excess of the payment over the exclusion amount. In the case of
fixed annuity payments, the exclusion amount is the amount determined by
multiplying (1) the fixed annuity payment by (2) the ratio of the "investment
in the contract" (defined above), adjusted for any period certain or refund
feature, allocated to the fixed annuity option to the total expected amount of
fixed annuity payments for the period of the Contract (determined under
Treasury Department regulations). In the case of variable annuity payments,
the exclusion amount for each variable annuity payment is a specified dollar
amount equal to the investment in the contract allocated to the variable
annuity option when payments begin divided by the number of variable payments
expected to be made (determined by Treasury Department regulations).
Once the total amount of the investment in the Contract is excluded using
these formulas, annuity payments will be fully taxable. If annuity payments
cease because of the death of the Annuitant and before the total amount of the
investment in the contract is recovered, the unrecovered amount generally will
be allowed as a deduction to the Annuitant or Beneficiary (depending upon the
circumstances).
TAXATION OF DEATH BENEFIT PROCEEDS
Prior to the annuity commencement date, amounts may be distributed from a
Contract because of the death of an Owner or, in certain circumstances, the
death of the Annuitant. Such death benefit proceeds are includible in income
as follows: (1) if distributed in a lump sum, they are taxed in the same
manner as a surrender, as described above, or (2) if distributed under an
annuity option, they are taxed in the same manner as annuity payments, as
described above. After the annuity commencement date, where a guaranteed
period exists under an annuity option and the Annuitant dies before the end of
that period, payments made to the Beneficiary for the remainder of that period
are includible in income as follows: (1) if received in a lump sum, they are
includible in income to the extent that they exceed the unrecovered investment
in the contract at that time, or (2) if distributed in accordance with the
existing annuity option selected, they are fully excludable from income until
the remaining investment in the contract is deemed to be recovered, and all
annuity payments thereafter are fully includible in income.
If certain amounts become payable in a lump sum from a Contract, such as the
death benefit, it is possible that such amounts might be viewed as
constructively received and thus subject to tax, even though not actually
received. A lump sum will not be constructively received if it is applied
under an annuity option within 60 days after the date on which it becomes
payable. (Any annuity option selected must comply with applicable minimum
distribution requirements imposed by the Code.)
ASSIGNMENTS, PLEDGES, AND GRATUITOUS TRANSFERS
Other than in the case of Contracts issued as IRAs or in connection with
certain other qualified retirement plans (which generally cannot be assigned
or pledged), any assignment or pledge (or agreement to assign or pledge) of
any portion of the value of the Contract is treated for federal income tax
purposes as a partial withdrawal of such amount or portion. The investment in
the contract is increased by the amount includible as income with respect to
such assignment or pledge, though it is not affected by any other aspect of
the assignment
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or pledge (including its release). If an Owner transfers a Contract without
adequate consideration to a person other than the Owner's spouse (or to a
former spouse incident to divorce), the Owner will be taxed on the difference
between the cash surrender value (within the meaning of the tax law) and the
investment in the contract at the time of transfer. In such case, the
transferee's investment in the contract will be increased to reflect the
increase in the transferor's income.
SECTION 1035 EXCHANGES
Code section 1035 provides that no gain or loss is recognized when an
annuity contract is received in exchange for a life, endowment, or annuity
contract, provided that no cash or other property is received in the exchange
transaction. Special rules and procedures apply in order for an exchange to
meet the requirements of section 1035. Also, there are additional tax
considerations involved when the contracts are issued in connection with
qualified retirement plans. Prospective Owners of this Contract should consult
a tax advisor before entering into a section 1035 exchange (with respect to
non-qualified annuity contracts) or a trustee-to-trustee transfer or rollover
(with respect to qualified annuity contracts).
PENALTY TAX ON PREMATURE DISTRIBUTIONS
Where a Contract has not been issued as an IRA or in connection with another
qualified retirement plan, there generally is a 10% penalty tax on the taxable
amount of any payment from the Contract unless the payment is: (a) received on
or after the Owner reaches age 59 1/2; (b) attributable to the Owner's
becoming disabled (as defined in the tax law); (c) made on or after the death
of the Owner or, if the Owner is not an individual, on or after the death of
the primary annuitant (as defined in the tax law); (d) made as a series of
substantially equal periodic payments (not less frequently than annually) for
the life (or life expectancy) of the Owner or the joint lives (or joint life
expectancies) of the Owner and a designated beneficiary (as defined in the tax
law), or (e) made under a Contract purchased with a single purchase payment
when the annuity starting date (as defined in the tax law) is no later than a
year from purchase of the Contract and substantially equal periodic payments
are made, not less frequently than annually, during the annuity period.
In the case of systematic partial withdrawals, it is unclear whether such
withdrawals will qualify for exception (d) above. (For reporting purposes, we
currently treat such withdrawals as if they do not qualify for this
exception). In addition, if withdrawals are of interest amounts only,
exception (d) will not apply.
AGGREGATION OF CONTRACTS
In certain circumstances, the amount of an annuity payment, withdrawal or
surrender from a Contract that is includible in income is determined by
combining some or all of the annuity contracts owned by an individual not
issued in connection with qualified retirement plans. For example, if a person
purchases two or more deferred annuity contracts from the same insurance
company (or its affiliates) during any calendar year, all such contracts will
be treated as one contract for purposes of determining whether any payment not
received as an annuity (including withdrawals and surrenders prior to the
annuity commencement date) is includible in income. In addition, if a person
purchases a Contract offered by this prospectus and also purchases at
approximately the same time an immediate annuity, the IRS may treat the two
contracts as one contract. The effects of such aggregation are not clear;
however, it could affect the time when income is taxable and the amount which
might be subject to the 10% penalty tax described above.
IRA CONTRACTS AND OTHER QUALIFIED RETIREMENT PLANS IN GENERAL
In addition to issuing the Contracts as non-qualified annuities, Golden
American also currently issues the Contracts as IRAs. (As indicated above in
this prospectus, IRAs are referred to as "qualified plans.") Golden American
may also issue the Contracts in connection with certain other types of
qualified retirement plans which receive favorable treatment under the Code.
Numerous special tax rules apply to the owners under IRAs and other qualified
retirement plans and to the contracts used in connection with such plans.
These tax rules vary
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according to the type of plan and the terms and conditions of the plan itself.
For example, for both surrenders and annuity payments under certain contracts
issued in connection with qualified retirement plans, there may be no
"investment in the contract" and the total amount received may be taxable.
Also, special rules apply to the time at which distributions must commence and
the form in which the distributions must be paid. Therefore, no attempt is
made to provide more than general information about the use of Contracts with
the various types of qualified retirement plans. A qualified tax advisor
should be consulted before purchase of a Contract in connection with a
qualified retirement plan.
When issued in connection with a qualified retirement plan, a Contract will
be amended as necessary to conform to the requirements of the plan. However,
Owners, Annuitants, and Beneficiaries are cautioned that the rights of any
person to any benefits under qualified retirement plans may be subject to the
terms and conditions of the plans themselves, regardless of the terms and
conditions of the Contract. In addition, Golden American is not bound by terms
and conditions of qualified retirement plans to the extent such terms and
conditions contradict the Contract, unless Golden American consents.
INDIVIDUAL RETIREMENT ANNUITIES
As indicated above, Golden American currently issues the Contract as an IRA.
If the Contract is used for this purpose, the Owner must be the Annuitant.
Premium Payments. Both the premium payments that may be paid, and the tax
deduction that an individual may claim for such premium payments, are limited
under an IRA. In general, the premium payments that may be made for an IRA for
any year are limited to the lesser of $2,000 or 100% of the individual's
earned income for the year. Also, with respect to an individual who has less
income than his or her spouse, premium payments may be made by that individual
into an IRA to the extent of the lesser of (1) $2,000, or (2) the sum of (i)
the compensation includible in the gross income of the individual for the
taxable year and (ii) the compensation includible in the gross income of the
individual's spouse for the taxable year reduced by the amount allowed as a
deduction for IRA contributions to such spouse. An excise tax is imposed on
IRA contributions that exceed the law's limits.
The deductible amount of the premium payments made for an IRA for any
taxable year (including a contract for a noncompensated spouse) is limited to
the amount of premium payments that may be paid for the contract for that
year, or a lesser amount where the individual or his or her spouse is an
active participant in certain qualified retirement plans. A single person who
is an active participant in a qualified retirement plan (including a qualified
pension, profit-sharing, or annuity plan, a simplified employee pension plan,
or a "section 403(b)" annuity plan, as discussed below) and who has adjusted
gross income in excess of $40,000 may not deduct premium payments, and such a
person with adjusted gross income between $30,000 and $40,000 may deduct only
a portion of such payments. Also, married persons who file a joint return, one
of whom is an active participant in a qualified retirement plan, and who have
adjusted gross income in excess of $60,000 may not deduct premium payments,
and those with adjusted gross in come between $50,000 and $60,000 may deduct
only a portion of such payments.
In applying these and other rules applicable to an IRA, all individual
retirement accounts and IRAs owned by an individual are treated as one
contract, and all amounts distributed during any taxable year are treated as
one distribution.
Tax Deferral During Accumulation Period. Until distributions are made from
an IRA, increases in the Accumulation Value of the Contract are not taxed.
IRAs and individual retirement accounts (that may invest in this Contract)
generally may not invest in life insurance contracts, but an annuity contract
that is issued as an IRA (or that is purchased by an individual retirement
account) may provide a death benefit that equals the greater of the premiums
paid and the contract's
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cash value. The Contract provides a death benefit that in certain
circumstances may exceed the greater of the premium payments and the
Accumulation Value. It is possible that an enhanced death benefit could be
viewed as violating the prohibition on investment in life insurance contracts,
with the result that the Contract would not be viewed as satisfying the
requirements of an IRA and would not be a permissible investment for an
individual retirement account.
Taxation of Distributions and Rollovers. If all premium payments made to an
IRA were deductible, all amounts distributed from the Contract are included in
the recipient's income when distributed. However, if nondeductible premium
payments were made to an IRA (within the limits allowed by the tax laws), a
portion of each distribution from the Contract typically is includible in
income when it is distributed. In such a case, any amount distributed as an
annuity payment or in a lump sum upon death or surrender is taxed as described
above in connection with such a distribution from a non qualified contract,
treating as the investment in the contract the sum of the nondeductible
premium payments at the end of the taxable year in which the distribution
commences or is made (less any amounts previously distributed that were
excluded from income). Also, in such a case, any amount distributed upon a
partial withdrawal is partially includible in income. The includible amount is
the excess of the distribution over the exclusion amount, which in turn
generally equals the distribution multiplied by the ratio of the investment in
the Contract to the Accumulation Value.
In any event, subject to the direct rollover and mandatory withholding
requirements (discussed below), amounts may be "rolled over" from certain
qualified retirement plans to an IRA (or from one IRA or individual retirement
account to an IRA) without incurring current income tax if certain conditions
are met. Only certain types of distributions to eligible individuals from
qualified retirement plans, individual retirement accounts, and IRAs may be
rolled over.
Penalty Taxes. Subject to certain exceptions, a penalty tax is imposed on
distributions from an IRA equal to 10% of the amount of the distribution
includible in income. (Amounts rolled over from an IRA generally are
excludable from income.) The exceptions provide, however, that this penalty
tax does not apply to distributions made to the Owner (1) on or after age 59
1/2, (2) on or after death or because of disability (as defined in the tax
law), or (3) as part of a series of substantially equal periodic payments over
the life (or life expectancy) of the Owner or the joint lives (or joint life
expectancies) of the Owner and his or her beneficiary (as defined in the tax
law). In addition to the foregoing, failure to comply with a minimum
distribution requirement will result in the imposition of a penalty tax of 50%
of the amount by which a minimum required distribution exceeds the actual
distribution from an IRA. Under this requirement, distributions of minimum
amounts from an IRA as specified in the tax law must generally commence by
April 1 of the calendar year following the calendar year in which the Owner
attains age 70 1/2.
OTHER TYPES OF QUALIFIED RETIREMENT PLANS
The following sections describe tax considerations of Contracts used in
connection with various types of qualified retirement plans other than IRAs.
Golden American does not currently offer all of the types of qualified
retirement plans described and may not offer them in the future. Prospective
purchasers of Contracts for use in connection with such qualified retirement
plans should therefore contact Golden American's Customer Service Center to
ascertain the availability of the Contract for qualified retirement plans at
any given time.
Simplified Employee Pensions (SEP-IRAs). Section 408(k) of the Code allows
employers to establish simplified employee pension plans for their employees,
using the employees' IRAs for such purposes, if certain criteria are met.
Under these plans the employer may, within specified limits, make deductible
contributions on behalf of the employees to IRAs. As discussed above (see
Individual Retirement Annuities), there is some uncertainty regarding the
treatment of the Contract's enhanced death benefit for purposes of certain tax
rules governing IRAs (which would include SEP-IRAs). Employers intending to
use the contract in connection with such plans should seek competent advice.
SIMPLE IRAs. Section 408(p) of the Code permits certain small employers to
establish "SIMPLE retirement accounts," including SIMPLE IRAs, for their
employees. Under SIMPLE IRAs, certain deductible
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contributions are made by both employees and employers. SIMPLE IRAs are
subject to various requirements, including limits on the amounts that may be
contributed, the persons who may be eligible, and the time when distributions
may commence. As discussed above (see Individual Retirement Annuities), there
is some uncertainty regarding the proper characterization of the Contract's
enhanced death benefit for purposes of certain tax rules governing IRAs (which
would include SIMPLE IRAs). Employers intending to use the Contract in
connection with a SIMPLE retirement account should seek competent advice.
ROTH INDIVIDUAL RETIREMENT ANNUITIES (ROTH IRAs).
Golden American currently issues the Contract as a Roth IRA. If the contract
is used for this purpose, the Owner must be the Annuitant.
Premium Payments. All premium payments to a Roth IRA are limited and are
non-deductible. In general, premium payments to a Roth IRA in a taxable year
are limited to the lesser of $2,000 or 100% of an individual's earned income
less any contributions made to other IRAs, including both Roth and non Roth
IRAs, but excluding any rollover contributions to IRAs. Subject to coordinated
IRA contribution limits, contributions to a Roth IRA for an individual and a
spouse cannot exceed $4,000 or 100% of the individual's and spouse's earned
income, if less. The maximum contribution can be made if either of the
following applies: (a) for joint tax filers, their adjusted gross income is
$150,000 or less, or (b) for individual tax filers, their adjusted gross
income is $95,000 or less. For amounts over these adjusted gross incomes, the
contribution limit is reduced as follows: (a) for a joint tax filer, the
maximum is reduced by 20% of the excess adjusted gross income over $150,000
(no contributions over $160,000); (b) for an individual tax filer, the maximum
is reduced by 13.3% of the excess adjusted gross income over $95,000 (no
contributions over $110,000).
Conversions of Non-Roth IRA to a Roth IRA. A Roth IRA may be purchased with
amounts received as a qualified rollover ("Rollover Roth IRA") if the
following conditions are met: (a) when a rollover is from a non-Roth IRA, the
taxpayer must not be a married individual filing separately and the taxpayer's
adjusted gross income must not exceed $100,000; (b) rollovers must be made
within 60 days of receipt by the taxpayer; (c) minimum distributions from a
non-Roth IRA cannot be contributed to a Rollover Roth IRA; (d) an asset
received in a distribution may be sold and the proceeds put in a Rollover Roth
IRA; (e) all or part of a non-Roth IRA may be contributed to a Rollover Roth
IRA except an inherited IRA or a SIMPLE IRA; (f) a rollover contribution must
be designated in writing as such by the Owner at the time the rollover
contribution must be designated in writing as such by the Owner at the time
the rollover is made. Any distribution from a non-Roth IRA made within 60 days
to a Roth IRA is taxable in the year of the distribution. For rollovers or
conversions completed in 1998, taxable income due to the distribution may be
included evenly over 1998-2001 tax years.
Rollovers from a Roth IRA to a Roth IRA. A rollover from a Roth IRA to a
Roth IRA may be accomplished if the following conditions are met: (a) the
rollover must be a direct rollover for the five year holding period of the
original Roth IRA to be preserved; (b) the rollover may be made for all or a
portion of the Roth IRA; (c) a rollover contribution must be designated as
such in writing at the time the rollover is made.
Taxation of Roth IRA Distributions. A distribution from a Roth IRA is not
subject to income tax or to the additional 10% penalty tax on premature
distributions if it is a "qualified distribution." A qualified distribution is
any payment or distribution from a Roth IRA which is made: (a) following the
end of the fifth taxable period (year) after a contribution or rollover is
made to a Roth IRA, and (b) on or after the Owner attains age 59 1/2, or made
to a beneficiary on or after the Owner's death, or as a result of the Owner
becoming disabled, or qualified first-time home buyer distribution (subject to
a $10,000 lifetime limit). Distributions not meeting these definitions are
"non-qualified distributions." Non-qualified distribution are treated as being
made from contributions to a Roth IRA to the extent the distribution, when
added to all previous distributions from a Roth IRA, does not exceed the sum
of contributions to a Roth IRA. A non-qualified distribution in excess of the
sum of contributions is subject to ordinary income tax in the year a
distribution is made. Such taxable distribution is also subject to a 10%
penalty tax unless the distribution is made under certain limited
circumstances.
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Roth IRAs are not subject to required distributions at age 70 1/2.
Corporate and Self-Employed ("H.R. 10" or "Keogh") Pension and Profit-
Sharing Plans. Sections 401(a) and 403(a) of the Code permit corporate
employers to establish various types of tax-favored retirement plans for
employees. The Self-Employed Individuals' Tax Retirement Act of 1962, as
amended, commonly referred to as "H.R. 10" or "Keogh," permits self-employed
individuals also to establish such tax-favored retirement plans for themselves
and their employees. Such retirement plans may permit the purchase of the
Contract in order to provide benefits under the plans. The Contract provides a
death benefit that in certain circumstances may exceed the greater of the
premium payments and the Accumulation Value. It is possible that such death
benefit could be characterized as an incidental death benefit. There are
limitations on the amount of incidental benefits that may be provided under
pension and profit sharing plans. In addition, the provision of such benefits
may result in currently taxable income to participants. Employers intending to
use the contract in connection with such plans should seek competent advice.
Section 403(b) Annuity Contracts. Section 403(b) of the Code permits public
school employees, employees of certain types of charitable, educational and
scientific organizations exempt from tax under section 501(c)(3) of the Code,
and employees of certain types of State educational organizations specified in
section 170(b)(l)(A)(ii), to have their employers purchase annuity contracts
for them and, subject to certain limitations, to exclude the amount of premium
payments from gross income for federal income tax purposes. Purchasers of the
contracts for use as a "Section 403(b) Annuity Contract" should seek competent
advice as to eligibility, limitations on permissible amounts of premium
payments and other tax consequences associated with such contracts. In
particular, purchasers and their advisors should consider that this Contract
provides a death benefit that in certain circumstances may exceed the greater
of the premium payments and the Accumulation Value. It is possible that such
death benefit could be characterized as an incidental death benefit. If the
death benefit were so characterized, this could result in currently taxable
income to employees. In addition, there are limitations on the amount of
incidental death benefits that may be provided under a Section 403(b) Annuity
Contract. Even if the death benefit under the contract were characterized as
an incidental death benefit, it is unlikely to violate those limits unless the
purchaser also purchases a life insurance contract as part of his or her
Section 403(b) Annuity Contract.
Section 403(b) Annuity Contracts contain restrictions on withdrawals of (i)
contributions made pursuant to a salary reduction agreement in years beginning
after December 31, 1988, (ii) earnings on those contributions, and (iii)
earnings after 1988 on amounts attributable to salary reduction contributions
(and earnings on those contributions) held as of the last year beginning
before January 1, 1989. These amounts can be paid only if the employee has
reached age 59 1/2, separated from service, died, become disabled (within the
meaning of the tax law), or in the case of hardship. Amounts permitted to be
distributed in the event of hardship are limited to actual contributions;
earnings thereon cannot be distributed on account of hardship. (These
limitations on withdrawals do not apply to the extent Golden American is
directed to transfer some or all of the Accumulation Value as a tax-free
direct transfer to the issuer of another Section 403(b) Annuity Contract or
into a section 403(b)(7) custodial account subject to withdrawal restrictions
which are at least as stringent.)
Eligible Deferred Compensation Plans of State and Local Governments and Tax-
Exempt Organizations. Section 457 of the Code permits employees of state and
local governments and tax-exempt organizations to defer a portion of their
compensation without paying current federal income taxes. The employees must
be participants in an eligible deferred compensation plan. To the extent the
contract is used in connection with an eligible plan, the employer as owner of
the contract has the sole right to the proceeds of the contract, until paid or
made available to the participant or other recipient, subject only to the
claims of the employer's general creditors. Generally, a Contract purchased by
a state or local government or a tax-exempt organization will not be treated
as an annuity contract for federal income tax purposes. Those who intend to
use the contracts in connection with such plans should seek competent advice.
DIRECT ROLLOVERS AND FEDERAL INCOME TAX WITHHOLDING FOR "ELIGIBLE ROLLOVER
DISTRIBUTIONS"
In the case of an annuity contract used in connection with a pension, profit
sharing, or annuity plan qualified under sections 401(a) or 403(a) of the
Code, or that is a Section 403(b) Annuity Contract, any "eligible rollover
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distribution" from the contract will be subject to direct rollover and
mandatory withholding requirements. An eligible rollover distribution
generally is the taxable portion of any distribution from a qualified pension
plan under section 401(a) of the Code, qualified annuity plan under Section
403(a) of the Code, or Section 403(b) Annuity or custodial account, excluding
certain amounts (such as minimum distributions required under section
401(a)(9) of the Code and distributions which are part of a "series of
substantially equal periodic payments" made not less frequently than annually
for the life (or life expectancy) of the employee, or for the joint lives (or
joint life expectancies) of the employee and the employee's designated
beneficiary (within the meaning of the tax law), or for a specified period of
10 years or more).
Under these requirements, federal income tax equal to 20% of the eligible
rollover distribution will be withheld from the amount of the distribution.
Unlike withholding on certain other amounts distributed from the Contract,
discussed below, the taxpayer cannot elect out of withholding with respect to
an eligible rollover distribution. However, this 20% withholding will not
apply to that portion of the eligible rollover distribution which, instead of
receiving, the taxpayer elects to have directly transferred to certain
eligible retirement plans (such as to this contract when issued as an IRA).
If this Contract is issued in connection with a pension, profit-sharing, or
annuity plan qualified under sections 401(a) or 403(a) of the Code, or is a
Section 403(b) Annuity Contract, then, prior to receiving an eligible rollover
distribution, the owner will receive a notice (from the plan administrator or
Golden American) explaining generally the direct rollover and mandatory
withholding requirements and how to avoid the 20% withholding by electing a
direct transfer.
FEDERAL INCOME TAX WITHHOLDING
Golden American will withhold and remit to the federal government a part of
the taxable portion of each distribution made under the Contract unless the
distributee notifies Golden American at or before the time of the distribution
that he or she elects not to have any amounts withheld. In certain
circumstances, Golden American may be required to withhold tax, as explained
above. The withholding rates applicable to the taxable portion of periodic
annuity payments (other than eligible rollover distributions) are the same as
the withholding rates generally applicable to payments of wages. In addition,
the withholding rate applicable to the taxable portion of non-periodic
payments (including surrenders prior to the annuity commencement date) is 10%.
Regardless of whether you elect to have federal income tax withheld, you are
still liable for payment of federal income tax on the taxable portion of the
payment. As discussed above, the withholding rate applicable to eligible
rollover distributions is 20%.
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STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INTRODUCTION
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.............................................. 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>
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<PAGE>
PLEASE TEAR OFF, COMPLETE AND RETURN THE FORM BELOW TO ORDER A FREE
STATEMENT OF ADDITIONAL INFORMATION FOR THE CONTRACTS OFFERED UNDER THE
PROSPECTUS. ADDRESS THE FORM TO OUR CUSTOMER SERVICE CENTER, THE ADDRESS IS
SHOWN ON THE COVER.
- ------------------------------------------------------------------------------
PLEASE SEND ME A FREE COPY OF THE STATEMENT OF ADDITIONAL INFORMATION FOR
SEPARATE ACCOUNT B
PLEASE PRINT OR TYPE
_______________________________
NAME
_______________________________
SOCIAL SECURITY NUMBER
_______________________________
STREET ADDRESS
_______________________________
CITY, STATE, ZIP
PE-I-NH 5.98
- ------------------------------------------------------------------------------
43
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
GRANITE PRIMELITE
DEFERRED COMBINATION VARIABLE
AND FIXED ANNUITY CONTRACT
ISSUED BY
SEPARATE ACCOUNT B
("Account B")
(or the "Account")
OF
GOLDEN AMERICAN LIFE INSURANCE COMPANY
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS. THE INFORMATION
CONTAINED HEREIN SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUS FOR THE
GOLDEN AMERICAN LIFE INSURANCE COMPANY DEFERRED VARIABLE ANNUITY CONTRACT
WHICH IS REFERRED TO HEREIN.
THE PROSPECTUS SETS FORTH INFORMATION THAT A PROSPECTIVE INVESTOR OUGHT TO
KNOW BEFORE INVESTING. FOR A COPY OF THE PROSPECTUS, SEND A WRITTEN REQUEST TO
GOLDEN AMERICAN LIFE INSURANCE COMPANY, CUSTOMER SERVICE CENTER, P.O. BOX 8794,
WILMINGTON, DE 19899-8794 OR TELEPHONE 1-800-366-0066.
DATE OF PROSPECTUS AND
STATEMENT OF ADDITIONAL INFORMATION:
May 1, 1998
<PAGE>
TABLE OF CONTENTS
ITEM PAGE
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Description of Golden American Life Insurance Company. . . . . . . 1
Safekeeping of Assets. . . . . . . . . . . . . . . . . . . . . . . 1
The Administrator. . . . . . . . . . . . . . . . . . . . . . . . . 1
Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . 2
Distribution of Contracts. . . . . . . . . . . . . . . . . . . . . 2
Performance Information. . . . . . . . . . . . . . . . . . . . . . 3
IRA Partial Withdrawal Option. . . . . . . . . . . . . . . . . . . 9
Other Information. . . . . . . . . . . . . . . . . . . . . . . . . 9
Financial Statements of Separate Account B . . . . . . . . . . . . 10
Financial Statements of Golden American Life Insurance Company . . 10
Appendix - Description of Bond Ratings . . . . . . . . . . . . . . A-1
<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.
Prior to 1994, Golden American had arranged with BT Variable, Inc. ("BT
Variable"), an affiliate, to perform services related to the development
and administration of its products. For the year 1993 and the period
from September 30, 1992 to December 31, 1992, fees earned by BT Variable
from Golden American for these services aggregated $2,701,000 and $209,000,
respectively. The agreement was terminated as of January 1, 1994.
In addition, BT Variable provided to Golden American certain of its
personnel to perform management, administrative and clerical services
and the use of certain of its facilities. BT Variable charged Golden
American for such expenses and all other general and administrative costs,
first on the basis of direct charges when identifiable, and second
allocated based on the estimated amount of time spent by BT Variable's
employees on behalf of Golden American. For the year 1993 and the period
from September 30, 1992 to December 31, 1992, BT Variable allocated to
Golden American $1,503,000 and $450,000, respectively. The agreement was
terminated on January 1, 1994.
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
Prior to 1994, Golden American had entered into agreements with DSI to perform
services related to the management of its investments and the distribution
of its products. For the year 1993, Golden American incurred $311,000 for
such services. The agreement was terminated as of January 1, 1994.
DSI acts as the principal underwriter (as defined in the Securities Act of
1933 and the Investment Company Act of 1940, as amended) of the variable
insurance products issued by Golden American which, are sold primarily
through two broker/dealer institutions. For the years ended 1997, 1996
and 1995 commissions paid by Golden American to DSI aggregated
$36,351,000, $27,065,000 and $8,440,000, respectively.
Golden American provided to DSI certain of its personnel to perform
management, administrative and clerical services and the use of certain
facilities. Golden American 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 the yield
and effective yield of the Liquid Asset Division, the yield of the remaining
divisions, and the total return of all divisions, may appear in reports or
promotional literature to current or prospective owners. Negative values are
denoted by minus signs ("-"). Performance information for measures other
than total return do not reflect sales load which can be a maximum level of
6.5% of premium, and any applicable premium tax that can range from 0% to
3.5%. As described in the prospectus, three death benefit options are
available. The following performance values reflect the election at issue
of the 7% Solution Enhanced Death Benefit Option providing values reflecting
the highest aggregate contract charges. If one of the other death benefit
options had been elected, the historical performance values would be higher
than those represented in the examples.
SEC STANDARD MONEY MARKET DIVISION YIELDS
Current yield for the Liquid Asset Division will be based on the change in
the value of a hypothetical investment (exclusive of capital changes) over a
particular 7-day period, less a pro-rata share of division expenses accrued
over that period (the "base period"), and stated as a percentage of the
investment at the start of the base period (the "base period return"). The
base period return is then annualized by multiplying by 365/7, with the
resulting yield figure carried to at least the nearest hundredth of one
percent. Calculation of "effective yield" begins with the same "base period
return" used in the calculation of yield, which is then annualized to reflect
weekly compounding pursuant to the following formula:
EFFECTIVE YIELD = [(BASE PERIOD RETURN) +1) ^ (365/7)] - 1
The current yield and effective yield of the Money Market Division for
the 7-day period December 25, 1997 to December 31, 1997 were 3.65% and
3.72%, respectively.
3
<PAGE>
SEC STANDARD 30-DAY YIELD FOR NON-MONEY MARKET DIVISIONS
Quotations of yield for the remaining divisions will be based on all investment
income per Unit (accumulation value divided by the index of investment
experience) earned during a particular 30-day period, less expenses accrued
during the period ("net investment income"), and will be computed by dividing
net investment income by the valueof an accumulation unit on the last day of
the period, according to the following formula:
YIELD = 2 [ ( a - b +1)^(6) - 1]
-----
cd
Where:
[a] equals the net investment income earned during the
period by the Series attributable to shares owned by a
division
[b] equals the expenses accrued for the period (net of
reimbursements)
[c] equals the average daily number of Units outstanding
during the period based on the index of investment
experience
[d] equals the value (maximum offering price) per index of
investment experience on the last day of the period
Yield on divisions of Account B is earned from the increase in net asset
value of shares of the Series in which the Division invests and from
dividends declared and paid by the Series, which are automatically
reinvested in shares of the Series.
SEC STANDARD AVERAGE ANNUAL TOTAL RETURN FOR ALL DIVISIONS
Quotations of average annual total return for any division will be expressed
in terms of the average annual compounded rate of return of a hypothetical
investment in a contract over a period of one, five and 10 years (or, if less,
up to the life of the division), calculated pursuant to the formula:
P(1+T)^(n)=erv
Where:
(1) [P] equals a hypothetical initial premium payment of
$1,000
(2) [T] equals an average annual total return
(3) [n] equals the number of years
(4) [ERV] equals the ending redeemable value of a
hypothetical $1,000 initial premium payment made at the
beginning of the period (or fractional portion thereof)
4
<PAGE>
All total return figures reflect the deduction of the maximum sales load, the
administrative charges, and the mortality and expense risk charges. The
Securities and Exchange Commission (the "SEC")
requires that an assumption be made that the contract owner surrenders the
entire contract at the end of the one, five and 10 year periods (or, if less,
up to the life of the security) for which performance is required to be
calculated. This assumption may not be consistent with the typical contract
owner's intentions in purchasing a contract and may adversely affect returns.
Quotations of total return may simultaneously be shown for other periods, as
well as quotations of total return that do not take into account certain
contractual charges such as sales load.
Average Annualized Total Return for the Divisions presented on a standardized
basis for the year ending December 31, 1997 were as follows:
<TABLE>
<CAPTION>
Average Annualized Total Return for Periods Ending 12/31/97 -- Standardized
- ----------------------------------------------------------------------------
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>
OTC 10.87%* n/a 19.89%* 10/07/94
Total Return 12.05% n/a 14.66%* 10/07/94
Research 11.32% n/a 20.60%* 10/07/94
Money Market -3.49% n/a 1.32% 05/24/95
Large Cap Value 17.74% n/a 21.72% 04/05/95
International -5.85% n/a 9.85% 03/27/95
High Income 5.14% n/a 10.58% 04/28/95
Appreciation 17.50% n/a 17.41% 03/22/96
</TABLE>
- ----------------------
* Total return calculation reflects partial waiver of fees and expenses.
5
<PAGE>
NON-STANDARD AVERAGE ANNUAL TOTAL RETURN FOR ALL DIVISIONS
Quotations of non-standard average annual total return for any division will
be expressed in terms of the average annual compounded rate of return of a
hypothetical investment in a contract over a period of one, five and 10
years (or, if less, up to the life of the division), calculated pursuant to
the formula:
[P(1+T)^(n)]=ERV
Where:
(1) [P] equals a hypothetical initial premium payment of
$1,000
(2) [T] equals an average annual total return
(3) [n] equals the number of years
(4) [ERV] equals the ending redeemable value of a
hypothetical $1,000 initial premium payment made at the
beginning of the period (or fractional portion thereof)
assuming certain loading and charges are zero.
All total return figures reflect the deduction of the mortality and expense
risk charge and the administrative charges, but not the deduction of the
maximum sales load and the annual contract fee.
Average Annualized Total Return for the Divisions presented on a non-
standardized basis for the year ending December 31, 1997 were as follows:
<TABLE>
<CAPTION>
Average Annualized Total Return for 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>
OTC 17.99%* n/a 20.98%* 10/07/94
Total Return 19.17% n/a 15.86%* 10/07/94
Research 18.44% n/a 21.67%* 10/07/94
Money Market 3.63% n/a 3.62% 05/24/95
Large Cap Value 24.86% n/a 23.31% 04/05/95
International 1.27% n/a 11.73% 03/27/95
High Income 12.26% n/a 12.52% 04/28/95
Appreciation 24.62% n/a 20.90% 03/22/96
</TABLE>
- --------------------------------------------------------------------------
* Total return calculation reflects partial waiver of fees and expenses.
6
<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,
7
<PAGE>
culminating in the assignment of Best's Ratings. These
ratings reflect their current opinion of the relative financial strength and
operating performance of an insurance company in comparison to the norms of
the life/health insurance industry. Best's ratings range from A+ + to F. An
A++ and A+ ratings mean, in the opinion of A.M. Best, that the insurer has
demonstrated the strongest ability to meet its respective policyholder and
other contractual obligations.
INDEX OF INVESTMENT EXPERIENCE
The calculation of the Index of Investment Experience ("IIE") is discussed in
the prospectus for the Contracts under Measurement of Investment Experience.
The following illustrations show a calculation of a new IIE and the purchase
of Units (using hypothetical examples). Note that the examples below are
calculated for a Contract issued with the 7% Solution Enhanced Death Benefit
Option, the death benefit option with the highest mortality and expense risk
charge. The mortality and expense risk charge associated with the Annual
Ratchet Enhanced Death Benefit Option and the Standard Death Benefit are lower
than that used in the examples and would result in higher IIE's or
Accumulation Values.
<TABLE>
<CAPTION>
<S> <C>
1. IIE, beginning of period. . . . . . . . . . . . . . . . . . . . . . . . . . $ 10.00
2. Value of securities, beginning of period. . . . . . . . . . . . . . . . . . $ 10.00
3. Change in value of securities . . . . . . . . . . . . . . . . . . . . . . . $ 0.10
4. Gross investment return (3) divided by (2). . . . . . . . . . . . . . . . . 0.01
5. Less daily mortality and expense charge . . . . . . . . . . . . . . . . . . 0.00003863
6. Less asset based administrative charge. . . . . . . . . . . . . . . . . . . 0.00000411
7. Net investment return (4) minus (5) minus (6) . . . . . . . . . . . . . . . 0.00995726
8. Net investment factor (1.000000) plus (7) . . . . . . . . . . . . . . . . . 1.00995726
9. IIE, end of period (1) multiplied by (8). . . . . . . . . . . . . . . . . . $ 10.09957261
ILLUSTRATION OF PURCHASE OF UNITS (ASSUMING NO STATE PREMIUM TAX)
Example 2.
1. Initial Premium Payment . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,000
2. IIE on effective date of purchase (see Example 1) . . . . . . . . . . . . . $ 10.00
3. Number of Units purchased [(1) divided by (2)] . . . . . . . . . . . . . . 100
4. IIE for valuation date following purchase
(see Example 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10.09957261
5. Accumulation Value in account for valuation date following
purchase [(3) multiplied by (4)]. . . . . . . . . . . . . . . . . . . . . . $ 1,009.96
</TABLE>
8
<PAGE>
IRA PARTIAL WITHDRAWAL OPTION
If the contract owner has an IRA contract and will attain age 70 1/2 in the
current calendar year, distributions will be made in accordance with the
requirements of Federal tax law. This option is available to assure that the
required minimum distributions from qualified plans under the Internal Revenue
Code (the "Code") are made. Under the Code, distributions must begin no later
than April 1st of the calendar year following the calendar year in which the
contract owner attains age 70 1/2. If the required minimum distribution is
not withdrawn, there may be a penalty tax in an amount equal to 50% of the
difference between the amount required to be withdrawn and the amount actually
withdrawn. Even if the IRA Partial Withdrawal Option is not elected,
distributions must nonetheless be made in accordance with the requirements of
Federal tax law.
Golden American notifies the contract owner of these regulations with a letter
mailed on January 1st of the calendar year in which the contract owner reaches
age 70 1/2 which explains the IRA Partial Withdrawal Option and supplies an
election form. If electing this option, the owner specifies whether the
withdrawal amount will be based on a life expectancy calculated on a single
life basis (contract owner's life only) or, if the contract owner is married,
on a joint life basis (contract owner's and spouse's lives combined). The
contract owner selects the payment mode on a monthly, quarterly or annual
basis. If the payment mode selected on the election form is more frequent
than annually, the payments in the first calendar year in which the option is
in effect will be based on the amount of payment modes remaining when Golden
American receives the completed election form. Golden American calculates the
IRA Partial Withdrawal amount each year based on the minimum distribution
rules. We do this by dividing the accumulation value by the life expectancy.
In the first year withdrawals begin, we use the accumulation value as of the
date of the first payment. Thereafter, we use the accumulation value on
December 31st of each year. The life expectancy is recalculated each year.
Certain minimum distribution rules govern payouts if the designated beneficiary
is other than the contract owner's spouse and the beneficiary is more than ten
years younger than the contract owner.
OTHER INFORMATION
Registration statements have been filed with the SEC under the Securities
Act of 1933, as amended, with respect to the Contracts discussed in this
Statement of Additional Information. Not all of the information set forth
in the registration statements, amendments and exhibits thereto has been
included in this Statement of Additional Information. Statements contained
in this Statement of Additional Information concerning the content of the
Contracts and other legal instruments are intended to be summaries. For
a complete statement of the terms of these documents, reference should be
made to the instruments filed with the SEC.
9
<PAGE>
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
The audited financial statements of Golden American are listed below and
are included in this Statement of Additional Information:
Report of Independent Auditors
Audited Financial Statements -- GAAP
Consolidated Balance Sheets -- Post-Acquisition as of December 31,
1997 and Pre-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
10
<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.
<PAGE>
______________________________________________________________________________
FINANCIAL STATEMENTS OF GOLDEN AMERICAN LIFE INSURANCE COMPANY
For the year ended December 31, 1997
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholder
Golden American Life Insurance Company
We have audited the accompanying consolidated balance sheets of Golden
American Life Insurance Company as of December 31, 1997 and 1996, and the
related consolidated statements of income, changes in stockholder's equity,
and cash flows for the periods from October 25, 1997 through December 31,
1997, January 1, 1997 through October 24, 1997, August 14, 1996 through
December 31, 1996, and January 1, 1996 through August 13, 1996, and the year
ended December 31, 1995. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion
on these financial statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Golden American Life Insurance Company at December 31, 1997 and 1996, and
the consolidated results of their operations and their cash flows for the
periods from October 25, 1997 through December 31, 1997, January 1, 1997
through October 24, 1997, August 14, 1996 through December 31, 1996, and
January 1, 1996 through August 13, 1996, and the year ended December 31,
1995, in conformity with generally accepted accounting principles.
s/Ernst & Young LLP
Des Moines, Iowa
February 12, 1998
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
POST-MERGER POST-ACQUISITION
______________________________________
December 31, 1997 | December 31, 1996
___________________| _________________
<S> <C> | <C>
ASSETS |
|
Investments: |
Fixed maturities, available for sale, |
at fair value (cost: 1997 - $413,288; |
1996 - $275,153) $414,401 | $275,563
Equity securities, at fair value |
(cost: 1997 - $4,437; 1996 - $36) 3,904 | 33
Mortgage loans on real estate 85,093 | 31,459
Policy loans 8,832 | 4,634
Short-term investments 14,460 | 12,631
___________________| _________________
Total investments 526,690 | 324,320
|
Cash and cash equivalents 21,039 | 5,839
|
Due from affiliates 827 | --
|
Accrued investment income 6,423 | 4,139
|
Deferred policy acquisition costs 12,752 | 11,468
|
Present value of in force acquired 43,174 | 83,051
|
Current income taxes recoverable 272 | --
|
Deferred income tax asset 36,230 | --
|
Property and equipment, less allowances |
for depreciation of $97 in 1997 and |
$63 in 1996 1,567 | 699
|
Goodwill, less accumulated amortization |
of $630 in 1997 and $589 in 1996 150,497 | 38,665
|
Other assets 195 | 2,471
|
Separate account assets 1,646,169 | 1,207,247
___________________| _________________
Total assets $2,445,835 | $1,677,899
===================| =================
</TABLE>
<TABLE>
<CAPTION>
POST-MERGER POST-ACQUISITION
______________________________________
December 31, 1997 | December 31, 1996
___________________| _________________
<S> <C> | <C>
LIABILITIES AND STOCKHOLDER'S EQUITY |
|
Policy liabilities and accruals: |
Future policy benefits: |
Annuity and interest sensitive life |
products $505,304 | $285,287
Unearned revenue reserve 1,189 | 2,063
Other policy claims and benefits 10 | --
___________________| _________________
506,503 | 287,350
|
Deferred income tax liability -- | 365
Line of credit with affiliate 24,059 | --
Surplus note 25,000 | 25,000
Due to affiliates 80 | 1,504
Other liabilities 16,711 | 15,949
Separate account liabilities 1,646,169 | 1,207,247
___________________| _________________
2,218,522 | 1,537,415
|
Commitments and contingencies |
|
Stockholder's equity: |
Common stock, par value $10 per share, |
authorized, issued and outstanding |
250,000 shares 2,500 | 2,500
Additional paid-in capital 224,997 | 137,372
Unrealized appreciation (depreciation) |
of securities at fair value 241 | 262
Retained earnings (deficit) (425)| 350
___________________| _________________
Total stockholder's equity 227,313 | 140,484
___________________| _________________
Total liabilities and stockholder's |
equity $2,445,835 | $1,677,899
===================| =================
</TABLE>
See accompanying notes.
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands)
<TABLE>
<CAPTION>
POST-MERGER POST-ACQUISITION
___________________________________
For the period | For the period
October 25, 1997 | January 1, 1997
through | through
December 31, 1997 |October 24, 1997
__________________|________________
|
<S> <C> | <C>
Revenues: |
Annuity and interest sensitive life |
product charges $3,834 | $18,288
Management fee revenue 508 | 2,262
Net investment income 5,127 | 21,656
Realized gains (losses) on investments 15 | 151
Other income 236 | 426
__________________|________________
9,720 | 42,783
|
|
Insurance benefits and expenses: |
Annuity and interest sensitive life benefits: |
Interest credited to account balances 7,413 | 19,276
Benefit claims incurred in excess of |
account balances -- | 125
Underwriting, acquisition and insurance |
expenses: |
Commissions 9,437 | 26,818
General expenses 3,350 | 13,907
Insurance taxes 450 | 1,889
Policy acquisition costs deferred (13,678)| (29,003)
Amortization: |
Deferred policy acquisition costs 892 | 1,674
Present value of in force acquired 948 | 5,225
Goodwill 630 | 1,398
__________________|________________
9,442 | 41,309
|
Interest expense 557 | 2,082
__________________|________________
9,999 | 43,391
__________________|________________
Income (loss) before income taxes (279)| (608)
|
Income taxes 146 | (1,337)
__________________|________________
|
Net income (loss) ($425)| $729
==================|================
</TABLE>
<TABLE>
<CAPTION>
POST-ACQUISITION PRE-ACQUISITION
____________________________________
For the period | For the period
August 14, 1996 | January 1, 1996
through | through
December 31, 1996 | August 13, 1996
__________________| ________________
|
<S> <C> | <C>
Revenues: |
Annuity and interest sensitive life |
product charges $8,768 | $12,259
Management fee revenue 877 | 1,390
Net investment income 5,795 | 4,990
Realized gains (losses) on investments 42 | (420)
Other income 486 | 70
__________________| ________________
15,968 | 18,289
|
|
Insurance benefits and expenses: |
Annuity and interest sensitive life benefits: |
Interest credited to account balances 5,741 | 4,355
Benefit claims incurred in excess of |
account balances 1,262 | 915
Underwriting, acquisition and insurance |
expenses: |
Commissions 9,866 | 16,549
General expenses 5,906 | 9,422
Insurance taxes 672 | 1,225
Policy acquisition costs deferred (11,712)| (19,300)
Amortization: |
Deferred policy acquisition costs 244 | 2,436
Present value of in force acquired 2,745 | 951
Goodwill 589 | --
__________________| ________________
15,313 | 16,553
|
Interest expense 85 | --
__________________| ________________
15,398 | 16,553
__________________| ________________
Income (loss) before income taxes 570 | 1,736
|
Income taxes 220 | (1,463)
__________________| ________________
|
Net income (loss) $350 | $3,199
==================| ================
</TABLE>
<TABLE>
<CAPTION>
PRE-ACQUISITION
__________________
For the year ended
December 31, 1995
__________________
<S> <C>
Revenues:
Annuity and interest sensitive life
product charges $18,388
Management fee revenue 987
Net investment income 2,818
Realized gains (losses) on investments 297
Other income 63
__________________
22,553
Insurance benefits and expenses:
Annuity and interest sensitive life benefits:
Interest credited to account balances 1,322
Benefit claims incurred in excess of
account balances 1,824
Underwriting, acquisition and insurance
expenses:
Commissions 7,983
General expenses 12,650
Insurance taxes 952
Policy acquisition costs deferred (9,804)
Amortization:
Deferred policy acquisition costs 2,710
Present value of in force acquired 1,552
Goodwill --
__________________
19,189
Interest expense --
__________________
19,189
__________________
Income (loss) before income taxes 3,364
Income taxes --
__________________
Net income (loss) $3,364
==================
</TABLE>
See accompanying notes.
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
(Dollars in thousands)
<TABLE>
<CAPTION>
PRE-ACQUISITION
__________________________________________________________
Unreal-
ized
Appre-
ciation
(Depre-
ciation)
Addi- of Total
Redeemable tional Securities Retained Stock-
Common Preferred Paid-In at Earnings holder's
Stock Stock Capital Fair Value (Deficit) Equity
__________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
Balance at
January 1, 1995 $2,500 $50,000 $37,086 ($1) ($79) $89,506
Contribution of
capital -- -- 7,944 -- -- 7,944
Net income -- -- -- -- 3,364 3,364
Preferred stock
dividends -- -- -- -- (3,348) (3,348)
Unrealized apprecia-
tion of securities
at fair value -- -- -- 659 -- 659
__________________________________________________________
Balance at
December 31, 1995 2,500 50,000 45,030 658 (63) 98,125
Net income -- -- -- -- 3,199 3,199
Preferred stock
dividends -- -- -- -- (719) (719)
Unrealized deprecia-
tion of securities
at fair value -- -- -- (1,175) -- (1,175)
__________________________________________________________
Balance at
August 13, 1996 $2,500 $50,000 $45,030 ($517) $2,417 $99,430
==========================================================
</TABLE>
<TABLE>
<CAPTION>
POST-ACQUISITION
__________________________________________________________
Unreal-
ized
Appre-
ciation
(Depre-
ciation)
Addi- of Total
Redeemable tional Securities Retained Stock-
Common Preferred Paid-In at Earnings holder's
Stock Stock Capital Fair Value (Deficit) Equity
__________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
Balance at
August 14, 1996 $2,500 $50,000 $87,372 -- -- $139,872
Contribution of
preferred stock
to additional
paid-in capital -- (50,000) 50,000 -- -- --
Net income -- -- -- -- $350 350
Unrealized apprecia-
tion of securities
at fair value -- -- -- $262 -- 262
__________________________________________________________
Balance at
December 31, 1996 2,500 -- 137,372 262 350 140,484
Contribution of
capital -- -- 1,121 -- -- 1,121
Net income -- -- -- -- 729 729
Unrealized apprecia-
tion of securities
at fair value -- -- -- 1,543 -- 1,543
__________________________________________________________
Balance at
October 24, 1997 $2,500 -- $138,493 $1,805 $1,079 $143,877
==========================================================
POST-MERGER
__________________________________________________________
Unreal-
ized
Appre-
ciation
(Depre-
ciation)
Addi- of Total
Redeemable tional Securities Retained Stock-
Common Preferred Paid-In at Earnings holder's
Stock Stock Capital Fair Value (Deficit) Equity
__________________________________________________________
Balance at
October 25, 1997 $2,500 -- $224,997 -- -- $227,497
Net loss -- -- -- -- ($425) (425)
Unrealized apprecia-
tion of securities
at fair value -- -- -- $241 -- 241
__________________________________________________________
Balance at
December 31, 1997 $2,500 -- $224,997 $241 ($425) $227,313
==========================================================
</TABLE>
See accompanying notes.
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
POST-MERGER POST-ACQUISITION
________________________________________
For the period | For the period
October 25, 1997 | January 1, 1997
through | through
December 31, 1997 | October 24, 1997
___________________| ___________________
<S> <C> | <C>
OPERATING ACTIVITIES |
Net income (loss) ($425)| $729
Adjustments to reconcile net income (loss) |
to net cash provided by (used in) |
operations: |
Adjustments related to annuity and |
interest sensitive life products: |
Change in annuity and interest |
sensitive life product reserves 7,361 | 19,177
Change in unearned revenues 1,189 | 3,292
Decrease (increase) in accrued |
investment income 1,205 | (3,489)
Policy acquisition costs deferred (13,678)| (29,003)
Amortization of deferred policy |
acquisition costs 892 | 1,674
Amortization of present value of in |
force acquired 948 | 5,225
Change in other assets, other |
liabilities and accrued income taxes 4,205 | (8,944)
Provision for depreciation and |
amortization 1,299 | 3,203
Provision for deferred income taxes 146 | 316
Realized (gains) losses on investments (15)| (151)
___________________| ___________________
Net cash provided by (used in) |
operating activities 3,127 | (7,971)
|
INVESTING ACTIVITIES |
Sale, maturity or repayment of |
investments: |
Fixed maturities - available for sale 9,871 | 39,622
Mortgage loans on real estate 1,644 | 5,828
Short-term investments - net -- | 11,415
___________________| ___________________
11,515 | 56,865
Acquisition of investments: |
Fixed maturities - available for sale (29,596)| (155,173)
Equity securities (1)| (4,865)
Mortgage loans on real estate (14,209)| (44,481)
Policy loans - net (328)| (3,870)
Short-term investments - net (13,244)| --
___________________| ___________________
(57,378)| (208,389)
</TABLE>
See accompanying notes.
<TABLE>
<CAPTION>
POST-ACQUISITION PRE-ACQUISITION
________________________________________
For the period | For the period
August 14, 1996 | January 1, 1996
through | through
December 31, 1996 | August 13, 1996
___________________| ___________________
<S> <C> | <C>
OPERATING ACTIVITIES |
Net income (loss) $350 | $3,199
Adjustments to reconcile net income (loss) |
to net cash provided by (used in) |
operations: |
Adjustments related to annuity and |
interest sensitive life products: |
Change in annuity and interest |
sensitive life product reserves 5,106 | 4,472
Change in unearned revenues 2,063 | 2,084
Decrease (increase) in accrued |
investment income (877)| (2,494)
Policy acquisition costs deferred (11,712)| (19,300)
Amortization of deferred policy |
acquisition costs 244 | 2,436
Amortization of present value of in |
force acquired 2,745 | 951
Change in other assets, other |
liabilities and accrued income taxes (96)| 4,672
Provision for depreciation and |
amortization 1,242 | 703
Provision for deferred income taxes 220 | (1,463)
Realized (gains) losses on investments (42)| 420
___________________| ___________________
Net cash provided by (used in) |
operating activities (757)| (4,320)
|
|
INVESTING ACTIVITIES |
Sale, maturity or repayment of |
investments: |
Fixed maturities - available for sale 47,453 | 55,091
Mortgage loans on real estate 40 | --
Short-term investments - net 2,629 | 354
___________________| ___________________
50,122 | 55,445
Acquisition of investments: |
Fixed maturities - available for sale (147,170)| (184,589)
Equity securities (5)| --
Mortgage loans on real estate (31,499)| --
Policy loans - net (637)| (1,977)
Short-term investments - net -- | --
___________________| ___________________
(179,311)| (186,566)
</TABLE>
See accompanying notes.
<TABLE>
<CAPTION>
PRE-ACQUISITION
_________________
For the year
ended
December 31, 1995
_________________
<S> <C>
OPERATING ACTIVITIES
Net income (loss) $3,364
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operations:
Adjustments related to annuity and
interest sensitive life products:
Change in annuity and interest
sensitive life product reserves 4,664
Change in unearned revenues 4,949
Decrease (increase) in accrued
investment income (676)
Policy acquisition costs deferred (9,804)
Amortization of deferred policy
acquisition costs 2,710
Amortization of present value of in
force acquired 1,552
Change in other assets, other
liabilities and accrued income taxes 4,686
Provision for depreciation and
amortization (142)
Provision for deferred income taxes --
Realized (gains) losses on investments (297)
_________________
Net cash provided by (used in)
operating activities 11,006
INVESTING ACTIVITIES
Sale, maturity or repayment of
investments:
Fixed maturities - available for sale 24,026
Mortgage loans on real estate --
Short-term investments - net --
_________________
24,026
Acquisition of investments:
Fixed maturities - available for sale (61,723)
Equity securities (10)
Mortgage loans on real estate --
Policy loans - net (1,508)
Short-term investments - net (1,681)
_________________
(64,922)
</TABLE>
See accompanying notes.
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS -(CONTINUED)
(Dollars in thousands)
<TABLE>
<CAPTION>
POST-MERGER POST-ACQUISITION
________________________________________
For the period | For the period
October 25, 1997 | January 1, 1997
through | through
December 31, 1997 | October 24, 1997
___________________| ___________________
<S> <C> | <C>
Funds held in escrow pursuant to |
an Exchange Agreement -- | --
Purchase of property and equipment ($252)| ($875)
___________________| ___________________
Net cash used in investing activities (46,115)| (152,399)
|
FINANCING ACTIVITIES |
Proceeds from issuance of surplus note -- | --
Proceeds from line of credit borrowings 10,119 | 97,124
Repayment of line of credit borrowings (2,207)| (80,977)
Receipts from annuity and interest |
sensitive life policies credited |
to policyholder account balances 62,306 | 261,549
Return of policyholder account balances |
on annuity and interest sensitive |
life policies (6,350)| (13,931)
Net reallocations to Separate |
Accounts (17,017)| (93,069)
Contributions of capital by Parent -- | 1,011
Dividends paid on preferred stock -- | --
___________________| ___________________
Net cash provided by financing |
activities 46,851 | 171,707
___________________| ___________________
Increase (decrease) in cash and |
cash equivalents 3,863 | 11,337
|
Cash and cash equivalents at |
beginning of period 17,176 | 5,839
___________________| ___________________
Cash and cash equivalents at end |
of period $21,039 | $17,176
===================| ===================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid during the period for:
Interest $295 $1,912
Income taxes -- 283
Non-cash financing activities:
Contribution of property, plant and equipment
from EIC Variable, Inc. net of $353 of
accumulated depreciation -- 110
</TABLE>
See accompanying notes.
<TABLE>
<CAPTION>
POST-ACQUISITION PRE-ACQUISITION
_____________________________________
For the period | For the period
August 14, 1996 | January 1, 1996
through | through
December 31, 1996 | August 13, 1996
__________________| _________________
<S> <C> | <C>
INVESTING ACTIVITIES - CONTINUED |
Funds held in escrow pursuant to |
an Exchange Agreement -- | --
Purchase of property and equipment ($137)| --
__________________| _________________
Net cash used in investing activities (129,326)| ($131,121)
|
FINANCING ACTIVITIES |
Proceeds from issuance of surplus note 25,000 | --
Proceeds from line of credit borrowings -- | --
Repayment of line of credit borrowings -- | --
Receipts from annuity and interest |
sensitive life policies credited |
to policyholder account balances 116,819 | 149,750
Return of policyholder account balances |
on annuity and interest sensitive |
life policies (3,315)| (2,695)
Net reallocations to Separate |
Accounts (10,237)| (8,286)
Contributions of capital by Parent -- | --
Dividends paid on preferred stock -- | (719)
__________________| _________________
Net cash provided by financing |
activities 128,267 | 138,050
__________________| _________________
Increase (decrease) in cash and |
cash equivalents (1,816)| 2,609
|
Cash and cash equivalents at |
beginning of period 7,655 | 5,046
__________________| _________________
Cash and cash equivalents at end |
of period $5,839 | $7,655
==================| =================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid during the period for:
Interest -- --
Income taxes -- --
Non-cash financing activities:
Contribution of property, plant and equipment
from EIC Variable, Inc. net of $353 of
accumulated depreciation -- --
</TABLE>
See accompanying notes.
<TABLE>
<CAPTION>
PRE-ACQUISITION
_________________
For the year
ended
December 31, 1995
_________________
<S> <C>
INVESTING ACTIVITIES - CONTINUED
Funds held in escrow pursuant to
an Exchange Agreement ($1,242)
Purchase of property and equipment --
_________________
Net cash used in investing activities (42,138)
FINANCING ACTIVITIES
Proceeds from issuance of surplus note --
Proceeds from line of credit borrowings --
Repayment of line of credit borrowings --
Receipts from annuity and interest
sensitive life policies credited
to policyholder account balances 29,501
Return of policyholder account balances
on annuity and interest sensitive
life policies (1,543)
Net reallocations to Separate
Accounts --
Contributions of capital by Parent 7,944
Dividends paid on preferred stock (3,348)
_________________
Net cash provided by financing
activities 32,554
_________________
Increase (decrease) in cash and
cash equivalents 1,422
Cash and cash equivalents at
beginning of period 3,624
_________________
Cash and cash equivalents at end
of period $5,046
=================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid during the period for:
Interest --
Income taxes --
Non-cash financing activities:
Contribution of property, plant and equipment
from EIC Variable, Inc. net of $353 of
accumulated depreciation --
</TABLE>
See accompanying notes.
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997
1. SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION
The consolidated financial statements include Golden American Life Insurance
Company ("Golden American") and its wholly owned subsidiary, First Golden
American Life Insurance Company of New York ("First Golden," and with Golden
American collectively, the "Company"). All significant intercompany accounts
and transactions have been eliminated.
ORGANIZATION
Golden American, a wholly owned subsidiary of Equitable of Iowa Companies,
Inc., offers variable insurance products and is licensed as a life insurance
company in the District of Columbia and all states except New York. On January
2, 1997 and December 23, 1997, First Golden became licensed to sell insurance
products in New York and Delaware, respectively. The Company's products are
marketed by broker/dealers, financial institutions and insurance agents. The
Company's primary customers are individuals and families.
On October 24, 1997, PFHI Holding, Inc. ("PFHI"), a Delaware corporation,
acquired all of the outstanding capital stock of Equitable of Iowa Companies
("Equitable"), pursuant to the terms of the Agreement and Plan of Merger
("Merger Agreement") among Equitable, PFHI, and ING Groep N.V. ("ING"). PFHI
is a wholly owned subsidiary of ING, a global financial services holding
company based in The Netherlands. As a result of the merger, Equitable was
merged into PFHI which was simultaneously renamed Equitable of Iowa Companies,
Inc. ("EIC" or the "Parent"), a Delaware corporation. See Note 5 for
additional information regarding the merger.
On August 13, 1996, Equitable acquired all of the outstanding capital stock of
EIC Variable, Inc. (formerly known as BT Variable, Inc.) and its wholly owned
subsidiaries, Golden American and Directed Services, Inc. ("DSI") from
Whitewood Properties Corporation ("Whitewood") pursuant to the terms of a
Stock Purchase Agreement between Equitable and Whitewood (the "Purchase
Agreement"). On April 30, 1997, EIC Variable, Inc. was liquidated and its
investments in Golden American and DSI were transferred to Equitable, while
the remainder of its net assets were contributed to Golden American. On
December 30, 1997, EIC Variable, Inc. was dissolved. See Note 6 for additional
information regarding the acquisition.
For financial statement purposes, the merger was accounted for as a purchase
effective October 25, 1997 and the change in control of Golden American through
the acquisition of BT Variable was accounted for as a purchase effective August
14, 1996. The merger and acquisition resulted in new bases of accounting
reflecting estimated fair values of assets and liabilities at their respective
dates. As a result, the Company's financial statements for the period
subsequent to October 24, 1997, are presented on the Post-Merger new basis of
accounting, for the period August 14, 1996 through October 24, 1997, are
presented on the Post-Acquisition basis of accounting, and for August 13, 1996
and prior periods are presented on the Pre-Acquisition basis of accounting.
INVESTMENTS
FIXED MATURITIES: Statement of Financial Accounting Standards ("SFAS") No.
115, "Accounting for Certain Investments in Debt and Equity Securities,"
requires fixed maturity securities to be designated as either "available for
sale," "held for investment" or "trading." Sales of fixed maturities
designated as "available for sale" are not restricted by SFAS No. 115.
Available for sale securities are reported at fair value and unrealized gains
and losses on these securities are included directly in stockholder's
equity, after adjustment for related changes in deferred policy acquisition
costs ("DPAC"), present value of in force acquired ("PVIF"), policy reserves
and deferred income
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
December 31, 1997
taxes. At December 31, 1997 and 1996, all of the Company's
fixed maturity securities are designated as available for sale although the
Company is not precluded from designating fixed maturity securities as held for
investment or trading at some future date.
Securities determined to have a decline in value that is other than temporary
are written down to estimated fair value which becomes the security's new cost
basis by a charge to realized losses in the Company's Statement of Income.
Premiums and discounts are amortized/accrued utilizing the scientific interest
method which results in a constant yield over the security's expected life.
Amortization/accrual of premiums and discounts on mortgage-backed securities
incorporates a prepayment assumption to estimate the securities' expected
lives.
EQUITY SECURITIES: Equity securities are reported at estimated fair value if
readily marketable. The change in unrealized appreciation and depreciation of
marketable equity securities (net of related deferred income taxes, if any) is
included directly in stockholder's equity. Equity securities determined to
have a decline in value that is other than temporary are written down to
estimated fair value which becomes the security's new cost basis by a charge
to realized losses in the Company's Statement of Income.
MORTGAGE LOANS: Mortgage loans on real estate are reported at cost adjusted
for amortization of premiums and accrual of discounts. If the value of any
mortgage loan is determined to be impaired (i.e., when it is probable the
Company will be unable to collect all amounts due according to the contractual
terms of the loan agreement), the carrying value of the mortgage loan is
reduced to the present value of expected future cash flows from the loan,
discounted at the loan's effective interest rate, or to the loan's observable
market price, or the fair value of the underlying collateral. The carrying
value of impaired loans is reduced by the establishment of a valuation
allowance which is adjusted at each reporting date for significant changes in
the calculated value of the loan. Changes in this valuation allowance are
charged or credited to income.
OTHER INVESTMENTS: Policy loans are reported at unpaid principal. Short-term
investments are reported at cost adjusted for amortization of premiums and
accrual of discounts.
FAIR VALUES: Estimated fair values, as reported herein, of publicly traded
fixed maturity securities are as reported by an independent pricing service.
Fair values of conventional mortgage-backed securities not actively traded
in a liquid market are estimated using a third party pricing system. This
pricing system uses a matrix calculation assuming a spread over U.S. Treasury
bonds based upon the expected average lives of the securities. Fair values
of private placement bonds are estimated using a matrix that assumes a spread
(based on interest rates and a risk assessment of the bonds) over U.S.
Treasury bonds. Estimated fair values of equity securities which consists of
the Company's investment in its registered separate accounts are based upon
the quoted fair value of the securities comprising the individual portfolios
underlying the separate accounts. Realized gains and losses are determined on
the basis of specific identification and average cost methods for manager
initiated and issuer initiated disposals, respectively.
CASH AND CASH EQUIVALENTS
For purposes of the consolidated statement of cash flows, the Company considers
all demand deposits and interest-bearing accounts not related to the investment
function to be cash equivalents. All interest-bearing accounts classified as
cash equivalents have original maturities of three months or less.
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
December 31, 1997
DEFERRED POLICY ACQUISITION COSTS
Certain costs of acquiring new insurance business, principally commissions and
other expenses related to the production of new business, have been deferred.
Acquisition costs for variable annuity and variable life products are being
amortized generally in proportion to the present value (using the assumed
crediting rate) of expected future gross profits. This amortization is
"unlocked" when the Company revises its estimate of current or future gross
profits to be realized from a group of products. DPAC is adjusted to reflect
the pro forma impact of unrealized gains and losses on fixed maturity
securities the Company has designated as "available for sale" under SFAS No.
115.
PRESENT VALUE OF IN FORCE ACQUIRED
As a result of the merger and the acquisition, a portion of the acquisition
cost related to each transaction was allocated to the right to receive
future cash flows from existing insurance contracts. This allocated cost
represents the PVIF which reflects the value of those purchased policies
calculated by discounting actuarially determined expected future cash flows
at the discount rate determined by the purchaser. Amortization of PVIF is
charged to expense in proportion to expected gross profits. This
amortization is "unlocked" when the Company revises its estimate of current
or future gross profits to be realized from the insurance contracts acquired.
PVIF is adjusted to reflect the pro forma impact of unrealized gains (losses)
on available for sale fixed maturities. See Notes 5 and 6 for additional
information on PVIF resulting from the merger and acquisition.
PROPERTY AND EQUIPMENT
Property and equipment primarily represent leasehold improvements, office
furniture and equipment and capitalized computer software and are not
considered to be significant to the Company's overall operations. Property
and equipment are reported at cost less allowances for depreciation.
Depreciation expense is computed primarily on the basis of the straight-line
method over the estimated useful lives of the assets.
GOODWILL
Goodwill was established as a result of the merger discussed previously and is
being amortized over 40 years on a straight-line basis. Goodwill established
as a result of the acquisition discussed above was being amortized over 25
years on a straight-line basis. See Notes 5 and 6 for additional information
on the merger and acquisition.
FUTURE POLICY BENEFITS
Future policy benefits for fixed interest divisions of the variable products
are established utilizing the retrospective deposit accounting method. Policy
reserves represent the premiums received plus accumulated interest, less
mortality and administration charges. Interest credited to these policies
ranged from 3.30% to 8.25% during 1997. The unearned revenue reserve
represents unearned distribution fees discussed below. These distribution
fees have been deferred and are amortized over the life of the contract in
proportion to its expected gross profits.
SEPARATE ACCOUNTS
Assets and liabilities of the separate accounts reported in the accompanying
balance sheets represent funds that are separately administered principally
for variable annuity and variable life contracts. Contractholders, rather than
the Company, bear the investment risk for variable products. At the direction
of the Contractholders, the separate accounts invest the premiums from the
sale of variable annuity and variable life products in shares of specified
mutual funds. The assets and liabilities of the separate accounts are clearly
identified and segregated from other assets and liabilities of the Company.
The portion of the separate account assets applicable to variable annuity and
variable life contracts cannot be charged with liabilities arising out of any
other business the Company may conduct.
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
December 31, 1997
Variable separate account assets carried at fair value of the underlying
investments generally represent Contractholder investment values maintained
in the accounts. Variable separate account liabilities represent account
balances for the variable annuity and variable life contracts invested in the
separate accounts. Net investment income and realized and unrealized capital
gains and losses related to separate account assets are not reflected in the
accompanying Statements of Income.
Product charges recorded by the Company from variable annuity and variable
life products consist of charges applicable to each contract for mortality and
expense risk, cost of insurance, contract administration and surrender charges.
In addition, some variable annuity and all variable life contracts provide for
a distribution fee collected for a limited number of years after each premium
deposit. Revenue recognition of collected distribution fees is amortized over
the life of the contract in proportion to its expected gross profits. The
balance of unrecognized revenue related to the distribution fees is reported
as an unearned revenue reserve.
DEFERRED INCOME TAXES
Deferred tax assets or liabilities are computed based on the difference
between the financial statement and income tax bases of assets and
liabilities using the enacted marginal tax rate. Deferred tax assets or
liabilities are adjusted to reflect the pro forma impact of unrealized gains
and losses on equity securities and fixed maturity securities the Company has
designated as available for sale under SFAS No. 115. Changes in deferred tax
assets or liabilities resulting from this SFAS No. 115 adjustment are charged
or credited directly to stockholder's equity. Deferred income tax expenses
or credits reflected in the Company's Statement of Income are based on the
changes in the deferred tax asset or liability from period to period
(excluding the SFAS No. 115 adjustment).
DIVIDEND RESTRICTIONS
The Company's ability to pay dividends to its parent is restricted because
prior approval of insurance regulatory authorities is required for payment of
dividends to the stockholder which exceed an annual limitation. During 1998,
Golden American cannot pay dividends to its parent without prior approval of
statutory authorities. The Company has maintained adequate statutory capital
and surplus and has not used surplus relief or financial reinsurance, which
have come under scrutiny by many state insurance departments.
Under the provisions of the insurance laws of the State of New York, First
Golden cannot distribute any dividends to its stockholders unless a notice of
its intention to declare a dividend and amount of the dividend has been filed
not less than thirty days in advance of the proposed declaration. The
superintendent may disapprove the distribution by giving written notice to
First Golden within thirty days after the filing should the superintendent
find that the financial condition of First Golden does not warrant the
distribution.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
affecting the amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates.
Management is required to utilize historical experience and assumptions about
future events and circumstances in order to develop estimates of material
reported amounts and disclosures. Included among the material (or potentially
material) reported amounts and disclosures that require extensive use of
estimates and assumptions are (1) estimates of fair values of investments in
securities and other financial instruments, as well as fair values of
policyholder liabilities, (2) policyholder liabilities, (3) deferred policy
acquisition costs and present value of in force acquired, (4) fair values of
assets and liabilities recorded as a result of merger and acquisition
transactions, (5) asset valuation
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
December 31, 1997
allowances, (6) guaranty fund assessment
accruals, (7) deferred tax benefits (liabilities) and (8) estimates for
commitments and contingencies including legal matters, if a liability is
anticipated and can be reasonably estimated. Estimates and assumptions
regarding all of the preceding are inherently subject to change and are
reassessed periodically. Changes in estimates and assumptions could
materially impact the financial statements.
2. BASIS OF FINANCIAL REPORTING
The financial statements of the Company differ from related statutory-basis
financial statements principally as follows: (1) acquisition costs of
acquiring new business are deferred and amortized over the life of the
policies rather than charged to operations as incurred; (2) an asset
representing the present value of future cash flows from insurance
contracts acquired was established as a result of the merger/acquisition and
is amortized and charged to expense; (3) future policy benefit reserves for
the fixed interest divisions of the variable products are based on full
account values, rather than the greater of cash surrender value or amounts
derived from discounting methodologies utilizing statutory interest rates;
(4) reserves are reported before reduction for reserve credits related to
reinsurance ceded and a receivable is established, net of an allowance for
uncollectible amounts, for these credits rather than presented net of these
credits; (5) fixed maturity investments are designated as "available for
sale" and valued at fair value with unrealized appreciation/depreciation,
net of adjustments to deferred income taxes (if applicable), present value of
in force acquired and deferred policy acquisition costs, credited/charged
directly to stockholder's equity rather than valued at amortized cost;
(6) the carrying value of fixed maturity securities is reduced to fair value
by a charge to realized losses in the Statement of Income when declines in
carrying value are judged to be other than temporary, rather than through the
establishment of a formula-determined statutory investment reserve (carried as
a liability), changes in which are charged directly to surplus; (7) deferred
income taxes are provided for the difference between the financial statement
and income tax bases of assets and liabilities; (8) net realized gains or
losses attributed to changes in the level of interest rates in the market are
recognized when the sale is completed rather than deferred and amortized over
the remaining life of the fixed maturity security; (9) a liability is
established for anticipated guaranty fund assessments, net of related
anticipated premium tax credits, rather than capitalized when assessed and
amortized in accordance with procedures permitted by insurance regulatory
authorities; (10) revenues for variable annuity and variable life products
consist of policy charges for the cost of insurance, policy administration
charges, amortization of policy initiation fees and surrender charges assessed
rather than premiums received; (11) the financial statements of Golden
American's wholly owned subsidiary are consolidated rather than recorded at the
equity in net assets; (12) surplus notes are reported as liabilities rather
than as surplus; and (13) assets and liabilities are restated to fair values
when a change in ownership occurs, with provisions for goodwill and other
intangible assets, rather than continuing to be presented at historical cost.
Net loss for Golden American as determined in accordance with statutory
accounting practices was $428,000 in 1997, $9,188,000 in 1996 and $4,117,000
in 1995. Total statutory capital and surplus was $76,914,000 at December 31,
1997 and $80,430,000 at December 31, 1996.
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
December 31, 1997
3. INVESTMENT OPERATIONS
INVESTMENT RESULTS
Major categories of net investment income are summarized below:
<TABLE>
<CAPTION>
POST-MERGER POST-ACQUISITION
________________________________________________________
For the period| For the period For the period
October 25, 1997| January 1, 1997 August 14, 1996
through| through through
December 31, 1997| October 24, 1997 December 31, 1996
__________________| ____________________________________
(Dollars in thousands)
<S> <C> | <C> <C>
Fixed maturities $4,443 | $18,488 $5,083
Equity securities 3 | -- 103
Mortgage loans on real |
estate 879 | 3,070 203
Policy loans 59 | 482 78
Short-term investments 129 | 443 441
Other, net (154)| 24 2
Funds held in escrow -- | -- --
__________________| ____________________________________
Gross investment income 5,359 | 22,507 5,910
Less investment expenses (232)| (851) (115)
__________________| ____________________________________
Net investment income $5,127 | $21,656 $5,795
==================| ====================================
</TABLE>
<TABLE>
<CAPTION>
PRE-ACQUISITION
_____________________________________
For the period |
January 1, 1996 | For the year
through | ended
August 13, 1996 | December 31, 1995
__________________| _________________
(Dollars in thousands)
<S> <C> | <C>
Fixed maturities $4,507 | $1,610
Equity securities -- | --
Mortgage loans on real |
estate -- | --
Policy loans 73 | 56
Short-term investments 341 | 899
Other, net 22 | 148
Funds held in escrow 145 | 166
__________________| _________________
Gross investment income 5,088 | 2,879
Less investment expenses (98)| (61)
__________________| _________________
Net investment income $4,990 | $2,818
==================| =================
</TABLE>
Realized gains (losses) on investments are as follows:
<TABLE>
<CAPTION>
POST-MERGER POST-ACQUISITION
________________________________________________________
For the period| For the period For the period
October 25, 1997| January 1, 1997 August 14, 1996
through| through through
December 31, 1997| October 24, 1997 December 31, 1996
__________________| ____________________________________
(Dollars in thousands)
<S> <C> | <C> <C>
Fixed maturities, |
available for sale $25 | $151 $42
Mortgage loans (10)| -- --
__________________| ____________________________________
Realized gains (losses) |
on investments $15 | $151 $42
========================================================
</TABLE>
<TABLE>
<CAPTION>
PRE-ACQUISITION
_____________________________________
For the period |
January 1, 1996 | For the year
through | ended
August 13, 1996 | December 31, 1995
__________________| _________________
(Dollars in thousands)
<S> <C> | <C>
Fixed maturities, |
available for sale ($420)| $297
Mortgage loans -- | --
__________________| _________________
Realized gains (losses) |
on investments ($420)| $297
=====================================
</TABLE>
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
December 31, 1997
The change in unrealized appreciation (depreciation) on securities at
fair value is as follows:
<TABLE>
<CAPTION>
POST-MERGER POST-ACQUISITION
________________________________________________________
For the period | For the period For the period
October 25, 1997 | January 1, 1997 August 14, 1996
through | through through
December 31, | October 24, December 31,
1997 | 1997 1996
__________________| ____________________________________
(Dollars in thousands)
<S> <C> | <C> <C>
Fixed maturities: |
Available for sale $1,113 | $4,607 $410
Held for investment -- | -- --
Equity securities (533)| (465) (3)
__________________| ____________________________________
Unrealized appreciation |
(depreciation) of |
securities $580 | $4,142 $407
========================================================
</TABLE>
<TABLE>
<CAPTION>
PRE-ACQUISITION
_____________________________________
For the period |
January 1, 1996 | For the year
through | ended
August 13, 1996 | December 31, 1995
__________________| _________________
(Dollars in thousands)
<S> <C> | <C>
Fixed maturities: |
Available for sale ($2,087)| $958
Held for investment -- | 90
Equity securities 1 | 3
__________________| _________________
Unrealized appreciation |
(depreciation) of |
securities ($2,086)| $1,051
=====================================
</TABLE>
At December 31, 1997 and December 31, 1996, amortized cost, gross unrealized
gains and losses and estimated fair values of fixed maturity securities, all
of which are designated as available for sale, are as follows:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
_______________________________________________
(Dollars in thousands)
December 31, 1997 POST-MERGER
______________________________________________________________________________
<S> <C> <C> <C> <C>
U.S. government and
governmental agencies
and authorities:
Mortgage-backed securities $62,988 $155 ($10) $63,133
Other 5,705 5 (1) 5,709
Foreign governments 2,062 -- (9) 2,053
Public utilities 25,899 49 (4) 25,944
Investment grade corporate 219,526 926 (32) 220,420
Below investment grade
corporate 41,355 186 (210) 41,331
Mortgage-backed securities 55,753 78 (20) 55,811
_______________________________________________
Total $413,288 $1,399 ($286) $414,401
===============================================
December 31, 1996 POST-ACQUISITION
______________________________________________________________________________
U.S. government and
governmental agencies
and authorities:
Mortgage-backed securities $70,902 $122 ($247) $70,777
Other 3,082 2 (4) 3,080
Public utilities 35,893 193 (38) 36,048
Investment grade corporate 134,487 586 (466) 134,607
Below investment grade
corporate 25,921 249 (56) 26,114
Mortgage-backed securities 4,868 69 -- 4,937
_______________________________________________
Total $275,153 $1,221 ($811) $275,563
===============================================
</TABLE>
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
December 31, 1997
At December 31, 1997, net unrealized investment gains on fixed maturities
designated as available for sale totaled $1,113,000. This appreciation caused
an increase to stockholder's equity of $587,000 at December 31, 1997 (net of
deferred income taxes of $316,000, an adjustment of $35,000 to DPAC and PVIF
of $175,000). Short-term investments with maturities of 30 days or less have
been excluded from the above schedules. Amortized cost approximates fair value
for these securities.
Amortized cost and estimated fair value of fixed maturities designated as
available for sale, by contractual maturity, at December 31, 1997, are shown
below. Expected maturities will differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or without
call or prepayment penalties.
<TABLE>
<CAPTION>
POST-MERGER
_____________________________
Estimated
Amortized Fair
December 31, 1997 Cost Value
_____________________________________________________________________________
(Dollars in thousands)
<S> <C> <C>
Due within one year $26,261 $26,239
Due after one year through five years 198,249 198,781
Due after five years through ten years 70,037 70,437
_____________ _____________
294,547 295,457
Mortgage-backed securities 118,741 118,944
_____________ _____________
Total $413,288 $414,401
============= =============
</TABLE>
An analysis of sales, maturities and principal repayments of the Company's
fixed maturities portfolio is as follows:
<TABLE>
<CAPTION>
Gross Gross Proceeds
Amortized Realized Realized from
Cost Gains Losses Sale
______________________________________________________________________________
(Dollars in thousands)
<S> <C> <C> <C> <C>
For the period October 25,
1997 through
December 31, 1997:
Scheduled principal
repayments, calls and
tenders $6,708 $2 -- $6,710
Sales 3,138 23 -- 3,161
______________________________________________________
Total $9,846 $25 -- $9,871
======================================================
For the period January 1,
1997 through October 24,
1997:
Scheduled principal
repayments, calls and
tenders $25,419 -- -- $25,419
Sales 14,052 $153 ($2) 14,203
______________________________________________________
Total $39,471 $153 ($2) $39,622
======================================================
For the period August 14,
1996 through
December 31, 1996:
Scheduled principal
repayments, calls and
tenders $1,612 -- -- $1,612
Sales 45,799 $115 ($73) 45,841
______________________________________________________
Total $47,411 $115 ($73) $47,453
======================================================
For the period January 1,
1996 through August 13,
1996:
Scheduled principal
repayments, calls and
tenders $1,801 -- -- $1,801
Sales 53,710 $152 ($572) 53,290
______________________________________________________
Total $55,511 $152 ($572) $55,091
======================================================
Year ended December 31,
1995:
Scheduled principal
repayments, calls and
tenders $20,279 $305 ($16) $20,568
Sales 3,450 8 -- 3,458
______________________________________________________
Total $23,729 $313 ($16) $24,026
======================================================
</TABLE>
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
December 31, 1997
INVESTMENT VALUATION ANALYSIS: The Company analyzes its investment portfolio
at least quarterly in order to determine if the carrying value of any of its
investments has been impaired. The carrying value of debt and equity
securities is written down to fair value by a charge to realized losses when
an impairment in value appears to be other than temporary. During 1997 and
1996, no investments were identified as having an impairment other than
temporary.
INVESTMENTS ON DEPOSIT: At December 31, 1997 and 1996, affidavits of deposits
covering bonds with a par value of $6,605,000 were on deposit with regulatory
authorities pursuant to certain statutory requirements.
INVESTMENT DIVERSIFICATIONS: The Company's investment policies related to its
investment portfolio require diversification by asset type, company and
industry and set limits on the amount which can be invested in an individual
issuer. Such policies are at least as restrictive as those set forth by
regulatory authorities. The following percentages relate to holdings at
December 31, 1997 and December 31, 1996. Fixed maturity investments included
investments in basic industrials (30% in 1997 and 1996), financial companies
(24% in 1997, 18% in 1996), various government bonds and government or agency
mortgage-backed securities (17% in 1997 and 27% in 1996) and public utilities
(7% in 1997, 13% in 1996). Mortgage loans on real estate have been analyzed
by geographical location with concentrations by state identified as Utah (13%
in 1997, 4% in 1996), California (12% in 1997, 7% in 1996), and Georgia (11%
in 1997, 17% in 1996). There are no other concentrations of mortgage loans in
any state exceeding ten percent at December 31, 1997 and 1996. Mortgage loans
on real estate have also been analyzed by collateral type with significant
concentrations identified in office buildings (43% in 1997, 36% in 1996),
industrial buildings (33% in 1997, 31% in 1996), retail facilities (15% in
1997, 6% in 1996) and multi-family residential buildings (9% in 1997, 27% in
1996). Equity securities and investments accounted for by the equity method
are not significant to the Company's overall investment portfolio.
No investment in any person or its affiliates (other than bonds issued by
agencies of the United States government) exceeded ten percent of
stockholder's equity at December 31, 1997.
4. FAIR VALUES OF FINANCIAL INSTRUMENTS
SFAS No. 107, "Disclosures about Fair Value of Financial Instruments,"
requires disclosure of estimated fair value of all financial instruments,
including both assets and liabilities recognized and not recognized in a
Company's balance sheet, unless specifically exempted. SFAS No. 119,
"Disclosure about Derivative Financial Instruments and Fair Value of Financial
Instruments," requires additional disclosures about derivative financial
instruments. Most of the Company's investments, investment contracts and debt
fall within the standards' definition of a financial instrument. Fair values
for the Company's insurance contracts other than investment contracts are not
required to be disclosed. In cases where quoted market prices are not
available, estimated fair values are based on estimates using present value or
other valuation techniques. Those techniques are significantly affected by
the assumptions used, including the discount rate and estimates of future cash
flows. Accounting, actuarial and regulatory bodies are continuing to study the
methodologies to be used in developing fair value information, particularly as
it relates to such things as liabilities for insurance contracts. Accordingly,
care should be exercised in deriving conclusions about the Company's business
or financial condition based on the information presented herein.
The Company closely monitors the composition and yield of its invested assets,
the duration and interest credited on insurance liabilities and resulting
interest spreads and timing of cash flows. These amounts are taken into
consideration in the Company's overall management of interest rate risk, which
attempts to minimize exposure to changing interest rates through the matching
of investment cash flows with amounts expected to be due under insurance
contracts. As discussed be-
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
December 31, 1997
low, the Company has used discount rates in its
determination of fair values for its liabilities which are consistent with
market yields for related assets. The use of the asset market yield is
consistent with management's opinion that the risks inherent in its asset and
liability portfolios are similar. This assumption, however, might not result
in values consistent with those obtained through an actuarial appraisal of the
Company's business or values that might arise in a negotiated transaction.
The following compares carrying values as shown for financial reporting
purposes with estimated fair values:
<TABLE>
<CAPTION>
December 31 1997 1996
_______________________________________________________________________________
(Dollars in thousands) |
Estimated | Estimated
Carrying Fair | Carrying Fair
Value Value | Value Value
___________ ___________| ___________ ___________
<S> <C> <C> | <C> <C>
ASSETS |
Fixed maturities, available |
for sale $414,401 $414,401 | $275,563 $275,563
Equity securities 3,904 3,904 | 33 33
Mortgage loans on real estate 85,093 86,348 | 31,459 30,979
Policy loans 8,832 8,832 | 4,634 4,634
Short-term investments 14,460 14,460 | 12,631 12,631
Cash and cash equivalents 21,039 21,039 | 5,839 5,839
Separate account assets 1,646,169 1,646,169 | 1,207,247 1,207,247
|
LIABILITIES |
Annuity products 493,181 431,859 | 280,076 253,012
Surplus note 25,000 28,837 | 25,000 28,878
Separate account liabilities 1,646,169 1,443,458 | 1,207,247 1,119,158
|
</TABLE>
The following methods and assumptions were used by the Company in estimating
fair values.
FIXED MATURITIES: Estimated fair values of publicly traded securities are as
reported by an independent pricing service. Estimated fair values of
conventional mortgage-backed securities not actively traded in a liquid market
are estimated using a third party pricing system. This pricing system uses a
matrix calculation assuming a spread over U.S. Treasury bonds based upon the
expected average lives of the securities.
EQUITY SECURITIES: Estimated fair values of equity securities, which consist
of the Company's investment in the portfolios underlying its separate accounts,
are based upon the quoted fair value of the individual securities comprising
the individual portfolios underlying the separate accounts. For equity
securities not actively traded, estimated fair values are based upon values of
issues of comparable yield and quality.
MORTGAGE LOANS ON REAL ESTATE: Fair values are estimated by discounting
expected cash flows, using interest rates currently offered for similar
loans.
POLICY LOANS: Carrying values approximate the estimated fair value for
policy loans.
SHORT-TERM INVESTMENTS AND CASH AND CASH EQUIVALENTS: Carrying values
reported in the Company's historical cost basis balance sheet approximate
estimated fair value for these instruments, due to their short-term nature.
SEPARATE ACCOUNT ASSETS: Separate account assets are based upon the quoted
fair values of the individual securities in the separate accounts.
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
December 31, 1997
ANNUITY PRODUCTS: Estimated fair values of the Company's liabilities for
future policy benefits for the fixed interest division of the variable annuity
products and for supplemental contracts without life contingencies are based
upon discounted cash flow calculations. Cash flows of future policy benefits
are discounted using the market yield rate of the assets supporting these
liabilities.
SURPLUS NOTE: Estimated fair value of the Company's surplus note was based
upon discounted future cash flows using a discount rate approximating the
Company's return on invested assets.
SEPARATE ACCOUNT LIABILITIES: Separate account liabilities are reported at
full account value in the Company's historical cost balance sheet.
Estimated fair values of separate account liabilities are based upon
assumptions using an estimated long-term average market rate of return to
discount future cash flows. The reduction in fair values for separate
account liabilities reflect the present value of future revenue from product
charges, distribution fees or surrender charges.
5. MERGER
TRANSACTION: On October 23, 1997, Equitable shareholders approved the Merger
Agreement dated as of July 7, 1997, among Equitable, PFHI and ING. On October
24, 1997, PFHI, a Delaware corporation, acquired all of the outstanding
capital stock of Equitable pursuant to the Merger Agreement. PFHI is a wholly
owned subsidiary of ING, a global financial services holding company based in
The Netherlands. Equitable, an Iowa corporation, in turn, owned all the
outstanding capital stock of Equitable Life Insurance Company of Iowa
("Equitable Life") and Golden American and their wholly owned subsidiaries.
Equitable also owned all the outstanding capital stock of Locust Street
Securities, Inc. ("LSSI"), Equitable Investment Services, Inc., DSI, Equitable
of Iowa Companies Capital Trust, Equitable of Iowa Companies Capital Trust II
and Equitable of Iowa Securities Network, Inc. In exchange for the outstanding
capital stock of Equitable, ING paid total consideration of approximately $2.1
billion in cash and stock plus the assumption of approximately $400 million
in debt according to the Merger Agreement. As a result of the merger,
Equitable was merged into PFHI which was simultaneously renamed Equitable of
Iowa Companies, Inc. ("EIC" or the "Parent"), a Delaware corporation. All
costs of the merger, including expenses to terminate certain benefit plans,
were paid by the Parent.
ACCOUNTING TREATMENT: The merger was accounted for as a purchase resulting
in a new basis of accounting, reflecting estimated fair values for assets
and liabilities at October 24, 1997. The purchase price was allocated to EIC
and its subsidiaries. Goodwill was established for the excess of the merger
cost over the fair value of the net assets and pushed down to EIC and its
subsidiaries including Golden American and First Golden. The merger cost is
preliminary with respect to estimated expenses and, as a result, the PVIF and
related amortization and deferred taxes may change. The allocation of the
purchase price to the Company was approximately $227,497,000. The amount of
goodwill allocated to the Company relating to the merger was $151,127,000 at
the merger date and is being amortized over 40 years on a straight-line basis.
The carrying value of goodwill will be reviewed periodically for any
indication of impairment in value. The Company's DPAC, previous balance of
PVIF and unearned revenue reserve, as of the merger date, were eliminated
and an asset of $44,297,000 representing PVIF was established for all policies
in force at the merger date.
PRESENT VALUE OF IN FORCE ACQUIRED: As part of the merger, a portion of the
acquisition cost was allocated to the right to receive future cash flows from
insurance contracts existing with the Company at the date of merger. This
allocated cost represents the present value of in force acquired reflecting
the value of those purchased policies calculated by discounting the
actuarially determined expected future cash flow at the discount rate
determined by ING.
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
December 31, 1997
An analysis of the PVIF asset is as follows:
<TABLE>
<CAPTION>
POST-MERGER
________________________
For the period
October 25, 1997
through
December 31, 1997
________________________
(Dollars in thousands)
<S> <C>
Beginning balance $44,297
Imputed interest 1,004
Amortization (1,952)
Adjustment for unrealized gains
on available for sale securities (175)
________________________
Ending balance $43,174
========================
</TABLE>
Interest is imputed on the unamortized balance of PVIF at a rate of 7.03% for
the period October 25, 1997 through December 31, 1997. The amortization of
PVIF net of imputed interest is charged to expense. PVIF is also adjusted for
the unrealized gains (losses) on available for sale securities; such changes
are included directly in stockholder's equity. Based on current conditions
and assumptions as to the impact of future events on acquired policies in
force, the expected approximate net amoritization for the next five years,
relating to the PVIF as of December 31, 1997, is $6,200,000 in 1998,
$6,000,000 in 1999, $5,600,000 in 2000, $5,000,000 in 2001 and $4,200,000 in
2002. Actual amortization may vary based upon final purchase price allocation
and changes in assumptions and experience.
6. ACQUISITION
TRANSACTION: On August 13, 1996, Equitable acquired all of the outstanding
capital stock of BT Variable from Whitewood, a wholly owned subsidiary of
Bankers Trust Company ("Bankers Trust"), pursuant to the terms of the
Purchase Agreement dated as of May 3, 1996 between Equitable and Whitewood.
In exchange for the outstanding capital stock of BT Variable, Equitable paid
the sum of $93,000,000 in cash to Whitewood in accordance with the terms of
the Purchase Agreement. Equitable also paid the sum of $51,000,000 in cash to
Bankers Trust to retire certain debt owed by BT Variable to Bankers Trust
pursuant to a revolving credit arrangement. Subsequent to the acquisition,
the BT Variable, Inc. name was changed to EIC Variable, Inc. At April 30,
1997, EIC Variable, Inc. was liquidated and its investments in Golden American
and DSI were transferred to Equitable, while the remainder of its net assets
were contributed to Golden American. On December 30, 1997, EIC Variable, Inc.
was dissolved.
ACCOUNTING TREATMENT: The acquisition was accounted for as a purchase
resulting in a new basis of accounting, which reflected estimated fair
values for assets and liabilities at August 13, 1996. The purchase price
was allocated to the three companies purchased - BT Variable, DSI and Golden
American. Goodwill was established for the excess of the acquisition cost
over the fair value of the net assets acquired and pushed down to Golden
American. The allocation of the purchase price to the Company was
approximately $139,872,000. The amount of goodwill relating to the
acquisition was $41,113,000 and was amortized over 25 years on a straight-line
basis until the October 24, 1997 merger with ING. The Company's DPAC, previous
balance of PVIF and unearned revenue reserve, as of the merger date, were
eliminated and an asset of $85,796,000 representing PVIF was established for
all policies in force at the acquisition date.
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
December 31, 1997
PRESENT VALUE OF IN FORCE ACQUIRED: As part of the acquisition, a portion of
the acquisition cost was allocated to the right to receive future cash flows
from the insurance contracts existing with the Company at the date of
acquisition. This allocated cost represents the present value of in force
acquired reflecting the value of those purchased policies calculated by
discounting the actuarially determined expected future cash flows at the
discount rate determined by Equitable.
An analysis of the PVIF asset is as follows:
<TABLE>
<CAPTION>
POST-ACQUISITION PRE-ACQUISITION
_________________________________________________
For the For the | For the
period period | period
January August | January For the
1, 1997 14, 1996 | 1, 1996 year
through through | through ended
October December | August December
24, 1997 31, 1996 | 13, 1996 31, 1995
_______________________| ________________________
(Dollars in thousands)
<S> <C> <C> | <C> <C>
Beginning balance $83,051 $85,796 | $6,057 $7,620
Imputed interest 5,138 2,465 | 273 548
Amortization (10,363) (5,210)| (1,224) (2,100)
Adjustment for unrealized |
gains (losses) on available |
for sale securities (373) -- | 11 (11)
_______________________| ________________________
Ending balance $77,453 $83,051 | $5,117 $6,057
=================================================
</TABLE>
Pre-Acquisition PVIF represents the remaining value assigned to in force
contracts when Bankers Trust purchased Golden American from Mutual Benefit
Life Insurance Company in Rehabilitation ("Mutual Benefit") on September
30, 1992.
Interest was imputed on the unamortized balance of PVIF at rates of 7.70%
to 7.80% for the period August 14, 1996 through October 24, 1997. The
amortization of PVIF net of imputed interest was charged to expense. PVIF
was also adjusted for the unrealized gains (losses) on available for sale
securities; such changes were included directly in stockholder's equity.
7. INCOME TAXES
The Company will file a consolidated federal income tax return with its wholly
owned life insurance subsidiary. Under the Internal Revenue Code, a newly
acquired insurance company cannot file as part of its parent's consolidated
tax return for 5 years.
At December 31, 1997, Golden American has net operating loss ("NOL")
carryforwards for federal income tax purposes of approximately $8,697,000.
Approximately $5,094,000 and $3,603,000 of these NOL carryforwards are
available to offset future taxable income of the Company through the years 2011
and 2012, respectively.
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
December 31, 1997
INCOME TAX EXPENSE
Income tax expense (benefit) included in the consolidated financial statements
is as follows:
<TABLE>
<CAPTION>
POST-MERGER POST-ACQUISITION PRE-ACQUISITION
_____________________________________________________________________
For the | For the For the | For the
period | period period | period
October 25, | January 1, August 14, | January 1,
1997 | 1997 1996 | 1996 For the
through | through through | through year ended
December 31, | October 24, December 31, | August 13, December 31,
1997 | 1997 1996 | 1996 1995
_____________| __________________________| __________________________
(Dollars in thousands)
<S> <C> | <C> <C> | <C> <C>
Current -- | $12 -- | -- --
Deferred $146 | (1,349) $220 | ($1,463) --
_____________| __________________________| __________________________
$146 | ($1,337) $220 | ($1,463) --
=====================================================================
</TABLE>
The effective tax rate on income (loss) before income taxes is different from
the prevailing federal income tax rate. A reconciliation of this difference
is as follows:
<TABLE>
<CAPTION>
POST-MERGER POST-ACQUISITION PRE-ACQUISITION
_______________________________________________________
For the | For the For the | For the
period | period period | period
October | January August | January
25, 1997 | 1, 1997 14, 1996 | 1, 1996 For the
through | through through | through year ended
December | October December | August December
31, 1997 | 24, 1997 31, 1996 | 13, 1996 31, 1995
___________| ____________________| ____________________
(Dollars in thousands)
<S> <C> | <C> <C> | <C> <C>
Income (loss) | |
before income taxes ($279)| ($608) $570 | $1,736 $3,364
===========| ====================| ====================
Income tax | |
(benefit) at federal | |
statutory rate ($98)| ($213) $200 | $607 $1,177
Tax effect (decrease) of: | |
Realization of NOL | |
carryforwards -- | -- -- | (1,214) --
Dividends received | |
deduction -- | -- -- | -- (350)
Goodwill amortization 220 | -- -- | -- --
Compensatory stock | |
option and restricted | |
stock expense -- | (1,011) -- | -- --
Other items 24 | (113) 20 | -- 17
Valuation allowance -- | -- -- | (856) (844)
___________| ____________________| ____________________
Income tax expense | |
(benefit) $146 | ($1,337) $220 | ($1,463) $--
=======================================================
</TABLE>
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
December 31, 1997
DEFERRED INCOME TAXES
The tax effect of temporary differences giving rise to the Company's deferred
income tax assets and liabilities at December 31, 1997 and 1996 is as follows:
<TABLE>
<CAPTION>
POST-MERGER POST-ACQUISITION
___________________________________
December 31 1997 | 1996
____________________________________________________________ | ________________
(Dollars in thousands)
<S> <C> | <C>
Deferred tax assets: |
Future policy benefits $27,399 | $19,102
Deferred policy acquisition costs 4,558 | 1,985
Goodwill 17,620 | 5,918
Net operating loss carryforwards 3,044 | 1,653
Other 1,548 | 235
________________ | ________________
54,169 | 28,893
Deferred tax liabilities: |
Unrealized appreciation (depreciation) |
of securities at fair value (130) | (145)
Fixed maturity securities (1,665) | --
Present value of in force acquired (15,172) | (29,068)
Other (972) | (45)
________________ | ________________
(17,939) | (29,258)
________________ | ________________
Deferred income tax asset (liability) $36,230 | ($365)
===================================
</TABLE>
The Company is required to establish a "valuation allowance" for any portion
of the deferred tax assets that management believes will not be realized. In
the opinion of management, it is more likely than not that the Company will
realize the benefit of the deferred tax assets, and, therefore, no such
valuation allowance has been established.
8. RETIREMENT PLANS
DEFINED BENEFIT PLANS
In 1997, the Company was allocated their share of the pension liability
associated with their employees. The Company's employees are covered by the
employee retirement plan of an affiliate, Equitable Life. The benefits are
based on years of service and the employee's average annual compensation
during the last five years of employment. Further, Equitable Life sponsors a
defined contribution plan that is qualified under Internal Revenue Code Section
401(k). The Company's funding and accounting policies are consistent with the
funding requirements of Federal law and regulations.
The following table sets forth the plan's funded status and amounts recognized
in the Company's consolidated balance sheet:
<TABLE>
<CAPTION>
POST-MERGER
_______________________
December 31, 1997
_______________________
(Dollars in thousands)
<S> <C>
Accumulated benefit obligation $579
=======================
Plan assets at fair value, primarily bonds, common
stocks, mortgage loans and short-term investments --
Projected benefit obligation for service rendered to date $956
_______________________
Pension liability $956
=======================
</TABLE>
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
December 31, 1997
Net periodic pension cost included the following components:
<TABLE>
<CAPTION>
POST-MERGER POST-ACQUISITION
______________________________________
For the period | For the period
October 25, 1997 | January 1, 1997
through | through
December 31, 1997 | October 24, 1997
__________________| __________________
(Dollars in thousands)
<S> <C> | <C>
Service cost-benefits earned |
during the period $114 | $568
Interest cost on projected |
benefit obligation 10 | 15
Net amortization and deferral -- | 1
__________________| __________________
Net periodic pension cost $124 | $584
======================================
</TABLE>
The discount rate and rate of increase in future compensation levels used in
determining the actuarial present value of the projected benefit obligation
were 7.25% and 5.00%, respectively, at December 31, 1997. The average
expected long term rate of return on plan assets was 9.00% in 1997.
9. RELATED PARTY TRANSACTIONS
DSI acts as the principal underwriter (as defined in the Securities Act of
1933 and the Investment Company Act of 1940, as amended) of the variable
insurance products issued by the Company which as of December 31, 1997 are
sold primarily through six broker/dealer institutions. For the periods
October 25, 1997, through December 31, 1997 and January 1, 1997 through
October 24, 1997, the Company paid commissions to DSI totaling $9,931,000
and $26,419,000, respectively ($9,995,000 for the period August 14, 1996
through December 31, 1996 and $17,070,000 for the period January 1, 1996
through August 13, 1996). For the year ended December 31, 1995 commissions
paid by Golden American to DSI aggregated $8,440,000.
Golden American provides certain managerial and supervisory services to DSI.
Beginning in 1995, this fee was calculated as a percentage of average assets
in the variable separate accounts. For the periods October 25, 1997 through
December 31, 1997 and January 1, 1997 through October 24, 1997, the fee was
$508,000 and $2,262,000, respectively. For the periods August 14, 1996
through December 31, 1996 and January 1, 1996 through August 13, 1996 the
fee was $877,000 and $1,390,000, respectively. This fee was $987,000 for 1995.
The Company has a service agreement with Equitable Investment Services, Inc.
("EISI"), an affiliate, in which EISI provides investment management services.
Payments for these services totaled $200,000, $768,000 and $72,000 for the
periods October 25, 1997 through December 31, 1997, January 1, 1997 through
October 24, 1997 and August 14, 1996 through December 31, 1996, respectively.
Golden American has a guaranty agreement with Equitable Life. In consideration
of an annual fee, payable June 30, Equitable Life guarantees to Golden American
that it will make funds available, if needed, to Golden American to pay the
contractual claims made under the provisions of Golden American's life
insurance and annuity contracts. The agreement is not, and nothing contained
therein or done pursuant thereto by Equitable Life shall be deemed to
constitute, a direct or indirect guaranty by Equitable Life of the payment of
any debt or other obligation, indebtedness or liability, of any kind or
character whatsoever, of Golden American. The agreement does not guarantee the
value of the underlying assets held in separate accounts in which funds of
variable life insurance and variable annuity policies have been invested. The
calculation of the annual fee is based on risk based capital. As Golden
American's risk based capital level was above required amounts, no annual fee
was payable.
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
December 31, 1997
Golden American provides certain advisory, computer and other resources and
services to Equitable Life. Revenues for these services which reduced general
expenses incurred by Golden American totaled $1,338,000 and $2,992,000 for
the periods October 25, 1997 through December 31, 1997 and January 1, 1997
through October 24, 1997, respectively. No services were provided by Golden
American in 1996.
The Company has a service agreement with Equitable Life in which Equitable Life
provides administrative and financial related services. For the period October
25, 1997 through December 31, 1997 and January 1, 1997 through October 24,
1997, the Company incurred expenses of $13,000 and $16,000, respectively,
under this agreement.
The Company had premiums, net of reinsurance, for variable products from six
significant broker/dealers for the year ended December 31, 1997, that
totaled $445,300,000, or 71% of premiums ($298,000,000 or 67% from two
significant broker/dealers for the year ended December 31, 1996). Included in
these amounts are premiums for 1997 of $26.2 million from LSSI, an affiliate.
SURPLUS NOTE: On December 17, 1996, Golden American issued an 8.25% surplus
note in the amount of $25,000,000 to Equitable. The note matures on December
17, 2026. The note and accrued interest thereon shall be subordinate to
payments due to policyholders, claimant and beneficiary claims, as well as
debts owed to all other classes of debtors of Golden American. Any payment of
principal made shall be subject to the prior approval of the Delaware Insurance
Commissioner. Golden American incurred interest totaling $344,000 and
$1,720,000 for the period October 25, 1997 through December 31, 1997 and
January 1, 1997 through October 24, 1997, respectively. On December 17, 1996,
Golden American contributed the $25,000,000 to First Golden acquiring 200,000
shares of common stock (100% of outstanding stock) of First Golden.
RECIPROCAL LOAN AGREEMENT: Golden American maintains a reciprocal loan
agreement with ING America Insurance Holdings, Inc. ("ING America"), a
Delaware corporation, and affiliate of EIC, to facilitate the handling of
unusual and/or unanticipated short-term cash requirements. Under this
agreement, which became effective January 1, 1998 and expires December 31,
2007, Golden American and ING America can borrow up to $65,000,000 from one
another. Interest on any Golden American borrowings is charged at the rate of
ING America's cost of funds for the interest period plus 0.15%. Interest
on any ING America borrowings is charged at a rate based on the prevailing
interest rate of U.S. commercial paper available for purchase with a similar
arrangement.
LINE OF CREDIT: Golden American maintained a line of credit agreement with
Equitable to facilitate the handling of unusual and/or unanticipated short-term
cash requirements. Under this agreement which became effective December 1, 1996
and expired December 31, 1997, Golden American could borrow up to $25,000,000.
Interest on any borrowings was charged at the rate of Equitable's monthly
average aggregate cost of short-term funds plus 1.00%. Under this agreement,
the Company incurred interest expense of $213,000 for the period October 25,
1997 through December 31, 1997, $362,000 for the period January 1, 1997 through
October 24, 1997, and $85,000 for the period August 14, 1996 through December
31, 1996. At December 31, 1997, $24,059,000 was outstanding under this
agreement. The outstanding balance was repaid by a capital contribution.
STOCKHOLDER'S EQUITY: On September 23, 1996, EIC Variable, Inc. contributed
$50,000,000 of Preferred Stock to the Company's additional paid-in capital.
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
December 31, 1997
10. COMMITMENTS AND CONTINGENCIES
CONTINGENT LIABILITY: In a transaction that closed on September 30, 1992,
Bankers Trust acquired from Mutual Benefit, in accordance with the terms of an
Exchange Agreement, all of the issued and outstanding capital stock of Golden
American and DSI and certain related assets for consideration with an
aggregate value of $13,200,000 and contributed them to BT Variable. The
transaction involved settlement of pre-existing claims of Bankers Trust
against Mutual Benefit. The ultimate value of these claims has not yet been
determined by the Superior Court of New Jersey and, prior to August 13, 1996,
was contingently supported by a $5,000,000 note payable from Golden American
and a $6,000,000 letter of credit from Bankers Trust. Bankers Trust had
estimated that the contingent liability due from Golden American amounted to
$439,000 at August 13, 1996. At August 13, 1996 the balance of the escrow
account established to fund the contingent liability was $4,293,000.
On August 13, 1996, Bankers Trust made a cash payment to Golden American in
an amount equal to the balance of the escrow account less the $439,000
contingent liability discussed above. In exchange, Golden American
irrevocably assigned to Bankers Trust all of Golden American's rights to
receive any amounts to be disbursed from the escrow account in accordance
with the terms of the Exchange Agreement. Bankers Trust also irrevocably
agreed to make all payments becoming due under the Golden American note and
to indemnify Golden American for any liability arising from the note.
REINSURANCE: At December 31, 1997, the Company had reinsurance treaties with
five unaffiliated reinsurers covering a significant portion of the mortality
risks under its variable contracts. The Company remains liable to the extent
its reinsurers do not meet their obligations under the reinsurance agreements.
Reinsurance in force for life mortality risks were $96,686,000 and $58,368,000
at December 31, 1997 and 1996. At December 31, 1997, the Company has a net
payable of $11,000 for reserve credits, reinsurance claims or other receivables
from these reinsurers comprised of $240,000 for claims recoverable from
reinsurers and a payable of $251,000 for reinsurance premiums. Included in the
accompanying financial statements are net considerations to reinsurers of
$326,000, $1,871,000, $875,000, $600,000 and $2,800,000 and net policy benefits
recoveries of $461,000, $1,021,000, $654,000, $1,267,000 and $3,500,000 for the
periods October 25, 1997 through December 31, 1997, January 1, 1997 through
October 24, 1997, August 14, 1996 through December 31, 1996, and January 1,
1996 through August 13, 1996 and the year ended 1995, respectively.
Effective June 1, 1994, Golden American entered into a modified coinsurance
agreement with an unaffiliated reinsurer. The accompanying financial
statements are presented net of the effects of the treaty which increased
income by $265,000, $335,000, $10,000 and $56,000 for the periods October
25, 1997 through December 31, 1997, January 1, 1997 through October 24, 1997,
August 14, 1996 through December 31, 1996 and January 1, 1996 through
August 13, 1996, respectively. In 1995, net income was reduced by $109,000.
GUARANTY FUND ASSESSMENTS: Assessments are levied on the Company by life and
health guaranty associations in most states in which the Company is licensed
to cover losses of policyholders of insolvent or rehabilitated insurers. In
some states, these assessments can be partially recovered through a reduction
in future premium taxes. The Company cannot predict whether and to what
extent legislative initiatives may affect the right to offset. Based upon
information currently available from the National Organization of Life and
Health Insurance Guaranty Associations (NOLHGA), the Company believes that
it is probable these insolvencies will result in future assessments which
could be material to the Company's financial statements if the Company's
reserve is not sufficient. The Company regularly reviews its reserve for
these insolvencies and updates its reserve based upon the Company's
interpretation of information from the NOLHGA annual report. The associated
cost for a particular insurance company can vary significantly based upon
its fixed account premium volume by line of business and
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
December 31, 1997
state premium levels
as well as its potential for premium tax offset. Accordingly, the Company
accrued and charged to expense an additional $141,000 for the period October
25, 1997 through December 31, 1997, $446,000 for the period January 1, 1997
through October 24, 1997, $291,000 for the period August 14, 1996 through
December 31, 1996 and $480,000 for the period January 1, 1996 through August
13, 1996. At December 31, 1997, the Company has an undiscounted reserve of
$1,358,000 to cover estimated future assessments (net of related anticipated
premium tax credits) and has established an asset totaling $238,000 for
assessments paid which may be recoverable through future premium tax offsets.
The Company believes this reserve is sufficient to cover expected future
insurance guaranty fund assessments, based upon previous premiums, and known
insolvencies at this time.
LITIGATION: In the ordinary course of business, the Company is engaged in
litigation, none of which management believes is material.
VULNERABILITY FROM CONCENTRATIONS: The Company has various concentrations in
its investment portfolio (see Note 3 for further information). The Company's
asset growth, net investment income and cash flow are primarily generated from
the sale of variable products and associated future policy benefits and
separate account liabilities. A significant portion of the Company's sales is
generated by six broker/dealers. Substantial changes in tax laws that would
make these products less attractive to consumers, extreme fluctuations in
interest rates or stock market returns which may result in higher lapse
experience than assumed, could cause a severe impact to the Company's
financial condition.
OTHER COMMITMENTS: At December 31, 1997, outstanding commitments to fund
mortgage loans on real estate totaled $1,825,000.
YEAR 2000 (UNAUDITED): Based on a study of its computer software and
hardware, the Company has determined its exposure to the Year 2000 change of
the century date issue. Management believes the Company's systems are or
will be substantially compliant by Year 2000 and has engaged external
consultants to validate this assumption. Golden American has spent
approximately $2,000 in 1997 related to the external consultants' analysis.
The projected cost to the Company for the external consultants' analysis is
approximately $130,000 to $170,000. The only system known to be affected by
this issue is a system maintained by an affiliate who will incur the related
costs to make the system compliant. To mitigate the effect of outside
influences and other dependencies relative to the Year 2000, the Company will
be contacting significant customers, suppliers and other third parties. To
the extent these third parties would be unable to transact business in the
Year 2000 and thereafter, the Company's operations could be adversely affected.
<PAGE>
APPENDIX: DESCRIPTION OF BOND RATINGS
Excerpts from Moody's Investors Service, Inc. ("Moody's) description of its bond
ratings:
Aaa: Judged to be the best quality; they carry the smallest degree of
investment risk.
Aa: Judged to be of high quality by all standards; together with the
Aaa group, they comprise what are generally known as high grade bonds.
A: Possess many favorable investment attributes and are to be considered
as "upper medium grade obligations."
Baa: Considered as medium grade obligations, i.e., they are neither highly
protected nor poorly secured; interest payments and principal security
appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of
time.
Ba: Judged to have speculative elements; their future cannot be
considered as well assured.
B: Generally lack characteristics of the desirable investment.
Caa: Are of poor standing; such issues may be in default or there may be
present elements of danger with respect to principal or interest.
Ca: Speculative in a high degree; often in default.
C: Lowest rate class of bonds; regarded as having extremely poor
prospects.
Moody's also applies numerical indicators 1, 2 and 3 to rating categories.
The modifier 1 indicates that the security is in the higher end of its rating
category; 2 indicates a mid-range ranking; and 3 indicates a ranking toward
the lower end of the category.
Excerpts from Standard & Poor's Rating Group ("Standard & Poor's") description
of its bond ratings:
AAA: Highest grade obligations; capacity to pay interest and repay
principal is extremely strong.
A - 1
<PAGE>
AA: Also qualify as high grade obligations; a very strong capacity to
pay interest and repay principal and differs from AAA issues only in
small degree.
A: Regarded as upper medium grade; they have a strong capacity to pay
interest and repay principal although it is somewhat more susceptible to
the adverse effects of changes in circumstances and economic conditions
than debt in higher rated categories.
BBB: Regarded as having an adequate capacity to pay interest and repay
principal; whereas it normally exhibits adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to
lead to a weakened capacity than in higher rated categories -- this group
is the lowest which qualifies for commercial bank investment.
BB, B,
CCC,
CC: Predominantly speculative with respect to capacity to pay interest
and repay principal in accordance with terms of the obligation: BB
indicates the lowest degree of speculation and CC the highest.
Standard & Poor's applies indicators "+," no character, and "-" to its rating
categories. The indicators show relative standing within the major rating
categories.
A-2
<PAGE>
