<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 11, 1995
Registration Nos. 33- ____
811-6090
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-3
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
and/or
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 17
--
SEPARATE ACCOUNT D
(EXACT NAME OF REGISTRANT)
GOLDEN AMERICAN LIFE INSURANCE COMPANY
(NAME OF DEPOSITOR)
1001 Jefferson Street
Wilmington, DE 19801
302-576-3400
(ADDRESS AND TELEPHONE NUMBER OF DEPOSITOR'S PRINCIPAL OFFICES)
COPY TO:
BERNARD R. BECKERLEGGE, ESQ. Stephen Roth, Esq.,
Golden American Life Insurance Company Thomas Bisset, Esq.
280 Park Avenue, 14 West, Sutherland, Asbill & Brennan
New York, NY 10017 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
-----------------
DECLARATION PURSUANT TO RULE 24F-2
The Registrant has previously filed a declaration of indefinite registration of
its shares pursuant to Rule 24f-2 under the Investment Company Act of 1940. The
Rule 24f-2 Notice for the year ended December 31,1994 was filed on February 24,
1995.
-----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE>
CROSS REFERENCE SHEET
Pursuant to Rule 495(a)
<TABLE>
<CAPTION>
PART A
N-3 Item Prospectus Heading
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<S> <C>
1. Cover Page Cover Page
2. Definitions Definition of Terms
3. Synopsis Summary of the Contracts
4. Condensed Financial Information Condensed Financial Information
5. General Description of Registrant Part I, Facts About the Company
and Insurance Company and the Accounts
6. Management Part I, Facts About the Company
and the Accounts
7. Deductions and Expenses Part I, Charges and Fees
8. General Description of Variable Part I, Facts About the Contracts
Annuity Contracts
9. Annuity Period Part I, Choosing an Income Plan
10. Death Benefit Part I, Facts About the Contracts
11. Purchases and Contract Value Part I, Facts About the Contracts,
Charges and Fees
12. Redemptions Part I, Facts About the Contracts
13. Taxes Part I, Federal Tax Considerations
Additional Considerations
14. Legal Proceedings Part I, Regulatory Information
15. Table of Contents of the Statement of Additional Information
Statement of Additional Information
<CAPTION>
PART B
Statement of Additional
N-3 Item Information Heading
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<S> <C>
15. Cover Page Cover Page
16. Table of Contents Table of Contents
17. General Information and History Description of Golden American
Life Insurance Company
19. Investment Objective and Policies Securities and Investment Techniques;
Investment Restrictions
20. Management Account Management; The Manager
21. Investment Advisory and Portfolio Manager; The Administrator;
Other Services Custodian and Portfolio Accounting Agent;
Experts
22. Brokerage Allocation Portfolio Transactions and Brokerage
23. Purchase and Pricing of Purchase and Pricing of the Global Account
Securities Being Offered
24. Underwriters Distribution of Contracts
25. Calculation of Performance Data Performance Information
26. Annuity Payments Part A
27. Financial Statements Financial Statements of The Managed Global
Account of Separate Account D;
Financial Statements of Golden American Life
Insurance Company
PART C
Items required in Part C are located therein.
</TABLE>
<PAGE>
PART A
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
A Subsidiary of Bankers Trust Company
GOLDEN AMERICAN LIFE INSURANCE COMPANY IS A STOCK COMPANY DOMICILED IN
WILMINGTON, DELAWARE
DEFERRED COMBINATION VARIABLE AND
FIXED ANNUITY PROSPECTUS
GOLDENSELECT DVA
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This prospectus describes group and individual deferred variable annuity
contracts (the "Contract") offered by Golden American Life Insurance Company
("Golden American," "we," "our" or "us"). The owner ("you" or "your") purchases
the contract with an initial premium and is permitted to make additional premium
payments.
The contract is funded by three separate accounts, Separate Account B ("Account
B") and Separate Account D ("Account D") and the Fixed Account (collectively,
the "Accounts").
Eleven Divisions of Account B are currently available under the contract. The
investments available through the Divisions of Account B include mutual fund
portfolios (the "Series") of The GCG Trust (the "Trust"). Account D is an
open-end management investment company. The only Division of Account D available
for investment is The Managed Global Account (the "Global Account") which
invests directly in securities. The investments available through the Fixed
Account include various Fixed Allocations which we credit with fixed rates of
interest for the Guarantee Periods you select. We currently offer Guarantee
Periods with durations of 1, 3, 5, 7 and 10 years. We reserve the right at any
time to increase or decrease the number of Guarantee Periods offered. We also
reserve the right to discontinue a Guarantee Period at any time.
Part I of this prospectus describes the contract and provides background
information regarding Account B, Account D and the Fixed Account. Part II of
this prospectus provides information regarding the investment activities of
Account D and the Global Account, including its investment policies. The
prospectus for the Trust, which must accompany this prospectus, provides
information regarding investment activities and policies of the Trust.
You may allocate your premiums among the twelve Divisions and the Fixed
Allocations available under the contract in any way you choose, subject to
certain restrictions. You may change the allocation of your Accumulation Value
during a contract year free of charge. We reserve the right, however, to assess
a charge for each allocation change after the twelfth allocation change in a
contract year.
Your Accumulation Value in Account B and Account D will vary in accordance with
the investment performance of the Divisions selected by you. Therefore, you bear
the entire investment risk for all amounts allocated to Account B and Account D.
You also bear the investment risk with respect to surrenders, partial
withdrawals, transfers and annuitization from a Fixed Allocation prior to the
end of the applicable Guarantee Period. A surrender, partial withdrawal,
transfer or annuitization made prior to the end of a Guarantee Period may be
subject to a Market Value Adjustment, which could have the effect of either
increasing or decreasing your Accumulation Value.
We will pay a death benefit to the beneficiary if the owner dies prior to the
annuity commencement date or the annuitant dies prior to the annuity
commencement date when the owner is other than an individual. See Part I,
Proceeds Payable to the Beneficiary.
This prospectus describes your principal rights and limitations and sets forth
the information concerning the Accounts that investors should know before
investing. A Statement of Additional Information, dated August __, 1995, about
Account B and Account D has been filed with the Securities and Exchange
Commission ("SEC") and is available without charge upon request. To obtain a
copy of this document call or write our Customer Service Center. The Table of
Contents of the Statement of Additional Information may be found on the last
page of this prospectus. The Statement of Additional Information is incorporated
herein by reference.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
CONTRACTS AND UNDERLYING SERIES SHARES WHICH FUND THE CONTRACTS ARE NOT INSURED
BY THE FDIC OR ANY OTHER AGENCY. THEY ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF
ANY BANK AND ARE NOT BANK GUARANTEED. THEY ARE SUBJECT TO MARKET FLUCTUATION,
REINVESTMENT RISK AND POSSIBLE LOSS OF PRINCIPAL INVESTED.
PLEASE READ THIS PROSPECTUS AND KEEP IT FOR FUTURE REFERENCE. IT IS NOT VALID
UNLESS ACCOMPANIED BY THE CURRENT PROSPECTUS FOR THE GCG TRUST.
THE FIXED ACCOUNT IS NOT AVAILABLE IN ALL STATES. YOU MAY CONTACT OUR CUSTOMER
SERVICE CENTER TO FIND OUT ABOUT STATE AVAILABILITY.
<TABLE>
<S> <C> <C>
ISSUED BY: DISTRIBUTED BY: ADMINISTERED AT:
Golden American Life Directed Services, Inc. Customer Service Center
Insurance Company New York, New York 10017 Mailing Address: P.O. Box 8794
Wilmington, Delaware 19899-8794
1-800-366-0066
</TABLE>
PROSPECTUS DATED: AUGUST __, 1995
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
DEFINITION OF TERMS..................................... 3
SUMMARY OF THE CONTRACT................................. 5
FEE TABLE............................................... 7
CONDENSED FINANCIAL INFORMATION......................... 9
Index of Investment Experience
Financial Statements
Performance Related Information
PART I
INTRODUCTION............................................ 11
FACTS ABOUT THE COMPANY AND THE ACCOUNTS................ 12
Golden American
The GCG Trust
Separate Accounts B and D
Account B Divisions
The Managed Global Account of Account D
Changes Within Account B and D
The Fixed Account
FACTS ABOUT THE CONTRACT................................ 19
The Owner
The Annuitant
The Beneficiary
Change of Owner or Beneficiary
Availability of the Contract
Types of Contracts
Your Right to Select or Change Contract Options
Premiums
Making Additional Premium Payments
Crediting Premium Payments
Restrictions on Allocation of Premium Payments
Exchange Program
Your Right to Reallocate
Dollar Cost Averaging
What Happens if a Division is Not Available
Your Accumulation Value
Accumulation Value in Each Division
Measurement of Investment Experience
Cash Surrender Value
Surrendering to Receive the Cash Surrender Value
Partial Withdrawals
Proceeds Payable to the Beneficiary
Death Benefit Options
Reports to Owners
When We Make Payments
CHARGES AND FEES........................................ 28
Charge Deduction Division
Charges Deducted from the Accumulation Value
Charges Deducted from the Divisions
Trust Expenses
Operating Expenses of Account D
CHOOSING AN INCOME PLAN................................. 30
The Income Plan
Annuity Commencement Date Selection
<CAPTION>
PAGE
<S> <C>
Frequency Selection
The Annuity Options
Payment When Named Person Dies
OTHER CONTRACT PROVISIONS............................... 32
In Case of Errors in Application Information
Your Right to Cancel or Exchange Your Contract
Other Contract Changes
Group or Sponsored Arrangements
Selling the Contract
REGULATORY INFORMATION.................................. 33
Voting Rights
State Regulation
Legal Proceedings
Legal Matters
Experts
MORE INFORMATION ABOUT GOLDEN AMERICAN LIFE INSURANCE
COMPANY................................................ 34
Selected Financial Data
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Directors and Executive Officers
Compensation Tables and Other Information
FEDERAL TAX CONSIDERATIONS.............................. 42
Introduction
Golden American Tax Status
Taxation on Non-Qualified Annuities
Taxation of Individual Retirement Annuities
Distribution-at-Death Rules
Taxation of Death Benefit Proceeds
Transfer of Annuity Contracts
Assignments
Multiple Contracts Rule
Section 1035 Exchanges
PART II
INTRODUCTION............................................ 48
THE MANAGED GLOBAL ACCOUNT OF ACCOUNT D................. 49
The Global Account
Investment Objective and Policies of the Global
Account
Non-Diversified
Risk Factors
Board of Governors of Account D
The Manager
The Portfolio Manager
Securities and Investment Techniques
Investment Restrictions
Brokerage Services
UNAUDITED AND AUDITED FINANCIAL STATEMENTS OF GOLDEN
AMERICAN LIFE INSURANCE COMPANY........................ 60
STATEMENT OF ADDITIONAL INFORMATION..................... 98
Table of Contents
APPENDIX A.............................................. A1
Market Value Adjustment Examples
APPENDIX B.............................................. B1
GoldenSelect Service Forms
</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>
DEFINITION OF TERMS
ACCOUNTS
Separate Account B, Separate Account D, and the Fixed Account.
ACCUMULATION VALUE
The total amount invested under the contract. Initially, this amount is equal to
the premium paid. Thereafter, the Accumulation Value will reflect the premiums
paid, investment experience of the Divisions and interest credited to your Fixed
Allocations, charges deducted and any partial withdrawals.
ANNUITANT
The person designated by the owner to be the measuring life in determining
annuity payments.
ANNUITY COMMENCEMENT DATE
The date on which annuity payments begin.
ANNUITY OPTIONS
Options the owner selects that determine the form and amount of annuity
payments.
ANNUITY PAYMENT
The periodic payment an owner receives. It may be either a fixed or a variable
amount based on the annuity option chosen.
ATTAINED AGE
The issue age of the owner or annuitant plus the number of full years elapsed
since the contract date.
BENEFICIARY
The person designated to receive benefits in the case of the death of the owner
or the annuitant (when the owner is other than an individual).
BUSINESS DAY
Any day the New York Stock Exchange ("NYSE") is open for trading, exclusive of
Federal holidays, or any day on which the SEC requires that mutual funds, unit
investment trusts or other investment portfolios be valued.
CASH SURRENDER VALUE
The amount the owner receives upon surrender of the contract, including any
Market Value Adjustment.
CHARGE DEDUCTION DIVISION
The Division from which all charges are deducted if so designated by you. The
Charge Deduction Division currently is the Liquid Asset Division.
CONTINGENT ANNUITANT
The person designated by the owner who, upon the annuitant's death prior to the
annuity commencement date, becomes the annuitant.
CONTRACT
The entire contract consisting of the basic contract and any riders or
endorsements.
CONTRACT ANNIVERSARY
The anniversary of the contract date.
CONTRACT DATE
The date on which we have received the initial premium and upon which we begin
determining the contract values. It may or may not be the same as the issue
date. This date is used to determine contract months, processing dates, years
and anniversaries.
CONTRACT PROCESSING DATES
The days when we deduct certain charges from the Accumulation Value. If the
contract processing date is not a valuation date, it will be on the next
succeeding valuation date. The contract processing dates will be once each year
on the contract anniversary.
CONTRACT PROCESSING PERIOD
The first contract processing period begins with the contract date and ends at
the close of business on the first contract processing date. All subsequent
contract processing periods begin at the close of business on the most recent
contract processing date and extend to the close of business on the next
contract processing date. There is one contract processing period each year.
CONTRACT YEAR
The period between contract anniversaries.
CUSTOMER SERVICE CENTER
Where service is provided to you. The mailing address and telephone number of
the Customer Service Center are shown on the cover.
DIVISIONS
The investment options available under Account B and Account D.
ENDORSEMENTS
An endorsement changes or adds provisions to the contract.
3
<PAGE>
DEFINITION OF TERMS (CONTINUED)
EXPERIENCE FACTOR
The factor which reflects the investment experience of the portfolio in which a
Division invests and also reflects the charges assessed against the Division for
a valuation period.
FIXED ACCOUNT
An account which contains all of our assets that support owner Fixed Allocations
and any interest credited thereto.
FIXED ALLOCATION
An amount allocated to the Fixed Account that is credited with a Guaranteed
Interest Rate for a specified Guarantee Period.
FREE LOOK PERIOD
The period of time within which the owner may examine the contract and return it
for a refund.
GUARANTEED INTEREST RATE
The effective annual interest rate which we will credit for a specified
Guarantee Period. The Guaranteed Interest Rate will never be less than 3%.
GUARANTEE PERIOD
The period of time for which a rate of interest is guaranteed to be credited to
a Fixed Allocation. We currently offer Guarantee Periods with durations of 1, 3,
5, 7 and 10 years.
INDEX OF INVESTMENT EXPERIENCE
The index that measures the performance of a Division.
INITIAL PREMIUM
The payment required to put a contract into effect.
ISSUE AGE
The owner's or annuitant's age on his or her last birthday on or before the
contract date.
ISSUE DATE
The date the contract is issued at our Customer Service Center.
MARKET VALUE ADJUSTMENT
A positive or negative adjustment made to a Fixed Allocation. It may apply to
certain withdrawals and transfers, whether in whole or in part, and
annuitizations of all or part of a Fixed Allocation prior to the end of a
Guarantee Period.
MATURITY DATE
The date on which a Guarantee Period matures.
OWNER
The person who owns the contract and is entitled to exercise all rights under
the contract. This person's death also initiates payment of the death benefit.
RIDER
A rider amends the contract, in certain instances adding benefits.
SPECIALLY DESIGNATED DIVISION
The Division to which distributions from a portfolio underlying a Division in
which reinvestment is not available will be allocated unless you specify
otherwise. The Specially Designated Division currently is the Liquid Asset
Division.
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.
4
<PAGE>
SUMMARY OF THE CONTRACT
This prospectus has been designed to provide you with information regarding the
contract and the Accounts which fund the contract. Information concerning the
Divisions of Account B and the Fixed Account is set forth in Part I of this
prospectus. Part II of this prospectus pertains to Account D which invests
directly in securities.
This summary is intended to provide only a very brief overview of the more
significant aspects of the contract. Further detail is provided in this
prospectus and in the contract. The contract, together with any riders or
endorsements, constitutes the entire agreement between you and us and should be
retained.
This prospectus has been designed to provide you with the necessary information
to make a decision on purchasing the contract offered by Golden American and
funded by the Accounts.
You have a choice of investments. We do not promise that your Accumulation Value
will increase. Depending on the investment experience of the Divisions and
interest credited to the Fixed Allocations in which you are invested, your
Accumulation Value,cash surrender value and death benefit may increase or
decrease on any day. You bear the investment risk.
DESCRIPTION OF THE CONTRACT
The contract is designed to establish retirement benefits for two types of
purchasers. The first type of purchaser is one who is eligible to participate
in, and purchases a contract for use with, an individual retirement annuity
("IRA") meeting the requirements of section 408(b) of the Internal Revenue Code
of 1986 ("qualified plan"). For a contract funding a qualified plan,
distribution must commence not later than April 1st of the calendar year
following the calendar year in which you attain age 70 1/2. The second type of
purchaser is one who purchases a contract outside of a qualified plan
("non-qualified plan").
The contract also offers a choice of annuity options to which you may apply all
or a portion of the Accumulation Value on the annuity commencement date or the
cash surrender value upon surrender of the contract. See Part I, Choosing an
Income Plan.
AVAILABILITY
We can issue a contract if both the annuitant and the owner are not older than
age 85 and accept additional premium payments until either the annuitant or
owner reaches the attained age of 85 for non-qualified plans (age 70 for
qualified plans, except for rollover contributions). The minimum initial premium
is $10,000 for a non-qualified plan and $1,500 for a qualified plan. We may
change the minimum initial or additional premium requirements for certain group
or sponsored arrangements. See Part I, Group or Sponsored Arrangements.
The minimum additional premium payment we will accept is $500 for a
non-qualified plan and $250 for a qualified plan. You must receive our prior
approval before making a premium payment that causes the Accumulation Value of
all annuities that you maintain with us to exceed $1,000,000.
THE DIVISIONS
Each of the twelve Divisions offered under this prospectus has its own distinct
investment objectives and policies. There are eleven Divisions of Account B.
Each Division of Account B invests in a corresponding Series of the Trust,
managed by Directed Services, Inc. ("DSI" or the "Manager"). The Trust and DSI
have retained several portfolio managers to manage the assets of each Series.
The Division of Account D is The Managed Global Account. DSI is the Manager and
Warburg, Pincus Counsellors, Inc. ("Warburg, Pincus") is the portfolio manager
(the "Portfolio Manager"). See Part I, Facts About the Company and the Accounts,
Account B Divisions, and The Managed Global Account of Account D.
HOW THE ACCUMULATION VALUE VARIES
The Accumulation Value in the Divisions varies each day based on investment
results. You bear the risk of poor investment performance and you receive the
benefits from favorable investment performance. The Accumulation Value also
reflects premium payments, charges deducted and partial withdrawals. See Part I,
Accumulation Value in Each Division.
THE FIXED ACCOUNT
The investments available through the Fixed Account include various Fixed
Allocations which we credit with fixed rates of interest for the Guarantee
Periods you select. We reset the interest rates for new Guarantee Periods
periodically based on our sole discretion. We may offer Guarantee Periods from
one to ten years. We currently offer Guarantee Periods with durations of 1, 3,
5, 7 and 10 years.
You bear the investment risk with respect to surrenders, partial withdrawals,
transfers and annuitization from your Fixed Allocations. A surrender, partial
withdrawal, transfer or annuitization made prior to the end of a Guarantee
Period may be subject to a Market Value Adjustment, which could have the effect
of either increasing or decreasing your Accumulation Value.We will not apply a
Market Value Adjustment within 30 days of the Maturity Date of the applicable
5
<PAGE>
SUMMARY OF THE CONTRACT (CONTINUED)
Guarantee Period or certain transfers made in connection with the dollar cost
averaging program. Systematic withdrawals from a Fixed Allocation also are not
subject to a Market Value Adjustment.
MARKET VALUE ADJUSTMENT
We will apply the Market Value Adjustment, subject to certain exceptions, to a
surrender, partial withdrawal, transfer or annuitization from a Fixed Allocation
made prior to the end of a Guarantee Period. The Market Value Adjustment does
not apply to amounts invested in either Account B or Account D.
SURRENDERING YOUR CONTRACT
You may surrender the contract and receive its cash surrender value at any time
while both the annuitant and owner are living and before the annuity
commencement date. See Part I, Cash Surrender Value and Surrendering to Receive
the Cash Surrender Value.
TAKING PARTIAL WITHDRAWALS
After the free look period, prior to the annuity commencement date and while the
contract is in effect, you may take partial withdrawals from the Accumulation
Value of the contract. You may elect in advance to take systematic partial
withdrawals on a monthly or quarterly basis. If you have an IRA contract, you
may elect IRA partial withdrawals on a monthly, quarterly or annual basis.
Partial withdrawals are subject to certain restrictions as defined in this
prospectus, including a surrender charge and a Market Value Adjustment. Partial
withdrawals above a specified percentage of your Accumulation Value may be
subject to a surrender charge. See Part I, Partial Withdrawals.
DOLLAR COST AVERAGING
Under this program, you may choose to have a specified dollar amount transferred
from either the Limited Maturity Bond Division, Liquid Asset Division or a Fixed
Allocation with a one year Guarantee Period to the other Divisions of Account B
and Account D on a monthly basis with the objective of shielding your investment
from short term price fluctuations. See Part I, dollar cost averaging.
YOUR RIGHT TO CANCEL THE CONTRACT
You may cancel your contract within the free look period which is a ten day
period of time beginning when you receive the contract. For purposes of
administering our allocation and certain other administrative rules, we deem
this period to end 15 days after the contract is mailed from our Customer
Service Center. Some states may require that we provide a longer free look
period. In some states we restrict the initial premium allocation during the
free look period. See Part I, Your Right to Cancel or Exchange Your Contract.
YOUR RIGHT TO CHANGE THE CONTRACT
The contract may be changed to another annuity plan subject to our rules at the
time of the change. See Part I, Other Contract Changes.
DEATH BENEFIT PROCEEDS
The contract provides a death benefit to the beneficiary if the owner dies prior
to the annuity commencement date. We may offer a reduced death benefit under
certain group and sponsored arrangements. See Part I, Group or Sponsored
Arrangements.
DEDUCTIONS FOR CHARGES AND FEES
We invest the entire amount of the initial and any additional premium payments
in the Divisions and the Fixed Allocations you select, subject to certain
restrictions we impose. See Part I, Restrictions on Allocation of Premium
Payments. We then may deduct an annual contract fee from your Accumulation
Value. See Part I, Charges and Fees. We may reduce certain charges under group
or sponsored arrangements. See Part I, Group or Sponsored Arrangements. Unless
you have elected the Charge Deduction Division, charges are deducted
proportionately from all Account B and Account D Divisions in which you are
invested. If there is no Accumulation Value in these Divisions, charges will be
deducted from your Fixed Allocations starting with Guarantee Periods nearest
their Maturity Dates until such charges have been deducted.
FEDERAL INCOME TAXES
The ultimate effect of Federal income taxes on the amounts held under an annuity
contract, on annuity payments and on the economic benefits to the owner,
annuitant or beneficiary depends on Golden American's tax status and upon the
tax status of the individuals concerned. In general, an owner is not taxed on
increases in value under an annuity contract until some form of distribution is
made under it. There may be tax penalties if you make a withdrawal or surrender
the contract before reaching age 59 1/2. See Part I, Federal Tax Considerations.
EXCHANGE PROGRAM
We currently offer an exchange program to purchasers who exchange an existing
contract issued by another insurance company not affiliated with us for our
Contract or who add, under certain qualified plans, to an existing Contract
through an exchange. See Facts About the Contract, Exchange Program.
6
<PAGE>
FEE TABLE
TRANSACTION EXPENSES(1)
Contingent Deferred Sales Charge(2) (imposed as a percentage of premium
payments withdrawn upon excess partial withdrawal or surrender):(3)
<TABLE>
<CAPTION>
COMPLETE YEARS ELAPSED SURRENDER
SINCE PREMIUM PAYMENT CHARGE
<S> <C>
0 7%
1 7%
2 6%
3 5%
4 4%
5 3%
6 1%
7+ 0%
</TABLE>
<TABLE>
<S> <C>
Excess Allocation Charge...................................................................................$0(4)
</TABLE>
ANNUAL CONTRACT FEES:
<TABLE>
<S> <C>
Administrative Charge........................................................................................$40
(Waived if the Accumulation Value equals or exceeds $100,000 at the end of the contract year, or once the sum of
premiums paid equals or exceeds $100,000.)
</TABLE>
SEPARATE ACCOUNT ANNUAL EXPENSES (percentage of assets in each Division):
<TABLE>
<CAPTION>
STANDARD
----------- ENHANCED DEATH BENEFIT
------------------------------------
ANNUAL RATCHET 7% SOLUTION
<S> <C> <C> <C>
Mortality and Expense Risk Charge............................ 1.10% 1.25% 1.40%
Asset Based Administrative Charge............................ 0.15% 0.15% 0.15%
----------- ------- -------
Total Separate Account Expenses.............................. 1.25% 1.40% 1.55%
</TABLE>
TRUST ANNUAL EXPENSES(5) (based on combined assets of the indicated groups of
Series):
<TABLE>
<CAPTION>
TOTAL
SERIES FEES OTHER EXPENSES(6) EXPENSES
- - ------------------------------------------------------ ---------- ----------------- -------------
<S> <C> <C> <C>
Multiple Allocation, Fully Managed, Capital
Appreciation, 1.00% 0.00% 1.00%
Rising Dividends, All-Growth, Real Estate, Natural
Resources and Value Equity Series:
Emerging Markets Series: 1.50% 0.02% 1.52%
Limited Maturity Bond Series: 0.60% 0.00% 0.60%
Liquid Asset Series: 0.60% 0.01% 0.61%
</TABLE>
THE MANAGED GLOBAL ACCOUNT ANNUAL EXPENSES AFTER REIMBURSEMENT (percentage of
average net assets):
<TABLE>
<CAPTION>
MANAGEMENT AND OTHER TOTAL ANNUAL
ASSETS ADVISORY FEES EXPENSES EXPENSES(7)
- - --------------------------------------------------------------------- --------------------- ------------- -----------------
<S> <C> <C> <C>
$0 to $500 million................................................... 1.00% 0.25% 1.25%
in excess of $500 million............................................ 0.80% 0.25% 1.05%
</TABLE>
- - ------------------------------
(1) A Market Value Adjustment, which may increase or decrease your Accumulation
Value, may apply to certain transactions. See Market Value Adjustment.
(2) We also deduct a charge for premium taxes from your Accumulation Value upon
surrender, excess partial withdrawals or on the annuity commencement date.
See Premium Taxes.
(3) For purposes of calculating the surrender charge for the excess partial
withdrawal, (i) we treat premium payments as being withdrawn on a first-in
first-out basis, and (ii) amounts withdrawn which are not considered an
excess partial withdrawal are not treated as a withdrawal of any premium
payments. See Charges Deducted from the Accumulation Value, Surrender Charge
for Excess Partial Withdrawals.
(4) We reserve the right to impose a charge in the future at a maximum of $25
for each allocation change in excess of twelve per contract year. See Excess
Allocation charge.
(5) Fees decline as combined assets increase (see Part I, Account B Divisions
and the Trust prospectus for details).
(6) Other Expenses generally consist of independent trustees fees and expenses.
In 1994, the Emerging Markets Series incurred transfer and repatriation
taxes of 0.21% of average daily net assets which are not reflected as Other
Expenses in this Fee Table.
(7) Reflects an expense reimbursement or waiver through December 31, 1994. In
the absence of expense reimbursement or waiver, the total annual expenses
would have been 1.40% of the Global Account's average daily net assets for
1994. This figure includes non-recurring expenses of approximately 0.06% of
average daily net assets which were not reimbursed.
7
<PAGE>
FEE TABLE (CONTINUED)
EXAMPLES:
If at issue you elect the 7% Solution Enhanced Death Benefit Option and you
surrender your contract at the end of the applicable time period, you would pay
the following expenses for each $1,000 of initial premium assuming a 5% annual
return on assets:
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DIVISION ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
<S> <C> <C> <C> <C>
Multiple Allocation..................................................... $ 96.92 $ 142.58 $ 180.77 $ 298.11
Fully Managed........................................................... $ 96.92 $ 142.58 $ 180.77 $ 298.11
Capital Appreciation.................................................... $ 96.92 $ 142.58 $ 180.77 $ 298.11
Rising Dividends........................................................ $ 96.92 $ 142.58 $ 180.77 $ 298.11
All-Growth.............................................................. $ 96.92 $ 142.58 $ 180.77 $ 298.11
Real Estate............................................................. $ 96.92 $ 142.58 $ 180.77 $ 298.11
Natural Resources....................................................... $ 96.92 $ 142.58 $ 180.77 $ 298.11
Value Equity............................................................ $ 96.92 $ 142.58 $ 180.77 $ 298.11
Emerging Markets........................................................ $ 102.04 $ 157.81 $ 205.91 $ 346.93
Global Account.......................................................... $ 99.38 $ 149.92 $ 192.92 $ 321.89
Limited Maturity Bond................................................... $ 93.08 $ 131.05 $ 161.56 $ 259.87
Liquid Asset............................................................ $ 93.08 $ 131.05 $ 161.56 $ 259.87
</TABLE>
- - --------------------------------------------------------------------------------
If at issue you elect the 7% Solution Enhanced Death Benefit Option and you do
not surrender your contract or if you annuitize on the annuity commencement
date, you would pay the following expenses for each $1,000 of initial premium
assuming a 5% annual return on assets:
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DIVISION ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
<S> <C> <C> <C> <C>
Multiple Allocation..................................................... $ 26.92 $ 82.58 $ 140.77 $ 298.11
Fully Managed........................................................... $ 26.92 $ 82.58 $ 140.77 $ 298.11
Capital Appreciation.................................................... $ 26.92 $ 82.58 $ 140.77 $ 298.11
Rising Dividends........................................................ $ 26.92 $ 82.58 $ 140.77 $ 298.11
All-Growth.............................................................. $ 26.92 $ 82.58 $ 140.77 $ 298.11
Real Estate............................................................. $ 26.92 $ 82.58 $ 140.77 $ 298.11
Natural Resources....................................................... $ 26.92 $ 82.58 $ 140.77 $ 298.11
Value Equity............................................................ $ 26.92 $ 82.58 $ 140.77 $ 298.11
Emerging Markets........................................................ $ 32.04 $ 97.81 $ 165.91 $ 346.93
Global Account.......................................................... $ 29.38 $ 89.92 $ 152.92 $ 321.89
Limited Maturity Bond................................................... $ 23.08 $ 71.05 $ 121.56 $ 259.87
Liquid Asset............................................................ $ 23.08 $ 71.05 $ 121.56 $ 259.87
</TABLE>
- - --------------------------------------------------------------------------------
For purposes of computing the annual per contract administrative charge, the
dollar amounts shown in the examples are based on an initial premium of $50,000.
The examples do not take into account any deduction for premium taxes. Premium
taxes currently range from 0% to 3.5% of premium payments. There may be
surrender charges if you choose to annuitize within the first seven contract
years.
The examples reflect the election at issue of the 7% Solution Enhanced Death
Benefit Option. If the Standard Death Benefit Option or the Annual Ratchet
Enhanced Death Benefit Option is elected, the actual expenses incurred will be
less than those represented in the Examples.
In the examples, the numbers for the Global Account reflect expenses based on
assumed assets in the Global Account of $500 million or less. If the Global
Account's assets exceed $500 million, these expenses will decrease.
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN, SUBJECT TO
THE GUARANTEES UNDER THE CONTRACT.
8
<PAGE>
CONDENSED FINANCIAL INFORMATION
INDEX OF INVESTMENT EXPERIENCE
Commencing on the date hereof, we will calculate the index of investment
experience for each Division of Account B and for the Global Account. The index
of investment experience is equal to the value of a unit for each Division of
the Accounts. We will also calculate the total value of each Division.
FINANCIAL STATEMENTS
The audited financial statements of Separate Account B for the years ended
December 31, 1994 and 1993 (as well as the auditor's report thereon) and the
audited financial statements of The Managed Global Account of separate Account D
for the years ended December 31, 1994 and 1993 (as well as the auditor's report
thereon) appear in the Statement of Additional Information. The audited
financial statements of Golden American prepared in accordance with statutory
accounting practices for the years ended December 31, 1994 and 1993 (as well as
the auditor's report thereon) and the audited financial statements of Golden
American prepared in accordance with generally accepted accounting principles
for the years ended December 31, 1994 and 1993 and the period September 30, 1992
to December 31, 1992 (as well as the auditor's report thereon) are contained in
the Prospectus.
The unaudited June 30, 1995 financial statements of Separate Account B and the
unaudited June 30, 1995 financial statements of The Managed Global Account of
Separate Account D are included in the Statement of Additional Information. The
unaudited June 30, 1995 financial statements of Golden American Life Insurance
Company are contained in the Prospectus.
PERFORMANCE RELATED INFORMATION
Performance information for the Divisions of Account B and Account D, including
the yield and effective yield of the Liquid Asset Division, the yield of the
remaining Divisions, and the total return of all Divisions may appear in reports
and promotional literature to current or prospective owners.
Current yield for the Liquid Asset Division will be based on income received by
a hypothetical investment over a given 7-day period (less expenses accrued
during the period), and then "annualized" (i.e., assuming that the 7-day yield
would be received for 52 weeks, stated in terms of an annual percentage return
on the investment). "Effective yield" for the Liquid Asset Division is
calculated in a manner similar to that used to calculate yield, but when
annualized, the income earned by the investment is assumed to be reinvested. The
"effective yield" will be slightly higher than the "yield" because of the
compounding effect of earnings.
For the remaining Divisions, quotations of yield will be based on all investment
income per unit (Accumulation Value divided by the index of investment
experience, see Part I, Measurement of Investment Experience, INDEX OF
INVESTMENT EXPERIENCE AND UNIT VALUE) earned during a given 30-day period, less
expenses accrued during the period ("net investment income"). Quotations of
average annual total return for any Division will be expressed in terms of the
average annual compounded rate of return on a hypothetical investment in a
contract over a period of one, five, and ten years (or, if less, up to the life
of the Division), and will reflect the deduction of the applicable surrender
charge, the administrative charge and the applicable mortality and expense risk
charge. See Charges and Fees. Quotations of total return may simultaneously be
shown for other periods that do not take into account certain contractual
charges, such as the distribution fee and surrender charge for example.
Performance information for a Division may be compared, in reports and
promotional literature, to: (i) the Standard & Poor's 500 Stock Index ("S & P
500"), Dow Jones Industrial Average ("DJIA"), Donoghue Money Market
Institutional Averages, or other indices measuring performance of a pertinent
group of securities so that investors may compare a Division's results with
those of a group of securities widely regarded by investors as representative of
the securities markets in general; (ii) other variable annuity separate accounts
or other investment products tracked by Lipper Analytical Services, a widely
used independent research firm which ranks mutual funds and other investment
companies by overall performance, investment objectives, and assets, or tracked
by other ratings services, including VARDS, companies, publications, or persons
who rank separate accounts or other investment products on overall performance
or other criteria; and (iii) the Consumer Price Index (measure for inflation) to
assess the real rate of return from an investment in the contract. Unmanaged
indices may assume the reinvestment of dividends but generally do not reflect
deductions for administrative and management costs and expenses.
Performance information for any Division reflects only the performance of a
hypothetical contract under which the Accumulation Value is allocated to a
Division during a particular time period on which the calculations are based.
Performance information should be considered in light of the investment
objectives and policies, characteristics and quality of the portfolio of the
Series of the Trust in which the Division invests or, the securities in which
Account D invests, and the market conditions during the given time period, and
should not be considered as a representation of what may be achieved in the
future. For a description of the methods used to determine yield and total
return for the Divisions, see the Statement of Additional Information.
Reports and promotional literature may also contain other information including
the ranking of any Division derived from rankings of variable annuity separate
accounts or other investment products tracked by Lipper Analytical Services or
by rating services, companies, publications, or other persons who rank separate
accounts or other investment products on overall performance or other criteria.
9
<PAGE>
(This page has been left blank intentionally.)
10
<PAGE>
PART I
INTRODUCTION THE FOLLOWING INFORMATION IN PART I DESCRIBES THE CONTRACT AND
THE ACCOUNTS WHICH FUND THE CONTRACT, ACCOUNT B AND ACCOUNT D AND THE FIXED
ACCOUNT. ACCOUNT B INVESTS IN MUTUAL FUND PORTFOLIOS OF THE TRUST. ACCOUNT D
INVESTS DIRECTLY IN SECURITIES. THE FIXED ACCOUNT CONTAINS ALL OF THE ASSETS
THAT SUPPORT OWNER FIXED ALLOCATIONS WHICH WE CREDIT WITH GUARANTEED INTEREST
RATES FOR THE GUARANTEE PERIODS YOU SELECT.
11
<PAGE>
FACTS ABOUT THE COMPANY AND THE ACCOUNTS
GOLDEN AMERICAN
Golden American Life Insurance Company ("Golden American") is a stock life
insurance company organized under the laws of the State of Delaware. Prior to
December 30, 1993, Golden American was a Minnesota corporation. Golden American
is a wholly owned indirect subsidiary of Bankers Trust Company. We are
authorized to do business in all jurisdictions except New York. We offer
variable annuities and variable life insurance. Administrative services for the
contract are provided at our Customer Service Center, the address is shown on
the cover. As of December 31, 1994 Golden American had stockholder's equity of
approximately $89.5 million and total assets of approximately $1.04 billion,
including approximately $950.3 million of separate account assets.
Bankers Trust Company is a New York banking corporation with executive offices
at 280 Park Avenue, New York, New York 10017. As of December 31, 1994, Bankers
Trust New York Corporation, parent of Bankers Trust Company, was the seventh
largest bank holding company in the United States with total assets of
approximately $98 billion. Bankers Trust Company conducts a variety of general
banking and trust activities and is a leading wholesale supplier of financial
services to the domestic and international markets.
In a transaction that closed on September 30, 1992, a wholly owned subsidiary of
Bankers Trust Company acquired all of the issued and outstanding capital stock
of Golden American and DSI, an affiliate of Golden American, and related assets.
The transaction involved settlement of pre-existing claims of Bankers Trust
Company against the former parent company of Golden American and DSI. Under
applicable banking law, stock so acquired is subject to various divestiture
requirements. While Bankers Trust Company has no immediate intent to divest its
ownership of the stock of Golden American and DSI, such a divestiture may occur
in the future. In addition, judicial or administrative decisions or
interpretations, as well as changes in either Federal or state banking statutes
or regulations, could prevent Bankers Trust Company from continuing to own the
stock of Golden American or DSI.
Effective October 3, 1994, First Colony Corporation ("First Colony") and BT
Variable, Inc. ("BT Variable") entered into an agreement providing for the
acquisition by First Colony of a minority interest in BT Variable. BT Variable,
an indirect subsidiary of Bankers Trust Company, is the corporate parent of
Golden American Life Insurance Company and Directed Services, Inc. The
acquisition is subject to the approval of the appropriate regulators.
First Colony is the corporate parent of two insurance companies, First Colony
Life Insurance Company and American Mayflower Life, which together provide life
insurance and annuity products throughout the United States.
For more information about Golden American, see Part I, More Information About
Golden American Life Insurance Company.
THE GCG TRUST
The Trust is an open-end management investment company, more commonly called a
mutual fund. The Trust's shares may also be available to certain separate
accounts funding variable life insurance policies offered by Golden American.
This is called "mixed funding."
The Trust may also sell its shares to separate accounts of other insurance
companies, both affiliated and not affiliated with Golden American. This is
called "shared funding." Although we do not anticipate any inherent difficulties
arising from either mixed or shared funding it is theoretically possible that,
due to differences in tax treatment or other considerations, the interest of
owners of various contracts participating in the Trust might at sometime be in
conflict. After the Trust receives the requisite order from the SEC, shares of
the Trust may also be sold to certain qualified pension and retirement plans.
The Board of Trustees of the Trust, the Trust's Manager, and we and any other
insurance companies participating in the Trust are required to monitor events to
identify any material conflicts that arise from the use of the 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 Trust prospectus.
You will find complete information about the Trust, including the risks
associated with each Series, in the accompanying Trust prospectus. You should
read it carefully in conjunction with this prospectus before investing.
Additional copies of the Trust prospectus may be obtained by contacting our
Customer Service Center.
SEPARATE ACCOUNTS B AND D
All obligations under the contract are general obligations of Golden American.
Account B and Account D are separate investment accounts used to support our
variable annuity contracts and for other purposes as permitted by applicable
laws and regulations. The assets of Account B and Account D are kept separate
from our general account and any other separate accounts
12
<PAGE>
FACTS ABOUT THE COMPANY AND THE ACCOUNTS (CONTINUED)
we may have. We may offer other variable annuity contracts investing in Account
B and Account D which are not discussed in this prospectus. Account B and
Account D may also invest in other series which are not available to the
contract described in this prospectus.
We own all the assets in Account B and Account D. Income and realized and
unrealized gains or losses from assets in each account is credited to or charged
against that account without regard to other income, gains or losses in our
other investment accounts. As required, the assets in Account B and Account D
are at least equal to the reserves and other liabilities of that account. These
assets may not be charged with liabilities from any other business we conduct.
They may, however, be subject to liabilities arising from Divisions whose assets
are attributable to other variable annuity contracts supported by Account B and
Account D. If the assets exceed the required reserves and other liabilities, we
may transfer the excess to our general account.
ACCOUNT B
Account B was established on July 14, 1988, and may invest in mutual funds,
unit investment trusts or other investment portfolios which we determine to be
suitable for the contract's purposes. Account B is treated as a unit
investment trust under Federal securities laws. It is registered with the SEC
under the Investment Company Act of 1940 (the "1940 Act") as an investment
company. It is governed by the laws of Delaware, our state of domicile, and
may also be governed by the laws of other states in which we do business.
Registration with the SEC does not involve any supervision by the SEC of the
management or investment policies or practices of Account B.
ACCOUNT D
Account D was established on April 18, 1990 and invests directly in securities
in accordance with the investment objectives and policies of Account D.
Account D is registered with the SEC under the 1940 Act as an open-end
management investment company and meets the definition of a separate account
under the federal securities laws. It is governed by the laws of Delaware, our
state of domicile, and may also be governed by laws of other states in which
we do business. Registration with the SEC does not involve any supervision by
the SEC of the management or investment policies or practices of Account D.
ACCOUNT B DIVISIONS
Account B is divided into Divisions. Currently, each Division of Account B
offered under this prospectus invests in a portfolio of The GCG Trust (the
"Trust"). DSI serves as the Manager to each Series of the Trust. See the Trust
prospectus for details. The Trust and DSI have retained several portfolio
managers to manage the assets of each Series as indicated below. There may be
restrictions on the amount of the allocation to certain Divisions based on state
laws and regulations. The investment objectives of the various Series in the
Trust are described below. There is no guarantee that any portfolio or Series
will meet its investment objectives. Meeting objectives depends on various
factors, including, in certain cases, how well the portfolio managers anticipate
changing economic and market conditions. Account B also has other Divisions
investing in other series which are not available to the contract described in
this prospectus.
DSI provides the overall business management and administrative services
necessary for the Series' operation and provides or procures the services and
information necessary to the proper conduct of the business of the Series. DSI
is responsible for providing or procuring, at DSI's expense, the services
reasonably necessary for the ordinary operation of the Series. 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, interest on borrowing, fees and expenses of the
independent trustees, and extraordinary expenses, such as litigation or
indemnification expenses. See the Trust prospectus for details.
The table below shows the monthly fee that the Trust pays DSI for its services
as a percentage of the average daily net assets of the Series. DSI (and not the
Trust) pays each portfolio manager a monthly fee for managing the assets of the
Series.
13
<PAGE>
FACTS ABOUT THE COMPANY AND THE ACCOUNTS (CONTINUED)
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FEES (based on combined assets of the indicated groups of
SERIES 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, Natural Resources and Value Equity 0.90% of next $1.5 billion; and
Series: 0.85% of amount in excess of $3.5 billion
Emerging Markets Series: 1.50% of average daily net assets
Limited Maturity Bond and 0.60% of first $200 million;
Liquid Asset Series: 0.55% of next $300 million; and
0.50% of amount in excess of $500 million
</TABLE>
- - --------------------------------------------------------------------------------
The following Divisions invest in designated Series of the Trust.
MULTIPLE ALLOCATION DIVISION
MULTIPLE ALLOCATION SERIES
OBJECTIVE
The highest total return, consisting of capital appreciation and current
income, consistent with the preservation of capital and elimination of
unnecessary risk.
INVESTMENTS
Investment in equity and debt securities and the use of certain sophisticated
investment strategies and techniques.
PORTFOLIO MANAGER
Zweig Advisors Inc.
FULLY MANAGED DIVISION
FULLY MANAGED SERIES
OBJECTIVE
High total investment return over the long term, consistent with the
preservation of capital and prudent investment risk.
INVESTMENTS
Pursues an active asset allocation strategy whereby investments are allocated,
based upon an evaluation of economic and market trends and the anticipated
relative total return available, among three asset classes -- debt securities,
equity securities and money market instruments.
PORTFOLIO MANAGER
Weiss, Peck & Greer Advisers, Inc.
CAPITAL APPRECIATION DIVISION
CAPITAL APPRECIATION SERIES
OBJECTIVE
Long-term capital growth.
INVESTMENTS
Invests in common stocks and preferred stock that will be allocated among
various categories of stocks referred to as "components" which consist of the
following: (i) The Growth Component -- Securities that the portfolio manager
believes have the following characteristics: stability and quality of earnings
and positive earnings momentum; dominant competitive positions; and
demonstrate above-average growth rates as compared to published S&P 500
earnings projections; and (ii) The Value Component -- Securities that the
portfolio manager regards as fundamentally undervalued, i.e., securities
selling at a discount to asset value and securities with a relatively low
price/earnings ratio. The securities eligible for this component may include
real estate stocks, such as securities of publicly-owned companies that, in
the portfolio manager's judgement, offer an optimum combination of current
dividend yield, expected dividend growth, and discount to current real estate
value.
PORTFOLIO MANAGER
Chancellor Trust Company
RISING DIVIDENDS DIVISION
RISING DIVIDENDS SERIES
OBJECTIVE
Capital appreciation, with dividend income as a secondary objective.
INVESTMENTS
Investment in equity securities of high quality companies that meet the
following four criteria: consistent dividend increases; substantial dividend
increases; reinvested profits; and an under-leveraged balance sheet.
PORTFOLIO MANAGER
Kayne, Anderson Investment Management, Inc.
ALL-GROWTH DIVISION
ALL-GROWTH SERIES
OBJECTIVE
Capital appreciation.
INVESTMENTS
Investment in securities selected for their long term growth prospects.
14
<PAGE>
FACTS ABOUT THE COMPANY AND THE ACCOUNTS (CONTINUED)
PORTFOLIO MANAGER
Warburg, Pincus Counsellors, Inc.
REAL ESTATE DIVISION
REAL ESTATE SERIES
OBJECTIVE
Capital appreciation, with current income as a secondary objective.
INVESTMENTS
Investment in publicly traded equity securities of companies in the real
estate industry listed on national exchanges or on the National Association of
Securities Dealers Automated Quotation System.
PORTFOLIO MANAGER
Chancellor Trust Company
NATURAL RESOURCES DIVISION
NATURAL RESOURCES SERIES
OBJECTIVE
Long-term capital appreciation.
INVESTMENTS
Investment in equity and debt securities of companies engaged in the
exploration, development, production, and distribution of natural resources.
PORTFOLIO MANAGER
Van Eck Associates Corporation
VALUE EQUITY DIVISION
VALUE EQUITY SERIES
OBJECTIVE
Capital appreciation with a secondary objective of dividend income.
INVESTMENTS
Investment primarily in equity securities of U.S. and foreign issuers which,
when purchased, meet quantitative standards believed by the Portfolio Manager
to indicate above average financial soundness and high intrinsic value
relative to price.
PORTFOLIO MANAGER
Eagle Asset Management, Inc.
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. Income
is not an objective, and any production of current income is considered
incidental to the objective of growth of capital.
PORTFOLIO MANAGER
Bankers Trust Company
LIMITED MATURITY BOND DIVISION
LIMITED MATURITY BOND SERIES
OBJECTIVE
Highest current income consistent with low risk to principal and liquidity.
Also seeks to enhance its total return through capital appreciation when
market factors indicate that capital appreciation may be available without
significant risk to principal.
INVESTMENTS
Investment primarily in a diversified portfolio of limited maturity debt
securities. No individual security will at the time of purchase have a
remaining maturity longer than seven years and the dollar-weighted average
maturity of the Series will not exceed five years.
PORTFOLIO MANAGER
Bankers Trust Company
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
Bankers Trust Company
THE MANAGED GLOBAL ACCOUNT OF ACCOUNT D
The Global Account is the only portfolio of Account D available under the
contract. The Global Account is a non-diversified investment company which
invests directly in securities. There can be no assurance that the Global
Account will meet its investment objective. Account D may also offer other
portfolios which are not available through the purchase of the contract offered
by this prospectus. DSI serves as Manager of Account D and Warburg, Pincus
serves as Portfolio Manager of the Global Account.
THE MANAGED GLOBAL ACCOUNT DIVISION
THE MANAGED GLOBAL ACCOUNT PORTFOLIO
OBJECTIVE
High total investment return, consistent with a prudent regard for capital
preservation.
15
<PAGE>
FACTS ABOUT THE COMPANY AND THE ACCOUNTS (CONTINUED)
INVESTMENTS
Investment in a wide range of equity and debt securities and money market
instruments of both domestic and foreign issuers.
PORTFOLIO MANAGER
Warburg, Pincus Counsellors, Inc.
ADVISORY FEE
0.60% of the first $500 million of average daily net assets on an annual
basis; and 0.50% of the excess over $500 million.
The initial organizational expenses of the Global Account were advanced by
Golden American. The Global Account reimburses Golden American for such
expenses, which are amortized over five years from the date of the Global
Account's commencement of operations.
FOR COMPLETE INFORMATION ABOUT THE MANAGED GLOBAL ACCOUNT OF ACCOUNT D,
INCLUDING THE RISKS ASSOCIATED WITH ITS INVESTMENTS, SEE PART II, INVESTMENT
OBJECTIVE AND POLICIES OF THE GLOBAL ACCOUNT.
CHANGES WITHIN ACCOUNT B AND ACCOUNT D
We may from time to time make additional Divisions available. These Divisions
will invest in investment portfolios we find suitable for the contract. We also
have the right to eliminate investment Divisions from Account B and Account D,
to combine two or more Divisions, or to substitute a new portfolio for the
portfolio in which a Division invests. A substitution may become necessary if,
in our judgment, a portfolio no longer suits the purposes of the contract. This
may happen due to a change in laws or regulations, or a change in a portfolio's
investment objectives or restrictions, or because the portfolio is no longer
available for investment, or for some other reason. In addition, we reserve the
right to transfer assets of Account B and Account D, which we determine to be
associated with the class of contracts to which your contract belongs, to
another account. If necessary, we will get prior approval from the insurance
department of our state of domicile before making such a substitution or
transfer. We will also get any required approval from the SEC and any other
required approvals before making such a substitution or transfer. We will notify
you as soon as practicable of any proposed changes.
When permitted by law, We reserve the right to:
(1) deregister an account under the 1940 Act;
(2) operate an account as a management company
under the 1940 Act if it is operating as a unit investment trust;
(3) operate an account as a unit investment trust
under the 1940 Act if it is operating as a managed separate account;
(4) restrict or eliminate any voting rights as to the
accounts; and
(5) combine an account with other accounts.
THE FIXED ACCOUNT
Premium payments may be allocated to the Fixed Account at the time of the
initial premium payment or as subsequently elected. In addition, all or part of
your Accumulation Value may be transferred to the Fixed Account. Assets
supporting amounts allocated to the Fixed Account are available to fund the
claims of all classes of our customers, owners and other creditors. Interests
under your Contract relating to the Fixed Account are registered under the
Securities Act of 1933 but the Fixed Account is not registered under the 1940
Act.
SELECTING THE GUARANTEE PERIOD
You may select one or more Fixed Allocations with specified Guarantee Periods
for investment. We currently offer Guarantee Periods with durations of 1, 3,
5, 7 and 10 years. We reserve the right at any time to decrease or increase
the number of Guarantee Periods offered, and to discontinue offering a
Guarantee Period. Each Fixed Allocation will have a Maturity Date
corresponding to the last day of the calendar month of the applicable
Guarantee Period. At least 30 calendar days prior to a Maturity Date, or
earlier if required by state or federal law, we will forward to you a notice
describing the Guarantee Periods available as of the date of such notice. The
notice will list the Guaranteed Interest Rates we then currently credit for
those Guarantee Periods.
Your Accumulation Value in the Fixed Account equals the sum of your Fixed
Allocations plus the interest credited thereto, as adjusted for any partial
withdrawals, reallocations or other charges we may impose. Your Fixed
Allocation will be credited with the Guaranteed Interest Rate in effect on the
date we receive and accept your premium or reallocation of Accumulation Value.
The Guaranteed Interest Rate will be credited daily to yield the quoted
Guaranteed Interest Rate.
TRANSFERS FROM A FIXED ALLOCATION
You may transfer your Accumulation Value from a Fixed Allocation to one or
more new Fixed Allocations with new Guarantee Periods of any length offered by
us or to the Divisions of Account B or Account D. Unless you specify in
writing the Fixed Allocations from which such transfers will be made,
16
<PAGE>
FACTS ABOUT THE COMPANY AND THE ACCOUNTS (CONTINUED)
we will transfer amounts from the Fixed Allocations starting with the
Guarantee Period nearest its Maturity Date, until we have honored your
transfer request.
Transfers made within 30 days prior to the Maturity Date of the applicable
Guarantee Period or pursuant to the dollar cost averaging program will not be
subject to a Market Value Adjustment. All other transfers from your Fixed
Allocations will be subject to a Market Value Adjustment. The minimum amount
that can be transferred to or from any Fixed Allocation is $250. If a transfer
request would reduce the Accumulation Value remaining in your Fixed Allocation
to less than $250, we will treat such transfer request as a request to
transfer the entire Accumulation Value in such Fixed Allocation.
At the end of a Fixed Allocation's Guarantee Period, you may transfer amounts
in that Fixed Allocation to the Divisions and one or more new Fixed
Allocations with Guarantee Periods of any length then offered by us. You may
not, however, transfer amounts to any Fixed Allocation with a Guarantee Period
that extends beyond your annuity commencement date.
We will notify you of your right to transfer amounts at least 30 days prior to
the end of the Guarantee Period. Prior to the end of such Guarantee Period you
must notify us as to which Division or new Guarantee Period you have selected.
If timely instructions are not received, we will transfer your Accumulation
Value to a Fixed Allocation with a Guarantee Period equal in length to the
expiring Guarantee Period. If such Guarantee Period is not available or
extends beyond your annuity commencement date, we will transfer your
Accumulation Value to the next shortest Guarantee Period which does not extend
beyond the annuity commencement date. If no such Guarantee Period is
available, we will transfer your Accumulation Value to the Specially
Designated Division.
GUARANTEED INTEREST RATES
We do not have a specific formula for establishing the Guaranteed Interest
Rates for the different Guarantee Periods. The determination made will be
influenced by, but not necessarily correspond to, interest rates available on
fixed income investments which we may acquire with the amounts we receive as
premium payments or reallocations of Accumulation Value under the contracts.
These amounts will be invested primarily in investment-grade fixed income
securities including: securities issued by the United States Government or its
agencies or instrumentalities, which issues may or may not be guaranteed by
the United States Government; debt securities that have an investment grade
rating, at the time of purchase, within the four highest grades assigned by
Moody's Investor Services, Inc. (Aaa, Aa, A or Baa), Standard & Poor's
Corporation (AAA, AA, A or BBB) or any other nationally recognized rating
service; mortgage-backed securities collateralized by the Federal Home Loan
Mortgage Association, the Federal National Mortgage Association or the
Government National Mortgage Association, or that have an investment grade
rating at the time of purchase within the four highest grades described above;
other debt investments; commercial paper; and cash or cash equivalents. You
will have no direct or indirect interest in these investments. We will also
consider other factors in determining the Guaranteed Interest Rates, including
regulatory and tax requirements, sales commissions and administrative expenses
borne by us, general economic trends and competitive factors. We cannot
predict or guarantee the level of future interest rates. However, no Fixed
Allocation will ever have a Guaranteed Interest Rate of less than 3% per year.
While the foregoing generally describes our investment strategy with respect
to the Fixed Account, we are not obligated to invest according to any
particular strategy, except as may be required by Delaware and other state
insurance laws.
PARTIAL WITHDRAWALS
Prior to the annuity commencement date and while your contract is in effect,
you may take partial withdrawals from the Accumulation Value in a Fixed
Allocation by sending satisfactory notice to our Customer Service Center. You
may make systematic withdrawals of interest earnings only from a Fixed
Allocation under our Systematic Partial Withdrawal Option. (See, Partial
Withdrawals, Systematic Partial Withdrawal Option.) Withdrawals from a Fixed
Allocation taken within 30 days of the Maturity Date and systematic
withdrawals are not subject to a Market Value Adjustment; however, a surrender
charge may be imposed. Systematic withdrawals from a Fixed Allocation are not
permitted if such Fixed Allocation participates in the dollar cost averaging
program. Withdrawals may have federal income tax consequences, including a 10%
penalty tax. See Surrender Charge, Surrender Charge for Excess Partial
Withdrawals and Federal Tax Considerations.
You must specify the Division of either Account B or Account D or the Fixed
Allocation from which your
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<PAGE>
FACTS ABOUT THE COMPANY AND THE ACCOUNTS (CONTINUED)
partial withdrawal will be made. If you do not specify the investment option
from which the partial withdrawal will be taken, we will assess your partial
withdrawal against the Divisions of Account B and Account D on a pro rata
basis. If there is no Accumulation Value in those Divisions, partial
withdrawals will be deducted from your Fixed Allocations starting with the
Guarantee Periods nearest their Maturity Dates until we have honored your
request.
MARKET VALUE ADJUSTMENT
We will apply a Market Value Adjustment, determined by application of the
formula described below, in the following circumstances: (i) whenever you make
a withdrawal or transfer from a Fixed Allocation, other than withdrawals or
transfers made within 30 days prior to the Maturity Date of the Guarantee
Period, systematic partial withdrawals, or pursuant to the dollar cost
averaging program; and (ii) on the annuity commencement date with respect to
any Fixed Allocation having a Guarantee Period that does not end on or within
30 days after the annuity commencement date.
The Market Value Adjustment is determined by multiplying the amount withdrawn,
transferred or annuitized by the following factor:
<TABLE>
<C> <C> <S> <C>
( 1+I )N/365
1+J+.0025 -1
</TABLE>
Where "I" is the Index Rate for a Fixed Allocation as of the first day of the
applicable Guarantee Period; "J" is the Index Rate for new Fixed Allocations
with Guarantee Periods equal to the number of years (fractional years are
rounded up to the next full year) remaining in the Guarantee Period at the
time of the withdrawal, transfer or annuitization; and "N" is the remaining
number of days in the Guarantee Period at the time of the withdrawal, transfer
or annuitization.
The Index Rate is the average of the Ask Yields for U.S. Treasury Strips as
reported by a national quoting service for the applicable maturity. The
average is based on the period from the 22nd day of the calendar month two
months prior to the calendar month of the Index Rate determination to the 21st
day of the calendar month immediately prior to the month of determination. The
applicable maturity is the maturity date for these U.S. Treasury Strips on or
next following the last day of the Guarantee Period. If the Ask Yields are no
longer available, the Index Rate will be determined using a suitable re-
placement method approved by the insurance department of the state in which
this Contract was delivered.
We currently set the Index Rate once each calendar month. However, we reserve
the right to set the Index Rate more frequently than monthly, but in no event
will such Index Rate be based upon a period of less than 28 days.
If a full surrender, transfer or annuitization has been requested, the balance
of the Market Value Adjustment will be added to or subtracted from the amount
surrendered, transferred or annuitized. If a partial withdrawal, transfer or
annuitization has been requested, the Market Value Adjustment will be
calculated on the total amount that must be withdrawn, transferred or
annuitized in order to provide the amount requested. If a negative Market
Value Adjustment exceeds the Accumulation Value in the Fixed Allocation, such
transaction will be considered a full surrender, transfer or annuitization.
The Appendix contains several examples which illustrate the application of the
Market Value Adjustment.
The Market Value Adjustment may result in either an increase or decrease in
the Accumulation Value of your Fixed Allocation. Because of the Market Value
Adjustment provision of the contract, you bear the investment risk that the
Guaranteed Interest Rates offered by us at the time you make a withdrawal or
transfer from a Fixed Allocation or start receiving annuity payments may be
higher or lower than the Guaranteed Interest Rate of the Fixed Allocation to
which the Market Value Adjustment is applied, with the result that the
Accumulation Value of your Fixed Allocation may be substantially reduced or
increased. This will depend on the relationship of (1) the Guaranteed Interest
Rate credited to the Fixed Allocation from which the withdrawal, transfer or
annuitization is made, to (2) the current Guaranteed Interest Rate offered by
us for the Guarantee Period equal to the number of years remaining in the
Guarantee Period as of such date. If the Guaranteed Interest Rate of (1) is
higher than the then current Guaranteed Interest Rate of (2) plus .0025,
application of the Market Value Adjustment will result in an increase in your
Accumulation Value. If the Guaranteed Interest Rate of (1) is lower than the
then current Guaranteed Interest Rate of (2) plus .0025, application of the
Market Value Adjustment will result in a decrease in your Accumulation Value.
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<PAGE>
FACTS ABOUT THE CONTRACT
THE OWNER
You are the owner. You are also the annuitant unless another annuitant is named
in the application or enrollment form. You have the rights and options described
in the contract. One or more persons may own the contract. If there are multiple
owners named, the age of the oldest owner shall determine the applicable death
benefit.
Death of an owner activates the death benefit provision. In the case of a sole
owner who dies prior to the annuity commencement date, we will pay the
beneficiary the death benefit then due. The sole owner's estate will be the
beneficiary if no beneficiary designation is in effect, or if the designated
beneficiary has predeceased the owner. In the case of a joint owner of the
contract dying prior to the annuity commencement date, we will designate the
surviving owner(s) as the beneficiary(ies). This supersedes any previous
beneficiary designation.
In the case where the owner is a trust and a beneficial owner of the trust has
been designated, the beneficial owner will be treated as the owner of the
contract solely for the purpose of activating the death benefit provisions. If a
beneficial owner is changed or added after the contract date, this will be
treated as a change of owner for purposes of determining the death benefit. See
Change of Owner or Beneficiary. If no beneficial owner of the Trust has been
designated, the level of death benefit will be determined by the age of the
annuitant at issue.
THE ANNUITANT
The annuitant is the person designated by the owner to be the measuring life in
determining annuity payments. The owner will receive the annuity benefits of the
contract if the annuitant is living on the annuity commencement date. If the
annuitant dies before the annuity commencement date, and a contingent annuitant
has been named, the contingent annuitant becomes the annuitant (unless the owner
is not an individual, in which case the death benefit becomes payable). Once
named, the annuitant may not be changed at any time.
If there is no contingent annuitant when the annuitant dies prior to the annuity
commencement date, the owner will become the annuitant. The owner may designate
a new annuitant within 60 days of the death of the annuitant.
If there is no contingent annuitant when the annuitant dies prior to the annuity
commencement date and the owner is not an individual, we will pay the
beneficiary the death benefit then due. The beneficiary will be as provided in
the beneficiary designation then in effect. If no beneficiary designation is in
effect, or if there is no designated beneficiary living, the owner will be the
beneficiary. If the annuitant was the sole owner and there is no beneficiary
designation, the annuitant's estate will be the beneficiary.
Regardless of whether a death benefit is payable, if the annuitant dies and any
owner is not an individual, such death will trigger application of the
distribution rules imposed by Federal tax law. See Federal Tax Considerations,
Distribution-at-Death Rules.
THE BENEFICIARY
The beneficiary is the person to whom we pay death benefit proceeds if the owner
dies prior to the annuity commencement date. We pay death benefit proceeds to
the primary beneficiary (unless there are joint owners, in which case death
proceeds are payable to the surviving owner(s)). See Proceeds Payable to the
Beneficiary.
If the beneficiary dies before the annuitant or owner, the death benefit
proceeds are paid to the contingent beneficiary, if any. If there is no
surviving beneficiary, we pay the death benefit proceeds to the owner's estate.
One or more persons who must be individuals may be named as beneficiary or
contingent beneficiary. In the case of more than one beneficiary, unless
otherwise specified, we will assume any death benefit proceeds are to be paid in
equal shares to the surviving beneficiaries.
You have the right to change beneficiaries during the annuitant's lifetime
unless you have designated an irrevocable beneficiary. When an irrevocable
beneficiary has been designated, you and the irrevocable beneficiary must act
together to exercise the rights and options under the contract.
CHANGE OF OWNER OR BENEFICIARY
During the annuitant's lifetime and while your contract is in effect, you may
transfer ownership of the contract (if purchased in connection with a
non-qualified plan) subject to our published rules at the time of the change. A
change in ownership may affect the amount of the death benefit and the
guaranteed death benefit. You may also change the beneficiary. To make either of
these changes, you must send us written notice of the change in a form
satisfactory to us. The change will take effect as of the day the notice is
signed. The change will not affect any payment made or action taken by us before
recording the change at our Customer Service Center. See Federal Tax
Considerations, Transfer of Annuity Contracts, and Assignments.
AVAILABILITY OF THE CONTRACT
We can issue a contract if both the annuitant and the owner are not older than
age 85.
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<PAGE>
FACTS ABOUT THE CONTRACT (CONTINUED)
TYPES OF CONTRACTS
QUALIFIED CONTRACTS
The contract may be issued as an Individual Retirement Annuity or in
connection with an individual retirement account. In the latter case, the
contract will be issued without an Individual Retirement Annuity endorsement,
and the rights of the participant under the contract will be affected by the
terms and conditions of the particular individual retirement trust or
custodial account, and by provisions of the Code and the regulations
thereunder. For example, the individual retirement trust or custodial account
will impose minimum distribution rules, which require distributions to
commence not later than April 1st of the calendar year following the calendar
year in which you attain age 70 1/2. For both Individual Retirement Annuities
and individual retirement accounts, the minimum initial premium is $1,500.
IF THE CONTRACT IS PURCHASED TO FUND A QUALIFIED PLAN, DISTRIBUTION MUST
COMMENCE NOT LATER THAN APRIL 1ST OF THE CALENDAR YEAR FOLLOWING THE CALENDAR
YEAR IN WHICH YOU ATTAIN AGE 70 1/2.
NON-QUALIFIED CONTRACTS
The contract may fund any non-qualified plan. Non-qualified contracts do not
qualify for any tax-favored treatment other than the benefits provided for by
annuities.
YOUR RIGHT TO SELECT OR CHANGE CONTRACT OPTIONS
Before the annuity commencement date, you may change the annuity commencement
date, frequency of annuity payments or the annuity option by sending a written
request to our Customer Service Center. The annuitant may not be changed at any
time.
PREMIUMS
You purchase the contract with an initial premium. After the end of the free
look period, you may make additional premium payments. See Making Additional
Premium Payments. The minimum initial premium is $10,000 for a non-qualified
contract and $1,500 for a qualified contract.
You must receive our prior approval before making a premium payment that causes
the Accumulation Value of all annuities that you maintain with us to exceed
$1,000,000. We may change the minimum initial or additional premium requirements
for certain group or sponsored arrangements. See Group or Sponsored
Arrangements.
QUALIFIED PLANS
For IRA contracts, the annual premium on behalf of any individual contract may
not exceed $2,000. Provided your spouse does not make a contribution to an
IRA, you may set up a spousal IRA even if your spouse has earned some
compensation during the year. The maximum deductible amount for a spousal IRA
program is the lesser of $2,250 or 100% of your compensation reduced by the
contribution (if any) made by you for the taxable year to your own IRA.
However, no more than $2,000 can go to either your or your spouse's IRA in any
one year. For example, $1,750 may go to your IRA and $500 to your spouse's
IRA. These maximums are not applicable if the premium is the result of a
rollover from another qualified plan.
WHERE TO MAKE PAYMENTS
Remit premium payments to our Customer Service Center. The address is shown on
the cover. We will send you a confirmation notice.
MAKING ADDITIONAL PREMIUM PAYMENTS
You may make additional premium payments after the end of the free look period.
We can accept additional premium payments until either the annuitant or owner
reaches the attained age of 85 under non-qualified plans. For qualified plans,
no contributions may be made to an IRA contract for the taxable year in which
you attain age 70 1/2 and thereafter (except for rollover contributions). The
minimum additional premium payment we will accept is $500 for a non-qualified
plan and $250 for a qualified plan.
CREDITING PREMIUM PAYMENTS
The initial premium will be accepted or rejected within two business days of
receipt by us if accompanied by information sufficient to permit us to determine
if we are able to issue a contract. We may retain an initial premium for up to
five business days while attempting to obtain information sufficient to enable
us to issue the contract. If we are unable to do so within five business days,
the applicant or enrollee will be informed of the reasons for the delay and the
initial premium will be returned immediately unless the applicant or enrollee
consents to our retaining the initial premium until we have received the
information we require. Thereafter, all additional premiums will be accepted on
the day received.
In certain states we will also accept, by agreement with broker-dealers,
transmittal of initial and additional premium payments by wire order from the
broker-dealer to our Customer Service Center. Such transmittals must be
accompanied by a simultaneous telephone facsimile or other electronic data
transmission containing the essential information we require to open an
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<PAGE>
FACTS ABOUT THE CONTRACT (CONTINUED)
account and allocate the premium payment. Contact our Customer Service Center to
find out about state availability and broker-dealer requirements.
Upon our acceptance of premium payments received via wire order and accompanied
by sufficient electronically transmitted data, we will issue the contract
allocate the premium payment according to your instructions, and invest the
payment at the value next determined following receipt. See Restrictions on
Allocation of Premium Payments. Wire orders not accompanied by sufficient data
to enable us to accept the premium payment may be retained for up to five
business days while we attempt to obtain information sufficient to enable us to
issue the contract. If we are unable to do so, our Customer Service Center will
inform the broker-dealer, on behalf of the applicant or enrollee, of the reasons
for the delay and return the premium payment immediately to the broker-dealer
for return to the applicant or enrollee, unless the applicant or enrollee
specifically consents to allow us to retain the premium payment until our
Customer Service Center receives the required information.
On the date we receive and accept your initial or additional premium payment:
(1) We allocate the initial premium among the
Divisions and Fixed Allocations according to your instructions, subject to any
restrictions. See Restrictions on Allocation of Premium Payments. For
additional premium payments, the Accumulation Value will increase by the
amount of the premium. If we do not receive instructions from you, the
increase in the Accumulation Value will be allocated among the Divisions in
proportion to the amount of Accumulation Value in each Division as of the
date we receive and accept the additional premium payment. If there is no
Accumulation Value in the Divisions, the increase in the Accumulation Value
will be allocated to the Fixed Account.
(2) For an initial premium, we calculate the
guaranteed death benefit. When an additional premium payment is made, we
increase the guaranteed death benefit.
Following receipt and acceptance of the wire order and accompanying data, and
investment of the premium payment, we will follow one of the two procedures set
forth below. The one we follow is determined by state availability and the
procedures of the broker-dealer which submitted the wire order.
(1) We will issue the contract. However, until we have
received and accepted a properly completed application or enrollment form,
we reserve the right to rescind the contract. If the form is not received
within fifteen days of receipt of the premium payment, we will refund the
Accumulation Value plus any charges we deducted, and the contract will be
voided. Some states require that we return the premium paid. In these
states, different rules will apply.
(2) Based on the information provided, we will issue
the contract. We will mail the contract to you, together with an Application
Acknowledgement Statement. You must execute the Application Acknowledgement
Statement and return it to us at our Customer Service Center. Until we
receive the executed Application Acknowledgement Statement, neither you nor
the broker-dealer may execute any financial transactions with respect to the
contract unless such transactions are appropriately requested in writing by
you.
RESTRICTIONS ON ALLOCATION OF PREMIUM PAYMENTS
We may require that an initial premium designated for a Division of either
Account B or Account D be allocated to the Specially Designated Division during
the free look period for initial premiums received from some states. After the
free look period, if your initial premium was allocated to the Specially
Designated Division, we will transfer the Accumulation Value to the Divisions
you previously selected based on the index of investment experience next
computed for each Division. See Part I, Measurement of Investment Experience,
Index of Investment Experience and Unit Value. Initial premiums designated for
the Fixed Account will be allocated to a Fixed Allocation with the Guarantee
Period you have chosen.
EXCHANGE PROGRAM
We currently offer an exchange program (the "Exchange Program") available only
to purchasers who exchange an existing contract issued by another insurance
company not affiliated with us (an "Exchange Contract") for our contract or who
add, under certain qualified plans, to an existing contract by using an Exchange
Contract. However, we reserve the right to modify, suspend, or terminate the
Exchange Program at any time or from time to time without notice. If such an
Exchange Program is in effect, it will apply to all such exchanges for our
contract, although at any time we may limit the Exchange Program to contracts
not issued in connection with a qualified plan.
The Exchange Program is available only where permitted by law to owners of
insurance or annuity contracts deemed not to constitute "securities" issued by
an investment company. Therefore, while a currently owned variable annuity or
variable life insurance policy may be exchanged for our contract pursuant to
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<PAGE>
FACTS ABOUT THE CONTRACT (CONTINUED)
Section 1035 of the Code, or where applicable, may qualify for a "rollover" or
transfer pursuant to certain other sections of the Code, such an exchange,
"rollover" or transfer will not qualify for the Exchange Program.
You should carefully evaluate whether any particular Exchange Program we offer
benefits you more than if you continue to hold your Exchange Contract. Factors
to consider include, but are not limited to: (a) the amount of surrender charges
under your Exchange Contract; (b) the time remaining under your Exchange
Contract during which surrender charges apply; (c) the on-going charges, if any,
under your Exchange Contract versus the on-going charges under our contract; (d)
the surrender charges under our contract; (e) the amount and timing of any
benefits under such an Exchange Program; and (f) the potentially greater cost to
you if the surrender charge on our Contract or the surrender charge on your
Exchange Contract exceeds the benefits under such an Exchange Program. There
could be adverse Federal income tax consequences. You should consult with your
tax advisor as to the tax consequences of such an exchange. See Federal Tax
Considerations.
Under the current Exchange Program we add certain amounts to your Accumulation
Value as credits ("Credits"). Such Credits are credited by us on behalf of the
owner of an Exchange Contract with funds from our general account. Credits equal
the surrender charge paid, if any, by the owner of an Exchange Contract.
Different rules apply for qualified plans.
For a complete description of the Exchange Program including any restrictions
and limits that may apply, please call our Customer Service Center.
YOUR RIGHT TO REALLOCATE
You may reallocate your Accumulation Value among the Divisions and Fixed
Allocations at the end of the free look period. We currently do not assess a
charge for allocation changes made during a contract year. We reserve the right,
however, to assess a $25 charge for each allocation change after the twelfth
allocation change in a contract year. We require that each reallocation of your
Accumulation Value equal at least $250 or, if less, your entire Accumulation
Value within a Division or Fixed Allocation. We reserve the right to limit, upon
notice, the maximum number of reallocations you may make within a contract year.
In addition, we reserve the right to defer the reallocation privilege at any
time we are unable to purchase or redeem shares of The GCG Trust or Account D.
We also reserve the right to modify or terminate your right to reallocate your
Accumulation Value at any time in accordance with applicable law. When a
reallocation is made, we redeem shares of the Series underlying the Divisions
you are transferring from at their net asset value. Reallocations from the Fixed
Account are subject to the Market Value Adjustment unless taken as part of the
dollar cost averaging program or within 30 days of the Maturity Date of the
applicable Guarantee Period. To make a reallocation change, you must provide us
with satisfactory notice at our Customer Service Center.
We reserve the right to limit the number of reallocations of your Accumulation
Value among the Divisions and Fixed Allocations or refuse any reallocation
request if we believe that: (a) excessive trading by you or a specific
reallocation request may have a detrimental effect on unit values or the share
prices of the underlying Series; or (b) we are informed by The GCG Trust or
Account D that the purchase or redemption of shares is to be restricted because
of excessive trading or a specific reallocation or group of reallocations is
deemed to have a detrimental effect on share prices of The GCG Trust or Account
D.
Where permitted by law, we may accept your authorization of third party
reallocation on your behalf, subject to our rules. We may suspend or cancel such
acceptance at any time. We will notify you of any such suspension or
cancellation. We may restrict the Divisions and Fixed Allocations that will be
available to you for reallocations of premiums during any period in which you
authorize such third party to act on your behalf. We will give you prior
notification of any such restrictions. However, we will not enforce such
restrictions if we are provided evidence satisfactory to us that: (a) such third
party has been appointed by a court of competent jurisdiction to act on your
behalf; or (b) such third party has been appointed by you to act on your behalf
for all your financial affairs.
Some restrictions may apply based on the free look provisions of the state where
the contract is issued. See Your Right to Cancel or Exchange Your Contract.
DOLLAR COST AVERAGING
If you have at least $10,000 of Accumulation Value in the Limited Maturity Bond
Division, the Liquid Asset Division or a Fixed Allocation with a one year
Guarantee Period, you may elect the dollar cost averaging program and have a
specified dollar amount transferred from those Divisions or such Fixed
Allocation on a monthly basis.
The main objective of dollar cost averaging is to attempt to shield your
investment from short term price
22
<PAGE>
FACTS ABOUT THE CONTRACT (CONTINUED)
fluctuations. Since the same dollar amount is transferred to other Divisions
each month, more units are purchased in a Division if the value per unit is low
and less units are purchased if the value per unit is high.
Therefore, a lower than average value per unit may be achieved over the long
term. This plan of investing allows investors to take advantage of market
fluctuations but does not assure a profit or protect against a loss in declining
markets.
Dollar cost averaging may be elected at issue or at a later date. The minimum
amount that may be transferred each month is $250. The maximum amount which may
be transferred is equal to your Accumulation Value in the Limited Maturity Bond
Division, the Liquid Asset Division or a Fixed Allocation with a one year
Guarantee Period when you elect the dollar cost averaging program, divided by
12.
The transfer date will be the same calendar day each month as the contract date.
The dollar amount will be allocated to the Divisions in which you are invested
in proportion to your Accumulation Value in each Division unless you specify
otherwise. If, on any transfer date, your Accumulation Value is equal to or less
than the amount you have elected to have transferred, the entire amount will be
transferred and the program will end. You may change the transfer amount once
each contract year, or cancel this program by sending satisfactory notice to our
Customer Service Center at least seven days before the next transfer date. Any
allocation under this program will not be included in determining if the excess
allocation charge will apply. We currently do not permit transfers under the
dollar cost averaging program from Fixed Allocations with other than one year
Guarantee Periods. Transfers from a Fixed Allocation under the dollar cost
averaging program will not be subject to a Market Value Adjustment. See, Market
Value Adjustment. A Fixed Allocation may not participate simultaneously in both
the dollar cost averaging program and the Systematic Partial Withdrawal Option.
WHAT HAPPENS IF A DIVISION IS NOT AVAILABLE
When a distribution is made from an investment portfolio supporting a Division
of Account B or The Managed Global Account Division of Account D in which
reinvestment is not available, we will allocate the distribution, unless you
specify otherwise, to the Specially Designated Division.
Such a distribution can occur when (a) an investment portfolio matures, or (b) a
distribution from a portfolio or Division cannot be reinvested in the portfolio
or Division due to the unavailability of securities for acquisition. When an
investment portfolio matures, we will notify you in writing 30 days in advance
of that date. To elect an allocation to other than the Specially Designated
Division, you must provide satisfactory notice to us at least seven days prior
to the date the portfolio matures. Such allocations are not counted for purposes
of the number of free allocation changes permitted. When a distribution from a
portfolio or Division cannot be reinvested in the portfolio due to the
unavailability of securities for acquisition, we will notify you promptly after
the allocation has occurred. If within 30 days you allocate the Accumulation
Value from the Specially Designated Division to other Divisions or Fixed
Allocations of your choice, such allocations will not be included in determining
if the excess allocation charge will apply.
YOUR ACCUMULATION VALUE
Your Accumulation Value is the sum of the amounts in each of the Divisions and
the Fixed Allocations in which you are invested, and is the amount available for
investment at any time. You select the Divisions and Fixed Allocations to which
to allocate your Accumulation Value. We adjust your Accumulation Value on each
Valuation Date to reflect the Divisions' investment performance and interest
credited to your Fixed Allocations, any additional premium payments or partial
withdrawals since the previous Valuation Date, and on each contract processing
date to reflect any deduction of the annual contract fee. Your Accumulation
Value is applied to your choice of an annuity option on the annuity commencement
date subject to our published rules at such time. See Choosing an Income Plan.
ACCUMULATION VALUE IN EACH DIVISION
ON THE CONTRACT DATE
On the contract date, your Accumulation Value is allocated to each Division as
you have specified, unless the contract is issued in a state that requires the
return of premium payments during the free look period, in which case, the
portion of your initial premium not allocated to a Fixed Allocation will be
allocated to the Specially Designated Division during the free look period.
See Your Right to Cancel or Exchange Your Contract.
ON EACH VALUATION DATE
At the end of each subsequent valuation period, the amount of Accumulation
Value in each Division will be calculated as follows:
(1) We take the Accumulation Value in the Division
at the end of the preceding valuation period.
(2) We multiply (1) by the Division's net rate of
return for the current valuation period.
(3) We add (1) and (2).
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<PAGE>
FACTS ABOUT THE CONTRACT (CONTINUED)
(4) We add to (3) any additional premium
payments allocated to the Division during the current valuation period.
(5) We add or subtract allocations to or from that
Division during the current valuation period.
(6) We subtract from (5) any partial withdrawals
and any associated charges allocated to that Division during the current
valuation period.
(7) We subtract from (6) the amounts allocated to
that Division for:
(a) any contract fees; and
(b) any charge for premium taxes.
All amounts in (7) are allocated to each Division in the proportion that (6)
bears to the Accumulation Value in Account B and Account D, unless the Charge
Deduction Division has been specified. See Charges Deducted from the
Accumulation Value.
MEASUREMENT OF INVESTMENT EXPERIENCE
INDEX OF INVESTMENT EXPERIENCE
AND UNIT VALUE
The investment experience of a Division is determined on each valuation date.
We use an index to measure changes in each Division's experience during a
valuation period. We set the index at $10 when the first investments in a
Division are made. The index for a current valuation period equals the index
for the preceding valuation period multiplied by the experience factor for the
current valuation period.
We may express the value of amounts allocated to the Divisions in terms of
units. We determine the number of units for a given amount on a valuation date
by dividing the dollar value of that amount by the index of investment
experience for that date. The index of investment experience is equal to the
value of a unit.
HOW WE DETERMINE THE EXPERIENCE FACTOR
For Divisions of Account B the experience factor reflects the investment
experience of the Series of the Trust in which a Division invests as well as
the charges assessed against the Division for a valuation period. The factor
is calculated as follows:
(1) We take the net asset value of the portfolio in
which the Division invests at the end of the current valuation period.
(2) We add to (1) the amount of any dividend or
capital gains distribution declared for the investment portfolio and
reinvested in such portfolio during the current valuation period. We
subtract from that amount a charge for our taxes, if any.
(3) We divide (2) by the net asset value of the
portfolio at the end of the preceding valuation period.
(4) We subtract the applicable daily mortality and
expense risk charge from each Division for each day in the valuation
period.
(5) We subtract the daily asset based
administrative charge from each Division for each day in the valuation period.
Calculations for Divisions investing in a Series are made on a per share
basis.
For the Global Account the experience factor reflects the investment
experience of the Global Account as well as the charges assessed against the
Global Account for a valuation period. The factor is calculated as follows:
(1) We take the value of the assets in the Global
Account at the end of the preceding valuation period.
(2) We add to (1) any investment income and
capital gains, realized or unrealized, credited to the assets during the current
valuation period.
(3) We subtract from (2) any capital losses, realized
or unrealized, charged against the assets during the current valuation
period.
(4) We subtract from (3) any amount charged
against the Global Account for any taxes.
(5) We divide (4) by the value of the assets in the
Global Account at the end of the preceding valuation period.
(6) We subtract from (5) the daily charge for
management and investment advice for each day in the valuation period.
(7) We subtract from (6) a daily charge for
estimated operating expenses for each day in the valuation period.
(8) We subtract from (7) the applicable daily charge
for mortality and expense risks for each day in the valuation period.
(9) We subtract from (8) the daily asset based
administrative charge for each day in the valuation period.
NET RATE OF RETURN FOR A DIVISION
The net rate of return for a Division during a valuation period is the
experience factor for that valuation period minus one.
24
<PAGE>
FACTS ABOUT THE CONTRACT (CONTINUED)
CASH SURRENDER VALUE
Your contract's cash surrender value fluctuates daily with the investment
results of the Divisions, interest credited to Fixed Allocations and any Market
Value Adjustment. We do not guarantee any minimum cash surrender value. On any
date before the annuity commencement date while the contract is in effect, the
cash surrender value is calculated as follows:
(1) We take the contract's Accumulation Value;
(2) We deduct any surrender charge and any
charge for premium taxes;
(3) We deduct any charges incurred but not yet
deducted; and
(4) We adjust for any Market Value Adjustment.
SURRENDERING TO RECEIVE THE CASH SURRENDER VALUE
The contract may be surrendered by the owner at any time while the annuitant is
living and before the annuity commencement date.
A surrender will be effective on the date your written request and the contract
are received at our Customer Service Center. The cash surrender value is
determined and all benefits under the contract will then be terminated, as of
that date. You may receive the cash surrender value in a single sum payment or
apply it under one or more annuity options. See The Annuity Options. We will
usually pay the cash surrender value within seven days but we may delay payment.
See, When We Make Payments.
PARTIAL WITHDRAWALS
Prior to the annuity commencement date, while the annuitant is living and the
contract is in effect, you may take partial withdrawals from the Accumulation
Value by sending satisfactory notice to our Customer Service Center. Unless you
specify otherwise, the amount of the withdrawal, including any surrender charge
and market value adjustment, will be taken in proportion to the amount of
Accumulation Value in each Division in which you are invested. If there is no
Accumulation Value in those Divisions, partial withdrawals will be deducted from
your Fixed Allocations starting with the Guarantee Periods nearest their
Maturity Dates until we have honored your request.
There are three options available for selecting partial withdrawals, the
Conventional Partial Withdrawal Option, the Systematic Partial Withdrawal Option
and the IRA Partial Withdrawal Option. All three options are described below.
The maximum amount you may withdraw each contract year without incurring a
surrender charge is 15% of your Accumulation Value. See Surrender Charge for
Excess Partial Withdrawals. Partial withdrawals may not be repaid. A partial
withdrawal request for an amount in excess of 90% of the cash surrender value
will be treated as a request to surrender the contract.
CONVENTIONAL PARTIAL WITHDRAWAL OPTION
After the free look period, you may take conventional partial withdrawals. The
minimum amount you may withdraw under this option is $1,000. A conventional
partial withdrawal from a Fixed Allocation may be subject to a Market Value
Adjustment.
SYSTEMATIC PARTIAL WITHDRAWAL OPTION
This option may be elected at the time you apply for a contract, or at a later
date. This option may be elected to commence in a contract year where a
conventional partial withdrawal has been taken. However, it may not be elected
while the IRA Partial Withdrawal Option is in effect.
You may choose to receive systematic partial withdrawals on a monthly or
quarterly basis from your Accumulation Value in the Divisions or the Fixed
Allocations. The commencement of payments under this option may not be elected
to start sooner than 28 days after the contract issue date. You select the
date of the quarter or month when the withdrawals will be made but no later
than the 28th day of the month. If no date is selected, the withdrawals will
be made on the same calendar day of each month as the contract date.
You may select a dollar amount or a percentage of the Accumulation Value from
the Divisions in which you are invested as the amount of your withdrawal
subject to the following maximums, but in no event can a payment be less than
$100:
<TABLE>
<CAPTION>
FREQUENCY MAXIMUM PERCENTAGE
- - ------------ -----------------------
<S> <C>
Monthly 1.25%
Quarterly... 3.75%
</TABLE>
If a dollar amount is selected and the amount to be systematically withdrawn
would exceed the applicable maximum percentage of your Accumulation Value on
the withdrawal date, the amount withdrawn will be reduced so that it equals
such percentage. For example, if a $500 monthly withdrawal was elected and on
the withdrawal date 1.25% of the Accumulation Value equaled $300, the
withdrawal amount would be reduced to $300. If a percentage is selected and
the amount to be systematically withdrawn based on that percentage would be
less than the minimum of $100, we would increase the amount to $100 provided
it does not exceed the maximum percentage. If it is below the maximum
percentage we will send the minimum. If it is above the maximum percentage we
will send the amount
25
<PAGE>
FACTS ABOUT THE CONTRACT (CONTINUED)
and then cancel the option. For example, if you selected 1.0% to be
systematically withdrawn on a monthly basis and that amount equaled $90, and
since $100 is less than 1.25% of the Accumulation Value, we would send $100.
If 1.0% equaled $75, and since $100 is more than 1.25% of the Accumulation
Value we would send $75 and then cancel the option. In such a case, in order
to receive systematic partial withdrawals in the future, you would be required
to submit a new notice to our Customer Service Center.
Systematic Partial Withdrawals from Fixed Allocations are limited to interest
earnings during the prior month or quarter, depending on whether you have
chosen a monthly or quarterly frequency, respectively. Systematic withdrawals
are not subject to a Market Value Adjustment. A Fixed Allocation, however, may
not participate simultaneously in both the dollar cost averaging program and
the Systematic Partial Withdrawal Option.
You may change the amount or percentage of your withdrawal once each contract
year or cancel this option at any time by sending satisfactory notice to our
Customer Service Center at least seven days prior to the next scheduled
withdrawal date. However, you may not change the amount or percentage of your
withdrawals in any contract year during which you have previously taken a
conventional partial withdrawal.
IRA PARTIAL WITHDRAWAL OPTION
If you have an IRA contract and will attain age 70 1/2 in the current calendar
year, distributions will be made to you to satisfy requirements imposed by
Federal tax law. IRA partial withdrawals provide payout of amounts required to
be distributed by the Internal Revenue Service rules governing mandatory
distributions under qualified plans. See Federal Tax Considerations, Taxation
of Individual Retirement Annuities. We will send you a notice before your
distributions must commence, and you may elect this option at that time, or at
a later date. You may not elect IRA partial withdrawals while the Systematic
Partial Withdrawal Option is in effect. If you do not elect the IRA Partial
Withdrawal Option, and distributions are required by Federal tax law,
distributions adequate to satisfy the requirements imposed by Federal tax law
will be made. Thus, if the Systematic Partial Withdrawal Option is in effect,
distribution under that option must be adequate to satisfy the mandatory
distribution rules imposed by Federal tax law.
You may choose to receive IRA partial withdrawals on a monthly, quarterly or
annual frequency. You select the day of the month when the withdrawals will be
made, but it cannot be later than the 28th day of the month. If no date is
selected, the withdrawals will be made on the same calendar day of the month
as the contract date.
We will determine the amount that is required to be withdrawn from your
contract each year based on the information you give us and various choices
you make. For information regarding the calculation and choices you have to
make, see the Statement of Additional Information. The minimum dollar amount
you can withdraw is $100. At the time we determine the required partial
withdrawal amount for a taxable year based on the frequency you select, if
that amount is less than $100, we will pay $100. At any time where the partial
withdrawal amount is greater than the Accumulation Value, we will cancel the
contract and send you the amount of the cash surrender value.
You may change the payment frequency of your withdrawals once each contract
year or cancel this option at any time by sending us satisfactory notice to
our Customer Service Center at least seven days prior to the next scheduled
withdrawal date.
An IRA partial withdrawal in excess of the amount allowed under the Systematic
Partial Withdrawal Option may be subject to a Market Value Adjustment.
PARTIAL WITHDRAWALS IN GENERAL
CONSULT YOUR TAX ADVISOR REGARDING THE TAX CONSEQUENCES ASSOCIATED WITH TAKING
PARTIAL WITHDRAWALS. A partial withdrawal made before the taxpayer reaches age
59 1/2 may result in imposition of a tax penalty of 10% of the taxable portion
withdrawn. See Federal Tax Considerations for more details.
PROCEEDS PAYABLE TO THE BENEFICIARY
If the owner or the annuitant (when the owner is other than an individual) dies
prior to the annuity commencement date, we will pay the beneficiary the death
benefit proceeds under the contract. Such amount may be received in a single sum
or applied to any of the annuity options. See The Annuity Options. If we do not
receive a request to apply the death benefit proceeds to an annuity option, a
single sum distribution will be made. Any distributions from non-qualified
contracts must comply with applicable Federal tax law requirements. See Federal
Tax Considerations.
DEATH BENEFIT OPTIONS
Subject to our rules, there are three death benefit options that may be
available to you under the contract: the Standard Death Benefit Option; the 7%
Solution Enhanced Death Benefit Option; and the Annual Ratchet Enhanced Death
Benefit Option.
26
<PAGE>
FACTS ABOUT THE CONTRACT (CONTINUED)
The 7% Solution enhanced Death Benefit Option may only be elected at issue and
only if the owner or annuitant (when the owner is other than an individual) is
age 75 or younger at issue. The Annual Ratchet Enhanced Death Benefit Option may
only be elected at issue and only if the owner or annuitant (when the owner is
other than an individual) is age 79 or younger at issue.
If an enhanced death benefit is elected, the death benefit under the contract is
equal to the greatest of: (i) the Accumulation Value; (ii) total premium
payments less any partial withdrawals; (iii) the cash surrender value; and (iv)
the enhanced death benefit (see below).
We may offer a reduced death benefit under certain group and sponsored
arrangements. See Part I, Group or Sponsored Arrangements.
STANDARD DEATH BENEFIT OPTION
You will automatically receive the Standard Death Benefit Option unless you
elect one of the enhanced death benefits. The Standard Death Benefit Option
for the contract is equal to the greatest of: (i) your Accumulation Value;
(ii) total premium payment less any partial withdrawals; and (iii) the cash
surrender value.
7% SOLUTION ENHANCED DEATH BENEFIT OPTION
(1) We take the guaranteed death benefit from the
prior Valuation Date. On the contract date, the guaranteed death benefit is
equal to the initial premium.
(2) We calculate interest on (1) for the current
valuation period at THE GUARANTEED DEATH BENEFIT INTEREST RATE, which rate is an
annual rate of 7%; except that with respect to amounts in the Liquid Asset
Division, the interest rate applied to such amounts will be the net rate of
return for the Liquid Asset Division during the current valuation period, if
it is less than an annual rate of 7%; and except with respect to amounts in
a Fixed Allocation, the interest rate applied to such amounts will be the
interest credited to such Fixed Allocation during the current valuation
period, if it is less than an annual rate of 7%.
Each accumulated initial or additional premium payment reduced by any
partial withdrawals, will continue to grow at the guaranteed death benefit
interest rate until reaching its maximum guaranteed death benefit. The
maximum guaranteed death benefit is equal to two times each initial or
additional premium paid minus the sum of partial withdrawals taken.
(3) We add (1) and (2).
(4) We add to (3) any additional premiums paid
during the current valuation period.
(5) We subtract from (4) any partial withdrawals
(including any market value adjustments and surrender charges incurred) made
during the current valuation period.
ANNUAL RATCHET ENHANCED DEATH BENEFIT OPTION
(1) We take the guaranteed death benefit from the
prior Valuation Date. On the contract date, the guaranteed death benefit is
equal to the initial premium.
(2) We add to (1) any additional premiums paid since
the prior Valuation Date and subtract from (1) any partial withdrawals
(including any market value adjustments and surrender charges incurred)
taken since the prior Valuation Date.
(3) On a Valuation Date that occurs on or prior to the
owner's attained age 80 which is also a contract anniversary, we set the
guaranteed death benefit equal to the greater of (2) or the Accumulation
Value as of such date.
On all other Valuation Dates, the guaranteed death benefit is equal to (2).
HOW TO CLAIM PAYMENTS TO BENEFICIARY
We must receive due proof of the death of the owner or the annuitant (if the
owner is other than an individual) (such as an official death certificate) at
our Customer Service Center before we will make any payments to the
beneficiary. We will calculate the death benefit as of the date we receive due
proof of death. The beneficiary should contact our Customer Service Center for
instructions.
REPORTS TO OWNERS
We will send you a report once each calendar quarter within 31 days after the
end of each calendar quarter. The report will show the Accumulation Value, the
cash surrender value, and the death benefit as of the end of the calendar
quarter.
The report will also show the allocation of your Accumulation Value as of such
date and the amounts deducted from or added to the Accumulation Value since the
last report. The report will also include any other information that may be
currently required by the insurance supervisory official of the jurisdiction in
which the contract is delivered. We will also send you copies of any shareholder
reports of the portfolios or securities in which Account B and Account D invest,
as well as any other reports, notices or documents required by law to be
furnished to owners.
27
<PAGE>
FACTS ABOUT THE CONTRACT (CONTINUED)
WHEN WE MAKE PAYMENTS
We will generally pay death benefit proceeds and the cash surrender value within
seven days after our Customer Service Center receives all the information needed
to process the payment.
However, we may delay payment of amounts derived from the Divisions if it is not
practical for us to value or dispose of shares of Account B or Account D
because:
(1) The NYSE is closed for trading;
(2) The SEC determines that a state of emergency
exists;
(3) An order or pronouncement of the SEC permits a
delay for the protection of owners; or,
(4) The check used to pay the premium has not
cleared through the banking system. This may take up to 15 days.
During such times, as to amounts allocated to the Divisions, we may delay:
(1) Determination and payment of any cash
surrender value;
(2) Determination and payment of any death benefit
if death occurs before the annuity commencement date;
(3) Allocation changes of the Accumulation Value; or,
(4) Application under an annuity option of the
Accumulation Value.
We reserve the right to delay payment of amounts from the Fixed Account for up
to six months.
CHARGES AND FEES
CHARGE DEDUCTION DIVISION
You may specify at issue if you wish to use the Charge Deduction Division
Option. If you so specify, all charges against the Accumulation Value will be
deducted from the Liquid Asset Division. If you do not elect this option, or if
the amount of the charges is greater than the amount in the Division, the
charges will be deducted as discussed below. You may also choose to elect or
cancel this option while the contract is in force by sending satisfactory notice
to our Customer Service Center.
CHARGES DEDUCTED FROM THE ACCUMULATION VALUE
We invest the entire amount of the initial and any additional premium payments
in the Divisions and the Fixed Allocations you select, subject to certain
restrictions. See Restrictions on Allocation of Premium Payments. We then may
deduct certain amounts from your Accumulation Value. We may reduce certain fees
and charges, including any surrender, administration, and mortality and expense
risk charges, under group or sponsored arrangements. See Group or Sponsored
Arrangements. Unless you have elected the Charge Deduction Division, charges are
deducted proportionately from all Divisions in which you are invested. If there
is no Accumulation Value in those Divisions, we will deduct charges from your
Fixed Allocations starting with the Guarantee Periods nearest their Maturity
Dates until such charges have been paid. The charges we deduct are:
SURRENDER CHARGE
A contingent deferred sales charge ("Surrender Charge") is imposed as a
percentage of each premium payment if the contract is surrendered or an excess
partial withdrawal is taken during the seven year period from the date we
receive and accept such premium payment. The percentage of premium payments
deducted at the time of surrender or excess partial withdrawal depends upon
the number of complete years that have elapsed since that premium payment was
made. We determine the surrender charge as a percentage of each premium
payment as follows:
<TABLE>
<CAPTION>
COMPLETE YEARS ELAPSED SURRENDER
SINCE PREMIUM PAYMENT CHARGE
- - ----------------------------------------- -----------------
<S> <C>
0 7%
1 7%
2 6%
3 5%
4 4%
5 3%
6 1%
7+ 0%
</TABLE>
Subject to our rules and as described in the contract, the surrender charge
arising from a surrender or excess partial withdrawal will be waived in the
following events:
(1) you begin receiving qualified extended medical
care on or after the first certificate anniversary for at least 45 days
during any continuous sixty-day period, and your request for the surrender
or withdrawal, together with all required proof of such qualified extended
medical care, must be received at our Customer Service Center during the
term of such care or within ninety days after the last day upon which you
received such care.
(2) you are first diagnosed by a qualifying medical
professional, on or after the first Certificate Anniversary, as having a
Qualifying Terminal Illness. Written proof of terminal illness,
satisfactory to us, must be received at our Customer Service Center. We
reserve the right to require an examination by a physician of our choice.
28
<PAGE>
CHARGES AND FEES (CONTINUED)
See your contract for more information. The waiver of surrender charge may not
be available in all states.
SURRENDER CHARGE FOR EXCESS PARTIAL WITHDRAWALS
There is considered to be an excess partial withdrawal in any contract year in
which the amount withdrawn exceeds 15% of your Accumulation Value at the
beginning of the contract year minus any amount withdrawn during that contract
year. Any combination of partial withdrawals taken and those expected to be
received in a contract year will be considered in determining the amount of
the excess partial withdrawal. Such a withdrawal will be considered a partial
surrender of the contract and we will impose a surrender charge and any
associated premium tax. Such charges will be deducted from the Accumulation
Value in proportion to the Accumulation Value in each Division or Fixed
Allocation from which the excess partial withdrawal was taken.
For purposes of calculating the surrender charge for the excess partial
withdrawal, (i) we treat contributions as being withdrawn on a first-in
first-out basis, and (ii) amounts withdrawn which are not considered an excess
partial withdrawal are not treated a withdrawal of any premium payments.
Although we treat premium payments as withdrawn before earnings for purposes
of calculating the surrender charge for excess partial withdrawals, the
Federal income tax law treats earnings as withdrawn first. See Federal Tax
Considerations, Taxation of Non-Qualified Annuities.
For example, the following assumes an initial premium payment of $10,000 and
additional premium payments of $10,000 in each of the second and third
contract years, for total premium payments under the contract of $30,000. It
also assumes a partial withdrawal at the beginning of the fourth contract year
of 20% of the Accumulation Value of $35,000.
In this example, $5,250 ($35,000 x .15) is the maximum partial withdrawal that
may be withdrawn during the contract year without the imposition of a
surrender charge. The total partial withdrawal would be $7,000 ($35,000 x .2).
Therefore, $1,750 ($7,000 - $5,250) is considered an excess partial withdrawal
of a part of the initial premium payment of $10,000 and would be subject to a
5% surrender charge of $87.50 ($1,750 x .05). This example does not take into
account any Market Value adjustment or deduction of any premium taxes.
PREMIUM TAXES
We make a charge for state and local premium taxes in certain states which can
range from 0% to 3.5% of premium. The charge depends on the owner's state of
residence. We reserve the right to change this amount to conform with changes
in the law or if the owner changes state of residence.
Premium taxes are generally incurred on the annuity commencement date and a
charge for such premium taxes is then deducted from your Accumulation Value on
such date. However, some jurisdictions impose a premium tax at the time that
initial and additional premiums are paid, regardless of the annuity
commencement date. In those states we may initially defer collection of the
amount of the charge for premium taxes from your Accumulation Value and deduct
it against Accumulation Value on surrender of the contract, excess partial
withdrawals or on the annuity commencement date.
ADMINISTRATIVE CHARGE
The administrative charge is incurred at the beginning of the contract
processing period and deducted at the end of each contract processing period.
We deduct this charge when determining the cash surrender value payable if you
surrender the contract prior to the end of a contract processing period. If
the Accumulation Value at the end of the contract processing period equals or
exceeds $100,000 or the sum of the premiums paid equals or exceeds $100,000,
the charge is zero. Otherwise, the amount deducted is $40 per contract year.
This charge is to cover a portion of our administrative expenses. See ASSET
BASED ADMINISTRATIVE CHARGE, below.
EXCESS ALLOCATION CHARGE
We currently do not assess a charge for allocation changes made during a
contract year. We reserve the right, however, to assess a $25 charge for each
allocation change after the twelfth allocation change in a contract year. This
amount represents the maximum we will charge. The charge would be deducted
from the Divisions and the Fixed Allocations from which each such reallocation
is made in proportion to the amount being transferred from each such Division
and Fixed Allocation unless you have chosen to use the Charge Deduction
Division. The excess allocation charge is set at a level that is not designed
to produce profit for Golden American or any affiliate. Any allocations or
transfers due to the election of dollar cost averaging and reallocation under
the provision WHAT HAPPENS IF A DIVISION IS NOT AVAILABLE will not be included
in determining if the excess allocation charge should apply.
29
<PAGE>
CHARGES AND FEES (CONTINUED)
CHARGES DEDUCTED FROM THE DIVISIONS
MORTALITY AND EXPENSE RISK CHARGE
A different mortality and expense risk charge is assessed with respect to the
death benefit option that has been elected. If the Standard Death Benefit
Option is elected, the charge is equivalent, on an annual basis, to 1.10% of
the assets in each Division. The charge is deducted on each valuation date at
the rate of .003030% for each day in the valuation period. Approximately .75%
is allocated to the mortality risk and .35% is allocated to the expense risk.
If an enhanced death benefit is elected, the charge is equivalent, on an
annual basis, to 1.25% for the Annual Ratchet Death Benefit Option, or 1.40%
for the 7% Solution Death Benefit Option, of the assets in each Division. The
charge is deducted on each valuation date at the rate of .003446% or .003863%,
respectively, for each day in the valuation period. For the Annual Ratchet
approximately .90%, or for the 7% Solution approximately 1.05%, is allocated
to the mortality risk.
This charge will compensate us for mortality and expense risks we assume under
the contract. We will realize a gain from this charge to the extent it is not
needed to provide for benefits and expenses under the contract. We will use
any gain for any lawful purpose including any shortfalls on paying
distribution expenses.
The mortality risk assumed is the risk that annuitants as a group will live
for a longer time than our actuarial tables predict. As a result, we would be
paying more in annuity income than we planned. Golden American also assumes a
risk under the contract for paying a guaranteed death benefit.
The expense risk assumed is the risk that it will cost us more to issue and
administer the contract than we expect.
ASSET BASED ADMINISTRATIVE CHARGE
We will deduct a daily charge from the assets in each Division, to compensate
us for a portion of the administrative expenses under the contract. The daily
charge is at a rate of 0.000411% (equivalent to an annual rate of 0.15%) on
the assets in each Division.
This asset based administrative charge plus the administrative charge above
will not exceed the cost of the services to be provided over the life of the
contract.
TRUST EXPENSES
There are fees and charges deducted from each Series. Please read the Trust
prospectus for details.
OPERATING EXPENSES OF ACCOUNT D
There are additional fees and charges to the Global Account in Account D for
management and advisory services as well as other operational expenses of the
Global Account. DSI as the Manager of Account D receives a monthly fee equal to
an annual rate based upon the following percentages of the Global Account's
average daily net assets: 0.40% of the first $500 million and 0.30% of the
amount over $500 million. Warburg, Pincus as the Portfolio Manager receives a
monthly fee equal to an annual rate based upon the following percentages of the
Global Account's average daily net assets: 0.60% of the first $500 million and
0.50% of the amount over $500 million. The total fees for management and
advisory services exceed the fees for similar services paid by some other
registered investment companies with similar objectives.
The Global Account bears the expenses of its investment management operations,
including expenses associated with custody of securities, portfolio accounting,
the Board of Governors, and legal and auditing services.
The initial organizational expenses of the Global Account were advanced by
Golden American. The Global Account reimburses Golden American for such
expenses, which are amortized over five years from the date of the Global
Account's commencement of operations.
The Global Account and DSI have agreed to limit the total expenses of the Global
Account. See Part I, The Managed Global Account of Account D.
CHOOSING AN INCOME PLAN
THE INCOME PLAN
If the annuitant and owner are living on the annuity commencement date, we will
begin making payments to the owner under an income plan. We will make these
payments under the annuity option chosen. You may change an annuity option by
making a written request to us at least 30 days prior to the annuity
commencement date of the contract. The amount of the payments will be determined
by applying your Accumulation Value adjusted for any applicable market value
adjustment on the annuity commencement date in accordance with The Annuity
Options section below, subject to our published rules at such time. See When We
Make Payments.
You may also elect an annuity option on surrender of the contract for its cash
surrender value or, you may
30
<PAGE>
CHOOSING AN INCOME PLAN (CONTINUED)
choose one or more annuity options for the payment of death benefit proceeds
while it is in effect and before the annuity commencement date. If, at the time
of the owner's death or the annuitant's death (if the owner is not an
individual), no option has been chosen for paying death benefit proceeds, the
beneficiary may choose an option within 60 days. In all events, payments of
death benefit proceeds must comply with the distribution requirements of
applicable Federal tax law. See Federal Tax Considerations.
The minimum monthly annuity income payment that we will make is $20. We may
require that a single sum payment be made if the Accumulation Value is less than
$2,000 or if the calculated monthly annuity income payment is less than $20.
For each option we will issue a separate written agreement putting the option
into effect. Before we pay any annuity benefits, we require the return of the
contract. If your contract has been lost, we will require that you complete and
return the applicable contract form. Various factors will affect the level of
annuity benefits including the annuity option chosen, the applicable payment
rate used and the investment results of the Divisions and interest credited to
the Fixed Allocations in which the Accumulation Value has been invested.
Fixed annuity payments are regular payments, the amount of which is fixed and
guaranteed by us. The amount of the payments will depend only on the form and
duration of payments chosen, the age of the annuitant or beneficiary (and sex,
where appropriate), the total Accumulation Value applied to purchase the fixed
option, and the applicable payment rate.
Our approval is needed for any option where:
(1) The person named to receive payment is other
than the owner or beneficiary;
(2) The person named is not a natural person, such as
a corporation; or
(3) Any income payment would be less than the
minimum annuity income payment allowed.
ANNUITY COMMENCEMENT DATE SELECTION
You select the annuity commencement date. You may select any date following the
third contract anniversary but before the contract processing date in the month
following the annuitant's 90th birthday. If you do not select a date, the
annuity commencement date will be in the month following the annuitant's 90th
birthday. However, in the state of Pennsylvania the annuity commencement date
may not be later than in the month following the annuitant's 85th birthday for
annuitants with an issue age of 80 and under. If the annuity commencement date
occurs when the annuitant is at an advanced age, such as over age 85, it is
possible that the contract will not be considered an annuity for Federal tax
purposes. See Federal Tax Considerations. For a contract purchased in connection
with a qualified plan, distribution must commence not later than April 1st of
the calendar year following the calendar year in which you attain age 70 1/2.
Consult your tax advisor.
FREQUENCY SELECTION
You choose the frequency of the annuity payments. They may be monthly,
quarterly, semi-annually or annually. If we do not receive written notice from
you, the payments will be made monthly. There may be certain restrictions on
minimum payments that we will allow.
THE ANNUITY OPTIONS
There are four options to choose from as shown below. Options 1 through 3 are
fixed and option 4 may be fixed or variable. For a fixed option, the
Accumulation Value in the Divisions is transferred to the general account.
OPTION 1. INCOME FOR A FIXED PERIOD
Payment is made in equal installments for a fixed number of years based on the
Accumulation Value as of the annuity commencement date. We guarantee that each
monthly payment will be at least the amount set forth in the contract.
Guaranteed amounts for annual, semi-annual and quarterly payments are
available upon request. Illustrations are available upon request. If the cash
surrender value or Accumulation Value is applied under this option, a 10%
penalty tax may apply to the taxable portion of each income payment until the
owner reaches age 59 1/2.
OPTION 2. INCOME FOR LIFE
Payment is made in equal monthly installments and guaranteed for at least a
period certain. The period certain can be 10 or 20 years. Other periods
certain may be available on request. A refund certain may be chosen instead.
Under this arrangement, income is guaranteed until payments equal the amount
applied. If the person named lives beyond the guaranteed period, payments
continue until his or her death. We guarantee that each payment will be at
least the amount set forth in the contract corresponding to the person's age
on his or her last birthday before the option's effective date. Amounts for
ages not shown in the contract are available upon request.
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CHOOSING AN INCOME PLAN (CONTINUED)
OPTION 3. JOINT LIFE INCOME
This option is available if there are two persons named to receive payments.
At least one of the persons named must be either the owner or beneficiary of
the contract. Monthly payments are guaranteed and are made as long as at least
one of the named persons is living. There is no minimum number of payments.
Monthly payment amounts are available upon request.
OPTION 4. ANNUITY PLAN
An amount can be used to buy any single premium annuity we offer on the
option's effective date.
PAYMENT WHEN NAMED PERSON DIES
When the person named to receive payment dies, we will pay any amounts still due
as provided by the option agreement. The amounts still due are determined as
follows:
(1) For option 1, or any remaining guaranteed
payments under option 2, payments will be continued. Under options 1 and 2, the
discounted values of the remaining guaranteed payments may be paid in a
single sum. This means we deduct the amount of the interest each remaining
guaranteed payment would have earned had it not been paid out early. The
discount interest rate is never less than 3% for option 1 and 3.50% for
option 2 per year. We will however, base the discount interest rate on the
interest rate used to calculate the payments for options 1 and 2 if such
payments were not based on the tables in the contract.
(2) For option 3, no amounts are payable after both
named persons have died.
(3) For option 4, the annuity agreement will state the
amount due, if any.
OTHER CONTRACT PROVISIONS
IN CASE OF ERRORS IN APPLICATION INFORMATION
If an age or sex given in the application or enrollment form is misstated, the
amounts payable or benefits provided by the contract shall be those that the
premium payment would have bought at the correct age or sex.
SENDING NOTICE TO US
Any written notices, inquiries or requests should be sent to our Customer
Service Center. Please include your name, your contract number and, if you are
not the annuitant, the name of the annuitant.
ASSIGNING THE CONTRACT AS COLLATERAL
You may assign a non-qualified contract as collateral security for a loan or
other obligation. This does not change the ownership. However, your rights and
any beneficiary's rights are subject to the terms of the assignment. See
Transfer of Annuity Contracts, and Assignments. An assignment may have Federal
tax consequences. See Federal Tax Considerations.
You must give us satisfactory written notice at our Customer Service Center in
order to make or release an assignment. We are not responsible for the
validity of any assignment.
NON-PARTICIPATING
The contract does not participate in the divisible surplus of Golden American.
AUTHORITY TO MAKE AGREEMENTS
All agreements made by us must be signed by our president or a vice president
and by our secretary or an assistant secretary. No other person, including an
insurance agent or broker, can change any of the contract's terms, make any
agreements binding on us or extend the time for premium payments.
CONTRACT CHANGES -- APPLICABLE TAX LAW
We reserve the right to make changes in the contract to the extent we deem it
necessary to continue to qualify the contract as an annuity. Any such changes
will apply uniformly to all contracts that are affected. You will be given
advance written notice of such changes.
YOUR RIGHT TO CANCEL OR EXCHANGE YOUR CONTRACT
CANCELLING YOUR CONTRACT
You may cancel your contract within your free look period, which is ten days
after you receive your contract. For purposes of administering our allocation
and administrative rules, we deem this period to expire 15 days after the
contract is mailed to you. Some states may require a longer free look period.
If you decide to cancel, you may mail or deliver the contract to our Customer
Service Center. We will refund the Accumulation Value plus any charges we
deducted, and the contract will be voided as of the date we receive the
contract and your request. Some states require that we return the premium
paid. In these states, we require your premiums designated for investment in
the Divisions of Account B and Account D be allocated to the Specially
Designated Division during the free look period. Premiums designated for the
Fixed Account will be allocated to a Fixed Allocation with the Guarantee
Period you
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OTHER CONTRACT PROVISIONS (CONTINUED)
have chosen. If you do not choose to exercise your right to cancel during the
free look period, then at the end of the free look period your money will be
invested in the Divisions chosen by you, based on the index of investment
experience next computed for each Division. See Measurement of Investment
Experience, INDEX OF EXPERIENCE AND UNIT VALUE.
EXCHANGING YOUR CONTRACT
For information regarding Section1035 exchanges, see Federal Tax
Considerations.
OTHER CONTRACT CHANGES
You may change the contract to another annuity plan subject to our rules at the
time of the change.
GROUP OR SPONSORED ARRANGEMENTS
For certain group or sponsored arrangements, we may reduce any surrender,
administration, and mortality and expense risk charges. We may also change the
minimum initial and additional premium requirements, or offer a reduced death
benefit. Group arrangements include those in which a trustee or an employer, for
example, purchases contracts covering a group of individuals on a group basis.
Sponsored arrangements include those in which an employer allows us to sell
contracts to its employees on an individual basis.
Our costs for sales, administration, and mortality generally vary with the size
and stability of the group among other factors. We take all these factors into
account when reducing charges. To qualify for reduced charges, a group or
sponsored arrangement must meet certain requirements, including our requirements
for size and number of years in existence. Group or sponsored arrangements that
have been set up solely to buy contracts or that have been in existence less
than six months will not qualify for reduced charges.
We will make these and any similar reductions according to our rules in effect
when an application or enrollment form for a contract is approved. We may change
these rules from time to time. Any variation in the administrative charge will
reflect differences in costs or services and will not be unfairly
discriminatory.
SELLING THE CONTRACT
DSI is also principal underwriter and distributor of the contract as well as for
other contracts issued through Account B and Account D and other separate
accounts of Golden American. We pay DSI for acting as principal underwriter
under a distribution agreement. The offering of the contract will be continuous.
DSI has entered into and will continue to enter into sales agreements with
broker-dealers to solicit for the sale of the contract through registered
representatives who are licensed to sell securities and variable insurance
products including variable annuities. These agreements provide that
applications for contracts may be solicited by registered representatives of the
broker-dealers appointed by Golden American to sell its variable life insurance
and variable annuities. These broker-dealers are registered with the SEC and are
members of the National Association of Securities Dealers, Inc. ("NASD"). The
registered representatives are authorized under applicable state regulations to
sell variable life insurance and variable annuities. The writing agent will
receive commissions of up to 6.0% of any initial or additional premium payments
made.
REGULATORY INFORMATION
VOTING RIGHTS
ACCOUNT B
We will vote the shares of the Trust owned by Account B according to your
instructions. However, if the Investment Company Act of 1940 or any related
regulations should change, or if interpretations of it or related regulations
should change, and we decide that we are permitted to vote the shares of the
Trust in our own right, we may decide to do so.
We determine the number of shares that you have in a Division by dividing the
contract's Accumulation Value in that Division by the net asset value of one
share of the portfolio in which a Division invests. Fractional votes will be
counted. We will determine the number of shares you can instruct us to vote
180 days or less before the Trust's meeting. We will ask you for voting
instructions by mail at least 10 days before the meeting.
If we do not get your instructions in time, we will vote the shares in the
same proportion as the instructions received from all contracts in that
Division.We will also vote shares we hold in Account B which are not
attributable to owners in the same proportion.
ACCOUNT D
Owners with Accumulation Value in the Global Account have certain voting
rights. Each such owner will be given one vote for every $1.00 of Accumulation
Value in the Global Account with fractional interests counted, unless a
different allocation of voting rights is required under applicable law for an
investment medium for variable annuity contracts.
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REGULATORY INFORMATION (CONTINUED)
Account D's rules do not require Account D to hold annual meetings of owners
of interests in Account D, although special meetings may be called for Account
D for purposes such as electing or removing members of the Board of Governors,
changing fundamental policies, or approving a contract for investment advisory
services. When required, "the vote of a majority of the outstanding voting
securities" of the Global Account of Account D means the lesser of:
(1) The holders of more than 50% of all votes
entitled to be cast in respect to Account D; or,
(2) The holders of at least 67% of the votes which
are present at a meeting of such persons are the holders of more than 50%
of all votes entitled to be cast in respect to Account D are present or
represented by proxy.
We will determine the number of votes you can instruct us to vote 90 days or
less before Account D's meeting. We will ask you for voting instructions by mail
at least 14 days before the meeting.
STATE REGULATION
We are regulated and supervised by the Insurance Department of the State of
Delaware, which periodically examines our financial condition and operations. We
are also subject to the insurance laws and regulations of all jurisdictions
where we do business. The variable contract offered by this prospectus has been
approved by the Insurance Department of the State of Delaware and by the
Insurance Departments of other jurisdictions. We are required to submit annual
statements of our operations, including financial statements, to the Insurance
Departments of the various jurisdictions in which we do business to determine
solvency and compliance with state insurance laws and regulations.
LEGAL PROCEEDINGS
Golden American, as an insurance company, is ordinarily involved in litigation.
We do not believe that any current litigation is material and we do not expect
to incur significant losses from such actions.
LEGAL MATTERS
The legal validity of the contract described in this prospectus has been passed
on by Bernard R. Beckerlegge, General Counsel and Secretary of Golden American.
Sutherland, Asbill & Brennan of Washington, D.C. has provided advice on certain
matters relating to Federal securities laws.
EXPERTS
The audited financial statements of Golden American Life Insurance Company,
Separate Account B and The Managed Global Account of Separate Account D,
appearing or incorporated by reference in the Statement of Additional
Information and Registration Statement have been audited by Ernst & Young LLP,
independent auditors, as set forth in their reports thereon appearing or
incorporated by reference in the Statement of Additional Information and in the
Registration Statement and are included or incorporated by reference in reliance
upon such reports given upon the authority of such firm as experts in accounting
and auditing.
MORE INFORMATION ABOUT GOLDEN AMERICAN LIFE INSURANCE COMPANY
SELECTED FINANCIAL DATA
The following selected financial data prepared in accordance with generally
accepted accounting principles ("GAAP") for Golden American should be read in
conjunction with the financial statements and notes thereto included in this
Prospectus.
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
---------------------------------------
FOR THE FISCAL YEARS ENDED DECEMBER 31,
---------------------------------------
(IN THOUSANDS) 1994 1993 1992(A)
- - ------------------------------------------------------------------------------------- ------------- ----------- -----------
<S> <C> <C> <C>
Variable Life and Annuity Product Fees and Policy Changes............................ $ 17,519 $ 10,192 $ 694
Net Income before Federal Income Tax................................................. $ 2,222 $ (1,793) $ (508)
Net Income (Loss).................................................................... $ 2,222 $ (1,793) $ (508)
Total Assets......................................................................... $ 1,044,760 $ 886,155 $ 320,539
Total Liabilities.................................................................... $ 955,254 $ 857,558 $ 306,197
Total Stockholder's Equity........................................................... $ 89,506 $ 28,597 $ 14,342
</TABLE>
____(a) Results for 1992 are for the period September 30, 1992 (date of
acquisition) to December 31, 1992.
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MORE INFORMATION ABOUT GOLDEN AMERICAN LIFE INSURANCE COMPANY (CONTINUED)
The following selected financial data was prepared on the basis of statutory
accounting practices ("SAP"), which have been prescribed or permitted by the
Department of Insurance of the State of Delaware and the National Association of
Insurance Commissioners. These practices differ in certain respects from GAAP.
The selected financial data should be read in conjunction with the financial
statements and notes thereto included in this Prospectus, which describe the
differences between SAP and GAAP.
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
-------------------------------------------------------------
FOR THE FISCAL YEARS ENDED DECEMBER 31,
-------------------------------------------------------------
(IN THOUSANDS) 1994 1993 1992 1991 1990
- - -------------------------------------------------------------- ----------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Premiums & Annuity Considerations............................. $ 294,550 $ 505,465 $ 191,039 $ 41,615 $ 29,739
Net Income before Federal Income Tax.......................... $ (11,260) $ (9,417) $ (4,225) $ (2,086) $ (1,566)
Net Income (Loss)............................................. $ (11,260) $ (9,401) $ (3,986) $ (1,752) $ (1,566)
Total Assets.................................................. $ 988,180 $ 834,123 $ 302,200 $ 119,652 $ 74,271
Total Liabilities............................................. $ 921,888 $ 815,301 $ 289,995 $ 106,199 $ 58,573
Total Capital & Surplus....................................... $ 66,292 $ 18,822 $ 12,205 $ 13,453 $ 15,698
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
This Management's Discussion and Analysis of Financial Condition and Results of
Operations should be read in conjunction with the Financial Statements and Notes
to Financial Statements included herein.
BUSINESS ENVIRONMENT
The current business and regulatory environment remains challenging for the
insurance industry. On the whole, more Americans have started to take a
proactive view toward their own retirement planning. Additionally, with the
fear that people will outlive their savings, many Americans have shifted their
resources from purchasing death benefit type products such as life insurance
to living benefit products such as annuities. As a result of this trend,
annuities have sustained a long growth phase. In recent years, variable
products provided contractholders with the opportunity to achieve diversified
investing in mutual fund type investments. The following factors provided a
positive impact on variable annuity premiums over the past three years: low
interest rates, strong stock market performance and demand for investment
alternatives. However, during 1994, the Federal Reserve Board began raising
interest rates pre-emptively to slow the growth of the economy to a more
sustainable rate and avoid a late-cycle outbreak of inflation. In part and as
a result of an increase in interest rates, fixed annuities and market value
adjusted annuity products gained popularity in many distribution networks as
variable annuities lost market share.
SUMMARY
During 1994, the rise in interest rates and stock market volatility
contributed to the slow-down in Golden American's premium growth as the
company was marketing exclusively variable annuity and life products tied to
mutual fund investing. Consequently, during 1995, the Company intends to
expand its strategic marketing emphasis by offering fixed rate investment
options in life and annuity products.
RESULTS OF OPERATIONS
1994 COMPARED TO 1993
Golden American realized net income (loss) of $2.22 million and $(1.79)
million for 1994 and 1993, respectively. The increase in net earnings for
1994 is attributable to the increase in average Separate Account assets in
1994, as compared to 1993.
Variable life and annuity product fees and policy charges were $17.52
million for 1994 as compared to $10.19 million for 1993. The increase is
primarily attributable to increased fees from the increasing block of
business under management in the Separate Accounts. Separate Account assets
have increased from $295 million at December 31, 1992 to $810 million at
December 31, 1993 to $950 million at December 31, 1994.
__ 1993 COMPARED TO 1992
Golden American realized a net loss of $1.79 million for the year ending
December 31, 1993, as compared to a net loss of $0.52 million for the three
month period ending December 31, 1992. Results for 1992 are for the period
September 30, 1992 (date of acquisition) to December 31, 1992.
Variable life and annuity product fees and policy charges increased from
$0.69 million for the three month period ending December 31, 1992 to $10.19
million for the year ending December 31, 1993. The increase is attributable
to 1994 results including twelve months versus three months for 1993 and the
increasing block of business under management in the Separate Accounts.
Separate Account assets increased from $295 million at December 31, 1992 to
$810 million at December 31, 1993.
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MORE INFORMATION ABOUT GOLDEN AMERICAN LIFE INSURANCE COMPANY (CONTINUED)
Total benefits and expenses in 1993 and 1992, respectively, were $12.24
million and $1.27 million. This increase is attributable to 1992 results
including twelve months versus three months for 1993 and an increase in
expenses associated with new sales and the increase in benefits costs and
the expenses associated with a growing block of business.
Golden American's earnings are principally derived from the charges imposed on
variable annuity products and, to a lesser extent, variable life products. The
primary revenues from these products consist of charges for mortality and
expense risk, the cost of insurance and contract administration charges that
have been assessed against account balances during the period. In addition, a
sales load ranging from 3% to 7.5% is assessed to each premium payment and
collected over a number of years for the variable annuity and life products.
These sales loads are earned over the life of the insurance contract in
relation to estimated future gross profits using methods and assumptions
similar to those for cost assigned to insurance in-force. Sales loads that
have been deducted but not yet earned are not recognized in current income and
are reported as unearned revenue. The costs associated with acquiring new
business are deferred at issue and amortized over the lives of the policies in
relation to the present value of estimated future gross profits. Golden
American also incurs expenses associated with the maintenance of in-force
contracts.
Cash required to fund the acquisition costs associated with deferred sales
load products written in 1992, 1993 and 1994 was provided by short-term
borrowings with an unaffiliated bank. Accordingly, the cost of these borrowed
funds increased in line with the general increase in the Federal Funds rates.
In 1994, the insurance industry saw a slow-down in the recent trend of
individuals moving away from traditional fixed products and into variable
products. Golden American experienced a similar slow-down as sales for 1994
were down 39% compared to 1993.
LIQUIDITY AND CAPITAL RESOURCES
Golden American's liquidity requirements include the payment of sales
commissions, and other acquisition and underwriting expenses on the annuity
and life business that it writes. Overall, the Company had negative cash flow
from operations in 1994 because it sold variable products exclusively; total
premiums received were invested immediately in the Company's Separate Accounts
which purchased shares of portfolios of The GCG Trust, an open-end, management
investment company, or directly purchased portfolio securities. Because 100%
of the premium was invested as described above, the payment of commissions and
other acquisition costs resulted in negative cash flow from operations during
the Company's early growth years.
Positive cash flow elements from operations are produced primarily from two
sources. Fees are collected from the in-force book of business. In addition,
during 1995, Golden American began to distribute a fixed account option with
its variable annuity product. Premium amounts directed to the fixed account
option produce positive cash flow from operations as amounts are retained
within the general account of the Company and are used to fund an investment
portfolio that finances future benefit payments. Investments are made in
fixed-rate investments such as bonds, and short-term investments in order to
provide a sufficient return as well as to match the duration of the obligation
for future benefit payments. Golden American products also contain surrender
charge features which reward persistency and penalize the early withdrawal of
funds.
Golden American has developed and utilizes a projection system which forecasts
cash flow. Cash flow from operations will vary depending on the amount of
premium written and the product mix. The Company also periodically performs
asset/liability matching in the management of its asset and liability
portfolios. Those matching practices involve the monitoring of asset and
liability durations for various product lines, cash flow testing under various
interest rate scenarios, and the continuous rebalancing of assets and
liabilities with respect to yield, risk, and cash flow characteristics.
Golden American has funded those past expenses described above for its
variable annuity and life business currently in-force at the beginning of 1995
by the issuance of $50 million redeemable preferred stock with its immediate
parent, BT Variable, Inc. on December 30, 1994. The short-term debt discussed
previously in the Results of Operations was retired by Golden American and
assumed by BT Variable, Inc. as of December 30, 1994. Dividends on this
preferred stock issue are payable on the last business day of each quarter,
beginning March 31, 1995. To the extent that Golden American has funds
available, Golden American may redeem at its option the Preferred Stock in
cash. Any redemption requires the prior approval of the California Department
of Insurance and may require approval of the
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MORE INFORMATION ABOUT GOLDEN AMERICAN LIFE INSURANCE COMPANY (CONTINUED)
Delaware Department of Insurance. Funds will become available for redemptions
from future statutory earnings as well as the collection of deferred sales
loads. The outstanding amount of deferred sales load to be collected as of
December 31, 1994 was $48.9 million.
The NAIC has developed and implemented the Risk Based Capital "RBC" adequacy
monitoring system. The RBC calculates the amount of adjusted capital which a
life insurance company should have based upon that company's risk profile. The
NAIC has established four different levels of regulatory action with respect
to the RBC adequacy monitoring system. Each of these levels may be triggered
if an insurer's total adjusted capital is less than a corresponding level of
RBC. As of December 31, 1994, based on the RBC formula, Golden American's
total adjusted capital level exceeded the minimum amount of capital required
to avoid regulatory action. Under currently effective funding agreements,
expected RBC levels will remain well in excess of levels required to avoid
regulatory actions. There is no assurance, however, that Golden American will
continue to maintain its current RBC level.
During 1994, BT Variable, Inc. made capital contributions to Golden American
of $8.75 million. Golden American believes that it will be able to fund the
capital and surplus required for projected new business from existing
statutory capital and surplus, statutory earnings on the existing book of
business as well as future surplus contributions from its parent. Golden
American also believes that it will be able to fund the above liquidity
requirements of sales commissions and acquisition costs of projected new
business from affiliated borrowings and/or borrowings with non-affiliated
banks. Golden American expects to continue to receive capital contributions
from BT Variable if necessary. Golden American's future marketing efforts
could be hampered should its parent and/or affiliates be unable to provide
additional funding.
Pursuant to the terms of an escrow agreement entered into in connection with
the purchase of Golden American from Mutual Benefit by Bankers Trust Company,
Golden American is obligated to fund up to $5.0 million into an escrow account
pending final resolution of a dispute concerning the final terms of the
agreements consummating the purchase of Golden American, which dispute is
before the Chancery Court of New Jersey. Any amounts assessed against Golden
American upon final adjudication of such dispute would be paid from the escrow
account. Management believes that the likelihood of any judgment against
Golden American with respect to the escrow account is unlikely and would not
have a material impact on Golden American. As of December 31, 1994, $2,675,000
has been deposited into the escrow account. Golden American's obligation is
secured by a pledge of its right to receive certain deferred sales loads.
Bankers Trust has estimated that the contingent liability due from Golden
American amounted to $438,636 at December 31, 1994 and 1993, and has been so
accrued in the accompanying financial statements.
SEGMENT INFORMATION
During the period since the acquisition by Bankers Trust, September 30, 1992
to date of this Prospectus, Golden American's operations consisted of one
business segment, the sale of variable annuity and variable life insurance
products. Golden American and its affiliate Directed Services, Inc., are party
to 127 sales agreements with broker-dealers. Two of those broker-dealers sell
a substantial portion of its business.
REINSURANCE
Golden American reinsures its mortality risk associated with the contract's
guaranteed death benefit with one or more appropriately licensed insurance
companies. Golden American also, effective June 1, 1994, entered into a
reinsurance agreement on a modified coinsurance basis with an affiliate of a
broker-dealer which distributes Golden American's products with respect to 25%
of the business produced by that broker-dealer.
RESERVES
In accordance with the life insurance laws and regulations under which Golden
American operates, it is obligated to carry on its books, as liabilities,
actuarially determined reserves to meet its obligations on outstanding
contracts. Reserves, based on valuation mortality tables in general use in the
United States, where applicable, are computed to equal amounts which, together
with interest on such reserves computed annually at certain assumed rates,
make adequate provision according to presently accepted actuarial standards of
practice, for the anticipated cash flows required by the contractual
obligations and related expenses of Golden American.
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MORE INFORMATION ABOUT GOLDEN AMERICAN LIFE INSURANCE COMPANY (CONTINUED)
INVESTMENTS
Golden American's assets are invested in accordance with applicable state
laws. These laws govern the nature and the quality of investments that may be
made by life insurance companies and the percentage of their assets that may
be committed to any particular type of investment. In general, these laws
permit investments, within specified limits subject to certain qualifications,
in federal, state, and municipal obligations, corporate bonds, preferred or
common stocks, real estate mortgages, real estate and certain other
investments. All of Golden American's assets, except for assets held in escrow
and variable separate account assets supporting variable products, are
available to meet its obligations under the Contracts.
Golden American makes investments in accordance with investment guidelines
that take into account investment quality, liquidity and diversification, and
invests assets supporting the Contract guarantees primarily in fixed income
assets such as mortgage backed securities, collateralized mortgage obligations
and corporate debentures. At December 31, 1994, Golden American had invested
assets of $17.2 million consisting of $13.9 million of short-term securities
and $3.3 million of bonds and other long-term investments.
At December 31, 1994, 100% of Golden American's invested assets and cash
equivalents supporting Contract guarantees consisted of liquid and readily
marketable securities.
At December 31, 1994, 100% of the total invested assets were invested in
investment grade bonds and 0% were invested in non-investment grade
securities. Golden American defines non-investment grade as unsecured
corporate debt obligations which do not have a rating equivalent to Standard
and Poor's (or similar rating agency) BBB or higher and are not guaranteed by
an agency of the federal government.
COMPETITION
Golden American is engaged in a business that is highly competitive because of
the large number of stock and mutual life insurance companies and other
entities marketing insurance products comparable to those of Golden American.
There are approximately 2,350 stock, mutual and other types of insurers in the
life insurance business in the United States, a substantial number of which
are significantly larger than Golden American.
CERTAIN AGREEMENTS
During 1994, Bankers Trust (Delaware), a subsidiary of Bankers Trust New York
Corporation, and Golden American became parties to a service agreement
pursuant to which Bankers Trust (Delaware) has agreed to provide certain
accounting, actuarial, tax, underwriting, sales, management and other services
to Golden American Expenses incurred by Bankers Trust (Delaware) in relation
to this service agreement are reimbursed by Golden American on an allocated
cost basis. Charges billed to Golden American by Bankers Trust (Delaware)
pursuant to the service agreement were $816,264 for 1994.
Prior to 1994, Golden American had arranged with BT Variable to perform
services related to the development and adminstration of its products. For the
year 1993 and the period from September 30, 1992 to December 31, 1992, fees
earned by BT Variable from Golden American for these services aggregated
$2,701,000 and $209,000, respectively. The agreement was terminated as of
January 1, 1994.
In addition, BT Variable provided to Golden American certain of its personnel
to perform management, administrative and clerical services and the use of
certain of its facilities. BT Variable charged Golden American for such
expenses and all other general and administrative costs, first on the basis of
direct charges when identifiable, and second allocated based on the estimated
amount of time spent by BT Variable's employees on behalf of Golden American.
For the year 1993 and the period from September 30, 1992 to December 31, 1992,
BT Variable allocated to Golden American $1,503,000 and $450,000,
respectively. The agreement was terminated on January 1, 1994. During 1994,
such expenses were allocated directly by BT New York Corporation to Golden
American and totaled $1,395,966 for the year.
DISTRIBUTION AGREEMENT
Prior to 1994, Golden American had entered into agreements with DSI to perform
services related to the management of its investments and the distribution of
its products. For the year 1993 and the period from September 30, 1992 to
December 31, 1992, Golden American incurred $311,000 and $35,000,
respectively, for such services. The agreement was terminated as of January 1,
1994.
DSI acts as the principal underwriter (as defined in the Securities Act of
1993 and the Investment Company Act of 1940, as amended) of the variable
insurance products issued by Golden American which, as of December 31, 1994,
are sold primarily through two broker/dealer institutions. For the years ended
1994 and 1993 and the period from September 30,
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1992 to December 31, 1992, commissions paid by Golden American to DSI
aggregated, $17,569,000, $34,260,000, and $6,429,197, respectively.
Golden American provided to DSI certain of its personnel to perform
management, administrative and clerical services and the use of certain
facilities. Golden American charged DSI for such expenses and all other
general and adminstrative costs, first on the basis of direct charges when
identifiable, and the remainder allocated based on the estimated amount of
time spent by Golden American's employees on behalf of DSI. In the opinion of
management, this method of cost allocation is reasonable. For the years ended
December 31, 1994 and 1993, expenses allocated to DSI were $1,983,000 and
$2,013,000, respectively.
EMPLOYEES
Golden American, as a result of its Service Agreements with each of Bankers
Trust (Delaware) and BT Variable, has very few direct employees. Instead,
various management services are provided by Bankers Trust (Delaware), BT
Variable and Bankers Trust New York Corporation, as described above under
"Certain Agreements." The cost of these services is allocated to Golden
American.
Certain officers of Golden American are also officers of BT Variable and DSI,
and their salaries are allocated among the three companies. One officer of
Golden American is also an officer of Bankers Trust New York Corporation, and
his salary is allocated solely to Bankers Trust New York Corporation. See
"Directors and Executive Officers."
PROPERTIES
Golden American's principal office is located at 1001 Jefferson Street, Suite
400, Wilmington, Delaware 19801, where all of Golden American's records are
maintained. This office space is sub-leased from Bankers Trust (Delaware)
under the service agreement described above. In addition, certain legal,
sales, product development and corporate communications personnel operate in a
Bankers Trust New York managed facility at 280 Park Avenue, 14 West, New York,
New York 10017. An allocable share of this property's cost is paid by Golden
American based on square feet.
DIRECTORS AND EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
NAME (AGE) POSITIONS(S) WITH THE COMPANY
- - ---------------------------- -----------------------------
<S> <C>
Terry L. Kendall (48) Chairman, President and Chief
Executive Officer
John Herron, Jr. (43) Director
Richard A. Marin (41) Director
Barnett Chernow (44) Executive Vice President
Mitchell R. Katcher (41) Executive Vice President
Robert B. Langel (57) Executive Vice President
Bernard R. Beckerlegge (48) General Counsel and Secretary
David L. Jacobson (45) Senior Vice President and
Assistant Secretary
Stephen J. Preston (37) Senior Vice President, Chief
Actuary and Controller
Myles R. Tashman (52) Senior Vice President
Mary B. Wilkinson (38) Senior Vice President and
Treasurer
</TABLE>
Each director is elected to serve for one year or until the next annual meeting
of shareholders or until his or her successor is elected. Some directors are
directors of insurance company subsidiaries of the Company's ultimate parent,
Banker's Trust, New York.
The principal positions of the Company's directors and executive officers for
the past five years are listed below:
MR. KENDALL joined Bankers Trust Company in September 1993 as Managing Director.
He is Chairman of the Board, President and Chief Executive Officer of the
Company. From 1982 through June 1993, he was President and Chief Executive
Officer of United Pacific Life Insurance Company.
MR. MARIN joined Bankers Trust Company in 1978 and is a Managing Director. He
has been a director of the Company since 1992.
MR. HERRON joined Banker Trust Company in 1978 and is a Managing Director. He
has been a director of the Company since 1993.
MR. CHERNOW joined the Company in October 1993 as Executive Vice President. From
1977 through 1993 he held various positions with Reliance Insurance Companies
and was Senior Vice President and Chief Financial Officer of United Pacific Life
Insurance Company from 1984 through 1993.
MR. KATCHER joined the Company in July 1993 as Executive Vice President. From
1991 through 1993 he was a Consulting Actuary for Tillinghast. Prior to 1991 he
was Senior Vice President and Chief Actuary with Monarch Financial Services,
Inc.
MR. LANGEL joined the Company in April 1991 as Executive Vice President. Prior
to joining the Company, he was with J.K. Schofield and Company as Executive Vice
President.
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MORE INFORMATION ABOUT GOLDEN AMERICAN LIFE INSURANCE COMPANY (CONTINUED)
MR. BECKERLEGGE joined the Company as General Counsel and Secretary in March
1988.
MR. TASHMAN joined the Company in August 1994 as Senior Vice President. From
1986 through 1993 he was Senior Vice President and General Counsel of United
Pacific Life Insurance Company.
MR. JACOBSON joined the Company 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.
MS. WILKINSON joined the Company in November 1993 as Senior Vice President. From
August 1993 through October 1993 she was an Assistant Vice President with CIGNA
Insurance Companies. From January 1987 through July 1993 she held various
positions with United Pacific Life Insurance Company and was Vice President and
Controller upon leaving.
MR. PRESTON joined the Company in December 1993 as Senior Vice President, Chief
Actuary and Controller. From September 1993 through November 1993 he was Senior
Vice President and Actuary for Mutual of America Insurance Company. From July
1987 through August 1993 he held various positions with United Pacific Life
Insurance Company and was Vice President and Actuary upon leaving.
COMPENSATION TABLES AND OTHER INFORMATION
The following tables set forth information with respect to the former Chief
Executive Officer of Golden American as well as the annual salary and bonus for
the next four most highly compensated executive officers for the fiscal year
ended December 31, 1994. Certain executive officers of Golden American are also
officers of Directed Services, Inc. ("DSI"). The salaries of such individuals
are allocated between Golden American and DSI. With the exception of Mr.
Kendall, executive officers of Golden American are also officers of BT Variable
and DSI. The salaries of such individuals are allocated between Golden American,
BT Variable and DSI pursuant to an arrangement among these companies. Mr.
Kendall also serves as a Managing Director at Bankers Trust New York
Corporation. Compensation amounts for Mr. Kendall which are reflected throughout
these tables are not charged to Golden American, but are instead absorbed by
Bankers Trust New York Corporation.
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MORE INFORMATION ABOUT GOLDEN AMERICAN LIFE INSURANCE COMPANY (CONTINUED)
EXECUTIVE COMPENSATION TABLE
The following table sets forth information with respect to the former Chief
Executive Officer of GALIC as well as the annual salary and bonus for the next
four most highly compensated executive officers for the fiscal year ended
December 31, 1994.
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
RESTRICTED SECURITIES
NAME AND ---------------------- STOCK AWARDS UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS(1) OPTIONS(2)(3) OPTIONS COMPENSATION
- - ---------------------------------------------- ----- --------- ----------- --------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Terry Lee Kendall, ........................... 1994 250,000 276,030 11,000
Chairman, President and Chief Executive 1995 400,000
Officer (6) (September 1993 to Present)
Barnett Chernow, ............................. 1994 185,000 1,800 500 98,212(4)
Executive Vice President 1995 165,000
Mitchell Katcher, ............................ 1994 175,000
Executive Vice President 1995 150,000
Robert Benjamin Langel, ...................... 1994 150,000 178,000 18,750(5)
Executive Vice President 1995 35,000
Fred H. Davidson, ............................ 1994 164,766 25,125(5)
Former Executive Vice President 1995
Stephen Preston, ............................. 1994 131,667 4,721(4)
Senior Vice President and Chief Actuary and 1995 50,000
Controller
</TABLE>
- - ------------------------------
(1) Bonuses paid in January 1995 relate to performance for the previous year.
The amount shown does not include bonuses paid in January 1994 for
performance in 1993.
(2) Amounts shown are for awards granted and exercisable in 1994. This table
does not reflect shares granted in 1993 exercisable in 1996. All awards have
been valued for this table using closing prices of the common stock of
Bankers Trust New York Corporation as of December 31, 1994 using a Bloomberg
system. Shares of restricted stock have a three year vesting period. The
number and value of Restricted Shares and Restricted Units held by executive
officers as of December 31, 1994 is Mr. Kendall 3,000 shares and 3,000 units
-- $166,125 and Mr. Chernow: 500 shares and 500 units -- $27,688.
(3) Dividends are paid on unvested Restricted Shares and dividend equivalents
are paid on unvested Restricted units. Such dividends and dividend
equivalents are equal in amount to the dividends paid on shares on Bankers
Trust New York Corporation Common Stock.
(4) Amounts shown for 1994 represent relocation expenses paid on behalf of the
employee.
(5) Contributions are made by the Company on behalf of the employee to
PartnerShare, the deferred compensation plan sponsored by Bankers Trust New
York Corporation and its affiliates for the benefit of all Bankers Trust
employees, in February of the current year to employees on record as of
December 31 of the previous year, after the employee completes one year of
service with the company. This contribution may be in the form of deferred
compensation and/or a cash payment. In 1994, Mr. Langel received $16,495 of
deferred compensation and $2,250 of cash payment from the plan. Mr. Davidson
received $19,044 of deferred compensation and $6,081 of cash payment from
the plan. All other executives listed above were not eligible for
contributions to the PartnerShare Plan in 1994.
(6) Mr. Kendall has served as Chairman, President and Chief Executive Officer of
Golden American since September of 1993. Mr. Kendall's salary and bonuses
are paid directly by Bankers Trust New York Corporation.
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MORE INFORMATION ABOUT GOLDEN AMERICAN LIFE INSURANCE COMPANY (CONTINUED)
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
% OF TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED TO EXPIRATION
UNDERLYING EMPLOYEES IN EXERCISE PRICE DATE
FISCAL YEAR OPTIONS GRANTED FISCAL YEAR ($ PER SHARE) ($ PER SHARE)
----------- --------------- -------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
Terry Lee Kendall........................ 1994 8,000 .0003268 68.625 6-21-2004
<CAPTION>
GRANT DATE
PRESENT
VALUE(3)
-----------
<S> <C>
Terry Lee Kendall........................ $ 161,680
</TABLE>
(1) Options grants in 1994 relate to performance in 1994. This table does not
include option grants in 1993 related to performance in 1993.
(2) All options on Bankers Trust New York Corporation common stock are
exercisable on June 21, 1995.
(3) Valued using a Black-Scholes style valuation. The assumptions used for the
variables in the model were: 27% volatility (which is the volatility of the
Common Stock for the 36 months preceding grant); an 8.29% rate of return
(which is the rate as of February 10, 1995 adjusted by 41 basis points to
represent the LIBOR rate as of the grant date for zero coupon bond expiring
June 2004); a 5.25% dividend yield; and a 10-year option term (which is the
term of the option granted). The actual gain Mr. Kendall will realize on the
options will depend on the future price of the Common Stock and cannot be
accurately forecast by application of an option valuation.
Directors of Golden American receive no additional compensation for serving as a
director.
OTHER COMPENSATION
On November 29, 1993, Mr. Jerome Golden resigned as President of Golden
American. He had served as President from July 1987 through November 29, 1993.
In accordance with the terms of a Separation Agreement between Mr. Golden and
the Company, Mr. Golden was paid $425,000 in 1994 and again in 1995. The
amounts represent a full settlement with no future payments required.
FEDERAL TAX CONSIDERATIONS
INTRODUCTION
The contract is designed for use by individuals or groups in retirement plans
which are qualified under Section 408 or non-qualified under the provisions of
the Internal Revenue Code of 1986, as amended (the "Code"). The ultimate effect
of Federal income taxes on the amounts paid for the contract, on the investment
return on assets held under the contract, on annuity payments and on the
economic benefits to the owner, annuitant or beneficiary depends upon the terms
of the contract, upon Golden American's tax status and upon the tax status of
the individuals concerned.
The following discussion is general in nature and is not intended as tax advice.
Each person concerned should consult a competent tax advisor. No attempt is made
to consider any applicable state or other tax laws. Moreover, the discussion is
based upon Golden American's understanding of the Federal income tax laws as
they are currently interpreted. No representation is made regarding the
likelihood of continuation of the Federal income tax laws, the Treasury
Regulations, or the current interpretations by the Internal Revenue Service (the
"IRS"). For a discussion of Federal income taxes as they relate to the Trust,
please see the accompanying prospectus for the Trust.
GOLDEN AMERICAN TAX STATUS
Golden American is taxed as a life insurance company under Part I of Subchapter
L of the Code. Since the Accounts are not separate entities from Golden American
and their operations form a part of Golden American, they will not be taxed
separately as "regulated investment companies" under Subchapter M of the Code.
Investment income and realized capital gains on the assets of Account B and
Account D are reinvested and taken into account in determining the Accumulation
Value in the Divisions. Under existing Federal income tax law, Golden American
does not incur tax on the Accounts' investment income, including realized net
capital gains. Golden American reserves the right to make a deduction for taxes
should they be imposed with respect to such items in the future.
TAXATION OF NON-QUALIFIED ANNUITIES
1. IN GENERAL
Code Section72 generally governs the taxation of non-qualified annuities.
Under this provision, except as described below, any increase in the
contract's value is generally not taxable to the owner until a distribution is
made from the contract, either in the form of annuity payments as contemplated
by the contract, or in some other form of distribution. However, this rule
applies only if (1) the investments of
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<PAGE>
FEDERAL TAX CONSIDERATIONS (CONTINUED)
Account B and Account D are "adequately diversified" in accordance with
Treasury Department regulations, (2) Golden American, rather than the owner,
is considered the owner of the assets of the Accounts for Federal income tax
purposes, and (3) the owner is an individual. In addition to the foregoing, if
the contract's annuity commencement date occurs at a time when the annuitant
is at an advanced age, such as over age 85, it is possible that the owner will
be taxable currently on the annual increase in the Accumulation Value.
DIVERSIFICATION REQUIREMENTS. Treasury Department regulations ("Regulations")
issued under Code Section817 (h) prescribe the manner in which the investments
of a segregated asset account, such as Account B and Account D, are to be
"adequately diversified." The Regulations generally require that on the last
day of each quarter of a calendar year (i) no more than 55% of the value of
each segregated asset account is represented by any one investment; (ii) no
more than 70% is represented by any two investments; (iii) no more than 80% is
represented by any three investments; and (iv) no more than 90% is represented
by any four investments. For purposes of complying with these requirements,
all securities of the same issuer are treated as a single investment, and each
U.S. government agency or instrumentality will be treated as a separate
issuer. In addition, where a segregated asset account invests in other
regulated investment companies or certain other entities (E.G., the Divisions
of Account B do), a "look-through" rule applies and, as a result, each
Division of an Account must be tested for compliance with the percentage
limitations by looking through to the assets of that regulated investment
company or other entity.
If a Division of Account B or Account D failed to comply with these
diversification standards, a contract allocating values to that Division would
not be treated as an annuity contract for Federal income tax purposes and the
owner would generally be taxable currently on the income on the contract (as
defined in the tax law) beginning with the first period of
non-diversification. Golden American expects that Account B and Account D,
including each of the Divisions, will comply with the diversification
requirements prescribed by the Regulations.
OWNERSHIP TREATMENT. In certain circumstances, variable annuity contract
owners may be considered the owners, for Federal income tax purposes, of the
assets of the segregated asset account, such as Account B and Account D, used
to support their contracts. In those circumstances, income and gains from the
segregated asset account would be includible in the contract owners' gross
income. The IRS has stated in published rulings that a variable contract owner
will be considered the owner of the assets of the segregated asset account if
the owner possesses incidents of ownership in those assets, such as the
ability to exercise investment control over the assets. In addition, the
Treasury Department announced, in connection with the issuance of regulations
concerning investment diversification, that those regulations "do not provide
guidance concerning the circumstances in which investor control of the
investments of a segregated asset account may cause the investor, rather than
the insurance company, to be treated as the owner of the assets in the
account." This announcement also stated that guidance would be issued by way
of regulations or rulings on the "extent to which policyholders may direct
their investments to particular sub- accounts [of a segregated asset account]
without being treated as owners of the underlying assets." As of the date of
this prospectus, no such guidance has been issued.
The ownership rights under the contract are similar to, but different in
certain respects from, those described by the IRS in rulings in which it was
determined that contract owners were not owners of the assets of a segregated
asset account. For example, the owner of this contract has the choice of more
investment options to which to allocate premium payments and Accumulation
Values, and may be able to transfer among investment options more frequently,
than in such rulings. In addition, the owner of this contract has the choice
of certain investment options which may be more similar to each other in their
investment objectives than in such rulings. These differences could result in
the owner being treated as the owner of a portion of the assets of Account B
and Account D. In addition, Golden American does not know what standards will
be set forth in the regulations or rulings which the Treasury Department has
stated it expects to issue. Golden American therefore reserves the right to
modify the contract as necessary to attempt to prevent contract owners from
being considered the owners of the assets of Account B and Account D.
Frequently, if the IRS or the Treasury Department sets forth a new position
which is adverse to taxpayers, the position is applied on a prospective basis
only. Thus, if the IRS or the Treasury Department were to issue regulations or
a ruling which treated an owner of this contract as the owner of Account B and
Account D, that treatment might apply on a
43
<PAGE>
FEDERAL TAX CONSIDERATIONS (CONTINUED)
prospective basis. However, if the ruling or regulations were not considered
to set forth a new position, an owner might retroactively be determined to be
the owner of the assets of Account B and Account D.
NON-NATURAL OWNER. As a general rule, contracts held by "non-natural persons"
such as a corporation, trust or other similar entity, as opposed to a natural
person, are not treated as annuity contracts for Federal tax purposes. The
income on such contracts (as defined in the tax law) is taxed as ordinary
income that is received or accrued by the owner of the contract during the
taxable year. There are several exceptions to this general rule for
non-natural owners. First, contracts will generally be treated as held by a
natural person if the nominal owner is a trust or other entity which holds the
contract as an agent for a natural person. However, this special exception
will not apply in the case of any employer who is the nominal owner of a
contract under a non-qualified deferred compensation arrangement for its
employees.
In addition, exceptions to the general rule for non-natural owners will apply
with respect to (1) contracts acquired by an estate of a decedent by reason of
the death of the decedent, (2) contracts issued in connection with certain
qualified plans, (3) contracts purchased by employers upon the termination of
certain qualified plans, (4) certain contracts used in connection with
structured settlement agreements, and (5) contracts purchased with a single
purchase payment when the annuity starting date is no later than a year from
purchase of the contract and substantially equal periodic payments are made,
not less frequently than annually, during the annuity period.
The remainder of this discussion assumes that the contract will be treated as
an annuity contract for Federal income tax purposes.
2. WITHDRAWALS PRIOR TO THE ANNUITY COMMENCEMENT DATE
Code Section72 provides that the proceeds of a total surrender of a contract
prior to the annuity commencement date will be taxed to the extent that the
amount distributed exceeds the "investment in the contract" and that any
partial withdrawal from a contract prior to the annuity commencement date will
be treated as taxable income to the extent the amount held under the contract
immediately before the withdrawal occurs exceeds the "investment in the
contract." The "investment in the contract" is defined in the Code as that
portion, if any, of premium payments by or on behalf of an individual under a
contract which was not excluded from the individual's gross income at the time
of such payment less any amounts previously received under the contract which
were excluded from the individual's gross income at the time of their receipt.
The taxable portion of any distribution received prior to the annuity
commencement date will be subject to tax at ordinary income tax rates. For
purposes of this rule, a pledge or assignment of a contract is treated as a
payment received on account of a partial withdrawal of a contract.
In the case of systematic partial withdrawals, the amount of each withdrawal
should be considered as a distribution and taxed in the same manner as a
partial withdrawal prior to the annuity commencement date, as described above.
However, there is some uncertainty regarding the tax treatment of systematic
partial withdrawals, and it is possible that additional amounts may be
includible in income.
In addition, the contract provides a death benefit that in certain
circumstances may exceed the greater of the premium payments and the
Accumulation Value. As described elsewhere in this prospectus, Golden American
imposes certain charges with respect to, among other things, the death
benefit. It is possible that some portion of those charges could be treated
for Federal tax purposes as a partial withdrawal from the contract.
In certain circumstances, surrender charges may be waived because of the
owner's need of extended medical care or because of the owner's terminal
illness. Distributions in respect of which surrender charges are waived are
treated as partial withdrawals.
3. ANNUITY PAYMENTS AND WITHDRAWALS ON OR AFTER THE ANNUITY COMMENCEMENT DATE
Proceeds of a total surrender of the contract after the annuity commencement
date are taxable to the extent the proceeds exceed the investment in the
contract at that time. In addition, proceeds of a partial withdrawal after the
annuity commencement date are fully taxable. Also, a portion of each annuity
payment under the contract is taxable if the value of the contract exceeds the
investment in the contract. The taxable portion of an annuity payment will be
subject to tax at ordinary income tax rates.
For fixed annuity payments, the taxable portion of each payment is determined
by using a formula known as the "exclusion ratio," which establishes
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FEDERAL TAX CONSIDERATIONS (CONTINUED)
the ratio that the investment in the contract (allocated to the fixed annuity
option) bears to the total expected amount of fixed annuity payments for the
term of the contract. That ratio is then applied to each payment to determine
the non-taxable portion of the payment. The remaining portion of each payment
is taxed at ordinary income rates.
For variable annuity payments, in general, the taxable portion is determined
by a formula which establishes a specific dollar amount of each payment that
is not taxed. The dollar amount is determined by dividing the investment in
the contract (allocated to the variable annuity option) by the total number of
expected periodic payments. The remaining portion of each payment is taxed at
ordinary income rates.
Once the excludable portion of annuity payments to date equals the investment
in the contract, the balance of the annuity payments will be fully taxable.
If amounts have become payable under the contract (such as where the owner
elects to surrender an amount) and if the distribution-at-death rules do not
apply to such amount, the amount will be treated as a partial or full
surrender for Federal income tax purposes if applied under an annuity option
later than 60 days after the time when the amount became payable. Thus, if
such an amount is applied under an annuity option after the 60 day period, it
will be treated as a partial or full surrender, even if the full amount has
not been distributed from the contract.
4. WITHHOLDING AND REPORTING REQUIREMENTS
Golden American will withhold and remit to the U.S. government a part of the
taxable portion of each distribution made under a contract unless the taxpayer
notifies Golden American at or before the time of the distribution that he or
she elects not to have any amounts withheld. The withholding rates applicable
to the taxable portion of periodic annuity payments typically are the same as
the withholding rates generally applicable to payments of wages. In addition,
the withholding rate applicable to the taxable portion of non-periodic
payments (including surrenders prior to the annuity commencement date) is 10%.
Golden American also has tax reporting obligations with respect to
distributions from the contract.
5. PENALTY TAX ON CERTAIN WITHDRAWALS
With respect to amounts withdrawn or distributed before the taxpayer reaches
age 59 1/2, a penalty tax is imposed equal to 10% of the taxable portion of
amounts withdrawn or distributed. However, the penalty tax will not apply to
withdrawals: (i) made on or after the death of the owner, or where the owner
is not an individual, the death of the "primary annuitant" (i.e., the
individual the events in whose life are of primary importance in affecting the
timing or amount of the payout under the contract); (ii) attributable to the
taxpayer's becoming totally disabled within the meaning of Code
Section72(m)(7); (iii) which are part of a series of substantially equal
periodic payments made at least annually for the life (or life expectancy) of
the taxpayer, or the joint lives (or joint life expectancies) of the taxpayer
and his beneficiary; (iv) from certain qualified retirement plans; (v)
allocable to investment in the contract before August 14, 1982; (vi) under a
qualified funding asset (as defined in Code Section130(d)); (vii) under an
immediate annuity contract, or (viii) which are purchased by an employer on
termination of certain types of qualified retirement plans and which are held
by the employer until the employee separates from service.
If the penalty tax does not apply to a withdrawal as a result of the
application of item (iii) above, and the series of payments is subsequently
modified (other than by reason of death or disability), the tax for the year
when the modification occurs will be increased by an amount (as determined by
regulations) equal to the tax that would have been imposed but for item (iii)
above, plus interest for the deferral period, if the modification takes place
(a) before the close of the period which is within five years of the date of
the first payment and after the taxpayer attains age 59 1/2, or (b) before the
taxpayer reaches age 59 1/2.
In the case of systematic withdrawals, it is unclear whether such withdrawals
will qualify for exception (iii) above.
TAXATION OF INDIVIDUAL RETIREMENT ANNUITIES
Code Section408 permits individuals or their employers to contribute to an
individual retirement program known as an Individual Retirement Annuity. If the
contract is used for this purpose, the owner must be the annuitant. In addition,
distributions from certain other types of qualified retirement plans may be
placed into an Individual Retirement Annuity on a tax deferred basis.
Individual Retirement Annuities are subject to limitations on the amount which
may be contributed and the time when distributions may commence. Tax penalties,
including disqualification in certain instances, may apply to contributions in
excess of specified limits, loans or assignments, distributions in excess of a
specified amount annually or that do not meet specified requirements, and in
certain other circumstances.
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FEDERAL TAX CONSIDERATIONS (CONTINUED)
Under the Internal Revenue Code, distributions from qualified retirement plans,
including Individual Retirement Annuities, Simplified Employee Pensions, and Tax
Sheltered Annuities, generally must begin not later than April 1st of the
calendar year following the calendar year in which an owner attains age 70 1/2.
If the required minimum distribution is not withdrawn, there may be a penalty
tax in an amount equal to 50% of the difference between the amount required to
be withdrawn and the amount actually withdrawn. See the Statement of Additional
Information for a discussion of the various special rules concerning the minimum
distribution requirements.
If all premium payments made to an Individual Retirement Annuity were
deductible, all amounts distributed from the contract are included in the
recipient's income when distributed. However, if nondeductible premium payments
were made to the Individual Retirement Annuity (within the limits allowed by the
tax law), a portion of each distribution from the contract typically is included
in income when it is distributed. In such a case, any amount distributed as an
annuity payment or in a lump sum upon death or a full surrender is taxed as
described above in connection with such a distribution from a non-qualified
contract, treating the investment in the contract as the sum of the
non-deductible premium payments at the end of the taxable year in which the
distribution commences or is made (less any amounts previously distributed that
were excluded from income). Also in such a case, any amount distributed upon a
partial surrender is partially includible in income. The includible amount is
the excess of the distribution over the exclusion amount, which in turn equals
the distribution multiplied by the ratio of the investment in the contract to
the amount held under the contract. The amount includible in income may be
subject to a 10% penalty tax if the recipient is under age 59 1/2.
Individual Retirement Annuities generally may not provide life insurance
coverage, but they may provide a death benefit that equals the greater of the
premiums paid and the contract value. The contract provides a death benefit that
in certain circumstances may exceed the greater of the premium payments and the
Accumulation Value. Golden American intends to request a determination letter
from the IRS that would approve use of the contract, as to form, as an
Individual Retirement Annuity.
Subject to certain direct rollover and mandatory withholding requirements
(discussed below), amounts generally may be "rolled over" from a qualified
retirement plan to an Individual Retirement Annuity (or from an Individual
Retirement Annuity or individual retirement account to an Individual Retirement
Annuity) without incurring tax if certain conditions are met. Only certain types
of distributions from qualified retirement plans or Individual Retirement
Annuities may be rolled over.
In the case of annuity contracts used in connection with a pension,
profit-sharing, or annuity plan qualified under Code Section401(a) or
Section403(a), or in the case of a Code Section403(b) "Tax Sheltered Annuity,"
any "eligible rollover distribution" from the contract will be subject to direct
rollover and mandatory withholding requirements. An eligible rollover
distribution generally is any taxable distribution from a qualified pension plan
under Code Section401(a), qualified annuity plan under Code Section403(a), or
Code Section403(b) Tax Sheltered Annuity or custodial account, excluding certain
amounts (such as minimum distributions required under Code Section401 (a) (9)
and distributions which are part of a "series of substantially equal periodic
payments" made for life or a specified period of 10 years or more. Under these
requirements, withholding at a rate of 20 percent will be imposed on any
eligible rollover distribution. In addition, the participant in these qualified
retirement plans cannot elect out of withholding with respect to an eligible
rollover distribution. However, this 20 percent withholding will not apply if,
instead of receiving the eligible rollover distribution, the participant elects
to have amounts directly transferred to certain qualified retirement plans (such
as to this contract when issued as an Individual Retirement Annuity).
It is important that you consult your tax advisor before purchasing an
Individual Retirement Annuity.
DISTRIBUTION-AT-DEATH RULES
In order to be treated as an annuity contract for Federal tax purposes, a
non-qualified contract must provide the following two distribution rules: (a) if
any holder dies on or after the annuity commencement date, and before the entire
interest in the contract has been distributed, the remainder of his or her
interest will be distributed at least as quickly as under the method of
distribution in effect on the holder's death; and (b) if any holder dies before
the annuity commencement date, the entire interest in the contract must
generally be distributed within five years after the date of death, or to the
extent such interest is payable to a designated beneficiary, such interest must
be distributed over the life of that designated beneficiary or over a period not
extending beyond the life expectancy of that beneficiary, so long as the
distributions begin within one year after the date of death. If the beneficiary
is the surviving spouse of the holder, the contract (together with the deferral
of tax on the
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FEDERAL TAX CONSIDERATIONS (CONTINUED)
accrued and future income thereunder) may be continued in the name of the
spouse. The holder of the contract will generally be the owner.
Where any holder is not an individual, solely for the purpose of the
distribution at death rules, the primary annuitant is also considered a holder
and the death of or change of the primary annuitant is treated as the death of a
holder. The primary annuitant is the individual the events in the life of whom
are of primary importance in affecting the timing or amount of payment under a
contract. Finally, in the case of joint holders, the distribution will be
required at the death of the first of the holders to die. In some instances,
these Distribution-at-Death rules will force distributions from a contract even
though no death benefit is payable.
TAXATION OF DEATH BENEFIT PROCEEDS
Amounts may be distributed from a non-qualified contract because of the death of
an owner or annuitant. Generally, such amounts are includible in the income of
the recipient as follows: (a) if distributed in a lump sum, they are taxed in
the same manner as a full surrender of the contract, as described above, or (b)
if distributed under an annuity option, they are taxed in the same manner as
annuity payments, as described above.
TRANSFER OF ANNUITY CONTRACTS
Transfers of non-qualified annuity contracts for less than the full and adequate
consideration will trigger tax on the gain in the contract, at the time of such
transfer, with the transferee getting a step-up in basis for the amount included
in the owner's income. This provision does not apply to transfers between
spouses or to a former spouse incident to a divorce.
ASSIGNMENTS
A transfer of ownership or a collateral assignment may result in tax
consequences to the owner that are not discussed herein. An owner contemplating
such a transfer or assignment of a contract should contact a competent tax
advisor with respect to the potential tax effects of such a transaction.
MULTIPLE CONTRACTS RULE
For purposes of determining the amount of any distribution under Code
Section72(e) (amounts not received as annuities) that is includible in gross
income, all non-qualified deferred annuity contracts issued by the same (or
affiliate) insurer to the same owner during any calendar year are to be
aggregated and treated as one contract. Thus, any amount received under any such
contract prior to the contract's annuity starting date (as defined in the tax
law), such as a partial surrender, dividend, or loan, will be taxable (and
possibly subject to the 10% penalty tax) to the extent of the combined income in
all such contracts. The Treasury Department has specific authority to issue
regulations that prevent the avoidance of 72(e) through the serial purchase of
annuity contracts or otherwise. In addition, there may be other situations in
which the Treasury Department may conclude that it would be appropriate to
aggregate two or more contracts purchased by the same owner. Accordingly, an
owner should consult a competent tax advisor before purchasing more than one
annuity contract.
SECTION 1035 EXCHANGES
Code Section 1035 provides that no gain or loss is recognized when an annuity
contract is received in exchange for a life insurance, endowment, or annuity
contract, provided that no cash or other property is received in the exchange
transaction. Special rules and procedures apply in order for an exchange to meet
the requirements of Code Section 1035. Also, there are additional tax
considerations involved when the contracts are issued in connection with
qualified retirement plans. Prospective owners of this contract should consult a
tax advisor before entering into a Code Section 1035 exchange (with respect to
nonqualified annuity contracts) or a trustee-to-trustee transfer or rollover
(with respect to qualified annuity contracts).
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PART II
THE MANAGED GLOBAL
ACCOUNT OF ACCOUNT D
INTRODUCTION PART II GIVES FURTHER BACKGROUND INFORMATION ON ACCOUNT D AND
THE GLOBAL ACCOUNT, INCLUDING ITS INVESTMENT POLICIES AND ACTIVITIES.
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THE MANAGED GLOBAL ACCOUNT OF ACCOUNT D
THE GLOBAL ACCOUNT
The Global Account is a non-diversified investment company which invests
directly in securities. There can be no assurance that the Global Account will
meet its investment objective. Account D may also offer other securities which
are not available through the purchase of the contract offered by this
prospectus. DSI serves as the Manager of Account D and Warburg, Pincus serves as
the Portfolio Manager of the Global Account.
INVESTMENT OBJECTIVE AND POLICIES OF THE GLOBAL ACCOUNT
The Global Account's investment objective is to seek high total investment
return consistent with a prudent regard for capital preservation. In seeking
this objective, the Global Account employs an asset allocation strategy
involving shifts among a wide range of investments and market sectors throughout
the world. The Global Account may invest in the following classes of securities:
equity securities of domestic and foreign issuers, including common stocks,
preferred stocks, convertible securities, and warrants; debt securities of
domestic and foreign issuers, including bonds, debentures, asset-backed
securities, and notes; and money market instruments of domestic and foreign
issuers. The Global Account may also use various investment strategies and
techniques in seeking its investment objective including entering into forward
currency contracts; purchasing and writing put and call options on securities,
securities indexes, and currencies; purchasing and selling futures contracts
including interest rate futures contracts, stock index futures contracts,
futures contracts based upon securities, which may be domestic or foreign and
corporate or governmental, foreign exchange futures contracts, and other
financial futures contracts; purchasing and writing put and call options on
financial futures contracts; engaging in short sales of securities; and entering
into repurchase agreements and reverse repurchase agreements.
The total investment return that the Global Account seeks may consist (i) of
capital appreciation from several possible sources, including appreciation in
the value of securities held by the Global Account, the sale of securities whose
market value has changed, the use of futures and options, and the use of forward
currency contracts; (ii) of interest from underlying securities; and (iii) of
income received from the writing of options. Changes in the value of securities
denominated in foreign currencies may be attributable in whole or in part to
changes in the value of the underlying currency relative to the U.S. dollar.
In seeking the Global Account's investment objective, the Portfolio Manager will
use an opportunistic approach to allocating the Global Account's assets through
varying economic and financial conditions. The Portfolio Manager believes that a
successful investment approach in the current global environment must be based
upon careful analysis of the global economic and geopolitical environment with a
view to capitalizing upon sector and market opportunities and to quickly
adapting to changing circumstances. Thus, the Portfolio Manager will allocate
the Global Account's assets among securities and currencies based upon the
Portfolio Manager's assessment of the most favorable markets, currencies, and
issuers. In this regard, the percentage of the Global Account's assets invested
in a particular country or denominated in a particular currency will vary in
accordance with the Portfolio Manager's assessment of the appreciation potential
of such assets and the relationship of the country's currency to the U.S.
dollar.
The Portfolio Manager may allocate the Global Account's assets among the various
types of securities and other assets and among issuers located in various
countries and regions as the Portfolio Manager deems appropriate, except that
the Global Account's assets normally will be invested in securities of issuers
domiciled or primarily traded in at least three different countries, which may
include the United States. (Certain additional foreign diversification
requirements apply as described below.) The Portfolio Manager is free to
allocate the Global Account's assets such that, at any time, the Global Account
may be primarily invested in equity securities or, alternatively, the Global
Account may have little or no assets in equity securities. Similarly, at any
time, the Global Account may be primarily invested in securities of issuers
domiciled or primarily traded in one region, such as the United States, Europe,
or the Pacific Basin, or the Global Account may have little or no assets
committed to that region.
In considering equity securities, the Portfolio Manager will emphasize large,
well-capitalized companies with strong balance sheets. The Portfolio Manager may
also consider other factors in selecting equity securities, including
price-earnings ratios, cash flows, and the relationship of an issuer's book
value to its market value.
In selecting debt instruments for the Global Account, the Portfolio Manager
emphasizes credit quality. The Global Account will invest only in the following:
(1) fixed-income instruments issued or guaranteed by the U.S. Government, its
agencies, or instrumentalities ("U.S. Government Securities"); (2) obligations
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THE MANAGED GLOBAL ACCOUNT OF ACCOUNT D (CONTINUED)
issued or guaranteed by a foreign government or any of its political
subdivisions, authorities, agencies, or instrumentalities, or by supranational
entities ("foreign government securities"), which, at the time of investment,
are rated A or better by Standard & Poor's Corporation ("S&P") or A or better by
Moody's Investors Services, Inc. ("Moody's") or, if not rated by S&P or Moody's,
determined by the Portfolio Manager to be of equivalent quality; and (3) debt
securities of domestic or foreign issuers which, at the time of investment, are
rated A or better by S&P or A or better by Moody's or, if not rated by S&P or
Moody's, determined by the Portfolio Manager to be of equivalent quality. In the
event that a debt security held by the Global Account is downgraded to a rating
that would render the security ineligible for purchase by the Global Account,
the Global Account may nonetheless retain the security.
Debt securities purchased by the Global Account may be of any maturity. It is
anticipated that the weighted average maturity of the debt securities in the
portfolio (excluding money market instruments) generally will be between 5 and
15 years, but may be shorter or longer at the discretion of the Portfolio
Manager.
The Global Account invests only in high-quality money market instruments. These
include the following: (1) short-term U.S. Government securities; (2) short-term
foreign government securities which, at the time of investment, are rated AA or
better by S&P or Aa or better by Moody's or, if not rated by S&P or Moody's,
determined by the Portfolio Manager to be of equivalent quality; (3)
certificates of deposit, time deposits, bankers' acceptances, and short-term
obligations of banks and other depository institutions, both U.S. and foreign,
that have total assets of at least $10 billion (U.S.) and are determined by the
Portfolio Manager to be of high quality; and (4) commercial paper and other
short-term corporate obligations which, at the time of investment, are rated A-2
or better by S&P or P-2 or better by Moody's or, if not rated by S&P or Moody's,
determined by the Portfolio Manager to be of equivalent quality.
The Global Account may employ various investment strategies involving
currencies, including entering into forward currency contracts, foreign exchange
futures contracts, and options on currencies. (See "Securities and Investment
Techniques," below.) These strategies may be employed for purposes of exposing
the Global Account to a foreign (or domestic) currency or to shift exposure to
foreign currency fluctuations from one country to another. These strategies may
also be employed as hedging techniques to help pro-
tect against declines in the U.S. dollar (or other currency) value of the Global
Account's assets that might result from adverse changes in currency exchange
rates. The Global Account may engage in forward currency transactions in
anticipation of or to protect itself against fluctuations in currency exchange
rates. The Global Account may purchase put and call options on foreign
currencies as a hedge against changes in the value of the U.S. dollar (or
another currency) in relation to a foreign currency in which securities of the
Global Account may be denominated. Hedging against a change in the value of a
foreign currency in the foregoing manner does not eliminate fluctuations in the
prices of portfolio securities or prevent losses if the prices of such
securities decline. Furthermore, such hedging transactions may reduce or
preclude the opportunity for gain if the value of the hedged currency should
change relative to the U.S. dollar.
NON-DIVERSIFIED
The Global Account is classified as a "non-diversified" investment company under
the 1940 Act, as amended, which means that the Global Account is not limited by
the 1940 Act in the amount of its assets that it may invest in the securities of
a single issuer. However, the Global Account will meet the diversification
requirements of Code Section817 (h) and the Treasury Department Regulations
issued thereunder. Under applicable state law requirements, the Global Account
may not acquire the securities of any issuer if, as a result of such investment,
more than 10% of the Global Account's total assets would be invested in the
securities of any one issuer, except that this restriction shall not apply to
U.S. Government securities or foreign government securities, and the Global
Account will not invest in a security if, as a result of such investment, it
would hold more than 10% of the outstanding voting securities of any one issuer.
Nonetheless, because the Global Account, as a non-diversified investment company
under the 1940 Act, may invest in a smaller number of individual issuers than a
diversified investment company, an investment in the Global Account may, under
certain circumstances, present greater risk to an investor than an investment in
a diversified company. This risk may include greater exposure to the risk of
poor earnings or default of one issuer than would be the case for a more
diversified fund.
The Global Account is also subject to the following guidelines for
diversification of foreign security investments. If the Global Account has less
then 20% of its assets in foreign issuers, then all of such investment may be in
issuers domiciled or primarily traded in one country. If the Global Account has
at least 20% but less than 40% of its assets in foreign issuers, then
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THE MANAGED GLOBAL ACCOUNT OF ACCOUNT D (CONTINUED)
such investment must be allocated to issuers domiciled or primarily traded in at
least two different countries. Similarly, if the Global Account has at least 40%
but less than 60% of its assets in foreign issuers, such investment must be
allocated in at least three different countries. Foreign investments must be
allocated to at least four different countries if at least 60% of the Global
Account's assets is in foreign issuers, and to at least five different countries
if at least 80% of its assets is in foreign issuers.
The Global Account may have no more than 20% of its net assets invested in
securities of issuers domiciled or primarily traded in any one country, except
that the Global Account may have an additional 15% of its net assets invested in
securities of issuers domiciled or primarily traded in any one of the following
countries: Australia, Canada, France, Germany, Japan and The United Kingdom. The
Global Account's investments in U.S. issuers are not subject to these foreign
country diversification guidelines.
RISK FACTORS
The Global Account's investment policies and certain of the investment
techniques in which the Global Account may engage involve certain risks. For
instance, the Global Account will invest in non-U.S. dollar-denominated
securities of foreign issuers. Investing in such securities involves different
risk considerations than investing in securities of U.S. issuers, including the
risks of investment in foreign countries, foreign exchange rate fluctuations,
exchange controls, and others. The Global Account may also engage in
transactions in financial futures contracts, both domestic and foreign, and in
various put and call options. The Global Account may also engage in foreign
currency transactions and options on foreign currencies. Risks associated with
these techniques are described more fully under "Securities and Investment
Techniques."
In general, because investment in foreign issuers will usually involve
currencies of foreign countries, and because the Global Account may be exposed
to currency risk independent of its securities positions, the value of the
assets of the Global Account as measured in U.S. dollars will be affected by
changes in foreign currency exchange rates. To the extent that the Global
Account's assets consist of investments denominated in a particular currency,
the Global Account's exposure to adverse developments affecting the value of
that currency will increase. Foreign currency exchange rates may fluctuate
significantly over short periods of time. They generally are determined by the
forces of supply and demand in the foreign exchange markets and the relative
merits of investment in different countries, actual or perceived changes in
interest rates, and other complex factors, as seen from an international
perspective. Currency exchange rates also can be affected unpredictably by
intervention by U.S. or foreign governments or central banks in the availability
of money or interest rates, by the failure to intervene, by currency controls,
or by political and economic developments in the U.S. or abroad. The market in
forward foreign currency exchange contracts and other privately negotiated
currency instruments offers less protection against defaults by the other party
to such instruments than is available for currency instruments traded on an
exchange. To the extent that a substantial portion of the Global Account's total
assets, adjusted to reflect the Global Account's net position after giving
effect to currency transactions, is denominated in the currencies of foreign
countries, the Global Account will be more susceptible to the risk of adverse
economic and political developments within those countries.
In addition, because of the Global Account's flexible investment policy,
portfolio turnover may be greater than for a portfolio that does not allocate
assets among various types of securities and among various countries and
regions. A higher rate of portfolio turnover involves correspondingly greater
brokerage expenses which must be borne by the Global Account (and indirectly by
investors allocating Accumulation Value to the Global Account), and may under
certain circumstances make it more difficult for the Global Account to qualify
as a regulated investment company under the Code.
There can be no assurance that the Global Account will achieve its investment
objective. Investors should be aware that the value of the Global Account's
assets will fluctuate and a contract owner's Accumulation Value will increase
and decrease in value as the market value of the securities and other assets in
which the Global Account invests fluctuates.
The Global Account is intended for long-term investors who can accept the risks
involved in investments in foreign securities. The Global Account does not
purport to offer a complete investment program to which a prudent investor would
commit all of his or her investment capital, nor is it intended for investors
whose principal objective is income.
BOARD OF GOVERNORS OF ACCOUNT D
The business and affairs of Account D are managed under the direction of a Board
of Governors, which
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THE MANAGED GLOBAL ACCOUNT OF ACCOUNT D (CONTINUED)
currently consists of four members. The Board of Governors has responsibility
for the investment management-related operations of Account D and matters
arising under the 1940 Act. The Board of Governors does not have responsibility
for the payment of obligations under the contract and administration of the
contract. These matters are Golden American's responsibility. The business and
affairs of Account D are governed under a set of rules adopted by the Board of
Governors called "Rules and Regulations of Separate Account D."
THE MANAGER
DSI serves as Manager to Account D pursuant to a Management Agreement with
Account D. The Manager is a corporation organized under the laws of the State of
New York. Its address is 280 Park Avenue, New York, New York 10017. DSI is a
wholly owned subsidiary of BT Variable, Inc., which is an indirect subsidiary of
Bankers Trust Company. DSI's business activities include those of a distributor
and underwriter of variable insurance products, broker-dealer and investment
manager. DSI is registered with the SEC as a broker-dealer and investment
adviser and is a member of the NASD. It is also registered as a broker-dealer
and/or investment adviser in various states.
U.S. banking laws and regulations, including the Glass-Steagall Act as currently
interpreted by the Board of Governors of the Federal Reserve System (the
"Board"), prohibit a bank holding company registered under the Bank Holding
Company Act of 1956, or any affiliate thereof, from sponsoring, organizing,
controlling, or distributing the shares of a registered open-end investment
company, which may for these purposes include the Global Account, continuously
engaged in the issuance of its securities and, except as otherwise provided by
order of the Board, prohibit banks generally from issuing, underwriting,
selling, or distributing securities. The same laws and regulations generally
permit a bank or bank affiliate to act as investment adviser, transfer, dividend
disbursing, and shareholder servicing agent and custodian to an investment
company and to purchase such shares as agent for and upon the order of a
customer.
Golden American and DSI perform the activities described above in this
prospectus and in Part I, under the caption "Selling the Contracts." As
discussed in Part I, under the caption "Golden American," while Bankers Trust
has no immediate intent to divest its ownership of the stock of Golden American
and DSI, such a divestiture may occur in the future. In addition, judicial or
administrative decisions or interpretations, as well as changes in either U.S.
Federal or state banking statutes or regulations, could prevent Golden American
from performing activities with respect to Account D, prevent DSI from
performing the activities described in this prospectus, or prevent Bankers Trust
Company from continuing to own the stock of Golden American or DSI. If any such
event were to occur, changes in the operation of Account D and the Global
Account might occur. It is not expected, however, that Account D or the Global
Account would suffer adverse financial consequences as a result of such
occurrence.
As discussed in Part I, DSI also currently provides management and
administrative services to the Trust. DSI's officers have extensive experience
in the development and distribution of investment products, specifically,
variable life insurance policies, variable annuity contracts, and management
investment companies that serve as investment media for such policies and
contracts.
Under the Management Agreement, DSI has overall responsibility, subject to the
supervision of the Board of Governors, for administering all operations of the
Global Account and for monitoring and evaluating the management of the assets of
the Global Account by the Portfolio Manager. The Manager is also responsible for
monitoring and evaluating the Portfolio Manager on a periodic basis, and will
consider its performance record with respect to the investment objective and
policies of the Global Account. The Management Agreement may be terminated
without penalty by the vote of the Board of Governors or the contract owners of
the Global Account, or by the Manager, on 60 days' written notice by the Board
or the Manager and will terminate automatically if assigned as that term is
described in the 1940 Act.
As Manager, DSI provides the overall business management and administrative
services necessary for the Global Account's operation. The Manager furnishes or
procures on behalf of the Global Account the services and information necessary
to the proper conduct of the Global Account's business. The Manager also acts as
liaison among the various service providers to the Global Account, including the
custodian, portfolio accounting personnel, Portfolio Manager, counsel, and
auditors. The Manager is also responsible for ensuring that the Global Account
operates in compliance with applicable legal requirements and for monitoring the
Portfolio Manager for compliance with requirements under applicable law and with
the investment policies and restrictions of the Global Account.
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THE MANAGED GLOBAL ACCOUNT OF ACCOUNT D (CONTINUED)
Pursuant to the Management Agreement, the Manager is authorized to exercise full
investment discretion and make all determinations with respect to the investment
of the Global Account's assets and the purchase and sale of securities for the
Global Account in the event that at any time a portfolio manager is not engaged
to manage the assets of the Global Account. In such event, the Management
Agreement provides that the Manager will be entitled to, in addition to its
usual compensation for services as Manager, as described below, a fee that would
otherwise be paid to the Portfolio Manager. For more information on the
Management Agreement, see the Statement of Additional Information.
For operating expenses under the Management Agreement see Part I, Charges and
Fees, Operating Expenses of Account D.
The Global Account and DSI have entered into an agreement to limit the total
expenses of the Global Account, excluding mortality and expense risk charges,
asset based administrative charges and other contractual charges, for the period
October 1, 1993 through December 31, 1994 so that such expenses do not exceed on
an annual basis: 1.25% of the first $500 million of average daily net assets and
1.05% of the excess over $500 million.
The initial organizational expenses of the Global Account were advanced by
Golden American. The Global Account reimburses Golden American for such
expenses, which are amortized over five years from the date of the Global
Account's commencement of operations.
THE PORTFOLIO MANAGER
Warburg, Pincus serves as the Portfolio Manager of the Global Account and in
that capacity provides investment advisory services for the Global Account,
including asset allocation and security selection. The Portfolio Manager's
address is 466 Lexington Avenue, New York, New York 10017. The Global Account,
the Manager, and the Portfolio Manager have entered into a Portfolio Management
Agreement under which the Portfolio Manager has full investment discretion and
makes all determinations with respect to the investment of the Global Account's
assets and the purchase and sale of securities and other investments. The
Portfolio Management Agreement may be terminated without penalty by the vote of
the Board of Governors or the contract owners of the Global Account, by the
Portfolio Manager, or by the Manager, on 60 days' written notice by any party to
the Portfolio Management Agreement and will terminate automatically if assigned
as that term is described in the 1940 Act.
Warburg, Pincus was incorporated in Delaware on December 15, 1970. Warburg,
Pincus is a professional investment counselling firm which provides investment
services to investment companies, employee benefit plans, endowment funds,
foundations and other institutions and individuals. The Portfolio Manager is
registered with the SEC as an investment adviser.
The individual primarily in charge of portfolio management decisions for the
Global Account is Richard H. King. Mr. King has been a Managing Director of E.M.
Warburg, Pincus & Co., Inc. ("EMW") since 1989, before which time he was senior
vice president of Fiduciary Trust Company International. Harold E. Sharon and
Nicholas P.W. Horsley, both of whom are research analysts and associate
portfolio managers of another investment company advised by Warburg, Pincus,
also exercise significant portfolio management responsibility with respect to
the Global Account. Mr. Sharon has been with EMW since 1990, before which time
he was an investment officer with Credit Suisse Asset Management. Mr. Horsley
has been with EMW since 1993, before which time he was a director, portfolio
manager and analyst at Barclays deZoete Wedd in New York City.
As of January 31, 1994, Warburg, Pincus managed approximately $7.0 billion of
assets and served as investment adviser to thirteen investment companies which
had total assets of approximately $2.0 billion. The Portfolio Manager is a
wholly-owned subsidiary of Warburg, Pincus Counsellors G.P., a New York general
partnership. EMW controls Warburg, Pincus through its ownership of a class of
voting preferred stock of Warburg, Pincus. Warburg, Pincus Counsellors G.P. has
no business other than being a holding company of Warburg, Pincus and its
subsidiaries.
From the commencement of operations of the Global Account through June 30, 1994,
Zulauf Asset Management AG served as portfolio manager for the Global Account.
Warburg, Pincus assumed management of the Global Account on July 1, 1994.
For operating expenses under the Portfolio Management Agreement see Part I,
Charges and Fees, Operating Expenses of Account D.
CUSTODIAN
The Custodian for the Global Account is Bankers Trust Company. DSI provides
portfolio accounting services for the Global Account.
SECURITIES AND INVESTMENT TECHNIQUES
The following discussion describes different types of securities and investment
techniques that may be
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THE MANAGED GLOBAL ACCOUNT OF ACCOUNT D (CONTINUED)
used by the Global Account, as well as the risks associated with such securities
and techniques. For more detailed information on these securities and investment
techniques, and for information on other securities and investment techniques
that may be used by the Global Account, including U.S. Government securities,
debt securities, foreign securities, repurchase agreements, short sales, futures
contracts, options on securities and foreign currency transactions, see the
discussion in the Statement of Additional Information on "Securities and
Investment Techniques."
FOREIGN SECURITIES
The Global Account may invest in equity and debt securities of foreign
issuers, in American Depository Receipts ("ADRs"), in foreign government
securities that are denominated in either U.S. dollars or foreign currencies,
and in foreign branches of commercial banks and foreign banks.
Investments in foreign securities offer potential benefits not available
solely in securities of domestic issuers by offering the opportunity to invest
in foreign issuers that appear to offer growth potential, or in foreign
countries with economic policies or business cycles different from those of
the United States, or to reduce fluctuations in portfolio value by taking
advantage of foreign stock markets that may not move in a manner parallel to
U.S. markets. Investments in securities of foreign issuers involve certain
risks not ordinarily associated with investments in securities of domestic
issuers. Such risks include fluctuations in foreign exchange rates, future
political and economic developments, and the possible imposition of exchange
controls, restrictions on investment or the flow of capital, or other foreign
governmental laws or restrictions. Since the Global Account may invest in
securities denominated or quoted in currencies other than the U.S. dollar,
changes in foreign currency exchange rates will affect the value of securities
in the portfolio and the unrealized appreciation or depreciation of
investments as denominated in U.S. dollars. While the Global Account may
employ certain investment techniques to hedge its foreign currency exposure,
such techniques also entail certain risks. In addition, with respect to
certain countries, there is the possibility of expropriation of assets,
confiscatory taxation, other foreign taxation, political or social
instability, or diplomatic developments that could adversely affect
investments in those countries.
There may be less publicly available information about a foreign company than
about a U.S. company, and foreign companies may not be subject to accounting,
auditing, and financial reporting standards and requirements comparable to or
as uniform as those of U.S. companies. Foreign securities markets, while
growing in volume, have, for the most part, substantially less volume than
U.S. markets. Securities of many foreign companies are less liquid and their
prices more volatile than securities of comparable U.S. companies.
Transactional costs in non-U.S. securities markets are generally higher than
in U.S. securities markets. There is generally less government supervision and
regulation of exchanges, brokers, and issuers than there is in the United
States. The Global Account might have greater difficulty taking appropriate
legal action with respect to foreign investments in non-U.S. courts than with
respect to domestic issuers in U.S. courts. In addition, transactions in
foreign securities may involve greater time from the trade date until
settlement than domestic securities transactions. Clearance and settlement
procedures in certain foreign countries have not developed at the same pace as
the related securities markets, making it difficult to execute desired
transactions. Delays in settlement could result in temporary periods when a
portion of the assets of the Global Account are uninvested and no return is
earned thereon. The inability of the Global Account to make intended
investments due to settlement problems could cause it to miss attractive
investment opportunities. Inability to dispose of securities or other
investments due to settlement problems could result either in losses to the
Global Account due to subsequent declines in value of the investment, or
possible liability to a purchaser. Foreign investments also involve the risk
of possible losses through the holding of securities by custodians and
securities depositories in foreign countries.
Interest income and gains from foreign securities may generally be subject to
withholding taxes by the country in which the issuer is located.
SHORT SALES
The Global Account may make short sales of securities. A short sale is a
transaction in which the Global Account sells a security it does not own in
anticipation of a decline in market price. The Global Account may make short
sales to offset a potential decline in a long position or a group of long
positions, or if the Portfolio Manager believes that a decline in the price of
a particular security or group of securities is likely.
The Global Account's obligation to replace a security borrowed in connection
with the short sale will
55
<PAGE>
THE MANAGED GLOBAL ACCOUNT OF ACCOUNT D (CONTINUED)
be secured by collateral deposited with the broker, consisting of cash or U.S.
Government securities or other securities acceptable to the broker. In
addition, with respect to any short sale, other than short sales against the
box, the Global Account will be required to deposit collateral consisting of
cash, cash items, or U.S. Government securities in a segregated account with
its custodian in an amount such that the value of the sum of both collateral
deposits (not including the proceeds from the short sale) is at all times
equal to at least 100% of the current market value of the securities sold
short. The deposits do not necessarily limit the Global Account's potential
loss on a short sale, which may exceed the entire amount of the collateral.
If the price of the security sold short increases between the time of the
short sale and the time the Global Account replaces the borrowed security, the
Global Account will incur a loss, and if the price declines during this
period, the Global Account will realize a capital gain. Any realized gain will
be decreased, and any incurred loss increased, by the amount of transactional
costs and any premium, dividend, or interest which the Global Account may have
to pay in connection with such short sale. Account D may have to pay a premium
to borrow the securities sold short and must pay any dividends or interest
payable on the securities until they are replaced. Possible losses from short
sales differ from losses that could be incurred from a purchase of a security,
because losses from short sales may be unlimited, whereas losses from
purchases of a security can equal only the total amount invested.
The Global Account may make a short sale only if, at the time the short sale
is made and after giving effect thereto, the market value of all securities
sold short is 25% or less of the value of its net assets. The Global Account
is not required to liquidate an existing short sale position solely because a
change in market values has caused this percentage limitation to be exceeded.
FUTURES CONTRACTS
The Global Account may purchase and sell stock index futures contracts,
interest rate futures contracts, and futures contracts based upon securities,
which may be domestic or foreign, and corporate or governmental, foreign
exchange futures contracts and other financial futures contracts, and may
purchase and write options on such contracts.
The Global Account may engage in such futures transactions as an adjunct to
its securities activities. The Global Account's transactions in futures
transactions must constitute bona fide hedging or other permissible
transactions under regulations promulgated by the Commodity Futures Trading
Commission ("CFTC"), under which a fund engaging in futures transactions would
not be deemed a "commodity pool." Under these regulations, the Global Account
may enter into futures and options (1) for "bona fide hedging" purposes,
without regard to the percentage of assets committed to initial margin and
options premiums, or (2) for other strategies, provided that the aggregate
initial margin and premiums required to establish such positions do not exceed
5% of the liquidation value of the Global Account's portfolio, after taking
into account unrealized profits and unrealized gains on any such contracts
entered into. Transactions in futures contracts and options on futures
contracts may also be limited by the requirements of the Code for
qualification as a regulated investment company. Other requirements are
described in the Statement of Additional Information.
There are several risks associated with the use of futures and futures
options. While the Global Account's hedging transactions may protect the
Global Account against adverse movements in the general level of interest
rates, securities prices, currency exchange rates, or other economic
conditions, such transactions could also preclude the Global Account from the
opportunity to benefit from favorable movements in the level of interest
rates, securities prices, currency exchange rates, or other economic
conditions. There can be no guarantee that there will be correlation between
price movements in the hedging vehicle and in the portfolio securities or
currency being hedged. An incorrect correlation could result in a loss on both
the hedged securities in the Global Account and the hedging vehicle so that
the Global Account's return might have been better if hedging had not been
attempted. The loss that could be incurred by the Global Account in writing
options on futures is potentially unlimited.
There can be no assurance that a liquid market will exist at a time when the
Global Account seeks to close out a futures contract or a futures option
position. Most futures exchanges and boards of trade limit the amount of
fluctuation permitted in futures contract prices during a single day; once the
daily limit has been reached on a particular contract, no trades may be made
that day at a price beyond that limit. In addition, certain of these
instruments are relatively new and without a significant trading history. As a
result, there is no assurance that an active secondary market will develop or
continue to exist.
56
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THE MANAGED GLOBAL ACCOUNT OF ACCOUNT D (CONTINUED)
The daily limit governs only price movements during a particular trading day
and therefore does not limit potential losses because the limit may work to
prevent the liquidation of unfavorable positions. For example, futures prices
have occasionally moved to the daily limit for several consecutive trading
days with little or no trading, thereby preventing prompt liquidation of
positions and subjecting some holders of futures contracts to substantial
losses. Lack of a liquid market for any reason may prevent the Global Account
from liquidating an unfavorable position and the Global Account would remain
obligated to meet margin requirements and continue to incur losses until the
position is closed.
The Global Account will only enter into futures contracts or futures options
which are standardized and traded on a U.S. or foreign exchange or board of
trade, or similar entity, or quoted on an automated quotation system, or in
the case of futures options, for which an established over-the-counter market
exists.
The Global Account may engage in futures contracts and options on futures
contracts not only on U.S. domestic markets, but also on exchanges and other
markets outside of the United States. Foreign markets may offer advantages
such as trading in indices that are not currently traded in the United States.
Foreign markets, however, may have greater risk potential than domestic
markets. Unlike trading on domestic commodity exchanges, trading on foreign
commodity markets is not regulated by the CFTC and may be subject to greater
risk than trading on domestic exchanges. For example, some foreign exchanges
are principal markets so that no common clearing facility exists and a trader
may look only to the broker for performance of the contract. Trading in
foreign futures or foreign options contracts may not be afforded certain of
the protective measures provided by the Commodity Exchange Act, the CFTC's
regulations, and the rules of the National Futures Association and any
domestic exchange, including the right to use reparations proceedings before
the CFTC and arbitration proceedings provided by the National Futures
Association or any domestic futures exchange. Amounts received for foreign
futures or foreign options transactions may not be provided the same
protections as funds received in respect of transactions on United States
futures exchanges. In addition, the Global Account could incur losses or lose
any profits that had been realized in trading by adverse changes in the
exchange rate of the currency in which the transaction is denominated.
Transactions on foreign exchanges may include both commodities that are traded
on domestic exchanges and boards of trade and those that are not.
OPTIONS ON SECURITIES AND SECURITIES INDICES
The Global Account may purchase and write put and call options on securities
and on securities indices. The Global Account will purchase and write only
options that are standardized and traded on a U.S. or foreign exchange or
board of trade, or for which an established over-the-counter market exists.
The ability to terminate over-the-counter options is more limited than with
exchange-traded options, and may involve the risk that broker-dealers
participating in such transactions will not fulfill their obligations. Until
such time as the staff of the SEC changes its position, the Global Account
will treat purchased over-the-counter options and all assets used to cover
written over-the-counter options as illiquid securities. However, for options
written with primary dealers in U.S. Government securities pursuant to an
agreement requiring a closing purchase transaction at a formula price, the
amount of illiquid securities may be calculated with reference to a formula
approved by the SEC staff.
The Global Account may write a call or put option only if the option is
"covered" by the Global Account holding a position in the underlying
securities or by other means that would permit immediate satisfaction of the
Global Account's obligation as writer of the option, typically deposit with
the Global Account's custodian of cash, U.S. Government securities, or other
high grade liquid debt securities with a value at least equal to the exercise
price of the put option, or the price at which a security underlying a call
option can be acquired.
The purchase and writing of options involves certain risks. During the option
period, the covered call writer has, in return for the premium on the option,
given up the opportunity to profit from a price increase in the underlying
securities above the exercise price, but, as long as its obligation as a
writer continues, has retained the risk of loss should the price of the
underlying security decline. The writer of an option has no control over the
time when it may be required to fulfill its obligation as a writer of the
option. Once an option writer has received an exercise notice, it cannot
effect a closing purchase transaction in order to terminate its obligation
under the option and must deliver the underlying securities at the exercise
price. If a put or call option purchased by the Global Account is not sold
when it has remaining value, and if the market price of the
57
<PAGE>
THE MANAGED GLOBAL ACCOUNT OF ACCOUNT D (CONTINUED)
underlying security, in the case of a put, remains equal to or greater than
the exercise price or, in the case of a call, remains less than or equal to
the exercise price, the Global Account will lose its entire investment in the
option. Also, where a put or call option on a particular security is purchased
to hedge against price movements in a related security, the price of the put
or call option may move more or less than the price of the related security.
There can be no assurance that a liquid market will exist when the Global
Account seeks to close out an option position. Furthermore, if trading
restrictions or a suspension is imposed on the options markets, the Global
Account may be unable to close out a position. If the Global Account cannot
effect a closing transaction, it will not be able to sell the underlying
security while the previously written option remains outstanding, even though
it might otherwise be advantageous to do so. The Global Account pays brokerage
commissions or spreads in connection with its options transactions. The
writing of options could significantly increase portfolio turnover rate.
FOREIGN CURRENCY TRANSACTIONS
The Global Account may enter into forward currency contracts and enter into
currency exchange transactions on a spot (i.e., cash) basis. A forward
currency contract is an obligation to purchase or sell a currency against
another currency at a future date and price as agreed upon by the parties. The
Global Account may either accept or make delivery of the currency at the
maturity of the forward contract or, prior to maturity, enter into a closing
transaction involving the purchase or sale of an offsetting contract. The
Global Account may engage in forward currency transactions in anticipation of
or to protect itself against fluctuations in currency exchange rates, and
entering into a forward currency contract will expose the Global Account to
the risk of adverse changes in the exchange rate of the currency that is
subject to the contract. The Global Account may also enter into a forward
currency contract for non-hedging purposes. Forward currency contracts are
further described in the Statement of Additional Information.
If the Global Account engages in an offsetting transaction to terminate its
contractual obligation under a forward currency contract, the Global Account
will incur a gain or a loss to the extent that there has been movement in
forward contract prices. For more information on closing a forward currency
position, including information on associated risks, see the Statement of
Additional Information.
In hedging transactions, the precise matching of forward currency contracts
and the value of the securities involved will not generally be possible since
the future value of the securities in foreign currencies will change as a
consequence of market movements in the value of those securities between the
date the forward contract is entered into and the date it matures. Projection
of short-term currency market movements is extremely difficult, and the
successful execution of a short-term hedging strategy is highly uncertain.
While forward foreign currency contracts tend to minimize the risk of loss due
to a decline in the value of a hedged currency, at the same time, they tend to
limit any potential gain which might result should the value of such currency
increase.
Forward contracts are not traded on regulated commodities exchanges. There can
be no assurance that a liquid market will exist when the Global Account seeks
to enter into or close out a forward currency position, in which case the
Global Account might not be able to effect a closing purchase transaction at
any particular time. In addition, the Global Account entering a forward
foreign currency contract incurs the risk of default by the counter party to
the transaction. Forward currency contracts offer less protection against
defaults than is available when trading in currencies on an exchange. Because
a forward currency contract is not guaranteed by an exchange or clearinghouse,
a default on the contract would deprive the Global Account of unrealized
profits or force the Global Account to cover its commitments for purchase or
resale, if any, at the current market price.
Although the Global Account values its assets daily in terms of U.S. dollars,
it does not intend physically to convert its holdings of foreign currencies
into U.S. dollars on a daily basis. The Global Account may do so from time to
time, and investors should be aware of the costs of currency conversion.
Although foreign exchange dealers do not charge a fee for conversion, they do
realize a profit based on the difference (the "spread") between the prices at
which they are buying and selling various currencies. Thus, a dealer may offer
to sell a foreign currency to the Global Account at one rate, while offering a
lesser rate of exchange should the Global Account desire to resell that
currency to the dealer.
The Global Account will place cash or high grade liquid debt securities into a
segregated account in an amount equal to the value of the Global Account's
total assets committed to the consummation of forward currency contracts
requiring the Global
58
<PAGE>
THE MANAGED GLOBAL ACCOUNT OF ACCOUNT D (CONTINUED)
Account to purchase foreign currencies or forward contracts entered into for
non-hedging purposes. If the value of the securities placed in the segregated
account declines, additional cash or securities will be placed in the account
on a daily basis so that the value of the account will equal the amount of the
Global Account's commitments with respect to such contracts. The segregated
account will be marked-to-market on a daily basis. Although the contracts are
not presently regulated by the CFTC, the CFTC may in the future assert
authority to regulate these contracts. In such event, the Global Account's
ability to utilize forward currency contracts may be restricted.
OPTIONS ON FOREIGN CURRENCIES
The Global Account may purchase and write call and put options on foreign
currencies. Such options will expose the Global Account to the risk of adverse
changes in the exchange rate of the currency that is subject to the option.
The Global Account may employ options on foreign currencies to increase or
shift exposure to a currency and as a hedge against changes in the value of
the U.S. dollar (or another currency) in relation to a foreign currency in
which portfolio securities of the Global Account may be denominated. Hedging
against a change in the value of a foreign currency with an option on the
foreign currency does not eliminate fluctuations in the prices of portfolio
securities or prevent losses if the prices of such securities decline.
Furthermore, such hedging transactions reduce or preclude the opportunity for
gain if the value of the hedged currency should change relative to the U.S.
dollar. The Global Account may use options on currency to cross-hedge, which
involves writing or purchasing options on one currency to hedge against
changes in exchange rates for a different currency, if there is a pattern of
correlation between the two currencies.
Currency options traded on U.S. or other exchanges may be subject to position
limits that may limit the ability of the Global Account to reduce foreign
currency risk using such options. Over-the-counter options differ from traded
options in that they are two-party contracts with price and other terms
negotiated between buyer and seller and generally do not have as much market
liquidity as exchange-traded options. There is no assurance that a liquid
secondary market will exist for any particular option, or at any particular
time. In the event no liquid secondary market exists, it might not be possible
to effect closing transactions in particular currency options. If the Global
Account cannot close out an option that it holds, it would have to exercise
its option in order to realize any profit and would incur transactional costs
on the sale of the underlying assets.
BORROWING
The Global Account may borrow up to 10% of the value of its net assets. For
temporary purposes, such as to facilitate redemptions, the Global Account may
increase its borrowings up to 25% of its net assets. Reverse repurchase
agreements, short sales of securities, and sales of securities against the box
will be included as borrowing subject to the borrowing limitations described
above, except that the Global Account is permitted to engage in short sales of
securities with respect to an additional 15% of the Global Account's net
assets in excess of the limits otherwise applicable to borrowing. Securities
purchased on a when-issued or delayed delivery basis will not be subject to
the Global Account's borrowing limitations to the extent that the Global
Account establishes and maintains liquid assets in a segregated account with
the Global Account's custodian equal to the Global Account's obligations under
the when-issued or delayed delivery arrangement.
INVESTMENT RESTRICTIONS
The Global Account is subject to investment restrictions that are described in
the Statement of Additional Information. Those investment restrictions so
designated and the investment objective are "fundamental policies" of the Global
Account, which means that they may not be changed without a majority vote of the
contract owners with Accumulation Value allocated to the Global Account. Except
for those restrictions specifically identified as fundamental and the Global
Account's investment objective, all other investment policies and practices
described in this prospectus and Statement of Additional Information are not
fundamental, meaning that the Board of Governors may change them without
contract owner approval.
BROKERAGE SERVICES
Pursuant to the Portfolio Management Agreement, the Portfolio Manager places
orders for the purchase and sale of portfolio investments for the Global Account
with brokers or dealers selected by the Portfolio Manager in its discretion. In
executing transactions, the Portfolio Manager will attempt to obtain the best
execution. In transactions on stock exchanges in the United States, payment of
brokerage commissions are negotiated. In effecting purchases and sales of
portfolio securities in transactions on U.S. stock exchanges, the Global Account
may pay higher commission rates
59
<PAGE>
THE MANAGED GLOBAL ACCOUNT OF ACCOUNT D (CONTINUED)
than the lowest available when the Portfolio Manager believes it is reasonable
to do so in light of the value of the brokerage and research services provided
by the broker effecting the transaction. In the case of securities traded on
some foreign stock exchanges, brokerage commissions may be fixed and the
Portfolio Manager may be unable to negotiate commission rates for these
transactions. In the case of securities traded on the over-the-counter markets,
there is generally no stated commission, but the price includes an undisclosed
commission or markup.
Some securities considered for investment by the Global Account may also be
appropriate for other clients served by the Portfolio Manager and/or its
affiliates. If a purchase or sale of securities consistent with the investment
policies of the Global Account and one or more of these clients served by the
Portfolio Manager and/or its affiliates is considered at or about the same time,
transactions in such securities will be allocated among the Global Account and
clients in a manner deemed fair and reasonable by the Portfolio Manager and/or
its affiliates. Although there is no specified formula for allocating such
transactions, the various allocation methods used by the Portfolio Manager, and
the results of such allocations, are subject to periodic review by the Manager
and Account D's Board of Governors.
The Portfolio Manager may place orders for the purchase of portfolio securities
with an affiliated broker-dealer where, in the judgment of the Portfolio
Manager, such firm will be able to obtain a price and execution at least as
favorable as other qualified brokers. Counsellors Securities Inc. is a
registered broker-dealer and an affiliate of the Portfolio Manager.
PORTFOLIO TURNOVER
It is anticipated that the Global Account's annual rate of portfolio turnover
normally will not exceed 100%. Portfolio turnover for the Global Account will
vary from year to year, and depending on market conditions, the portfolio
turnover rate could be greater in periods of unusual market movement. A higher
turnover rate would result in heavier brokerage commissions or other
transactional expenses which must be borne, directly or indirectly, by the
Global Account and ultimately by the Global Account's contract owners. For
information on the calculation of the portfolio turnover rate, see the
Statement of Additional Information.
60
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STATEMENT OF ADDITIONAL INFORMATION
- - --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM PAGE
<S> <C>
INTRODUCTION......................................................................................................... 2
PART I
Description of Golden American Life Insurance Company................................................................ 2
Safekeeping of Assets................................................................................................ 2
The Administrator.................................................................................................... 2
Independent Auditors................................................................................................. 3
Reinsurance.......................................................................................................... 3
Distribution of Contracts............................................................................................ 3
Performance Information.............................................................................................. 3
IRA Partial Withdrawal Option........................................................................................ 7
Other Information.................................................................................................... 8
PART II
Securities and Investment Techniques................................................................................. 8
U.S. Government Securities......................................................................................... 8
Debt Securities.................................................................................................... 9
Short Sales Against the Box........................................................................................ 9
Futures Contracts and Options on Futures Contracts................................................................. 10
Options on Securities.............................................................................................. 11
Options of Securities Indexes...................................................................................... 12
Foreign Currency Transactions...................................................................................... 13
Options on Foreign Currencies...................................................................................... 14
Repurchase Agreements.............................................................................................. 15
Banking Industry and Savings Industry Obligations.................................................................. 15
Commercial Paper................................................................................................... 16
When Issued or Delayed Delivery Securities......................................................................... 17
Investment Restrictions.............................................................................................. 17
Management of Separate Account D..................................................................................... 19
The Manager.......................................................................................................... 20
Portfolio Manager.................................................................................................... 21
Custodian and Portfolio Accounting Agent............................................................................. 22
Portfolio Transactions and Brokerage................................................................................. 22
Purchase and Pricing of the Global Account........................................................................... 24
Financial Statements of Separate Account B........................................................................... 25
Financial Statements of The Managed Global Account of Separate Account D............................................. 25
Appendix -- Description of Bond Ratings
</TABLE>
61
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- - --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION (CONTINUED)
- - --------------------------------------------------------------------------------
PLEASE TEAR OFF, COMPLETE AND RETURN THE FORM BELOW TO ORDER A FREE STATEMENT OF
ADDITIONAL INFORMATION FOR THE CONTRACTS OFFERED UNDER THE PROSPECTUS. ADDRESS
THE FORM TO OUR CUSTOMER SERVICE CENTER, THE ADDRESS IS SHOWN ON THE COVER.
...............................................................................
PLEASE SEND ME A FREE COPY OF THE STATEMENT OF ADDITIONAL INFORMATION FOR
SEPARATE ACCOUNT B AND THE MANAGED GLOBAL ACCOUNT OF ACCOUNT D.
PLEASE PRINT OR TYPE
<TABLE>
<CAPTION>
<S> <C> <C>
--------------------------------------------
NAME
--------------------------------------------
SOCIAL SECURITY NUMBER
--------------------------------------------
STREET ADDRESS
--------------------------------------------
CITY, STATE, ZIP
</TABLE>
(IN 3106 DVA/MVA 3/95)
...............................................................................
62
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APPENDIX A
MARKET VALUE ADJUSTMENT EXAMPLES
EXAMPLE #1: FULL SURRENDER -- EXAMPLE OF A NEGATIVE MARKET VALUE ADJUSTMENT
Assume $100,000 was allocated to a Fixed Allocation with a Guarantee Period of
ten years, a Guaranteed Interest Rate of 7.50%, an initial Index Rate ("I") of
7.00%; that a full surrender is requested three years into the Guarantee Period;
that the then Index Rate for a seven year Guarantee Period ("J") is 8.0%; and
that no prior transfers or partial withdrawals affecting this Fixed Allocation
have been made.
CALCULATE THE MARKET VALUE ADJUSTMENT
1. The Accumulation Value of the Fixed Allocation on the date of surrender
is $124,230
($100,000 X 1.075(3))
2. N = 2,555 (365 X 7)
3. Market Value Adjustment = $124,230 X [(1.07 )2,555/365 ] = $9,700
------------------------------------------------
__________ 1.0825 -1
Therefore, the amount paid to you on full surrender ignoring any surrender
charge is $114,530 ($124,230 - $9,700).
EXAMPLE #2: FULL SURRENDER -- EXAMPLE OF A POSITIVE MARKET VALUE ADJUSTMENT
Assume $100,000 was allocated to a Fixed Allocation with a Guarantee Period of
ten years, a Guaranteed Interest Rate of 7.5%, an initial Index Rate ("I") of
7.00%; that a full surrender is requested three years into the Guarantee Period;
that the then Index Rate for a seven year Guarantee Period ("J") is 6.0%; and
that no prior transfers or partial withdrawals affecting this Fixed Allocation
have been made.
CALCULATE THE MARKET VALUE ADJUSTMENT
1. The Accumulation Value of the Fixed Allocation on the date of surrender
is $124,230
($100,000 X 1.0753)
2. N = 2,555 (365 X 7)
3. Market Value Adjustment = $124,230 X [(1.07 )2,555/365 ] = $6,270
------------------------------------------------
__________ 1.0625 -1
Therefore, the amount paid to you on full surrender ignoring any surrender
charge is $130,500 ($124,230 + $6,270).
EXAMPLE #3: PARTIAL WITHDRAWAL -- EXAMPLE OF A NEGATIVE MARKET VALUE ADJUSTMENT
Assume $200,000 was allocated to a Fixed Allocation with a Guarantee Period of
ten years, a Guaranteed Interest Rate of 7.5%, an initial Index Rate ("I") of
7.00%; that a partial withdrawal of $114,530 is requested three years into the
Guarantee period; that the then Index Rate ("J") for a seven year Guarantee
Period is 8.0%; and that no prior transfers or partial withdrawals affecting
this Fixed Allocation have been made.
First calculate the amount that must be withdrawn from the Fixed Allocation to
provide the amount requested.
1. The Accumulation Value of the Fixed Allocation on the date of withdrawal
is $248,459
($200,000 X 1.0753)
2. N = 2,555 (365 X 7)
3. Amount that must be withdrawn = [$114,530/(1.07 )2,555/365] = $124,230
---------------------------------------------------
1.0825
A1
<PAGE>
Then calculate the Market Value Adjustment on that amount
4. Market Value Adjustment = $124,230 X [(1.07 )2,555/365 ] = $9,700
------------------------------------------------
__________ 1.0825 -1
Therefore, the amount of the partial withdrawal paid to you is $114,530, as
requested. The Fixed Allocation will be reduced by the amount of the partial
withdrawal, $114,530, and also reduced by the Market Value Adjustment of $9,700,
for a total reduction in the Fixed Allocation of $124,230.
EXAMPLE #4: PARTIAL WITHDRAWAL -- EXAMPLE OF A POSITIVE MARKET VALUE ADJUSTMENT
Assume $200,000 was allocated to a Fixed Allocation with a Guarantee Period of
ten years, a Guaranteed Interest Rate of 7.5%, an initial Index Rate of 7.0%;
that a partial withdrawal of $130,500 requested three years into the Guarantee
Period; that the then Index Rate ("J") for a seven year Guarantee Period is
6.0%; and that no prior transfers or partial withdrawals affecting this Fixed
Allocation have been made.
First calculate the amount that must be withdrawn from the Fixed Allocation to
provide the amount requested.
1. The Accumulation Value of Fixed Allocation on the date of surrender is
$248,459
($200,000 X 1.0753)
2. N = 2,555 (365 X 7)
3. Amount that must be withdrawn = [$130,500/(1.07 )2,555/365] = $124,230
---------------------------------------------------
1.0625
Then calculate the Market Value Adjustment on that amount
4. Market Value Adjustment = $124,230 X [(1.07 )2,555/365 ] = $6,270
------------------------------------------------
__________ 1.0625 -1
Therefore, the amount of the partial withdrawal paid to you is $130,500, as
requested. The Fixed Allocation will be reduced by the amount of the partial
withdrawal, $130,500, but increased by the Market Value Adjustment of $6,270,
for a total reduction in the Fixed Allocation of $124,230.
A2
<PAGE>
APPENDIX B
GOLDENSELECT SERVICE FORMS
- - - Deferred Variable Annuity Application -- Use in all states except MN
- - - Contact the Sales Desk for the Special Form to be used in MN
(GoldenSelect DVA is currently Not Available in ME and NY; consult your
financial adviser to determine if the Fixed Account is available in your state.)
- - - Absolute Assignment to Effect Section 1035(a) Exchange
- - - Request to Effect IRA Or Other Qualified Account Transfer
- - - Certificate of Deposit Transfer Form
Submit all forms (with all other necessary documents) to the Customer Service
Center
WITHHOLDING ELECTION INSTRUCTIONS (BEFORE THE WITHHOLDING ELECTION SECTION ON
THE APPLICATION IS COMPLETED, PLEASE HAVE THE OWNER READ THE FOLLOWING
CAREFULLY)
Your withdrawals under annuity contracts may be subject to Federal income tax
withholding unless you elect not to have withholding apply. You may elect not to
have withholding apply by checking the box by line A and signing in the
signature section. Check the box by line B to make an election to have
withholding apply. If you want additional withholding made, check the box by
line C.
Withholding will only apply to the portion of your withdrawal that is subject to
Federal income tax and it will be like wage withholding. Thus, there will be no
withholding on the portion of each payment representing a return of your
premium. You may change your withholding as often as you wish by sending in IRS
Form W-4P to Golden American. Your election will remain in effect until you
revoke it. You may revoke it at any time.
If you elect not to have withholding apply to your withdrawals, or if you do not
have enough Federal income tax withheld from your withdrawal payments, you may
be responsible for payment of estimated tax. You may incur penalties under the
estimated tax rules if your withholding and estimated tax payments are not
sufficient.
By signing the application and completing the withholding election, you certify
that no bankruptcy proceeding, attachment or other lien or claims are pending
against you.
B1
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY DEFERRED VARIABLE ANNUITY
A Subsidiary of Bankers Trust Company
GOLDEN AMERICAN LIFE INSURANCE COMPANY IS A STOCK
COMPANY DOMICILED IN WILMINGTON, DELAWARE APPLICATION
<TABLE>
<S> <C> <C>
1. OWNER(S)
Name Male Female Soc. Sec. #
/ / / / or Tax ID.#
Permanent City State Zip
Address
Phone Date of Birth
( )
2. ANNUITANT (IF OTHER THAN OWNER)
Name Male Female Soc. Sec. #
/ / / / or Tax ID.#
Permanent City State Zip
Address
Phone Date of Birth Relation
( ) to Owner
CONTINGENT ANNUITANT (OPTIONAL)
Name Address Relation
to Owner
3. PRIMARY BENEFICIARY(IES) (IF MORE THAN ONE - INDICATE %)
Name(s) Relation
to Owner
CONTINGENT BENEFICIARY(IES) Name Relation
to Owner
4. PLAN (CHECK ONE)
/ / DVA / / Other _______________________
5. DEATH BENEFIT (CHECK ONE IF ISSUE AGE OF OWNER IS LESS THAN 76):
/ / 7% Solution Enhanced / / Annual Ratchet Enhanced / / Standard Death Benefit Option
Death Benefit Option Death Benefit Option
6. INITIAL PREMIUM AND ALLOCATION INFORMATION
(A) INITIAL PREMIUM PAID $__________ MAKE CHECK PAYABLE TO GOLDEN AMERICAN LIFE
INSURANCE COMPANY
Fill in percentages for Premium allocation below (see (A) INITIAL.)
(B) DOLLAR COST AVERAGING (DCA): OPTIONAL. PLEASE CHECK BOX TO ELECT. / /
Amount to be transferred monthly $_________________ (minimum $250)
Division or Allocation Transferred From:
/ / Limited Maturity Bond Division
/ / Liquid Asset Division
/ / 1 Yr. Fixed Allocation
(MINIMUM OF $10,000 MUST BE ALLOCATED TO THE DIVISION OR FIXED ALLOCATION CHECKED)
Divisions Transferred To: Fill in percentages for allocation of DCA below (see (B)
DCA).
</TABLE>
<TABLE>
<CAPTION>
ACCOUNT DIVISION INVESTMENT ADVISER (A) INITIAL (B) DCA
<S> <C> <C> <C>
MULTIPLE ALLOCATION ZWEIG ADVISORS, INC. % %
FULLY MANAGED T. ROWE PRICE ASSOCIATES INC. % %
ALL-GROWTH WARBURG, PINCUS COUNSELLORS, INC. % %
CAPITAL APPRECIATION CHANCELLOR TRUST CO. % %
VALUE EQUITY EAGLE ASSET MANAGEMENT, INC. % %
RISING DIVIDENDS KAYNE, ANDERSON INV. MGMT., L.P. % %
REAL ESTATE EII REALTY SECURITIES, INC. % %
NATURAL RESOURCES VAN ECK ASSOCIATES CORP. % %
EMERGING MARKETS BANKERS TRUST COMPANY % %
THE MANAGED GLOBAL ACCOUNT WARBURG, PINCUS COUNSELLORS, INC. % %
LIMITED MATURITY BOND BANKERS TRUST COMPANY %
LIQUID ASSET BANKERS TRUST COMPANY %
FIXED ALLOCATION ELECTION 1 YEAR %
FIXED ALLOCATION ELECTION 3 YEAR %
FIXED ALLOCATION ELECTION 5 YEAR %
FIXED ALLOCATION ELECTION 7 YEAR %
FIXED ALLOCATION ELECTION 10 YEAR %
TOTAL 100% 100%
GOLDEN AMERICAN LIFE INSURANCE COMPANY, CSUSTOMER SERVICE CENTER, PO Box 8794, Wilmington, DE 19899-8794
B2
GA-AA-1000-12/94
<PAGE>
7. OPTIONAL SYSTEMATIC PARTIAL WITHDRAWALS
If you want to receive Systematic Partial Withdrawals, your request must be
received in writing. For the appropriate form, please call our Customer Service
Center: 1-800-366-0066.
8. TELEPHONE REALLOCATION AUTHORIZATION ________________ OWNER'S INITIALS
I authorize Golden American to act upon reallocation instructions given
by telephone from __________________________(name of your registered
representative) upon furnishing his/her social security number. Neither
Golden American nor any person authorized by Golden American will be
responsible for any claim, loss, liability or expense in connection with
reallocation instructions received by telephone from such person if Golden
American or such other person acted on such telephone instructions in good
faith in reliance upon this authorization. Golden American will continue
to act upon this authorization until such time as the person indicated
above is no longer affiliated with the broker/dealer under which my
contract was purchased or until such time that I notify Golden
American otherwise in writing.
9. TAX-QUALIFIED PLANS IF YOU ARE FUNDING A QUALIFIED PLAN, PLEASE SPECIFY TYPE:
/ / IRA / / IRA Rollover / / SEP/IRA / / Other ________________________
10. REPLACEMENT
Will the contract applied for replace any existing annuity or life insurance policies on the annuitant's life?
/ / Yes (If yes, please complete following) / / No
Company Name Policy Number Face Amount
11. READ THE FOLLOWING STATEMENTS CAREFULLY AND SIGN BELOW:
o BY SIGNING BELOW, I ACKNOWLEDGE RECEIPT OF THE PROSPECTUS. I UNDERSTAND THAT
THIS CONTRACT'S CASH SURRENDER VALUE, 1) WHEN BASED ON THE INVESTMENT EXPERIENCE
OF A SEPERATE ACCOUNT DIVISION, MAY INCREASE OR DECREASE ON ANY DAY AND THAT NO
MINIMUM VALUE IS GUARANTEED, AND 2) WHEN, BASED ON THE FIXED ACCOUNT MAY BE
SUBJECT TO A MARKET VALUE ADJUSTMENT, THE OPERATION OF WHICH MAY CAUSE THE
VALUES TO INCREASE OR DECREASE. THIS CERTIFICATE IS IN ACCORD WITH MY
ANTICIPATED FINANCIAL NEEDS.
o I AGREE THAT, TO THE BEST OF MY KNOWLEDGE AND BELIEF, ALL STATEMENTS AND
ANSWERS IN THIS APPLICATION ARE COMPLETE AND TRUE AND MAY BE RELIED UPON IN
DETERMINING WHETHER TO ISSUE THE CERTIFICATE. MY ANSWERS WILL FORM A PART OF ANY
CERTIFICATE TO BE ISSUED, AND ONLY THE OWNER AND GOLDEN AMERICAN HAVE THE
AUTHORITY TO MODIFY THIS APPLICATION.
o CONTRACTS AND POLICIES AND UNDERLYING SERIES SHARES OR SECURITIES WHICH FUND
CONTRACTS AND POLICIES ARE NOT INSURED BY THE FDIC OR ANY OTHER AGENCY. THEY ARE
NOT DEPOSITS OR OTHER OBLIGATIONS OF ANY BANK AND ARE NOT BANK GUARANTEED. ALSO,
THEY ARE SUBJECT TO MARKET FLUCTUATION, INVESTMENT RISK AND POSSIBLE LOSS OF
PRINCIPAL INVESTED.
----------------------------------------- --------------------------------------
Signature of Owner Signed at (City, State) Date
----------------------------------------- --------------------------------------
Signature of Joint Owner (IF APPLICABLE) Signed at (City, State) Date
----------------------------------------- --------------------------------------
Signature of Annuitant (IF OTHER THAN OWNER) Signed at (City, State) Date
Client Account No. (IF APPLICABLE)_____________________
FOR AGENT USE ONLY
DO YOU HAVE REASON TO BELIEVE THAT THE CONTRACT APPLIED FOR WILL REPLACE ANY
EXISTING ANNUITY OR LIFE INSURANCE ON THE ANNUITANT'S LIFE? / / YES / / NO
- - -------------------- ----------------------- --------------------- --------------------
Agent Signature Print Agent Name & No. Social Security No. Broker/Dealer/Branch
----------------------------------
Florida License ID# (Florida Only)
GOLDEN AMERICAN LIFE INSURANCE COMPANY, CUSTOMER SERVICE CENTER, PO Box 8794,
Wilmington, DE 19899-8794
1-800-366-0066
</TABLE>
B3
GA-AA-1000-12/94
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
A Subsidiary of Bankers Trust Company
GOLDEN AMERICAN LIFE INSURANCE COMPANY IS A STOCK COMPANY DOMICILED IN
WILMINGTON, DELAWARE
REQUEST TO EFFECT IRA OR OTHER QUALIFIED ACCOUNT TRANSFER
- - --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
TO: -------------------------------------
PRESENT SPONSOR
------------------------------------- ACCOUNT NO.
ADDRESS
------------------------------------- -----------------------------------------------------
ADDRESS PARTICIPANT'S NAME
RE: IRA OR OTHER QUALIFIED ACCOUNT TRANSFER
</TABLE>
ATTN: QUALIFIED TRANSFER DEPARTMENT
Dear Sirs:
I wish to transfer the entire value of my present Qualified Account to the
"GoldenSelect IRA" sponsored by Golden American Life Insurance Company.
I adopted the "GoldenSelect IRA" on ____________________________________________
DATE OF APPLICATION
Please make the check payable to GoldenSelect/Golden American Life Insurance
Company. As indicated below, Golden American has already indicated its
willingness to accept from you all my Qualified Account assets.
Please send all such proceeds and details to:
Golden American Life Insurance Company
IRA and Pension Operations
P.O. Box 8794
Wilmington, DE 19899-8794
Your prompt attention to this matter is appreciated.
<TABLE>
<S> <C> <C>
Sincerely, (Signature Guarantee if Required)
X ----------------------------------------
PARTICIPANT'S SIGNATURE (NAME OF BANK/FIRM)
----------------------------------------
(SIGNATURE OF OFFICER/TITLE)
</TABLE>
- - -
GOLDEN AMERICAN APPROVAL FOR QUALIFIED ACCOUNT TRANSFER
Golden American Life Insurance Company has established the "GoldenSelect IRA"
application number
- - ------------------------- for the participant named above. We are willing to
accept the transfer. Please forward all proceeds accordingly.
<TABLE>
<S> <C>
By: -------------------------------------- Date: ----------------------------------------------
Name: ----------------------------------- Title: ----------------------------------------------
</TABLE>
Golden American Life Insurance Company, Customer Service Center, P.O. Box 8794,
Wilmington, DE 19899-8974 1-800-366-0066
GAL-IRA-3/95
B4
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
A Subsidiary of Bankers Trust Company
GOLDEN AMERICAN LIFE INSURANCE COMPANY IS A STOCK COMPANY DOMICILED IN
WILMINGTON, DELAWARE
ABSOLUTE ASSIGNMENT TO EFFECT SECTION 1035(A) EXCHANGE
- - --------------------------------------------------------------------------------
<TABLE>
<S> <C>
OWNER: ANNUITANT OR INSURED:
CURRENT CONTRACT NO.: EXISTING INSURANCE CO.:
</TABLE>
I hereby make a complete and absolute assignment and transfer all rights, titles
and interest of every nature and character in and to the above contract to
Golden American Life Insurance Company ("Golden American") in an exchange
intended to qualify under Section 1035 of the Internal Revenue Code.
Upon receipt, Golden American is directed to surrender the above contract and
apply the value to the GoldenSelect product for which I have submitted an
application.
I understand that, by executing this assignment, I irrevocably waive all rights,
claims and demands under the above contract.
I acknowledge that Golden American is furnishing this form and participating in
this transaction as an accommodation to me, and that Golden American assumes no
responsibility or liability for my tax treatment under Section 1035 of the
Internal Revenue Code or otherwise.
Signed this ______________ day of ________________, 19 __________ at ___________
<TABLE>
<S> <C>
X X
WITNESS SIGNATURE OF OWNER
</TABLE>
- - -
NOTIFICATION OF ASSIGNMENT AND SURRENDER
<TABLE>
<S> <C>
To (Existing Insurance Company): Re: Contract No.
</TABLE>
This is to notify you that an absolute assignment of all rights, title and
interest in and to the above contract has been made to Golden American Life
Insurance Company, for the purpose of making an exchange under Section 1035 of
the Internal Revenue Code. Golden American, owner of the above contract, hereby
surrenders it and requests its full surrender value for the purpose of an
exchange under Section 1035 of the Internal Revenue Code. Upon surrender of this
contract, please issue a check for its cash value to Golden American Life
Insurance Company, and mail to Golden American Life Insurance Company, Customer
Service Center, P.O. Box 8794, Wilmington, DE, 19899-8794, Attn: New Business
Department. Please provide Golden American with the cost basis, issue date and
other payment information along with your check.
<TABLE>
<S> <C>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
By:
DATE OFFICER OF ABOVE-NAMED INSURANCE COMPANY
</TABLE>
Golden American Life Insurance Company, Customer Service Center, P.O. Box 8794,
Wilmington, DE 19899-8974 1-800-366-0066
GAL-1035-3/95
B5
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
A Subsidiary of Bankers Trust Company
GOLDEN AMERICAN LIFE INSURANCE COMPANY IS A STOCK COMPANY DOMICILED IN
WILMINGTON, DELAWARE
CERTIFICATE OF DEPOSIT TRANSFER FORM
- - --------------------------------------------------------------------------------
APPOINTMENT OF ATTORNEY-IN-FACT TO SURRENDER CERTIFICATE OF DEPOSIT
(NON-QUALIFIED ONLY)
CERTIFICATE(S) OF DEPOSIT
Issued By: _____________________________________________________________________
INSTITUTION
Address: _______________________________________________________________________
Certificate Number(s): _________________________ Issued to: ____________________
Maturity Date(s): ______________________________________________________________
Estimated Amount(s): ___________________________________________________________
I/We do hereby name and appoint Golden American Life Insurance Company ("Golden
American") through its duly authorized officers as lawful agent and
attorney-in-fact for me/us, to surrender the above Certificate(s) of Deposit
upon the respective maturity date(s).
I/We request that upon maturity all funds available be transferred to Golden
American. Golden American will apply all such funds received to a variable
contract issued to me/us.
I/We understand that Golden American assumes no responsibility for the tax
treatment of this matter and that I/ we shall be responsible for the payment of
all federal, state and local taxes and any other fees and charges incurred with
respect to the Certificate(s).
I/We acknowledge that the investment earnings credited under the variable
contract will begin to accrued when Golden American receives the proceeds from
the Certificate(s). Golden American has the responsibility only to present the
Certificate(s) for payment upon maturity and shall not be responsible for the
solvency of the issuing Financial Institution.
Dated at ______________________________ on this ______ day of
____________________, 19________________________________________________________
<TABLE>
<S> <C>
X X
Witness Signature of Certificate Owner
X X
Witness Signature of Joint Certificate Owner
</TABLE>
Special Handling Instructions: _________________________________________________
________________________________________________________________________________
ACKNOWLEDGMENT
Golden American will accept any and all funds which discharge the obligation
listed above and request that such funds be sent to: Golden American Life
Insurance Company, Customer Service Center, P.O. Box 8794, Wilmington, DE
19899-8794
By _____________________________________________________________________________
Name Title Date
Golden American Life Insurance Company, Customer Service Center, P.O. Box 8794,
Wilmington, DE 19899-8974 1-800-366-0066
GAL-CDTF-3/95
B6
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
A Subsidiary of Bankers Trust Company
GOLDEN AMERICAN LIFE INSURANCE COMPANY IS A STOCK COMPANY
DOMICILED IN WILMINGTON, DELAWARE
IN CDSL DVA/MVA Prosp. 8/95
<PAGE>
PART B
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
GOLDENSELECT DVA
DEFERRED COMBINATION VARIABLE
AND FIXED ANNUITY CONTRACT
ISSUED BY
SEPARATE ACCOUNT B
("Account B")
AND
SEPARATE ACCOUNT D
("Account D")
(collectively, the "Accounts")
OF
GOLDEN AMERICAN LIFE INSURANCE COMPANY
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS. THE INFORMATION
CONTAINED HEREIN SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUS FOR THE
GOLDEN AMERICAN LIFE INSURANCE COMPANY DEFERRED VARIABLE ANNUITY CONTRACT WHICH
IS REFERRED TO HEREIN.
THE PROSPECTUS SETS FORTH INFORMATION THAT A PROSPECTIVE INVESTOR OUGHT TO KNOW
BEFORE INVESTING. FOR A COPY OF THE PROSPECTUS, SEND A WRITTEN REQUEST TO
GOLDEN AMERICAN LIFE INSURANCE COMPANY, CUSTOMER SERVICE CENTER, P.O. BOX 8794,
WILMINGTON, DE 19899-8794 OR TELEPHONE 1-800-366-0066.
DATE OF PROSPECTUS AND
STATEMENT OF ADDITIONAL INFORMATION:
AUGUST __, 1995
IN CDSL DVA/MVA SAI 8/95
<PAGE>
TABLE OF CONTENTS
ITEM PAGE
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
PART I
Description of Golden American Life Insurance Company. . . . . . . . . . .2
Safekeeping of Assets. . . . . . . . . . . . . . . . . . . . . . . . . . .2
The Administrator. . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . .3
Distribution of Contracts. . . . . . . . . . . . . . . . . . . . . . . . 3
Performance Information. . . . . . . . . . . . . . . . . . . . . . . . . .3
IRA Partial Withdrawal Option. . . . . . . . . . . . . . . . . . . . . . 7
Other Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
PART II
Securities and Investment Techniques . . . . . . . . . . . . . . . . . . 8
U.S. Government Securities. . . . . . . . . . . . . . . . . . . . . . 8
Debt Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Short Sales Against the Box . . . . . . . . . . . . . . . . . . . . . 9
Futures Contracts and Options on Futures Contracts. . . . . . . . . . 10
Options on Securities . . . . . . . . . . . . . . . . . . . . . . . . 11
Options on Securities Indexes . . . . . . . . . . . . . . . . . . . . 12
Foreign Currency Transactions . . . . . . . . . . . . . . . . . . . . 13
Options on Foreign Currencies . . . . . . . . . . . . . . . . . . . . 14
Repurchase Agreements . . . . . . . . . . . . . . . . . . . . . . . . 15
Banking Industry and Savings Industry Obligations . . . . . . . . . . 15
Commercial Paper. . . . . . . . . . . . . . . . . . . . . . . . . . . 16
When Issued or Delayed Delivery Securities. . . . . . . . . . . . . . 17
Investment Restrictions. . . . . . . . . . . . . . . . . . . . . . . . . 17
Management of Separate Account D . . . . . . . . . . . . . . . . . . . . 19
The Manager. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Portfolio Manager. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Custodian and Portfolio Accounting Agent . . . . . . . . . . . . . . . . 22
Portfolio Transactions and Brokerage . . . . . . . . . . . . . . . . . . 22
Purchase and Pricing of the Global Account . . . . . . . . . . . . . . . 24
Financial Statements of Separate Account B . . . . . . . . . . . . . . . 25
Financial Statements of The Managed Global Account of
Separate Account D . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Appendix - Description of Bond Ratings
1
<PAGE>
INTRODUCTION
Part I of this Statement of Additional Information provides background
information regarding Account B and Account D. Part II of this Statement of
Additional Information provides information regarding the investment activities
of Account D and The Managed Global Account (the "Global Account"), including
its investment policies.
PART I
DESCRIPTION OF GOLDEN AMERICAN LIFE INSURANCE COMPANY
Golden American Life Insurance Company ("Golden American") is a stock life
insurance company organized under the laws of the State of Delaware. Prior to
December 30, 1993, Golden American was a Minnesota corporation. From January 2,
1973 through December 31, 1987, the name of the company was St. Paul Life
Insurance Company. On December 31, 1987, after all of St. Paul Life Insurance
Company's business was sold, the name was changed to Golden American. On March
7, 1988, all of the stock of Golden American was acquired by The Golden
Financial Group, Inc. ("GFG"), a financial services holding company. On October
19, 1990, GFG merged with and into MBL Variable, Inc. ("MBLV"), a wholly owned
direct subsidiary of The Mutual Benefit Life Insurance Company ("MBL"). On
January 1, 1991, MBLV became a wholly owned indirect subsidiary of MBL and
Golden American became a wholly owned direct subsidiary of MBL. Golden
American's name had been changed to MB Variable Life Insurance Company in the
state of Minnesota but subsequently has been changed back to Golden American.
In a transaction that closed on September 30, 1992, Golden American was acquired
by a subsidiary of Bankers Trust Company ("Bankers Trust"). As of December 31,
1994, Golden American had over $89.5 million in stockholders' equity and
approximately $1.04 billion in total assets, including approximately $950.3
million of separate account assets. Golden American is authorized to do
business in all jurisdictions except New York. Golden American offers variable
annuities and variable life insurance.
SAFEKEEPING OF ASSETS
Golden American acts as its own custodian for Account B.
THE ADMINISTRATOR
Effective January 1, 1994, Bankers Trust (Delaware), a subsidiary of Bankers
Trust New York Corporation, and Golden American became parties to a service
agreement pursuant to which Bankers Trust (Delaware) has agreed to provide
certain accounting, actuarial, tax, underwriting, sales , management and other
services to Golden American. Expenses incurred by Bankers Trust (Delaware) in
relation to this service agreement are reimbursed by Golden American on an
allocated cost basis. Charges billed to Golden American by Bankers Trust
(Delaware) pursuant to the service agreement were $816,264 for 1994.
Prior to 1994, Golden American had arranged with BT Variable to perform services
related to the development and administration of its products. For the year
1993 and the period from September 30, 1992 to December 31, 1992, fees earned by
BT Variable from Golden American for these
2
<PAGE>
services aggregated $2,701,000 and $209,000, respectively. The agreement was
terminated as of January 1, 1994.
In addition, BT Variable provided to Golden American certain of its personnel to
perform management, administrative and clerical services and the use of certain
of its facilities. BT Variable charged Golden American for such expenses and
all other general and administrative costs, first on the basis of direct charges
when identifiable, and second allocated based on the estimated amount of time
spent by BT Variable's employees on behalf of Golden American. For the year
1993 and the period from September 30, 1992 to December 31, 1992, BT Variable
allocated to Golden American $1,503,000 and $450,000, respectively. The
agreement was terminated on January 1, 1994. During 1994, such expenses were
allocated directly by BT New York Corporation to Golden American and totaled
$1,395,966 for the year.
INDEPENDENT AUDITORS
Ernst & Young LLP, 787 Seventh Avenue, New York, NY 10019, independent auditors,
will perform annual audits of Golden American and the Accounts.
DISTRIBUTION OF CONTRACTS
Prior to 1994, Golden American had entered into agreements with DSI to perform
services related to the management of its investments and the distribution of
its products. For the year 1993 and the period from September 30, 1992 to
December 31, 1992, Golden American incurred $311,000 and $35,000, respectively,
for such services. The agreement was terminated as of January 1, 1994.
DSI acts as the principal underwriter (as defined in the Securities Act of 1933
and the Investment Company Act of 1940, as amended) of the variable insurance
products issued by Golden American which, as of December 31, 1994, are sold
primarily through two broker/dealer institutions. For the years ended 1994 and
1993 and the period from September 30, 1992 to December 31, 1992, commissions
paid by Golden American to DSI aggregated, $17,569,000, $34,260,000, and
$6,429,197, respectively.
Golden American provided to DSI certain of its personnel to perform management,
administrative and clerical services and the use of certain facilities. Golden
American charged DSI for such expenses and all other general and administrative
costs, first on the basis of direct charges when identifiable, and the remainder
allocated based on the estimated amount of time spent by Golden American's
employees on behalf of DSI. In the opinion of management, this method of cost
allocation is reasonable. For the years ended December 31, 1994 and 1993,
expenses allocated to DSI were $1,983,000 and $2,013,000, respectively.
PERFORMANCE INFORMATION
Performance information for the divisions of Account B and the Global Account,
including the yield and effective yield of the Liquid Asset Division, the yield
of the remaining divisions and the Global Account, and the total return of all
divisions, may appear in reports or promotional literature to current or
prospective owners. Negative values are denoted by parentheses. Performance
information for measures other than total return do not reflect sales load which
can have a maximum level of 6% of premium, and any applicable premium tax that
can range from 0% to 3.5%.
3
<PAGE>
SEC STANDARD MONEY MARKET DIVISION YIELDS
Current yield for the Liquid Asset Division will be based on the change in the
value of a hypothetical investment (exclusive of capital changes) over a
particular 7-day period, less a pro-rata share of division expenses accrued over
that period (the "base period"), and stated as a percentage of the investment at
the start of the base period (the "base period return"). The base period return
is then annualized by multiplying by 365/7, with the resulting yield figure
carried to at least the nearest hundredth of one percent. Calculation of
"effective yield" begins with the same "base period return" used in the
calculation of yield, which is then annualized to reflect weekly compounding
pursuant to the following formula:
EFFECTIVE YIELD = [(BASE PERIOD RETURN) +1)to the power of 365/7] - 1
The current yield and effective yield of the Liquid Asset Division will be given
for the 7-day period December 24, 1995 to December 31, 1995 in an updated
statement of additional information.
SEC STANDARD 30-DAY YIELD FOR NON-MONEY MARKET DIVISIONS
Quotations of yield for the remaining divisions will be based on all investment
income per Unit (accumulation value divided by the index of investment
experience) earned during a particular 30-day period, less expenses accrued
during the period ("net investment income"), and will be computed by dividing
net investment income by the value of an accumulation unit on the last day of
the period, according to the following formula:
YIELD = 2 [ ( a - b +1)to the sixth power - 1]
-----
CD
Where:
[a] equals the net investment income earned during the period
by the Series attributable to shares owned by a division
[b] equals the expenses accrued for the period (net of
reimbursements)
[c] equals the average daily number of Units outstanding during
the period based on the index of investment experience
[d] equals the value (maximum offering price) per index of
investment experience on the last day of the period
Yield on divisions of Account B is earned from the increase in net asset value
of shares of the Series in which the Division invests and from dividends
declared and paid by the Series, which are automatically reinvested in shares of
the Series. Yield on the Global Account is earned from the increase in asset
value of shares of the securities in which the Global Account invests.
4
<PAGE>
SEC STANDARD AVERAGE ANNUAL TOTAL RETURN FOR NON-MONEY MARKET DIVISIONS
Quotations of average annual total return for any division will be expressed in
terms of the average annual compounded rate of return of a hypothetical
investment in a contract over a period of one, five and 10 years (or, if less,
up to the life of the division), calculated pursuant to the formula:
P(1+T)to the power of n=ERV
Where:
(1) [P] equals a hypothetical initial premium payment of $1,000
(2) [T] equals an average annual total return
(3) [n] equals the number of years
(4) [ERV] equals the ending redeemable value of a hypothetical
$1,000 initial premium payment made at the beginning of the
period (or fractional portion thereof)
All total return figures reflect the deduction of the maximum sales load, the
administrative charges, and the mortality and expense risk charges. The SEC
requires that an assumption be made that the contract owner surrenders the
entire contract at the end of the one, five and 10 year periods (or, if less, up
to the life of the security) for which performance is required to be calculated.
This assumption may not be consistent with the typical contract owner's
intentions in purchasing a contract and may adversely affect returns.
Quotations of total return may simultaneously be shown for other periods, as
well as quotations of total return that do not take into account certain
contractual charges such as sales load.
Average Annualized Total Return for the Divisions presented on a standardized
basis for the period from the date hereof to December 31, 1995 will be provided
in an updated Statement of Additional Information.
NON-STANDARD AVERAGE ANNUAL TOTAL RETURN FOR NON-MONEY MARKET DIVISIONS
Quotations of non-standard average annual total return for any division will be
expressed in terms of the average annual compounded rate of return of a
hypothetical investment in a contract over a period of one, five and 10 years
(or, if less, up to the life of the division), calculated pursuant to the
formula:
[P(1+T)to the power of n]=ERV
Where:
(1) [P] equals a hypothetical initial premium payment of $1,000
(2) [T] equals an average annual total return
(3) [n] equals the number of years
(4) [ERV] equals the ending redeemable value of a hypothetical
$1,000 initial premium payment made at the beginning of the
period (or fractional portion thereof) assuming certain
loading and charges are zero.
All total return figures reflect the deduction of the mortality and expense risk
charge and the administrative charges, but not the deduction of the maximum
sales load and the annual contract fee.
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Average Annualized Total Return for the Divisions presented on a non-
standardized basis for the period from the date hereof to December 31, 1995 will
be provided in an updated Statement of Additional Information.
Performance information for a division may be compared, in reports and
promotional literature, to: (i) the Standard & Poor's 500 Stock Index ("S & P
500"), Dow Jones Industrial Average ("DJIA"), Donoghue Money Market
Institutional Averages, or other indices that measure performance of a pertinent
group of securities so that investors may compare a division's results with
those of a group of securities widely regarded by investors as representative of
the securities markets in general; (ii) other groups of variable annuity
separate accounts or other investment products tracked by Lipper Analytical
Services, a widely used independent research firm which ranks mutual funds and
other investment companies by overall performance, investment objectives, and
assets, or tracked by other services, companies, publications, or persons who
rank such investment companies on overall performance or other criteria; and
(iii) the Consumer Price Index (measure for inflation) to assess the real rate
of return from an investment in the contract. Unmanaged indices may assume the
reinvestment of dividends but generally do not reflect deductions for
administrative and management costs and expenses.
Performance information for any division reflects only the performance of a
hypothetical contract under which accumulation value is allocated to a division
during a particular time period on which the calculations are based.
Performance information should be considered in light of the investment
objectives and policies, characteristics and quality of the portfolio of the
Series of the Trust in which the Account B divisions invest and the securities
in which the Global Account invests, and the market conditions during the given
time period, and should not be considered as a representation of what may be
achieved in the future.
Reports and promotional literature may also contain other information including
the ranking of any division derived from rankings of variable annuity separate
accounts or other investment products tracked by Lipper Analytical Services or
by other rating services, companies, publications, or other persons who rank
separate accounts or other investment products on overall performance or other
criteria.
PUBLISHED RATINGS
From time to time, the rating of Golden American as an insurance company by A.M.
Best may be referred to in advertisements or in reports to contract owners.
Each year the A.M. Best Company reviews the financial status of thousands of
insurers, culminating in the assignment of Best's Ratings. These ratings
reflect their current opinion of the relative financial strength and operating
performance of an insurance company in comparison to the norms of the
life/health insurance industry. Best's ratings range from A+ to C. An A+
rating means, in the opinion of A.M. Best, that the insurer has demonstrated the
strongest ability to meet its respective policyholder and other contractual
obligations.
PORTFOLIO TURNOVER
For reporting purposes, the Global Account's portfolio turnover rate is
calculated by dividing the value of the lesser of purchases or sales of
portfolio securities for the fiscal year by the monthly average of the value of
the portfolio securities owned by the Global Account during the fiscal year. In
determining such portfolio turnover, all securities whose maturities at the time
of acquisition were
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one year or less are excluded. A 100% portfolio turnover rate would occur, for
example, if all the securities in the portfolio (other than short-term
securities) were replaced once during the fiscal year.
INDEX OF INVESTMENT EXPERIENCE
The calculation of the Index of Investment Experience ("IIE") is discussed in
the prospectus for the Contracts under Measurement of Investment Experience.
The following illustrations show a calculation of a new IIE and the purchase of
Units (using hypothetical examples):
ILLUSTRATION OF CALCULATION OF IIE
[TO BE COMPLETED BY AMENDMENT]
EXAMPLE 1.
1. IIE, beginning of perio. . . . . . . . . . . . . . . . . . . . . . .$ X
2. Value of securities, beginning of period . . . . . . . . . . . . . .$ X
3. Change in value of securities. . . . . . . . . . . . . . . . . . . .$ X
4. Gross investment return (3) divided by (2) . . . . . . . . . . . . . X
5. Less daily mortality and expense charge. . . . . . . . . . . . . . . X
6. Less asset based administrative charge . . . . . . . . . . . . . . . X
7. Net investment return (4) minus (5) minus (6). . . . . . . . . . . . X
8. Net investment factor (1.000000) plus (7). . . . . . . . . . . . . . X
9. IIE, end of period (1) multiplied by (8) . . . . . . . . . . . . . .$ X
ILLUSTRATION OF PURCHASE OF UNITS (ASSUMING NO STATE PREMIUM TAX)
EXAMPLE 2.
1. Initial Premium Paymen . . . . . . . . . . . . . . . . . . . . . . .$ X
2. IIE on effective date of purchase (see Example 1). . . . . . . . . .$ X
3. Number of Units purchased [(1) divided by (2)] . . . . . . . . . . . X
4. IIE for valuation date following purchase (see Example 1) . . . . .$ X
5. Accumulation Value in account for valuation date following purchase
[(3) multiplied by(4)]. . . . . . . . . . . . . . . . . . . . . . .$ X
IRA PARTIAL WITHDRAWAL OPTION
If the contract owner has an IRA contract and will attain age 70 1/2 in the
current calendar year, distributions will be made to you in accordance with the
requirements of Federal tax law. This option is available to assure that the
required minimum distributions from qualified plans under the Internal Revenue
Code (the "Code") are made. Under the Code, distributions must begin no later
than April 1st of the calendar year following the calendar year in which the
contract owner attains age 70 1/2. If the required minimum distribution is not
withdrawn, there may be a penalty tax in an amount equal to 50% of the
difference between the amount required to be withdrawn and the amount actually
withdrawn. Even if the IRA Partial Withdrawal Option is not elected,
distributions must nonetheless be made in accordance with the requirements of
Federal tax law.
Golden American notifies the contract owner of these regulations with a letter
mailed on January 1st of the calendar year in which the contract owner reaches
age 70 1/2 which explains the IRA Partial
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Withdrawal Option and supplies an election form. If the contract owner chooses
to elect this option, he or she specifies whether the withdrawal amount will be
based on a life expectancy calculated on a single life basis (contract owner's
life only) or, if the contract owner is married, on a joint life basis (contract
owner's and spouse's life combined). The contract owner selects the payment
mode on a monthly, quarterly or annual basis. If the payment mode selected on
the election form is more frequent than annually, the payments in the first
calendar year in which the option is in effect will be based on the amount of
payment modes remaining when Golden American receives the completed election
form.
Golden American calculates the IRA Partial Withdrawal amount each year based on
the minimum distribution rules. We do this by dividing the accumulation value
by the life expectancy. In the first year withdrawals begin, we use the
accumulation value as of the date of the first payment. Thereafter, we use the
accumulation value on December 31st of each year. The life expectancy is
recalculated each year. Certain minimum distribution rules govern payouts if
the designated beneficiary is other than the contract owner's spouse and the
beneficiary is more than ten years younger than the contract owner.
OTHER INFORMATION
Registration statements have been filed with the Securities and Exchange
Commission under the Securities Act of 1933 as amended, with respect to the
Contracts discussed in this Statement of Additional Information. Not all of the
information set forth in the registration statements, amendments and exhibits
thereto has been included in this Statement of Additional Information.
Statements contained in this Statement of Additional Information concerning the
content of the Contracts and other legal instruments are intended to be
summaries. For a complete statement of the terms of these documents, reference
should be made to the instruments filed with the Securities and Exchange
Commission.
PART II
SECURITIES AND INVESTMENT TECHNIQUES
This description of the Global Account of Account D securities and investment
techniques is not comprehensive and is intended to supplement the discussion
contained in Part II of the prospectus under "Securities and Investment
Techniques."
U.S. GOVERNMENT SECURITIES
The Global Account may invest in U.S. Government securities. U.S. Government
securities are obligations of, or are guaranteed by, the U.S. Government, its
agencies or instrumentalities. Treasury bills, notes, and bonds are direct
obligations of the U.S. Treasury supported by the full faith and credit of the
United States. Securities guaranteed by the U.S. Government include Federal
agency obligations guaranteed as to principal and interest by the U.S. Treasury
(such as GNMA certificates and Federal Housing Administration debentures). In
guaranteed securities, the payment of principal and interest is unconditionally
guaranteed by the U.S. Government, and thus they are generally of the highest
credit quality. Such direct obligations or guaranteed securities are subject to
variations in market value due to fluctuations in interest rates, but, if held
to maturity, the U.S. Government is obligated to or guarantees to pay them in
full.
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Securities issued by U.S. Government instrumentalities and certain Federal
agencies are neither direct obligations of nor guaranteed by the Treasury.
However, they involve Federal sponsorship in one way or another: some are backed
by specific types of collateral; some are supported by the issuer's right to
borrow from the Treasury; some are supported by the discretionary authority of
the Treasury to purchase certain obligations of the issuer; others are supported
only by the credit of the issuing government agency or instrumentality. These
agencies and instrumentalities include, but are not limited to, Federal Land
Banks, Farmers Home Administration, Federal National Mortgage Association
("FNMA"), Federal Home Loan Mortgage Corporation ("FHLMC"), Student Loan
Mortgage Association, Central Bank for Cooperatives, Federal Intermediate Credit
Banks, and Federal Home Loan Banks.
The Global Account may also purchase obligations of the International Bank for
Reconstruction and Development ("IBRD"), which, while technically not a U.S.
Government Agency or instrumentality has the right to borrow from IBRD
participating countries, including the United States.
DEBT SECURITIES
The Global Account may invest in debt securities of domestic and foreign issuers
including bonds, debentures, asset-backed securities, and notes which meet the
minimum ratings criteria set forth for the Global Account, or, if unrated, are,
in the Portfolio Manager's determination, comparable in quality to corporate
debt securities in which the Global Account may invest.
The investment return on a debt security reflects interest earnings and changes
in the market value of the security. The market value of debt obligations may
be expected to rise and fall inversely with interest rates generally. There
also exists the risk that the issuers of the securities may not be able to meet
their obligations on interest or principal payments at the time called for by an
instrument. Any bond may be susceptible to changing conditions, particularly to
economic downturns, which could lead to a weakened capacity to pay interest and
principal.
New issues of certain debt securities are often offered on a when-issued or
firm-commitment basis; that is, the payment obligation and the interest rate are
fixed at the time the buyer enters into the commitment, but delivery and payment
for the securities normally takes place after the customary settlement time.
The value of when-issued securities or securities purchased on a firm-commitment
basis may vary prior to and after delivery depending on market conditions and
changes in interest rate levels. However, the Global Account will not accrue
any income on these securities prior to delivery. The Global Account will
maintain in a segregated account with its custodian an amount of cash or high-
quality debt securities equal (on a daily mark-to-market basis) in the amount of
its commitment to purchase the when-issued securities or securities purchased on
a firm-commitment basis.
Many debt securities of foreign issuers are not rated by Moody's Investors
Services, Inc. ("Moody's") or Standard and Poor's Corporation ("Standard &
Poor's"); therefore, the selection of such issuers depends, to a large extent,
on the credit analysis performed or used by the Portfolio Manager.
SHORT SALES AGAINST THE BOX
The Global Account may make short sales "against the box." A short sale
"against the box" is a short sale where, at time of the short sale, the Global
Account owns or has the immediate and unconditional right, at no added cost, to
obtain the identical security. The Global Account would enter into such a
transaction to defer a gain or loss for Federal income tax purposes on the
security
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owned by the Global Account. Short sales against the box are not subject to the
percentage limitations on short sales as described in the prospectus.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
The Global Account may purchase and sell stock index futures contracts, interest
rate futures contracts, and futures contracts based upon securities, which may
be domestic or foreign, and corporate or governmental, foreign exchange futures
contracts and other financial futures contracts, and may purchase and write
options on such contracts. A futures contract provides for the future sale by
one party and purchase by another party of a specified amount of a particular
financial instrument (debt security), or currency for a specified price at a
designated date, time, and place. Although futures contracts by their terms
require actual future delivery of and payment for financial instruments or
currencies, futures contracts are usually closed out before the delivery date.
Closing out an open futures contract position is effected by entering into an
offsetting sale or purchase, respectively, for the same aggregate amount of the
same financial instrument and the same delivery date. Where the Global Account
has sold a futures contract, if the offsetting purchase price is less than the
original futures contract sale price, the Global Account realizes a gain; if it
is more, the Global Account realizes a loss. Where the Global Account has
purchased a futures contract, if the offsetting price is more than the original
futures contract purchase price, the Global Account realizes a gain; if it is
less, the Global Account realizes a loss. The transaction costs must also be
included in these calculations.
Using futures to effect a particular strategy instead of using the underlying or
related security or index or currency will frequently result in lower
transaction costs being incurred. The Global Account's use of futures contracts
and futures options may include hedging transactions. For example, the Global
Account might use futures contracts to hedge against anticipated changes in
interest rates that might adversely affect either the value of the Global
Account's securities or the price of the securities which the Global Account
intends to purchase. The Global Account's hedging may include sales of futures
contracts as an offset against the effect of expected increases in interest
rates and purchases of futures contracts as an offset against the effect of
expected declines in interest rates. Although other techniques could be used to
reduce the Global Account's exposure to interest rate fluctuations, the Global
Account may be able to hedge its exposure more effectively and perhaps at a
lower cost by using futures contracts and futures options.
The Global Account may sell stock index futures to protect against a market
decline in an attempt to offset partially or wholly a decrease in the market
value of securities that the Global Account intends to sell. Similarly, to
protect against a market advance when the Global Account is not fully invested
in the securities market, the Global Account may purchase stock index futures
that may partly or entirely offset increases in the cost of securities that the
Global Account intends to purchase. A stock index is a method of reflecting in
a single number the market values of many different stocks, or, in the case of
capitalization weighted indices that take into account both stock prices and the
number of shares outstanding, of many different companies. An index fluctuates
generally with changes in the market values of the common stocks so included. A
stock index futures contract is a bilateral agreement pursuant to which two
parties agree to take or make delivery of an amount of cash equal to a specified
dollar amount multiplied by the difference between the stock index value at the
close of the last trading day of the contract and the price at which the futures
contract is originally purchased or sold. No physical delivery of the
underlying stocks in the index is made.
If a purchase or sale of a futures contract is made by the Global Account, the
Global Account is required to deposit with its custodian a specified amount of
cash or U.S. Government securities
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("initial margin"). Generally, the margin required for a futures contract is
set by the exchange or board of trade on which the contract is traded and may be
modified during the term of the contract. The initial margin is in the nature
of a performance bond or good faith deposit on the futures contract which is
returned to the Global Account upon termination of the contract, assuming all
contractual obligations have been satisfied. The Global Account expects to earn
interest income on its initial margin deposits. A futures contract held by the
Global Account is valued daily at the official settlement price of the exchange
on which it is traded. Each day the Global Account pays or receives cash,
called "variation margin" equal to the daily change in value of the futures
contract. This process is known as "marking-to-market". The payment or receipt
of the variation margin does not represent a borrowing or loan by the Global
Account but is settlement between the Global Account and the broker of the
amount one would owe the other if the futures contract expired. In computing
daily net asset value, each fund will mark-to-market its open futures positions.
The Global Account is also required to deposit and maintain margin with respect
to put and call options on futures contracts it writes. Such margin deposits
will vary depending on the nature of the underlying futures contract (including
the related initial margin requirements), the current market value of the
option, and other futures positions held by the Global Account.
When purchasing a futures contract or selling a put option on a futures
contract, the Global Account is required to maintain with its custodian high-
quality liquid debt securities, cash, or cash equivalents (including any margin)
equal to the purchase price of such contract or option to collateralize the
position, or to otherwise cover the position. When selling a futures contract
or selling a call option on a futures contract, the Global Account is required
to maintain with its custodian high-quality liquid debt securities, cash, or
cash equivalents (including any margin) equal to the market value of such
contract or option, or to otherwise cover the position.
In compliance with the requirements of the Commodity Futures Trading Commission
("CFTC") under which an investment company may engage in futures transactions,
the Global Account will comply with certain regulations of the CFTC to qualify
for an exclusion from being a "commodity pool." The regulations require that
the Global Account enter into futures and option (1) for "bona fide hedging"
purposes, without regard to the percentage of assets committed to initial margin
and options premiums, or (2) for other strategies, provided that the aggregate
initial margin and premiums required to establish such positions do not exceed
5% of the liquidation value of the Global Account's portfolio, after taking into
account unrealized profits and unrealized gains on any such contracts entered
into.
OPTIONS ON SECURITIES
In pursuing its investment objective, the Global Account may engage in
transactions on options on securities. An option on a security is a contract
that gives the purchaser of the option, in return for the premium paid, the
right to buy a specified security (in the case of a call option) or to sell a
specified security (in the case of a put option) from or to the seller
("writer") of the option at a designated price during the term of the option.
One reason the Global Account may purchase put options on securities is to
protect holdings in an underlying or related security against a substantial
decline in market value. Securities are considered related if their price
movements generally correlate to one another. For example, the purchase of put
options on debt securities held by the Global Account would enable the Global
Account to protect, at least partially, an unrealized gain in an appreciated
security without actually selling the security. In addition, the Global Account
would continue to receive interest income on such security.
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The Global Account may purchase call options on securities in furtherance of its
investment objective, which may include a call option to protect against
substantial increases in prices of securities the Global Account intends to
purchase pending its ability to invest in such securities in an orderly manner.
The Global Account may sell put or call options it has previously purchased,
which could result in a net gain or loss depending on whether the amount
realized on the sale is more or less than the premium and other transactional
costs paid on the put or call option which is sold.
In order to earn additional income on its portfolio securities or to protect
partially against declines in the value of such securities, the Global Account
may write covered call options. The exercise price of a call option may be
below, equal to, or above the current market value of the underlying security at
the time the option is written. During the option period, a covered call option
writer may be assigned an exercise notice by the broker-dealer through whom such
call option was sold requiring the writer to deliver the underlying security
against payment of the exercise price. This obligation is terminated upon the
expiration of the option period or at such earlier time in which the writer
effects a closing purchase transaction. Closing purchase transactions will
ordinarily be effected to realize a profit on an outstanding call option, to
prevent an underlying security from being called, to permit the sale of the
underlying security, or to enable the Global Account to write another call
option on the underlying security with either a different exercise price or
expiration date or both.
In order to earn additional income or to facilitate its ability to purchase a
security at a price lower than the current market price of such security, the
Global Account may write secured put options. During the option period, the
writer of a put option may be assigned an exercise notice by the broker-dealer
through whom the option was sold requiring the writer to purchase the underlying
security at the exercise price.
The Global Account may write a call or put option only if the option is
"covered" or "secured". This means that so long as the Global Account is
obligated as the writer of a call option, it will own the underlying securities
subject to the option or if the Global Account holds a call at the same exercise
price, for the same exercise period, and on the same securities as the written
call. Alternatively, the Global Account may maintain, in a segregated account
with Account D's custodian, cash, cash equivalents, or high-quality liquid debt
securities with a value sufficient to meet its obligation as writer of the
option. A put is secured if the Global Account maintains cash, cash
equivalents, or high-quality debt securities with a value equal to the exercise
price in a segregated account, or holds a put on the same underlying security at
an equal or greater exercise price. Prior to exercise or expiration, an option
may be closed out by an offsetting purchase or sale of an option of the same
series.
Unless otherwise indicated above, the Global Account will enter only into
options which are standardized and traded on a U.S. or foreign exchange or board
of trade, or for which an established over-the-counter market exists.
OPTIONS ON SECURITIES INDEXES
Call and put options on securities indexes also may be purchased or sold by the
Global Account in furtherance of its investment objective. Options on
securities indexes are similar to options on securities, except that the
exercise of securities index options requires cash payments and does not involve
the actual purchase or sale of securities. In addition, securities index
options are designed to reflect price fluctuations in a group of securities or
segment of the securities market rather than price fluctuations in a single
security. When such options are written, the Global Account is required to
maintain a segregated account consisting of cash, cash equivalents or high grade
obligations with a
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value equal to the exercise price or the Global Account must purchase a like
option of greater value that will expire no earlier than the option sold.
Purchased options may not enable the Global Account to hedge effectively against
stock market risk if they are not highly correlated with the value of the Global
Account's securities. Moreover, the ability to hedge effectively depends upon
the ability to predict movements in the stock market.
FOREIGN CURRENCY TRANSACTIONS
The Global Account may enter into forward currency contracts, currency exchange
transactions on a spot (i.e. cash) basis and options on currencies. A forward
currency contract is an obligation to purchase or sell a currency against
another currency at a future date and price as agreed upon by the parties. The
Global Account may either accept or make delivery of the currency at the
maturity of the forward contract or, prior to maturity, enter into a closing
transaction involving the purchase or sale of an offsetting contract. The
Global Account will engage in forward currency transactions in furtherance of
its investment objective, which may include hedging purposes such as
transactions in anticipation of or to protect the Global Account against
fluctuations in currency exchange rates. The Global Account might sell a
particular currency forward, for example, when it wanted to hold bonds or bank
obligations denominated in that currency but anticipated or wished to be
protected against a decline in the currency against the dollar.
The Global Account may enter into a long position in a forward currency contract
for a fixed amount of foreign currency in anticipation of an increase in the
value of that currency. The Global Account may enter into forward foreign
currency contracts in other circumstances, as described in Part II of the
prospectus under Investment Objective and Policies of the Global Account. When
the Global Account enters into a contract for the purchase or sale of a security
denominated in a foreign currency, the Global Account may desire to "lock in"
the U.S. dollar price of the security. By entering into a forward contract for
a fixed amount of dollars for the purchase or sale of the amount of foreign
currency involved in the underlying transactions, the Global Account will be
able to protect itself against a possible loss resulting from an adverse change
in the relationship between the U.S. dollar and such foreign currency during the
period between the date on which the security is purchased or sold and the date
on which payment is made or received.
Also, when the Portfolio Manager believes that the currency of a particular
foreign country may suffer a substantial decline against the U.S. dollar, it may
enter into a forward contract for a fixed amount of dollars to sell the amount
of foreign currency approximating the value of some or all of the Global
Account's securities denominated in such foreign currency. The precise matching
of the forward contract amounts and the value of the securities involved will
not generally be possible since the future value of securities in foreign
currencies will change as a consequence of market movements in the value of
these securities between the date on which the forward contract is entered into
and the date it matures. The projection of short-term currency market movement
is extremely difficult, and the successful execution of a short-term hedging
strategy is highly uncertain.
At the maturity of a forward contract, the Global Account may either sell the
security and make delivery of the foreign currency, or it may retain the
security and terminate its contractual obligation to deliver the foreign
currency by purchasing an "offsetting" contract with the same currency trader
obligating it to purchase, on the same maturity date, the same amount of the
foreign currency. It is impossible to forecast the market value of a particular
security at the expiration of the contract. Accordingly, if a decision is made
to sell the security and make delivery of the foreign currency, it may be
necessary for the Global Account to purchase additional foreign currency on the
spot market
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(and bear the expense of such purchase) if the market value of the security is
less than the amount of foreign currency that the Global Account is obligated to
deliver.
If the Global Account retains the security and engages in an offsetting
transaction, the Global Account will incur a gain or a loss (as described below)
to the extent that there has been movement in forward contract prices. Should
forward prices decline during the period between the Global Account's entering
into a forward contract for the sale of a foreign currency and the date it
enters into an offsetting contract for the purchase of the foreign currency, the
Global Account will realize a gain to the extent that the price of the currency
it has agreed to sell exceeds the price of the currency it has agreed to
purchase. Should forward prices increase, the Global Account will suffer a loss
to the extent that the price of the currency it has agreed to purchase exceeds
the price of the currency it has agreed to sell.
When entering into a long position on a forward currency contract or selling a
put option on a forward currency contract, the Global Account is required to
maintain with its custodian high-quality liquid debt securities, cash, or cash
equivalents (including any margin) equal to the purchase price of such contract
or option to collateralize the position or to otherwise cover the position.
When entering into a short position in a forward currency contract or selling a
call option on a forward currency contract, the Global Account is required to
maintain with its custodian high-quality liquid debt securities, cash, or cash
equivalents (including any margin) equal to the market value of such contract or
option or to otherwise cover the position.
Forward contracts are not traded on regulated commodities exchanges. There can
be no assurance that a liquid market will exist when the Global Account seeks to
close out a forward currency position, and in such an event, the Global Account
might not be able to effect a closing purchase transaction at any particular
time. In addition, the Global Account entering into a forward foreign currency
contract incurs the risk of default by the counter party to the transaction.
The CFTC has indicated that it may in the future assert jurisdiction over
certain types of forward contracts in foreign currencies and attempt to prohibit
certain entities from engaging in such foreign currency forward transactions.
OPTIONS ON FOREIGN CURRENCIES
The Global Account may write and purchase call and put options on foreign
currencies. Such strategies may be employed for purposes of exposing the Global
Account to a foreign (or domestic) currency or to shift exposure to foreign
currency fluctuations from one country to another or to function as a hedge
against changes in the value of the U.S. dollar (or another currency) in
relation to a foreign currency in which securities of the Global Account may be
denominated. A call option on a foreign currency gives the buyer the right to
buy, and a put option gives the buyer the right to sell, a certain amount of
foreign currency at a specified price during a fixed period of time. The Global
Account may enter into closing sale transactions with respect to such options,
exercise them, or permit them to expire.
The Global Account may enter into an option on a currency before the Global
Account purchases a foreign security denominated in the currency the Global
Account anticipates acquiring, during the period the Global Account holds the
foreign security, or between the date the foreign security is purchased or sold
and the date on which payment therefor is made or received.
In those situations where foreign currency options may not be readily purchased
(or where such options may be deemed illiquid) in the currency in which a hedge
is desired, the hedge may be
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obtained by purchasing or selling an option on a "surrogate" currency, i.e., a
currency where there is tangible evidence of a direct correlation in the trading
value of the two currencies. A surrogate currency is a currency that can act,
for hedging purposes, as a substitute for a particular currency because the
surrogate currency's exchange rate movements parallel that of the primary
currency. Surrogate currencies are used to hedge an illiquid currency risk,
when no liquid hedge instruments exist in world currency markets for the primary
currency.
REPURCHASE AGREEMENTS
The Global Account may invest in repurchase agreements. A repurchase agreement
is a transaction in which the seller of a security commits itself at the time of
the sale to repurchase that security from the buyer at a mutually agreed upon
time and price. These agreements may be considered to be loans by the purchaser
collateralized by the underlying securities. The term of such an agreement is
generally quite short, possibly overnight or for a few days, although it may
extend over a number of months (up to one year) from the date of delivery. The
resale price is in excess of the purchase price by an amount which reflects an
agreed upon market rate of return, effective for the period of time the Global
Account is invested in the security. This results in a fixed rate of return
protected from market fluctuations during the period of the agreement. This
rate is not tied to the coupon rate on the security subject to the repurchase
agreement.
The Global Account may engage in repurchase transactions in accordance with
guidelines approved by the Board of Governors of Account D, which include
monitoring the creditworthiness of the parties with which the Global Account
engages in repurchase transactions, obtaining collateral at least equal in value
to the repurchase obligation, and marking the collateral to market on a daily
basis. The Global Account may not enter into a repurchase agreement having more
than seven days remaining to maturity if, as a result, such agreements, together
with any other securities that are not readily marketable, would exceed 15% of
the net assets of the Global Account. If the seller should become bankrupt or
default on its obligations to repurchase the securities, the Global Account may
experience delays or difficulties in exercising its rights to the securities
held as collateral and might incur a loss if the value of the securities should
decline. The Global Account also might incur disposition costs in connection
with liquidating the securities.
BANKING INDUSTRY AND SAVINGS INDUSTRY OBLIGATIONS
The Global Account may invest in (i) certificates of deposit, time deposits,
bankers' acceptances, and other short-term debt obligations issued by commercial
banks and in (ii) certificates of deposit, time deposits, and other short-term
obligations issued by savings and loan or other depository associations ("S&L").
Certificates of deposit are negotiable certificates issued against funds
deposited in a commercial bank for a definite period of time and earning a
specified return. Bankers' acceptances are negotiable drafts or bills of
exchange, which are normally drawn by an importer or exporter to pay for
specific merchandise, and which are "accepted" by a bank, meaning, in effect,
that the bank unconditionally agrees to pay the face value of the instrument on
maturity. Fixed-time deposits are bank obligations payable at a stated maturity
date and bearing interest at a fixed rate. Fixed-time deposits may be withdrawn
on demand by the investor, but may be subject to early withdrawal penalties
which vary depending upon market conditions and the remaining maturity of the
obligation. There are no contractual restrictions on the right to transfer a
beneficial interest in a fixed-time deposit to a third party, because there is
no market for such deposits. The Global Account will not invest in fixed-time
deposits (i) which are not subject to prepayment or (ii) which provide for
withdrawal penalties upon prepayment (other than overnight deposits), if, in the
aggregate, more than 15% of its assets would
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be invested in such deposits, in repurchase agreements maturing in more than
seven days, and in other illiquid assets.
Obligations of foreign banks involve somewhat different investment risks than
those affecting obligations of U.S. banks, which include: (i) the possibility
that their liquidity could be impaired because of future political and economic
developments; (ii) their obligations may be less marketable than comparable
obligations of U.S. banks; (iii) a foreign jurisdiction might impose withholding
taxes on interest income payable on those obligations; (iv) foreign deposits may
be seized or nationalized; (v) foreign governmental restrictions, such as
exchange controls, may be adopted which might adversely affect the payment of
principal and interest on those obligations; and (vi) the selection of those
obligations may be more difficult because there may be less publicly available
information concerning foreign banks and/or because the accounting, auditing,
and financial reporting standards, practices and requirements applicable to
foreign banks may differ from those applicable to U.S. banks. Foreign banks are
not generally subject to examination by any U.S. Government agency or
instrumentality.
The Global Account will not invest in obligations issued by a U.S. or foreign
commercial bank or S&L unless:
(i) the bank or S&L has total assets of at least $10 billion (U.S.), or
the equivalent in other currencies, and the institution has
outstanding securities rated A or better by Moody's or Standard &
Poor's, or, if the institution has no outstanding securities rated by
Moody's or Standard & Poor's, it has, in the determination of the
Portfolio Manager, similar creditworthiness to institutions having
outstanding securities so rated; and
(ii) in the case of a U.S. bank or S&L, its deposits are insured by the
FDIC or the Savings Association Insurance Fund ("SAIF"), as the case
may be.
COMMERCIAL PAPER
The Global Account may invest in commercial paper (including variable amount
master demand notes), denominated in U.S. dollars, issued by U.S. corporations
or foreign corporations. The Global Account may invest in commercial paper (i)
rated, at the date of investment, P-2 or better by Moody's or A-2 or better by
Standard & Poor's; (ii) if not rated by either Moody's or Standard & Poor's,
issued by a corporation having an outstanding debt issue rated A or better by
Moody's or A or better by Standard & Poor's; or (iii) if not rated, are
determined to be of an investment quality comparable to rated commercial paper
in which the Global Account may invest. Generally, commercial paper represents
short-term unsecured promissory notes issued in bearer form by bank holding
companies, corporations, and finance companies.
Commercial paper obligations may include variable amount master demand notes.
These notes are obligations that permit the investment of fluctuating amounts at
varying rates of interest pursuant to direct arrangements between the Global
Account, as lender, and the borrower. These notes permit daily changes in the
amounts borrowed. The lender has the right to increase or to decrease the
amount under the note at any time up to the full amount provided by the note
agreement; and the borrower may prepay up to the full amount of the note without
penalty. Because variable amount master demand notes are direct lending
arrangements between the lender and borrower, and because no secondary market
exists for those notes, such instruments will probably not be traded. However,
the notes are redeemable (and thus immediately repayable by the borrower) at
face value, plus accrued interest, at any time. In connection with master
demand note arrangements, the Portfolio Manager will monitor, on an ongoing
basis, the earning power, cash flow, and other liquidity ratios
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of the borrower and its ability to pay principal and interest on demand. The
Portfolio Manager also will consider the extent to which the variable amount
master demand notes are backed by bank letters of credit. These notes generally
are not rated by Moody's or Standard & Poor's; the Global Account may invest in
them only if the Portfolio Manager believes that at the time of investment the
notes are of comparable quality to the other commercial paper in which the
Global Account may invest. Master demand notes are considered by the Global
Account to have a maturity of one day, unless the Portfolio Manager has reason
to believe that the borrower could not make immediate repayment upon demand.
See the Appendix for a description of Moody's and Standard & Poor's ratings
applicable to commercial paper.
WHEN ISSUED OR DELAYED DELIVERY SECURITIES
The Global Account may purchase securities on a when-issued or delayed delivery
basis if the Global Account holds, and maintains until the settlement date in a
segregated account, cash, U.S. Government securities, or high-grade liquid debt
obligations in an amount sufficient to meet the purchase price, or if the Global
Account enters into offsetting contracts for the forward sale of other
securities it owns. Purchasing securities on a when-issued or delayed delivery
basis involves a risk of loss if the value of the security to be purchased
declines prior to the settlement date, which risk is in addition to the risk of
decline in value of the Global Account's other assets. Although the Global
Account would generally purchase securities on a when-issued basis or enter into
forward commitments with the intention of acquiring securities, the Global
Account may dispose of a when-issued or delayed delivery security prior to
settlement if the Portfolio Manager deems it appropriate to do so. The Global
Account may realize short-term profits or losses upon such sales.
INVESTMENT RESTRICTIONS
The Global Account's investment objective as set forth under "Investment
Objective and Policies" in Part II of the prospectus, together with the
investment restrictions set forth below are, unless otherwise noted, fundamental
policies of the Global Account and may not be changed without the approval of a
majority of the outstanding voting interests of the Global Account. The vote of
a majority of the outstanding voting interests of the Global Account means the
vote, at an annual or special meeting, of the lesser of: (a) 67% or more of the
voting interest present at such meeting, if the holders of more than 50% of the
outstanding voting interests of the Global Account are present or represented by
proxy; or (b) more than 50% of the outstanding voting interest of the Global
Account. In accordance with its investment restrictions, the Global Account
will not:
(1) Invest in a security if more than 25% of its total assets (taken at
market value at the time of such investment) would be invested in the
securities of issuers in any particular industry, except that this
restriction does not apply to securities issued or guaranteed by the
U.S. Government or its agencies or instrumentalities (or repurchase
agreements with respect thereto) or securities issued or guaranteed
by a foreign government or any of its political subdivisions,
authorities, agencies or instrumentalities (or repurchase agreements
with respect thereto):
(2) Purchase or sell real estate, except that the Global Account may
invest in securities secured by real estate or real estate interests
or issued by companies in the real estate industry or which invest in
real estate or real estate interests;
(3) Purchase securities on margin (except for use of short-term credit
necessary for clearance of purchases and sales of securities), except
that to the extent the Global
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Account engages in transactions in options, futures, and options on
futures, the Global Account may make margin deposits in connection
with those transactions and except that effecting short sales will be
deemed not to constitute a margin purchase for purposes of this
restriction;
(4) Lend any funds or other assets, except that the Global Account may,
consistent with its investment objective and policies:
(a) invest in debt obligations, even though the purchase of such
obligations may be deemed to be the making of loans;
(b) enter into repurchase agreements; and
(c) lend its portfolio securities in accordance with applicable
guidelines established by the Securities and Exchange
Commission and any guidelines established by Account D's
Board of Governors;
(5) Issue senior securities, except insofar as the Global Account may be
deemed to have issued a senior security by reason of borrowing money
in accordance with the Global Account's borrowing policies, or in
connection with any repurchase agreement, and except, for purposes of
this investment restriction, collateral or escrow arrangements with
respect to the making of short sales, purchase or sale of futures
contracts or related options, purchase or sale of forward currency
contracts, writing of stock options, and collateral arrangements with
respect to margin or other deposits respecting futures contracts,
related options, and forward currency contracts are not deemed to be
an issuance of a senior security;
(6) Act as an underwriter of securities of other issuers, except, when in
connection with the disposition of portfolio securities, the Global
Account may be deemed to be an underwriter under Federal securities
laws;
(7) Borrow money or pledge, mortgage, or hypothecate its assets, except
that the Global Account may: (a) borrow from banks but only if
immediately after each borrowing and continuing thereafter, there is
asset coverage of 300%; and (b) enter into reverse repurchase
agreements and transactions in options, futures, options on futures,
and forward currency contracts as described in the prospectus and in
this Statement of Additional Information. (The deposit of assets in
escrow in connection with the writing of covered put and call options
and the purchase of securities on a "when-issued" or delayed delivery
basis and collateral arrangements with respect to initial or
variation margin and other deposits for futures contracts, options on
futures contracts, and forward currency contracts will not be deemed
to be pledges of the Global Account's assets for purposes of this
restriction.)
The Global Account is also subject to the following restrictions and policies
that are not fundamental and may, therefore, be changed by the Board of
Governors (without contract owner approval) relating to the investment of its
assets and activities. Unless otherwise indicated, the Global Account may not:
(1) Invest in securities that are illiquid because they are subject to
legal or contractual restrictions on resale, in repurchase agreements
maturing in more than seven days, or other securities which in the
determination of the Portfolio Manager are illiquid if, as a
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result of such investment, more than 15% of the total assets of the
Global Account (taken at market value at the time of such investment)
would be invested in such securities; and
(2) Purchase or sell commodities or commodities contracts (which, for the
purpose of this restriction, shall not include foreign currency or
forward foreign currency contracts or futures contracts on
currencies), except that the Global Account may engage in interest
rate futures contracts, stock index futures contracts, futures
contracts based on other financial instruments, and in options on
such futures contracts.
MANAGEMENT OF SEPARATE ACCOUNT D
BOARD OF GOVERNORS
The business and affairs of Account D are managed under the direction of a Board
of Governors, which consists of four members. The Board of Governors has
responsibility for matters relating to the portfolio of Account D and matters
arising under the Investment Company Act of 1940. The Board of Governors does
not have responsibility for the payment of obligations under the Contracts and
administration of the Contracts. These matters are Golden American's
responsibility. The business and affairs of Account D are governed under a set
of rules adopted by the Board of Governors called "Rules and Regulations of
Separate Account D".
The members of the Board of Governors and principal officers, their business
addresses, and principal occupation(s) during the past five years are as
follows:
POSITION WITH PRINCIPAL OCCUPATION
NAME AND ADDRESS ACCOUNT D DURING PAST 5 YEARS
- - --------------------------------------------------------------------------------
Terry L. Kendall* Chairman and Chairman, President and Chief
Golden American Life President Executive Officer, Golden
Insurance Co. American Life Insurance Company,
1001 Jefferson Street October 1993 to present;
Wilmington, DE 19801 Chairman, President and Chief
Executive Officer, BT Variable,
Inc. October 1993 to present;
Chairman and Chief Executive
Officer, Directed Services,
Inc., October 1993 to present;
President and Chief Executive
Officer, United Pacific Life
Insurance Company, September
1982 to September 1993.
Bernard R. Beckerlegge Secretary Secretary and General Counsel,
Golden American Life Directed Services, Inc. March
Insurance Co. 1988 to present; Secretary and
1001 Jefferson Street General Counsel, Golden American
Wilmington, DE 19801 Life Insurance Company, March
1988 to present; Secretary, BT
Variable, Inc., October 1992 to
present; Vice President and
General Counsel, MBL Variable,
Inc., February 1991 to September
1992; General Counsel, The
Golden Financial Group, Inc.,
March 1988 to October 1990.
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Robert A. Grayson Member Co-founder, Grayson Associates,
Grayson Associates Inc.; Adjunct Professor of
108 Loma Media Road Marketing, New York University
Santa Barbara, CA 93103 School of Business
Administration; Former
Director, The Golden Financial
Group, Inc.; Former Senior Vice
President, David & Charles
Advertising
Barnett Chernow Executive Vice Executive Vice President, BT
Golden American Life I President Variable and Directed Services,
nsurance Co. and Principal Inc., October 1993 to present;
1001 Jefferson Street Financial From 1977 through 1993, various
Wilmington, DE 19801 Officer positions with Reliance Insurance
Companies, and Senior vice
President and Chief Financial
Officer of United Pacific Life
Insurance Company from 1984
through 1993.
Stephen J. Preston Comptroller Senior Vice President, BT
Golden American Life Variable and Directed Services,
Insurance Co. Inc., December 1993 to present;
1001 Jefferson Street From September 1993 through
Wilmington, DE 19801 November 1993, Senior Vice
President and Actuary for Mutual
of America Insurance Company;
From July 1987 through August
1993, various positions with
United Pacific Life Insurance
Company and was Vice president
and Actuary upon leaving.
M. Norvel Young Member Chancellor Emeritus and Board of
Pepperdine University Regents, Pepperdine University;
Malibu, CA 90263 Director, Imperial Bancorp,
Imperial Bank and Imperial Trust
Company and 20th Century
Christian Publishing Company
Roger B. Vincent Member President, Springwell
230 Park Avenue Corporation; Director,
New York, NY 10169 Petralone, Inc; formerly,
Managing Director, Bankers Trust
Company
____________________________
*Mr. Kendall is an "interested person" of Account D (as that term is defined in
the Investment Company Act of 1940) by reason of his affiliation with Directed
Services, Inc..
THE MANAGER
DSI also serves as the manager (the "Manager") to Account D pursuant to a
management agreement effective October 2, 1992. The Manager is a New York
corporation. Its address is 280 Park Avenue, New York, New York 10017. DSI is
a wholly owned indirect subsidiary of Bankers Trust Company, which in turn, is a
wholly owned subsidiary of Bankers Trust New York Corporation. DSI's business
activities include those of a distributor and underwriter of variable insurance
products, broker-dealer and investment manager. DSI is registered with the SEC
as a broker-dealer and investment advisor and is a member of the National
Association of Securities Dealers, Inc. ("NASD"). It is also registered as a
broker-dealer and/or investment advisor in various states.
Under the management agreement, the Manager, subject to the direction of the
Board of Governors, is responsible for providing all supervisory and management
services reasonably necessary for the operation of Account D, including the
Global Account, other than the investment advisory services performed by the
Portfolio Manager. These services include, but are not limited to, (i)
coordinating all matters relating to the functions of the Portfolio Manager,
Custodian, Recordkeeping Agent
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(including pricing and valuation of the Global Account), accountants, attorneys,
and other parties performing services or operational functions for Account D;
(ii) providing Account D and the Global Account, at the Manager's expense, with
the services of a sufficient number of persons competent to perform such
administrative and clerical functions as are necessary to provide effective
supervision and administration of Account D; (iii) maintaining or supervising
the maintenance by the Portfolio Manager or third parties approved by Account D
of such books and records of Account D and the Global Account as may be required
by applicable Federal or state law; (iv) preparing or supervising the
preparation by third parties approved by Account D of all Federal, state and
local tax returns and reports of Account D required by applicable law; (v)
preparing and filing and arranging for the distribution of proxy materials and
periodic reports to contract owners of Account D as required by applicable law;
(vi) preparing and arranging for the filing of such registration statements and
other documents with the Securities and Exchange Commission and other Federal
and state regulatory authorities as may be required by applicable law; (vii)
taking such other action with respect to Account D as may be required by
applicable law, including without limitation the rules and regulations of the
SEC and other regulatory agencies; and (viii) providing Account D at the
Manager's expense, with adequate personnel, office space, communications
facilities, and other facilities necessary for its operations as contemplated in
the Management Agreement. Other responsibilities of the Manager are described
in the prospectus.
The Manager shall make its officers and employees available to the Board of
Governors and Officers of Account D for consultation and discussions regarding
the supervision and administration of the Global Account.
Pursuant to the Management Agreement, the Manager is authorized to exercise full
investment discretion and make all determinations with respect to the investment
of Global Account's assets and the purchase and sale of securities in the event
that at any time no portfolio manager is engaged to manage the assets of the
Global Account.
The Management Agreement was continued by the Board of Governors in September,
1994 and shall continue in effect until October 2, 1995, and from year to year
thereafter, provided such continuance is approved annually by a majority of the
Board of Governors who are not parties to such Management Agreement or
"interested persons" (as defined in the Investment Company Act of 1940, the
"1940 Act") of any such party. The Management Agreement may be terminated
without penalty by vote of the Board of Governors or the contract owners of the
Global Account, or by the Manager, on 60 days' written notice by the Board or
the Manager and will terminate automatically if assigned as that term is
described in the 1940 Act.
The Global Account pays the Manager a monthly fee based upon the following
annual percentages of the Global Account's average daily net assets: 0.40% of
the first $500 million and 0.30% of the amount over $500 million.
The initial organizational expenses of the Global Account will be amortized by
Account D for accounting purposes on a straight line basis over a period of five
years from the date that the Global Account commences operations.
PORTFOLIO MANAGER
The Global Account and Warburg, Pincus Counsellors, Inc. entered into a
Portfolio Management Agreement dated June 9, 1994. The Portfolio Management
Agreement, which became effective July
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1, 1994, provides that, subject to the supervision of Account D's Board of
Governors and the Manager, the Portfolio Manager will provide a continuous
investment program for the Global Account and will determine the composition of
the assets of the Global Account, including determination of the purchase,
retention, or sale of the securities, cash, and other investments contained in
the portfolio. The Portfolio Manager is required to provide investment research
and conduct a continuous program of evaluation, investment, sales, and
reinvestment of the Global Account's assets. The Portfolio Management Agreement
may be terminated without penalty by the vote of the Board of Governors or the
contract owners of the Global Account, by the Portfolio Manager, or by the
Manager, on 60 days' written notice by any party to the Portfolio Management
Agreement and will terminate automatically if assigned as that term is described
in the 1940 Act.
Pursuant to the Portfolio Management Agreement, the Global Account pays the
Portfolio Manager a monthly fee equal to an annual rate based upon the following
percentages of the Global Account's average daily net assets: 0.60% of the
first $500 million and 0.50% of the amount over $500 million.
CUSTODIAN AND PORTFOLIO ACCOUNTING AGENT
The Custodian for Account D is Bankers Trust Company, 280 Park Avenue, New York,
New York 10017. DSI provides portfolio accounting services for the Global
Account.
PORTFOLIO TRANSACTIONS AND BROKERAGE
INVESTMENT DECISIONS
Investment decisions for the Global Account are made by the Portfolio Manager
which has investment advisory clients other than the Global Account. A
particular security may be bought or sold by the Portfolio Manager for certain
clients even though it could have been bought or sold for other clients at the
same time. Two or more clients also may simultaneously purchase or sell the
same security, in which event each day's transactions in such security are,
insofar as possible, allocated between such clients in a manner deemed fair and
reasonable by the Portfolio Manager. Although there is no specified formula for
allocating such transactions, the various allocation methods used by the
Portfolio Manager, and the results of such allocations, are subject to periodic
review by Account D's Manager and Board of Governors. There may be
circumstances when purchases or sales of securities for one or more clients will
have an adverse effect on other clients.
BROKERAGE AND RESEARCH SERVICES
The Portfolio Manager places all orders for the purchase and sale of securities,
options, and futures contracts for the Global Account through a substantial
number of brokers and dealers or futures commission merchants. In executing
transactions, the Portfolio Manager will attempt to obtain the best execution
for the Global Account taking into account such factors as price (including the
applicable brokerage commission or dollar spread), size of order, the nature of
the market for the security, the timing of the transaction, the reputation,
experience and financial stability of the broker-dealer involved, the quality of
the service, the difficulty of execution and operational facilities of the firms
involved, and the firm's risk in positioning a block of securities. In
transactions on stock exchanges in the United States, payments of brokerage
commissions are negotiated. In effecting purchases and sales of securities in
transactions on U.S. stock exchanges for the Global Account, the Portfolio
Manager may pay higher commission rates than the lowest available when the
Portfolio Manager believes it is reasonable to do so in light of the value of
the brokerage and research services provided by the broker effecting the
transaction, as described below. In the case of securities traded
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<PAGE>
on some foreign stock exchanges, brokerage commissions may be fixed and the
Portfolio Manager may be unable to negotiate commission rates for these
transactions. In the case of securities traded on the over-the-counter markets,
there is generally no stated commission, but the price includes an undisclosed
commission or markup.
There is generally no stated commission in the case of fixed-income securities,
which are generally traded in the over-the-counter markets, but the price paid
by the Global Account usually includes an undisclosed dealer commission or mark-
up. In underwritten offerings, the price paid by the Global Account includes a
disclosed, fixed commission or discount retained by the underwriter or dealer.
Transactions on U.S. stock exchanges and other agency transactions involve the
payment by the Global Account of negotiated brokerage commission. Such
commissions vary among different brokers. Also, a particular broker may charge
different commissions according to such factors as the difficulty and size of
the transaction.
It has for many years been a common practice in the investment advisory business
for advisors of investment companies and other institutional investors to
receive research services from broker-dealers which execute portfolio
transactions for the clients of such advisors. Consistent with this practice,
the Portfolio Manager for the Global Account may receive research services from
many broker-dealers with which the Portfolio Manager places the Global Account's
portfolio transactions. These services, which in some cases may also be
purchased for cash, include such matters as general economic and security market
reviews, industry and company reviews, evaluations of securities and
recommendations as to the purchase and sale of securities. Some of these
services may be of value to the Portfolio Manager and its affiliates in advising
its various clients (including the Global Account), although not all of these
services are necessarily useful and of value in managing the Global Account.
The advisory fee paid by the Global Account to the Portfolio Manager is not
reduced because the Portfolio Manager and its affiliates receive such services.
As permitted by Section 28(e) of the Securities Exchange Act of 1934, the
Portfolio Manager may cause the Global Account to pay a broker-dealer, which
provides "brokerage and research services" (as defined in the 1934 Act) to the
Portfolio Manager, a disclosed commission for effecting a securities transaction
for the Global Account in excess of the commission which another broker-dealer
would have charged for effecting that transaction.
A Portfolio Manager may place orders for the purchase and sale of exchange-
listed portfolio securities with a broker-dealer that is an affiliate of the
Portfolio Manager where, in the judgment of the Portfolio Manager, such firm
will be able to obtain a price and execution at least as favorable as other
qualified brokers. Counsellors Securities Inc. is a registered broker-dealer
and is an affiliate of the Portfolio Manager.
Pursuant to rules of the Securities and Exchange Commission, a broker-dealer
that is an affiliate of the Manager or Portfolio Manager or, if it is also a
broker-dealer, the Portfolio Manager may receive and retain compensation for
effecting portfolio transactions for the Global Account on a national securities
exchange of which the broker-dealer is a member if the transaction is "executed"
on the floor of the exchange by another broker which is not an "associated
person" of the affiliated broker-dealer or Portfolio Manager, and if there is in
effect a written contract between the Portfolio Manager and the Global Account
expressly permitting the affiliated broker-dealer or Portfolio Manager to
receive and retain such compensation. The Portfolio Management Agreement
provides that the Portfolio Manager may retain compensation on transactions
effected for the Global Account in accordance with the terms of these rules.
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Securities and Exchange Commission rules further require that commissions paid
to such an affiliated broker-dealer or Portfolio Manager by the Global Account
on exchange transactions not exceed "usual and customary brokerage commission."
The rules define "usual and customary" commissions to include amounts which are
"reasonable and fair compared to the commission, fee or other remuneration
received or to be received by other brokers in connection with comparable
transactions involving similar securities being purchased or sold on a
securities exchange during a comparable period of time." The Board of Governors
has adopted procedures for evaluating the reasonableness of commissions paid to
broker-dealers that are affiliated with the Portfolio Manager and will review
these procedures periodically.
PURCHASE AND PRICING OF THE GLOBAL ACCOUNT
The valuation of the Global Account's assets is determined once each business
day, Monday through Friday, exclusive of Federal holidays, at 4:00 p.m., New
York City time, on each day that the New York Stock Exchange is open for
trading. In general, valuation of the Global Account's assets is based on
actual or estimated market value, with special provisions for assets not having
readily available market quotations and short-term debt securities. The value
of the Global Account will fluctuate in response to changes in market conditions
and other factors.
Portfolio securities for which market quotations are readily available are
stated at market value. Market value is determined on the basis of last
reported sales price, or, if no sales are reported, the mean between
representative bid and asked quotations obtained from a quotation reporting
system or from established market makers. In other cases, securities are valued
at their fair value as determined in good faith by the Board of Governors,
although the actual calculations will be made by persons acting under the
direction of the Board of Governors and subject to the Board of Governor's
review.
Money market instruments are valued at market value, except that instruments
maturing in sixty days or less may be valued using the amortized cost method of
valuation. The value of a foreign security is determined in its national
currency based upon the price on the pertinent foreign exchange as of its close
of business immediately preceding the time of valuation. Securities traded in
over-the-counter markets outside the United States are valued at the last
available price in the over-the-counter market prior to the time of valuation.
Other debt securities, including those to be purchased under firm commitment
agreements (other than obligations having a maturity date sixty days or less
after their date of acquisition, valued under the amortized cost method), are
normally valued on the basis of quotes obtained from brokers and dealers or
pricing services, which take into account appropriate factors such as
institutional-size trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading characteristics, and other market
data. Debt obligations having a maturity of sixty days or less may be valued at
amortized cost, unless the Portfolio Manager believes that amortized cost does
not approximate market value.
When the Global Account writes a put or call option, the amount of the premium
is included in the Global Account's assets and an equal amount is included in
its liabilities. The liability thereafter is adjusted to the current market
value of the option. The premium paid for an option purchased by the Global
Account is recorded as an asset and subsequently adjusted to market value.
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FINANCIAL STATEMENTS OF SEPARATE ACCOUNT B
The audited financial statements of Separate Account B are listed below and are
included in this Statement of Additional Information:
Report of Independent Auditors
Financial Statements -- Audited
Statement of Assets and Liabilities as of December 31, 1994
Combined Statement of Operations for the Year ended December 31,
1994
Combined Statements of Changes in Net Assets for the Years ended
December 31, 1994 and 1993
Notes to Audited Financial Statements
FINANCIAL STATEMENTS OF
THE MANAGED GLOBAL ACCOUNT OF SEPARATE ACCOUNT D
The audited financial statements of The Managed Global Account of Separate
Account D are listed below and are included in this Statement of Additional
Information:
Report of Independent Auditors
Financial Statements -- Audited
Statement of Assets and Liabilities as of December 31, 1994
Statement of Operations for the Year ended December 31, 1994
Statements of Changes in Net Assets for the Years ended December
31, 1994 and 1993
Statement of Investments as of December 31, 1994
Notes to Audited Financial Statements
25
<PAGE>
Appendix: Description of Bond Ratings
Excerpts from Moody's Investors Service, Inc. ("Moody's) description
of its bond ratings:
Aaa: Judged to be the best quality; they carry the smallest degree of
investment risk.
Aa: Judged to be of high quality by all standards; together with the
Aaa group, they comprise what are generally known as high grade bonds.
A: Possess many favorable investment attributes and are to be
considered as "upper medium grade obligations."
Baa: Considered as medium grade obligations, i.e., they are neither
highly protected nor poorly secured; interest payments and principal
security appear adequate for the present but certain protective elements
may be lacking or may be characteristically unreliable over any great
length of time.
Ba: Judged to have speculative elements; their future cannot be
considered as well assured.
B: Generally lack characteristics of the desirable investment.
Caa: Are of poor standing; such issues may be in default or there may
be present elements of danger with respect to principal or interest.
Ca: Speculative in a high degree; often in default.
C: Lowest rate class of bonds; regarded as having extremely poor
prospects.
Moody's also applies numerical indicators 1, 2 and 3 to rating categories. The
modifier 1 indicates that the security is in the higher end of its rating
category; 2 indicates a mid-range ranking; and 3 indicates a ranking toward the
lower end of the category.
Excerpts from Standard & Poor's Corporation ("Standard & Poor's")
description of its bond ratings:
AAA: Highest grade obligations; capacity to pay interest and repay
principal is extremely strong.
AA: Also qualify as high grade obligations; a very strong capacity to
pay interest and repay principal and differs from AAA issues only in
small degree.
A: Regarded as upper medium grade; they have a strong capacity to pay
interest and repay principal although it is somewhat more susceptible to
the adverse effects of changes in circumstances and economic conditions
than debt in higher rated categories.
BBB: Regarded as having an adequate capacity to pay interest and repay
principal; whereas it normally exhibits adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to
lead to a weakened capacity than in higher rated categories -- this
group is the lowest which qualifies for commercial bank investment.
BB, B, CCC, CC: Predominantly speculative with respect to capacity
to pay interest and repay principal in accordance with terms of the
obligation: BB indicates the lowest degree of speculation and CC the
highest.
Standard & Poor's applies indicators "+," no character, and "-" to its rating
categories. The indicators show relative standing within the major rating
categories.
<PAGE>
PART C
OTHER INFORMATION
<PAGE>
ITEM 28: FINANCIAL STATEMENTS AND EXHIBITS
FINANCIAL STATEMENTS
(a) All financial statements are included in either the Prospectus or the
Statement of Additional Information, as indicated therein.
EXHIBITS
(b) (1) Resolution of the board of directors of Depositor authorizing the
establishment of the Registrant (1)
(2) Rules and Regulations of Separate Account D (2)
(3) Custodial Agreement (5)
(4) (a) Management Agreement (5)
(b) Portfolio Management Agreement (5)
(c) Expense Reimbursement Agreement (6)
(5) (a) Distribution Agreement between the Depositor and Directed
Services, Inc. (5)
(b) Dealers Agreement (5)
(6) (a) Individual Deferred Combination Variable and Fixed Annuity
Contract (CDSL) *
(b) Discretionary Group Deferred Combination Variable and Fixed
Annuity Contract (CDSL) *
(7) (a) Individual Deferred Combination Variable and Fixed Annuity
Application *
(b) Group Deferred Combination Variable and FixedAnnuity
Enrollment Form *
(8) (a) (i) Articles of Incorporation of Golden American Life
Insurance Company(3)
(ii) Certificate of Amendment of the Restated Articles of
Incorporation of Golden American Life Insurance
Company(4)
(iii) Certificate of Amendment of the Restated Articles of
Incorporation of MB Variable Life Insurance
Company(2)
(iv) Certificate of Amendment of the Restated Articles of
Incorporation of Golden American Life Insurance
Company (7)
(b) (i) By-Laws of Golden American Life Insurance Company(3)
(ii) By-Laws of MB Variable Life Insurance Company, as
amended(4)
(iii) Certificate of Amendment of the By-Laws of MB
Variable Life Insurance Company, as amended(2)
(iv) By-Laws of Golden American, as amended (7)
(c) Resolution of Board of Directors for Powers of Attorney *
(d) Powers of Attorney *
(9) Not applicable
(10) Not applicable
(11) Not applicable
<PAGE>
(12) (a) Consent of Sutherland, Asbill & Brennan *
(b) Opinion and Consent of Counsel *
(c) Consent of Bernard R. Beckerlegge *
(13) Consent of Ernst & Young *
(14) Not applicable
(15) Not applicable
(16) Not applicable
- - -------------------------------------
(1) Incorporated herein by reference to an initial registration statement for
Golden American Life Insurance Company filed with the Securities and
Exchange Commission on April 20, 1990 (File No. 33-34482).
(2) Incorporated herein by reference to an initial registration statement for
Golden American Life Insurance Company filed with the Securities and
Exchange Commission on August 19, 1992 (File No. 33-51028).
(3) Incorporated herein by reference to an initial registration statement for
the Specialty Managers Separate Account B filed with the Securities and
Exchange Commission on July 27, 1988 (File No. 33-23351).
(4) Incorporated herein by reference to post-effective amendment No. 5 to a
registration statement for Separate Account B filed with the Securities and
Exchange Commission on May 2, 1991 (File No. 33-23351).
(5) Incorporated herein by reference to pre-effective amendment No. 1 to a
registration statement for Separate Account D filed with the Securities and
Exchange Commission on October 9, 1992 (File No. 33-51028).
(6) Incorporated herein by reference to post-effective amendment No. 2 to a
registration statement for Separate Account D filed with the Securities and
Exchange Commission on May 3, 1993 (File No. 33-51028).
(7) Incorporated herein by reference to post-effective amendment No. 16 to the
registration statement for Separate Account B filed with the Securities and
Exchange Commission on May 2, 1994 (File No. 33-23351).
ITEM 29: DIRECTORS AND OFFICERS OF THE DEPOSITOR
<TABLE>
<CAPTION>
Principal Position(s)
Name Business Address with Depositor
---- ---------------- --------------
<S> <C> <C>
Terry L. Kendall Golden American Life Ins. Co. Chairman, President and
1001 Jefferson Street Chief Executive Officer
Wilmington, DE 19801
Richard A. Marin Bankers Trust Company Director
Retirement Services
280 Park Avenue
New York, NY 10017
John Herron, Jr. Bankers Trust Company Director
BT Ventures
280 Park Avenue
New York, NY 10017
<PAGE>
ITEM 29 (CONT'D)
<CAPTION>
Principal Position(s)
Name Business Address with Depositor
---- ---------------- --------------
<S> <C> <C>
Bernard R. Beckerlegge Golden American Life Ins. Co. General Counsel and
1001 Jefferson Street Secretary
Wilmington, DE 19801
Barnett Chernow Golden American Life Ins. Co. Executive Vice President
1001 Jefferson Street and Principal Financial Officer
Wilmington, DE 19801
Mitchell R. Katcher Golden American Life Ins. Co. Executive Vice President
1001 Jefferson Street
Wilmington, DE 19801
Stephen J. Preston Golden American Life Ins. Co. Senior Vice President
1001 Jefferson Street and Comptroller
Wilmington, DE 19801
Elizabeth J. Crandall, M.D. American International Group Medical Director
70 Pine Street
New York, NY 10270
</TABLE>
ITEM 30: PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT
The Depositor does not directly or indirectly control any person.
The following persons control or are under common control with the Depositor.
BT VARIABLE, INC. ("BTV") - This corporation is a general business
corporation organized under the laws of the State of New York. The primary
purpose of BTV is to serve in an advisory, managerial and consultative
capacity to the Depositor and to engage generally in the business of
providing, promoting and establishing systems, methods and controls for
managerial efficiency and operation for such company, as well as others.
BT Variable, Inc. is an indirect, wholly-owned subsidiary of Bankers Trust
Company.
DIRECTED SERVICES, INC. ("DSI") - This corporation is a general business
corporation organized under the laws of the State of New York, and is
wholly owned by BTV. The primary purpose of DSI is to act as a broker-
dealer in securities. It acts as the principal underwriter and distributor
of variable insurance products including variable annuities as required by
the SEC. The Contract is issued by the Depositor. DSI also has the power
to carry on a general financial, securities, distribution, advisory or
investment advisory business; to act as a general agent or broker for
insurance companies and to render advisory, managerial, research and
consulting services for maintaining and improving managerial efficiency and
operation. DSI is also registered with the SEC as an investment adviser.
<PAGE>
As of December 31, 1994, Bankers Trust New York Corporation subsidiaries are as
follows:
Bankers Trust Company
Bankers Trust (Delaware)
Bankers Trust Company of Florida, N.A.
Bankers Trust Company New Jersey Limited
Bankers Trust Company International
Bankers Trust International Private Banking Corporation
BT Brokerage Corporation
BT Capital Corporation
BT Commercial Corporation
BT Equipment Leasing, Inc.
BT Futures Corp.
BT Holdings (New York), Inc.
BT Securities Corporation
BT Private Clients Corporation
Bankers International Corporation
BT Financial Services Information Systems Corporation
BT International Trading Corporation
BT Investment Managers Inc.
Private Clients Group, Inc.
ITEM 31: NUMBER OF CONTRACT OWNERS
5,580 as of December 31, 1994.
ITEM 32: INDEMNIFICATION
Golden American shall indemnify (including therein the prepayment of expenses)
any person who is or was a director, officer or employee, or who is or was
serving at the request of Golden American as a director, officer or employee of
another corporation, partnership, joint venture, trust or other enterprise for
expenses (including attorney's fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him with respect to any
threatened, pending or completed action, suit or proceedings against him by
reason of the fact that he is or was such a director, officer or employee to the
extent and in the manner permitted by law.
Golden American may also, to the extent permitted by law, indemnify any other
person who is or was serving Golden American in any capacity. The Board of
Directors shall have the power and authority to determine who may be indemnified
under this paragraph and to what extent (not to exceed the extent provided in
the above paragraph) any such person may be indemnified.
Golden American may purchase and maintain insurance on behalf of any such person
or persons to be indemnified under the provision in the above paragraphs,
against any such liability to the extent permitted by law.
<PAGE>
Insofar as indemnification for liabilities arising under the Securities Act of
1933, as amended, may be permitted to directors, officers and controlling
persons of the Registrant, as provided above or otherwise, the Registrant has
been advised that in the opinion of the SEC such indemnification by the
Depositor is against public policy, as expressed in the Securities Act of 1933,
and therefore may be unenforceable. In the event that a claim of such
indemnification (except insofar as it provides for the payment by the Depositor
of expenses incurred or paid by a director, officer or controlling person in the
successful defense of any action, suit or proceeding) is asserted against the
Depositor by such director, officer or controlling person and the SEC is still
of the same opinion, the Depositor or Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question of whether such indemnification
by the Depositor is against public policy as expressed by the Securities Act of
1933 and will be governed by the final adjudication of such issue.
ITEM 33: BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
For information regarding Warburg, Pincus Counsellors, Inc., reference is made
to Form ADV of Warburg, Pincus Counsellors, Inc., which is incorporated herein
by reference.
ITEM 34: PRINCIPAL UNDERWRITER
(a) At present, Directed Services, Inc., the Registrant's Distributor, also
serves as principal underwriter for all contracts issued by Golden
American. DSI is the principal underwriter for Separate Account A,
Separate Account B and Alger Separate Account A of Golden American.
(b) The following information is furnished with respect to the principal
officers and directors of Directed Services, Inc., the Registrant's
Distributor:
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address with Underwriter with Registrant
------------------ -------------------- ---------------------
<S> <C> <C>
Terry L. Kendall Chairman and Chairman and President of
Directed Services, Inc. Chief Executive Officer Board of Governors
280 Park Avenue
New York, NY 10017
Robert B. Langel President None
Directed Services, Inc.
280 Park Avenue
New York, NY 10017
Richard A. Marin Director None
Bankers Trust Company
Retirement Services
280 Park Avenue
New York, NY 10017
John Herron, Jr. Director None
Bankers Trust Company
BT Ventures
280 Park Avenue
New York, NY 10017
Bernard R. Beckerlegge General Counsel Secretary
Directed Services, Inc. and Secretary
280 Park Avenue
New York, NY 10017
</TABLE>
<PAGE>
ITEM 34 (CONT'D)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address with Underwriter with Registrant
------------------ -------------------- ---------------------
<S> <C> <C>
Barnett Chernow Executive Vice President Principal Financial Officer
Directed Services, Inc.
280 Park Avenue
New York, NY 10017
Mitchell R. Katcher Executive Vice President None
Directed Services, Inc.
280 Park Avenue
New York, NY 10017
Stephen J. Preston Senior Vice President Comptroller
Directed Services, Inc.
280 Park Avenue
New York, NY 10017
<CAPTION>
1994 Net
Name of Underwriting Compensation
Principal Discounts and on Brokerage
Underwriter Commissions Redemption Commissions Compensation
----------- ------------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
DSI $1,343,000 $0 $0 $0
</TABLE>
ITEM 35: LOCATION OF ACCOUNTS AND RECORDS
Accounts and records are maintained by BT Variable, Inc., 280 Park Avenue, 14
West, New York, New York 10017 and Golden American Life Insurance Company, 1001
Jefferson Street, Suite 400, Wilmington, DE 19801.
ITEM 36: MANAGEMENT SERVICES
None.
ITEM 37: UNDERTAKINGS
(a) Registrant hereby undertakes to file a post-effective amendment, using
financial statements that need not be certified, within four to six months
from the latter of the effective date of Registrant's Registration
Statement under the Securities Act of 1933 or the date on which Registrant
first issues securities (other than those issued for seed money);
(b) Registrant hereby undertakes to file a post-effective amendment to this
registration statement as frequently as it is necessary to ensure that the
audited financial statements in the registration statement are never more
than 16 months old so long as payments under the variable annuity contracts
may be accepted;
(c) Registrant hereby undertakes to include either (1) as part of any
application to purchase a contract offered by the prospectus, a space that
an applicant can check to request a Statement of Additional Information, or
(2) a post card or similar written communication affixed to or included in
the prospectus that the applicant can remove to send for a Statement of
Additional Information; and,
<PAGE>
(d) Registrant hereby undertakes to deliver any Statement of Additional
Information and any financial statements required to be made available
under this Form promptly upon written or oral request.
REPRESENTATION
Registrant makes the following representation -- Account D meets the definition
of a "separate account" under the federal securities laws.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant has caused this Registration Statement to be signed on its
behalf in the City of New York and State of New York, on the 10th day of May,
1995.
SEPARATE ACCOUNT D
-----------------------------
(Registrant)
By: GOLDEN AMERICAN LIFE
INSURANCE COMPANY
-----------------------------
(Depositor)
By: /s/ Terry L. Kendall
-----------------------------
Terry L. Kendall*
Chairman, President and
Cheif Executive Officer
Attest: /s/ Bernard R. Beckerlegge
--------------------------
Bernard R. Beckerlegge
General Counsel
and 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 and on the date
indicated.
Signature Title Date
- - --------- ----- ----
/s/ Terry L. Kendall Chairman, President and May 10, 1995
- - ------------------------------ Cheif Executive Officer
Terry L. Kendall* of Depositor
/s/ Barnett Chernow Principal Financial Officer May 10, 1995
- - ------------------------------
Barnett Chernow*
/s/ Stephen J. Preston Comptroller May 10, 1995
- - ------------------------------
Stephen J. Preston*
/s/ John Herron, Jr. Director of Depositor May 10, 1995
- - ------------------------------
John Herron, Jr.*
/s/ Richard A. Marin Director of Depositor May 10, 1995
- - ------------------------------
Richard A. Marin*
By: /s/ Bernard R. Beckerlegge Attorney-in-Fact May 10, 1995
---------------------------
Bernard R. Beckerlegge
- - -------------------
* Executed by Bernard R. Beckerlegge on behalf of those indicated
pursuant to Power of Attorney.
