<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 1, 1997
Registration No. 33-23458
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Post-Effective Amendment No. 21
to
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUSTS
REGISTERED ON FORM N-8B-2
SEPARATE ACCOUNT A
(EXACT NAME OF TRUST)
GOLDEN AMERICAN LIFE INSURANCE COMPANY
(NAME OF DEPOSITOR)
1001 Jefferson Street, 4th Floor
Wilmington, DE 19801
302-576-3400
(ADDRESS AND TELEPHONE NUMBER OF DEPOSITOR'S PRINCIPAL OFFICES)
MARILYN TALMAN, ESQ. COPY TO:
Golden American Life Insurance Company Susan S. Krawczyk, Esq.
1001 Jefferson Street, Sutherland, Asbill & Brennan, L.L.P.
Wilmington, DE 19801 1275 Pennsylvania Avenue, N.W.
(NAME AND ADDRESS OF AGENT FOR Washington, D.C. 20004-2404
SERVICE OF PROCESS)
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
A soon as practical after the effective date of the Registration Statement
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE:
[ ] immediately upon filing pursuant to paragraph (b)
[X] on May 1, 1997 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(i)
[ ] on _________ pursuant to paragraph (a)(i)
[ ] 75 days after filing pursuant to paragraph (a)(ii)
[ ] on _________ pursuant to paragraph (a)(ii) of Rule 485.
IF APPROPRIATE, CHECK THE FOLLOWING BOX:
[ ] this Post-Effective Amendment designates a new effective date for
a previously filed Post-Effective Amendment.
------------
DECLARATION PURSUANT TO RULE 24F-2
The Registrant has previously filed a declaration of indefinite registration of
its shares of beneficial interest pursuant under the Securities Act of 1933
pursuant to Rule 24f-2 under the Investment Company Act of 1940. The Rule 24f-2
Notice for the year ended December 31, 1996 was filed on February 28, 1997.
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<PAGE>
CROSS REFERENCE SHEET
PURSUANT TO RULE 495(A)
N-8B-2 Item Prospectus Heading
- ----------------- --------------------------------------------------
1 Cover Page
2 Cover Page
3 Facts About Golden American, Account A and the
Fixed Account
4 Other Important Information
5 Facts About Golden American, Account A and the
Fixed Account
6 Facts About Golden American, Account A and the
Fixed Account
7 Not Applicable
8 Financial Statements
9 Other Important Information
10 Summary of the Policy; Facts About The Policy;
Other Important Information
11 Facts About Golden American, Account A and the
Fixed Account
12 Facts About Golden American, Account A and the
Fixed Account
13 Summary of the Policy; Charges and Deductions
14 Summary of the Policy; Facts About The Policy
15 Facts About The Policy
16 Summary of the Policy; Facts About The Policy
17 Summary of the Policy; Your Policy Benefits
18 Facts About Golden American, Account A and the
Fixed Account
19 Other Important Information
20 Facts About Golden American, Account A and the
Fixed Account
21 Summary of the Policy; Your Policy Benefits
<PAGE>
N-8B-2 Item Prospectus Heading
- ----------------- --------------------------------------------------
22 Not Applicable
23 Not Applicable
24 Other Important Information
25 Facts About Golden American, Account A and the
Fixed Account
26 Not Applicable
27 Facts About Golden American, Account A and the
Fixed Account
28 Facts About Golden American, Account A and the
Fixed Account
29 Facts About Golden American, Account A and the
Fixed Account
30 Management
31 Not Applicable
32 Not Applicable
33 Not Applicable
34 Not Applicable
35 Facts About Golden American, Account A and the
Fixed Account
36 Not Applicable
37 Not Applicable
38 Other Important Information
39 Other Important Information
40 Not Applicable
41 Other Important Information
42 Not Applicable
43 Not Applicable
44 Facts About The Policy; Insurance Benefits; Other
Important Information
45 Not Applicable
<PAGE>
N-8B-2 Item Prospectus Heading
- ----------------- --------------------------------------------------
46 Facts About The Policy; Your Policy's Benefits
47 Facts About Golden American, Account A and the
Fixed Account
48 Not Applicable
49 Not Applicable
50 Not Applicable
51 Cover Page; Summary of Policy; Facts About The
Policy; Your Policy Benefits
52 Facts About Golden American, Account A
and the Fixed Account; Other Important Information
53 Facts About Golden American, Account A and the
Fixed Account; Federal Income Tax Considerations
54 Not Applicable
55 Not Applicable
56 Not Applicable
57 Not Applicable
58 Not Applicable
59 Financial Statements
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ GOLDENSELECT GENESIS I & GOLDENSELECT GENESIS FLEX +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
GOLDEN AMERICAN LIFE INSURANCE COMPANY
Golden American Life Insurance Company is a stock company domiciled in Wilming-
ton, Delaware
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE PROSPECTUS
GOLDENSELECT GENESIS I AND GOLDENSELECT GENESIS FLEX
- --------------------------------------------------------------------------------
This prospectus is for individual and group flexible premium variable life in-
surance policies offered by Golden American Life Insurance Company ("Golden
American," "We," "Our" or "Us"). Both the individual policy and the group pol-
icy and any certificates issued thereunder (collectively the "Policies" and
separately the "Policy") permit the Policyowner ("You" or "Your") to make addi-
tional premium payments, to take policy loans and partial withdrawals subject
to certain restrictions, and under certain circumstances, to change the death
benefit option and to change the Face Amount.
Premiums are allocated among the divisions of Separate Account A ("Account A")
and, if available, the Fixed Interest Division (the "Fixed Account", and to-
gether with Account A the "Accounts"). The Investments available through the
divisions of Account A include mutual fund portfolios (the "Series") of The GCG
Trust (the "GCG Trust") and the Equi-Select Series Trust (the "ESS Trust").
Each premium is allocated according to Your instructions, subject to any re-
strictions for the initial premium during the Free Look Period. After the Free
Look Period, You may change the allocation of Your Investment Value.
The Policy can be purchased on a single life basis or a joint and last survivor
("survivorship") basis. The Policy provides life insurance coverage on the
Insured(s). While the Policy is in force, the death benefit may vary to reflect
the Policy's investment results but will never be less than the Face Amount.
The death benefit is payable upon the death of the Insured if purchased on a
single life basis and the last surviving Insured if purchased on a survivorship
basis.
We guarantee that the coverage will remain in force during the lifetime of the
Insured(s) (but in no event beyond the Maturity Date) for a period called the
Guarantee Period. During the Guarantee Period We may terminate the Policy only
if there is Debt and the Cash Surrender Value is negative. After the Guarantee
Period the Policy will remain in force as long as the Cash Surrender Value is
sufficient to cover the charges due.
The Genesis Flex Policy is designed to comply with the Life Insurance Premium
Payment Test under Federal tax law. As a result, any loans received under a
Genesis Flex Policy should not be taxable to You. The Genesis I Policy will not
comply with the Life Insurance Premium Payment Test and thus will be a "modi-
fied endowment contract" under Federal tax law. Loans, partial withdrawals and
surrenders under a Genesis I Policy may be taxable in whole or in part and may
also be subject to a 10% penalty tax.
For more information on both types of policies, see Federal Income Tax Consid-
erations, Modified Endowment Contracts.
You may turn in the Policy for its Cash Surrender Value at any time while the
Policy is in force. The Cash Surrender Value will vary with the investment re-
sults of the divisions of Account A in which you are invested and interest
credited with respect to allocations to the Fixed Account. With respect to pre-
miums allocated to Account A, We do not guarantee any minimum Cash Surrender
Value.
Within certain limits, You may return the Policy for a refund. It may not be
advantageous to replace existing insurance with the Policy.
- --------------------------------------------------------------------------------
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 AC-
CURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
POLICIES AND UNDERLYING SERIES SHARES WHICH FUND THE POLICIES ARE NOT INSURED
BY THE FDIC OR ANY OTHER AGENCY. THEY ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF
ANY BANK AND ARE NOT BANK GUARANTEED. THEY ARE SUBJECT TO MARKET FLUCTUATION,
REINVESTMENT RISK AND POSSIBLE LOSS OF PRINCIPAL INVESTED.
PLEASE READ THIS PROSPECTUS AND KEEP IT FOR FUTURE REFERENCE. IT IS NOT VALID
UNLESS ACCOMPANIED BY THE CURRENT PROSPECTUSES FOR THE GCG TRUST AND THE ESS
TRUST. THE FIXED ACCOUNT MAY NOT BE AVAILABLE IN ALL STATES. YOU MAY CONTACT
OUR CUSTOMER SERVICE CENTER TO FIND OUT ABOUT STATE AVAILABILITY.
ISSUED BY: DISTRIBUTED BY: ADMINISTERED AT:
Golden Directed Services, Inc. Customer Service Center
American Life Wilmington, Delaware 19801 Mailing Address: P.O. Box 8794
Insurance Company Wilmington, DE 19899-8794
1-800-366-0066
PROSPECTUS DATE: MAY 1, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
IMPORTANT TERMS............................................................ 3
SUMMARY OF THE POLICY...................................................... 5
FACTS ABOUT GOLDEN AMERICAN, ACCOUNT A AND THE FIXED ACCOUNT
Golden American........................................................... 10
Account A................................................................. 10
Account A Divisions....................................................... 10
Changes Within Account A.................................................. 15
The Fixed Account......................................................... 15
FACTS ABOUT THE POLICY
Who May be Covered by a Policy............................................ 15
Death Benefit Options..................................................... 16
Premium Payments.......................................................... 16
Making Additional Premium Payments........................................ 17
Allocation of Premium Payments............................................ 17
Your Right to Reallocate.................................................. 17
Transfers from the Fixed Account.......................................... 18
Dollar Cost Averaging..................................................... 18
What Happens if a Division is not Available............................... 19
Your Investment Value..................................................... 19
Investment Value in Each Division of Account A............................ 19
Tabular Value............................................................. 20
Measurement of Investment Experience...................................... 20
CHARGES AND DEDUCTIONS
Deductions for Deferred Loading........................................... 20
Deductions for Insurance Based Charges.................................... 21
Deductions for Transaction and Other Charges.............................. 22
Deductions from Divisions of Account A.................................... 23
Trust Expenses............................................................ 23
YOUR POLICY'S BENEFITS
Your Policy's Cash Surrender Value........................................ 23
Policy Loans.............................................................. 23
Taking Partial Withdrawals................................................ 24
Your Right to Cancel or Exchange Your Policy.............................. 26
INSURANCE BENEFITS
Death Benefit Proceeds.................................................... 26
Variable Insurance Amount................................................. 27
Net Single Premium Factor................................................. 27
Changes in Face Amount.................................................... 27
Guarantee Period.......................................................... 28
Changing the Death Benefit Option......................................... 28
When Your Guarantee Period Ends Before the Maturity Date.................. 29
Policy Guarantees......................................................... 29
CHOOSING AN INCOME PLAN.................................................... 29
Payment When Named Person Dies............................................ 30
OTHER IMPORTANT INFORMATION
Other General Policy Provisions........................................... 30
Your Voting Privileges.................................................... 32
Sales and Other Agreements................................................ 33
Group or Sponsored Arrangements........................................... 33
State Regulation.......................................................... 33
Registration Statement.................................................... 34
Legal Considerations for Employers........................................ 34
Legal Proceedings......................................................... 34
Legal Matters............................................................. 34
Experts................................................................... 34
Reinsurance............................................................... 34
Additional Information.................................................... 34
MANAGEMENT................................................................. 35
FEDERAL INCOME TAX CONSIDERATIONS
Golden American -- Tax Status............................................. 36
Deferred Acquisition Costs................................................ 36
Death Benefits............................................................ 37
Survivorship Policies and Policies Issued to Individuals with Substandard
Mortality Risks.......................................................... 37
Surrender................................................................. 37
Partial Withdrawals....................................................... 37
Loans..................................................................... 37
Change of Ownership or Assignment......................................... 38
Modified Endowment Contracts.............................................. 38
Code Section 1035 Exchanges............................................... 39
Diversification Standards................................................. 39
Ownership Treatment....................................................... 39
ILLUSTRATIONS.............................................................. 40
FINANCIAL STATEMENTS....................................................... 45
</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.
2
<PAGE>
IMPORTANT TERMS
ACCOUNT A
Refers to Separate Account A, a separate investment account.
ATTAINED AGE
For each Insured, the Issue Age plus the number of full years elapsed since
the Policy Date.
CASH SURRENDER VALUE
The Investment Value, less any unrecovered deferred charges, plus any accrued
general account loan interest credit, less any policy charges incurred but not
yet deducted.
CUSTOMER SERVICE CENTER
The facility where We provide service to Policyowners. The address is shown on
the cover.
DEBT
Any loan plus accrued interest.
FACE AMOUNT
The portion of the death Benefit that will not vary with Investment perfor-
mance.
FREE LOOK PERIOD
The period of time within which a Policyowner may examine a Policy and return
it for a refund.
GUARANTEE PERIOD
The time during which We guarantee that the coverage under the Policy will re-
main in force regardless of Investment experience unless there is Debt and the
Cash Surrender Value is negative. Additional payments may increase Your Guar-
antee Period while partial withdrawals may reduce it. A change in the death
Benefit option may also result in an increase or decrease in the Guarantee Pe-
riod.
INSURED
A person who has become insured under the Policy.
INVESTMENT DATE
The date the initial premium is received and the date from which We begin mea-
suring Investment experience. It may or may not be the same as the Policy
Date.
INVESTMENT RESULTS
The Investment performance of the divisions of Account A and interest credited
to the Fixed Account.
INVESTMENT VALUE
The sum of the amounts under Your Policy invested in each division of Account
A and in the Fixed Account.
ISSUE AGE
An Insured's age on his or her birthday nearest the Policy Date.
ISSUE DATE
The date the insurance under the Policy become effective. The contestable and
suicide periods are measured from this date. Under group certificates this is
called the Coverage Date.
JOINT INSURED
The person named as such in the application or enrollment form.
LIFE INSURANCE PREMIUM PAYMENT TEST
This test, also referred to as the "seven-pay test" under Federal income tax
law, provides that cumulative premiums paid under a policy at any time during
the policy's first seven years cannot exceed certain guidelines. See Federal
Income Tax Considerations, Modified Endowment Contracts.
MATURITY DATE
The Policy Anniversary nearest the 100th birthday of the Insured under a sin-
gle life policy or the younger Insured under a survivorship policy. On this
date coverage under the Policy terminates and the Cash Surrender Value is pay-
able to the Policyowner.
NET AMOUNT AT RISK
The difference, as of the beginning of the Processing Period, between (i) the
death Benefit, and (ii) Cash Surrender Value plus Debt, both adjusted for in-
terest at an annual rate of 4%.
NET RATE OF RETURN
The Investment performance for a division of Account A during a Valuation Pe-
riod.
NET SINGLE PREMIUM FACTOR
A factor based on the age, sex and underwriting class of the Insured(s). We
use the Net Single Premium Factor to calculate the Variable Insurance Amount,
which provides an amount sufficient to insure that the Policies qualify as
life insurance under Federal income tax laws.
3
<PAGE>
IMPORTANT TERMS (CONTINUED)
OPTION I DEATH BENEFIT
The greater of the Face Amount and the Variable Insurance Amount.
OPTION II DEATH BENEFIT
The greater of (i) the Face Amount plus the Option II Death Benefit Adjustment
and (ii) the Variable Insurance Amount.
OPTION II DEATH BENEFIT ADJUSTMENT
The greater of (i) the Option II Guaranteed Death Benefit and (ii) the Invest-
ment Value plus Debt.
OPTION II GUARANTEED DEATH BENEFIT
The Option II Guaranteed Death Benefit is subject to a maximum of two times
the sum of each premium paid less any partial withdrawals associated with each
premium. After the Guarantee Period, the Option II Guaranteed Death Benefit is
zero.
POLICY ANNIVERSARY
The anniversary of the Policy Date.
POLICY DATE
The date used to determine Processing Dates, Policy Years and Policy Anniver-
saries. It may or may not be the same as the Issue Date. The Policy Date will
usually be the date Our Customer Service Center receives the initial premium.
POLICYOWNER
The person or entity who owns a Policy and is entitled to exercise all rights
under the Policy.
POLICY YEAR
The period between each Policy Anniversary.
PROCESSING DATES
The dates on which We deduct charges from the Investment Value. These dates
occur quarterly. The first processing date is one quarter after the Policy
Date.
PROCESSING PERIOD
The period between consecutive Processing Dates. The first Processing Period
begins on the Policy Date.
SPECIALLY DESIGNATED DIVISION
The Liquid Asset Division. We allocate distributions from a portfolio under-
lying a division of Account A in which reInvestment is not available to the
Liquid Asset Division.
TABULAR NET AMOUNT AT RISK
The difference, as of the beginning of the Processing Period, between (i) the
death Benefit, and (ii) the Tabular Value, adjusted for interest. The calcula-
tion does not reflect loans.
TABULAR VALUE
The amount We calculate to determine the length of the Guarantee Period, as
well as to limit the mortality cost deduction and Our right to cancel Your
Policy during the Guarantee Period. Under the Option II Death Benefit, the
Tabular Value will be substituted for the Option II Death Benefit Adjustment
in determining the death Benefit in the calculation designed to limit the mor-
tality cost.
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. A business
day is any day that the New York Stock Exchange (NYSE) is open for trading, or
any day on which the SEC requires that mutual funds, unit Investment trusts or
other Investment portfolios be Valued.
VARIABLE INSURANCE AMOUNT
The Investment Value plus any Debt multiplied by the Net Single Premium Fac-
tor.
4
<PAGE>
SUMMARY OF THE POLICY
This summary is intended to provide only a brief overview of the more
significant aspects of the Policy. Further detail is provided in this
prospectus and in the Policy. The Policy, together with its attached
application or enrollment form and any endorsements and optional benefit
riders, constitutes the entire agreement between You and Us and should be
retained.
PURPOSES OF THE POLICIES
These are flexible premium variable life insurance policies offering a choice
of investments and an opportunity for the Investment Value, Cash Surrender
Value and death benefit to grow based on Investment Results.
We do not promise that the value of your Policy will increase. Depending on
the Policy's Investment Results, the Investment Value, Cash Surrender Value
and death benefit may increase or decrease on any day. You bear the investment
risk. We do guarantee to keep the Policy in force during the Guarantee Period
so long as there is no Debt. If there is Debt, the Policy will remain in force
provided that the Cash Surrender Value is zero or positive. The Policy will
lapse after the Guarantee Period if the Cash Surrender Value falls below zero.
See Insurance Benefits, When Your Guarantee Period Ends Before the Maturity
Date.
Life insurance is not a short-term investment. The Policyowner should evaluate
the need for insurance and the Policy's long-term investment potential before
purchasing a Policy.
AVAILABILITY
We can issue a single life policy for an Insured age 75 or under, or a survi-
vorship policy, if both Insureds are age 75 or under. Under survivorship poli-
cies, at least one Insured must be age 20 or older. We will take under consid-
eration applications for Insured(s) up to age 80.
The minimum Genesis I premium is $25,000 ($15,000 if under a 1035 exchange,
see Federal Income Tax Considerations, Code Section 1035 Exchanges). The mini-
mum planned annual premium under Genesis Flex will be no less than $5,000.
PLANNED PREMIUMS (GENESIS FLEX ONLY)
Premium payments can be made on a planned basis during the first 10 Policy
Years following issue of the Policy or an increase in Face Amount, subject to
the above minimum planned annual premium requirements. Subject to Our rules,
planned premiums may be available for periods other than 10 years and may be
payable on a basis other than annual.
UNPLANNED PREMIUMS
Additional premium payments may be made on an unplanned basis provided the In-
sured is age 80 or under. Under survivorship policies, both Insureds must be
alive and also age 80 or under. The minimum unplanned premium is $5,000 under
a Genesis I Policy and $500 under a Genesis Flex Policy. We may also require
evidence of insurability for unplanned premiums. See Facts About The Policy,
Premium Payments and Making Additional Premium Payments.
GROUP OR SPONSORED ARRANGEMENTS
For certain group or sponsored arrangements, We may reduce the minimum premium
requirements. See Other Important Information, Group or Sponsored Arrange-
ments. We may also reduce the charges in a Policy where the initial or total
premium payments exceed Our published rules. However, any reductions in Policy
charges will reflect difference in costs or services and will not discriminate
unfairly against any person.
LIFE INSURANCE PREMIUM PAYMENT TEST (GENESIS FLEX)
Genesis Flex is designed to comply with the Life Insurance Premium Payment
Test. As such, certain distributions under a policy, such as loans, receive
favorable tax treatment afforded life insurance policies under Federal tax
law.
MODIFIED ENDOWMENT CONTRACTS (GENESIS I)
Genesis I is generally a "modified endowment contract". As such, the amount of
certain distributions made during the Insured's lifetime, such as policy
loans, partial withdrawals or surrenders, will be includible in Your gross in-
come to the extent of any income in the Policy. A 10% penalty tax may also be
imposed on income if distributed before You attain age 59 1/2.
For more information on "modified endowment contracts," and the Life Insurance
Premium Payment Test, see Federal Income Tax Considerations, Modified Endow-
ment Contracts.
THE DEATH BENEFIT OPTIONS
All Policies are purchased with the Option I Death Benefit in effect. After
the first Policy anniversary, while the Insured(s) is living and the Policy is
in effect, You may be able to change the Death Benefit Option under the Poli-
cy. Thereafter, subject to Our
5
<PAGE>
SUMMARY OF THE POLICY (CONTINUED)
rules, You may change, no more frequently than once every three Policy Years,
between the two death benefit options (see below). Currently the Option II
Death Benefit is only available for Genesis I.
OPTION I DEATH BENEFIT
The Option I Death Benefit provides a death benefit that is the greater of (i)
the Face Amount and (ii) the Variable Insurance Amount.
OPTION II DEATH BENEFIT
The Option II Death Benefit provides a death benefit that is greater of (i)
the Face Amount plus the Option II Death Benefit Adjustment and (ii) the Vari-
able Insurance Amount.
CHANGES IN DEATH BENEFIT OPTION
We must receive written notice of any change in death benefit option in a form
satisfactory to Us. Any change in death benefit option will take effect on the
Processing Date on or next following the date We approve the change. We limit
the number of death benefit option changes You can make. See Insurance Bene-
fits, Changing the Death Benefit Option.
For more information on death benefit options, See Facts About the Policy,
Death Benefit Options.
CHANGING THE FACE AMOUNT
After the first Policy Anniversary, You may request an increase or decrease in
Face Amount. Any increase in Face Amount will be subject to evidence of insur-
ability satisfactory to Us. See Insurance Benefits, Changes in Face Amount.
PERIOD OF COVERAGE
Your Policy will remain in force during the Guarantee Period, regardless of
investment experience. However, if there is Debt and the Cash Surrender Value
is negative, We can terminate the Policy. After the Guarantee Period, Your
Policy will remain in force as long as there is sufficient Cash Surrender
Value to cover the charges due. See Insurance Benefits, Guarantee Period. Un-
der the Genesis I Policy, We may limit the Guarantee Period to a specified
number of years under group or sponsored arrangements. See Other Important In-
formation, Group or Sponsored Arrangements.
HOW THE DEATH BENEFIT VARIES
The death benefit may increase or decrease on any day depending on Your
Policy's Investment Results but will never be less than the Face Amount. See
Insurance Benefits, Death Benefit Proceeds.
THE DIVISIONS
There are nineteen divisions in Account A offered under this prospectus. You
may invest Your Investment Value in up to nineteen of these divisions at any
time, subject to any restrictions. You may also change Your Investment Value
allocation. The divisions of Account A invest in shares of the Series of the
GCG Trust and ESS Trust, at their net asset value. Each Series has a different
investment objective. See Facts About Golden American Account A Divisions.
THE FIXED ACCOUNT
In addition to the divisions of Account A described above, you may also allo-
cate Your Investment Value to the Fixed Account. Premium payments may be allo-
cated to the Fixed Account to the extent elected by you at the time of the
initial premium payment or as subsequently elected. We will periodically de-
termine and credit a rate of interest (the "Guaranteed Interest Rate") for at
least a one year period from the date of the allocation to the Fixed Account.
This rate will be no less than 4% annually and will expire on the last day of
the calendar month one year after the allocation to the Fixed Account was made
(the "Expiry Date"). The Fixed Account may not be available in Your state. See
Facts About Golden American, Account A and The Fixed Account.
HOW THE INVESTMENT VALUE VARIES
Your Policy's Investment Value varies each day based on its Investment Re-
sults. You bear the risk of poor Investment performance and You receive the
Benefits from favorable Investment performance. See Facts About the Policy,
Your Investment Value.
CASH SURRENDER VALUE
You may surrender the policy and receive its cash surrender Value at any time.
See Your Policy's Benefits, Your Policy's Cash Surrender Value.
PREMIUM PAYMENT ALLOCATION
We allocate Your initial premium to the Liquid Asset Division prior to the end
of the Free Look Period. After the Free Look Period, We allocate Your Invest-
ment Value to the divisions of Account A you specify. However, if we receive
written instructions with your initial premium to allocate all or a portion of
such premium to the Fixed Account, we will do so even prior to the end of the
Free Look Period. See Facts About the Policy, Allocation of Premium Payments.
6
<PAGE>
SUMMARY OF THE POLICY (CONTINUED)
CHARGES DEDUCTED FROM YOUR INVESTMENT VALUE
We periodically deduct charges from Your Investment Value. We deduct any de-
ferred or incurred charges upon surrender. See Charges and Deductions. We also
accelerate recovery of any deferred loading for excess partial withdrawals.
See Your Policy's Benefits, Taking Partial Withdrawals. We may reduce certain
charges under group or sponsored arrangements. See Other Important Informa-
tion, Group or Sponsored Arrangements. We may also reduce certain charges for
Policies purchased in combination with certain annuity products that We offer.
The charges We deduct are:
DEFERRED LOADING
Recovery of Deferred Loading. We deduct a sales load equal to 6.0% of each
premium. This sales load is deducted in equal installments over a six-year pe-
riod (a deduction of 1.0% of premium per year).
INSURANCE BASED CHARGES
TAXES
Premium Taxes. Your premium incurs a charge for premium or other state and lo-
cal taxes when it is received. For Genesis I Policies We deduct a premium tax
charge equal to 2.40% of premium. This premium tax charge is designed to ap-
proximate the average premium tax that We expect to pay. Currently, the pre-
mium tax charge is deferred and will be deducted in equal annual installments
over a six year period (a deduction of 0.40% per year). For Genesis Flex Poli-
cies, the amounts We deduct depend on the Insured's state of residence. These
charges are expressed as a percentage of premium and can range from 2.0% to
4.0%. See Deductions for Insurance Based Charges, Taxes, Premium Taxes.
Corporate Tax Charge. We reserve the right to deduct a corporate tax charge
equal to 1.38% of each premium payment. When assessed, the charge will be de-
ducted in equal installments over a six year period from the date we receive
and accept each premium payment.
ISSUE CHARGES
Per Policy Charge. We charge $200 for Policies written on a single life basis
and $300 for Policies written on a survivorship basis. This charge is cur-
rently waived for the Genesis I Policy.
Deferred Face Amount Charge. We charge an amount per $1,000 of initial Face
Amount and any increases in Face Amount deducted in equal installments over a
six year period following receipt of the initial premium or increase in face
amount. This charge will vary based on the age and sex of the Insured (the
younger Insured for survivorship policies) and the Policy chosen and will
never exceed a maximum of $12 per $1,000 of Face Amount. A portion of this
charge will be considered to be an additional sales load.
MORTALITY CHARGES
Mortality Cost. We deduct an amount per $1,000 of Net Amount at Risk. The
amount is based on each Insured's sex, Attained Age and underwriting class.
Minimum Death Benefit Guarantee Charge. We deduct an amount per $1,000 of Tab-
ular Net Amount at Risk. The amount is based on the Attained Age of the In-
sured (the younger Insured for survivorship policies). The charge will never
exceed $0.15 per $1,000 of Face Amount per quarter.
TRANSACTION AND OTHER CHARGES
ANNUAL ADMINISTRATIVE CHARGE
Currently We impose an annual administrative charge of $40. We guarantee the
charge will never exceed $80 per Policy Year. If total premiums paid equal
$100,000 or more, or if the Investment Value is at least $100,000 at the time
the charge is due, the charge will be zero.
LOAN INTEREST CHARGE
On each Policy Anniversary, We calculate the loan interest charge and deduct
it from the Investment Value. This charge is 5.0% annually (accrued daily) of
the outstanding loans.
EXCESS ALLOCATION CHARGE
We currently allow unlimited allocation changes without charge but reserve
the right to charge $25 for each allocation change in excess of twelve in a
Policy Year. We also reserve the right to limit allocation changes.
PARTIAL WITHDRAWAL CHARGE
If You take more than four partial withdrawals per Policy Year, We currently
do not intend but reserve the right to impose a charge of the lesser of $25
and 2.0% of the amount withdrawn for each additional partial withdrawal.
DEDUCTIONS FROM DIVISIONS OF ACCOUNT A
ASSET BASED CHARGES
MORTALITY AND EXPENSE RISK CHARGE
We deduct from each division of Account A, a daily asset based charge equiva-
lent to an annual rate of 0.90%.
7
<PAGE>
SUMMARY OF THE POLICY (CONTINUED)
ASSET BASED ADMINISTRATIVE CHARGE
We deduct from each division of Account A, a daily asset based charge equiva-
lent to an annual rate of 0.10%.
TRUST EXPENSES
There are fees and expenses deducted from each Series. See Facts About Golden
American, Account A Divisions. The Investment performance of the Series and
expenses and deductions of certain charges from the GCG Trust and ESS Trust
will affect Your Investment Value. Please read the Trust prospectuses for de-
tails.
LOANS
After the Free Look Period, You may borrow up to 90% of the sum of the Cash
Surrender Value plus Debt. Any existing Debt will be deducted from a new loan.
The interest rate We charge is 5.0% annually. We credit interest on the amount
held in Our general account as collateral for policy loans. Portions of the
collateral amount may earn interest at different rates, but in no event will
any portion earn less than 4.0% annually. We may offer a preferred loan fea-
ture. See Your Policy's Benefits, Policy Loans. Loans under "modified endow-
ment contracts" may be subject to a 10% penalty tax. See Federal Income Tax
Considerations, Modified Endowment Contracts, Penalty Tax.
Depending upon the Investment Results and the amounts borrowed, loans may
cause a Policy to lapse. If the Policy lapses with a loan outstanding, certain
amounts may be included in Your taxable income.
PARTIAL WITHDRAWALS
After the Free Look Period, You may take partial withdrawals from the Invest-
ment Value. Partial withdrawals may be taken four times per Policy Year with-
out charge. Partial withdrawals are subject to certain restrictions and par-
tial withdrawals above a maximum amount may be subject to an accelerated re-
covery of the deferred loading. Under Policies purchased in connection with a
1035 Exchange, partial withdrawals may not be permitted during the first seven
Policy Years. See Your Policy's Benefits, Taking Partial Withdrawals.
DOLLAR COST AVERAGING
Under this program, You may choose to have a specified dollar amount trans-
ferred from the Fixed Account, the Limited Maturity Bond Division or the Liq-
uid Asset Division to the other divisions of Account A on a monthly basis. The
objective of dollar cost averaging is to shield Your Investment from short-
term price fluctuations. See Facts About the Policy, Dollar Cost Averaging.
HOW BENEFITS ARE TAXED
Under current tax law, life insurance policies receive certain tax Benefits.
Generally, the Death Benefit is fully excludable from the beneficiary's gross
income for Federal income tax purposes according to Section 101(a)(1) of the
Internal Revenue Code. You will not be taxed on any increase in Cash Surrender
Value while the Policy remains in force unless You take a partial withdrawal
or a loan as discussed below.
If You surrender Your Policy for its Cash Surrender Value or take a partial
withdrawal, You may recognize ordinary income that would be subject to tax.
You may also recognize ordinary income that would be subject to tax upon a
loan received under the Policy and, depending upon the circumstances, You may
be subject to an additional 10% tax upon surrender of the Policy, a partial
withdrawal, or taking a policy loan. See Federal Income Tax Considerations.
CANCELLATION AND EXCHANGE RIGHT
If You return Your Policy during the Free Look Period, We will refund any pre-
miums paid without interest. Generally under a Genesis I Policy, this period
ends 10 days from the date You receive the Policy. For purposes of administer-
ing Our allocation rules, We deem this period to end 15 days after a Policy is
mailed from Our Customer Service Center. Some states may require that We pro-
vide a longer Free Look Period.
Under a Genesis Flex Policy, the Free Look Period generally ends on the latest
of (i) 10 days after You receive Your Policy, (ii) 45 days from the date You
complete part I of the application or enrollment form, or (iii) 10 days from
the mailing of the notice of cancellation right. See Your Policy's Benefits,
Your Right to Cancel or Exchange Your Policy.
You also have an Option during the first 24 months to convert Your Policy so
that Your Benefits do not vary based on the Net Rate of Return. You may also
convert Your Policy if there is a change of the Investment adviser of any
portfolio or if there is a material change in the Investment objectives of or
restrictions in any portfolio in which the divisions invest. In each case this
conversion is accomplished by transferring Your entire Investment Value to Our
general account. See Your Policy's Benefits, Your Right to Cancel or Exchange
Your Policy.
8
<PAGE>
SUMMARY OF THE POLICY (CONTINUED)
REPLACEMENT OF EXISTING COVERAGE
Before purchasing a Policy, the Policyowner should ask his or her registered
representative if changing, or adding to, current insurance coverage would be
advantageous. Generally, it is not advisable to purchase another policy as a
replacement for existing coverage. This is especially true if the primary de-
cision for replacement is based on a comparison of policy illustrations.
ILLUSTRATIONS
Illustrations in this prospectus or used in connection with the purchase of
the Policy are based on hypothetical Investment rates of return. These rates
are not guaranteed. They are illustrative only and should not be deemed a rep-
resentation of past or future performance. Actual rates of return may be more
or less than those reflected in the illustrations and, therefore, actual Val-
ues will be different than those illustrated.
9
<PAGE>
FACTS ABOUT GOLDEN AMERICAN, ACCOUNT A AND THE FIXED ACCOUNT.
GOLDEN AMERICAN
Golden American Life Insurance Company ("Golden American" or the "Company") is
a stock life insurance company organized under the laws of the State of Dela-
ware and is a wholly owned subsidiary of Equitable of Iowa Companies ("Equita-
ble of Iowa"). Prior to December 30, 1993, Golden American was a Minnesota
corporation. Prior to August 13, 1996, Golden American was a wholly owned in-
direct subsidiary of Bankers Trust Company. We are authorized to do business
in the District of Columbia and all states except New York. In May 1996, we
established a subsidiary, First Golden American Life Insurance Company of New
York, which is authorized to do business in New York. We offer variable annui-
ties and variable life insurance. Administrative services for the Policies are
provided at our Customer Service Center, the address is shown on the cover. As
of December 31, 1996 Golden American had stockholder's equity of approximately
$140.5 million and total assets of approximately $1.7 billion, including ap-
proximately $1.21 billion of separate account assets.
Equitable of Iowa is the holding company for Equitable Life Insurance Company
of Iowa, USG Annuity & Life Company, Locust Street Securities, Inc., Equitable
American Insurance Company, Equitable Investment Services, Inc. ("EISI"), Eq-
uitable of Iowa Securities Network, Inc., Directed Services, Inc. ("DSI") and
Golden American. As of December 31, 1996, Equitable of Iowa had over $12.5
billion in assets.
ACCOUNT A
All obligations under a Policy are general obligations of Golden American. Ac-
count A is a separate Investment account used to support Our variable life
policies and for other purposes permitted by applicable laws and regulations.
We may offer other variable life insurance policies investing in Account A
which are not described in this prospectus. The assets of Account A are kept
separate from Our general account and any other separate accounts We may have.
We own all the assets in Account A. Income and realized and unrealized gains
and losses from assets in Account A are credited to or charged against Account
A without regard to other income, gains or losses on Our other Investment ac-
counts. As required, the assets in Account A are at least equal to the re-
serves and other liabilities of Account A. These assets may not be charged
with liabilities from any other business We conduct. However, if the assets
exceed the required reserves and other liabilities, We may transfer the excess
to Our general account.
Account A was established pursuant to Minnesota law on July 14, 1988 and fol-
lowing the redomestication of Golden American, operates under Delaware law.
Account A may invest in mutual funds, unit investment trusts and other invest-
ment portfolios which We determine to be suitable for the Policies' purposes.
Account A is treated as a unit investment trust under Federal securities laws.
It is registered as an investment company with the Securities and Exchange
Commission (the "SEC") under the Investment Company Act of 1940 (the "1940
Act"). It is also governed by the laws of Delaware and 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 A.
ACCOUNT A DIVISIONS
Currently, each division of Account A invests in a Series of the GCG Trust or
the ESS Trust. DSI serves as the Manager to each Series of the GCG Trust, and
EISI serves as the Manager to each Series of the ESS Trust. The Trusts, DSI
and EISI have retained several portfolio managers to manage the assets of each
Series. The investment objectives of the various Series are described below.
There may be restrictions on the amounts that can be allocated to certain di-
visions based on state laws and regulations. There is no guarantee that any
Series will meet its investment objective. Success in meeting the investment
objective of a Series depends on various factors, particularly how well the
portfolio manager anticipates changing economic and market conditions.
DSI and EISI (together, the "Managers") provide the overall business manage-
ment and administrative services necessary for the Series' operation and pro-
vide or procure the services and information necessary to the proper conduct
of the business of the Series. See the Trusts' Prospectuses for details.
DSI is responsible for providing or procuring, at DSI's expense, the services
reasonably necessary for the ordinary operation of the Series of the GCG
Trust. DSI does not bear the expense of brokerage fees and other transactional
expenses for securities or other assets (which are generally considered part
of the cost for assets), taxes (if any) paid by a Series of the GCG Trust, in-
terest on borrowing, fees and expenses of the independent trustees, and ex-
traordinary expenses, such as litigation or indemnification expenses. See the
GCG Trust prospectus for details.
10
<PAGE>
FACTS ABOUT GOLDEN AMERICAN, ACCOUNT A AND THE FIXED ACCOUNT. (CONTINUED)
Each Trust pays its respective Manager for its services a monthly fee based on
the following percentages of the average daily nets assets of the Series. DSI
and EISI (and not the Trusts) pay each portfolio manager a monthly fee for
managing the assets of the Series.
THE GCG TRUST
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SERIES FEES (based on combined assets of the indicated groups of Series)
- ------------------------ -----------------------------------------------------------------
<S> <C>
Multiple Allocation,
Fully Managed, 1.00% of first $750 million;
Capital Appreciation,
Rising Dividends, 0.95% of next $1.250 billion;
All-Growth, Real Estate,
Hard Assets, 0.90% of next $1.5 billion; and
Strategic Equity, Small 0.85% of amount in excess of $3.5 billion
Cap, and Value Equity
Series:
Emerging Markets Series: 1.75% of average daily net assets
Managed Global: 1.25% of first $500 million;
1.05% of amount in excess of $500 million
Limited Maturity Bond
and 0.60% of first $200 million;
Liquid Asset Series: 0.55% of next $300 million; and
0.50% of amount in excess of $500 million
- -------------------------------------------------------------------------------
THE ESS TRUST
- -------------------------------------------------------------------------------
<CAPTION>
SERIES FEES
- ------------------------ -----------------------------------------------------------------
<S> <C>
OTC, Research, and Total
Return Portfolios: 0.80% of first $300 million;
0.55% of amount in excess of $300 million
Growth & Income and
Value + Growth
Portfolios: 0.95% of first $200 million;
0.75% of amount in excess of $200 million
</TABLE>
- -------------------------------------------------------------------------------
EXPENSES OF THE TRUSTS
THE GCG TRUST ANNUAL EXPENSES (based on combined net assets of the indicated
groups of Series):
<TABLE>
<CAPTION>
OTHER TOTAL
SERIES FEES(/1/) EXPENSES(/2/) EXPENSES
------ --------- ------------- --------
<S> <C> <C> <C>
Multiple Allocation, Fully Managed,
Capital Appreciation, Rising Dividends,
All-Growth, Real Estate, Hard Assets, 0.99% 0.01% 1.00%
Value Equity, Strategic Equity, and
Small Cap Series:
Emerging Markets Series:(/3/) 1.75% 0.05% 1.80%
Managed Global Series:(/4/) 1.25% 0.01% 1.26%
Limited Maturity Bond and Liquid Asset 0.60% 0.01% 0.61%
Series:
THE ESS TRUST ANNUAL EXPENSES:
<CAPTION>
OTHER TOTAL
SERIES FEES(/1/) EXPENSES(/5/) EXPENSES
------ --------- ------------- --------
<S> <C> <C> <C>
OTC, Research, and Total Return 0.80% 0.40% 1.20%
Portfolios:
Growth & Income and Value + Growth 0.95% 0.40% 1.35%
Portfolios:
</TABLE>
- -------------------
(1) Fees decline as combined assets increase (see Accounting tables and the
Trust prospectuses for details).
(2) Other Expenses generally consist of independent trustees fees and ex-
penses.
(3) Expenses have been restated to reflect current fees.
(4) The expenses for the Managed Global Series are based on the actual experi-
ence of the Series together with that of its predecessor for accounting
purposes, the Managed Global Account of Separate Account D. On September
3, 1996, the Managed Global Account was reorganized into the Managed
Global Division of Separate Account B of Golden American and the Managed
Global Series of the GCG Trust.
(5) Other expenses shown take into account the effect of EISI's agreement to
reimburse the portfolios for all operating expenses, excluding management
fees, that exceed 0.40% of their average daily net assets. This reimburse-
ment agreement commenced February 1, 1997. Prior to February 1, 1997, EISI
reimbursed the portfolios for all operating expenses, excluding management
fees, that exceeded 0.75% of their average daily net assets. This reim-
bursement is voluntary and can be terminated at any time. In the absence
of the current reimbursement agreement, Other Expenses would have been
0.55%, 0.51%, 0.45%, 0.95% and 0.69%, respectively, for the OTC, Research,
Total Return, Growth & Income, and Value + Growth Portfolios for the year
ended December 31, 1996.
11
<PAGE>
FACTS ABOUT GOLDEN AMERICAN, ACCOUNT A AND THE FIXED ACCOUNT. (CONTINUED)
The following divisions invest in shares of the corresponding Series of the
GCG Trust.
MULTIPLE ALLOCATION DIVISION
MULTIPLE ALLOCATION SERIES
OBJECTIVE
The highest total return, consisting of capital appreciation and current in-
come, consistent with the preservation of capital and elimination of unneces-
sary risk.
INVESTMENTS
Investment in equity and debt securities and the use of certain sophisticated
investment strategies and techniques.
PORTFOLIO MANAGER
Zweig Advisors Inc.
FULLY MANAGED DIVISION
FULLY MANAGED SERIES
OBJECTIVE
High total investment return over the long term, consistent with the preser-
vation of capital and prudent investment risk.
INVESTMENTS
Invests primarily in common stocks. The Series also may invest in fixed in-
come securities and money market instruments to preserve its principal value
during uncertain or declining market conditions. The Series' strategy is
based on the premise that, from time to time, certain asset classes are more
attractive long-term investments than others.
PORTFOLIO MANAGER
T. Rowe Price Associates, Inc.
CAPITAL APPRECIATION DIVISION
CAPITAL APPRECIATION SERIES
OBJECTIVE
Long-term capital growth.
INVESTMENTS
Invests in common stocks and preferred stock that will be allocated among
various categories of stocks referred to as "components" which consist of the
following: (i) The Growth Component -- Securities that the Portfolio Manager
believes have the following characteristics: stability and quality of earn-
ings and positive earnings momentum; dominant competitive positions; and dem-
onstrate above-average growth rates as compared to published S&P 500 earnings
projections; and (ii) The Value Component -- Securities that the portfolio
manager regards as fundamentally undervalued, i.e., securities selling at a
discount to asset value and securities with a relatively low price/earnings
ratio. The securities eligible for this component may include real estate
stocks, such as securities of publicly-owned companies that, in the portfolio
manager's judgement, offer an optimum combination of current dividend yield,
expected dividend growth, and discount to current real estate value.
PORTFOLIO MANAGER
Chancellor LGT Asset Management, Inc.
RISING DIVIDENDS DIVISION
RISING DIVIDENDS SERIES
OBJECTIVE
Capital appreciation, with dividend income as a secondary Objective.
INVESTMENT
Investment in equity securities of high quality companies that meet the fol-
lowing four criteria: consistent dividend increases; substantial dividend in-
creases; reinvested profits; and an under-leveraged balance sheet.
PORTFOLIO MANAGER
Kayne, Anderson Investment Management, L.P.
ALL-GROWTH DIVISION
ALL-GROWTH SERIES
OBJECTIVE
Capital appreciation.
INVESTMENTS
Investment in securities selected for their long-term growth prospects.
PORTFOLIO MANAGER
Pilgrim Baxter & Associates, Ltd.
REAL ESTATE DIVISION
REAL ESTATE SERIES
OBJECTIVE
Capital appreciation, with current income as a secondary Objective.
INVESTMENTS
Investment in publicly traded equity securities of companies in the real es-
tate industry listed on national exchanges or on the National Association of
Securities Dealers Automated Quotation System.
PORTFOLIO MANAGER
E.I.I. Realty Securities, Inc.
HARD ASSETS DIVISION
(FORMERLY NATURAL RESOURCES)
HARD ASSETS SERIES
OBJECTIVE
Long-term capital appreciation.
12
<PAGE>
FACTS ABOUT GOLDEN AMERICAN, ACCOUNT A AND THE FIXED ACCOUNT. (CONTINUED)
INVESTMENTS
Investment in equity and debt securities of companies engaged in the explora-
tion, development, production, management and distribution of hard assets.
PORTFOLIO MANAGER
Van Eck Associates Corporation
VALUE EQUITY DIVISION
VALUE EQUITY SERIES
OBJECTIVE
Capital appreciation, with dividend income as a secondary objective.
INVESTMENTS
Investment primarily in equity securities of U.S. and foreign issuers which
when purchased meet quantitative standards that indicate above average finan-
cial soundness and high intrinsic value relative to price.
PORTFOLIO MANAGER
Eagle Asset Management, Inc.
STRATEGIC EQUITY DIVISION
STRATEGIC EQUITY SERIES
OBJECTIVE
Long-term capital appreciation.
INVESTMENTS
Investment primarily in equity securities based on various market timing
techniques. The amount of the Series' assets allocated to equities shall vary
from time to time to seek positive investment performance from advancing eq-
uity markets and to reduce exposure to equities when risk/reward characteris-
tics are believed to be less attractive.
PORTFOLIO MANAGER
Zweig Advisors Inc.
SMALL CAP DIVISION
SMALL CAP SERIES
OBJECTIVE
Long-term capital appreciation.
INVESTMENTS
Investment primarily in equity securities of companies that, at the time of
purchase, have a total market capitalization -- present market value per
share multiplied by the total number of shares outstanding -- within the
range of companies included in the Russell 2000 Growth Index.
PORTFOLIO MANAGER
Fred Alger Management, Inc.
EMERGING MARKETS DIVISION
EMERGING MARKETS SERIES
OBJECTIVE
Long-term growth of capital.
INVESTMENTS
Investment primarily in equity securities of companies that are considered to
be in emerging market countries in the Pacific Basin and Latin America. In-
come is not an objective, and any production of current income is considered
incidental to the objective of growth of capital.
PORTFOLIO MANAGER
Putnam Investment Management, Inc.
LIMITED MATURITY BOND DIVISION
LIMITED MATURITY BOND SERIES
OBJECTIVE
Highest current income consistent with low risk to principal and liquidity.
Also seeks to enhance its total return through capital appreciation when mar-
ket factors indicate that capital appreciation may be available without sig-
nificant risk to principal.
INVESTMENTS
Investment primarily in a diversified portfolio of limited maturity debt se-
curities. No individual security will at the time of purchase have a remain-
ing maturity longer than five and one-half years and the dollar-weighted av-
erage maturity of the Series will not exceed five years.
PORTFOLIO MANAGER
Equitable Investment Services, Inc.
LIQUID ASSET DIVISION
LIQUID ASSET SERIES
OBJECTIVE
High level of current income consistent with the preservation of capital and
liquidity.
INVESTMENTS
Obligations of the U.S. Government and its agencies and instrumentalities;
bank obligations; commercial paper and short-term corporate debt securities.
TERM
All issues maturing in less than one year.
PORTFOLIO MANAGER
Equitable Investment Services, Inc.
MANAGED GLOBAL DIVISION
MANAGED GLOBAL SERIES
OBJECTIVE
High total investment return, consistent with a prudent regard for capital
preservation.
13
<PAGE>
FACTS ABOUT GOLDEN AMERICAN, ACCOUNT A AND THE FIXED ACCOUNT. (CONTINUED)
INVESTMENTS
Investment in a wide range of equity and debt securities and money market in-
struments of both domestic and foreign issuers.
PORTFOLIO MANAGER
Putnam Investment Management, Inc.
The following divisions invest in shares of the corresponding Series of the
ESS Trust.
OTC DIVISION
OTC PORTFOLIO
OBJECTIVE
Long-term growth of capital.
INVESTMENTS
Investment primarily in securities of companies that are traded principally
on the over-the-counter (OTC) market.
PORTFOLIO MANAGER
Massachusetts Financial Services Company.
RESEARCH DIVISION
RESEARCH PORTFOLIO
OBJECTIVE
Long term growth of capital and future income.
INVESTMENTS
Investment primarily in common stocks or securities convertible into common
stocks of companies believed to possess better than average prospects for
long-term growth.
PORTFOLIO MANAGER
Massachusetts Financial Services Company
TOTAL RETURN DIVISION
TOTAL RETURN PORTFOLIO
OBJECTIVE
Above-average income consistent with prudent employment of capital.
INVESTMENTS
Investment primarily in equity securities.
PORTFOLIO MANAGER
Massachusetts Financial Services Company
GROWTH & INCOME DIVISION
GROWTH & INCOME PORTFOLIO
OBJECTIVE
Long-term total return.
INVESTMENTS
Investment primarily in equity and debt securities, focusing on small- and
mid-cap companies that offer potential appreciation, current income, or both.
PORTFOLIO MANAGER
Robertson, Stephens & Company Investment Management, L.P.
VALUE + GROWTH DIVISION
VALUE + GROWTH PORTFOLIO
OBJECTIVE
Capital appreciation.
INVESTMENTS
Investment primarily in mid-cap growth companies with favorable relationships
between price/earnings ratios and growth rates. Mid-cap companies are those
with market capitalizations ranging from $750 million to approximately $2
billion.
PORTFOLIO MANAGER
Robertson, Stephens & Company Investment Management, L.P.
THE GCG TRUST AND THE ESS TRUST
The GCG Trust is an open-end management investment company, commonly known as
a mutual fund. The GCG Trust's shares may also be available to certain vari-
able annuity contractowners for investment under such contracts offered by
Golden American. This is called "mixed funding."
The GCG Trust may also sell its shares to separate accounts of other insurance
companies, both affiliated and not affiliated with Golden American. This is
called "shared funding." Although We do not anticipate any inherent difficul-
ties arising from either mixed or shared funding it is theoretically possible
that, due to differences in tax treatment or other considerations, the inter-
est of owners of various contracts participating in the GCG Trust might at
sometime be in conflict. After the GCG Trust receives the requisite order from
the SEC, shares of the GCG Trust may also be sold to certain qualified pension
and retirement plans. The Board of Trustees of the GCG Trust, the GCG Trust's
Manager and We and any other insurance companies participating in the GCG
Trust are required to monitor events to identify any material conflicts that
arise from the use of the GCG Trust for mixed and/or shared funding or between
various policyowners and pension and retirement plans. For more information
about the risks of mixed and shared funding please refer to the GCG Trust pro-
spectus.
The ESS Trust is also an open-end management investment company. Currently,
the ESS Trust's shares are not available to separate accounts of other insur-
ance companies except affiliated insurance companies such as Golden American.
It is an-
14
<PAGE>
FACTS ABOUT GOLDEN AMERICAN, ACCOUNT A AND THE FIXED ACCOUNT. (CONTINUED)
ticipated that in the future the ESS Trust will become available to separate
accounts of unaffiliated companies.
You will find further information about both the GCG Trust and the ESS Trust,
including the investment risks associated with each Series and a complete de-
scription of each Trust's costs and expenses, in the accompanying Trust pro-
spectuses. You should read them in conjunction with this prospectus. Addi-
tional copies of the Trust prospectuses may be obtained by contacting Our Cus-
tomer Service Center.
CHANGES WITHIN ACCOUNT A
We may from time to time make additional divisions available to You. These di-
visions will invest in investment portfolios We find suitable for the Poli-
cies. We also have the right to eliminate investment divisions from Account A,
to combine two or more divisions, or to substitute a new portfolio for the
portfolio in which a division invests. A substitution may become necessary if,
in Our judgment, a portfolio no longer suits the purposes of the Policies.
This may happen due to a change in laws or regulations, or a change in a port-
folio's investment objectives or restrictions, or because the portfolio is no
longer available for investment, or for some other reason. We would get any
required approval from the insurance department of Our state of domicile be-
fore making such a substitution. Where applicable, this approval process is on
file with the insurance department of the jurisdiction in which the Policy is
delivered. We would also get any required approval from the SEC and any other
required approvals before making such a substitution.
We reserve the right to transfer assets of Account A, which We determine to be
associated with the class of Policies to which Your Policy belongs, to another
account. We will notify You as soon as practicable of any proposed changes.
When permitted by law, We reserve the right to:
(1) deregister Account A under the 1940 Act;
(2) operate Account A as a management company under the 1940 Act;
(3) restrict or eliminate any voting rights as to Account A; and
(4) combine Account A with other accounts.
THE FIXED ACCOUNT
The Fixed Account is part of the Golden American general account. Interests in
the Fixed Account have not been registered under the Securities Act of 1933
("1933 Act"), and neither the Fixed Account nor the general account has been
registered under the 1940 Act. Thus, neither the Fixed Account nor the general
account, nor any interest therein, is subject to regulation under the provi-
sions of the 1933 Act or the 1940 Act. Accordingly, the Securities and Ex-
change Commission has not passed on the disclosure in this prospectus relating
to the Fixed Account. Disclosures contained herein with respect to the Fixed
Account and the general account, however, may be subject to certain generally
applicable provisions of the Federal securities laws relating to the accuracy
and completeness of information. The Fixed Account may not be available in all
states.
The general account contains all of the assets of Golden American other than
those in certain separate accounts we establish (including Account A). Golden
American has sole discretion to invest the assets of the general account, sub-
ject to applicable law. Allocation of any amounts to the Fixed Account does
not entitle You to share directly in the performance of those assets. Assets
supporting amounts allocated to the Fixed Account are available to fund the
claims of all classes of our customers, owners, and other creditors.
FACTS ABOUT THE POLICY
WHO MAY BE COVERED BY A POLICY
We can issue a single life policy for Insureds age 75 or under, or a survivor-
ship policy if both Insureds are age 75 or under. Under survivorship, at least
one Insured must be age 20 or older. We will take under consideration applica-
tions for Insured(s) up to age 80. We use the Insured's age on the Insured's
birthday nearest the Policy Date. The Insureds must also meet Our underwriting
requirements for acceptance of both initial and unplanned premium payments.
Each Insured will be assigned to an underwriting class according to the method
of underwriting We use, the smoking status of the Insured(s) and the classifi-
cation of the mortality risk of the Insured(s). The classification can be
standard, preferred or special.
We use two methods of underwriting:
(1) non-medical underwriting, based mainly on Your answers in the application
or enrollment form; and
(2) medical underwriting, based on additional medical information which may
include a physical examination.
15
<PAGE>
FACTS ABOUT THE POLICY (CONTINUED)
The underwriting classes combined with the age, sex, and smoking status of the
Insured(s) determine the mortality rates We will use in calculating mortality
cost deductions, Net Single Premium Factors and Guarantee Periods.
APPLYING FOR A POLICY
To purchase a Policy You must complete an application or enrollment form and
pay an initial premium. Any mone submitted prior to a policy bein issued
will be applied to our general account. At issue, the initial premium will
be allocated to the Liquid Asset Division.
DEATH BENEFIT OPTIONS
All Policies are purchased with the Option I Death Benefit. After the first
Policy Anniversary, You may change the death benefit option under Your Policy
and thereafter, You may change back and forth between the two, subject to our
rules at the time You request the change but no more frequently than once ev-
ery three Policy Years. See Insurance Benefits, Changing the Death Benefit Op-
tion. A table of illustrative premiums for a specified face amount is shown
below. This table shows actual premiums that will be paid for $250,000 of cov-
erage at each issue age for males and females. We may accept lower premium
payments in the case of Genesis I.
The Option I Death Benefit provides a death benefit that is the greater of (i)
the Face Amount and (ii) the Variable Insurance Amount. The Option II Death
Benefit provides a death benefit that is the greater of (i) the Face Amount
plus the Option II Death Benefit Adjustment, and (ii) the Variable Insurance
Amount. See Insurance Benefits, Death Benefit Proceeds.
PREMIUM PAYMENTS
You purchase an initial death benefit, which is the Face Amount under the Op-
tion I Death Benefit with an initial premium payment. The minimum initial Gen-
esis I premium is $25,000 ($15,000 if under a 1035 exchange, see Federal In-
come Tax Considerations, Code Section 1035 Exchanges). The minimum planned an-
nual premium under Genesis Flex will never be more than $5,000.
We may refuse a premium payment if such payment would cause the Net Amount at
Risk under the Policy to exceed $2,500,000.
For certain group or sponsored arrangements, We may reduce the minimum premium
requirements. We may offer planned premium payment periods of durations other
than 10 years. Such durations would cause the illustrative premiums for a
specified face amount as shown below to change. We may also reduce the charges
in a Policy where the initial or total premium payments exceed amounts We
specify in our published rules. However, any reductions will reflect differ-
ences in costs or services and will not discriminate unfairly against any per-
son.
GENESIS I
TABLE OF ILLUSTRATIVE PREMIUMS WITH A FACE AMOUNT OF $250,000
SINGLE LIFE, NON-SMOKER
<TABLE>
<CAPTION>
PREMIUM
ISSUE -----------------
AGE MALE FEMALE
----- -------- --------
<S> <C> <C>
50 $ 95,484 $ 84,669
60 128,696 114,574
70 165,233 151,151
</TABLE>
SURVIVORSHIP, NON-SMOKERS
<TABLE>
<CAPTION>
ISSUE AGE
-----------
MALE FEMALE PREMIUM
---- ------ -------
<C> <C> <S>
55 45 $ 63,990
60 55 86,763
70 65 120,989
</TABLE>
GENESIS FLEX
TABLE OF ILLUSTRATIVE PLANNED PREMIUMS WITH A FACE AMOUNT OF $250,000
SINGLE LIFE, NON-SMOKER
<TABLE>
<CAPTION>
PREMIUM
ISSUE ---------------
AGE MALE FEMALE
----- ------- -------
<S> <C> <C>
50 $11,623 $10,255
60 16,354 14,212
70 23,632 20,170
</TABLE>
SURVIVORSHIP, NON-SMOKERS
<TABLE>
<CAPTION>
ISSUE AGE
-----------
MALE FEMALE PREMIUM
---- ------ -------
<C> <C> <S>
55 45 $ 7,594
60 55 10,319
70 65 14,615
</TABLE>
LIFE INSURANCE PREMIUM PAYMENT TEST (GENESIS FLEX)
Genesis Flex is designed to comply with the Life Insurance Premium Payment
Test. As such, certain distributions under a policy, such as loans, should
receive favorable tax treatment afforded life insurance policies under Fed-
eral tax law.
MODIFIED ENDOWMENT CONTRACTS (GENESIS I)
Genesis I is generally a "modified endowment contract." As such, the amount
of certain distributions made during the Insured's lifetime, such as policy
loans, partial withdrawals or surrenders, will be includible in Your gross
income to the extent of any income in the Policy ("income-first basis"), and
a 10% penalty tax may be imposed on
16
<PAGE>
FACTS ABOUT THE POLICY (CONTINUED)
such income distributed before You attain age 59 1/2.
For more information on "modified endowment contracts," and the Life Insur-
ance Premium Payment Test, see Federal Income Tax Considerations, Modified
Endowment Contracts.
MAKING ADDITIONAL PREMIUM PAYMENTS
PLANNED PREMIUMS (GENESIS FLEX ONLY)
Premium payments can be made on a planned basis during the first ten Policy
Years following issue of the Policy or increase in Face Amount subject to Our
minimum premium requirements. Subject to Our rules, We may offer planned pre-
mium payment periods of other than 10 years. We will send reminder notices
for planned premiums that are not paid as part of an automatic withdrawal
program. Any change in the amount, period and frequency of planned premiums
will be subject to Our rules at the time of the request. Any premium received
more than 30 days after a planned premium payment date will be treated as an
unplanned premium. In addition, any premium received above the planned pre-
mium will also be treated as an unplanned premium.
UNPLANNED PREMIUMS
Unplanned premiums can be made while coverage is in effect provided the In-
sured is age 80 or under. Under survivorship policies, both Insureds must be
alive and also age 80 or under. Subject to Our rules, the minimum unplanned
premium is $5,000 under a Genesis I Policy and $500 under a Genesis Flex Pol-
icy. Evidence of insurability based on Our underwriting rules may be required
if the unplanned premium would cause the death benefit to increase. Unless
otherwise specified, if there is any Debt, any unplanned premium will be used
as a loan repayment with any excess applied as an additional premium payment.
GENERAL
On the date We receive and accept Your additional premium payment:
(1) The Variable Insurance Amount will increase. See Insurance Benefits,
Variable Insurance Amount.
(2) The Investment Value will increase. See Facts About the Policy, Invest-
ment Value in Each Division.
(3) The Tabular Value will increase. See Facts About the Policy, Tabular Val-
ue.
On the Processing Date on or next following the date We receive and accept
the additional premium payment, the guaranteed benefits will increase as fol-
lows:
(1) If the Guarantee Period prior to such premium payment ends before the Ma-
turity Date, the Tabular Value as of the Processing Date will be used to
calculate a new Guarantee Period subject to any maximum Guarantee Period
shown in the Policy Schedule. Any part in excess of the amount required
to increase the Guarantee Period to the Maturity Date will be applied as
indicated in (2).
(2) If the Guarantee Period ends on the Maturity Date, the Tabular Value or
the excess from (1) will be applied as a net single premium for life to
increase the Face Amount.
(3) The Guarantee Period ends on the earlier of the date determined above and
any maximum shown in the Policy schedule.
ALLOCATION OF PREMIUM PAYMENTS
Prior to the end of the Free Look Period, Your initial premium is allocated to
the Liquid Asset Division. At the end of the Free Look Period, Your Investment
Value will be allocated to the divisions according to Your instructions. How-
ever, if we receive written instructions with your initial premium to allocate
all or a portion of such premium to the Fixed Account, we will do so even
prior to the end of the Free Look Period.
ADDITIONAL PREMIUM ALLOCATION
Any additional premiums are allocated to the Liquid Asset Division until ac-
cepted according to Our rules. Unless You specify otherwise, additional pre-
mium payments will be allocated among the divisions of Account A and the
Fixed Account in proportion to the Investment Value in each division of Ac-
count A and the Fixed Account on the date the premium is considered to be ac-
cepted. If there is no Investment Value attributable to Account A, the addi-
tional premium payments will be allocated to the Fixed Account.
YOUR RIGHT TO REALLOCATE
You may reallocate Your Investment Value among the divisions of Account A and
the Fixed Account at the end of the free look period. We currently do not as-
sess a charge for allocation changes. We reserve the right, however, to assess
a $25 charge for each allocation change after the twelfth allocation change in
a Policy year. We require that each reallocation of your Investment Value
equal at least $250 or, if less, your entire Investment Value within a divi-
sion or the Fixed Account. We reserve the right to limit, upon notice, the
maximum number of reallocations
17
<PAGE>
FACTS ABOUT THE POLICY (CONTINUED)
you may make within a contract year. In addition, we reserve the right to de-
fer 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 Investment Value at any time in accordance with ap-
plicable law. When a reallocation is made, we redeem shares of the Series un-
derlying the divisions you are transferring from at their net asset Value.
Reallocations from the Fixed Account are subject to the restrictions below.
See Transfers from the Fixed Account. 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 Investment
Value among the divisions and the Fixed Account or refuse any reallocation re-
quest if we believe that: (a) excessive trading by you or a specific realloca-
tion request may have a detrimental effect on unit Values or the share prices
of the underlying Series; or (b) we are informed by a Trust that the purchase
or redemption of shares is to be restricted because of excessive trading or a
specific reallocation or group of reallocations is deemed to have a detrimen-
tal effect on share prices of the GCG Trust or the ESS Trust.
Where permitted by law, we may accept your authorization of third party real-
location 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 cancella-
tion. 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 pro-
vided evidence satisfactory to us that: (a) such third party has been ap-
pointed 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.
TRANSFERS FROM THE FIXED ACCOUNT
Any allocation of premium or transfer of Investment Value to the Fixed Account
is considered a separate Fixed Account allocation. Transfers from an alloca-
tion of the Fixed Account are currently permitted once a year on or within 30
days of the Expiry Date of the Guaranteed Interest Rate. The maximum amount
which may be transferred out of such an allocation each year is currently the
greater of: (a) 33% of the amount of such allocation, or (b) $2,000. If we re-
ceive your transfer request up to 30 days before the Expiry Date, the transfer
will be made on the Expiry Date. If we receive your request on or within 30
days after the Expiry Date, the transfer will be made at the end of the valua-
tion period in which a satisfactory transfer request is received at our Serv-
ice Center. The minimum transfer amount is $250 or the entire remaining amount
of the allocation on the transfer date, whichever is less. Unless You specify
otherwise, We will transfer amounts from allocations within the Fixed Account
from the fixed allocations closest to their respective Rate Expiry Date. These
rules are subject to change in the future.
We reserve the right to establish an interest rate for transfers to the Fixed
Account that may differ from the rate that we establish for allocations of
planned and unplanned premiums to the Fixed Account. We also reserve the right
to reduce the amount otherwise available for transfer from the Fixed Account
by any amounts that have been previously withdrawn from the Fixed Account.
DOLLAR COST AVERAGING
If You have at least $10,000 of Investment Value in the Fixed Account, the
Limited Maturity Bond Division or the Liquid Asset Division, You may choose to
have a specified dollar amount transferred to other divisions in Account A 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 dol-
lar amount is transferred to other divisions of Account A 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.
A lower average Value per unit thus 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.
See Facts About the Policy, Measurement of Investment Experience, Index of In-
vestment Experience and Unit Value.
Dollar cost averaging may be elected at the time the application or enrollment
form is completed or at a later date. The minimum amount that may be trans-
ferred each month is $250. The maximum amount which may be transferred is
equal to the Investment Value in the Fixed Account, the Limited Maturity Bond
Division or the Liquid Asset Division divided by 12. Under this program,
transfers will commence on the later of 20 days after the Issue Date and the
end of the Free Look Period.
18
<PAGE>
FACTS ABOUT THE POLICY (CONTINUED)
The transfer date will be the same calendar day each month as the Policy Date.
The dollar amount will be allocated to the divisions in which You are invested
in proportion to Your Investment Value in each division unless you specify
otherwise. If, on any transfer date, the Investment Value in the specified di-
vision or Fixed Account is equal to or less than the amount You have elected
to have transferred, the entire amount will be transferred and the program
will end. You may change the transfer amount once each Policy Year, or cancel
this program by sending satisfactory notice to Our Customer Service Center at
least seven days before the next transfer date. Any transfers under this pro-
gram 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 A in which reInvestment is not available, We will allocate the dis-
tribution, 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 cannot be reinvested in the portfolio due to
the unavailability of securities for acquisition. When an Investment portfolio
matures, We will notify You 30 days in advance of that date. To elect an allo-
cation to other than the Specially Designated Division, You must provide sat-
isfactory notice to Us at least seven days prior to the date the portfolio ma-
tures. Such allocations are not counted as an allocation change of the Invest-
ment Value for purposes of the number of free allocation changes permitted.
When a distribution from a portfolio 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
Investment Value from the Specially Designated Division to other divisions of
Your choice, such allocations will not be included in determining if the ex-
cess allocation charge will apply.
YOUR INVESTMENT VALUE
Your Investment Value is the amount available for Investment at any time.
Prior to the Investment Date, the Investment Value is zero. On the Investment
Date, the Investment Value is equal to the premium paid less any charges de-
ducted on such date. We adjust Your Investment Value daily to reflect its In-
vestment Results. See Facts About the Policy, Measurement of Investment Expe-
rience.
You may choose up to sixteen divisions and the Fixed Account to allocate Your
Investment Value among in any way You choose, subject to any restrictions. See
Facts About the Policy, Allocation of Premium Payments.
INVESTMENT VALUE IN EACH DIVISION OF ACCOUNT A
On each Valuation Date, the amount of Investment Value in each division of Ac-
count A will be calculated as follows:
(1) We take the amount of Investment 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 Valu-
ation Period.
(3) We add (1) and (2) together.
(4) We add to (3) any additional premium payments allocated to the division
during the current Valuation Period.
(5) We add or subtract reallocations to or from the division during the cur-
rent Valuation Period.
(6) We subtract from (5) any partial withdrawal and any associated charges al-
located to the division during the current Valuation Period.
(7) We add to (6) any loan repayments or loan interest payments received and
subtract any loans which are allocated to the division during the current
Valuation Period.
(8) If the Policy Anniversary occurs during the current Valuation Period, We
add to (7) the amount allocated to the division for any general account
loan interest credit.
(9) If a Processing Date occurs during the current Valuation Period, We sub-
tract from (8) the amounts allocated to the applicable division for de-
ferred loading, insurance based charges and transaction and other charges.
If the Processing Date is also the Policy Anniversary, any loan interest
charge will be deducted from the Investment Value. See Charges and Deduc-
tions. Amounts in (8) and (9) will be allocated to each division in the
proportion that (7) bears to the Investment Value.
(10) If the charges in (9) exceed the amount in (8), We will first calculate
the Cash Surrender Value to determine the amount of any overdue charges
and then set the amount of Investment Value in each division and the
Fixed Account to zero.
19
<PAGE>
FACTS ABOUT THE POLICY (CONTINUED)
TABULAR VALUE
Prior to the Investment Date, the Tabular Value is zero. The Tabular Value on
the Investment Date equals the Investment Value on that date. Thereafter, the
Tabular Value is calculated in the same manner as the Cash Surrender Value ex-
cept that: (i) the mortality cost will be based on rates no greater than the
guaranteed maximum cost of insurance rates; (ii) currently other charges are
not reflected in Our computations; and (iii) the net rate of return will be
based on the interest rate used in Our computations, which is currently 4% per
year. The Tabular Value calculations do not reflect loans, repayments, or loan
interest payments. The Variable Insurance Amount used in computing the Tabular
Value is calculated in the same manner as described under Insurance Benefits,
except that Tabular Value replaces the Investment Value plus Debt.
MEASUREMENT OF INVESTMENT EXPERIENCE
INDEX OF INVESTMENT EXPERIENCE AND UNIT VALUE
The Investment experience of Account A is determined on each Valuation Date.
We use an index to measure changes in experience during a Valuation Period.
We set the index at $10 when the first Investments in a division are made,
except for the OTC, Research, Total Return, Growth & Income, and
Value + Growth Divisions which started with indices of $14.64, $16.43,
$13.76, $10.94, and $11.99, respectively. The index for a current Valuation
Period equals the index for the last Valuation Period multiplied by the expe-
rience factor for the current period.
We may express the Value of amounts allocated to Account A divisions in
units. The index of Investment experience is equal to the Value of one unit.
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 experi-
ence for that date.
HOW WE DETERMINE THE EXPERIENCE FACTOR
For divisions of Account A, the experience factor reflects the Investment ex-
perience of the portfolio in which the 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 a division invests
as of the end of the current Valuation Period.
(2) We add to (1) the amount of any dividend or capital gains distribution
declared during the current Valuation Period for such portfolio and rein-
vested in the portfolio. We subtract from that amount a charge for Our
taxes, if any.
(3) We divide (2) by the net asset Value of the portfolio at the end of the
preceding Valuation Period.
(4) We subtract the daily mortality and expense risk charge. See Charges and
Deductions, Deductions from Divisions of Account A, Mortality and Expense
Risk Charge.
(5) We subtract the daily asset based administrative charge. See Charges and
Deductions, Deductions from Divisions of Account A, Asset Based Adminis-
trative Charge.
Calculations for divisions investing in mutual fund portfolios are made on a
per share basis.
NET RATE OF RETURN FOR ACCOUNT A
The net rate of return for an Account A division during a Valuation Period is
the experience factor for that Valuation Period minus one. See Measurement of
Investment Experience, Index of Investment Experience and Unit Value.
CHARGES AND DEDUCTIONS
The charges described below are deducted from Your Investment Value. With re-
spect to any Investment Value attributable to the Fixed Account, charges will
be deducted from each fixed allocation on a pro rata basis, unless specified
otherwise by Us.
DEDUCTIONS FOR DEFERRED LOADING
RECOVERY OF DEFERRED LOADING
Although the sales load is chargeable to each premium payment when it is re-
ceived, the amount of the deferred loading is deducted in equal installments
on each Policy Anniversary over a six year period following receipt and ac-
ceptance of each premium payment. It applies both to the initial and any ad-
ditional premiums. The deferred loading applicable to each premium payment is
6.0% (a deduction of 1.0% of premium per year). We may lower or waive this
load with respect to later premium payments made in connection with Genesis
Flex.
If You surrender the Policy, We will deduct the total amount of any unrecov-
ered deferred loading from the amount We pay You. We also immediately recover
a portion of the deferred loading applicable to an excess partial withdrawal.
Collection of a portion of the deferred loading due to an
20
<PAGE>
CHARGES AND DEDUCTIONS (CONTINUED)
excess partial withdrawal may shorten the period of recovery or the last in-
stallment amount may be reduced. See Your Policy's Benefits, Taking Partial
Withdrawals.
As a result of the deferred loading structure, a positive net rate of return
will give a higher Cash Surrender Value and a negative net rate of return
will give a lower Cash Surrender Value than would be the case had the de-
ferred loading been deducted from Your premium.
We anticipate that Our deferred sales load and the sales load portion of the
deferred face amount charge (below) may be insufficient to cover distribution
expenses. Any shortfall will be made up from Our general account which may
include amounts derived from the mortality and expense risk charge.
DEDUCTIONS FOR INSURANCE BASED CHARGES
PREMIUM TAXES
Your premium incurs a charge for premium or other state and local taxes.
For Genesis I Policies We deduct a premium tax charge equal to 2.40% of pre-
mium. This premium tax charge is designed to approximate the average premium
tax that We expect to pay to state and local governments. The charge will not
necessarily equal the premium tax paid by Us with respect to a particular
Policy. Currently, the premium tax charge is deferred and will be deducted in
equal annual installments over a six year period (a deduction of 0.40% per
year). If You surrender Your Genesis I Policy, We will deduct the total
amount of any unrecovered deferred premium tax charge from the amount We pay
You. We reserve the right to change the amount of the premium tax charge for
future premium payments to conform to changes in the average premium tax that
We expect to pay.
For Genesis Flex Policies, the amounts We deduct depend on the Insured's
state of residence. These charges are expressed as a percentage of premium
which can range from 2.0% to 4.0%. We reserve the right to change this per-
centage for future premium payments to conform with changes in the law or if
the Insured(s) changes state of residence. The charge is deducted from the
Investment Value on the first quarterly Processing Date following receipt and
acceptance of each premium payment. We deduct any charges for premium taxes
incurred but not yet deducted from the amount We pay You if the Policy is
surrendered. We return any premium taxes as part of the refund if the Policy
is cancelled during the Free Look Period.
CORPORATE TAX CHARGE
We currently do not but reserve the right to assess a corporate tax charge on
premiums. The charge will be deducted from the Investment Value in equal in-
stallments on each Policy Anniversary over a six year period following re-
ceipt and acceptance of each premium payment.
If You surrender the Policy, We will deduct the total amount of any corporate
tax charge not yet deducted from the amount We pay You. We believe this
charge is reasonable in relation to Our increased tax burden resulting from
the requirement that We capitalize and amortize policy acquisition expenses
over a ten year period. We reserve the right to change the amount We charge
for future premium payments to conform with changes in the amount payable by
Us under applicable Federal income tax law as of the date(s) of such premium
payment(s). See Federal Income Tax Considerations, Deferred Acquisition
Costs.
ISSUE CHARGES
PER POLICY CHARGE
We charge $200 for Policies written on a single life basis and $300 for Poli-
cies written on a survivorship basis. This charge is incurred on the Issue
Date and deducted from the Investment Value on the first Policy Anniversary.
This charge is to reimburse Us for a portion of the cost of underwriting and
issuing a Policy. We do not expect to make a profit from this charge. This
charge is currently waived for the Genesis I Policy.
DEFERRED FACE AMOUNT CHARGE
There is a charge assessed that is expressed per $1,000 of initial Face
Amount and of any increases in Face Amount. It will vary based on the age and
sex of the Insured (the younger Insured for survivorship policies) and on
whether a Genesis I or Genesis Flex Policy is chosen. It will never exceed a
maximum of $12 per $1,000 of Face Amount. This charge is incurred on the Is-
sue Date or effective date of any increase in Face Amount and deducted from
the Investment Value in equal installments on each Policy Anniversary over a
six year period following the effective date of such increase in Face Amount.
We deduct the total amount of any deferred face amount charge not yet de-
ducted when determining the Cash Surrender Value payable if You surrender
Your Policy.
21
<PAGE>
CHARGES AND DEDUCTIONS (CONTINUED)
A portion of the deferred face amount charge will reimburse us for the cost
of underwriting and issuing a Policy, not covered by the per policy charge
(above). The remainder of the deferred face amount charge will be considered
to be an additional sales load. This charge together with the deferred sales
load above, will not exceed the maximum sales load allowed under the Federal
securities laws.
MORTALITY CHARGES
MORTALITY COST
The mortality cost is deducted from the Investment Value on each quarterly
Processing Date and is calculated as follows:
(1) We determine the Death Benefit as of the beginning of the Processing Pe-
riod and adjust it with interest at the rate shown in the Policy to the
middle of the Processing Period.
(2) We subtract from (1) the Cash Surrender Value plus any Debt as of the be-
ginning of the Processing Period, adjusted with interest to the end of
the Processing Period. (This is the Net Amount at Risk).
(3) We determine the current cost of insurance rate per $1,000 based on each
Insured's sex, Issue Age, years since the Policy Date and underwriting
class.
(4) We multiply the Net Amount at Risk in (2) by (3) and then divide this re-
sult by 1,000.
During the Guarantee Period, in no event will the mortality cost be greater
than the amount determined by substituting the Tabular Value for the Cash
Surrender Value plus Debt in (2) above and the guaranteed maximum cost of in-
surance rate per $1,000 for the current cost of insurance rate per $1,000 in
(3) above. In addition, the Tabular Value will be substituted for the Option
II Death Benefit Adjustment in calculating the Death Benefit in (1) above.
See Insurance Benefits, Policy Guarantees.
MINIMUM DEATH BENEFIT GUARANTEE CHARGE
We deduct an amount per $1,000 of Tabular Net Amount at Risk. The amount is
based on the Attained Age of the Insured (the younger Insured for survivor-
ship policies). The charge is deducted from the Investment Value on each
quarterly Processing Date during the Guarantee Period. The quarterly charge
will never exceed $0.15 per $1,000 of Face Amount per quarter.
The guaranteed Death Benefit risks are related to potentially unfavorable In-
vestment results. One risk is that the Policy's Cash Surrender Value cannot
cover the charges due during the Guarantee Period. Another risk is that We
may have to limit the deduction for mortality cost. See Mortality Cost,
above.
DEDUCTIONS FOR TRANSACTION AND OTHER CHARGES
ANNUAL ADMINISTRATIVE CHARGE
The annual administrative charge covers a portion of Our ongoing administra-
tive expenses. The charge is incurred at the beginning of each Policy Year
and deducted from the Investment Value at the end of each Policy Year on the
Policy Anniversary. We deduct any annual administrative charge incurred but
not yet deducted from the amount We pay You if the Policy is surrendered. If
the Investment Value at the end of a policy processing period equals or ex-
ceeds $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 Policy Year.
This charge will never exceed $80 per Policy Year. This charge is not de-
signed to produce a profit for Golden American or any affiliate and the an-
nual amount plus the asset based administrative charge (below) will not ex-
ceed Our expected cost of the services to be provided over the life of the
Policy.
LOAN INTEREST CHARGE
On each Policy Anniversary, We calculate the loan interest charge and deduct
it from the Investment Value. This charge is 5.0% annually (accrued daily) of
the outstanding loans. Between Policy Anniversaries, Your Cash Surrender
Value will reflect the accrued charge.
EXCESS ALLOCATION CHARGE
We allow unlimited allocation changes without charge but reserve the right to
charge $25 for each allocation change in excess of twelve in a Policy Year.
The charge is deducted in proportion to the amount being transferred from
each division of Account A or the applicable allocation within the Fixed Ac-
count.
PARTIAL WITHDRAWAL CHARGE
If You take more than four partial withdrawals during a Policy Year, We may
impose a charge of the lesser of $25 and 2.0% of the amount withdrawn for
each additional partial withdrawal. The charge will be deducted in proportion
to the Investment Value in each division or the applicable allocation within
the Fixed Account from which the partial withdrawal was taken. See Your
22
<PAGE>
CHARGES AND DEDUCTIONS (CONTINUED)
Policy's Benefits, Taking Partial Withdrawals. This charge is cost based
and is designed to cover Our administrative costs in processing each addi-
tional withdrawal.
DEDUCTIONS FROM DIVISIONS OF ACCOUNT A
ASSET BASED CHARGES
MORTALITY AND EXPENSE RISK CHARGE
We will deduct a daily charge from the assets in each division of Account A
to compensate Us for mortality and expense risks We assume under the Policy.
The total daily charge is equal to 0.002477% (equivalent to an annual rate of
0.90%) of the assets in each division. Approximately 0.625% is allocated to
the mortality risk and 0.275% is allocated to the expense risk. We will real-
ize a gain from this charge to the extent it is not needed to provide for
Benefits and expenses under the Policies. We will use any gain for any lawful
purpose including any shortfalls on distribution expenses.
The mortality risk assumed is the risk that Insureds as a group will live for
a shorter time than Our actuarial tables predict. As a result, We would be
paying more in Death Benefits than We planned. The expense risk assumed is
the risk that it will cost Us more to issue and administer the Policies than
We expect.
ASSET BASED ADMINISTRATIVE CHARGE
We charge each division of Account A with a daily asset based charge to cover
a portion of the policy administration. The daily charge is at a rate of
0.000276% (equivalent to an annual rate of 0.10%) of the assets in each divi-
sion. This charge plus the annual administrative charge (above) will not ex-
ceed Our expected cost of the services to be provided over the life of the
Policy.
TRUST EXPENSES
There are fees and expenses deducted from each Series. See Facts About Golden
American, Account A and the Fixed Account, Account A Divisions. The investment
performance of the Series and expenses and deductions of certain charges from
the Trusts will affect Your Investment Value. Please read the Trust prospec-
tuses for details.
YOUR POLICY'S BENEFITS
YOUR POLICY'S CASH SURRENDER VALUE
Your Policy's Cash Surrender Value fluctuates daily with the Investment Re-
sults. With respect to premiums allocated to Account A, We do not guarantee
any minimum Cash Surrender Value. On any date, the Cash Surrender Value is
equal to the Investment Value less any deferred charges not yet deducted, plus
any accrued general account loan interest credit and less any charges incurred
and not yet deducted.
SURRENDERING TO RECEIVE THE CASH SURRENDER VALUE
You can surrender Your Policy at any time while the Policy is in force. You
will receive the Policy's Cash Surrender Value. The surrender will be effec-
tive on the date Your written request and the Policy are sent to Us. We will
determine the Cash Surrender Value when We receive the written request and
the Policy at Our Customer Service Center. You may elect to have this amount
paid in a single payment or applied under one or more Income Plans. See
Choosing An Income Plan.
For information on the tax treatment on surrender of a Policy, including Pol-
icies that are "modified endowment contracts," see Federal Income Tax Consid-
erations.
POLICY LOANS
After the Free Look Period, You may use Your Policy as collateral to borrow
funds from Us, by sending in a written request in a form satisfactory to Us.
The minimum loan We will make is $500. The maximum amount You can borrow at
any time is the difference between the loan value (90% of the Policy's Cash
Surrender Value plus the Debt) and the Debt (the outstanding loan plus accrued
interest). Unless specified otherwise, the amount of the loan will be taken
from the Investment Value in proportion to the amount of Investment Value in
each division in which You are invested.
We calculate Your new loan to equal any Debt plus the current amount You bor-
row. Certain states may not permit Us to impose a minimum on the amounts You
can borrow or repay. The minimum and maximum amounts will be shown in Your
Policy.
You may repay all or part of the loan any time while the Policy is in force.
Each repayment must be at least $500 or the amount of the Debt, if less. Un-
less otherwise specified, loan repayments will be allocated in proportion to
the amount of Investment Value in each division.
For Genesis I Policies, there may be a 10% penalty tax on loans. For informa-
tion on the tax treatment of loans from policies that are "modified endowment
contracts," see Federal Income Tax Considerations, Modified Endowment Con-
tracts, Penalty Tax.
23
<PAGE>
YOUR POLICY'S BENEFITS (CONTINUED)
INTEREST
While a policy loan is outstanding, We will charge interest at 5.0% annually.
See Charges and Deductions, Transaction and Other Charges, Loan Interest
Charge. Interest accrues each day and payments are due at the end of each
Policy Year. If You do not pay the interest when due, We add it to Your loan.
Generally, interest paid on a policy loan is not tax-deductible. See Federal
Income Tax Considerations, Loans. The sum of outstanding loans plus accrued
interest is called Debt.
If on any Valuation Date there is Debt outstanding and the Cash Surrender
Value is negative, We will terminate the Policy 31 days after We send You an
overloan notice. We will notify You and anyone who holds the Policy as col-
lateral at their last known address. To avoid termination, You must pay Us at
least the minimum repayment amount, listed in the notice before the 31 day
period ends.
LOAN INTEREST CREDIT
When You take a loan, We transfer an amount equal to the amount You borrowed
out of Your divisions and hold it as collateral in Our general account. We
will credit interest to portions of the collateral amount at a rate of 4% per
annum (and, on a current basis, 5% for "Preferred Loans"). Any loan interest
credit will be added to the Investment Value on each Policy Anniversary. Be-
tween Policy Anniversaries, Your Cash Surrender Value will reflect the ac-
crued credit.
With respect to Genesis I Policies, loans where the amount of the collateral
is equal to the Investment Value less the total of all premium payments under
the Policy and the initial loan being carried over on a 1035 Exchange are
considered "Preferred Loans." With respect to Genesis Flex Policies, all new
loans taken after the later of attained age 60 or the tenth Policy Anniver-
sary are considered "Preferred Loans."
EFFECT ON DEATH BENEFIT AND CASH SURRENDER VALUE
Whether or not You repay a policy loan, taking a loan will have a permanent
effect on Your Cash Surrender Value and may have a permanent effect on Your
death benefit. This is because the collateral for Your loan does not partici-
pate in the Investment Results while the loan is outstanding. If the amount
credited to the collateral is more than Investment Results, the Cash Surren-
der Value will be higher, as may be the death benefit. Conversely, if the
amount credited is less, the Cash Surrender Value will be lower as may be the
death benefit.
TAKING PARTIAL WITHDRAWALS
After the Free Look Period, You may take partial withdrawals from the Invest-
ment Value. Under Policies purchased in connection with a 1035 Exchange, par-
tial withdrawals may not be permitted during the first seven Policy Years.
Unless You specify otherwise, the amount of the withdrawal will be taken in
proportion to the Investment Value in each division in which You are invested.
Partial withdrawals may not be repaid and in no event may a partial withdrawal
be greater than 90% of the Investment Value less any applicable unrecovered
deferred loading.
You may take a partial withdrawal four times per Policy Year without charge.
Your request for a partial withdrawal must be in a written form satisfactory
to Us. The effective date of a partial withdrawal will be the date We receive
Your written request at Our Customer Service Center. If You take more than
four partial withdrawals in a Policy Year, We may impose a charge of the
lesser of $25 and 2.0% of the amount withdrawn for each additional partial
withdrawal.
The minimum partial withdrawal amount is $1,000 and the maximum amount of all
partial withdrawals that may be withdrawn during a Policy Year without accel-
erating recovery of the deferred loading is 15% of the Investment Value. See
Accelerated Recovery of Deferred Charges, below. The maximum amount You may
withdraw is further limited by the minimum Face Amount and Guarantee Period
requirements of the Policy. See Effect of a Partial Withdrawal on Guaranteed
Benefits, below.
ACCELERATED RECOVERY OF DEFERRED CHARGES
An excess partial withdrawal is the amount by which the sum of all partial
withdrawals taken during a Policy Year plus the current partial withdrawal
exceed 15% of the Investment Value on the date of the withdrawal. An excess
partial withdrawal will be considered a partial surrender of the Policy and
We will recover a pro rata portion of the unrecovered deferred charges. Such
amount will be deducted in proportion to the Investment Value in each divi-
sion or the Fixed Account from which the excess partial withdrawal was taken.
Collection of a portion of the deferred loading for an excess partial with-
drawal may shorten the period during which the deferred loading is recovered,
or the last installment amount may be reduced. For example, the following
Genesis I example assumes a $100,000 initial premium (with deferred loading
of $6,000 recovered at the rate of
24
<PAGE>
YOUR POLICY'S BENEFITS (CONTINUED)
$1,000 per Policy Year for six years and premium taxes of $2,400 recovered at
the rate of $400 per Policy Year for six years), an Investment Value of
$120,000 and unrecovered deferred charges in the amount of $4,200 at the be-
ginning of the fourth Policy Year.
If a partial withdrawal of $30,000 were taken, $18,000 of this amount could
be taken without accelerating recovery of the deferred loading ($120,000 X
.15). The amount of deferred loading to be deducted immediately due to the
excess withdrawal amount would be determined by first calculating the per-
centage of the Investment Value by which the withdrawal is in excess of the
maximum (($30,000 - $18,000) / $120,000). Then this percentage is applied to
the current amount of the unrecovered deferred loading ($4,200 X .10 = $420)
to determine the amount of unrecovered deferred loading to be deducted from
the Investment Value as of the date of the withdrawal.
If the Policy were surrendered following the partial withdrawal, the unrecov-
ered deferred loading deducted from the Investment Value would be $3,780
($4,200 - $420). If instead, the Policy were surrendered at the beginning of
the sixth Policy Year assuming no additional payments or further partial
withdrawals, the unrecovered deferred loading deducted upon surrender would
be $980 ($1,400 - $420).
PARTIAL WITHDRAWALS IN GENERAL
We will send You a notice of how Your Policy Benefits are affected by a par-
tial withdrawal. 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. FOR INFORMATION ON THE TAX TREATMENT OF PARTIAL WITHDRAWALS, IN-
CLUDING THE TREATMENT FOR POLICIES THAT ARE MODIFIED ENDOWMENT CONTRACTS, SEE
FEDERAL INCOME TAX CONSIDERATIONS.
EFFECT OF A PARTIAL WITHDRAWAL ON THE INVESTMENT VALUE AND DEATH BENEFIT
As of the effective date of a partial withdrawal:
(1) The Investment Value of the Policy is reduced by the partial withdrawal
and any associated charges.
(2) Unless You specify otherwise, the reduction in Investment Value will be
taken in proportion to the Investment Value in each division in which You
are invested as of the effective date of the partial withdrawal. If there
is insufficient Investment Value in the divisions, the remaining reduc-
tion will be deducted from Your allocations to the Fixed Account.
(3) Any amounts paid in accordance with the Suicide provision of the Policy
will be reduced by the amount of any partial withdrawals and any associ-
ated charges.
(4) The Variable Insurance Amount will reflect the partial withdrawal and any
associated charges.
As of the Processing Date on or next following the effective date of a
partial withdrawal the guaranteed Benefits may decrease. See Effect of a
Partial Withdrawal on Guaranteed Benefits, below. If the Death Benefit be-
comes payable before the Processing Date on or next following the effec-
tive date of a partial withdrawal, We will deduct the amount of the par-
tial withdrawal from the Death Benefit proceeds payable, if the Death Ben-
efit is determined to be the Face Amount.
EFFECT OF A PARTIAL WITHDRAWAL ON GUARANTEED BENEFITS
A partial withdrawal may affect the guaranteed Benefits under the Policy. The
change, if any, in the Face Amount and Guarantee Period as of the Processing
Date on or next following the effective date of a partial withdrawal will be
calculated as follows:
(1) Prior to effecting the partial withdrawal, We calculate the death benefit
as of the date of the partial withdrawal.
(2) We subtract from (1) the amount of the partial withdrawal and any associ-
ated charges.
(3) If the amount determined in (2) is less than the Face Amount, We reduce
the Face Amount to the amount determined in (2).
Decreases in the Face Amount could result in the Policy becoming a "modi-
fied endowment contract." See Federal Income Tax Considerations, Modified
Endowment Contracts.
(4) The Tabular Value as of such Processing Date and the Face Amount will be
used to calculate a new Guarantee Period. The Guarantee Period ends on
the earlier of the date so determined and any maximum shown in the Poli-
cy. In no event will We allow a partial withdrawal that will reduce the
Guarantee Period below the minimum shown in the Policy or reduce the Face
Amount below the amount We would then allow.
25
<PAGE>
YOUR POLICY'S BENEFITS (CONTINUED)
YOUR RIGHT TO CANCEL OR EXCHANGE YOUR POLICY
CANCELLING YOUR POLICY
You may cancel Your Policy within the Free Look Period and We will refund any
premiums paid without interest. Generally under a Genesis I Policy, this pe-
riod ends 10 days from the date You receive the Policy. For purposes of ad-
ministering Our allocation rules, We deem this period as ending 15 days after
a Policy is mailed from Our Customer Service Center. Some states may require
a longer Free Look Period.
Under a Genesis Flex Policy, the Free Look Period generally ends on the lat-
est of (i) 10 days after You receive Your Policy, (ii) 45 days from the date
You complete part I of the application or enrollment form, or (iii) 10 days
from the mailing of the notice of cancellation right.
If You cancel the Policy, We will require that You wait six months before ap-
plying to Us again.
EXCHANGING YOUR POLICY
During the first 24 months after the Issue Date, You may convert the Policy
so that Your benefits do not vary based on the Net Rate of Return. In effect,
We make this option available to You by permitting You to reallocate all of
the Policy's Investment Value to Our general account. At the time of such
election, there will be no effect on the Policy's Face Amount, Net Amount at
Risk, underwriting class(es), or Issue Age(s). We will not ask for evidence
of insurability.
This right of conversion will also be offered at any time there is a change
in the Investment adviser of any portfolio or if there is a material change
in the Investment Objectives or restrictions of any portfolio in which the
divisions invest. We will notify You if there is any such change. You will be
able to convert Your Policy within 60 days after Our notice or the effective
date of the change, whichever is later.
INSURANCE BENEFITS
DEATH BENEFIT PROCEEDS
We will pay the death benefit proceeds to the beneficiary when We receive due
proof of the death (such as an official death certificate) of the Insured un-
der a single life policy, or both Insureds under a survivorship policy, and
all other requirements.
Death benefit proceeds are determined on the date of death of the Insured(s)
as follows:
(1) We determine the death benefit.
(2) We subtract from (1) any Debt.
(3) If the Insured(s) dies during a grace period We subtract from (2) the sum
of any overdue charges and any charges incurred to the date of death. See
When Your Guarantee Period Ends Before the Maturity Date, Grace Period.
OPTION I DEATH BENEFIT
If the Option I Death Benefit is in effect on the date of death, the death
benefit is the greater of:
(1) the Face Amount as of the prior Processing Date; and
(2) the Variable Insurance Amount as of the date of death.
If at the time the death benefit proceeds become payable, an additional pre-
mium payment has been accepted and/or a partial withdrawal has been made
since the last Processing Date, the death benefit used to determine proceeds
payable will be calculated as the greater of:
(1) the Face Amount calculated as of the prior Processing Date plus any addi-
tional premium payments, less any partial withdrawals; and
(2) the Variable Insurance Amount as of the date of death.
OPTION II DEATH BENEFIT
If the Option II Death Benefit is in effect on the date of death, the death
benefit is the greater of:
(1) the Face Amount as of the prior Processing Date plus the Option II Death
Benefit Adjustment as of the date of death (see below); and
(2) the Variable Insurance Amount as of the date of death.
OPTION II DEATH BENEFIT ADJUSTMENT
The Option II Death Benefit Adjustment is calculated as the greater of (i)
the Option II Guaranteed Death Benefit and (ii) the Investment Value plus
Debt.
OPTION II GUARANTEED DEATH BENEFIT
On the Issue Date the Option II Guaranteed Death Benefit is equal to the pre-
miums paid. On subsequent Valuation Dates during the Guarantee Period, the
Option II Guaranteed Death Benefit is calculated as follows:
(1) We take the Option II Guaranteed Death Benefit from the prior Valuation
Date;
(2) We calculate interest at the Option II Guaranteed Death Benefit Interest
Rate (as defined below);
(3) We add (1) and (2);
26
<PAGE>
INSURANCE BENEFITS (CONTINUED)
(4) We add to (3) any premiums paid during the current Valuation Period; and
(5) We subtract from (4) any partial withdrawals taken during the current
Valuation Period.
However, in no event will the Option II Guaranteed Death Benefit be greater
than two times the sum of each premium paid less any partial withdrawals as-
sociated with each premium paid. After the Guarantee Period, the Option II
Guaranteed Death Benefit is zero.
The Option II Guaranteed Death Benefit Interest Rate is equal to 7%; however,
(i) for the Liquid Asset Division it is equal to the net rate of return dur-
ing the current Valuation Period, if less than an annualized rate of 7%; (ii)
for the Fixed Account it is equal to the rate of interest credited to such
amounts during the current Valuation Period, if less than an annualized rate
of 7%; and (iii) for amounts transferred to the general account as collateral
for any policy loans it is equal to the rate of interest credited to such
amounts during the current Valuation Period, if less than an annualized rate
of 7%.
PAYMENT OF DEATH BENEFITS PROCEEDS
The beneficiary should contact Our Customer Service Center for instructions.
We usually pay the proceeds within seven days after We receive due proof of
the death of the applicable Insured(s) and all other requirements. We may de-
lay payment of all or part of the death benefit proceeds under certain cir-
cumstances. See Other Important Information, Other General Policy Provisions,
Payments We May Defer. Interest will be paid on death benefit proceeds at an
annual rate of at least 3.5% from the date of death of the applicable
Insured(s) to the date of payment. Interest will never be less than required
by applicable law.
VARIABLE INSURANCE AMOUNT
The Variable Insurance Amount will vary daily based on the Investment Results,
premium payments made and partial withdrawals taken and will be determined as
follows:
(1) We determine the Investment Value;
(2) We add any Debt;
(3) We multiply by the Net Single Premium Factor.
It will never be less than the amount required by applicable law to keep the
Policy qualified as life insurance.
NET SINGLE PREMIUM FACTOR
The Net Single Premium Factor is based on the Attained Age, sex and underwrit-
ing class of the Insured(s). It decreases as an Insured's age increases. As a
result, the Variable Insurance Amount will decrease in relationship to the
Policy's Investment Value as the Insured's age increases. Also, Net Single
Premium Factors may be higher for a woman than for a man of the same age. A
table of Minimum Net Single Premium Factors is included in the Policy.
TABLES OF ILLUSTRATIVE MINIMUM NET SINGLE PREMIUM FACTORS
SINGLE LIFE, MALE, AGE 35,
NON-SMOKER
<TABLE>
<CAPTION>
POLICY NSP
YEAR FACTOR
------ -------
<S> <C>
1 4.28987
5 3.74881
10 3.17597
15 2.70250
20 2.31286
25 1.99777
30 1.74514
35 1.54717
40 1.39370
45 1.28082
50 1.19623
55 1.13703
60 1.08538
65 1.02207
SURVIVORSHIP, MALE AND FEMALE, AGE 35,
NON-SMOKERS
<CAPTION>
POLICY NSP
YEAR FACTOR
------ -------
<S> <C>
1 6.43408
5 5.50113
10 4.52680
15 3.73086
20 3.08264
25 2.55812
30 2.13693
35 1.80584
40 1.55097
45 1.36578
50 1.23618
55 1.15170
60 1.08806
65 1.02207
</TABLE>
CHANGES IN FACE AMOUNT
After the first Policy Anniversary, You may request a change in the Face
Amount under Your Policy.
27
<PAGE>
INSURANCE BENEFITS (CONTINUED)
The request for any change must be in written form satisfactory to Us.
INCREASING THE FACE AMOUNT
To increase the Face Amount, a supplemental application or enrollment form
must be submitted. Any increase will be subject to evidence of insurability
satisfactory to Us. Such increase must at least equal the minimum increase We
then allow. The increase will take effect on the Processing Date on or next
following the date We approve such increase.
DECREASING THE FACE AMOUNT
Any decrease in Face Amount will take effect on the Processing Date on or
next following the date We approve the written request for the decrease. Such
decrease must at least equal the minimum decrease We then allow. If there
have been any prior increases in Face Amount, the decrease will first be ap-
plied against the prior increases in the reverse order of their effective
dates. Decreases in Face Amount will be subject to Our rules at the time of
request.
Decreases in the Face Amount could result in the Policy becoming a "modified
endowment contract." See Federal Income Tax Considerations, Modified Endow-
ment Contracts.
WHEN A CHANGE IN FACE AMOUNT IS MADE
The Tabular Value will be used to calculate a new Guarantee Period. Any part
of the Tabular Value in excess of the amount required to increase the Guaran-
tee Period to life will be applied as a net single premium for life to in-
crease the Face Amount.
GUARANTEE PERIOD
The death benefit under your Policy is subject to a guaranteed minimum amount
for a guaranteed minimum period of time regardless of Investment Results. The
guaranteed minimum amount is your Policy's Face Amount and the Policy's Guar-
antee Period is the minimum period of time We guarantee that your Policy will
remain in force regardless of its Investment Results. However, if there is
Debt, and your Cash Surrender Value is negative, We will terminate your Policy
before the end of the Guarantee Period unless sufficient payment is made. See
Your Policy's Benefits, Policy Loans.
Your Guarantee Period at issue depends upon your initial premium payment and
Face Amount. Thereafter, the Guarantee Period may change if (1) you take a
partial withdrawal, (2) you pay a planned or unplanned premium, or (3) you
change the Face Amount of your Policy. For Genesis Flex, each planned premium
extends the Guarantee Period, and if all planned premiums are paid as planned
and the Insured(s) are in a standard or better underwriting class, the Guaran-
tee Period will last until the Maturity Date of your Policy. For Genesis I, if
you elect the minimum face amount we allow for a given single premium and the
Insured(s) are in a standard or better underwriting class, the Guarantee Pe-
riod will last until the Maturity Date of your Policy; however, if you elect a
face amount greater than such minimum, your Guarantee Period will end before
the Maturity Date.
The Guarantee Period will be calculated using (1) rates no greater than the
guaranteed maximum cost of insurance rates shown in the Policy and (2) a 4.0%
interest assumption. For a given premium payment and Face Amount, the Guaran-
tee Period will differ depending on the age, sex and underwriting class of the
Insured(s). For example under a single life policy, for the same premium and
Face Amount, an older Insured will have a shorter Guarantee Period than a
younger Insured of the same sex and in the same underwriting class.
CHANGING THE DEATH BENEFIT OPTION (Genesis I Only)
After the first Policy Anniversary, while the Insured(s) is living and the
Policy is in effect, You may change the death benefit option. However, changes
may be made no more frequently than once every three Policy Years. We must re-
ceive written notice of any change in a form satisfactory to Us. Any change in
death benefit option will take effect on the Processing Date on or next fol-
lowing the date We approve the change. When the change is from the Option II
Death Benefit to the Option I Death Benefit, We will increase the Face Amount
in force by the amount of the Option II Death Benefit Adjustment, as of the
date of the change. If the change is from the Option I Death Benefit to the
Option II Death Benefit, We will decrease the Face Amount in force by the
amount of the Option II Death Benefit Adjustment, as of the date of the
change. These increases and decreases in Face Amount are made so that the
death benefit remains the same on the date of the change. Changes in death
benefit options are subject to Our rules at the time of the change.
LIFETIME GUARANTEE OPTION
Subject to Our rules, you may be available for a lifetime guarantee Option if
the Guarantee Period under Your Policy ends before the Maturity Date, You may
request a change to Your Policy such that the Guarantee Period will end on
the Maturity Date. The request must be in a written form
28
<PAGE>
INSURANCE BENEFITS (CONTINUED)
satisfactory to Us. On the date We receive Your request, if the Option II
Death Benefit is in effect under Your Policy, We will first change the death
benefit option to the Option I Death Benefit and then change the Face Amount
such that the Guarantee Period will end on the Maturity Date. If the Option I
Death Benefit is already in effect under Your Policy, We will change the cur-
rent Face Amount such that the Guarantee Period will end on the Maturity
Date. See Insurance Benefits, Guarantee Period.
GENERAL
When a change in Face Amount is made, the Tabular Value will be used to cal-
culate a new Guarantee Period. Any part of the Tabular Value in excess of the
amount required to increase the Guarantee Period to the Maturity Date, will
be applied as a net single premium to the Maturity Date to increase the Face
Amount. See Facts About the Policy, Tabular Value.
WHEN YOUR GUARANTEE PERIOD ENDS BEFORE THE MATURITY DATE
After the end of the Guarantee Period and a grace period, We may cancel Your
Policy if the Cash Surrender Value on a Processing Date will not cover the
charges due. See Charges and Deductions.
GRACE PERIOD
We will notify You before cancelling Your Policy. You will have 61 days (the
"grace period") from the date We mail the notice to You, to pay Us the
charges due on the Processing Date when Your Cash Surrender Value becomes in-
sufficient. (In certain states the amount of the required payment may differ
and the amount will be shown on the notice We mail to You). We will not can-
cel Your Policy until the end of this grace period. Any excess of the payment
above the overdue charges will be treated as an additional premium payment.
See Making Additional Premium Payments.
REINSTATING YOUR POLICY
If We cancel Your Policy, You may reinstate it while the Insured (both of the
Insureds for survivorship policies) is still living provided that:
(1) You request the reinstatement within three years after the end of the
grace period;
(2) We receive satisfactory evidence of insurability; and
(3) You pay Us at least the reinstatement cost, which is the minimum payment
for which We would then issue the Policy based on the Attained Age and
underwriting class of the Insured(s) as of the effective date of the re-
instatement.
Your reinstated Policy will be effective on the Processing Date on or next
following the date We approve Your reinstatement application.
POLICY GUARANTEES
Although Your Policy Values depend on the Investment Results and the amount of
Cash Surrender Value in Account A is not guaranteed, the Policy does provide
the following guarantees.
GUARANTEE PERIOD
We guarantee that the Policy will stay in force during the Guarantee Period.
We will not cancel the Policy during the Guarantee Period unless there is
Debt and the Cash Surrender Value is negative. See Your Policy's Benefits,
Policy Loans. We will hold a reserve in Our general account to support this
guarantee.
MORTALITY COST
Each Policy guarantees maximum mortality rates of 100% of the 1980 CSO Mor-
tality Tables adopted by the National Association of Insurance Commissioners.
Policies issued in one of the special classes will have guaranteed maximum
mortality rates based on multiples of the 1980 CSO Mortality Tables that are
appropriate for the risks involved. We may use current tables that are less
but never greater than these rates.
We limit the mortality cost if Investment results are unfavorable. See
Charges and Deductions, Mortality Charges. In effect, during the Guarantee
Period You will not be charged for mortality costs that are greater than
those for a comparable fixed policy based on 4.0% interest and the same guar-
anteed mortality rates.
CHOOSING AN INCOME PLAN
We offer several income plans to provide for payment of the Death Benefit pro-
ceeds to the beneficiary. You may choose one or more income plans at any time
while the Policy is in force. If no plan has been chosen when the death bene-
fit is payable, the beneficiary has one year to apply the death benefit pro-
ceeds to one or more of the plans. You may also choose one or more income
plans on surrender of the Policy.
Plans 1, 2 and 3 are supported by Our general account assets and do not vary
to reflect investment experience of the Account. Plan 4 may be supported
29
<PAGE>
CHOOSING AN INCOME PLAN (CONTINUED)
by a separate account in which case it will vary with investment experience.
Our approval is needed for any plan where:
(1) the person named to receive payment is other than the owner or beneficia-
ry; or
(2) the person named is not a natural person, such as a corporation; or
(3) any income payment would be less than $500.
The income plans are:
PLAN 1: INCOME FOR A FIXED PERIOD
Payments are made in equal installments for a fixed number of years.
PLAN 2: INCOME FOR LIFE
Payments are made to the person named in equal monthly installments and guar-
anteed for at least a period certain. The period certain can be 10 or 20
years. Other periods certain are available on request. A refund certain may
be chosen instead. Under this arrangement, income is guaranteed until pay-
ments equal the amount applied.
PLAN 3: JOINT LIFE INCOME
Payments are made in monthly installments as long as at least one of two
named persons is living. Payments end completely when both named persons die.
PLAN 4: ANNUITY PLAN
An amount can be used to purchase any single premium annuity We offer. We
will issue a written agreement putting the plan into effect.
PAYMENT WHEN NAMED PERSON DIES
When the person named to receive payment dies, We will pay any amounts still
due as provided by the plan agreement. The amounts still due are determined as
follows:
(1) For plans 1, 2, or any remaining guaranteed payments, payments will be
continued. Under plans 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 annual discount interest rate is 3.0%
for plan 1 and 3.50% for plan 2. We will, however, base the discount in-
terest rate on the interest rate used to calculate the payments for plans
1 and 2 if such payments were not based on the tables in the Policy.
(2) For plan 3, no amounts are payable after both named persons have died.
(3) For plan 4, the annuity agreement will state the amount due, if any.
OTHER IMPORTANT INFORMATION
OTHER GENERAL POLICY PROVISIONS
OWNERSHIP
The Policyowner is usually the Insured, unless another owner has been named
in the application or enrollment form. The Policyowner has all rights and op-
tions described in the Policy.
If You, the Policyowner, are not the Insured, You may want to name a contin-
gent owner. If You die before the Insured, the contingent owner will own the
Policy and have all Your rights. If You do not name a contingent owner, Your
estate will own the Policy at Your Death.
CHANGING THE OWNER
During Your lifetime, You have the right to transfer ownership of the Policy.
The new owner will have all rights and options described in the Policy. The
Change will be effective as of the day the notice is signed, but will not af-
fect any payment made or action taken by Us before receipt of the change at
Our Customer Service Center. See Federal Income Tax Considerations, Change of
Ownership or Assignment.
NAMING BENEFICIARIES
On the death of the Insured (single life), or the last surviving Insured
(survivorship), We will pay the beneficiary the death benefit proceeds. If
the beneficiary has died, We pay the contingent beneficiary. If no contingent
beneficiary is living, We pay the estate of the Insured under a single life
policy, or the last surviving Insured under a survivorship policy.
You may name more than one person as beneficiaries or contingent beneficia-
ries. We will pay them in equal shares unless You give other instructions.
You have the right to change beneficiaries unless the beneficiary designation
has been made irrevocable. If the designation is irrevocable, the beneficiary
must consent when You exercise certain rights and options under the Policy.
Any change in beneficiary will be effective as of the day the notice is
signed, but will not affect any payment made or action taken by Us before re-
ceipt of the change at Our Customer Service Center.
INCONTESTABILITY
We rely on statements made in the application or enrollment form. Legally,
they are considered rep-
30
<PAGE>
OTHER IMPORTANT INFORMATION (CONTINUED)
resentations, not warranties. We can contest the validity of a Policy if any
material misstatements are made in the initial application or enrollment
form. We can also contest the validity of any change in face amount requested
by You if any material misstatements are made in any application required for
that change. We can also contest any amount of death benefit which would not
be payable except for the fact that an additional premium which requires evi-
dence of insurability was paid if any material misstatements are made in any
application required with the additional premium.
We will not contest the validity of a Policy after it has been in effect dur-
ing the Insured's lifetime (or during the lifetime of at least one of the
Insureds for survivorship policies) for two years from the date of issue. We
can also contest any change in face amount requested by the Policyowner after
the change has been in effect during the Insured's lifetime (or during the
lifetime of at least one of the Insureds for survivorship policies) for two
years from the date of the payment. Nor will We contest any amount of death
benefit attributable to an additional payment after such death benefit has
been in effect during the Insured's lifetime (or during the lifetime of at
least one of the Insureds for survivorship policies) for two years from the
date of the payment.
For survivorship policies, after the second Policy Anniversary We will send
You by certified mail, a request for notification of the death of either In-
sured. If the death of either Insured has occurred and You fail to reply to
such request and provide proof of death of either Insured, if applicable, We
may contest the validity of coverage under the Policy.
If their Policy is reinstated, this provision will be measured from the ef-
fective date of the reinstated Policy.
POLICY VALUES REPORTS
After the end of each calendar quarter You will receive a statement of the
allocation of Your Investment Value, death benefit, Cash Surrender Value, any
Debt and Your current Face Amount and Guarantee Period. All figures will be
as of the last day of the prior calendar quarter. It will also include any
other information that may be currently required by the state insurance de-
partment of the jurisdiction in which the Policy is delivered.
You will also receive annual reports containing a financial statement for Ac-
count A and any shareholder reports of the Trusts, as well as any other re-
ports, notices or documents required by law to be furnished to You.
POLICY CHANGES -- APPLICABLE TAX LAW
For You to receive the tax treatment accorded to life insurance under Federal
law, Your Policy must qualify initially and continue to qualify as life in-
surance under the Internal Revenue Code or successor law. Therefore, to as-
sure this qualification, We have reserved the right to defer acceptance of or
to return any additional payments that would cause the Policy to fail to
qualify as life insurance under applicable tax law. Further, We reserve the
right to make changes in the Policy or its optional benefit riders or to make
distributions from the Policy to the extent We find it necessary to continue
to qualify Your Policy as life insurance. Any such changes will apply uni-
formly to all Policies that are affected and You will be given advance writ-
ten notice of such changes. See Federal Income Tax Considerations.
IN CASE OF ERRORS ON THE APPLICATION
If an Insured's age or sex has been misstated on the application or enroll-
ment form, the death benefit shall be that which would be purchased by the
mortality cost determined for the current Processing Period based on the cor-
rect age and sex. In addition, the benefit provided by any optional benefit
rider shall be the amount purchased by the rider deduction for the current
Processing Period based on the correct age and sex.
SENDING NOTICE TO US
Any written notices or requests should be sent to Our Customer Service Cen-
ter. The address is shown on the Cover Page. Please include Your name, policy
number and if You are not an Insured, the name(s) of the Insured(s).
SUICIDE
For single life policies, if an Insured commits suicide within two years from
the Policy's Issue Date or an increase in the Policy's face amount, We will
pay only a limited death benefit. The benefit will be equal to the premium
payments made or, in the case of an increase in face amount, the death bene-
fit that would otherwise have been payable had no increase in face amount
been made. If an Insured commits suicide within two years of any date We re-
ceive and accept an additional payment, any amount of death benefit which
would not be payable except for the fact that the additional payment was made
will be limited to the amount of the additional payment.
For survivorship policies, if either Insured commits suicide within two years
from the Policy's Is-
31
<PAGE>
OTHER IMPORTANT INFORMATION (CONTINUED)
sue Date, upon notification We will issue coverage to the last surviving In-
sured on a single life basis as of the Issue Date. If there is no surviving
Insured, the beath benefit will be limited to the amount of the premium pay-
ments made.
If the last surviving Insured commits suicide within two years of the effec-
tive date of any increase in face amount requested by the Policyowners, we
will terminate the coverage attributable to such increase in face amount and
pay only a limited benefit. The limited benefit will be the amount of mortal-
ity cost deductions made for such increase.
If the last surviving Insured commits suicide within two years of any date We
receive and accept an additional premium which requires evidence of insur-
ability, any amount of death benefit which would not be payable except for
the fact that the additional premium was made will be limited to the amount
of the additional premium.
The death benefit We will pay will be reduced by any Debt and by any partial
withdrawals taken.
PAYMENTS WE MAY DEFER
We will pay death benefit proceeds, Cash Surrender Values and loans within
seven days after Our Customer Service Center receives all the information
needed to process the payment.
We may, however, delay payment if We contest the Policy. We may also delay
payment of amounts derived from the divisions of Account A if it is not prac-
tical for Us to value or dispose of shares of Account A because:
(1) the New York Stock Exchange is closed for other than a regular holiday or
weekend; or
(2) trading is restricted; or
(3) an emergency exists according to SEC rules; or
(4) the check used to pay the premium has not cleared through the banking
system. This may take up to 15 days.
We may also delay payment if an SEC order or pronouncement allows Us to in
order to protect Our Policyowners.
We may defer payment of any Cash Surrender Value or loan amount (except a
loan to pay a premium to Us) from the Fixed Account for up to six months af-
ter We receive Your request.
ESTABLISHING SURVIVORSHIP -- SURVIVORSHIP POLICIES ONLY
If We are unable to determine which of the Insureds was the last survivor on
the basis of the proofs of death provided to Us, We shall consider the In-
sured (not the Joint Insured) to be the last surviving Insured.
CLAIMS OF CREDITORS
The proceeds of the Policy will be free from creditors' claims to the extent
allowed by law.
ASSIGNING THE POLICY AS COLLATERAL
You may assign the Policy as collateral security for a loan or other obliga-
tion. This does not change the ownership. However, Your rights and any
beneficiary's rights are subject to the terms of the assignment. See Federal
Income Tax Considerations, Change of Ownership or Assignment.
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 va-
lidity of any assignment.
NON-PARTICIPATING
The Policies do 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:
(1) change any of the Policy's terms; or
(2) make any agreements binding on Us.
CHANGES IN EXPENSE CHARGES AND INSURANCE BASED CHARGES
Changes in expense charges or insurance based charges will be by class and
based upon changes in future expectations for such elements as mortality,
persistency, expenses and taxes. Any change in policy cost factors will be
determined in accordance with procedures and standards on file, if required,
with the insurance supervisory official of the jurisdiction in which the Pol-
icy is delivered.
YOUR VOTING PRIVILEGES
You have the right to instruct Us as to how to vote at shareholder meetings of
the GCG Trust and ESS Trust on the ratification of the selection of indepen-
dent auditors and such other matters as the 1940 Act requires.
We will vote the shares of each Trust owned by Account A according to Your in-
structions. However, if the Investment Company Act of 1940 or any related reg-
ulations should change, or if interpretations of it or related regulations
should change and We decide that We are permitted to vote the shares of the
Trusts in Our own right, We may decide to do so.
32
<PAGE>
OTHER IMPORTANT INFORMATION (CONTINUED)
We determine the number of shares that You have in a division of Account A by
dividing a Policy's Investment Value in that division by the net asset value
of one share of the Series in which a division invests. You may cast one vote
per share. Fractional votes will be counted. We will determine the number of
shares You can instruct Us to vote 90 days or less before each Trust's meet-
ing. We will ask You for voting instructions by mail at least 14 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 Policies in that divi-
sion. We will also vote shares We hold in Account A which are not attributable
to Policyowners in the same proportion.
Under certain circumstances, We may be required by state regulatory authori-
ties to disregard voting instructions. This may happen if following the in-
structions would mean voting to change the sub-classification or investment
objectives of the portfolios, or to approve or disapprove an investment advi-
sory contract.
We may also disregard instructions to vote for changes initiated by an owner
in the investment policy or the portfolio manager if We disapprove the pro-
posed changed. We would disapprove a proposed change only if it was:
(1) contrary to state law:
(2) prohibited by state regulatory authorities; or
(3) decided by Us that the change would result in overly speculative or un-
sound investments. If We disregard voting instructions, We will include a
summary of Our actions in the semiannual report.
SALES AND OTHER AGREEMENTS
DSI is principal underwriter and distributor of the Policies, as well as for
other policies issued through Account A and other separate accounts of Golden
American. DSI is a wholly owned subsidiary of Equitable of Iowa. DSI is regis-
tered with the SEC as a broker-dealer and is a member of the National Associa-
tion of Securities Dealers, Inc. ("NASD"). We pay DSI for acting as principal
underwriter under a distribution agreement. The amount We paid under this
agreement for all of the policies issued through the Account came to approxi-
mately $286,000 for 1994, $370,000 for 1995, and $135,000 for 1996.
DSI will enter into sales agreements with other broker-dealers to sell the
Policies. These agreements provide for payment of commissions of up to 7% of
premiums for the Genesis I Policy. Currently, for the Genesis Flex Policy, the
first year commission will be greater but in no event more than 37 1/2% of
premiums with 4.5% commission on renewal premiums. The agreements also provide
that applications for Policies may be solicited by registered representatives
of the broker-dealers appointed by Golden American to sell its variable life
insurance and variable annuities. These broker-dealers are registered with the
SEC and are members of the NASD. The registered representatives are authorized
under applicable state regulations to sell variable life insurance and vari-
able annuities. The offering of the Policies will be continuous.
GROUP OR SPONSORED ARRANGEMENTS
For certain group or sponsored arrangements, we may reduce the deferred load-
ing, the per policy charge, the annual administrative charge and the minimum
initial premium and the minimum additional premium requirements. We also may
offer planned premium payment periods of other than ten years and limit the
Guarantee Period to a specified number of years. Group arrangements include
those in which a trustee or an employer, for example, purchases policies cov-
ering each individual in a group on a group basis. Sponsored arrangements in-
clude those in which an employer allows Us to sell policies to its employees
on an individual basis.
Our costs for sales, administration and mortality generally vary with the size
and stability of the group, among other factors. We take all these factors
into account when reducing charges. To qualify for reduced charges, a group or
sponsored arrangement must meet certain requirements, including Our require-
ments for size and number of years in existence. Group or sponsored arrange-
ments that have been set up solely to buy policies or that have been in exist-
ence less than six months will not qualify for reduced charges.
We will make any reductions according to Our rules in effect when an applica-
tion or enrollment form for a policy or additional premium is approved. We may
change these rules from time to time. However, any reductions will reflect
differences in costs or services and will not discriminate unfairly against
any person.
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 busi-
33
<PAGE>
OTHER IMPORTANT INFORMATION (CONTINUED)
ness. The variable life insurance policies offered by this prospectus have
been filed with the Insurance Department of the State of Delaware and in other
jurisdictions.
We are required to submit annual statements of Our operations, including fi-
nancial statements, to the insurance departments of the various jurisdictions
in which We do business to determine solvency and compliance with local insur-
ance laws and regulations.
REGISTRATION STATEMENT
We have filed a registration statement under the Securities Act of 1933 with
the SEC relating to the offering described in this prospectus. This prospectus
does not include all the information in the registration statement. We have
omitted certain portions according to SEC rules. You may obtain the omitted
information from the SEC's main office in Washington, D.C. by paying the SEC's
prescribed fees.
LEGAL CONSIDERATIONS FOR EMPLOYERS
In 1983, the Supreme Court decided in Arizona Governing Committee v. Norris
that optional annuity benefits provided under an employer's deferred compensa-
tion plan could not, under Title VII of the Civil Rights Act of 1964, vary be-
tween men and women. In that case, the Court applied its decision only to ben-
efits derived from contributions made on or after August 1, 1983. However, a
more recent decision of the United States Court of Appeals for the Second Cir-
cuit, Spirt V. TIAA-CREF, suggests that in other circumstances the prohibition
of sex-distinct Benefits may apply to contributions made before that date.
The Policies offered by this Prospectus are based on mortality tables that
distinguish between men and women. As a result, the Policies pay different
benefits to men and women of the same age. Employers and employee organiza-
tions should check with their legal advisers before purchasing the Policy.
Some states prohibit the use of actuarial tables that distinguish between men
and women in determining premiums and policy benefits for Policies issued on
the lives of their residents. Therefore, Policies offered by this prospectus
to insure residents of these states will have premiums and benefits which are
based on actuarial tables that do not differentiate on the basis of sex.
LEGAL PROCEEDINGS
Golden American, as an insurance company is ordinarily involved in litigation.
We do not believe that any current litigation is material and We do not expect
to incur significant losses from such actions.
LEGAL MATTERS
The legal validity of the Policies described in this prospectus has been
passed on by Myles R. Tashman, Executive Vice President, General Counsel and
Secretary of Golden American. Sutherland, Asbill & Brennan, L.L.P. of Washing-
ton, D.C. has provided advice on certain matters relating to Federal securi-
ties laws.
EXPERTS
The financial statements of Golden American Life Insurance Company and Sepa-
rate Account A appearing in this prospectus and registration statement have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
reports thereon appearing elsewhere herein and in the registration statement
and are included in reliance upon such reports given upon the authority of
such firm as experts in accounting and auditing.
Actuarial matters included in this prospectus have been examined by Stephen J.
Preston, F.S.A., MAAA, as stated in his opinion filed as an exhibit to the
registration statement.
REINSURANCE
Golden American reinsures all or a portion of the mortality risks under the
Policies with one or more appropriately licensed insurance companies.
ADDITIONAL INFORMATION
Additional information may be obtained from Our Customer Service Center, the
address and telephone number of which are on the cover of this prospectus.
34
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
POSITIONS(S) WITH THE
NAME (AGE) COMPANY
- ------------------------- ---------------------
<S> <C>
Terry L. Kendall (50) President and Chief
Executive Officer
Fred S. Hubbell (46) Chairman
Lawrence V. Durland, Jr. (50) Director
Paul E. Larson (44) Director, Executive
Vice President, CFO
and Assistant
Secretary
Thomas L. May (48) Director
John A. Merriman (54) Director and
Assistant Secretary
Beth B. Neppl (38) Director and Vice
President
Paul R. Schlaack (50) Director
Jerome L. Sychowski (55) Director, Senior
Vice President and
Chief Information
Officer
Barnett Chernow (47) Executive Vice
President
Dennis D. Hargens (54) Treasurer
David L. Jacobson (47) Senior Vice
President and
Assistant Secretary
Stephen J. Preston (39) Senior Vice
President and Chief
Actuary
Myles R. Tashman (54) Executive Vice
President, General
Counsel and
Secretary
David A. Terwilliger (39) Vice President,
Controller,
Assistant Secretary
and Assistant
Treasurer
Edward C. Wilson (56) Executive Vice
President
</TABLE>
The directors and principal officers of Golden American, together with their
principal occupations during the past five years, are as follows:
Mr. Terry L. Kendall became Director, President and Chief Executive Officer of
Golden American in September, 1993. From September 1993 through September
1996, he also served as Chairman of Golden American. Since June, 1996, he has
also served as President, Chief Executive Officer and Chairman of First Golden
American Life Insurance Company of New York, Golden American's New York sub-
sidiary. From 1982 through June 1993, he was President and Chief Executive Of-
ficer of United Pacific Life Insurance Company.
Mr. Fred S. Hubbell became Chairman, President and Chief Executive Officer of
Equitable of Iowa in 1991. He also has served as Chairman and President of Eq-
uitable Life Insurance Company of Iowa since 1987. He was elected to serve as
a director of Golden American in August 1996 and as Chairman of the Board in
September 1996. He serves in a similar capacity for most Equitable of Iowa af-
filiate companies.
Mr. Lawrence V. Durland, Jr. joined Equitable of Iowa in 1986 as a Senior Vice
President. He was elected to serve as a director of Golden American in August
1996.
Mr. Paul E. Larson joined Equitable of Iowa in 1977 and is currently an Execu-
tive Vice President, Treasurer and Chief Financial Officer (CFO). He was
elected to serve as a director of Golden American in August 1996. He was
elected to serve as Executive Vice President, CFO, and Assistant Secretary of
Golden American in December 1996.
Mr. Thomas L. May joined Equitable Life Insurance Company of Iowa in 1990 and
is currently Senior Vice President. He was elected to serve as a director of
Golden American in August 1996.
Mr. John A. Merriman joined Equitable of Iowa in 1987 and is currently Secre-
tary and General Counsel. He was elected to serve as a director of Golden
American in August 1996.
Ms. Beth B. Neppl joined Equitable of Iowa in 1987 and is currently a Vice
President. She was elected to serve as a director of Golden American in August
1996.
Mr. Paul R. Schlaack joined Equitable Investment Services, Inc. in 1984 and is
currently President and Chief Executive Officer. He was elected to serve as a
director of Golden American in August 1996.
Mr. Jerome L. Sychowski joined Equitable of Iowa in 1996 as Senior Vice Presi-
dent and Chief Information Officer. He was elected to serve as a director of
Golden American in December 1996.
Mr. Barnett Chernow joined Golden American in October 1993 as Executive Vice
President. From 1977 through 1993, he held various positions with Reliance In-
surance Companies and was Senior Vice President and Chief Financial Officer of
United Pacific Life Insurance Company from 1984 through 1993.
Mr. Dennis D. Hargens was elected Treasurer of Golden American in December
1996. He joined Equitable Life Insurance Company of Iowa in 1961 and is cur-
rently Treasurer and was elected Treasurer of USG Annuity & Life Company in
1996.
Mr. David L. Jacobson joined Golden American in November 1993 as Senior Vice
President and Assistant Secretary. From April 1974 through November 1993, he
held various positions with United Pacific Life Insurance Company and was Vice
President upon leaving.
Mr. Stephen J. Preston joined Golden American in December 1993 as Senior Vice
President, Chief Actuary and Controller. He currently serves as Senior
35
<PAGE>
MANAGEMENT (CONTINUED)
Vice President and Chief Actuary. From September 1993 through November 1993,
he was Senior Vice President and Actuary for Mutual of America Insurance Com-
pany. From July 1987 through August 1993, he held various positions with
United Pacific Life Insurance Company and was Vice President and Actuary upon
leaving.
Mr. Myles R. Tashman joined Golden American in August 1994 as Senior Vice
President and was named Executive Vice President, General Counsel and Secre-
tary effective January 1, 1996. From 1986 through 1993 he was Senior Vice
President and General Counsel of United Pacific Life Insurance Company.
Mr. David A. Terwilliger was elected Vice President, Controller, Assistant
Secretary and Assistant Treasurer of Golden American in December 1996. He
joined Equitable Life Insurance Company of Iowa in 1979 and presently serves
as Vice President and Controller of Equitable of Iowa and several of its
affiliates.
Mr. Edward C. Wilson joined Golden American in December, 1995 as Executive
Vice President. In December 1996, he became President of DSI. From August,
1994 to December, 1995 he was Senior Managing Director at Van Eck Global In-
vestors. From July, 1990 to August, 1994 he was Vice President and National
Sales Manager at Keyport Life Insurance Company.
FEDERAL INCOME TAX CONSIDERATIONS
INTRODUCTION
The ultimate effect of Federal income taxes on the benefits of a policy and to
the owner or beneficiary depends on Golden American's tax status and upon the
tax status of the individual concerned. The discussion contained herein is
general in nature and focuses primarily on the Federal income tax. It is not
intended to be an exhaustive discussion of all tax questions that might arise
under the policies and should not be taken as tax advice. No attempt is made
to interpret estate and inheritance taxes, or any state, municipal or other
tax laws. Moreover, no representation is made as to the likelihood of continu-
ation of current interpretations by the Internal Revenue Service. We reserve
the right to make changes in the Policies to assure that they will continue to
qualify as life insurance. For complete information on tax considerations, a
qualified tax advisor should be consulted.
Golden American makes no guarantee regarding the tax consequences of any poli-
cy. However, subject to the discussion below, Golden American does believe
that the policy qualifies as life insurance for Federal income tax purposes.
GOLDEN AMERICAN -- TAX STATUS
We are taxed as a life insurance company under Subchapter L of the Internal
Revenue Code of 1986, as amended (the "Code"). Account A is not a separate en-
tity from Golden American and its operations form a part of Golden American.
However, the assets in the Account are segregated from all of Golden Ameri-
can's other assets and may not be charged with liabilities which arise from
any other business Golden American conducts.
Investment income and realized capital gains on the assets of the Account are
reinvested and taken into consideration in determining Investment Values. Un-
der existing Federal income tax law, the investment income of the Account, in-
cluding realized net capital gains, is not taxed to Golden American.
Under the current provisions of the Code, Golden American does not expect to
incur Federal income taxes on earnings in the Account to the extent the earn-
ings are credited under the Policies. Accordingly, no charge is expected to be
made to the Account for Federal income taxes. Periodically, We will review the
appropriateness of a charge to the Account for Our Federal income taxes. A
charge may be made for any Federal income taxes incurred by Golden American
that are attributable to the Account. We reserve the right to make a deduction
for taxes should they be imposed in the future.
Under current laws, Golden American may incur state and local taxes (in addi-
tion to premium taxes) in several states. At present, these taxes are not sig-
nificant. If there is a material change in applicable state or local tax laws,
We reserve the right to charge the Account for such taxes, if any, attribut-
able to the Account.
DEFERRED ACQUISITION COSTS
As a result of the Omnibus Budget Reconciliation Act of 1990, insurance compa-
nies are required to capitalize and amortize specified policy acquisition ex-
penses over a ten year period (a five year amortization is permitted for a
specifically defined small amount of specified policy acquisition expenses).
Prior to this change, insurance companies were permitted to deduct policy ac-
quisition costs in the year in which they were incurred. This revised treat-
ment of deferred acquisition costs results in significantly higher corporate
income tax liability for the insurance company in early policy years.
36
<PAGE>
FEDERAL INCOME TAX CONSIDERATIONS (CONTINUED)
To compensate for this change, Golden American may deduct a charge based on
each premium received to conform with changes in the amount payable by Us un-
der applicable Federal income tax law as of the date(s) of such premium pay-
ments. We believe this charge will be reasonable in relation to Our increased
tax liability resulting from the capitalization and amortization of policy ac-
quisition costs.
DEATH BENEFITS
The Death Benefit paid under a policy (whether or not a "modified endowment
contract," see Modified Endowment Contracts) will receive the same tax treat-
ment as a Death Benefit paid under fixed benefit life insurance provided that
the policy meets the statutory definition of a life insurance contract under
Code Section 7702. We believe that the Policy does meet that definition, sub-
ject to the discussion below. Thus, the death benefit proceeds under the Pol-
icy should be excludable from the gross income of the beneficiary under Sec-
tion 101(a)(1) of the Code and the owner should not be deemed to be in con-
structive receipt of the Cash Surrender Values, including increments thereon.
SURVIVORSHIP POLICIES AND POLICIES ISSUED TO INDIVIDUALS WITH SUBSTANDARD
MORTALITY RISKS
Regulations have been proposed under Code Section 7702 regarding mortality
charges which may be taken into account under life insurance policies. Cur-
rently, these proposed regulations deny certain safe harbors to survivorship
policies and policies issued on the lives of insureds who constitute substan-
dard mortality risks. When the regulations are finalized, it is anticipated
that these situations will be addressed, but the requirements that ultimately
will be imposed are uncertain. It is possible that when these regulations are
finalized, death benefits or premiums may need to be adjusted and higher cost
of insurance charges may need to be imposed in order for the Policy to con-
tinue to qualify as life insurance for Federal income tax purposes. Thus, it
is possible that the amount of the Policy's Cash Surrender Value and other
benefits may be affected. So that the Policy will continue to qualify as life
insurance for Federal income tax purposes, Golden American reserves with the
right to modify the Policy as necessary to comply with these regulations as
finalized.
SURRENDER
Upon full surrender of a policy for its cash surrender value, the owner may
recognize ordinary income for Federal income tax purposes. Ordinary income
would be the amount by which the cash surrender value plus any debt exceeds
the premiums paid but not previously recovered without taxation. If the policy
is a "modified endowment contract," any income received upon surrender may be
subject to an additional 10% tax. See Modified Endowment Contracts, Penalty
Tax.
PARTIAL WITHDRAWALS
Partial withdrawals may be taxable depending on the circumstances. If the pol-
icy is a "modified endowment contract," partial withdrawals are fully taxable
to the extent of income in the policy and are possibly subject to an addi-
tional 10% tax. See Modified Endowment Contracts, Penalty Tax and Distribu-
tions Affected.
If the policy is not a "modified endowment contract," partial withdrawals may
still be taxable, as follows. The amount withdrawn is taxable to the extent it
exceeds the total amount of premiums paid but not previously recovered. Also
Code Section 7702(f)(7) provides that if a reduction in death benefits occurs
during the first 15 years after a policy is issued and there is a cash distri-
bution associated with that reduction, the owner may be taxed on all or part
of the amount distributed. A reduction in death benefits may result from a
partial withdrawal. You should consult with Your tax advisor in advance of a
proposed decrease in benefits for the effect a partial withdrawal might have
under Code Section 7702(f)(7) and under the rules affecting "modified endow-
ment contracts." See Modified Endowment Contracts, Reduction in Benefits.
We believe that the tax consequences of partial withdrawals under a policy
that was received in a Code Section 1035 exchange for a policy issued before
June 21, 1988, so long as no additional premiums are paid, should be the same
as those for a policy which is not a "modified endowment contract," but that
the 15 year period referred to in Code Section 7702(f)(7) must be measured
from the date of the exchange rather than the date of the original policy is-
suance. See Code Section 1035 Exchanges.
LOANS
Golden American believes that any loan received under the Policy will be
treated as indebtedness of the owner. If a policy is a "modified endowment
contract," loans are fully taxable to the extent of income in the policy and
are possibly subject to an additional 10% tax. See Modified Endowment Con-
tracts, Penalty Tax and Distributions Affected. If the Policy is not a "modi-
fied endowment contract," Golden American believes that no part of any loan
under a policy will
37
<PAGE>
FEDERAL INCOME TAX CONSIDERATIONS (CONTINUED)
constitute income to the owner while the policy is in effect. However, with
respect to Preferred Loans it is possible that the Internal Revenue Service
could find the Policyowner as being in receipt of certain amounts of income.
The deductibility by the owner of loan interest under a policy may be limited
under Code Section 264, depending on the circumstances. Any owner intending to
fund premium payments through borrowing should consult a tax advisor with re-
spect to the tax consequences thereof.
Under the "personal" interest limitation provisions of the Code, interest on
policy loans used for personal purposes, which otherwise meet the requirements
of Code Section 264, are no longer tax deductible. Other rules may apply to
allow all or part of the interest expense as a deduction if the loan proceeds
are used for "trade or business" or "investment" purposes.
If the policy is owned by a business or corporation, the Code imposes addi-
tional restrictions. The Code also limits the interest deduction on business-
owned policy loans and may impose tax upon the inside build-up of corporate-
owned life insurance policies through the corporate alternative minimum tax.
We believe that the tax consequences of loans under a policy that was received
in a Code Section 1035 exchange for a policy issued before June 21, 1988, as
long as no additional premiums are paid, should be the same as those for a
policy which is not a "modified endowment contract," but that the 15 year pe-
riod referred to in Code Section 7702(f)(7) must be measured from the date of
the exchange rather than the date of the original policy issuance. See Code
Section 1035 Exchanges.
CHANGE OF OWNERSHIP OR ASSIGNMENT
A change of ownership or assignment of coverage may have tax consequences de-
pending on the circumstances. No such change or assignment will be effective
without the prior consent of Golden American. We recommend that You seek the
advice of a qualified tax consultant prior to making any such changes or as-
signment.
MODIFIED ENDOWMENT CONTRACTS
GENERAL
As a result of the Technical and Miscellaneous Revenue Act of 1988 (the "1988
Act") and the Omnibus Budget Reconciliation Act of 1989 (the "1989 Act"),
loans and other distributions under "modified endowment contracts" will in
general be taxed to the extent of accumulated income (generally, the excess
of Investment Value plus any Debt, over premiums paid). Policies are "modi-
fied endowment contracts" if they meet the definition of life insurance, but
fail the "seven-pay" test. This test essentially provides that the cumulative
premiums paid under a policy at any time during the policy's first seven
years cannot exceed the sum of the net level premiums that would have been
paid on or before that time had the policy provided for paid-up future bene-
fits after the payment of seven level annual premiums. In addition, a "modi-
fied endowment contract" includes any life insurance contract that is re-
ceived in exchange for a "modified endowment contract." Except where the pol-
icy was purchased as a "modified endowment contract," We will monitor premi-
ums paid during a policy year. Those premiums which would otherwise result in
a policy becoming a "modified endowment contract," that are returned by
Golden American within 60 days after the end of the policy year, will not
cause the policy to fail the "seven-pay" test. These premiums will be re-
turned with Investment experience for that portion attributable to the sepa-
rate account.
REDUCTION IN BENEFITS
If there is a reduction in death benefits during the first seven policy
years, premiums are redetermined for purposes of the "seven-pay" test as if
the policy had originally been issued at the reduced death benefit level. The
new limitation is applied to the cumulative amount paid for each of the first
seven policy years. Also, see Survivorship Contracts.
DISTRIBUTIONS AFFECTED
If a policy fails to meet the "seven-pay" test, it is considered a "modified
endowment contract" only as to distributions in the year in which the failure
takes effect and all subsequent years. However, distributions made in antici-
pation of such failure also are considered distributions under a "modified
endowment contract." All distributions made within two years prior to a fail-
ure of the "seven-pay" test are deemed to have been made in anticipation of
such failure.
PENALTY TAX
Any amounts taxable under a "modified endowment contract," including amounts
received as policy loans, will also be subject to a 10% tax, with certain ex-
ceptions. This additional tax will not apply in the case of distributions:
(i) made on or after the taxpayer attains age 59 1/2; (ii) that are attribut-
able to the taxpayer becoming disabled, or (iii) which are a part of a series
of substantially equal periodic payments (not less frequently than
38
<PAGE>
FEDERAL INCOME TAX CONSIDERATIONS (CONTINUED)
annually) made for the life (or life expectancy) of the taxpayer.
MATERIAL CHANGE RULES
Any determination of whether the policy meets the "seven-pay" test will begin
again any time the policy undergoes a "material change" which includes most
increases in death benefits. However, if an increase is attributable to pre-
miums paid "necessary to fund" the lowest death benefit payable in the first
seven policy years, or the crediting of interest or dividends with respect to
these premiums, the "increase" does not constitute a material change. A re-
duction in death benefits is not considered a material change.
A material change may occur at any time during the life of the policy (within
the first seven years or thereafter) and future taxation, assuming no change
in applicable law, of distributions or loans would depend on whether the pol-
icy satisfied the "seven-pay" test from the time of the material change.
Additional premium payments will be carefully monitored by Golden American to
determine whether such premium payments cause either the start of a new seven
year period or the taxation of distributions and loans. All additional pre-
mium payments must be considered.
If the policy satisfies the "seven-pay" test for seven years, distributions
and loans will generally not be subject to the new tax rules.
SERIAL CONTRACTS
The 1988 Act and the 1989 Act also provide that all "modified endowment con-
tracts" that are issued within the same calendar year to the same policyowner
by one company or its affiliates are treated as one "modified endowment con-
tract" for the purposes of determining the taxable portion of any loans or
distributions.
SURVIVORSHIP CONTRACTS
A policy which insures multiple lives and pays a death benefit upon the death
of the survivor is subject to new rules pursuant to the 1989 Act. If there is
a reduction in the death benefit below the lowest level provided during the
first seven years the contract was in force, the "seven-pay" test will be ap-
plied as if the contract had originally been issued with the lower death ben-
efit. If such treatment causes the contract to retroactively fail the "seven-
pay" test, it will immediately be treated as a "modified endowment contract"
for purposes of all distributions in the year the death benefit is reduced
and later years, subject also to the special rule described above in Distri-
butions Affected for distributions deemed to have been made in anticipation
of failure.
CODE SECTION 1035 EXCHANGES
Internal Revenue Code Section 1035 provides that no gain or loss shall be rec-
ognized on the exchange of certain types of policies. Special rules and proce-
dures apply to Code Section 1035 transactions. Prospective Policyowners wish-
ing to take advantage of Code Section 1035 should consult their tax advisors.
DIVERSIFICATION STANDARDS
To comply with the diversification regulations ("Regulations"), issued under
Code Section 817(h), the Account will be required to diversify its
investments.
The Regulations generally require that on the last day of each quarter of a
calendar year (i) no more than 55% of the value of the Account is represented
by any investment; (ii) no more than 70% is represented by any two invest-
ments; (iii) no more than 80% is represented by any three investments; and
(iv) no more than 90% is represented by any four investments. A "look-through"
rule provides that each division of the Account will be tested for compliance
with the percentage limitations by looking through to the assets of the Series
of the Trust in which each such division invests. All securities of the same
issuer are treated as a single investment. As a result of the 1988 Act, each
government agency or instrumentality will be treated as a separate issuer for
the purposes of these limitations.
The general diversification requirements are modified if any of the assets of
the Accounts are direct obligations of the United States Treasury. In this
case, there is no limit on the investment that may be made in United States
Treasury securities and for purposes of determining whether assets other than
United States Treasury securities are adequately diversified, the applicable
percentage limitations are increased based on a formula that takes into ac-
count the percentage of the Account's investment in United States Treasury se-
curities.
We intend to comply with the regulations to assure that the Policy continues
to qualify as life insurance for Federal income tax purposes.
OWNERSHIP TREATMENT
In certain circumstances, variable life insurance policyowners may be consid-
ered the owners, for Federal income tax purposes, of the assets of the sepa-
rate account, such as the Account, used to support their policies. In those
circumstances, income
39
<PAGE>
FEDERAL INCOME TAX CONSIDERATIONS (CONTINUED)
and gains from the separate account would be includible in the policyowners'
gross income. The Internal Revenue Service has stated in published rulings
that a variable policyowner will be considered the owner of separate account
assets 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 invest-
ments 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 regula-
tions or rulings on the "extent to which policyholders may direct their in-
vestments to particular sub-accounts [of a separate account] without being
treated as owners of the underlying assets." As of the dates of this prospec-
tus, no such guidance has been issued.
The ownership rights under the policy are similar to, but different in certain
respects from, those described by the Internal Revenue Service in rulings in
which it was determined that policyowners were not owners of separate account
assets. For example, a Policyowner of this Policy has the choice of more in-
vestment options to which to allocate premiums and Investment Values, and may
be able to transfer among investment options more frequently, than in such
rulings. In addition, the Policyowner has the choice of certain investment op-
tions which are somewhat more similar to each other in their investment objec-
tives than in such rulings. These differences could result in the Policyowner
being considered, under the standard of those rulings, the owner of the assets
of the Account. 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 Policy as necessary to attempt to prevent Policyowners from being
considered the owners of the assets of the Account.
Frequently, if the Internal Revenue Service 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 Internal Revenue Service or the Trea-
sury Department were to issue regulations or a ruling which treated a
Policyowner as the owner of the assets of the Account, that treatment might
apply only on a prospective basis. However, if the regulations or ruling were
not considered to set forth a new position, a policyholder might be retroac-
tively determined to be the owner of the assets of the Account.
ILLUSTRATIONS
The following tables demonstrate the way in which Your Policy works. The ta-
bles are based on the following ages, initial death benefits and premiums.
1. Table 1 is for a Genesis I Policy issued on a single life basis to a male,
non-smoker, age 30 with an initial premium of $100,000, and face amount of
$507,639.
2. Table 2 is for Genesis Flex Policy issued on a single life basis to a male,
non-smoker, age 55 with an initial premium of $10,000, with planned premi-
ums payable for 10 years, and face amount of $181,432.
3. Table 3 is for a Genesis Flex Policy issued on a survivorship basis to a
male, non-smoker, age 55 and female, non-smoker, age 55 with an initial
premium of $10,000, with planned premiums payable for 10 years, and face
amount of $258,618.
Each table shows how the Investment Value, Cash Surrender Value and death ben-
efit would vary over an extended period of time assuming hypothetical gross
rates of return equivalent to a constant annual rate of 0%, 6% or 12%. These
tables will assist in the comparison of death benefits, Investment Values and
Cash Surrender Values of the policy with other variable life insurance plans.
The illustrations assume that no premium has been allocated to the Fixed Ac-
count.
Death benefits, Investment Values and Cash Surrender Values for a policy would
be different from the amounts shown if the actual gross rates of return aver-
aged 0%, 6% or 12%, but varied above and below those averages for the period.
They would also be different depending on the allocation of the Investment
Value among the divisions of the Account, if the actual gross rate of return
for all divisions averaged 0%, 6% or 12%, but varied above or below that aver-
age for individual divisions. They would also differ if any policy loans or
partial withdrawals were made during the period of time illustrated.
The illustrations assume that the cost of insurance charges are based on Our
guaranteed maximum cost of insurance rates and reflect the deduction of all
charges from the Investment Value at their guaranteed maximum levels. They are
based on an
40
<PAGE>
ILLUSTRATIONS (CONTINUED)
average state premium tax of 2.40% and corporate tax charge of 0.00%. They
also reflect (i) the guaranteed maximum daily mortality and expense risk
charge assessed against the Account of 0.002477% (equivalent to an annual rate
of 0.90%) of the assets in the Account; (ii) the asset based administrative
charge assessed against the Account of 0.000276% (equivalent to an annual rate
of 0.10%) on the assets in each division attributable to the Policies; and
(iii) the operating expenses incurred by the Trusts of 1.08% of the average
daily net assets of the Trusts, which is an average of the fees and expenses
for each Series.
Taking account of the assumed charges for expense and mortality risks in the
Account and the investment advisory fees and expenses of the Trust, the gross
rates of return of 0%, 6% and 12% would correspond to actual net investment
returns of -2.07%, 3.87% and 9.81%, respectively.
Although the illustrations assume policy charges at their maximum level, the
level of charges currently being made is lower and this will affect the death
benefits, Investment Values and Cash Surrender Values. The actual investment
advisory fees and expenses may be more or less than the amounts illustrated
and will depend on the allocations made by the Policyowner.
The hypothetical rates of return shown in the tables do not reflect any tax
charges attributable to the Account since no such charges are currently made.
If any such charges are imposed in the future the gross annual rate of return
would have to exceed the rates shown by an amount sufficient to cover the tax
charges, in order to produce the death benefits, Investment Values and Cash
Surrender Values illustrated.
The third column of each table shows the amount which would accumulate if an
amount equal to the initial premium were invested and earned interest, after
taxes, at 5.0% per year, compounded annually.
Golden American will furnish upon request a comparable illustration using the
age, sex and underwriting classification of an Insured(s), for any initial
death benefit and premium requested. In addition to an illustration assuming
policy charges at their maximum, We will furnish an illustration assuming cur-
rent policy charges and current mortality rates.
41
<PAGE>
ILLUSTRATIONS (CONTINUED)
TABLE 1: SINGLE LIFE GENESIS I POLICY
MALE ISSUE AGE: 30, NON-SMOKER GUARANTEE PERIOD AT ISSUE: LIFE
INITIAL PREMIUM: $100,000 FACE AMOUNT: $507,639
GUARANTEED MAXIMUM MORTALITY COSTS
<TABLE>
<CAPTION>
END OF YEAR
TOTAL PREMIUMS DEATH BENEFIT(2)
PAID PLUS ASSUMING HYPOTHETICAL GROSS
INTEREST AT 5% AS ANNUAL INVESTMENT RETURN OF
POLICY YEAR PAYMENTS(1) OF END OF YEAR 0% 6% 12%
- ----------- ----------- ----------------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
1 $100,000 $105,000 $507,639 $507,639 $ 515,552
2 110,250 507,639 507,639 537,810
3 115,763 507,639 507,639 561,525
4 121,551 507,639 507,639 586,785
5 127,628 507,639 507,639 613,670
6 134,010 507,639 507,639 642,263
7 140,710 507,639 507,639 676,935
8 147,746 507,639 507,639 713,589
9 155,133 507,639 507,639 752,337
10 162,889 507,639 507,639 793,292
15 207,893 507,639 507,639 1,035,731
20 265,330 507,639 507,639 1,354,988
30 432,194 507,639 507,639 2,327,541
</TABLE>
<TABLE>
<CAPTION>
END OF YEAR END OF YEAR
INVESTMENT VALUE(2) CASH SURRENDER VALUE(2)
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
POLICY YEAR 0% 6% 12% 0% 6% 12%
- ----------- ------- -------- ---------- ------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
1 $93,404 $ 99,214 $ 105,015 $88,066 $ 93,876 $ 99,677
2 89,511 101,074 113,291 85,241 96,803 109,021
3 85,692 103,000 122,343 82,489 99,797 119,140
4 81,938 104,985 132,238 79,803 102,850 130,102
5 78,244 107,029 143,051 77,176 105,962 141,983
6 74,602 109,128 154,859 74,602 109,128 154,859
7 72,079 112,351 168,825 72,079 112,351 168,825
8 69,575 115,664 184,063 69,575 115,664 184,063
9 67,085 119,068 200,687 67,085 119,068 200,687
10 64,605 122,560 218,813 64,605 122,560 218,813
15 52,199 141,326 336,950 52,199 141,326 336,950
20 39,424 162,186 517,514 39,424 162,186 517,514
30 9,490 207,898 1,198,182 9,490 207,898 1,198,182
</TABLE>
(1) All payments are illustrated as if made at the beginning of the Policy
Year.
(2) Assumes no policy loan or partial withdrawal has been made.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE ARE ILLUSTRATIVE ONLY
AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES
OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND
WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE
BY AN OWNER AND THE INVESTMENT EXPERIENCE OF THE SERIES OF THE TRUST. THE
DEATH BENEFIT, INVESTMENT VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS ANNUAL RATES OF RETURN AVERAGED
0%, 6% OR 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE
AVERAGES FOR INDIVIDUAL POLICY YEARS. THEY WOULD ALSO BE DIFFERENT IF ANY POL-
ICY LOANS OR PARTIAL WITHDRAWALS WERE MADE. NO REPRESENTATIONS CAN BE MADE BY
GOLDEN AMERICAN LIFE INSURANCE COMPANY OR ACCOUNT A OR THE TRUSTS THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER A PERIOD OF TIME.
42
<PAGE>
ILLUSTRATIONS (CONTINUED)
TABLE 2: SINGLE LIFE GENESIS FLEX POLICY
MALE ISSUE AGE: 55, NON-SMOKER GUARANTEE PERIOD AT ISSUE: 6.50 YEARS(1)
INITIAL PREMIUM: $10,000 FACE AMOUNT: $181,432
GUARANTEED MAXIMUM MORTALITY COSTS
<TABLE>
<CAPTION>
END OF YEAR
TOTAL PREMIUMS DEATH BENEFIT(3)
PAID PLUS ASSUMING HYPOTHETICAL GROSS
INTEREST AT 5% AS ANNUAL INVESTMENT RETURN OF
POLICY YEAR PAYMENTS(2) OF END OF YEAR 0% 6% 12%
- ----------- ----------- ----------------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
1 $10,000 $ 10,500 $ 181,432 $ 181,432 $ 181,432
2 10,000 21,525 181,432 181,432 181,432
3 10,000 33,101 181,432 181,432 181,432
4 10,000 45,256 181,432 181,432 181,432
5 10,000 58,019 181,432 181,432 181,432
6 10,000 71,420 181,432 181,432 181,432
7 10,000 85,491 181,432 181,432 181,432
8 10,000 100,266 181,432 181,432 181,432
9 10,000 115,779 181,432 181,432 199,038
10 (age 65) 10,000 132,068 181,432 181,432 226,909
15 168,556 181,432 181,432 294,141
20 215,125 181,432 181,432 385,631
30 (age 85) 350,415 181,432(4) 181,432 664,572
</TABLE>
<TABLE>
<CAPTION>
END OF YEAR END OF YEAR
INVESTMENT VALUE(3) CASH SURRENDER VALUE(3)
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
POLICY YEAR 0% 6% 12% 0% 6% 12%
- ----------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
1 $ 7,549 $ 8,100 $ 8,652 $ 6,182 $ 6,732 $ 7,284
2 14,982 16,552 18,190 13,388 14,958 16,595
3 22,110 25,179 28,510 20,389 23,459 26,789
4 28,950 33,998 39,700 27,203 32,251 37,953
5 35,513 43,023 51,856 33,839 41,350 50,182
6 41,816 52,273 65,105 40,316 50,773 63,605
7 48,155 62,046 79,866 46,655 60,546 78,366
8 54,372 72,207 96,158 52,872 70,707 94,658
9 60,492 82,794 114,053 58,992 81,294 112,553
10 (age 65) 66,632 93,938 133,359 65,132 92,438 131,859
15 49,516 101,532 194,406 49,516 101,532 194,406
20 32,500 108,924 281,863 32,500 108,924 281,863
30 (age 85) 0 115,305 561,972 0 115,305 561,972
</TABLE>
(1) If all planned premiums are paid as illustrated the Guarantee Period after
the last payment will be for life.
(2) All payments are illustrated as if made at the beginning of the Policy
Year.
(3) Assumes no policy loan or partial withdrawal has been made.
(4) Guarantee Period applies.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE ARE ILLUSTRATIVE ONLY
AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES
OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND
WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE
BY AN OWNER AND THE INVESTMENT EXPERIENCE OF THE SERIES OF THE TRUST. THE
DEATH BENEFIT, INVESTMENT VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS ANNUAL RATES OF RETURN AVERAGED
0%, 6% OR 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE
AVERAGES FOR INDIVIDUAL POLICY YEARS. THEY WOULD ALSO BE DIFFERENT IF ANY POL-
ICY LOANS OR PARTIAL WITHDRAWALS WERE MADE. NO REPRESENTATIONS CAN BE MADE BY
GOLDEN AMERICAN LIFE INSURANCE COMPANY OR ACCOUNT A OR THE TRUSTS THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER A PERIOD OF TIME.
43
<PAGE>
ILLUSTRATIONS (CONTINUED)
TABLE 3: JOINT AND LAST SURVIVOR GENESIS FLEX POLICY
MALE ISSUE AGE: 55, NON-SMOKER FEMALE ISSUE AGE: 55, NON-SMOKER
INITIAL PREMIUM: $10,000 FACE AMOUNT: $258,618
GUARANTEE PERIOD AT ISSUE: 18.00 YEARS(1)
GUARANTEED MAXIMUM MORTALITY COSTS
<TABLE>
<CAPTION>
END OF YEAR
TOTAL PREMIUMS DEATH BENEFIT(3)
PAID PLUS ASSUMING HYPOTHETICAL GROSS
INTEREST AT 5% AS ANNUAL INVESTMENT RETURN OF
POLICY YEAR PAYMENTS(2) OF END OF YEAR 0% 6% 12%
- ----------- ----------- ----------------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
1 $10,000 $ 10,500 $ 258,618 $ 258,618 $ 258,618
2 10,000 21,525 258,618 258,618 258,618
3 10,000 33,101 258,618 258,618 258,618
4 10,000 45,256 258,618 258,618 258,618
5 10,000 58,019 258,618 258,618 258,618
6 10,000 71,420 258,618 258,618 258,618
7 10,000 85,491 258,618 258,618 258,618
8 10,000 100,266 258,618 258,618 258,618
9 10,000 115,779 258,618 258,618 288,180
10 (age 65) 10,000 132,068 258,618 258,618 325,167
15 168,556 258,618 258,618 421,754
20 215,125 258,618 258,618 552,372
30 (age 85) 350,415 258,618 258,618 950,785
</TABLE>
<TABLE>
<CAPTION>
END OF YEAR END OF YEAR
INVESTMENT VALUE(3) CASH SURRENDER VALUE(3)
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
POLICY YEAR 0% 6% 12% 0% 6% 12%
- ----------- -------- --------- --------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
1 $ 8,749 $ 9,329 $ 9,909 $ 7,441 $ 8,021 $ 8,601
2 17,492 19,192 20,963 15,945 17,646 19,416
3 25,924 29,308 32,970 24,239 27,623 31,285
4 34,049 39,681 46,022 32,326 37,958 44,299
5 41,871 50,321 60,218 40,209 48,659 58,557
6 49,393 61,233 75,670 47,893 59,733 74,170
7 56,880 72,688 92,762 55,380 71,188 91,262
8 64,168 84,540 111,574 62,668 83,040 110,074
9 71,256 96,802 132,155 69,756 95,302 130,655
10 (age 65) 78,228 109,566 154,622 76,728 108,066 153,122
15 65,209 126,470 238,284 65,209 126,470 238,284
20 51,437 144,637 363,783 51,437 144,637 363,783
30 (age 85) 9,529 170,127 781,060 9,529 170,127 781,060
</TABLE>
(1) If all planned premiums are paid as illustrated the Guarantee Period after
the last payment will be for life.
(2) All payments are illustrated as if made at the beginning of the Policy
Year.
(3) Assumes no policy loan or partial withdrawal has been made.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE ARE ILLUSTRATIVE ONLY
AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES
OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND
WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE
BY AN OWNER AND THE INVESTMENT EXPERIENCE OF THE SERIES OF THE TRUST. THE
DEATH BENEFIT, INVESTMENT VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS ANNUAL RATES OF RETURN AVERAGED
0%, 6% OR 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE
AVERAGES FOR INDIVIDUAL POLICY YEARS. THEY WOULD ALSO BE DIFFERENT IF ANY POL-
ICY LOANS OR PARTIAL WITHDRAWALS WERE MADE. NO REPRESENTATIONS CAN BE MADE BY
GOLDEN AMERICAN LIFE INSURANCE COMPANY OR ACCOUNT A OR THE TRUSTS THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER A PERIOD OF TIME.
44
<PAGE>
FINANCIAL STATEMENTS OF ACCOUNT A
The audited financial statements of Account A are listed below and included
herein beginning on the following page:
Report of Independent Auditors
Financial Statements--Audited
Audited Statements of Assets and Liability--December 31, 1996
Audited Statements of Operations for the Years ended December 31, 1996,
1995 and 1994
Audited Statements of Changes in Net Assets for the Years ended December
31, 1996, 1995 and 1994
Notes to Financial Statements
FINANCIAL STATEMENTS OF GOLDEN AMERICAN LIFE INSURANCE COMPANY
The audited financial statements of Golden American prepared in accordance
with generally accepted accounting principles ("GAAP") are listed below and
included herein following the financial statements of Account A:
Report of Independent Auditors
Financial Statements--Audited
Consolidated Balance Sheets--Post-Acquisition as of December 31, 1996 and
Pre-Acquisition as of December 31, 1995
Consolidated Statements of Income--Post-Acquisition for the period August
14, 1996 through December 31, 1996 and Pre-Acquisition for the period
January 1, 1996 through August 13, 1996 and for the years ended December 31,
1995 and 1994
Consolidated Statements of Changes in Stockholder's Equity--Post-Acquisition
for the period August 14, 1996 through December 31, 1996 and Pre-Acquisition
for the period January 1, 1996 through August 13, 1996 and for the years ended
De-cember 31, 1995 and 1994
Consolidated Statements of Cash Flows--Post-Acquisition for the period August
14, 1996 through December 31, 1996 and Pre-Acquisition for the period January
1, 1996 through August 13, 1996 and for the years ended Decem-ber 31, 1995 and
1994
Notes to Consolidated Financial Statements--December 31, 1996
The financial statements of Golden American, which are included herein should be
distinguished from the Financial Statements of Account A and should be
considered only as bearing on the ability of Golden American to meet its
obligations under the Policies. They should not be considered as bearing on the
investment performance of the assets held in Account A.
45
<PAGE>
FINANCIAL STATEMENTS OF SEPARATE ACCOUNT A
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Golden American Life Insurance Company
We have audited the accompanying statement of assets and liability of Sepa-
rate Account A as of December 31, 1996, and the related statements of opera-
tions and changes in net assets for each of the periods indicated therein.
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 stan-
dards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of mate-
rial misstatement. An audit includes examining, on a test basis, evidence sup-
porting the amounts and disclosures in the financial statements. Our proce-
dures included confirmation of securities owned as of December 31, 1996, by
correspondence with the custodian. An audit also includes assessing the ac-
counting 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 A at De-
cember 31, 1996, and the results of their operations and changes in their net
assets for each of the periods indicated therein in conformity with generally
accepted accounting principles.
[SIGNATURE OF ERNST & YOUNG LLP APPEARS HERE]
Des Moines, Iowa
February 5, 1997
46
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT A
STATEMENT OF ASSETS AND LIABILITY
DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COMBINED
--------
<S> <C>
ASSETS
Investments at net asset value:
The GCG Trust Liquid Asset Series, 1,607,842 shares (cost--$1,608).. $ 1,608
The GCG Trust Limited Maturity Bond Series, 103,441 shares (cost--
$1,148)............................................................. 1,079
The GCG Trust Natural Resources Series, 33,155 shares (cost--$595).. 592
The GCG Trust All-Growth Series, 138,311 shares (cost--$1,944)...... 1,852
The GCG Trust Real Estate Series, 27,321 shares (cost--$397)........ 437
The GCG Trust Fully Managed Series, 141,562 shares (cost--$1,920)... 2,097
The GCG Trust Multiple Allocation Series, 163,864 shares (cost--
$1,999)............................................................. 2,034
The GCG Trust Capital Appreciation Series, 181,174 shares (cost--
$2,633)............................................................. 2,728
The GCG Trust Rising Dividends Series, 162,944 shares (cost--
$2,216)............................................................. 2,576
The GCG Trust Emerging Markets Series, 115,470 shares (cost--
$1,112)............................................................. 1,122
The GCG Trust Value Equity Series, 123,446 shares (cost--$1,652).... 1,718
The GCG Trust Strategic Equity Series, 46,120 shares (cost--$521)... 539
The GCG Trust Small Cap Series, 107,551 shares (cost--$1,259)....... 1,292
The GCG Trust Managed Global Series, 8,430 shares (cost--$93)....... 94
Equi-Select Series Trust OTC Portfolio, 5,612 shares (cost--$82).... 78
Equi-Select Series Trust Growth & Income Portfolio, 6,559 shares
(cost--$81)......................................................... 83
-------
Total Investments (cost--$19,260).................................. 19,929
Accrued investment income............................................ 4
-------
Total Assets....................................................... 19,933
LIABILITY
Payable to Golden American Life Insurance Company for charges and
fees................................................................. 55
-------
Total Net Assets................................................... $19,878
=======
NET ASSETS
For variable life insurance policies................................. $18,327
Retained in Separate Account A by Golden American Life Insurance
Company.............................................................. 1,551
-------
Total Net Assets................................................... $19,878
=======
</TABLE>
See accompanying notes.
47
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT A
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994, EXCEPT AS NOTED
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
LIQUID ASSET LIMITED MATURITY NATURAL RESOURCES
DIVISION BOND DIVISION DIVISION
----------------------- ------------------------- ------------------------
1996 1995 1994 1996 1995 1994 1996 1995 1994
------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Income:
Dividends............... $ 85 $ 44 $ 29 $ 119 -- $ 23 $ 2 $ 3 $ 1
Capital gains distribu-
tions................... -- -- -- -- -- -- 60 -- 2
------- ------- ------- ------- ------- ------- ------- ------- -------
Total investment in-
come.................... 85 44 29 119 -- 23 62 3 3
EXPENSES:
Mortality and expense
risk and asset based ad-
ministrative charges.... 17 8 7 10 $ 6 4 3 1 1
------- ------- ------- ------- ------- ------- ------- ------- -------
Net investment income
(loss).................. 68 36 22 109 (6) 19 59 2 2
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVEST-
MENTS
Net realized gain (loss)
on investments.......... -- -- -- 39 1 (29) 28 4 11
Net unrealized apprecia-
tion (depreciation) of
investments............. -- -- -- (113) 67 (8) (7) 9 (13)
------- ------- ------- ------- ------- ------- ------- ------- -------
Net increase (decrease)
in net assets resulting
from operations ........ $ 68 $ 36 $ 22 $ 35 $ 62 $ (18) $ 80 $ 15 $ --
======= ======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
See accompanying notes.
48
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT A
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994, EXCEPT AS NOTED
(CONTINUED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ALL-GROWTH REAL ESTATE FULLY MANAGED
DIVISION DIVISION DIVISION
------------------------ ------------------------ -----------------------
1996 1995 1994 1996 1995 1994 1996 1995 1994
------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Income:
Dividends............... $ 39 $ 60 $ 5 $ 16 $ 6 $ 18 $ 72 $ 27 $ 28
Capital gains distribu-
tions................... 6 -- -- 7 -- -- 87 -- --
------- ------- ------- ------- ------- ------- ------- ------- -------
Total investment in-
come.................... 45 60 5 23 6 18 159 27 28
EXPENSES:
Mortality and expense
risk and asset based ad-
ministrative charges.... 16 7 4 2 2 3 16 10 6
------- ------- ------- ------- ------- ------- ------- ------- -------
Net investment income
(loss).................. 29 53 1 21 4 15 143 17 22
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVEST-
MENTS
Net realized gain (loss)
on investments.......... (7) 73 (48) 27 (7) 13 18 3 (2)
Net unrealized apprecia-
tion (depreciation) of
investments............. (82) 5 (19) 27 27 (19) 77 169 (75)
------- ------- ------- ------- ------- ------- ------- ------- -------
Net increase (decrease)
in net assets resulting
from operations......... $ (60) $ 131 $ (66) $ 75 $ 24 $ 9 $ 238 $ 189 $ (55)
======= ======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
See accompanying notes.
49
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT A
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994, EXCEPT AS NOTED
(CONTINUED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MULTIPLE ALLOCATION CAPITAL APPRECIATION RISING DIVIDENDS
DIVISION DIVISION DIVISION
------------------------ ----------------------- -----------------------
1996 1995 1994 1996 1995 1994 1996 1995 1994
------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
INCOME:
Dividends............... $ 96 $ 109 $ 45 $ 27 $ 92 $ 10 $ 20 $ 6 $ 5
Capital gains
distributions........... 85 -- -- 168 -- -- 17 -- --
------- ------- ------- ------- ------- ------- ------- ------- -------
Total investment
income.................. 181 109 45 195 92 10 37 6 5
EXPENSES:
Mortality and expense
risk and asset based
administrative charges.. 18 15 9 19 8 5 17 6 1
------- ------- ------- ------- ------- ------- ------- ------- -------
Net investment income
(loss).................. 163 94 36 176 84 5 20 -- 4
REALIZED AND UNREALIZED
GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss)
on investments.......... 31 21 4 73 109 1 45 21 (1)
Net unrealized
appreciation
(depreciation) of
investments............. (50) 134 (54) 104 2 (16) 235 129 (5)
------- ------- ------- ------- ------- ------- ------- ------- -------
Net increase (decrease)
in net assets resulting
from operations......... $ 144 $ 249 $ (14) $ 353 $ 195 $ (10) $ 300 $ 150 $ (2)
======= ======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
See accompanying notes.
50
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT A
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994, EXCEPT AS NOTED
(CONTINUED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
EMERGING MARKETS VALUE EQUITY STRATEGIC EQUITY SMALL CAP
DIVISION DIVISION DIVISION DIVISION
------------------------- --------------- ---------------------------
1996 1995 1994 1996 1995(A) 1996 1995(B) 1996(C)
------- ------- ------- ------- ------- -------- ------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
INCOME:
Dividends............... -- -- -- $ 27 $ 10 $ 6 -- --
Capital gains
distributions........... -- -- $ 27 49 -- 6 -- --
------- ------- ------- ------- ------- -------- -------- -------
Total investment
income.................. -- -- 27 76 10 12 -- --
EXPENSES:
Mortality and expense
risk and asset based
administrative charges.. $ 9 $ 6 5 10 1 2 -- $ 6
------- ------- ------- ------- ------- -------- -------- -------
Net investment income
(loss).................. (9) (6) 22 66 9 10 -- (6)
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVEST-
MENTS
Net realized gain (loss)
on investments.......... (21) (93) 24 12 2 13 -- 8
Net unrealized
appreciation
(depreciation) of
investments............. 59 48 (150) 42 24 17 -- 33
------- ------- ------- ------- ------- -------- -------- -------
Net increase (decrease)
in net assets resulting
from operations......... $ 29 $ (51) $ (104) $ 120 $ 35 $ 40 -- $ 35
======= ======= ======= ======= ======= ======== ======== =======
</TABLE>
(a) Commencement of operations, January 1, 1995
(b) Commencement of operations, October 2, 1995
(c) Commencement of operations, January 30, 1996
See accompanying notes.
51
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT A
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994, EXCEPT AS NOTED
(CONTINUED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MANAGED GROWTH &
GLOBAL OTC INCOME
DIVISION DIVISION DIVISION COMBINED
-------- -------- -------- -----------------------
1996(D) 1996(E) 1996(E) 1996 1995 1994
-------- -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
INCOME:
Dividends................ -- -- -- $ 509 $ 357 $ 164
Capital gains distribu-
tions.................... -- $ 4 -- 489 -- 29
------- ------- ------- ------- ------- -------
Total investment income.. -- 4 -- 998 357 193
EXPENSES:
Mortality and expense
risk and asset based ad-
ministrative charges
charges.................. -- -- -- 145 70 45
------- ------- ------- ------- ------- -------
Net investment income
(loss)................... -- 4 -- 853 287 148
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVEST-
MENTS
Net realized gain (loss)
on investments........... -- 2 -- 268 134 (27)
Net unrealized apprecia-
tion (depreciation) of
investments.............. $ 1 (4) $ 2 341 614 (359)
------- ------- ------- ------- ------- -------
Net increase (decrease)
in net assets resulting
from operations.......... $ 1 $ 2 $ 2 $ 1,462 $ 1,035 $ (238)
======= ======= ======= ======= ======= =======
</TABLE>
(d) Commencement of operations, September 23, 1996
(e) Commencement of operations, October 2, 1996
See accompanying notes.
52
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994, EXCEPT AS NOTED
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
LIQUID ASSET LIMITED MATURITY NATURAL RESOURCES
DIVISION BOND DIVISION DIVISION
------------------------- ------------------------- -------------------------
1996 1995 1994 1996 1995 1994 1996 1995 1994
------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS
Operations:
Net investment income
(loss)................. $ 68 $ 36 $ 22 $ 109 $ (6) $ 19 $ 59 $ 2 $ 2
Net realized gain
(loss) on investments.. -- -- -- 39 1 (29) 28 4 11
Net unrealized appreci-
ation (depreciation) of
investments............ -- -- -- (113) 67 (8) (7) 9 (13)
------- ------- ------- ------- ------- ------- ------- ------- -------
Net increase (decrease)
in net assets resulting
from operations......... 68 36 22 35 62 (18) 80 15 --
CHANGES FROM POLICY RE-
LATED TRANSACTIONS:
Premiums............... 10,103 4,659 1,770 3 -- 1,533 4 -- 2
Surrenders and other
withdrawals............ (2,084) (210) (53) (22) 1 (6) (44) (48) --
Net transfers among
Divisions and Fixed
Interest Division of
Golden American........ (8,526) (3,223) (1,309) 334 177 (1,452) 375 49 44
Net additions to (from)
assets retained in the
Account by Golden
American............... (23) 90 23 39 -- 8 44 -- 2
Policy related charges
and fees............... (11) (8) (7) (6) (5) (2) (6) (1) (1)
------- ------- ------- ------- ------- ------- ------- ------- -------
Increase (decrease) in
net assets from policy
related transactions.... (541) 1,308 424 348 173 81 373 -- 47
------- ------- ------- ------- ------- ------- ------- ------- -------
Total increase (de-
crease)................. (473) 1,344 446 383 235 63 453 15 47
Net assets at beginning
of period............... 2,076 732 286 694 459 396 137 122 75
------- ------- ------- ------- ------- ------- ------- ------- -------
Net assets at end of pe-
riod.................... $ 1,603 $ 2,076 $ 732 $ 1,077 $ 694 $ 459 $ 590 $ 137 $ 122
======= ======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
See accompanying notes.
53
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994, EXCEPT AS NOTED
(CONTINUED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ALL-GROWTH REAL ESTATE FULLY MANAGED
DIVISION DIVISION DIVISION
------------------------- ------------------------- -------------------------
1996 1995 1994 1996 1995 1994 1996 1995 1994
------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS
Operations:
Net investment income
(loss)................. $ 29 $ 53 $ 1 $ 21 $ 4 $ 15 $ 143 $ 17 $ 22
Net realized gain
(loss) on investments.. (7) 73 (48) 27 (7) 13 18 3 (2)
Net unrealized appreci-
ation (depreciation) of
investments............ (82) 5 (19) 27 27 (19) 77 169 (75)
------- ------- ------- ------- ------- ------- ------- ------- -------
Net increase (decrease)
in net assets resulting
from operations......... (60) 131 (66) 75 24 9 238 189 (55)
CHANGES FROM POLICY RE-
LATED TRANSACTIONS:
Premiums............... 22 5 1 1 -- -- 5 22 1
Surrenders and other
withdrawals............ (32) (13) (5) (3) (3) (1) (131) (14) (51)
Net transfers among
Divisions and Fixed
Interest Division of
Golden American........ 680 468 217 198 (228) 132 787 (20) 665
Net additions to (from)
assets retained in the
Account by Golden
American............... 63 43 12 20 (7) 6 80 (6) 60
Policy related charges
and fees............... (13) (6) (5) (2) (1) (3) (13) (11) (5)
------- ------- ------- ------- ------- ------- ------- ------- -------
Increase (decrease) in
net assets from policy
related transactions.... 720 497 220 214 (239) 134 728 (29) 670
------- ------- ------- ------- ------- ------- ------- ------- -------
Total increase (de-
crease)................. 660 628 154 289 (215) 143 966 160 615
Net assets at beginning
of period............... 1,187 559 405 147 362 219 1,127 967 352
------- ------- ------- ------- ------- ------- ------- ------- -------
Net assets at end of pe-
riod.................... $ 1,847 $ 1,187 $ 559 $ 436 $ 147 $ 362 $ 2,093 $ 1,127 $ 967
======= ======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
See accompanying notes.
54
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994, EXCEPT AS NOTED
(CONTINUED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MULTIPLE ALLOCATION CAPITAL APPRECIATION RISING DIVIDENDS
DIVISION DIVISION DIVISION
------------------------- ------------------------- -------------------------
1996 1995 1994 1996 1995 1994 1996 1995 1994
------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS
Operations:
Net investment income
(loss)................. $ 163 $ 94 $ 36 $ 176 $ 84 $ 5 $ 20 -- $ 4
Net realized gain
(loss) on investments.. 31 21 4 73 109 1 45 $ 21 (1)
Net unrealized appreci-
ation (depreciation) of
investments............ (50) 134 (54) 104 2 (16) 235 129 (5)
------- ------- ------- ------- ------- ------- ------- ------- -------
Net increase (decrease)
in net assets resulting
from operations......... 144 249 (14) 353 195 (10) 300 150 (2)
CHANGES FROM POLICY RE-
LATED TRANSACTIONS:
Premiums............... 18 50 2 7 -- -- 37 35 2
Surrenders and other
withdrawals............ (152) (86) (39) (145) (14) -- (79) (60) --
Net transfers among
Divisions and Fixed
Interest Division of
Golden American........ 454 91 696 1,292 395 87 1,355 365 250
Net additions to (from)
assets retained in the
Account by Golden
American............... 38 6 54 151 40 5 161 35 23
Policy related charges
and fees............... (15) (13) (10) (27) (9) (4) (19) (9) (4)
------- ------- ------- ------- ------- ------- ------- ------- -------
Increase (decrease) in
net assets from policy
related transactions.... 343 48 703 1,278 412 88 1,455 366 271
------- ------- ------- ------- ------- ------- ------- ------- -------
Total increase (de-
crease)................. 487 297 689 1,631 607 78 1,755 516 269
Net assets at beginning
of period............... 1,542 1,245 556 1,088 481 403 814 298 29
------- ------- ------- ------- ------- ------- ------- ------- -------
Net assets at end of pe-
riod.................... $ 2,029 $ 1,542 $ 1,245 $ 2,719 $ 1,088 $ 481 $ 2,569 $ 814 $ 298
======= ======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
See accompanying notes.
55
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994, EXCEPT AS NOTED
(CONTINUED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
VALUE STRATEGIC
EMERGING MARKETS EQUITY EQUITY SMALL CAP
DIVISION DIVISION DIVISION DIVISION
------------------------- ---------------- ---------------- ---------
1996 1995 1994 1996(A) 1995 1996 1995(B) 1996(C)
------- ------- ------- ------- ------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS
Operations:
Net investment income
(loss)................. $ (9) $ (6) $ 22 $ 66 $ 9 $ 10 -- $ (6)
Net realized gain
(loss) on investments.. (21) (93) 24 12 2 13 -- 8
Net unrealized
appreciation
(depreciation) of
investments............ 59 48 (150) 42 24 17 -- 33
------- ------- ------- ------- ------- ------- ------- -------
Net increase (decrease)
in net assets resulting
from operations......... 29 (51) (104) 120 35 40 -- 35
CHANGES FROM POLICY
RELATED TRANSACTIONS:
Premiums............... 5 23 3 8 -- -- -- 8
Surrenders and other
withdrawals............ (118) (48) -- (31) -- (1) -- (5)
Net transfers among
Divisions and Fixed
Interest Division of
Golden American........ 527 138 311 1,130 309 424 $ 23 1,134
Net additions to (from)
assets retained in the
Account by Golden
American............... 45 (6) 33 130 27 51 2 125
Policy related charges
and fees............... (10) (8) (6) (12) (2) (2) -- (10)
------- ------- ------- ------- ------- ------- ------- -------
Increase (decrease) in
net assets from policy
related transactions.... 449 99 341 1,225 334 472 25 1,252
------- ------- ------- ------- ------- ------- ------- -------
Total increase
(decrease).............. 478 48 237 1,345 369 512 25 1,287
Net assets at beginning
of period............... 641 593 356 369 -- 25 -- --
------- ------- ------- ------- ------- ------- ------- -------
Net assets at end of
period.................. $ 1,119 $ 641 $ 593 $ 1,714 $ 369 $ 537 $ 25 $ 1,287
======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
(a) Commencement of operations, January 1, 1995
(b) Commencement of operations, October 2, 1995
(c) Commencement of operations, January 30, 1996
See accompanying notes.
56
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994, EXCEPT AS NOTED
(CONTINUED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MANAGED GROWTH &
GLOBAL OTC INCOME
DIVISION DIVISION DIVISION COMBINED
-------- -------- -------- -------------------------
1996(D) 1996(E) 1996(E) 1996 1995 1994
-------- -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS
Operations:
Net investment income
(loss)................. -- $ 4 -- $ 853 $ 287 $ 148
Net realized gain
(loss) on investments.. -- 2 -- 268 134 (27)
Net unrealized
appreciation
(depreciation) of
investments............ $ 1 (4) $ 2 341 614 (359)
------- ------- ------- ------- ------- -------
Net increase (decrease)
in net assets resulting
from operations......... 1 2 2 1,462 1,035 (238)
CHANGES FROM POLICY
RELATED TRANSACTIONS:
Premiums............... (2) 1 1 10,221 4,794 3,314
Surrenders and other
withdrawals............ -- -- -- (2,847) (495) (155)
Net transfers among
Divisions and Fixed
Interest Division of
Golden American........ 87 72 71 394 (1,456) (359)
Net additions to (from)
assets retained in the
Account by Golden
American............... 8 7 9 948 224 226
Policy related charges
and fees............... -- (1) -- (147) (73) (47)
------- ------- ------- ------- ------- -------
Increase (decrease) in
net assets from policy
related transactions.... 93 79 81 8,569 2,994 2,979
------- ------- ------- ------- ------- -------
Total increase
(decrease).............. 94 81 83 10,031 4,029 2,741
Net assets at beginning
of period............... -- -- -- 9,847 5,818 3,077
------- ------- ------- ------- ------- -------
Net assets at end of
period.................. $ 94 $ 81 $ 83 $19,878 $ 9,847 $ 5,818
======= ======= ======= ======= ======= =======
</TABLE>
(d) Commencement of operations, September 23, 1996
(e) Commencement of operations, October 2, 1996
See accompanying notes.
57
<PAGE>
SEPARATE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 1--ORGANIZATION
Separate Account A (the "Account") was established on July 14, 1988, by
Golden American Life Insurance Company ("Golden American"), under Minnesota
insurance law to support the operations of flexible premium variable life in-
surance policies ("Policies"). Effective September 30, 1992, Golden American
became a wholly owned subsidiary of BT Variable, Inc. ("BTV"), an indirect
wholly owned subsidiary of Bankers Trust Company. Effective December 30, 1993,
Golden American was redomesticated from the State of Minnesota to the State of
Delaware. Effective August 13, 1996, Equitable of Iowa Companies acquired all
of the outstanding capital stock of BTV. As of August 14, 1996, BT Variable,
Inc.'s name was changed to EIC Variable, Inc. These transactions had no effect
on the accompanying financial statements. Golden American is primarily engaged
in the issuance of variable insurance products and is licensed as a life in-
surance company in the District of Columbia and all states except New York.
Operations of the Account commenced on February 16, 1989. The Account is
registered as a unit investment trust with the Securities and Exchange Commis-
sion under the Investment Company Act of 1940, as amended. Golden American
provides for variable accumulation and benefits under the Policies by credit-
ing insurance premiums to one or more divisions within the Account or the
Golden American Fixed Interest Division which is not part of the Account, as
elected by the Policyowners. The portion of the Account's assets applicable to
Policies will not be chargeable with liabilities arising out of any other
business Golden American may conduct, but obligations of the Account, includ-
ing the promise to make benefit payments, are obligations of Golden American.
The assets and liabilities of the Account are clearly identified and distin-
guished from the other assets and liabilities of Golden American.
The Account has, under GoldenSelect Policies, sixteen investment divisions:
the Liquid Asset, the Limited Maturity Bond, the Natural Resources, the All-
Growth, the Real Estate, the Fully Managed, the Multiple Allocation, the Capi-
tal Appreciation, the Rising Dividends, the Emerging Markets, the Value Equi-
ty, (commenced operations January, 1995), the Strategic Equity (commenced op-
erations October, 1995), the Small Cap (commenced operations January, 1996),
the Managed Global (commenced operations September, 1996), the OTC (commenced
operations October, 1996), and the Growth & Income (commenced operations Octo-
ber, 1996) ("Divisions"). The assets in each Division are invested in shares
of a designated series ("Series," which may also be referred to as a "Portfo-
lio") of mutual funds, of The GCG Trust or the Equi-Select Series Trust (the
"Trusts"). Effective January 1997, the Natural Resources Series was renamed to
Hard Assets.
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the significant accounting policies of the Ac-
count:
Use of Estimates: The preparation of the financial statements in conformity
with generally accepted accounting principles requires management to make es-
timates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those es-
timates.
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 Se-
ries 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 re-
demptions of the shares of the Series or Portfolio of the Trusts are deter-
mined on the basis of specific identification.
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 capi-
tal gains of the Account attributable to the Policyowners are excluded in the
determination of the federal income tax liability of Golden American.
Reclassification: Certain amounts in the 1995 and 1994 financial statements
have been reclassified to conform to the 1996 financial statement presenta-
tion.
58
<PAGE>
SEPARATE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
NOTE 3--CHARGES AND FEES
Under the terms of the Policies, certain charges are allocated to the Poli-
cies to cover Golden American's expenses in connection with the issuance and
administration of the Policies. Following is a summary of these charges:
Mortality and Expense Risk and Asset Based Administrative Charges: Golden
American assumes mortality and expense risks related to the operations of the
Account and, in accordance with the terms of the Policies, deducts a daily
charge from the assets of the Account at annual rates of either .80% or .90%
of the assets attributable to the Policies to cover these risks. For certain
policies, a daily asset based administrative charge at an annual rate of .10%
is deducted from assets attributable to Policies.
Administrative Charges: An administrative charge of $200 (single life) or
$300 (joint life) is made to cover the cost of underwriting and issuing a Pol-
icy. The charge is deducted in quarterly installments on each Policy during
the first Policy year. In addition, a quarterly administrative charge of $10
per Policy is deducted quarterly to cover ongoing administrative expenses.
Mortality Cost: A mortality cost is deducted equal to the cost of providing
coverage under the Policy. The cost is based on each insurer's sex, attained
age, and underwriting class. The maximum cost of insurance is shown in the
Policy.
Minimum Death Benefit Guarantee Charge: A minimum death benefit guarantee
charge is made of a maximum per year of $0.60 per $1,000 of face or net amount
at risk, as defined in each Policy. The charge is deducted in equal install-
ments on each Policy quarterly processing date during the guarantee period.
Deferred Sales Load: Under Policies offered subsequent to October 1995, a
sales load of 6% of premium is deducted in equal installments over a six-year
period. Under Policies offered prior to October 1995, a sales load of up to 7
1/2% was applicable to each premium payment for sales-related expenses as
specified in the Policy. For the policies previously offered, the sales load
is deducted in equal annual installments over the period the Policy is in
force, not to exceed ten years. The sales load, on all policies, is chargeable
to each premium when it is received by Golden American, the amount of such
charge is initially advanced by Golden American to Policyowners. This amount
is included in the accumulation value and then deducted in equal installments
on each Policy anniversary date over a period of either six or ten years. Upon
surrender of the Policy, the unamortized deferred sales load is deducted from
the accumulation value by Golden American.
Deferred Face Amount Charge: There is a charge of an amount per $1,000 of
initial face amount and any increases in face amount deducted in equal in-
stallments over a six year period following receipt of the initial premium or
increase in face amount. This charge varies based on the age and sex of the
insured and the Policy chosen. This charge will never exceed a maximum of $12
per $1,000 of face amount. A portion of this charge is considered to be an ad-
ditional sales load.
Premium Taxes: Premiums are subject to a charge for premium and other state
and local taxes. The amount and timing of the deduction depend on the state of
residence and currently ranges up to 4.0% of premiums. Although the premium
tax is chargeable to each premium when received, the amount of such charge is
initially advanced by Golden American to Policyowners and included as a compo-
nent of the Policyowner's investment value and then deducted in equal install-
ments on each Policy anniversary date over a period of either six or ten
years. Upon the surrender of the Policy, any unamortized premium taxes are de-
ducted from the Policyowners investment value. For some policies, the deferred
premium taxes are collected in one installment at the end of the Policy
processing period following the premium collection.
Loan Charge: A current net loan charge of up to 1.00% is made based on the
Policy loan amount on policies that allow loans. The charge is accrued daily,
as applicable, and deducted on each Policy anniversary date.
Other Charges: Twelve free investment re-allocations among Divisions per
Policy are allowed each Policy year. For each additional investment re-alloca-
tion, a $25 charge may be made from the amount transferred from each Division.
For each partial withdrawal in excess of four per year, a charge is made equal
to the lesser of $25 and 2% of the amount withdrawn.
59
<PAGE>
SEPARATE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
NOTE 3--CHARGES AND FEES (CONTINUED)
Fees Waived: Certain charges and fees for various types of policies are cur-
rently waived by Golden American. Golden American reserves the right to dis-
continue these waivers at its discretion or to conform with changes in the
law.
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, previously noted. Net assets retained for
the periods ended December 31, 1996, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
COMBINED
--------------------------
1996 1995 1994
-------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Balance at beginning of period................. $ 603 $ 379 $ 153
Sales load advanced............................ 758 259 244
Premium tax advanced........................... 304 100 89
Net transfer from Fixed Interest Division...... 38 -- --
Amortization of deferred sales load and premium
tax............................................ (152) (135) (107)
-------- ------- -------
Balance at end of period....................... $ 1,551 $ 603 $ 379
======== ======= =======
</TABLE>
NOTE 4--PURCHASES AND SALES OF INVESTMENT SECURITIES
The aggregate cost of purchases and proceeds from sales of investments were
as follows:
<TABLE>
<CAPTION>
PERIOD ENDED DECEMBER 31
---------------------------------------------------
1996 1995 1994
----------------- ---------------- ----------------
PURCHASES SALES PURCHASES SALES PURCHASES SALES
--------- ------- --------- ------ --------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
The GCG Trust Liquid Asset
Series.................... $ 9,546 $10,017 $ 5,306 $3,962 $ 3,566 $3,119
The GCG Trust Limited Matu-
rity Bond Series.......... 1,100 642 309 142 2,175 2,075
The GCG Trust Natural Re-
sources Series............ 576 140 79 77 136 88
The GCG Trust All-Growth
Series.................... 1,918 1,168 1,501 950 1,896 1,673
The GCG Trust Real Estate
Series.................... 337 102 98 334 284 133
The GCG Trust Fully Managed
Series.................... 1,054 180 226 236 839 145
The GCG Trust Multiple Al-
location Series........... 915 408 553 413 933 190
The GCG Trust Capital Ap-
preciation Series......... 2,513 1,054 1,460 961 369 275
The GCG Trust Rising Divi-
dends Series.............. 1,653 174 536 168 340 66
The GCG Trust Emerging Mar-
kets Series............... 777 335 481 388 991 627
The GCG Trust Value Equity
Series.................... 1,390 94 367 25 -- --
The GCG Trust Strategic Eq-
uity Series............... 583 100 25 -- -- --
The GCG Trust Small Cap Se-
ries...................... 1,404 153 -- -- -- --
The GCG Trust Managed
Global Series............. 96 3 -- -- -- --
Equi-Select Series Trust
OTC Portfolio............. 127 47 -- -- -- --
Equi-Select Series Trust
Growth & Income
Portfolio................. 81 -- -- -- -- --
------- ------- ------- ------ ------- ------
TOTAL..................... $24,070 $14,617 $10,941 $7,656 $11,529 $8,391
======= ======= ======= ====== ======= ======
</TABLE>
60
<PAGE>
SEPARATE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
NOTE 5--SUMMARY OF CHANGES FROM UNIT TRANSACTIONS
Policyowner transactions in units were as follows:
<TABLE>
<CAPTION>
PERIOD ENDED DECEMBER 31
-----------------------------------------------------
1996 1995 1994
----------------- ----------------- -----------------
PURCHASES SALES PURCHASES SALES PURCHASES SALES
--------- ------- --------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
Liquid Asset Division... 751,988 792,125 445,345 346,247 303,200 268,664
Limited Maturity Bond
Division............... 64,993 41,870 21,819 9,470 155,673 150,428
Natural Resources
Division............... 29,493 9,091 5,298 5,102 9,701 6,485
All-Growth Division..... 131,273 83,029 112,852 77,153 149,488 132,418
Real Estate Division.... 15,888 4,944 6,513 23,082 18,801 9,375
Fully Managed Division.. 55,652 11,003 16,877 18,610 60,189 10,369
Multiple Allocation
Division............... 43,404 23,182 29,953 25,061 61,487 12,673
Capital Appreciation
Division............... 148,680 67,690 106,129 74,482 31,804 24,056
Rising Dividends
Division............... 113,046 12,227 46,340 14,004 32,582 6,343
Emerging Markets
Division............... 78,278 33,532 51,859 39,746 82,276 53,904
Value Equity Division... 96,086 6,366 29,415 1,930 -- --
Strategic Equity
Division............... 51,540 8,565 2,559 -- -- --
Small Cap Division...... 121,574 12,919 -- -- -- --
Managed Global
Division............... 8,986 250 -- -- -- --
OTC Division............ 8,153 3,011 -- -- -- --
Growth & Income
Division............... 6,613 4 -- -- -- --
</TABLE>
NOTE 6--NET ASSETS
Net assets at December 31, 1996 consisted of the following:
<TABLE>
<CAPTION>
LIMITED
LIQUID MATURITY NATURAL ALL- REAL FULLY
ASSET BOND RESOURCES GROWTH ESTATE MANAGED
DIVISION DIVISION DIVISION DIVISION DIVISION DIVISION
-------- -------- --------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Unit transactions....... $1,399 $ 951 $477 $1,709 $305 $1,676
Accumulated net
investment income
(loss).................. 204 195 116 230 91 240
Net unrealized
appreciation
(depreciation)
of investments.......... -- (69) (3) (92) 40 177
------ ------ ---- ------ ---- ------
$1,603 $1,077 $590 $1,847 $436 $2,093
====== ====== ==== ====== ==== ======
</TABLE>
<TABLE>
<CAPTION>
MULTIPLE CAPITAL RISING EMERGING VALUE STRATEGIC
ALLOCATION APPRECIATION DIVIDENDS MARKETS EQUITY EQUITY
DIVISION DIVISION DIVISION DIVISION DIVISION DIVISION
---------- ------------ --------- -------- -------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Unit transactions....... $1,535 $2,140 $2,122 $1,192 $1,560 $496
Accumulated net
investment
income (loss)........... 459 484 87 (83) 88 23
Net unrealized
appreciation
(depreciation) of
investments............. 35 95 360 10 66 18
------ ------ ------ ------ ------ ----
$2,029 $2,719 $2,569 $1,119 $1,714 $537
====== ====== ====== ====== ====== ====
</TABLE>
<TABLE>
<CAPTION>
MANAGED GROWTH &
SMALL CAP GLOBAL OTC INCOME
DIVISION DIVISION DIVISION DIVISION COMBINED
--------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Unit transactions................ $1,252 $93 $79 $81 $17,067
Accumulated net investment income
(loss)........................... 2 -- 6 -- 2,142
Net unrealized appreciation
(depreciation)
of investments................... 33 1 (4) 2 669
------ --- --- --- -------
$1,287 $94 $81 $83 $19,878
====== === === === =======
</TABLE>
61
<PAGE>
SEPARATE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
NOTE 7--UNIT VALUES
Accumulation unit value information (which is based on total assets) for
units outstanding by contract type as of December 31, 1996 was as follows:
<TABLE>
<CAPTION>
SERIES UNITS UNIT VALUE TOTAL UNIT VALUE
- ------ ------- ---------- ----------------
(IN THOUSANDS)
<S> <C> <C> <C>
LIQUID ASSET
Variable Life--Single....................... 9,517 $13.914 $ 132
Variable Life--Joint........................ 107,210 13.762 1,476
------
1,608
LIMITED MATURITY BOND
Variable Life--Single....................... 7,345 15.811 116
Variable Life--Joint........................ 61,762 15.588 963
------
1,079
NATURAL RESOURCES
Variable Life--Single....................... 3,162 20.599 65
Variable Life--Joint........................ 26,012 20.262 527
------
592
ALL-GROWTH
Variable Life--Single....................... 14,134 14.373 203
Variable Life--Joint........................ 116,927 14.110 1,649
------
1,852
REAL ESTATE
Variable Life--Single....................... 7,818 22.081 173
Variable Life--Joint........................ 12,172 21.699 264
------
437
FULLY MANAGED
Variable Life--Single....................... 3,076 18.052 56
Variable Life--Joint........................ 114,481 17.828 2,041
------
2,097
MULTIPLE ALLOCATION
Variable Life--Single....................... 10,048 18.530 186
Variable Life--Joint........................ 100,956 18.300 1,848
------
2,034
CAPITAL APPRECIATION
Variable Life--Single....................... 9,744 17.816 173
Variable Life--Joint........................ 144,809 17.649 2,555
------
2,728
RISING DIVIDENDS
Variable Life--Single....................... 950 15.984 15
Variable Life--Joint........................ 161,299 15.880 2,561
------
2,576
EMERGING MARKETS
Variable Life--Single....................... 3,859 9.915 38
Variable Life--Joint........................ 110,092 9.850 1,084
------
1,122
</TABLE>
62
<PAGE>
SEPARATE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
NOTE 7--UNIT VALUES (CONTINUED)
<TABLE>
<CAPTION>
SERIES UNITS UNIT VALUE TOTAL UNIT VALUE
- ------ ------- ---------- ----------------
(IN THOUSANDS)
<S> <C> <C> <C>
VALUE EQUITY
Variable Life--Single....................... 1,245 $14.722 $ 18
Variable Life--Joint........................ 115,960 14.664 1,700
------
1,718
STRATEGIC EQUITY
Variable Life--Joint........................ 45,536 11.830 539
SMALL CAP
Variable Life--Single....................... 3,201 11.914 38
Variable Life--Joint........................ 105,454 11.890 1,254
------
1,292
MANAGED GLOBAL
Variable Life--Joint........................ 8,736 10.740 94
OTC
Variable Life--Joint........................ 5,142 15.860 82
GROWTH & INCOME
Variable Life--Joint........................ 6,609 12.523 83
</TABLE>
63
<PAGE>
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 Amer-
ican Life Insurance Company as of December 31, 1996 and 1995, and the related
consolidated statements of income, changes in stockholder's equity, and cash
flows for the post-acquisition period from August 14, 1996 to December 31,
1996 and the pre-acquisition period from January 1, 1996 to August 13, 1996
and for each of the years ended December 31, 1995 and 1994. Our audits also
included the financial statements schedules listed in the Index at Item 14(a).
These financial statements and schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion on these fi-
nancial statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing stan-
dards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of mate-
rial misstatement. An audit includes examining, on a test basis, evidence sup-
porting 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 pre-
sentation. We believe that our audits provide a reasonable basis for our opin-
ion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Golden American Life Insurance Company at December 31, 1996 and 1995, and
the consolidated results of their operations and their cash flows for the
post-acquisition period from August 14, 1996 to December 31, 1996 and the pre-
acquisition period from January 1, 1996 to August 13, 1996 and for each of the
years ended December 31, 1995 and 1994, in conformity with generally accepted
accounting principles. Also, in our opinion, the related financial statement
schedules, when considered in relation to the basic financial statements taken
as a whole, present fairly in all material respects the information set forth
therein.
[SIGNATURE OF ERNST & YOUNG LLP APPEARS HERE]
Des Moines, Iowa
February 11, 1997
64
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
POST-ACQUISITION PRE-ACQUISITION
DECEMBER 31, 1996 DECEMBER 31, 1995
----------------- -----------------
<S> <C> <C>
ASSETS:
Investments:
Fixed maturities, available for sale, at fair value
(cost: 1996 -- $275,153; 1995 -- $48,671)................................................ $ 275,563 $ 49,629
Equity securities, at fair value (cost: 1996 -- $36;
1995 -- $27)............................................................................. 33 29
Mortgage loans on real estate............................................................. 31,459 --
Policy loans.............................................................................. 4,634 2,021
Short-term investments.................................................................... 12,631 15,614
---------- ----------
Total Investments........................................................................ 324,320 67,293
Cash and cash equivalents................................................................. 5,839 5,046
Accrued investment income................................................................. 4,139 768
Deferred policy acquisition costs......................................................... 11,468 67,314
Present value of in force acquired........................................................ 83,051 6,057
Property and equipment, less allowances for depreciation of $63 in 1996 and $86 in 1995... 699 490
Goodwill, less accumulated amortization of $589 in 1996................................... 38,665 --
Other assets.............................................................................. 2,471 7,136
Separate account assets................................................................... 1,207,247 1,048,953
---------- ----------
Total Assets............................................................................. $1,677,899 $1,203,057
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY:
Policy liabilities and accruals:
Future policy benefits:
Annuity and interest sensitive life products............................................ $ 285,287 $ 33,673
Unearned revenue reserve................................................................ 2,063 6,556
---------- ----------
287,350 40,229
Deferred income taxes...................................................................... 365 --
Surplus note............................................................................... 25,000 --
Due to affiliates.......................................................................... 1,504 675
Other liabilities.......................................................................... 15,949 15,075
Separate account liabilities............................................................... 1,207,247 1,048,953
---------- ----------
Total Liabilities........................................................................ 1,537,415 1,104,932
Commitments and contingent liabilities
STOCKHOLDER'S EQUITY:
Common stock, par value $10 per share, authorized, issued and outstanding 250,000 shares.. 2,500 2,500
Redeemable preferred stock, par value $5,000 per share, 50,000 shares authorized (1995 --
10,000 shares issued and outstanding)................................................... -- 50,000
Additional paid-in capital................................................................ 137,372 45,030
Unrealized appreciation (depreciation) of securities at fair value........................ 262 658
Retained earnings (deficit)............................................................... 350 (63)
---------- ----------
Total Stockholder's Equity............................................................... 140,484 98,125
---------- ----------
Total Liabilities and Stockholder's Equity............................................... $1,677,899 $1,203,057
========== ==========
</TABLE>
See accompanying notes.
65
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
POST-ACQUISITION PRE-ACQUISITION
----------------- ---------------------------------
FOR THE PERIOD FOR THE PERIOD
AUGUST 14, 1996 JANUARY 1, 1996 FOR THE YEAR FOR THE YEAR
THROUGH THROUGH ENDED ENDED
DECEMBER 31, 1996 AUGUST 13, 1996 DECEMBER 31, 1995 DECEMBER 31, 1994
----------------- --------------- ----------------- -----------------
<S> <C> <C> <C> <C>
REVENUES:
Annuity and interest sensitive life product charges.... $ 8,768 $ 12,259 $18,388 $ 17,519
Management fee revenue................................. 877 1,390 987 --
Net investment income.................................. 5,795 4,990 2,818 560
Realized gains (losses) on investments................. 42 (420) 297 65
Other income........................................... 486 70 63 --
-------- -------- ------- --------
15,968 18,289 22,553 18,144
INSURANCE BENEFITS AND EXPENSES:
Annuity and interest sensitive life benefits:
Interest credited to account balances................. 5,741 4,355 1,322 40
Benefit claims incurred in excess of account
balances............................................. 1,262 915 1,824 (5)
Underwriting, acquisition, and insurance expenses:
Commissions........................................... 9,866 16,549 7,983 16,978
General expenses...................................... 5,906 9,422 12,650 12,921
Insurance taxes....................................... 672 1,225 952 373
Policy acquisition costs deferred..................... (11,712) (19,300) (9,804) (23,119)
Amortization:
Deferred policy acquisition costs.................... 244 2,436 2,710 4,608
Present value of in force acquired................... 2,745 951 1,552 2,164
Goodwill............................................. 589 -- -- --
-------- -------- ------- --------
15,313 16,553 19,189 13,960
Interest expense....................................... 85 -- -- 1,962
-------- -------- ------- --------
15,398 16,553 19,189 15,922
-------- -------- ------- --------
570 1,736 3,364 2,222
Income taxes........................................... 220 (1,463) -- --
-------- -------- ------- --------
Net Income............................................. $ 350 $ 3,199 $ 3,364 $ 2,222
======== ======== ======= ========
</TABLE>
See accompanying notes.
66
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRE-ACQUISITION
-------------------------------------------------------------------
UNREALIZED
APPRECIATION
REDEEMABLE ADDITIONAL (DEPRECIATION) RETAINED TOTAL
COMMON PREFERRED PAID-IN OF SECURITIES EARNINGS STOCKHOLDER'S
STOCK STOCK CAPITAL AT FAIR VALUE (DEFICIT) EQUITY
------ ---------- ---------- -------------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1,
1994.................... $2,500 $ 28,336 $ 62 $(2,301) $ 28,597
Issuance of 10,000
shares of preferred
stock.................. -- $ 50,000 -- -- -- 50,000
Contribution of
capital................ -- -- 8,750 -- -- 8,750
Net income for 1994.... -- -- -- -- 2,222 2,222
Unrealized depreciation
of securities at fair
value.................. -- -- -- (63) -- (63)
------ -------- -------- ------- ------- --------
Balance at December 31,
1994.................... 2,500 50,000 37,086 (1) (79) 89,506
Contribution of
capital................ -- -- 7,944 -- -- 7,944
Net income for 1995.... -- -- -- -- 3,364 3,364
Preferred stock
dividends.............. -- -- -- -- (3,348) (3,348)
Unrealized appreciation
of securities at fair
value.................. -- -- -- 659 -- 659
------ -------- -------- ------- ------- --------
Balance at December 31,
1995.................... 2,500 50,000 45,030 658 (63) 98,125
Net income for the
period January 1, 1996
to August 13, 1996..... -- -- -- -- 3,199 3,199
Preferred stock
dividends.............. -- -- -- -- (719) (719)
Unrealized depreciation
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
====== ======== ======== ======= ======= ========
<CAPTION>
POST-ACQUISITION
-------------------------------------------------------------------
UNREALIZED
APPRECIATION
REDEEMABLE ADDITIONAL (DEPRECIATION) RETAINED TOTAL
COMMON PREFERRED PAID-IN OF SECURITIES EARNINGS STOCKHOLDER'S
STOCK STOCK CAPITAL AT FAIR VALUE (DEFICIT) EQUITY
------ ---------- ---------- -------------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at August 14,
1996.................... $2,500 $ 50,000 $ 87,372 -- -- $139,872
Contribution of
preferred stock to
additional paid-in
capital................ -- (50,000) 50,000 -- -- --
Net income for the
period August 14, 1996
to December 31, 1996... -- -- -- -- $ 350 350
Unrealized appreciation
of securities at fair
value.................. -- -- -- $ 262 -- 262
------ -------- -------- ------- ------- --------
Balance at December 31,
1996.................... $2,500 $ -- $137,372 $ 262 $ 350 $140,484
====== ======== ======== ======= ======= ========
</TABLE>
See accompanying notes.
67
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
POST-ACQUISITION PRE-ACQUISITION
----------------- -----------------------------------------
FOR THE PERIOD FOR THE PERIOD FOR THE FOR THE
AUGUST 14, 1996 JANUARY 1, 1996 YEAR ENDED YEAR ENDED
THROUGH THROUGH DECEMBER 31, DECEMBER 31,
DECEMBER 31, 1996 AUGUST 13, 1996 1995 1994
----------------- --------------- ------------ ------------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income.............. $ 350 $ 3,199 $ 3,364 $ 2,222
Adjustments to reconcile
net income to net cash
provided by (used in)
operations:
Adjustments related to
annuity and interest
sensitive life
products:
Change in annuity and
interest sensitive
life product
reserves.............. 5,106 4,472 4,664 (1,370)
Change in unearned
revenues.............. 2,063 2,084 4,949 1,594
Increase in accrued
investment income...... (877) (2,494) (676) (24)
Policy acquisition
costs deferred......... (11,712) (19,300) (9,804) (23,119)
Amortization of
deferred policy
acquisition costs...... 244 2,436 2,710 4,608
Amortization of present
value of in force
acquired............... 2,745 951 1,552 2,164
Change in other assets,
other liabilities and
accrued income taxes... (96) 4,672 4,686 (4,543)
Provision for
depreciation and
amortization........... 1,242 703 (142) 13
Provision for deferred
income taxes........... 220 (1,463) -- --
Realized (gains) losses
on investments......... (42) 420 (297) (65)
-------- -------- ------- --------
Net cash provided by
(used in) operating
activities.............. (757) (4,320) 11,006 (18,520)
INVESTING ACTIVITIES
Sale, maturity or
repayment of
investments:
Fixed maturities--
available for sale..... 47,453 55,091 24,026 --
Fixed maturities--held
for investment......... -- -- -- 321
Equity securities...... -- -- -- 313
Mortgage loans on real
estate................. 40 -- -- --
Short-term
investments--net....... 2,629 354 -- 1,299
-------- -------- ------- --------
50,122 55,445 24,026 1,933
Acquisition of
investments:
Fixed maturities--
available for sale..... (147,170) (184,589) (61,723) --
Fixed maturities--held
for investment......... -- -- -- (857)
Equity securities...... (5) -- (10) (7)
Mortgage loans on real
estate................. (31,499) -- -- --
Policy loans--net...... (637) (1,977) (1,508) (369)
Short-term
investments--net....... -- -- (1,681) --
-------- -------- ------- --------
(179,311) (186,566) (64,922) (1,233)
Funds held in escrow
pursuant to an Exchange
Agreement.............. -- -- (1,242) (1,382)
Purchase of property
and equipment.......... (137) -- -- --
-------- -------- ------- --------
Net cash used in
investing activities.... (129,326) (131,121) (42,138) (682)
</TABLE>
See accompanying notes.
68
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS--(CONTINUED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
POST-ACQUISITION PRE-ACQUISITION
----------------- -----------------------------------------
FOR THE PERIOD FOR THE PERIOD FOR THE FOR THE
AUGUST 14, 1996 JANUARY 1, 1996 YEAR ENDED YEAR ENDED
THROUGH THROUGH DECEMBER 31, DECEMBER 31,
DECEMBER 31, 1996 AUGUST 13, 1996 1995 1994
----------------- --------------- ------------ ------------
<S> <C> <C> <C> <C>
FINANCING ACTIVITIES
Retirement of short-term debt.................................... $ -- $ -- $ -- $(40,000)
Proceeds from issuance of surplus note........................... 25,000 -- -- --
Receipts from annuity and interest sensitive life policies
credited to policyholder account balances........................ 116,819 149,750 29,501 --
Return of policyholder account balances on annuity and interest
sensitive life policies.......................................... (3,315) (2,695) (1,543) --
Net reallocations (to) from Separate Accounts.................... (10,237) (8,286) -- --
Contributions of capital by parent............................... -- -- 7,944 8,750
Issuance of preferred stock...................................... -- -- -- 50,000
Dividends paid on preferred stock................................ -- (719) (3,348) --
--------- --------- -------- --------
Net cash provided by financing activities........................ 128,267 138,050 32,554 18,750
--------- --------- -------- --------
Increase (decrease) in cash and cash equivalents................. (1,816) 2,609 1,422 (452)
Cash and cash equivalents at beginning of period................. 7,655 5,046 3,624 4,076
--------- --------- -------- --------
Cash and cash equivalents at end of period....................... $ 5,839 $ 7,655 $ 5,046 $ 3,624
========= ========= ======== ========
</TABLE>
See accompanying notes.
69
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. SIGNIFICANT ACCOUNTING POLICIES
Consolidation
The consolidated financial statements include Golden American Life Insurance
Company ("Golden American") and its wholly-owned subsidiary, First Golden
American Life Insurance Company of New York ("First Golden") collectively the
"Company". First Golden was capitalized by Golden American on December 17,
1996. All significant intercompany accounts and transactions have been elimi-
nated.
Organization
Golden American offers variable insurance products and is licensed as a life
insurance company in the District of Columbia and all states except New York.
On January 2, 1997, First Golden became licensed to sell insurance products in
the state of New York. The Company's products are marketed by broker/dealers,
financial institutions and insurance agents. The Company's primary customers
are individuals and families.
On August 13, 1996, Equitable of Iowa Companies ("Equitable") acquired all
of the outstanding capital stock of BT Variable, Inc. ("BT Variable") and its
wholly-owned subsidiaries, Golden American and Directed Services, Inc. ("DSI")
from Whitewood Properties Corporation ("Whitewood") pursuant to the terms of a
Stock Purchase Agreement between Equitable and Whitewood (the "Purchase Agree-
ment"). See Note 5 for additional information.
For financial statement purposes, the change in control of Golden American
through the acquisition of BT Variable was accounted for as a purchase acqui-
sition effective August 14, 1996. This acquisition resulted in a new basis of
accounting reflecting estimated fair values of assets and liabilities at that
date. As a result, the Company's financial statements for periods subsequent
to August 13, 1996, are presented on the Post-Acquisition new basis of ac-
counting, while the financial statements for August 13, 1996 and prior periods
are presented on the Pre-Acquisition historical cost basis of accounting.
Investments
Fixed Maturities: Statement of Financial Accounting Standards ("SFAS") No.
115, "Accounting for Certain Investments in Debt and Equity Securities" re-
quires fixed maturity securities to be designated as either "available for
sale", "held for investment" or "trading". Sales of fixed maturities desig-
nated 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 ad-
justment for related changes in deferred policy acquisition costs, present
value of in force acquired, policy reserves and deferred income taxes. At De-
cember 31, 1996 and 1995, all of the Company's fixed maturity securities are
designated as available for sale although the Company is not precluded from
designating fixed maturity securities as held for investment or trading at
some future date. Securities the Company has the positive intent and ability
to hold to maturity are designated as "held for investment". Held for invest-
ment securities are reported at cost adjusted for amortization of premiums and
discounts. Changes in the fair value of these securities, except for declines
that are other than temporary, are not reflected in the Company's financial
statements. Sales of securities designated as held for investment are severely
restricted by SFAS No. 115. Securities that are bought and held principally
for the purpose of selling them in the near term are designated as trading se-
curities. Unrealized gains and losses on trading securities are included in
current earnings. Transfers of securities between categories are restricted
and are recorded at fair value at the time of the transfer. Securities that
are determined to have a decline in value that is other than temporary are
written down to estimated fair value which becomes the security's new cost ba-
sis by a charge to realized losses in the Company's Statements of Income. Pre-
miums and discounts are amortized/accrued utilizing the scientific interest
method which results in a constant yield over the security's expected life.
Amortization/accrual of premiums and discounts on mortgage-backed securities
incorporates a prepayment assumption to estimate the securities' expected
lives.
Equity Securities: Equity securities are reported at estimated fair value if
readily marketable or at cost if not readily marketable. The change in
unrealized appreciation and depreciation of marketable equity securities (net
of related deferred income taxes, if any) is included directly in stockhold-
er's equity. Equity
70
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996
securities that are determined to have a decline in value that is other than
temporary are written down to estimated fair value which becomes the
security's new cost basis by a charge to realized losses in the Company's
Statement of Income.
Mortgage loans: Mortgage loans on real estate are reported at cost adjusted
for amortization of premiums and accrual of discounts. If the value of any
mortgage loan is determined to be impaired (i.e., when it is probable that the
Company will be unable to collect all amounts due according to the contractual
terms of the loan agreement), the carrying value of the mortgage loan is re-
duced to the present value of expected future cash flows from the loan, dis-
counted 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 allow-
ance 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 ac-
crual 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 pri-
vate 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 un-
derlying the separate accounts. Realized gains and losses are determined on
the basis of specific identification and average cost methods for manager ini-
tiated and issuer initiated disposals, respectively.
Cash and Cash Equivalents
For purposes of the consolidated statement of cash flows, the Company con-
siders all demand deposits and interest-bearing accounts not related to the
investment function to be cash equivalents. All interest-bearing accounts
classified as cash equivalents have original maturities of three months or
less.
Deferred Policy Acquisition Costs
Certain costs of acquiring new insurance business, principally commissions
and other expenses related to the production of new business, have been de-
ferred. Acquisition costs for variable annuity and life products are being am-
ortized generally in proportion to the present value (using the assumed cred-
iting rate) of expected future gross profits. This amortization is adjusted
retrospectively, or "unlocked", when the Company revises its estimate of cur-
rent or future gross profits to be realized from a group of products. Deferred
policy acquisition costs are adjusted to reflect the pro forma impact of
unrealized gains and losses on fixed maturity securities the Company has des-
ignated as "available for sale" under SFAS No. 115.
Present Value of in Force Acquired
As a result of the acquisition of Golden American, a portion of the acquisi-
tion cost was allocated to the right to receive future cash flows from the ex-
isting insurance contracts. This allocated cost represents the present value
of in force acquired ("PVIF") which reflects the value of those purchased pol-
icies calculated by discounting actuarially determined expected cash flows at
the discount rate determined by the purchaser. Interest is imputed on the un-
amortized balance of PVIF at rates of 7.70% to 7.80%. Amortization of PVIF is
charged to expense in proportion to expected gross profits. This amortization
is adjusted retrospectively, or "unlocked", when the Company revises its esti-
mate of current or future gross profits to be realized from the insurance con-
tracts acquired. PVIF is adjusted to reflect the pro forma impact of
unrealized gains (losses) on available for sale fixed maturities.
71
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996
Property and Equipment
Property and equipment primarily represent leasehold improvements at the
Golden American headquarters, office furniture and equipment and capitalized
computer software and are not considered to be significant to the Company's
overall operations. Property and equipment are reported at cost less allow-
ances for depreciation. Depreciation expense is computed primarily on the ba-
sis of straight-line method over the estimated useful lives of the assets.
Goodwill
Goodwill was established as a result of the acquisition discussed above and
is being amortized over 25 years on a straight line basis. See Note 5 for ad-
ditional information.
Future Policy Benefits
Future policy benefits for fixed interest divisions of the variable prod-
ucts, are established utilizing the retrospective deposit accounting method.
Policy reserves represent the premiums received plus accumulated interest,
less mortality and administration charges. Interest credited to these policies
ranged from 4.00% to 7.25% during 1996.
The unearned revenue reserve represents unearned distribution fees discussed
below. These distribution fees have been deferred and are amortized over the
life of the contract in proportion to its expected gross profits.
Separate Accounts
Assets and liabilities of the separate accounts reported in the accompanying
balance sheets represent funds that are separately administered principally
for variable annuity and variable life contracts. Contractholders, rather than
the Company, bear the investment risk for variable products. At the direction
of the contractholders, the separate accounts invest the premiums from the
sale of variable annuity and variable life products in shares of specified mu-
tual funds. The assets and liabilities of the separate accounts are clearly
identified and segregated from other assets and liabilities of the Company.
The portion of the separate account assets applicable to variable annuity and
variable life contracts cannot be charged with liabilities arising out of any
other business the Company may conduct.
Variable separate account assets carried at fair value of the underlying in-
vestments 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 accompany-
ing Statement of Income.
Product charges recorded by the Company from variable annuity and variable
life products consist of charges applicable to each contract for mortality and
expense risk, cost of insurance, contract administration and surrender
charges. In addition, some variable annuity and all variable life contracts
provide for a distribution fee collected for a limited number of years after
each premium deposit. Revenue recognition of collected distribution fees is
amortized over the life of the contract in proportion to its expected gross
profits. The balance of unrecognized revenue related to the distribution fees
is reported as an unearned revenue reserve.
Deferred Income Taxes
Deferred tax assets or liabilities are computed based on the difference be-
tween 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 eq-
uity securities and fixed maturity securities the Company has designated as
available for sale under SFAS No. 115. Changes in deferred tax assets or lia-
bilities resulting from this SFAS No. 115 adjustment are charged or credited
directly to stockholder's equity. Deferred income tax expenses or credits re-
flected in the Company's State
72
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996
ment of Income are based on the changes in the deferred tax asset or liability
from period to period (excluding the SFAS No. 115 adjustment).
Dividend Restrictions
Golden American's ability to pay dividends to its parent is restricted be-
cause prior approval of insurance regulatory authorities is required for pay-
ment of dividends to the stockholder which exceed an annual limitation. During
1997, Golden American could pay dividends to its parent of approximately
$2,186,000 without prior approval of statutory authorities. The Company has
maintained adequate statutory capital and surplus and has not used surplus re-
lief or financial reinsurance, which have come under scrutiny by many state
insurance departments.
Use Of Estimates
The preparation of financial statements in conformity with generally ac-
cepted accounting principles requires management to make estimates and assump-
tions that affect the reported assets and liabilities and disclosure of con-
tingent assets and liabilities at the date of the financial statements and the
reported amounts of revenue and expenses during the preparation period. Actual
results could differ from those estimates.
Management is required to utilize historical experience and assumptions
about future events and circumstances in order to develop estimates of mate-
rial reported amounts and disclosures. Included among the material (or poten-
tially 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 poli-
cyholder liabilities, (2) policyholder liabilities, (3) deferred policy acqui-
sition costs and present value of in force acquired, (4) fair values of assets
and liabilities recorded as a result of acquisition transactions, (5) asset
valuation allowances, (6) guaranty fund assessment accruals, (7) deferred tax
benefits (liabilities) and (8) estimates for commitments and contingencies in-
cluding legal matters, if a liability is anticipated and can be reasonably es-
timated. Estimates and assumptions regarding all of the preceding are inher-
ently subject to change and are reassessed periodically. Changes in estimates
and assumptions could materially impact the financial statements.
Reclassification
Certain amounts in the 1995 and 1994 financial statements have been reclas-
sified to conform to the 1996 financial statement presentation.
2. BASIS OF FINANCIAL REPORTING
The financial statements of the Company differ from related statutory-basis
financial statements principally as follows: (1) acquisition costs of acquir-
ing 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 es-
tablished as a result of an acquisition and is amortized and charged to ex-
pense; (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 methodolo-
gies utilizing statutory interest rates; (4) reserves are reported before re-
duction 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 ap-
plicable) 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 re-
alized losses in the Statements of Income when declines in carrying value are
judged to be other than temporary, rather than through the establishment of a
formula-determined statutory investment reserve (carried as a liability),
changes in which are charged directly to surplus; (7) deferred income taxes
are provided for the difference between the financial statement and income tax
bases of assets and liabilities; (8) net realized gains or losses attributed
to changes in the level of interest rates in the market are recognized when
the sale is completed
73
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996
rather than deferred and amortized over the remaining life of the fixed matu-
rity security; (9) a liability is established for anticipated guaranty fund
assessments, net of related anticipated premium tax credits, rather than capi-
talized when assessed and amortized in accordance with procedures permitted by
insurance regulatory authorities; (10) revenues for variable annuity and vari-
able life products consist of policy charges for the cost of insurance, policy
administration charges, amortization of policy initiation fees and surrender
charges assessed rather than premiums received; and (11) assets and liabili-
ties are restated to fair values when a change in ownership occurs, with pro-
visions for goodwill and other intangible assets, rather than continuing to be
presented at historical cost.
Net income (loss) for Golden American, as determined in accordance with
statutory accounting practices was $(9,188,000) in 1996, $(4,117,000) in 1995
and $(11,260,000) in 1994. Total statutory capital and surplus was $80,430,000
at December 31, 1996 and $66,357,000 at December 31, 1995.
3. INVESTMENT OPERATIONS
Investment Results
Major categories of net investment income are summarized below:
<TABLE>
<CAPTION>
POST-ACQUISITION PRE-ACQUISITION
----------------- -----------------------------------------
FOR THE PERIOD FOR THE PERIOD FOR THE FOR THE
AUGUST 14, 1996 JANUARY 1, 1996 YEAR ENDED YEAR ENDED
THROUGH THROUGH AUGUST DECEMBER 31, DECEMBER 31,
DECEMBER 31, 1996 13, 1996 1995 1994
----------------- --------------- ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Fixed maturities.............................................. $5,083 $4,507 $1,610 $142
Equity securities............................................. 103 -- -- 1
Mortgage loans on real estate................................. 203 -- -- --
Policy loans.................................................. 78 73 56 11
Short-term investments........................................ 441 341 899 226
Other, net.................................................... 2 22 148 99
Funds held in escrow.......................................... -- 145 166 83
------ ------ ------ ----
Gross investment income....................................... 5,910 5,088 2,879 562
Less investment expenses...................................... (115) (98) (61) (2)
------ ------ ------ ----
Net investment income......................................... $5,795 $4,990 $2,818 $560
====== ====== ====== ====
</TABLE>
Realized gains (losses) are as follows:
<TABLE>
<CAPTION>
REALIZED*
-----------------------------------------------------------
POST-ACQUISITION PRE-ACQUISITION
----------------- -----------------------------------------
FOR THE PERIOD FOR THE PERIOD
AUGUST 14, 1996 JANUARY 1, 1996 YEAR ENDED YEAR ENDED
THROUGH THROUGH AUGUST DECEMBER 31, DECEMBER 31,
DECEMBER 31, 1996 13, 1996 1995 1994
----------------- --------------- ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Fixed maturities:
Available for sale........................................... $42 $(420) $297
Held for investment.......................................... -- -- -- $ 2
Equity securities............................................. -- -- -- 63
--- ----- ---- ---
Realized gains (losses) on investments........................ $42 $(420) $297 $65
=== ===== ==== ===
</TABLE>
- -------------------
* See Note 6 for the income tax effects attributable to realized gains and
losses on investments.
74
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996
The change in unrealized appreciation (depreciation) on securities at fair
value is as follows:
<TABLE>
<CAPTION>
UNREALIZED
-------------------------------------------------------------
POST-ACQUISITION PRE-ACQUISITION
------------------- -----------------------------------------
FOR THE PERIOD FOR THE PERIOD
AUGUST 14, 1996 JANUARY 1, 1996 YEAR ENDED YEAR ENDED
THROUGH THROUGH AUGUST DECEMBER 31, DECEMBER 31,
DECEMBER 31, 1996** 13, 1996 1995 1994
------------------- --------------- ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Fixed maturities:
Available for sale......................................... $410 $(2,087) $ 958 $ (65)
Held for investment........................................ -- -- 90 --
Equity securities........................................... (3) 1 3 (63)
---- ------- ------ -----
Unrealized appreciation (depreciation) of securities........ $407 $(2,086) $1,051 $(128)
==== ======= ====== =====
</TABLE>
- -------------------
** On August 13, 1996, all fixed maturities and equity securities in the
Company's investment portfolio were marked to market.
At December 31, 1996 and December 31, 1995, amortized cost, gross unrealized
gains and losses and estimated fair values of fixed maturity securities, all
of which are designated as available for sale, are as follows:
<TABLE>
<CAPTION>
POST-ACQUISITION
-----------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
DECEMBER 31, 1996 COST GAINS LOSSES VALUE
----------------- --------- ---------- ---------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
U.S. government and governmental
agencies and authorities:
Mortgage-backed securities...... $ 70,902 $ 122 $(247) $ 70,777
Other........................... 3,082 2 (4) 3,080
Public utilities................. 35,893 193 (38) 36,048
Investment grade corporate....... 134,487 586 (466) 134,607
Below investment grade
corporate........................ 25,921 249 (56) 26,114
Mortgage-backed securities....... 4,868 69 -- 4,937
-------- ------ ----- --------
Total............................ $275,153 $1,221 $(811) $275,563
======== ====== ===== ========
</TABLE>
<TABLE>
<CAPTION>
PRE-ACQUISITION
-----------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
DECEMBER 31, 1995 COST GAINS LOSSES VALUE
----------------- --------- ---------- ---------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
U.S. government and governmental
agencies and authorities--Other.. $13,334 $176 $13,510
Public utilities................. 5,276 26 5,302
Investment grade corporate....... 27,042 700 $(31) 27,711
Mortgage-backed securities....... 3,019 87 -- 3,106
------- ---- ---- -------
Total............................ $48,671 $989 $(31) $49,629
======= ==== ==== =======
</TABLE>
At December 31, 1996, net unrealized investment gains on fixed maturities
designated as available for sale totaled $410,000. This appreciation caused an
increase to stockholder's equity of $265,000 at December 31, 1996 (net of de-
ferred income taxes of $145,000). No fixed maturity securities were designated
as held for investment at December 31, 1996 or 1995. Short-term investments
with maturities of 30 days or less have been excluded from the above sched-
ules. Amortized cost approximates fair value for these securities.
75
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996
Amortized cost and estimated fair value of fixed maturities designated as
available for sale, by contractual maturity, at December 31, 1996, are shown
below. Expected maturities will differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or without
call or prepayment penalties.
<TABLE>
<CAPTION>
POST-ACQUISITION
-------------------
ESTIMATED
AMORTIZED FAIR
DECEMBER 31, 1996 COST VALUE
----------------- --------- ---------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Due within one year...................................... $ 15,908 $ 15,930
Due after one year through five years.................... 122,958 123,487
Due after five years through ten years................... 60,517 60,432
-------- --------
199,383 199,849
Mortgage-backed securities............................... 75,770 75,714
-------- --------
Total.................................................... $275,153 $275,563
======== ========
</TABLE>
An analysis of sales, maturities and principal repayments of the Company's
fixed maturities portfolio is as follows:
<TABLE>
<CAPTION>
GROSS GROSS PROCEEDS
AMORTIZED REALIZED REALIZED FROM
COST GAINS LOSSES SALE
--------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
For the period August 14, 1996 through
December 31, 1996:
Scheduled principal repayments, calls
and tenders........................... $ 1,612 $ 1,612
Sales................................. 45,799 $115 $ (73) 45,841
------- ---- ----- -------
Total.................................. $47,411 $115 $ (73) $47,453
======= ==== ===== =======
For the period January 1, 1996 through
August 13, 1996:
Scheduled principal repayments, calls
and tenders........................... $ 1,801 $ 1,801
Sales................................. 53,710 $152 $(572) 53,290
------- ---- ----- -------
Total.................................. $55,511 $152 $(572) $55,091
======= ==== ===== =======
Year ended December 31, 1995:
Scheduled principal repayments, calls
and tenders........................... $20,279 $305 $ (16) $20,568
Sales................................. 3,450 8 -- 3,458
------- ---- ----- -------
Total.................................. $23,729 $313 $ (16) $24,026
======= ==== ===== =======
Year ended December 31, 1994:
Scheduled principal repayments,
tenders (available for sale only) and
calls--held for investment............ $ 319 $ 2 $ -- $ 321
------- ---- ----- -------
Total.................................. $ 319 $ 2 $ -- $ 321
======= ==== ===== =======
</TABLE>
Investment Valuation Analysis: The company analyzes its investment portfolio
at least quarterly in order to determine if the carrying value of any of its
investments has been impaired. The carrying value of debt and equity securi-
ties is written down to fair value by a charge to realized losses when an im-
pairment in value appears to be other than temporary. During 1996 and 1995, no
investments were identified as having an impairment other than temporary.
Investments on Deposit: At December 31, 1996 and 1995, affidavits of depos-
its covering bonds with a par value of $6,605,000 and $2,695,000, respective-
ly, were on deposit with regulatory authorities pursuant to certain statutory
requirements.
76
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996
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 regu-
latory authorities. Fixed maturity investments included investments in various
government bonds and government or agency mortgage-backed securities (27% in
1996 and 1995), public utilities (13% in 1996, 11% in 1995), basic industrials
(30% in 1996, 20% in 1995) and financial companies (18% in 1996, 30% in 1995).
Mortgage loans on real estate have been analyzed by geographical location and
17% of all mortgage loans are in Georgia. There are no other concentrations of
mortgage loans in any state exceeding ten percent in 1996. Mortgage loans on
real estate have also been analyzed by collateral type with significant con-
centrations identified in office buildings (36% in 1996), industrial buildings
(31% in 1996) and multi-family residential buildings (27% in 1996). Equity se-
curities and investments accounted for by the equity method are not signifi-
cant 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 stockhold-
er's equity at December 31, 1996.
4. FAIR VALUES OF FINANCIAL INSTRUMENTS
SFAS No. 107, "Disclosures about Fair Value of Financial Instruments" re-
quires disclosure of estimated fair value of all financial instruments, in-
cluding both assets and liabilities recognized and not recognized in a
Company's balance sheet, unless specifically exempted. SFAS No. 119, "Disclo-
sure about Derivative Financial Instruments and Fair Value of Financial In-
struments" requires additional disclosures about derivative financial instru-
ments. Most of the Company's investments, insurance liabilities and debt fall
within the standards' definition of a financial instrument. Although the
Company's insurance liabilities are specifically exempted from this disclosure
requirement, estimated fair value disclosure of these liabilities is also pro-
vided in order to make the disclosures more meaningful. Accounting, actuarial
and regulatory bodies are continuing to study the methodologies to be used in
developing fair value information, particularly as it relates to such things
as liabilities for insurance contracts. Accordingly, care should be exercised
in deriving conclusions about the Company's business or financial condition
based on the information presented herein.
The Company closely monitors the composition and yield of its invested as-
sets, the duration and interest credited on insurance liabilities and result-
ing 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 con-
tracts. As discussed below, the Company has used discount rates in its deter-
mination 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.
77
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996
The following compares carrying values as shown for financial reporting pur-
poses with estimated fair values.
<TABLE>
<CAPTION>
DECEMBER 31, 1996
---------------------
CARRYING ESTIMATED
VALUE FAIR VALUE
---------- ----------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
ASSETS
Balance sheet financial assets:
Fixed maturities available for sale.................. $ 275,563 $ 275,563
Equity securities.................................... 33 33
Mortgage loans on real estate........................ 31,459 30,979
Short-term investments............................... 12,631 12,631
Cash and cash equivalents............................ 5,839 5,839
Other receivables.................................... 4,214 4,214
Separate account assets.............................. 1,207,247 1,207,247
---------- ----------
1,536,986 1,536,506
Deferred policy acquisition costs..................... 11,468 --
Present value of in force acquired.................... 83,051 --
Goodwill.............................................. 38,665 --
Deferred income taxes on fair value adjustments....... -- 7,741
Non-financial assets.................................. 3,095 3,095
---------- ----------
Total assets.......................................... $1,673,265 $1,547,342
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Balance sheet financial liabilities:
Future policy benefits (net of related policy
loans):
Annuity products.................................. $ 280,076 $ 253,012
Interest sensitive life products.................. 2,640 2,368
---------- ----------
282,716 255,380
Surplus note.......................................... 25,000 28,878
Separate account liabilities.......................... 1,207,247 1,119,158
---------- ----------
1,514,963 1,403,416
Non-financial liabilities............................. 17,818 17,818
---------- ----------
Total liabilities..................................... 1,532,781 1,421,234
Stockholder's equity.................................. 140,484 126,108
---------- ----------
Total liabilities and stockholder's equity............ $1,673,265 $1,547,342
========== ==========
</TABLE>
The following methods and assumptions were used by the Company in estimating
fair values.
Fixed maturities: Estimated fair values of publicly traded securities are as
reported by an independent pricing service. Estimated fair values of conven-
tional mortgage-backed securities not actively traded in a liquid market are
estimated using a third party pricing system. This pricing system uses a ma-
trix calculation assuming a spread over U.S. Treasury bonds based upon the ex-
pected 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 ac-
counts, are based upon the quoted fair value of the individual securities com-
prising 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 ex-
pected cash flows, using interest rates currently offered for similar loans.
78
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996
Short-term investments, cash and cash equivalents, and other receivables:
Carrying values reported in the Company's historical cost basis balance sheet
approximate estimated fair value for these instruments, due to their short-
term nature.
Deferred policy acquisition costs, present value of in force acquired and
goodwill: For historical cost purposes, the recovery of policy acquisition
costs and present value of in force acquired is based on the realization,
among other things, of future interest spreads and gross premiums on in force
business. Because these cash flows are considered in the computation of the
future policy benefit cash flows, the deferred policy acquisition cost and
present value of in force acquired balances do not appear on the estimated
fair value balance sheet. Goodwill does not appear in the estimated fair value
balance sheet because no cash flows are related to this asset.
Separate account assets: Separate account assets represent the estimated
fair values of the underlying securities in the Company's historical cost and
estimated fair value basis balance sheets.
Future policy benefits: Estimated fair values of the Company's liabilities
for future policy benefits for the fixed interest division of the variable
products are based upon discounted cash flow calculations. Cash flows of fu-
ture policy benefits are discounted using the market yield rate of the assets
supporting these liabilities. Estimated fair values are presented net of the
estimated fair value of corresponding policy loans due to the interdependent
nature of the cash flows associated with these items.
Surplus note: Estimated fair value of the Company's surplus note was based
upon discounted future cash flows using a discount rate approximating the
Company's return on invested assets.
Separate account liabilities: Separate account liabilities are reported at
full account value in the Company's historical cost balance sheet. Estimated
fair values of separate account liabilities are based upon assumptions using
an estimated long-term average market rate of return to discount future cash
flows. The reduction in fair values for separate account liabilities reflect
the present value of future revenue from product charges, distribution fees or
surrender charges.
Deferred income taxes on fair value adjustments: Deferred income taxes have
been reported at the statutory rate for the differences (except for those at-
tributed to permanent differences) between the carrying value and estimated
fair value of assets and liabilities set forth herein.
Non-financial assets and liabilities: Values are presented at historical
cost. Non-financial assets consist primarily of property and equipment, re-
ceivable from the Separate Accounts and restricted stock assets. Non-financial
liabilities consist primarily of outstanding checks, guaranty fund assessments
payable, payables for investments and suspense accounts.
At December 31, 1995, the carrying amounts reported for the financial in-
struments consisting primarily of short-term investments, policy loans, the
adjustable principal amount promissory note and insurance and annuity reserves
approximate fair value.
SFAS No. 107 and SFAS No. 119 require disclosure of estimated fair value in-
formation about financial instruments, whether or not recognized in the con-
solidated balance sheets, for which it is practicable to estimate that value.
In cases where quoted market prices are not available, estimated fair values
are based on estimates using present value or other valuation techniques.
Those techniques are significantly affected by the assumptions used, including
the discount rate and estimates of future cash flows. In that regard, the de-
rived fair value estimates cannot be substantiated by comparison to indepen-
dent markets and, in many cases, could not be realized in immediate settlement
of the instrument. The above presentation should not be viewed as an appraisal
as there are several factors, such as the fair value associated with customer
or agent relationships and other intangible items, which have not been consid-
ered. In addition, interest rates and other assumptions might be modified if
an actual appraisal were to be performed. Accordingly, the aggregate estimated
fair value amounts presented herein are limited by each of these factors and
do not purport to represent the underlying value of the Company.
79
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996
5. ACQUISITION
Transaction: On August 13, 1996, Equitable acquired all of the outstanding
capital stock of BT Variable from Whitewood, a wholly-owned subsidiary of
Bankers Trust, pursuant to the terms of the Purchase Agreement dated as of May
3, 1996 between Equitable and Whitewood. In exchange for the outstanding capi-
tal 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 ar-
rangement. Subsequent to the acquisition, the BT Variable, Inc. name was
changed to EIC Variable, Inc.
Accounting Treatment: The acquisition was accounted for as a purchase re-
sulting in a new basis of accounting, reflecting estimated fair values for as-
sets and liabilities at August 13, 1996. The purchase price was allocated to
the three companies purchased--BT Variable, DSI and Golden American. Goodwill
was established for the excess of the acquisition cost over the fair value of
the net assets acquired and pushed down to Golden American. The acquisition
cost is preliminary with respect to the final settlement of taxes with Bankers
Trust and estimated expenses and, as a result, goodwill may change. The allo-
cation of the purchase price to Golden American was approximately
$139,872,000. The amount of goodwill relating to the acquisition was
$39,254,000 at the acquisition date and is being amortized over 25 years on a
straight line basis. The carrying value of goodwill will be reviewed periodi-
cally for any indication of impairment in value.
Pro Forma Information (Unaudited): The following pro forma information is
presented as if the acquisition had occurred on January 1, 1995. The informa-
tion is combined to reflect the purchase accounting in the pre-acquisition pe-
riods of January 1, 1996 through August 13, 1996 and for the year ended Decem-
ber 31, 1995. This information is intended for informational purposes only and
may not be indicative of the Company's future results of operations.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
---------------
1996 1995
------- -------
(DOLLARS IN
THOUSANDS)
(UNAUDITED)
<S> <C> <C>
Revenues..................................................... $35,955 $25,149
Net income................................................... 799 1,093
</TABLE>
The primary pro forma effects are revised amortization of deferred policy
acquisition costs, present value of in force acquired, unearned revenue, good-
will and the elimination of deferred tax benefits.
Present Value of In Force Acquired: As part of the acquisition, a portion of
the acquisition cost was allocated to the right to receive future cash flows
from the insurance contracts existing with Golden American at the date of ac-
quisition. This allocated cost represents the present value of in force ac-
quired ("PVIF") which reflects the value of those purchased policies calcu-
lated 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 PERIOD FOR THE PERIOD
AUGUST 14, 1996 JANUARY 1, 1996 YEAR ENDED YEAR ENDED
THROUGH THROUGH DECEMBER 31, DECEMBER 31,
DECEMBER 31, 1996 AUGUST 13, 1996 1995 1994
----------------- --------------- ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Beginning balance............................................. $85,796 $ 6,057 $ 7,620 $ 9,784
Imputed interest.............................................. 2,465 273 548 696
Amortization.................................................. (5,210) (1,224) (2,100) (2,860)
Adjustment for unrealized gains on available for sale
securities.................................................... -- 11 (11) --
------- ------- ------- -------
Ending balance................................................ $83,051 $ 5,117 $ 6,057 $ 7,620
======= ======= ======= =======
</TABLE>
80
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996
Pre-Acquisition PVIF represents the remaining value assigned to in force
contracts when Bankers Trust purchased Golden American from Mutual Benefit on
September 30, 1992. See Note 8, contingent liability for additional informa-
tion.
Interest is imputed on the unamortized balance of PVIF at rates of 7.70% to
7.80% for the period August 14, 1996 through December 31, 1996. PVIF is
charged to expense and adjusted for the unrealized gains (losses) on available
for sale securities. Based on current conditions and assumptions as to the fu-
ture events on acquired policies in force, the expected approximate net amor-
tization for the next five years, relating to the balance of the PVIF as of
December 31, 1996, is as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
---- ----------------------
(DOLLARS IN THOUSANDS)
<S> <C>
1997.................................................. $9,664
1998.................................................. 10,109
1999.................................................. 9,243
2000.................................................. 7,919
2001.................................................. 6,798
</TABLE>
6. INCOME TAXES
The Company files a federal income tax return separate from its parent com-
pany. Under the Internal Revenue Service Code, a newly acquired insurance com-
pany must file a separate return for 5 years. Deferred income taxes have been
established based upon the temporary differences, the reversal of which will
result in taxable or deductible amounts in future years when the related asset
or liability is recovered or settled.
At December 31, 1995 and 1994, Golden American had net operating loss
("NOL") carryforwards for federal income tax purposes of approximately
$22,600,000 and $17,400,000, respectively. As a result of the election made in
connection with the acquisition, the Company will be treated as a new taxpayer
commencing on August 14, 1996. For the period August 14, 1996 through December
31, 1996, the Company incurred a NOL of $4,725,000.
Income Tax Expense
Income tax expenses (credits) are included in the consolidated financial
statements as follows:
<TABLE>
<CAPTION>
POST-ACQUISITION PRE-ACQUISITION
----------------- ---------------
FOR THE PERIOD FOR THE PERIOD
AUGUST 14, 1996 JANUARY 1, 1996
THROUGH THROUGH AUGUST
DECEMBER 31, 1996 13, 1996
----------------- ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Taxes provided in consolidated statements of income--deferred............................. $220 $(1,463)
Taxes provided in consolidated statement of changes in stockholder's equity on unrealized
gains--deferred........................................................................... 145 --
---- -------
$365 $(1,463)
==== =======
</TABLE>
81
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996
Income tax expense (credits) attributed to realized gains and losses on in-
vestments amounted to $15,000 and $(147,000) and for the periods August 14,
1996 through December 31, 1996, and January 1, 1996 through August 13, 1996,
respectively. The effective tax rate on income before income taxes and equity
income (loss) is different from the prevailing federal income tax rate as fol-
lows:
<TABLE>
<CAPTION>
POST-ACQUISITION PRE-ACQUISITION
----------------- -----------------------------------------
FOR THE PERIOD FOR THE PERIOD
AUGUST 14, 1996 JANUARY 1, 1996 YEAR ENDED YEAR ENDED
THROUGH THROUGH AUGUST DECEMBER 31, DECEMBER 31,
DECEMBER 31, 1996 13, 1996 1995 1994
----------------- --------------- ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Income before income taxes.................................... $570 $ 1,736 $3,364 $2,222
Income tax at federal statutory rate.......................... 200 607 1,177 778
Tax effect (decrease) of:
Realization of NOL carryforwards............................. -- (1,214) -- --
Dividends received deduction................................. -- -- (350) (368)
Other items.................................................. 20 -- 17 (210)
Valuation allowance.......................................... -- (856) (844) (200)
---- ------- ------ ------
Income tax expense (benefit).................................. $220 $(1,463) $ -- $ --
==== ======= ====== ======
</TABLE>
Deferred Income Taxes
The tax effect of temporary differences giving rise to the Company's de-
ferred income tax assets and liabilities at December 31, 1996 and 1995 is as
follows:
<TABLE>
<CAPTION>
POST-ACQUISITION PRE-ACQUISITION
---------------- ---------------
DECEMBER 31, 1996 1995
------------ ---------------- ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Future policy benefits.................................................................... $19,102 $15,520
Deferred policy acquisition costs......................................................... 1,985 3,666
Goodwill.................................................................................. 5,918 --
Net operating loss carryforwards.......................................................... 1,653 7,891
Other..................................................................................... 235 57
------- -------
28,893 27,134
Deferred tax liabilities:
Net unrealized appreciation of available for sale fixed maturity securities............... 145 --
Deferred policy acquisition costs......................................................... -- 23,560
Unamortized cost assigned to present value of in force acquired........................... 29,068 2,120
Other..................................................................................... 45 598
------- -------
29,258 26,278
Valuation allowance, for deferred tax assets............................................... -- (856)
------- -------
Deferred income tax liability.............................................................. $ 365 $ --
======= =======
</TABLE>
7. RELATED PARTY TRANSACTIONS
DSI acts as the principal underwriter (as defined in the Securities Act of
1933 and the Investment Company Act of 1940, as amended) of the variable in-
surance products issued by Golden American which as of December 31, 1996 are
sold primarily through two broker/dealer institutions. For the periods August
14, 1996, through December 31, 1996 and January 1, 1996 through August 13,
1996, Golden American paid
82
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996
commissions to DSI totaling $9,995,000 and $17,070,000, respectively. For the
years ended December 31, 1995, and 1994, commissions paid by Golden American
to DSI aggregated $8,440,000 and $17,569,000, respectively.
Golden American charged DSI for various expenses and all other general and
administrative costs, first on the basis of direct charges when identifiable,
with the remainder allocated based on the estimated amount of time spent by
Golden American's employees on behalf of DSI. For the year ended December 31,
1994 expenses allocated to DSI were $1,983,000.
Golden American provides certain managerial and supervisory services to DSI.
In 1996 and 1995, this fee was calculated as a percentage of average assets in
the variable separate accounts. For the periods August 14, 1996 through Decem-
ber 31, 1996 and January 1, 1996 through August 13, 1996 the fee was $877,000
and $1,390,000, respectively. This fee was $987,000 for 1995.
On August 14, 1996, the Company began purchasing investment management serv-
ices from an affiliate. Payments for these services totaled $72,000 through
December 31, 1996. On August 14, 1996, all employees of Golden American, ex-
cept wholesalers, became statutory employees of Equitable Life Insurance Com-
pany of Iowa, an affiliate.
Surplus Note: On December 17, 1996, Golden American issued a surplus note in
the amount of $25,000,000 to Equitable. The note matures on December 17, 2026
and will accrue interest of 8.25% per annum until paid. The note and accrued
interest thereon shall be subordinate to payments due to policyholders, claim-
ant and beneficiary claims, as well as debts owed to all other classes of
debtors of Golden American. Any payment of principal made shall be subject to
the prior approval of the Delaware Insurance Commissioner. On December 17,
1996, Golden American contributed the $25,000,000 to First Golden acquiring
200,000 shares of common stock (100% of outstanding stock) of First Golden.
Line of Credit: Golden American maintains a line of credit agreement with
Equitable to facilitate the handling of unusual and/or unanticipated short-
term cash requirements. Under the current agreement, which became effective
December 1, 1996 and expires on December 31, 1997, Golden American can borrow
up to $25,000,000. Interest on any borrowings is charged at the rate of
Equitable's monthly average aggregate cost of short-term funds plus 1.00%. For
the period August 14 through December 31, 1996, the Company paid $85,000 of
interest under this agreement. At December 31, 1996, no amounts were outstand-
ing under this agreement.
Short-term Debt: All short-term debt was repaid as of December 30, 1994. In-
terest paid during 1994 was $1,962,000. The repayment of amounts under this
loan had been guaranteed by Bankers Trust.
Stockholder's Equity: On September 23, 1996, EIC Variable, Inc. (formally
known as BT Variable, Inc.) contributed $50,000,000 of Preferred Stock to the
Company's additional paid-in capital.
8. COMMITMENTS AND CONTINGENCIES
Contingent Liability: In a transaction that closed on September 30, 1992,
Bankers Trust Company ("Bankers Trust") acquired from Mutual Benefit Life In-
surance Company in Rehabilitation ("Mutual Benefit"), in accordance with the
terms of an Exchange Agreement, all of the issued and outstanding capital
stock of Golden American and DSI and certain related assets for consideration
with an aggregate value of $13,200,000 and contributed them to BT Variable.
The transaction involved settlement of pre-existing claims of Bankers Trust
against Mutual Benefit. The ultimate value of these claims has not yet been
determined by the Superior Court of New Jersey and, prior to August 13, 1996,
was contingently supported by a $5,000,000 note payable from Golden American
and a $6,000,000 letter of credit from Bankers Trust. Bankers Trust had esti-
mated that the contingent liability due from Golden American amounted to
$439,000 at August 13, 1996 and December 31, 1995. At August 13, 1996 the bal-
ance of the escrow account established to fund the contingent liability was
$4,293,000 ($4,150,000 at December 31, 1995).
On August 13, 1996, Bankers Trust made a cash payment to Golden American in
an amount equal to the balance of the escrow account less the $439,000 contin-
gent liability discussed above. In exchange, Golden American irrevocably as-
signed 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
83
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996
Trust also irrevocably agreed to make all payments becoming due under the
Golden American note and to indemnify Golden American for any liability aris-
ing from the note.
Reinsurance: At December 31, 1996, Golden American had reinsurance treaties
with reinsurers covering a significant portion of the mortality risks under
its variable contracts with unaffiliated reinsurers. Golden American remains
liable to the extent its reinsurers do not meet their obligations under the
reinsurance agreements. Reinsurance in force for life mortality risks were
$58,368,000 and $24,709,000 at December 31, 1996 and 1995. Included in the ac-
companying financial statements are net considerations to reinsurers of
$875,000, $600,000, $2,800,000 and $2,400,000 and net policy benefits recov-
eries of $654,000, $1,267,000, $3,500,000 and $1,900,000 for the periods Au-
gust 14, 1996 through December 31, 1996, and January 1, 1996 through August
13, 1996 and the years ended 1995 and 1994, respectively.
Effective June 1, 1994, Golden American entered into a modified coinsurance
agreement with an unaffiliated reinsurer. The accompanying financial state-
ments are presented net of the effects of the treaty which increased income by
$10,000 and $56,000 for the periods August 14, 1996 through December 31, 1996
and January 1, 1996 through December 31, respectively. In 1995 and 1994, net
income was reduced by $109,000 and $27,000, respectively.
Guaranty Fund Assessments: Assessments are levied on the Company by life and
health guaranty associations in most states in which the Company is licensed
to cover losses of policyholders of insolvent or rehabilitated insurers. In
some states, these assessments can be partially recovered through a reduction
in future premium taxes. The Company cannot predict whether and to what extent
legislative initiatives may affect the right to offset. Based upon information
currently available from the National Organization of Life and Health Insur-
ance 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 suffi-
cient. The Company regularly reviews its reserve for these insolvencies and
updates its reserve based upon the Company's interpretation of information
from the NOLHGA annual report. The associated cost for a particular insurance
company can vary significantly based upon its fixed account premium volume by
line of business and state premiums levels as well as its potential for pre-
mium tax offset. Accordingly, the Company accrued and charged to expense an
additional $291,000 for the period August 14, 1996 through December 31, 1996
and $480,000 for the period January 1, 1996 through August 13, 1996. At Decem-
ber 31, 1996, the Company has an undiscounted reserve of $771,000 to cover es-
timated future assessments (net of related anticipated premium tax credits)
and has established an asset totaling $3,000 for assessments paid which may be
recoverable through future premium tax offsets. The Company believes this re-
serve is sufficient to cover expected future insurance guaranty fund assess-
ments, based upon previous premium levels, and known insolvencies at this
time.
Litigation: In the ordinary course of business, the Company is engaged in
litigation, none of which management believes is material.
Vulnerability from Concentrations: The Company has various concentrations in
its investment portfolio (see Note 3 for further information). The Company's
asset growth, net investment income and cash flow are primarily generated from
the sale of variable products and associated future policy benefits and sepa-
rate account liabilities. A significant portion of the Company's sales are
generated by two broker/dealers. Substantial changes in tax laws that would
make these products less attractive to consumers, extreme fluctuations in in-
terest rates or stock market returns which may result in higher lapse experi-
ence than assumed, could cause a severe impact to the Company's financial con-
dition.
Other Commitments: At December 31, 1996, outstanding commitments to fund
mortgage loans on real estate totaled $14,250,000.
84
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
Golden American Life Insurance Company is a stock
company domiciled in Wilmington, Delaware
IN 3458 GS VLI (Prosp.) 5/97
<PAGE>
PART II
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of section 15(d) of the Securities Exchange
Act of 1934, the undersigned Registrant hereby undertakes to file with the
Securities and Exchanges Commission such supplementary and periodic information,
documents and reports as may be prescribed by any rule or regulation of the
Commission heretofore or hereafter duly adopted pursuant to authority conferred
in that section.
REQUIRED REPRESENTATION
Registrant makes the following representation:
Golden American Life Insurance Company hereby represents that the fees
and charges deducted under the Contract described in the Prospectus, in
the aggregate, are reasonable in relation to the services rendered, the
expenses to be incurred and the risks assumed by the Company.
RULE 484 UNDERTAKING
Golden American Life Insurance Company's Articles of Incorporation provide, in
Article XIII, for indemnification of directors, officers and employees of the
company.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provision, or otherwise under circumstances
where the burden of proof set forth in section 11(b) of the Act has not been
sustained, the Registrant has been advised that, in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that claim for indemnification against such liabilities (other than the payment
by the Registrant of expenses incurred or paid by director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
REPRESENTATION PURSUANT TO RULE 6e-3(T)
This filing is made pursuant to Rules 6c-3 and 6e-3(T) under the Investment
Company Act of 1940.
- 1 -
<PAGE>
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents: the
facing sheet; the prospectus; the undertaking to file reports; Rule 484
Undertaking; Representations Pursuant to Rule 6e-3(T); the signatures;
Consents of Stephen J. Preston, Myles R. Tashman, Esq., Ernst & Young, LLP,
independent auditors, and Sutherland, Asbill & Brennan, L.L.P.; and the
following exhibits:
1.A (1) Resolution of Board of Directors establishing the separate
account.(1)
(2) Form of Custodian Agreement.(3)
(3) Distributing Contracts:
(a) Form of Distribution Agreement between Directed Services,
Inc., and Golden American(3)
(b) Form of typical Sales Agreement between directed Services,
Inc., and various broker-dealers.(3)
(c) Organizational Agreement.(7)
(d) Addendum to Organizational Agreement.(5)
(e) Expense Reimbursement Agreement.(7)
(f) Expense Reimbursement Agreement Amendment No.(3)
(g) Form of Assignment for Organizational Agreement.(7)
(4) Not Applicable.
(5) Form of each type of contract:
(a) Individual Flexible Premium - Variable Life Insurance
Policy(1)
(b) Individual Joint and Last Survivor - Variable Life Insurance
Policy(1)
(c) Group Flexible Premium - Variable Life Insurance Policy(2)
(d) Group Joint and Last Survivor - Variable Life Insurance
Policy(2)
(e) Amended Individual Flexible Premium - Variable Life
Insurance Policy(5)
(f) Amended Individual Joint and Last Survivor - Variable Life
Insurance Policy(5)
(g) Amended Group Flexible Premium - Variable Life Insurance
Policy(5)
(h) Amended Group Joint and Last Survivor -Variable Life
Insurance Policy(5)
(i) Charge Deduction Division Rider.(1)
(j) Discretionary Group Charge Deduction Division Rider.(4)
(k) Partial Withdrawal Rider.(1)
(l) Discretionary Group Partial Withdrawal Rider.(4)
- 2 -
<PAGE>
(m) Discretionary Group Incontestability and Suicide Amendment
Rider.(5)
(n) Incontestability and Suicide Amendment Rider.(5)
(o) Amended Individual Flexible Premium - Variable Life
Insurance Policy - Schedule Pages.(6)
(p) Amended Individual Joint and Last Survivor - Variable
Insurance Policy - Schedule Pages.(6)
(q) Amended Group Flexible Premium - Variable Life Insurance
Policy - Scheduled Pages.(6)
(r) Amended Group Joint and Last Survivor - Variable Life
Insurance Policy - Schedule Pages.(6)
(s) Mortality Cost Calculation Amendment.(6)
(t) Individual Flexible Premium Variable Life Insurance Policy
(V290).(8)
(u) Individual Flexible Premium Joint and Last Survivor Variable
Insurance Life Insurance Policy (V390).(8)
(v) Individual Flexible Premium First to Die Variable Life
Insurance Policy (V393).(8)
(w) Group Flexible Premium Joint and Last Survivor Variable Life
Insurance Policy (GV290).(8)
(x) Group Flexible Premium and Joint and Last Survivor Variable
Life Insurance Policy (GV390).(8)
(y) Group Flexible Premium First to Die Variable Life Insurance
Policy (GV392).(8)
(z) Flexible Premium Variable Life Insurance Policy(12)
(aa) Flexible Premium Joint and Last Survivor Variable Life
Insurance Policy(12)
(bb) Group Flexible Premium Variable Life Insurance Policy(12)
(cc) Group Flexible Premium Joint and Last Survivor Variable Life
Ins. Policy(12)
(6) (a) Articles of Incorporation of Golden American.(4)
(b) Certificates of Amendment of the Restated Articles of
Incorporation of Golden American Life Insurance Company.(6)
(c) Certificate of Amendment of the Restated Articles of
Incorporation of MB Variable Life Insurance Company.(10)
(d) Certificate of Amendment of the Restated Articles of
Incorporation of Golden American Life Insurance Company
(12/28/93).(11)
(d) By-Laws of Golden American.(1)
(e) By-Laws of Golden American, as amended.(6)
(f) Certificate of Amendment of the By-Laws of MB Variable Life
Insurance Company, as amended.(10)
(g) By-Laws of Golden American, as amended (12/21/93).(11)
(7) Not Applicable.
(8) Not Applicable.
- 3 -
<PAGE>
(9) Not Applicable.
(10) Form of Application:
(a) Individual Flexible Premium and Joint and Last Survivor
Flexible Premium Variable Life Insurance Application Form.(1)
(b) Group Flexible Premium and Joint and Last Survivor Flexible
Premium Variable Life Insurance Application Form.(2)
(c) Individual Flexible Premium Variable Life Insurance Application
Form (GAL-LAPP-9/92).(8)
(d) Group Flexible Premium Variable Life Insurance Enrollment Form
(GAL-LENR-11/92).(8)
(e) Flexible Premium Variable Life Insurance Application/Enrollment
Form(12)
(11) Memorandum Describing Golden American's Inssuance, Transfer and
Redemption Procedures.(2)
2. See 1.A.(5.)
3. Opinion and Consent of Counsel as to the legality of the securities being
registered.(1)
4. Financial Schedules.
5. Not Applicable.
6. Opinion and Consent of Stephen J. Preston, F.S.A., M.A.A.A.
7. Consent of Myles R. Tashman, Esq.
8. Consent of Ernst & Young LLP, Independent Auditors.
9. Consent of Sutherland, Asbill & Brennan, L.L.P.
10. (a) Resolution of Board of Directors Authorizing Power of Attorney.(5)
(b) Powers of Attorney.
1. Incorporated herein by reference to the Registrant's initial registration
statement filed on Form S-6 with the Securities and Exchange Commission on
August 5, 1988 (File No. 33-23458).
2. Incorporated herein by reference to the Registrant's Pre-Effective
Amendment No. 1 filed on Form S-6 with the Securities and Exchange
Commission on October 28, 1988 (File No. 33-23458).
3. Incorporated herein by reference to the Registrant's Pre-Effective
Amendment No. 2 filed on Form S-6 with the Securities and Exchange
Commission on December 23, 1988 (File No. 33-23458).
4. Incorporated herein by reference to the Registrant's Post-Effective
Amendment No. 1 filed on Form S-6 with the Securities and Exchange
Commission on April 18, 1989 (File No. 33-23458).
- 4 -
<PAGE>
5. Incorporated herein by reference to the Registrant's Post-Effective
Amendment No. 2 filed on Form S-6 with the Securities and Exchange
Commission on September 13, 1989 (File No. 33-23458).
6. Incorporated herein by reference to Post-Effective Amendment No. 5 filed on
Form N-4 with the Securities and Exchange Commission May 2, 1991 (File No.
33-23351).
7. Incorporated here by reference to Post-Effective Amendment No. 8 filed on
Form N-4 with the Securities and Exchange Commission May 1, 1992 (File No.
33-23351).
8. Incorporated herein by reference to the Registrant's Post-Effective
Amendment No. 11 filed on Form S-6 with the Securities and Exchange
Commission on December 1, 1992 (File No. 33-23458).
9. Incorporated herein by reference to Post-Effective Amendment No. 12 filed
on Form N-4 with the Securities and Exchange Commission on May 3, 1993
(File No. 33-23351).
10. Incorporated herein by reference to the depositor's initial registration
statement on Form N-3 filed with the Securities and Exchange Commission on
August 19, 1992 (File No. 33-51028).
11. Incorporated herein by reference to the depositor's registration statement
on Form N-4 filed with the Securities and Exchange Commission on May 2,
1994 (File No. 33-23351).
12. Incorporated herein by reference to the Registrant's Post-Effective
Amendment No. 17 filed on Form S-6 with the Securities and Exchange
Commission on July 14, 1995 (File No. 33-23458).
- 5 -
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it meets all of the requirements for effectiveness of this
Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933
and has duly caused this Post-Effective Amendment No. 21 to the Registration
Statement to be signed on its behalf in the City of Wilmington and State of
Delaware, on the 30th day of April, 1997.
SEPARATE ACCOUNT A
--------------------
(Registrant)
By: GOLDEN AMERICAN LIFE
INSURANCE COMPANY
--------------------
(Depositor)
By:
________________________
Terry L. Kendall*
President and Chief
Executive Officer
Attest: /s/ Marilyn Talman
---------------------------
Marilyn Talman
Vice President and Assistan Secretary of Depositor
As required by the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the
capacities indicated on April 30, 1997.
Signature Title
--------- -----
________________________ President, Director
Terry L. Kendall* Chief Executive Officer
of Depositor
________________________ Principal Financial Officer
Paul E. Larson*
DIRECTORS OF DEPOSITOR
________________________ ________________________
Fred S. Hubbell, Chairman* Lawrence V. Durland*
________________________ ________________________
Paul E. Larson* Thomas L. May*
________________________ ________________________
John A. Merriman* Beth B. Neppl*
________________________ ________________________
Paul R. Schlaack* Jerome L. Sychowski*
By: /s/ Marilyn Talman Attorney-in-Fact
-----------------------
Marilyn Talman
_______________________
*Executed by Marilyn Talman on behalf of those indicated pursuant
to Power of Attorney.
<PAGE>
EXHIBIT INDEX
Exhibit Item Page
- ------- ---- ----
4. Financial Schedules
6. Opinion and Consent of Stephen J. Preston, F.S.A., F.A.A.A.
7. Consent of Myles R. Tashman, Esq.
8. Consent of Ernst & Young LLP, Independent Auditors
9. Consent of Sutherland, Asbill & Brennan, L.L.P.
10(b). Powers of Attorney
- 7 -
SCHEDULE I
SUMMARY OF INVESTMENTS
OTHER THAN INVESTMENTS IN RELATED PARTIES
(Dollars in thousands)
<TABLE>
<CAPTION>
Balance
Sheet
December 31, 1996 Cost 1 Value Amount
_______________________________________________________________________________
<S> <C> <C> <C>
TYPE OF INVESTMENT
Fixed maturities, available for sale:
Bonds:
United States Government and govern-
mental agencies and authorities $73,984 $73,857 $73,857
Public utilities 35,893 36,048 36,048
Investment grade corporate 134,487 134,607 134,607
Below investment grade corporate 25,921 26,114 26,114
Mortgage-backed securities 4,868 4,937 4,937
___________ ___________ ___________
Total fixed maturities, available
for sale 275,153 275,563 275,563
Equity securities:
Common stocks: industrial, miscel-
laneous and all other 36 33 33
Mortgage loans on real estate 31,459 31,459
Policy loans 4,634 4,634
Short-term investments 12,631 12,631
___________ ___________
Total investments $323,913 $324,320
=========== ===========
<FN>
Note 1: Cost is defined as original cost for stocks and other invested assets,
amortized cost for bonds and unpaid principal for policy loans and
mortgage loans on real estate, adjusted for amortization of premiums
and accrual of discounts.
</TABLE>
SCHEDULE III
SUPPLEMENTARY INSURANCE INFORMATION
(Dollars in thousands)
<TABLE>
<CAPTION>
Column Column Column Column Column Column
A B C D E F
________________________________________________________________________________
Future
Policy Other
De- Benefits, Policy
ferred Losses, Claims Insur-
Policy Claims Un- and ance
Acqui- and earned Bene- Premiums
sition Loss Revenue fits and
Segment Costs Expenses Reserve Payable Charges
________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
POST-ACQUISITION
________________________________________________________________________________
Period August 14, 1996
through December 31, 1996:
Life insurance $11,469 $285,287 $2,063 -- $8,768
PRE-ACQUISITION
________________________________________________________________________________
Period January 1, 1996
through August 13, 1996:
Life insurance 85,265 176,914 8,826 -- 12,259
Year ended December 31, 1995:
Life insurance 67,314 33,673 6,556 -- 18,388
Year ended December 31, 1994:
Life insurance 60,662 1,051 1,759 -- 17,519
</TABLE>
SCHEDULE III
SUPPLEMENTARY INSURANCE INFORMATION - CONTINUED
(Dollars in thousands)
<TABLE>
<CAPTION>
Column Column Column Column Column Column
A G H I J K
________________________________________________________________________________
Amorti-
Benefits zation
Claims, of
Losses Deferred
Net and Policy Other
Invest- Settle- Acqui- Opera-
ment ment sition ting Premiums
Segment Income Expenses Costs Expenses Written
________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
POST-ACQUISITION
________________________________________________________________________________
Period August 14, 1996
through December 31, 1996:
Life insurance $5,795 $7,003 $244 $8,066 --
PRE-ACQUISITION
________________________________________________________________________________
Period January 1, 1996
through August 13, 1996:
Life insurance 4,990 5,270 2,436 8,847 --
Year ended December 31, 1995:
Life insurance 2,818 3,146 2,710 13,333 --
Year ended December 31, 1994:
Life insurance 560 35 4,608 9,317 --
</TABLE>
SCHEDULE IV
REINSURANCE
GOLDEN AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARY
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E Column F
_______________________________________________________________________________
Percentage
Ceded to Assumed of Amount
Gross Other from Other Net Assumed
Amount Companies Companies Amount to Net
_______________________________________________________________________________
<S> <C> <C> <C> <C> <C>
At December 31, 1996:
Life insurance in
force $86,192,000 $58,368,000 -- $27,824,000 --
============ ============ ========= ============ ==========
At December 31, 1995:
Life insurance in
force $38,383,000 $24,709,000 -- $13,674,000 --
============ ============ ========= ============ ==========
At December 31, 1994:
Life insurance in
force $30,227,000 $23,061,000 -- $7,166,000 --
============ ============ ========= ============ ==========
</TABLE>
<PAGE>
EXHIBIT 6. OPINION AND CONSENT OF STEPHEN J. PRESTON, F.S.A., F.A.A.A.
- 8 -
<PAGE>
Exhibit 6
GOLDEN AMERICAN LIFE INSURANCE COMPANY
1001 Jefferson Street, Wilmington, DE 19801 Tel: (302) 576-3400
Fax: (302) 576-3540
April 30, 1997
Members of the Board of Directors
Golden American Life Insurance Company
1001 Jefferson Street, Suite 400
Wilmington, De 19801
Directors:
This opinion is furnished in connection with the filing of Post-Effective
Amendment No 21 on Form S-6 ("Registration Statement") (File No. 33-23458) which
covers premiums expected to be received under the flexible premium variable life
insurance policies ("Policies") offered by Separate Account A of Golden American
Life Insurance Company ("Golden American"). The prospectuses included in the
Registration Statement describes Policies which are offered by Golden American
in each state where they have been approved by the appropriate state insurance
authorities. The Policy forms were prepared under my direction, and I am
familiar with the Registration Statement and the exhibits thereto. In my
opinion:
1) The illustrations of death benefits, investment values, cash surrender
values and accumulated premiums for the Policies in the prospectuses
included in the Registration Statement based on assumptions stated in the
illustrations, are consistent with the provisions of the Policies. The
rate structure of the Policies has not been designed so as to make the
prospectuses, more favorable than for Policies for other ages.
2) The table of illustratives premiums and the table of illustrative net
single premium factors in the prospectuses are consistent with the
provisions of the Policies.
I hereby consent to the use of this opinion as an exhibit to the Registration
Statement and to the reference to my name under the heading "Experts" in the
prospectuses.
Sincerely,
/s/ Stephen J. Preston
- ---------------------------------
Stephen J. Preston F.S.A., M.A.A.A.
Sr. Vice President and Chief Actuary
<PAGE>
EXHIBIT 7. CONSENT OF MYLES R. TASHMAN
- 9 -
<PAGE>
Exhibit 7
GOLDEN AMERICAN LIFE INSURANCE COMPANY
1001 Jefferson Street, Suite 400
Wilmington, DE 19801 Tel: (302) 576-3400
April 30, 1997
Members of the Board of Directors
Golden American Life Insurance Company
1001 Jefferson Street, Suite 400
Wilmington, DE 19801
Directors:
I hereby consent to the reference of my name under the caption "Legal Matters"
in the Prospectus contained in Post-Effective Amendment No. 21 to the
Registration Statement on Form S-6 (File No. 33-23458) filed by Golden American
Life Insurance Company and Separate Account A with the Securities and Exchange
Commission under the Securities Act of 1933.
Sincerely,
/s/ Myles R. Tashman
- ----------------------------
Myles R. Tashman
Executive Vice President and Secretary
<PAGE>
EXHIBIT 8. CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
- 10 -
<PAGE>
Exhibit 8 -- CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our reports dated February 5, 1997, with respect to Separate Account A
and dated February 11, 1997, with respect to Golden American Life Insurance
Company in Post-Effective Amendment No. 21 to the Registration Statement
(Form S-6 No. 33-23458) and related Prospectus of Separate Account A.
Our audit also included the financial statement schedules of Golden American
Life Insurance Company included in Item 4. These schedules are the
responsibility of the Company's management. Our responsibility is to
express an opinion based on our audit. In our opinion, the financial
statement schedules referred to above, when considered in relation to the
basic financial statements taken as a whole, present fairly in all material
respects the information set forth therein.
/s/ ERNST & YOUNG LLP
Des Moines, Iowa
April 24, 1997
<PAGE>
EXHIBIT 9. CONSENT OF SUTHERLAND, ASBILL & BRENNAN, L.L.P.
- 11 -
<PAGE>
Sutherland, Asbill & Brennan, L.L.P. ATLANTA
Tel: (202) 383-0100 1275 Pennsylvania Ave, NW AUSTIN
Fax: (202) 637-3593 Washington, DC 20004-2404 NEW YORK
WASHINGTON
SUSAN S. KRAWCZYK
DIRECT LINE: (202) 383-0197
Internet: [email protected]
April 30, 1997
Board of Directors
Golden American Life Insurance Company
1001 Jefferson Street, Suite 400
Wilmington, DE 19801
Ladies and Gentlemen:
We hereby consent to the reference to our name under the caption "Legal
Matters" in the Prospectus filed as part of Post-Effective Amendment No. 21 to
the registration statement on Form S-6 for Separate Account A (File No. 33-
23458) of Golden American Life Insurance Company. In giving this consent, we
do not admit that we are in the category of persons whose consent is required
under Section 7 of the Securities Act of 1933.
Very truly yours,
SUTHERLAND, ASBILL & BRENNAN,
L.L.P.
By /s/ Susan S. Krawczyk
-------------------------
Susan S. Krawczyk
<PAGE>
EXHIBIT 10(b) POWERS OF ATTORNEY
- 13 -
<PAGE>
Exhibit 10(b)
GOLDEN AMERICAN LIFE INSURANCE COMPANY
1001 Jefferson Street, Suite 400, Wilmington, DE 19803
Phone: (302) 576-3400
Fax: (302) 576-3520
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned,
being duly elected Directors and officers of Golden American Life
Insurance Company ("Golden American"), constitute and appoint
Myles R. Tashman, and Marilyn Talman, and each of them, his or
her true and lawful attorneys-in-fact and agents with full power
of substitution and resubstitution for him or her in his or her
name, place and stead, in any and all capacities, to sign Golden
American's registration statements and applications for exemptive
relief, and any and all amendments thereto, and to file the same,
with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents full power and authority
to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as
s/he might or could do in person, hereby ratifying and affirming
all that said attorneys-in-fact and agents, or any of them, or
his or her substitute or substitutes, may lawfully do or cause to
be done by virtue thereof.
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ Terry L. Kendall Director, President and April 21, 1997
- ----------------------- --------------------
Terry L. Kendall Chief Executive
Officer
/s/ Paul E. Larson Director, Executive April 14, 1997
- ----------------------- --------------------
Paul E. Larson Vice President, Chief
Financial Officer and
Assistant Secretary
/s/ Fred S. Hubbell Director and Chairman April 14, 1997
- ----------------------- --------------------
Fred S. Hubbell
/s/ Lawrence V. Durland Director April 14, 1997
- ----------------------- --------------------
Lawrence V. Durland
/s/ Thomas L. May Director April 14, 1997
- ----------------------- --------------------
Thomas L. May
John A. Merriman Director and Assistant April 14, 1997
- ----------------------- --------------------
John A. Merriman Secretary
Beth B. Neppl Director and Vice April 14, 1997
- ----------------------- --------------------
Beth B. Neppl President
Paul R. Schlaack Director April 14, 1997
- ----------------------- --------------------
Paul R. Schlaack
Jerome L. Sychowski Director April 14, 1997
- ----------------------- --------------------
Jerome L. Sychowski
<PAGE>
