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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 VARIABLE 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 two separate accounts, Separate Account B ("Account
B") and Separate Account D ("Account D") (collectively, the "Accounts").
Thirteen 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.
Part I of this prospectus describes the contract and provides background
information regarding Account B and Account D. Part II of this prospectus
(beginning on page 41) 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 fourteen divisions currently available
under the contract in any way you choose, subject to certain restrictions. You
may change the allocation of your accumulation value up to five times per
contract year free of charge.
You may surrender the contract for its cash surrender value at any time before
the annuity commencement date provided the annuitant and owner are living. The
cash surrender value will vary daily with the investment results of the
contract. We do not guarantee any minimum cash surrender value. You may make
partial withdrawals under the contract, subject to certain restrictions.
We will pay a death benefit to the beneficiary if the annuitant (when there is
no contingent annuitant) or owner dies prior to the annuity commencement date.
See 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 May 1, 1996 relating to
the Accounts 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.
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ISSUED BY: DISTRIBUTED BY: ADMINISTERED AT:
Golden American Life Directed Services, Inc. Customer Service Center
Insurance Company Wilmington, Delaware 19801 Mailing Address: P.O. Box 8794
Wilmington, Delaware 19899-8794
1-800-366-0066
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PROSPECTUS DATED: MAY 1, 1996
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TABLE OF CONTENTS
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PAGE
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DEFINITION OF TERMS..................................... 3
FEE TABLE............................................... 5
SUMMARY OF THE CONTRACT................................. 7
CONDENSED FINANCIAL INFORMATION......................... 10
Index of Investment Experience
Financial Statements
Performance Related Information
PART I
INTRODUCTION............................................ 13
FACTS ABOUT THE COMPANY AND THE ACCOUNTS................ 14
Golden American
The Accounts
Account B Divisions
The Managed Global Account of Account D
Changes Within the Accounts
FACTS ABOUT THE CONTRACT................................ 18
The Owner
The Annuitant
The Beneficiary
Change of Owner or Beneficiary
Availability of the Contract
Types of Contracts
Your Right to Select or Change Contract Options
Premiums
Making Additional Premium Payments
Crediting Premium Payments
Restrictions on Allocation of Premium Payments
Your Right to Reallocate
Dollar Cost Averaging Option
What Happens if a Division is Not Available
Your Accumulation Value
Accumulation Value in Each Division
Measurement of Investment Experience
Cash Surrender Value
Surrendering to Receive the Cash Surrender Value
Partial Withdrawals
Proceeds Payable to the Beneficiary
Reports to Owners
When We Make Payments
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
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CHOOSING AN INCOME PLAN................................. 30
The Income Plan
Annuity Commencement Date Selection
Frequency Selection
The Annuity Options
Payment When Named Person Dies
OTHER INFORMATION....................................... 32
Other Contract Provisions
Contract Changes -- Applicable Tax Law
Your Right to Cancel or Exchange Your Contract
Other Contract Changes
Group or Sponsored Arrangements
Selling the Contract
Reinsurance
REGULATORY INFORMATION.................................. 33
Voting Rights
State Regulation
Legal Proceedings
Legal Matters
Experts
FEDERAL TAX CONSIDERATIONS.............................. 34
Introduction
Golden American Tax Status
Taxation of Non-Qualified Annuities
Taxation of Individual Retirement Annuities
ADDITIONAL CONSIDERATIONS............................... 39
Distribution-at-Death Rules
Taxation of Death Benefit Proceeds
Transfer of Annuity Contracts
Section1035 Exchanges
Assignments
Multiple Contracts Rule
PART II
INTRODUCTION............................................ 41
THE MANAGED GLOBAL ACCOUNT OF ACCOUNT D................. 42
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
STATEMENT OF ADDITIONAL INFORMATION..................... 54
Table of Contents
APPENDIX................................................ A1
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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
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DEFINITION OF TERMS
ACCOUNTS
Separate Account B and Separate Account D.
ACCUMULATION VALUE
The amount that the contract provides for investment at any time. Initially,
this amount is equal to the premium paid. Thereafter, the accumulation value
will reflect the premiums paid, investment experience, charges deducted and
partial withdrawals taken.
ANNUITANT
The person designated by the owner to receive the annuity payments and whose
death initiates payment of the death benefit.
ANNUITY COMMENCEMENT DATE
The date on which annuity payments begin.
ANNUITY OPTIONS
Options the owner selects that determine the form and amount of annuity
payments.
ANNUITY PAYMENT
The periodic payment an annuitant receives. It may be either a fixed or a
variable amount based on the annuity option chosen.
ATTAINED AGE
The issue age of the annuitant plus the number of full years elapsed since the
contract date.
BENEFICIARY
The person designated to receive benefits in the case of the death of the
annuitant (when there is no contingent annuitant) or owner.
BUSINESS DAY
Any day the New York Stock Exchange ("NYSE") is open for trading, exclusive of
Federal holidays, or any day on which the SEC requires that mutual funds, unit
investment trusts or other investment portfolios be valued.
CASH SURRENDER VALUE
The amount the owner receives if the owner surrenders the contract.
CHARGE DEDUCTION DIVISION
The Liquid Asset Division, which is the division from which all charges are
deducted if so designated on the application or enrollment form, or later
elected by the owner.
CONTINGENT ANNUITANT
The person designated by the owner who, upon the annuitant's death prior to the
annuity commencement date, becomes the annuitant.
CONTRACT
The entire contract consisting of the basic contract, the application or
enrollment form and any riders or endorsements.
CONTRACT ANNIVERSARY
The anniversary of the contract date.
CONTRACT DATE
The date on which we have received the initial premium and upon which we begin
determining the contract values. It may or may not be the same as the issue
date. This date is used to determine contract months, processing dates, years
and anniversaries.
CONTRACT PROCESSING DATES
The days when we deduct certain charges from the accumulation value. If the
contract processing date is not a valuation date, it will be on the next
succeeding valuation date. The contract processing dates will be once each year
on the contract anniversary.
CONTRACT PROCESSING PERIOD
The period between successive contract processing dates unless it is the first
contract processing period. In that case, it is the period from the contract
date to the first contract processing date.
CONTRACT YEAR
The period between contract anniversaries.
CUSTOMER SERVICE CENTER
Where service is provided to our contract owners. The mailing address and
telephone number of the Customer Service Center are shown on the cover.
DEFERRED ANNUITY
A contract which provides for the accumulation of funds that will reflect
investment experience. These funds may be applied under an annuity option at the
annuity commencement date.
ENDORSEMENTS
An endorsement changes or adds provisions to the contract.
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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.
FREE LOOK PERIOD
The period of time within which the contract owner may examine the contract and
return it for a refund.
GENERAL ACCOUNT
The account which contains all of our assets other than those held in our
separate accounts.
INDEX OF INVESTMENT EXPERIENCE
The index that measures the performance of a separate account division.
INITIAL PREMIUM
The payment amount required to put a contract into effect.
ISSUE AGE
The annuitant's age on his or her last birthday on or before the contract date.
ISSUE DATE
The date the contract is issued at our Customer Service Center.
OWNER
The person who owns the contract and is entitled to exercise all rights under
the contract. This person's death also initiates payment of the death benefit.
RIDER
A rider adds benefits to the contract.
SPECIALLY DESIGNATED DIVISION
The Liquid Asset Division. Distributions from a portfolio underlying a division
(or from a division of Separate Account D) in which reinvestment is not
available will be allocated to this division unless you specify otherwise.
VALUATION DATE
The day at the end of a valuation period when each division is valued.
VALUATION PERIOD
Each business day together with any non-business days before it.
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FEE TABLE
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OWNER TRANSACTION EXPENSES (deducted from accumulation value)
DISTRIBUTION FEE (ANNUAL SALES LOAD) AS A PERCENTAGE OF THE INITIAL AND EACH ADDITIONAL PREMIUM,
deducted at the end of each contract processing period following receipt of each premium over a
six year period from the date we receive and accept each premium payment.......................... 1.00%(1)(2)
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DURING YEAR
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SURRENDER CHARGE AS A PERCENTAGE OF THE INITIAL OR ADDITIONAL PREMIUM deducted upon surrender as
measured from the date the premium is accepted.......................................................... 1............ 6.00 %
2............ 5.00
3............ 4.00
4............ 3.00
5............ 2.00
6............ 1.00
7+........... 0.00
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EXCESS ALLOCATION CHARGE for each allocation change in excess of the five
free allocation changes allowed per contract year................................................... $25
PARTIAL WITHDRAWAL CHARGE (2.0% of the withdrawal for each additional conventional partial withdrawal
after the first in a contract year) not to exceed................................................... $25
ANNUAL CONTRACT FEES (deducted from the accumulation value)
ADMINISTRATIVE CHARGE
If total premiums paid in the first contract year are less than $100,000............................. $40
If total premiums paid in the first contract year are $100,000 or more............................... $0
SEPARATE ACCOUNT ANNUAL EXPENSES (percentage of assets in each separate account division)
MORTALITY AND EXPENSE RISK CHARGE.................................................................... 0.90 %(2)
ASSET BASED ADMINISTRATIVE CHARGE.................................................................... 0.10 %
Total Separate Account Annual Expenses............................................................... 1.00 %
TRUST ANNUAL EXPENSES (based on combined assets of the indicated groups of Series)
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OTHER TOTAL
SERIES FEES(3) EXPENSES(4) EXPENSES
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Multiple Allocation, Fully Managed, Capital
Appreciation,
Rising Dividends, All-Growth, Real Estate, 1.00% 0.01% 1.01%
Natural Resources, Value Equity, Strategic Equity, and
Small Cap Series:
Emerging Markets Series: 1.50% 0.03% 1.53%
Limited Maturity Bond and Liquid Asset Series: 0.60% 0.01% 0.61%
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THE MANAGED GLOBAL ACCOUNT ANNUAL EXPENSES AFTER REIMBURSEMENT (percentage of
average net assets)
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MANAGEMENT AND OTHER TOTAL ANNUAL
ASSETS ADVISORY FEES EXPENSES EXPENSES(5)
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$0 to $500 million................................................... 1.00% 0.25% 1.25 %
in excess of $500 million............................................ 0.80% 0.25% 1.05 %
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(1) Contracts with a contract date prior to May 3, 1993 and the prospectus
delivered in connection with such contracts described the sales load as a
deferred load, which is equivalent to the combination of the distribution
fee and surrender charge described above. Limited Edition contracts
purchased through Account D and the prospectus delivered in connection with
such contracts also described the sales load as a deferred load.
(2)
If your initial premium will be $25,000 or more, we also offer DVA Series
100 through another prospectus, which is a contract with a different
charging structure.
(3) Fees decline as combined assets increase (see Part I, Account B Divisions
and the Trust prospectus for details).
(4) Other expenses generally consist of independent trustees fees and expenses.
(5) Reflects an expense reimbursement or waiver effective through December 31,
1995. See Part I, The Managed Global Account of Account D. In the absence of
expense reimbursement or waiver, the total annual expenses would have been
1.34% of the Global Account's average daily net assets for 1995.
5
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FEE TABLE (CONTINUED)
EXAMPLES:
If you surrender your contract at the end of the applicable time period, you
would pay the following expenses for each $1,000 of initial premium assuming a
5% annual return on assets:
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DIVISION ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
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Multiple Allocation..................................................... $ 80.81 $ 123.55 $ 167.88 $ 287.51
Fully Managed........................................................... 80.81 123.55 167.88 287.51
Capital Appreciation.................................................... 80.81 123.55 167.88 287.51
Rising Dividends........................................................ 80.81 123.55 167.88 287.51
All-Growth.............................................................. 80.81 123.55 167.88 287.51
Real Estate............................................................. 80.81 123.55 167.88 287.51
Natural Resources....................................................... 80.81 123.55 167.88 287.51
Value Equity............................................................ 80.81 123.55 167.88 287.51
Strategic Equity........................................................ 80.81 123.55 167.88 287.51
Small Cap............................................................... 80.81 123.55 167.88 287.51
Emerging Markets........................................................ 85.83 138.51 192.62 336.12
Global Account.......................................................... 83.12 130.48 179.37 310.25
Limited Maturity Bond................................................... 76.94 111.93 148.49 248.42
Liquid Asset............................................................ 76.94 111.93 148.49 248.42
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If you do not surrender your contract or if you annuitize, you would pay the
following expenses for each $1,000 of initial premium assuming a 5% annual
return on assets:
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DIVISION ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
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Multiple Allocation..................................................... $ 30.81 $ 93.55 $ 157.88 $ 287.51
Fully Managed........................................................... 30.81 93.55 157.88 287.51
Capital Appreciation.................................................... 30.81 93.55 157.88 287.51
Rising Dividends........................................................ 30.81 93.55 157.88 287.51
All-Growth.............................................................. 30.81 93.55 157.88 287.51
Real Estate............................................................. 30.81 93.55 157.88 287.51
Natural Resources....................................................... 30.81 93.55 157.88 287.51
Value Equity............................................................ 30.81 93.55 157.88 287.51
Strategic Equity........................................................ 30.81 93.55 157.88 287.51
Small Cap............................................................... 30.81 93.55 157.88 287.51
Emerging Markets........................................................ 35.83 108.51 182.62 336.12
Global Account.......................................................... 33.12 100.48 169.37 310.25
Limited Maturity Bond................................................... 26.94 81.93 138.49 248.42
Liquid Asset............................................................ 26.94 81.93 138.49 248.42
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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.
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.
The purpose of the fee table is to assist you in understanding the various costs
and expenses that you may bear directly or indirectly. The fee table reflects
expenses of the Accounts as well as the Trust. Premium taxes may also be
applicable. See Part I, Charges and Fees, PREMIUM TAXES. For a complete
description of contract costs and expenses and the charges and expenses for
Account D, see the section titled Charges and Fees in Part I of this prospectus.
For a more complete description of the Trust's costs and expenses, see the Trust
prospectus.
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.
6
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SUMMARY OF THE CONTRACT
This prospectus has been designed to provide you with information regarding the
contract and the Accounts which fund the contract. Information concerning the
divisions of Account B is set forth in the Trust prospectus. Part II of this
prospectus, beginning on page 41, 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 its attached
application or enrollment form and any riders or endorsements, constitutes the
entire agreement between you and us and should be retained.
This prospectus has been designed to provide you with the necessary information
to make a decision on purchasing the contract offered by Golden American and
funded by the Accounts.
You have a choice of investments. We do not promise that your accumulation value
will increase. Depending on the contract's investment experience for funds
invested in the Accounts, the accumulation value, cash surrender value and death
benefit may increase or decrease on any day. You bear the investment risk.
DESCRIPTION OF THE CONTRACT
The contract is designed to establish retirement benefits for two types of
purchasers. The first type of purchaser is one who is eligible to participate
in, and purchases a contract for use with, 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 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 1/2 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. If your
initial premium will be $25,000 or more we also offer GoldenSelect DVA Series
100 through another prospectus, which is a contract with a different charging
structure. 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. We will take under
consideration and may refuse to accept a premium payment if the sum of all
premium payments received under the contract totals more than $1,500,000.
THE DIVISIONS
Each of the fourteen divisions offered under this prospectus have their own
distinct investment objectives and policies. There are thirteen divisions of
Account B currently available under the contract. 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 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.
SURRENDERING YOUR CONTRACT
The cash surrender value varies each day depending on investment results. We do
not guarantee any minimum cash surrender value. You may surrender the contract
and receive its cash 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.
7
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SUMMARY OF THE CONTRACT (CONTINUED)
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 take conventional partial withdrawals once per
contract year without charge. Alternatively, you may elect in advance to take
systematic partial withdrawals on a monthly or quarterly basis. If you have an
IRA contract, 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 and partial withdrawals above a specified percentage of your
accumulated value may be subject to a surrender charge. See Part I, Partial
Withdrawals.
DOLLAR COST AVERAGING
Under this option, you may choose to have a specified dollar amount transferred
from either the Limited Maturity Bond Division or Liquid Asset Division to the
other divisions on a monthly basis with the objective of shielding your
investment from short term price fluctuations. See Part I, Dollar Cost Averaging
Option.
YOUR RIGHT TO CANCEL THE CONTRACT
You may cancel your contract within the free look period which is a ten day
period of time beginning when you receive the contract. For purposes of
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 annuitant (when
there is no contingent annuitant) or an owner dies prior to the annuity
commencement date. See Part I, Proceeds Payable to the Beneficiary. We may
reduce the death benefit proceeds payable under certain group or sponsored
arrangements. See Part I, Group or Sponsored Arrangements.
CONTRACT PROCESSING PERIODS
The first contract processing period begins with the contract date and ends at
the close of business on the first contract processing date. All subsequent
contract processing periods begin at the close of business on the most recent
contract processing date and extend to the close of business on the next
contract processing date. There is one contract processing period each year.
DEDUCTIONS FOR CHARGES AND FEES
We invest the entire amount of the initial and any additional premium payments
in the divisions you select, subject to certain restrictions we impose. See Part
I, Restrictions on Allocation of Premium Payments. We then periodically deduct
certain amounts 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. We may also reduce certain charges for
contracts purchased in combination with certain flexible premium variable life
products that we offer. Charges are deducted proportionately from all divisions
in which you are invested, unless you have elected the Charge Deduction
Division. The charges we deduct are:
DISTRIBUTION FEE
We deduct a sales load in an annual amount of 1.00% of each premium at the end
of each contract processing period for a period of six years from the date we
receive and accept each premium payment.
We also offer through other prospectuses other DVAs which are contracts with
different charging structures.
SURRENDER CHARGE
A surrender charge is imposed as a percentage of premium if the contract is
surrendered or an excess partial withdrawal is taken during the six year
period from the date we receive and accept each premium payment. The
percentage imposed at the time of surrender or excess partial withdrawal
depends on the distribution fee collected to the time the contract is
surrendered or the excess partial withdrawal is taken. The surrender charge in
the first contract year is 6.00% and reduces by 1.00% each year during the six
year period from the date we receive and accept each premium payment.
CONTRACTS WITH A CONTRACT DATE PRIOR TO MAY 3, 1993 AND THE PROSPECTUS
DELIVERED IN CONNECTION WITH SUCH CONTRACTS, DESCRIBED THE SALES LOAD AS A
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SUMMARY OF THE CONTRACT (CONTINUED)
DEFERRED LOAD, WHICH IS EQUIVALENT TO THE COMBINATION OF THE DISTRIBUTION FEE
AND SURRENDER CHARGE DESCRIBED ABOVE. GOLDENSELECT LIMITED EDITION CONTRACTS
PURCHASED THROUGH ACCOUNT D AND THE PROSPECTUS DELIVERED IN CONNECTION WITH
SUCH CONTRACTS ALSO DESCRIBED THE SALES LOAD AS A DEFERRED LOAD.
IF YOUR INITIAL PREMIUM WILL BE $25,000 OR MORE WE ALSO OFFER DVA SERIES 100
THROUGH ANOTHER PROSPECTUS, WHICH IS A CONTRACT WITH A DIFFERENT CHARGING
STRUCTURE.
MORTALITY AND EXPENSE RISK CHARGE
We charge each division of the Accounts with a daily asset based charge for
mortality and expense risks equivalent to an annual rate of 0.90%.
PREMIUM TAXES
Generally, premium taxes are incurred on the annuity commencement date, and a
charge for premium taxes is then deducted from the accumulation value on such
date. Some jurisdictions impose a premium tax at the time the initial or
additional premiums are paid, regardless of the annuity commencement date.
ADMINISTRATIVE CHARGE
The amount deducted is $40 per contract year if total premiums paid in the
first contract year are less than $100,000. If the total premiums paid in the
first contract year equals $100,000 or more, the charge is zero.
EXCESS ALLOCATION CHARGE
The first five allocation changes in any contract year may be made without
charge. Each subsequent allocation change is subject to a $25 excess
allocation charge.
PARTIAL WITHDRAWAL CHARGE
If you take more than one conventional partial withdrawal during a contract
year, we impose a charge of the lesser of $25 and 2.0% of the amount withdrawn
for each additional conventional partial withdrawal. See Part I, Partial
Withdrawals, Conventional Partial Withdrawal Option.
ASSET BASED ADMINISTRATIVE CHARGE
We charge each division of the Accounts with a daily asset based charge to
cover a portion of contract administration equivalent to an annual rate of
0.10%.
TRUST EXPENSES
There are fees and expenses deducted from each Series. The investment
performance of the Series and deductions for fees and expenses from the Trust
will affect your accumulation value. Please read the Trust prospectus for
details.
OPERATING EXPENSES OF ACCOUNT D
There are management and other operating expenses deducted from Account D. The
investment performance of the Global Account and the deduction of operating
expenses of Account D will affect your accumulation value. For information on
the operating expenses of Account D, see Part I, Charges and Fees.
TAX PENALTIES
The ultimate effect of Federal income taxes on the amounts held under an annuity
contract, on annuity payments and on the economic benefits to the owner,
annuitant or beneficiary depends on Golden American's tax status and upon the
tax status of the individuals concerned. In general, an owner is not taxed on
increases in value under an annuity contract until some form of distribution is
made under it. There may be tax penalties if you make a withdrawal or surrender
the contract before reaching age 59 1/2. See Part I, Federal Tax Considerations.
9
<PAGE>
CONDENSED FINANCIAL INFORMATION
INDEX OF INVESTMENT EXPERIENCE
The upper table gives the index of investment experience for each division of
Account B and for the Global Account on their respective commencement of
operations and on December 31, 1989, 1990, 1991, 1992, 1993, 1994 and 1995, as
applicable. The index of investment experience is equal to the value of a unit
for each division of the Accounts. The total value of each division as of the
end of each period indicated is shown in the lower table.
<TABLE>
<CAPTION>
INDEX OF INVESTMENT EXPERIENCE
-----------------------------------------------------------------------------------------------------
1/25/89 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94
-------- ------------ ------------ ------------ ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Multiple
Allocation... $10.00 $ 10.82 $ 11.19 $ 13.30 $ 13.41 $ 14.75 $ 14.43
Fully
Managed...... 10.00 10.38 9.87 12.59 13.24 14.11 12.95
Capital
Appreciation... --(1) --(1) --(1) --(1) 11.01 11.81 11.50
Rising
Dividends.... --(3) --(3) --(3) --(3) --(3) 10.29 10.25
All-Growth.... 10.00 10.71 9.74 13.16 12.69 13.39 11.83
Real Estate... 10.00 9.90 7.68 10.19 11.48 13.33 14.04
Natural
Resources.... 10.00 11.86 10.05 10.42 9.30 13.81 14.02
Value
Equity....... --(4) --(4) --(4) --(4) --(4) --(4) --(4)
Strategic
Equity....... --(5) --(5) --(5) --(5) --(5) --(5) --(5)
Small Cap..... --(6) --(6) --(6) --(6) --(6) --(6) --(6)
Emerging
Markets...... --(3) --(3) --(3) --(3) --(3) 12.41 10.42
Global
Account...... --(2) --(2) --(2) --(2) 10.01 10.52 9.09
Limited
Maturity
Bond......... 10.00 10.88 11.61 12.78 13.27 13.95 13.65
Liquid
Asset........ 10.00 10.68 11.38 11.90 12.15 12.35 12.68
<CAPTION>
12/31/95
-------------
<S> <C> <C>
Multiple
Allocation... $ 17.00
Fully
Managed...... 15.48
Capital
Appreciation.. 14.83
Rising
Dividends.... 13.30
All-Growth.... 14.34
Real Estate... 16.20
Natural
Resources.... 15.36
Value
Equity....... 13.39
Strategic
Equity....... 10.01
Small Cap..... --(6)
Emerging
Markets...... 9.27
Global
Account...... 9.66
Limited
Maturity
Bond......... 15.10
Liquid
Asset........ 13.24
</TABLE>
<TABLE>
<CAPTION>
TOTAL ACCUMULATION VALUE
------------------------------------------------------------------------------------------
12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94
------------ ------------ ------------ ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Multiple
Allocation... $ 15,556,366 $ 23,963,356 $ 57,739,245 $ 115,124,744 $ 273,158,122 $ 297,507,994
Fully
Managed...... 5,333,885 5,414,160 9,834,436 37,352,585 108,290,963 98,836,207
Capital
Appreciation... --(1) --(1) --(1) 18,366,222 86,798,642 88,344,684
Rising
Dividends.... --(3) --(3) --(3) --(3) 14,387,382 50,384,765
All-Growth.... 3,077,542 4,528,380 11,159,814 23,418,811 56,055,565 70,623,784
Real Estate... 650,003 309,556 696,180 3,600,461 28,772,896 36,936,728
Natural
Resources.... 2,320,696 2,460,399 2,646,183 2,882,417 21,436,544 32,746,767
Value
Equity....... --(4) --(4) --(4) --(4) --(4) --(4)
Strategic
Equity....... --(5) --(5) --(5) --(5) --(5) --(5)
Small Cap..... --(6) --(6) --(6) --(6) --(6) --(6)
Emerging
Markets...... --(3) --(3) --(3) --(3) 30,488,589 59,747,048
Global
Account...... --(2) --(2) --(2) 38,699,402 88,477,493 86,208,555
Limited
Maturity
Bond......... 2,595,966 8,009,970 15,935,184 39,861,202 71,622,231 71,573,009
Liquid
Asset........ 2,190,649 8,419,953 9,224,303 12,769,536 16,497,588 45,364,989
<CAPTION>
12/31/95
-------------
<S> <C> <C>
Multiple
Allocation... $ 305,499,995
Fully
Managed...... 117,325,242
Capital
Appreciation.. 121,047,204
Rising
Dividends.... 80,341,660
All-Growth.... 91,960,166
Real Estate... 34,814,825
Natural
Resources.... 26,991,780
Value
Equity....... 28,447,742
Strategic
Equity....... 8,030,333
Small Cap..... --(6)
Emerging
Markets...... 36,887,958
Global
Account...... 72,375,222
Limited
Maturity
Bond......... 67,838,218
Liquid
Asset........ 36,490,508
</TABLE>
- ------------------------
(1) The Capital Appreciation Division became available for investment on May 4,
1992 starting with an index of investment experience of $10.00.
(2) The Global Account Division of Account D became available for investment on
October 21, 1992 starting with an index of investment experience of $10.00.
(3) The Rising Dividends and Emerging Markets Divisions became available for
investment on October 4, 1993 starting with an index of investment
experience of $10.00.
(4) The Value Equity Division became available for investment on January 1, 1995
starting with an index of investment experience of $10.00.
(5) The Strategic Equity Division became available for investment in October 2,
1995 starting with an index of investment experience of $10.00.
(6)The Small Cap Division became available for investment on January 2, 1996
starting with an index of investment experience of $10.00.
In order to provide for continuity in results, the above table is based on
charges for the contract described in this prospectus. Contracts issued prior to
May 1, 1991, were based on lower asset charges and, thus, would have higher
values for the indices of investment experience.
10
<PAGE>
CONDENSED FINANCIAL INFORMATION (CONTINUED)
FINANCIAL STATEMENTS
The audited financial statements of Separate Account B (as well as the auditors'
report thereon), the audited financial statements of The Managed Global Account
of Separate Account D (as well as the auditors' report thereon) and the audited
financial statements of Golden American Life Insurance Company (as well as the
auditors' reports thereon) are included in the Statement of Additional
Information.
PERFORMANCE RELATED INFORMATION
Performance information for the divisions of the Accounts, 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 distribution
fee and/or surrender charge, the administrative charge and the mortality and
expense risk charge. Quotations of total return may simultaneously be shown for
other periods that do not take into account certain contractual charges, such as
the distribution fee and surrender charge 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.
11
<PAGE>
(This page has been left blank intentionally.)
12
<PAGE>
PART I
INTRODUCTION THE FOLLOWING INFORMATION IN PART I DESCRIBES THE CONTRACT AND
THE SEPARATE ACCOUNTS WHICH FUND THE CONTRACT, ACCOUNT B AND ACCOUNT D. ACCOUNT
B INVESTS IN MUTUAL FUND PORTFOLIOS OF THE TRUST. ACCOUNT D INVESTS DIRECTLY IN
SECURITIES.
13
<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, 1995 Golden American had stockholder's equity of
approximately $98.1 million and total assets of approximately $1.2 billion,
including approximately $1.05 billion 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, 1995, 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 $104 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. A divestiture is likely to occur in the future. Also, 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.
Equitable of Iowa Companies ("Equitable of Iowa") and Whitewood Properties
Corp., a subsidiary of Bankers Trust Company, have entered into a definitive
agreement providing for the acquisition by Equitable of Iowa of all interest
in BT Variable, Inc. BT Variable, Inc., an indirect subsidiary of Bankers
Trust Company, is the corporate parent of Golden American and DSI.
The acquisition, which is subject to the approval of the appropriate
regulators and satisfaction of certain other customary conditions set
forth in the agreement, is expected to close during the second half of 1996.
With assets of $10 billion as of March 31, 1996, Equitable of Iowa is the
holding company for Equitable Life Insurance Company of Iowa, USG Annuity &
Life Company, Locust Street Securities, Inc., and Equitable Investment
Services, Inc.
THE ACCOUNTS
All obligations under the contract are general obligations of Golden American.
The Accounts 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 the Accounts are kept separate from our general
account and any other separate accounts we may have. We may offer other variable
annuity contracts investing in the Accounts which are not discussed in this
prospectus. The Accounts may also invest in other series which are not available
to the contract described in this prospectus.
We own all the assets in the Accounts. Income and realized and unrealized gains
or losses from assets in an Account are credited to or charged against that
Account without regard to other income, gains or losses in our other investment
accounts. As required, the assets in an Account are at least equal to the
reserves and other liabilities of that Account. These assets may not be charged
with liabilities from any other business we conduct.
They may, however, be subject to liabilities arising from divisions of the
Accounts whose assets are attributable to other variable annuity contracts
supported by the Accounts. 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.
14
<PAGE>
FACTS ABOUT THE COMPANY AND THE ACCOUNTS (CONTINUED)
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. 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 may also have 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 Trust pays DSI for its services a monthly fee based on the following
percentages 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.
- --------------------------------------------------------------------------------
<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, Value Equity, 0.90% of next $1.5 billion; and
Strategic Equity, and Small Cap Series: 0.85% of amount in excess of 3.5 billion
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>
- --------------------------------------------------------------------------------
15
<PAGE>
FACTS ABOUT THE COMPANY AND THE ACCOUNTS (CONTINUED)
The following divisions invest in shares of the Series designated.
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
Invests primarily in common stocks. The Series also may invest in fixed income
securities and money market instruments to preserve its principal value during
uncertain or declining market conditions. The Series' strategy is based on the
premise that, from time to time, certain asset classes are more attractive
long term investments than others.
PORTFOLIO MANAGER
T. Rowe Price Associates, Inc.
CAPITAL APPRECIATION DIVISION
CAPITAL APPRECIATION SERIES
OBJECTIVE
Long-term capital growth.
INVESTMENTS
Invests in common stocks and preferred stock that will be allocated among
various categories of stocks referred to as "components" which consist of the
following: (i) The Growth Component -- Securities that the portfolio manager
believes have the following characteristics: stability and quality of 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.
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
E.I.I. Realty Securities, Inc.
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 dividend income as a secondary objective.
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.
16
<PAGE>
FACTS ABOUT THE COMPANY AND THE ACCOUNTS (CONTINUED)
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
STRATEGIC EQUITY DIVISION
STRATEGIC EQUITY SERIES
OBJECTIVE
Long term capital appreciation.
INVESTMENTS
Investment primarily in equity securities based on various equity market
timing techniques. The amount of the Series' assets allocated to equities
shall vary from time to time to seek positive investment performance from
advancing equity markets and to reduce exposures to equities when risk/reward
characteristics are believed to be less attractive.
PORTFOLIO MANAGER
Zweig Advisors Inc.
SMALL CAP DIVISION
SMALL CAP SERIES
OBJECTIVE
Long term capital appreciation.
INVESTMENTS
Investment primarily in equity securities of companies that, at the time of
purchase, have a total market capitalization -- present market value per share
mutliplied by the total number of shares outstanding -- of less than $1
billion.
PORTFOLIO MANAGER
Fred Alger Management, Inc.
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.
17
<PAGE>
FACTS ABOUT THE COMPANY AND THE ACCOUNTS (CONTINUED)
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.
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.
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 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 through
December 31, 1996, 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.
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, PAGE 41.
CHANGES WITHIN THE ACCOUNTS
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 the Accounts, 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 the Accounts, 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.
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.
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FACTS ABOUT THE CONTRACT (CONTINUED)
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, the beneficial
owner of the trust will be treated as the owner of the contract solely for the
purpose of activating the death benefit provision. See Contracts Owned by
Non-Natural Persons.
THE ANNUITANT
The annuitant will receive the annuity benefits of the contract if living on the
annuity commencement date. If the annuitant dies before the annuity commencement
date, and a contingent annuitant has been named, the contingent annuitant
becomes the annuitant. Once named, neither the annuitant nor the contingent
annuitant, if any, may be changed at any time.
If there is no contingent annuitant when the annuitant dies prior to the annuity
commencement date, we will pay the beneficiary the death benefit then due. The
beneficiary will be as provided in the beneficiary designation then in effect.
If no beneficiary designation is in effect, or if there is no designated
beneficiary living, the owner will be the beneficiary. If the annuitant was the
sole owner and there is no beneficiary designation, the annuitant's estate will
be the beneficiary.
THE BENEFICIARY
The beneficiary is the person to whom we pay death benefit proceeds if the
annuitant (when there is no contingent annuitant) or owner dies prior to the
annuity commencement date. We pay death benefit proceeds to the primary
beneficiary. See Proceeds Payable to the Beneficiary.
If the beneficiary dies before the annuitant or owner, the death benefit
proceeds are paid to the contingent beneficiary, if any. If there is no
surviving beneficiary, we pay the death benefit proceeds to the owner (if other
than the annuitant). If the owner was the annuitant, we pay any death benefit
proceeds to the annuitant's estate.
One or more persons who must be individuals may be named as beneficiary or
contingent beneficiary. In the case of more than one beneficiary, we will assume
any death benefit proceeds are to be paid in equal shares to the surviving
beneficiaries. You may specify other than equal shares.
You have the right to change beneficiaries during the annuitant's lifetime
unless you have designated an irrevocable beneficiary. When an irrevocable
beneficiary has been designated, you and the irrevocable beneficiary must act
together to exercise the rights and options under the contract.
CHANGE OF OWNER OR BENEFICIARY
During the annuitant's lifetime and while the contract is in effect, you may
transfer ownership of the contract (if purchased in connection with a non-
qualified plan) subject to our published rules at the time of the change. You
may also change the beneficiary. To make either of these changes, you must send
us written notice of the change in a form satisfactory to us. The change will
take effect as of the day the notice is signed. The change will not affect any
payment made or action taken by us before recording the change at our Customer
Service Center. See Additional Considerations, Transfer of Annuity Contracts,
and Assignments.
AVAILABILITY OF THE CONTRACT
We can issue a contract if both the annuitant and the owner are not older than
age 85.
TYPES OF CONTRACTS
QUALIFIED CONTRACTS
The contract may be issued as an Individual Retirement Annuity or in
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
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FACTS ABOUT THE CONTRACT (CONTINUED)
THAN APRIL 1ST OF THE CALENDAR YEAR FOLLOWING THE CALENDAR YEAR IN WHICH YOU
ATTAIN AGE 70 1/2.
NON-QUALIFIED CONTRACTS
The contract may fund any non-qualified plan. Non-qualified contracts do not
qualify for any tax-favored treatment other than the benefits provided for by
annuities.
YOUR RIGHT TO SELECT OR CHANGE
CONTRACT OPTIONS
Before the annuity commencement date, you may change the annuity commencement
date, frequency of annuity payments or the annuity option by sending a written
request to the Customer Service Center. The annuitant named on the application
or enrollment form may not be changed at any time.
PREMIUMS
You purchase the contract with an initial premium. After the end of the free
look period, you may make additional premium payments. See Making Additional
Premium Payments. The minimum initial premium is $10,000 for a non-qualified
contract and $1,500 for a qualified contract. If your initial premium will be
$25,000 or more, we also offer DVA Series 100 through another prospectus, which
is a contract with a different charging structure.
We may refuse a premium payment if an initial premium or the sum of all premium
payments is more than $1,500,000. We may change the minimum initial or
additional premium requirements for certain group or sponsored arrangements. See
Group or Sponsored Arrangements.
QUALIFIED PLANS
For IRA contracts, the annual premium on behalf of any individual contract may
not exceed $2,000. Provided your spouse does not make a contribution to an
IRA, you may set up a spousal IRA even if your spouse has earned some
compensation during the year. The maximum deductible amount for a spousal IRA
program is the lesser of $2,250 or 100% of your compensation reduced by the
contribution (if any) made by you for the taxable year to your own IRA.
However, no more than $2,000 can go to either your or your spouse's IRA in any
one year. For example, $1,750 may go to your IRA and $500 to your spouse's
IRA. These maximums are not applicable if the premium is the result of a
rollover from another qualified plan.
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 of a completed application or enrollment form. We may retain the
initial premium for up to five days while attempting to complete an incomplete
application or enrollment form. If the application or enrollment form cannot be
made complete within five valuation days, the applicant or enrollee will be
informed of the reasons for the delay and the initial premium will be returned
immediately unless the applicant or enrollee specifically consents to our
retaining the initial premium until the application or enrollment form is made
complete. Thereafter, all premiums will be accepted on the day received.
We will accept, by agreement with broker-dealers who use wire transmittals,
transmittal of initial and additional premium payments by wire order from the
broker-dealer to the Customer Service Center. Such transmittals must be
accompanied by a simultaneous telephone facsimile transmission containing the
essential information we require to open an account and allocate the premium
payment.
Premium payments accepted via wire order and accompanying facsimile
transmissions will be invested at the value next determined following receipt.
Wire orders not accompanied by facsimile transmissions, or accompanied by
facsimile transmissions which do not contain the essential information we
require to open an account and allocate the premium payment, may be retained for
a period not exceeding five business days while an attempt is made to obtain the
required facsimile transmission. If the required facsimile transmission cannot
be obtained within five business days, the Customer
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FACTS ABOUT THE CONTRACT (CONTINUED)
Service Center will inform the broker-dealer, on behalf of the
applicant/enrollee, of the reasons for the delay and return the premium payment
immediately to the broker-dealer for return to the applicant/enrollee, unless
the applicant/enrollee specifically consents to allow us to retain the premium
payment until the required facsimile transmission is received by the Customer
Service Center.
We will issue the contract; however, until we have received and accepted at the
Customer Service Center a properly completed application or enrollment form, we
reserve the right to rescind the contract. If an application or enrollment form
is not received within ten days of receipt of the initial premium via wire
order, or if an incomplete application or enrollment form is received and cannot
be completed within ten days of receipt of the initial premium, the amount of
the initial premium, with any gain, will be returned to the broker-dealer for
return to the applicant/enrollee. In no event will less than the full amount of
the initial premium be returned to the applicant/enrollee.
On the date we receive and accept your initial or additional premium payment:
(1) We allocate the initial premium among the
divisions according to your instructions, subject to any restrictions. See
Restrictions on Allocation of Premium Payments. For additional premium
payments, the accumulation value will increase by the amount of the premium.
If we do not receive instructions from you, the increase in the accumulation
value will be allocated among the divisions in proportion to the amount of
accumulation value in each division as of the date we receive and accept the
additional premium payment.
(2) For an initial premium, we calculate the
distribution fee and any charge for premium taxes, if applicable. When an
additional premium payment is made we increase any distribution fee and any
charge for premium taxes, if applicable. These charges will be collected by
us from the contract's accumulation value. HOWEVER, WE CURRENTLY WAIVE THE
DEDUCTION OF THE CHARGE FOR PREMIUM TAXES. (See Charges and Fees, PREMIUM
TAXES).
(3) For an initial premium, we calculate the
guaranteed death benefit. When an additional premium payment is made we increase
the guaranteed death benefit.
ELECTRONIC DATA TRANSMISSION OF
APPLICATION INFORMATION
In certain states, we will also accept, by agreement with broker-dealers who
use electronic data transmissions of application information, wire
transmittals of initial premium payments from the broker-dealer to the
Customer Service Center for purchase of the contract. Contact the Customer
Service Center to find out about state availability.
Upon receipt of the electronic data and wire transmittal, we will open an
account and allocate the premium payment according to the client's
instructions. Based on the information provided, we will generate an
application or enrollment form and contract to be forwarded to the
applicant/enrollee for signature.
During the period from receipt of the initial premium until the signed
application or enrollment form is received, the owner may not execute any
financial transactions with respect to the contract unless such transactions
are requested in writing and signature guaranteed.
RESTRICTIONS ON ALLOCATION OF
PREMIUM PAYMENTS
We may require that the initial premium be allocated to the Specially 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 Measurement of Investment Experience, INDEX
OF INVESTMENT EXPERIENCE AND UNIT VALUE.
YOUR RIGHT TO REALLOCATE
You may reallocate your accumulation value among the divisions of the Accounts
at the end of the free look period. You are allowed five allocation changes per
contract year without charge. There will be a charge of $25 deducted from the
accumulation value for each additional allocation change. When a reallocation is
made, we redeem shares of the Series underlying the divisions you are
transferring from at their net asset value. Reinvestment is then made in shares
of the Series of the divisions you are transferring to at their net asset value.
To make a reallocation change, you must provide us with satisfactory notice at
our Customer Service Center.
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FACTS ABOUT THE CONTRACT (CONTINUED)
RESTRICTIONS ON REALLOCATIONS
Some restrictions may apply based on the free look provisions of the state
where the contract is issued. See Your Right to Cancel or Exchange Your
Contract.
DOLLAR COST AVERAGING OPTION
If you have at least $10,000 of accumulation value in the Limited Maturity Bond
Division or the Liquid Asset Division, you may choose to have a specified dollar
amount transferred from this division to other divisions in the Accounts on a
monthly basis. The main objective of dollar cost averaging is to attempt to
shield your investment from short term price fluctuations. Since the same dollar
amount is transferred to other divisions each month, more units are purchased in
a division if the value per unit is low and less units are purchased if the
value per unit is high.
Therefore, a lower than average value per unit may be achieved over the long
term. This plan of investing allows investors to take advantage of market
fluctuations but does not assure a profit or protect against a loss in declining
markets. See Measurement of Investment Experience, INDEX OF INVESTMENT
EXPERIENCE AND UNIT VALUE.
This dollar cost averaging option may be elected at the time the application or
enrollment form is completed or at a later date. The minimum amount that may be
transferred each month is $250. The maximum amount which may be transferred is
equal to the accumulation value in the Limited Maturity Bond Division or the
Liquid Asset Division when elected, divided by 12.
The transfer date will be the same calendar day each month as the contract date.
The dollar amount will be allocated to the divisions in which you are invested
in proportion to your accumulation value in each division unless you specify
otherwise. If, on any transfer date, the accumulation value is equal to or less
than the amount you have elected to have transferred, the entire amount will be
transferred and the option will end. You may change the transfer amount once
each contract year, or cancel this option by sending us satisfactory notice to
the Customer Service Center at least seven days before the next transfer date.
Any allocation under this option will not be included in determining if the
excess allocation charge will apply.
WHAT HAPPENS IF A DIVISION IS NOT AVAILABLE
When a distribution is made from an investment portfolio supporting a division
of Account B 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 as an
allocation change of the accumulation value for purposes of the number of free
allocation changes permitted. When a distribution from a portfolio or division
cannot be reinvested in the portfolio due to the unavailability of securities
for acquisition, we will notify you promptly after the allocation has occurred.
If within 30 days you allocate the accumulation value from the Specially
Designated Division to other divisions of your choice, such allocations are not
counted as an allocation change of the accumulation value for purposes of the
number of free allocation changes permitted.
YOUR ACCUMULATION VALUE
Your accumulation value is the sum of the amounts in each of the divisions in
which you are invested, and is the amount available for investment at any time.
You select the divisions to which to allocate the accumulation value. We adjust
your accumulation value on each Valuation Date to reflect the divisions'
investment performance and on each contract processing date to reflect the
removal of any charges. The accumulation value is applied to your choice of an
annuity option on the annuity commencement date. See Choosing an Income Plan.
You may choose up to fourteen divisions and allocate your accumulation value
among them in any way you choose.
ACCUMULATION VALUE IN EACH DIVISION
ON THE CONTRACT DATE
On the contract date, the accumulation value is allocated to each division as
specified on the application or enrollment form, unless the contract is issued
in a state that requires the return of premium payments during the free look
period, in which case, your initial premium will be
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FACTS ABOUT THE CONTRACT (CONTINUED)
allocated to the Specially Designated Division during the free look period.
See Your Right to Cancel or Exchange Your Contract.
ON EACH VALUATION DATE
At the end of each subsequent valuation period, the amount of accumulation
value in each division will be calculated as follows:
(1) We take the accumulation value in the
division at the end of the preceding valuation period.
(2) We multiply (1) by the division's net rate of
return for the current valuation period.
(3) We add (1) and (2).
(4) We add to (3) any additional premium
payments allocated to the division during the current valuation period.
(5) We add or subtract allocations to or from
that division during the current valuation period.
(6) We subtract from (5) any partial withdrawals
and any associated charges allocated to that division during the current
valuation period.
(7) We subtract from (6) the amounts allocated
to that division for:
(a) any contract fees; and
(b) any distribution fee and any charge for
premium taxes. HOWEVER, WE CURRENTLY WAIVE THE DEDUCTION OF THE CHARGE
FOR PREMIUM TAXES. (See Charges and Fees, PREMIUM TAXES.)
All amounts in (7) are allocated to each division in the proportion that (6)
bears to the accumulation value, unless the Charge Deduction Division has been
specified.
MEASUREMENT OF INVESTMENT EXPERIENCE
INDEX OF INVESTMENT EXPERIENCE
AND UNIT VALUE
The investment experience of a division is determined on each valuation date.
We use an index to measure changes in each division's experience during a
valuation period. We set the index at $10 when the first investments in a
division are made. 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 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 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.
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FACTS ABOUT THE CONTRACT (CONTINUED)
(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 daily charge for
mortality and expense risks for each day in the valuation period.
(9) We subtract from (8) the asset based
administrative charge for each day in the valuation period.
NET RATE OF RETURN FOR A DIVISION
OF THE ACCOUNTS
The net rate of return for a division during a valuation period is the
experience factor for that valuation period minus one.
CASH SURRENDER VALUE
Your contract's cash surrender value fluctuates daily with the investment
results of the divisions you have selected. We do not guarantee any minimum. On
any date before the annuity commencement date while the contract is in effect,
the cash surrender value is calculated as follows:
(1)We take the contract's accumulation value;
(2)We deduct any surrender charge and any
unrecovered charge for premium taxes. (See Charges and Fees, PREMIUM TAXES);
(3)We deduct any charges incurred but not yet
deducted. (See Charges and Fees, ADMINISTRATIVE CHARGE, EXCESS ALLOCATION
CHARGE, PARTIAL WITHDRAWAL CHARGE).
SURRENDERING TO RECEIVE THE
CASH SURRENDER VALUE
The contract may be surrendered by the owner at any time while the annuitant is
living and before the annuity commencement date.
A surrender will be effective on the date your written request and the contract
are received by us at our Customer Service Center and the cash surrender value
is determined accordingly as of that date. All benefits under the contract will
then be terminated as of that date. You may receive the cash surrender value in
a single sum payment or apply it under one or more annuity options. See The
Annuity Options. We will usually pay the cash surrender value within seven days
but we may delay payment as described in the When We Make Payments provision.
PARTIAL WITHDRAWALS
Prior to the annuity commencement date, while the annuitant is living and the
contract is in effect, you may take partial withdrawals from the accumulation
value by sending satisfactory notice to the Customer Service Center. Unless you
specify otherwise, the amount of the withdrawal will be taken in proportion to
the amount of accumulation value in each division in which you are invested.
There are three options available for selecting partial withdrawals, the
Conventional Partial Withdrawal Option, the Systematic Partial Withdrawal Option
and the IRA Partial Withdrawal Option. All three options are described below.
Partial withdrawals may not be repaid, and in no event may a withdrawal amount
be greater than 90% of the cash surrender value.
CONVENTIONAL PARTIAL WITHDRAWAL OPTION
After the free look period, you may take a conventional partial withdrawal
once each contract year without charge. If you take more than one conventional
partial withdrawal in a contract year, we impose a charge of the lesser of $25
and 2.0% of the amount withdrawn. The minimum amount you may withdraw under
this option is $1,000 and the maximum amount that may be withdrawn without
incurring a surrender charge (assuming no systematic or IRA partial
withdrawals are in place during that contract year) is 15% of the accumulation
value. SEE SURRENDER CHARGES FOR EXCESS PARTIAL WITHDRAWALS, below.
SYSTEMATIC PARTIAL WITHDRAWAL OPTION
This option may be elected at the time the application or enrollment form is
completed, or at a later date. This option may be elected to commence in a
contract year where a conventional partial withdrawal has been taken. However,
it may not be elected while the IRA partial withdrawal option is in effect.
You may choose to receive systematic partial withdrawals on a monthly or
quarterly basis from the accumulation value in the divisions of the Accounts.
The commencement of payments under this option may not be elected to start
sooner
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FACTS ABOUT THE CONTRACT (CONTINUED)
than 28 days after the contract issue date. You select the date of the quarter
or month when the withdrawals will be made but no later than the 28th day of
the month. If no date is selected, the withdrawals will be made on the same
calendar day of each month as the contract date. You may select a dollar
amount or a percentage of the accumulation value as the amount of your
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 the accumulation value on
the withdrawal date, the amount withdrawn will be reduced so that it equals
such percentage. For example, if a $500 monthly withdrawal was elected and on
the withdrawal date 1.25% of the accumulation value equaled $300, the
withdrawal amount would be reduced to $300. If a percentage is selected and
the amount to be systematically withdrawn based on that percentage would be
less than the minimum of $100, we would increase the amount to $100 provided
it does not exceed the maximum percentage. If it is below the maximum
percentage we will send the minimum. If it is above the maximum percentage we
will send the amount and then cancel the option. For example, if you selected
1.0% to be systematically withdrawn on a monthly basis and that amount equaled
$90, and since $100 is less than 1.25% of the accumulation value, we would
send $100. If 1.0% equaled $75, since $100 is more than 1.25% of the
accumulation value we would send $75 and then cancel the option. In such a
case, in order to receive systematic partial withdrawals in the future, you
would be required to submit a new notice to our Customer Service Center.
You may change the amount or percentage of your withdrawal once each contract
year or cancel this option at any time by sending satisfactory notice to us at
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.
There may be a surrender charge associated with a partial withdrawal in any
contract year in which you receive systematic partial withdrawals and also
take a conventional partial withdrawal. See SURRENDER CHARGES FOR EXCESS
PARTIAL WITHDRAWALS, below.
IRA PARTIAL WITHDRAWAL OPTION
If you have an IRA contract and will attain age 70 1/2 in the current calendar
year, distributions will be made to you to satisfy requirements imposed by
Federal tax law. IRA partial withdrawals provide payout of amounts required to
be distributed by the Internal Revenue Service rules governing mandatory
distributions under qualified plans. See Federal Tax 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
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FACTS ABOUT THE CONTRACT (CONTINUED)
notice to our Customer Service Center at least seven days prior to the next
scheduled withdrawal date.
There may be a surrender charge associated with a partial withdrawal in any
contract year during which you receive IRA partial withdrawals and take a
conventional partial withdrawal. See SURRENDER CHARGES FOR EXCESS PARTIAL
WITHDRAWALS, below.
SURRENDER CHARGES FOR EXCESS
PARTIAL WITHDRAWALS
An excess partial withdrawal is the amount by which annualized partial
withdrawals for a contract year exceed 15% of the accumulation value on the
date of the withdrawal. Any partial withdrawal and any combination of partial
withdrawals either taken during a contract year or expected to be received in
a contract year will be taken into account in determining the amount of the
excess partial withdrawal. An excess partial withdrawal will be considered a
partial surrender of the contract and we will impose a surrender charge
applicable to the accumulation value. Such amount will be deducted from the
accumulation value in proportion to the accumulation value in each division
from which the excess partial withdrawal was taken.
An excess partial withdrawal will result in the imposition of a surrender
charge and a corresponding reduction in the remaining surrender charge that
subsequently can be imposed under the contract. For example the following
assumes a conventional partial withdrawal of $17,200 is taken at the beginning
of the fourth contract year. A contract with a current surrender charge of
$3,000 (an initial surrender charge of $6,000 reducing at the rate of $1,000
per contract year for six years), has an accumulation value of $100,000.
In this example, $15,000 (15% of accumulation value) may be withdrawn during
the contract year without the imposition of a surrender charge. The excess
partial withdrawal is the amount by which the withdrawal is in excess of the
maximum ($17,200 - $15,000 = $2,200). The excess is calculated as a percentage
of the accumulation value ($2,200/$100,000 = .022). Applying this percentage
to the current amount of the surrender charge ($3,000 x .022 = $66) determines
the amount to be deducted from the accumulation value as of the date of the
withdrawal.
If the contract were surrendered following the partial withdrawal, the
surrender charge would be $2,934 ($3,000 - $66). If instead, the contract were
surrendered at the beginning of the fifth year assuming no further partial
withdrawals, the surrender charge would be $1,934 ($2,000 - $66).
CONTRACTS WITH A CONTRACT DATE PRIOR TO MAY 3, 1993 AND THE PROSPECTUS
DELIVERED IN CONNECTION WITH SUCH CONTRACTS, DESCRIBED THIS PROVISION AS
ACCELERATION OF RECOVERY OF DEFERRED LOADING, WHICH IS THE FUNCTIONAL
EQUIVALENT OF THE ASSESSMENT OF A SURRENDER CHARGE FOR EXCESS PARTIAL
WITHDRAWALS. LIMITED EDITION CONTRACTS PURCHASED THROUGH ACCOUNT D AND THE
PROSPECTUS DELIVERED IN CONNECTION WITH SUCH CONTRACTS ALSO DESCRIBED THIS
PROVISION AS ACCELERATION OF RECOVERY OF DEFERRED LOADING.
PARTIAL WITHDRAWALS IN GENERAL
CONSULT YOUR TAX ADVISOR REGARDING THE TAX CONSEQUENCES ASSOCIATED WITH TAKING
PARTIAL WITHDRAWALS. A partial withdrawal made before the taxpayer reaches age
59 1/2 may result in imposition of a tax penalty of 10% of the taxable portion
withdrawn. Please refer to Federal Tax Considerations for more details.
PROCEEDS PAYABLE TO THE BENEFICIARY
If either the annuitant (when there is no contingent annuitant) or owner dies
prior to the annuity commencement date, we will pay the beneficiary the death
benefit proceeds under the contract. Such amount may be received in a single sum
or applied to any of the annuity options. See The Annuity Options. If we do not
receive a request to apply the death benefit proceeds to an annuity option, a
single sum distribution will be made. We may reduce the death benefit proceeds
payable under certain group or sponsored arrangements. See Part 1, Group or
Sponsored Arrangements.
If the annuitant and owner are both age 75 or younger at issue (age 80 or
younger for contracts with a contract date before November 6, 1992) the death
benefit is the greater of the accumulation value and the guaranteed death
benefit.
MAXIMUM GUARANTEED DEATH BENEFIT
This amount is calculated as follows:
(1) We determine the total premiums paid;
(2) We multiply (1) by two;
(3) We determine the total partial withdrawals
taken; and
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FACTS ABOUT THE CONTRACT (CONTINUED)
(4) We subtract (3) from (2).
GUARANTEED DEATH BENEFIT
On the contract date the guaranteed death benefit is equal to the initial
premium. On subsequent valuation dates, the guaranteed death benefit is
calculated as follows:
(1) We take the guaranteed death benefit from
the prior valuation date;
(2) We calculate interest on (1) for the current
valuation period at an annual rate of 7% (the GUARANTEED DEATH BENEFIT
INTEREST RATE), except that with respect to amounts in the Liquid Asset
Division, the interest rate applied to such amounts will be the net rate
of return for the Liquid Asset Division during the current valuation
period, if it is less than 7%; (Under contracts with a contract date
before November 6, 1992, the 7% test for the Liquid Asset Division does
not apply.);
(3) We add (1) and (2);
(4) We add to (3) any additional premiums paid
during the current valuation period; and,
(5) We subtract from (4) any partial withdrawals
made during the current valuation period.
If (5) is greater than the maximum guaranteed death benefit, we will pay the
maximum guaranteed death benefit.
If the annuitant or owner is age 76 or older at issue (age 81 or older for
contracts with a contract date before November 6, 1992), the death benefit is
the greater of:
(1) The cash surrender value; and
(2) The sum of the premiums paid, less any
partial withdrawals.
DEATH BENEFIT FOR CONTRACTS PURCHASED IN NORTH CAROLINA WITH A CONTRACT DATE
BEFORE NOVEMBER 6, 1992
If the annuitant and owner are both age 80 or younger at issue the death
benefit is the greater of:
(1) The accumulation value; and
(2) The sum of the premiums paid, less any
partial withdrawals.
If the annuitant or owner is age 81 or older at issue, the death benefit is
the greater of:
(1)The cash surrender value; and
(2)The sum of the premiums paid, less any
partial withdrawals.
HOW TO CLAIM PAYMENTS TO BENEFICIARY
We must receive due proof of the death of the annuitant or owner (such as an
official death certificate) at our Customer Service Center before we will make
any payments to the beneficiary. We will calculate the death benefit as of the
date we receive due proof of death. The beneficiary should contact our
Customer Service Center for instructions.
REPORTS TO OWNERS
We will send you a report once each contract quarter within 31 days after the
end of each contract quarter. The report will show the accumulation value, the
cash surrender value, and the death benefit as of the end of the contract
quarter.
The report will also show the allocation of the accumulation value as of such
date and the amounts deducted from or added to the accumulation value since the
last report. The report will also include any other information that may be
currently required by the insurance supervisory official of the jurisdiction in
which the contract is delivered. We will also send you copies of any shareholder
reports of the portfolios or securities in which the Accounts invest, as well as
any other reports, notices or documents required by law to be furnished to
contract owners.
WHEN WE MAKE PAYMENTS
We will pay death benefit proceeds and the cash surrender value within seven
days after our Customer Service Center receives all the information needed to
process the payment.
However, we may delay payment of amounts derived from the divisions if it is not
practical for us to value or dispose of shares of the Accounts because:
(1) The NYSE is closed for trading;
(2) The SEC determines that a state of emergency
exists;
(3) An order or pronouncement of the SEC permits
a delay for the protection of contract owners; or,
(4) The check used to pay the premium has not
cleared through the banking system. This may take up to 15 days.
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FACTS ABOUT THE CONTRACT (CONTINUED)
During such times, as to amounts allocated to the divisions, we may delay:
(1) Determination and payment of any cash
surrender value;
(2) Determination and payment of any death
benefit if death occurs before the annuity commencement date;
(3) Allocation changes of the accumulation value;
or,
(4) Application under an annuity option of the
accumulation value.
CHARGES AND FEES
CHARGE DEDUCTION DIVISION
You may specify on the application or enrollment form if you wish to use the
Charge Deduction Division Option. If you so specify, all charges against the
accumulation value will be deducted from the Liquid Asset Division. If the
amount of the charge is greater than the amount in the division, the charge will
be deducted proportionately from all the divisions in which you are invested.
You may also choose to elect or cancel this option while the contract is in
force by sending us satisfactory notice to our Customer Service Center. If you
do not elect this option, the charges will be deducted proportionately from all
the divisions in which you are invested.
CHARGES DEDUCTED FROM THE
ACCUMULATION VALUE
We invest the entire amount of the initial and any additional premium payments
in the divisions you select, subject to certain restrictions. See Restrictions
on Allocation of Premium Payments. We then periodically deduct certain amounts
from your accumulation value. We may reduce certain fees and charges, including
any distribution fees, surrender, administration, and mortality and expense risk
charges, under group or sponsored arrangements. See Group or Sponsored
Arrangements. Charges are deducted proportionately from all divisions in which
you are invested, unless you have elected the Charge Deduction Division. The
charges we deduct are:
DISTRIBUTION FEE
We deduct a sales load in an annual amount of 1.00% of each premium at the end
of each contract processing period for a period of six years from the date we
receive and accept each premium payment.
SURRENDER CHARGE
A surrender charge is imposed as a percentage of premium if the contract is
surrendered or an excess partial withdrawal is taken during the six year
period from the date we receive and accept each premium payment. The
percentage imposed at the time of surrender or excess partial withdrawal
depends on the distribution fee collected to the time the contract is
surrendered or the excess partial withdrawal is taken. The surrender charge in
the first contract year is 6.00% and reduces by 1.00% each year during the six
year period from the date we receive and accept each premium payment.
CONTRACTS WITH A CONTRACT DATE PRIOR TO MAY 3, 1993 AND THE PROSPECTUS
DELIVERED IN CONNECTION WITH SUCH CONTRACTS, DESCRIBED THE SALES LOAD AS A
DEFERRED LOAD, WHICH IS EQUIVALENT TO THE COMBINATION OF THE DISTRIBUTION FEE
AND SURRENDER CHARGE DESCRIBED ABOVE. LIMITED EDITION CONTRACTS PURCHASED
THROUGH ACCOUNT D AND THE PROSPECTUS DELIVERED IN CONNECTION WITH SUCH
CONTRACTS ALSO DESCRIBED THE SALES LOAD AS A DEFERRED LOAD.
If your initial premium will be $25,000 or more, we also offer DVA Series 100
through another prospectus, which is a contract with a different charging
structure.
PREMIUM TAXES
We make a charge for state and local premium taxes in certain states which can
range from 0% to 3.5% of premium. The charge depends on the annuitant's or
owner's state of residence, as applicable. We reserve the right to change this
amount to conform with changes in the law or if the annuitant changes state of
residence.
Premium taxes are generally incurred on the annuity commencement date and a
charge for such premium taxes is then deducted from your accumulation value on
such date. However, some jurisdictions impose a premium tax at the time the
initial and additional premiums are paid, regardless of the annuity
commencement date. In those states we initially advance the amount of the
charge for premium taxes to your accumulation value and then deduct it in
equal installments on each contract processing date over a six year period.
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CHARGES AND FEES (CONTINUED)
CURRENTLY, IN THOSE STATES WHERE WE ADVANCE THE CHARGE FOR PREMIUM TAXES, WE
WILL WAIVE THE DEDUCTION OF THE APPLICABLE INSTALLMENTS OF THE CHARGE FOR
PREMIUM TAXES ON EACH CONTRACT PROCESSING DATE. HOWEVER, WE WILL DEDUCT THE
UNRECOVERED CHARGE FOR PREMIUM TAXES (NOT INCLUDING INSTALLMENTS WHICH WERE
WAIVED) WHEN DETERMINING THE CASH SURRENDER VALUE PAYABLE IF YOU SURRENDER
YOUR CONTRACT. WE RESERVE THE RIGHT TO DEDUCT THE TOTAL AMOUNT OF THE CHARGE
FOR PREMIUM TAXES PREVIOUSLY WAIVED AND UNRECOVERED ON THE ANNUITY
COMMENCEMENT DATE.
In those cases when we advance the charge for premium taxes, since the charge
for premium taxes is advanced to the accumulation value, a positive net rate
of return will give a higher cash surrender value and a negative net rate of
return will give a lower cash surrender value than would be the case had the
charge for premium taxes been deducted from your premium payment.
ADMINISTRATIVE CHARGE
The administrative charge is incurred at the beginning of the contract
processing period and deducted at the end of each contract processing period.
We deduct this charge when determining the cash surrender value payable if you
surrender the contract prior to the end of a contract processing period. The
amount deducted is $40 per contract year if total premiums paid in the first
contract year are less than $100,000. If the total premium paid in the first
contract year equals $100,000 or more, the charge is zero. This charge is to
cover a portion of our administrative expenses. See ASSET BASED ADMINISTRATIVE
CHARGE, below.
EXCESS ALLOCATION CHARGE
We allow you five free allocation changes between divisions per contract year.
For each additional allocation change, we will charge you $25 at the time each
allocation change is processed. This amount represents the maximum we will
charge. The charge is deducted from the division(s) from which each such
reallocation is made in proportion to the amount being transferred from each
such division unless you have chosen to use the Charge Deduction Division. The
excess allocation charge is set at a level that is not designed to produce
profit for Golden American or any affiliate. Any allocation(s) or transfer(s)
due to the election of the Dollar Cost Averaging Option 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.
PARTIAL WITHDRAWAL CHARGE
If you take more than one conventional partial withdrawal during a contract
year, we impose a charge of the lesser of $25 and 2.0% of the amount withdrawn
for each additional conventional partial withdrawal. The charge is deducted
from the division(s) from which each such partial withdrawal is made in
proportion to the amount being withdrawn from each division unless you have
chosen to use the Charge Deduction Division. See Partial Withdrawals,
CONVENTIONAL PARTIAL WITHDRAWAL OPTION.
CHARGES DEDUCTED FROM THE DIVISIONS
MORTALITY AND EXPENSE RISK CHARGE
The daily charge is at the rate of 0.002477% (equivalent to an annual rate of
0.90%) on the assets in each division. Approximately 0.575% of this annual
charge is allocated to the mortality risk and 0.325% is allocated to the
expense 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 of the
Accounts, to compensate Golden American for a portion of the administrative
expenses under the contract. The daily charge is at a rate of 0.000276%
(equivalent to an annual rate of 0.10%) on the assets in each division.
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CHARGES AND FEES (CONTINUED)
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 annuitant under an income plan. We will make these
payments under the annuity option chosen in the application or enrollment form
or as subsequently changed. You may change an annuity option by making a written
request to us at least 30 days prior to the annuity commencement date of the
contract. The amount of the payments will be determined by applying the
accumulation value on the annuity commencement date in accordance with The
Annuity Options section below. See When We Make Payments.
You may also elect an annuity option on surrender of the contract for its cash
surrender value or, you may choose one or more annuity options for the payment
of death benefit proceeds while it is in effect and before the annuity
commencement date. If, at the time of the annuitant's or owner's death, no
option has been chosen for paying death benefit proceeds, the beneficiary may
choose an option within one year.
The minimum monthly annuity income payment that we will make is $20. We may
require that a single sum payment be made if the accumulation value is less than
$2,000 or if the calculated monthly annuity income payment is less than $20.
For each option we will issue a separate written agreement putting the option
into effect. Before we pay any annuity benefits, we require the return of the
contract. If your contract has been lost, we will require that you complete and
return the applicable lost contract form. Various factors will affect the level
of annuity benefits including the annuity option chosen, the assumed interest
rate used and the investment results of the division(s) in which the
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 in the application or enrollment form.
You may select any date following the third contract anniversary but before the
contract processing date in the month
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CHOOSING AN INCOME PLAN (CONTINUED)
following the annuitant's 90th birthday. If you do not select a date, the
annuity commencement date will be in the month following the annuitant's 90th
birthday. However, in the state of Pennsylvania the annuity commencement date
may not be later than in the month following the annuitant's 85th birthday for
annuitants with an issue age of 80 and under. FOR CONTRACTS WITH CONTRACT DATES
BEFORE MAY 3, 1993, DIFFERENT ANNUITY COMMENCEMENT DATE LIMITATIONS MAY APPLY.
If the annuity commencement date occurs when the annuitant is at an advanced
age, such as over age 85, it is possible that the contract will not be
considered an annuity for Federal tax purposes. See Federal Tax Considerations.
For a contract purchased in connection with a qualified plan, 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 is variable. For a fixed option, the accumulation value is
transferred to the general account.
OPTION 1. INCOME FOR A FIXED PERIOD
Payment is made in equal installments for a fixed number of years based on the
accumulation value as of the annuity commencement date. We guarantee that each
monthly payment will be at least the amount set forth in the contract.
Guaranteed amounts for annual, semi-annual and quarterly payments are
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
annuitant reaches age 59 1/2.
OPTION 2. INCOME FOR LIFE
Payment is made in equal monthly installments and guaranteed for at least a
period certain. The period certain can be 10 or 20 years. Other periods
certain are available on request. A refund certain may be chosen instead.
Under this arrangement, income is guaranteed until payments equal the amount
applied. If the person named lives beyond the guaranteed period, payments
continue until his or her death. We guarantee that each payment will be at
least the amount set forth in the contract corresponding to the person's age
on his or her last birthday before the option's effective date. Amounts for
ages not shown in the contract are available upon request.
OPTION 3. JOINT LIFE INCOME
This option is available if there are two persons named to receive payments.
At least one of the persons named must be either the owner or beneficiary of
the contract. Monthly payments are guaranteed and are made as long as at least
one of the named persons is living. There is no minimum number of payments.
Monthly payment amounts are available upon request.
OPTION 4. ANNUITY PLAN
An amount can be used to buy any single premium annuity we offer on the
option's effective date.
PAYMENT WHEN NAMED PERSON DIES
When the person named to receive payment dies, we will pay any amounts still due
as provided by the option agreement. The amounts still due are determined as
follows:
(1) For options 1, 2, or any remaining guaranteed
payments, payments will be continued. Under options 1 and 2, the discounted
values of the remaining guaranteed payments may be paid in a single sum.
This means we deduct the amount of the interest each remaining guaranteed
payment would have earned had it not been paid out early. The discount
interest rate is 3% for option 1 and 3.50% for option 2 per year. We will
however, base the discount interest rate on the interest rate used to
calculate the payments for options 1 and 2 if such payments were not based
on the tables in the contract.
(2) For option 3, no amounts are payable after
both named persons have died.
(3) For option 4, the annuity agreement will state
the amount due, if any.
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OTHER INFORMATION
OTHER CONTRACT PROVISIONS
IN CASE OF ERRORS ON THE APPLICATION OR ENROLLMENT FORM
If an age or sex given in the application or enrollment form is misstated, the
amounts payable or benefits provided by the contract shall be those that the
premium payment would have bought at the correct age or sex.
SENDING NOTICE TO US
Any written notices, inquiries or requests should be sent to our Customer
Service Center. Please include your name, your contract number and, if you are
not the annuitant, the name of the annuitant.
ASSIGNING THE CONTRACT AS COLLATERAL
You may assign a non-qualified contract as collateral security for a loan or
other obligation. This does not change the ownership. However, your rights and
any beneficiary's rights are subject to the terms of the assignment. See
Additional Considerations, Transfer of Annuity Contracts, and Assignments. An
assignment may have Federal tax consequences. See Federal Tax Considerations.
You must give us satisfactory written notice at our Customer Service Center in
order to make or release an assignment. We are not responsible for the
validity of any assignment.
NON-PARTICIPATING
The contract does not participate in the divisible surplus of Golden 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 us at our
Customer Service Center. We will refund the accumulation value plus any
charges we deducted, and the contract will be voided as of the date we receive
the contract and your request. Some states require that we return the premium
paid. In these states, we require that your premium be allocated to the
Specially Designated Division during the free look period. If you exercise
your right to cancel, we will return the greater of (a) the premium invested
and (b) the accumulation value of your contract plus any amounts deducted
under the contract or by the Trust for taxes, charges or fees. If you do not
choose to exercise your right to cancel during the free look period, then at
the end of the free look period your money will be invested in the division(s)
chosen by you, based on the index of investment experience next computed for
each division. See Measurement of Investment Experience, INDEX OF EXPERIENCE
AND UNIT VALUE.
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 distribution fee,
surrender, administration, and mortality and expense risk charges. We may also
change the minimum initial and additional premium requirements, or reduce the
death benefit proceeds payable. Group arrangements include those in which a
trustee or an employer, for example, purchases contracts covering a group of
individuals on a group basis. Sponsored arrangements include those in which an
employer allows us to sell contracts to its employees on an individual basis.
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OTHER INFORMATION (CONTINUED)
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 distribution fee or
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 the Accounts 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% of any initial or additional premium payments
made.
REINSURANCE
Golden American reinsures its mortality risk associated with one or more
appropriately licensed insurance companies. Golden American also, effective June
1, 1994, entered into a reinsurance agreement on a modified coinsurance basis
with an affiliate of a broker-dealer which distributes Golden American's
products with respect to 25% of the business produced by that broker-dealer.
REGULATORY INFORMATION
VOTING RIGHTS
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. 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
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REGULATORY INFORMATION (CONTINUED)
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 Myles R. Tashman, Executive Vice President 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 financial statements of Golden American Life Insurance Company, Separate
Account B and The Managed Global Account of Separate Account D, appearing in the
Statement of Additional Information and in the Registration Statement, have been
audited by Ernst & Young LLP, independent auditors, as set forth in their
reports thereon appearing in the Statement of Additional Information and in the
Registration Statement and are included in reliance upon such reports given upon
the authority of such firm as experts in accounting and auditing.
FEDERAL TAX CONSIDERATIONS
INTRODUCTION
The contract is designed for use by individuals or groups in retirement plans
which are qualified under Section 408 or non-qualified under the provisions of
the Internal Revenue Code of 1986, as amended (the "Code"). The ultimate effect
of Federal income taxes on the amounts paid for the contract, on the investment
return on assets held under the contract, on annuity payments and on the
economic benefits to the owner, annuitant or beneficiary depends upon the terms
of the contract, upon Golden American's tax status and upon the tax status of
the individuals concerned.
The following discussion is general in nature and is not intended as tax advice.
Each person concerned should consult a competent tax advisor. No attempt is made
to consider any applicable state or other tax laws. Moreover, the discussion is
based upon Golden American's understanding of the Federal income tax laws as
they are currently interpreted. No representation is made regarding the
likelihood of continuation of the Federal income tax laws, the Treasury
Regulations, or the current interpretations by the Internal Revenue Service (the
"IRS"). For a discussion of Federal income taxes as they relate to the Trust,
please see the accompanying prospectus for the Trust.
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FEDERAL TAX CONSIDERATIONS (CONTINUED)
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 the Accounts are
reinvested and taken into account in determining the accumulation value. 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. (For purposes of this
rule, the amount of any indebtedness that is secured by a pledge or assignment
of the contract is treated as a payment received on account of a partial
withdrawal from the contract.) However, this rule applies only if (1) the
investments of the Accounts 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.
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 the Accounts, 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 division.
If the Accounts failed to comply with these diversification standards, the
contract would not be treated as an annuity contract for Federal income tax
purposes and the owner would generally be taxable currently on the income on
the contract (as defined in the tax law) beginning with the first period of
non-diversification. Golden American expects that the Accounts, 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 the Accounts, 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.
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FEDERAL TAX CONSIDERATIONS (CONTINUED) (CONTINUED)
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 the
Accounts. 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 the Accounts.
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 the Accounts,
that treatment might apply on a prospective basis. However, if the ruling or
regulations were not considered to set forth a new position, an owner might
retroactively be determined to be the owner of the assets of the Accounts.
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.
In addition to the foregoing, if the contract's annuity commencement date
occurs at a time when the annuitant is at an advanced age, such as over age
85, it is possible that the owner will be taxable currently on the annual
increase in the accumulation value. The remainder of this discussion assumes
that the contract will be treated as an annuity contract for Federal income
tax purposes.
2. WITHDRAWALS PRIOR TO THE ANNUITY COMMENCEMENT DATE
Code 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
conventional or systematic partial withdrawal from a contract prior to the
annuity commencement date will be treated as taxable income to the extent the
amount held under the contract immediately before the withdrawal occurs
exceeds the "investment in the contract." The "investment in the contract" is
defined in the Code as that portion, if any, of premium payments by or on
behalf of an individual under a contract which was not excluded from the
individual's gross income at the time of such payment less any amounts
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.
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FEDERAL TAX CONSIDERATIONS (CONTINUED) (CONTINUED)
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.
3. ANNUITY PAYMENTS AND WITHDRAWALS ON OR AFTER THE ANNUITY COMMENCEMENT DATE
Proceeds of a total surrender of the contract after the annuity commencement
date are taxable to the extent the proceeds exceed the investment in the
contract. In addition, proceeds of a partial withdrawal after the annuity
commencement date are fully taxable. Also, a portion of each annuity payment
under the contract is taxable if the value of the contract exceeds the
investment in the contract. The taxable portion of an annuity payment will be
subject to tax at ordinary income tax rates.
For fixed annuity payments, the taxable portion of each payment is determined
by using a formula known as the "exclusion ratio," which establishes the ratio
that the investment in the contract (allocated to the fixed annuity option)
bears to the total expected amount of fixed 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 a qualified plan; (v) allocable to investment
in the contract before
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FEDERAL TAX CONSIDERATIONS (CONTINUED) (CONTINUED)
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 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
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.
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. It is possible that the death benefit could be viewed as
violating the prohibition on investment in life insurance contracts with the
result that the contract would not be viewed as satisfying the requirements of
an IRA.
Subject to certain direct rollover and mandatory withholding requirements
(discussed below), amounts generally may be "rolled over" from a qualified
retirement plan to an Individual Retirement Annuity (or from an Individual
Retirement Annuity or individual retirement account to an Individual 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
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FEDERAL TAX CONSIDERATIONS (CONTINUED) (CONTINUED)
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.
ADDITIONAL CONSIDERATIONS
DISTRIBUTION-AT-DEATH RULES
In order to be treated as an annuity contract for Federal tax purposes, a
non-qualified contract must provide the following two distribution rules: (a) if
any holder dies on or after the annuity commencement date, and before the entire
interest 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 accrued and future income thereunder) may be continued in the name
of the spouse. Before the annuity commencement date, the holder will generally
be the owner, and after the annuity commencement date, the holder generally may
be the annuitant and the owner.
Where the holder is not an individual, solely for the purpose of the
distribution at death rules, the primary annuitant is considered the holder. The
primary annuitant is the individual the events in the life of whom are of
primary importance in affecting the timing or amount of payment under a
contract. Finally, in the case of joint holders, the distribution will be
required at the death of the first of the holders to die.
TAXATION OF DEATH BENEFIT PROCEEDS
Amounts may be distributed from a non-qualified contract because of the death of
an owner or annuitant. Generally, such amounts are includible in the income of
the recipient as follows: (a) if distributed in a lump sum, they are taxed in
the same manner as a full surrender of the contract, as described above, or (b)
if distributed under an annuity option, they are taxed in the same manner as
annuity payments, as described above.
TRANSFER OF ANNUITY CONTRACTS
Transfers of non-qualified annuity contracts for less than the full and adequate
consideration will trigger tax on the gain in the contract, at the time of such
transfer, with the transferee getting a step-up in basis for the amount included
in the owner's income. Such a transfer could result on the annuity commencement
date if the annuitant is not the owner or the owner's spouse. This provision
does not apply to transfers between spouses or incident to a divorce.
SECTION1035 EXCHANGES
Code Section1035 provides that no gain or loss shall be recognized on the
exchange of an annuity contract for another. If the exchanged contract was
issued prior to August 14, 1982, the tax rules which formerly provided that the
surrender was taxable only to the extent the amount received exceeds the owner's
investment in the contract, will continue to apply to the new contract. In
contrast, contracts issued on or after January 19, 1985, in a Code Section1035
exchange are treated as new contracts for purposes of the penalty tax and
distribution-at-death rules. Special rules and procedures apply to Code
Section1035 transactions. Prospective owners wishing to take advantage of Code
Section1035 should consult their tax advisors.
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ADDITIONAL CONSIDERATIONS (CONTINUED)
ASSIGNMENTS
A transfer of ownership, a collateral assignment, or the designation of an
annuitant or other beneficiary who is not also the owner may result in tax
consequences to the owner, annuitant or beneficiary that are not discussed
herein. An owner contemplating such a transfer or assignment of a contract
should contact a competent tax advisor with respect to the potential tax effects
of such a transaction.
MULTIPLE CONTRACTS RULE
For purposes of determining the amount of any distribution under Code
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 Section72(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.
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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.
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THE MANAGED GLOBAL ACCOUNT OF ACCOUNT D (CONTINUED)
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
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 Ratings Group ("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 protect 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,
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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 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.
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THE MANAGED GLOBAL ACCOUNT OF ACCOUNT D (CONTINUED)
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 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 1001 Jefferson Street, Wilmington, Delaware 19801. 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," Bankers Trust is
under contract to divest its ownership of the stock of Golden American and DSI.
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
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THE MANAGED GLOBAL ACCOUNT OF ACCOUNT D (CONTINUED)
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.
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, through
December 31, 1996, 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, a Senior Managing Director or E.M.
Warburg, Pincus & Co., Inc. ("EMW"), has been with Warburg, Pincus since 1989,
before which time he was chief investment officer and director of Fiduciary
Trust Company International. P. Nicholas Edwards, Nicholas P. W. Horsley, Harold
W. Ehrlich and Vincent J. McBride also exercise significant portfolio management
responsibilities with respect to the Global Account. Mr. Edwards, a Senior Vice
President of Warburg, Pincus, has been with Warburg Pincus since August 1995,
before which time he was a director at Jardine Fleming Investment Advisers,
Tokyo. Mr. Horsley, a Senior Vice President of Warburg, Pincus, has been with
Warburg, Pincus since 1993, before which time he was a director, portfolio
manager and analyst at Barclays deZoete Wedd in New York City. Mr. Ehrlich, a
Senior Vice President
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THE MANAGED GLOBAL ACCOUNT OF ACCOUNT D (CONTINUED)
with Warburg, Pincus, has been with Warburg, Pincus since February 1995, before
which time he was a senior vice president, portfolio manager and analyst at
Templeton Investment Counsel Inc. Mr. McBride has been with Warburg, Pincus
since 1994. Prior to joining Warburg, Pincus, Mr. McBride was an international
equity analyst at Smith Barney Inc. from 1993 to 1994 and at General Electric
Investment Corporation from 1992 to 1993. From 1989 to 1992 he was a portfolio
manager/analyst at United Jersey Bank.
As of February 29, 1996, Warburg, Pincus managed approximately $14.0 billion of
assets, including approximately $7.7 billion of investment company assets. The
Portfolio Manager is a wholly-owned subsidiary of Warburg, Pincus Counsellors
G.P., a New York general partnership which has no business other than being a
holding company of Warburg, Pincus and its subsidiaries. EMW is deemed to
control Warburg, Pincus through its ownership of a class of voting preferred
stock of Warburg, Pincus.
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. First Data
Corporation 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 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.
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THE MANAGED GLOBAL ACCOUNT OF ACCOUNT D (CONTINUED)
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 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,
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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. 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.
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THE MANAGED GLOBAL ACCOUNT OF ACCOUNT D (CONTINUED)
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 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
50
<PAGE>
THE MANAGED GLOBAL ACCOUNT OF ACCOUNT D (CONTINUED)
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 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.
51
<PAGE>
THE MANAGED GLOBAL ACCOUNT OF ACCOUNT D (CONTINUED)
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 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
52
<PAGE>
THE MANAGED GLOBAL ACCOUNT OF ACCOUNT D (CONTINUED)
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.
53
<PAGE>
-----------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM PAGE
<S> <C>
INTRODUCTION......................................................................................................... 1
PART I
Description of Golden American Life Insurance Company................................................................ 1
Safekeeping of Assets................................................................................................ 1
The Administrator.................................................................................................... 1
Independent Auditors................................................................................................. 1
Reinsurance.......................................................................................................... 1
Distribution of Contracts............................................................................................ 2
Performance Information.............................................................................................. 2
IRA Partial Withdrawal Option........................................................................................ 6
Other Information.................................................................................................... 6
PART II
Securities and Investment Techniques................................................................................. 7
U.S. Government Securities......................................................................................... 7
Debt Securities.................................................................................................... 7
Short Sales Against the Box........................................................................................ 8
Futures Contracts and Options on Futures Contracts................................................................. 8
Options on Securities.............................................................................................. 9
Options of Securities Indexes...................................................................................... 10
Foreign Currency Transactions...................................................................................... 10
Options on Foreign Currencies...................................................................................... 11
Repurchase Agreements.............................................................................................. 12
Banking Industry and Savings Industry Obligations.................................................................. 12
Commercial Paper................................................................................................... 13
When Issued or Delayed Delivery Securities......................................................................... 13
Investment Restrictions.............................................................................................. 14
Management of Separate Account D..................................................................................... 16
The Manager.......................................................................................................... 17
Portfolio Manager.................................................................................................... 18
Custodian and Portfolio Accounting Agent............................................................................. 18
Portfolio Transactions and Brokerage................................................................................. 18
Purchase and Pricing of the Global Account........................................................................... 20
Financial Statements of Separate Account B........................................................................... 21
Financial Statements of The Managed Global Account of Separate Account D............................................. 21
Financial Statements of Golden American Life Insurance Company....................................................... 21
Appendix -- Description of Bond Ratings
</TABLE>
54
<PAGE>
(This page has been left blank intentionally.)
55
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION (CONTINUED)
- --------------------------------------------------------------------------------
PLEASE TEAR OFF, COMPLETE AND RETURN THE FORM BELOW TO ORDER A FREE STATEMENT OF
ADDITIONAL INFORMATION FOR THE CONTRACTS OFFERED UNDER THE PROSPECTUS. ADDRESS
THE FORM TO OUR CUSTOMER SERVICE CENTER, THE ADDRESS IS SHOWN ON THE COVER.
...............................................................................
PLEASE SEND ME A FREE COPY OF THE STATEMENT OF ADDITIONAL INFORMATION FOR
SEPARATE ACCOUNT B AND THE MANAGED GLOBAL ACCOUNT OF ACCOUNT D.
PLEASE PRINT OR TYPE
--------------------------------------------
NAME
--------------------------------------------
SOCIAL SECURITY NUMBER
--------------------------------------------
STREET ADDRESS
--------------------------------------------
CITY, STATE, ZIP
(DVA 5/95 6%)
...............................................................................
56
<PAGE>
APPENDIX
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
(Golden Select DVA is currently Not Available in ME and NY)
- - 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.
A1
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE
COMPANY
DEFERRED VARIABLE ANNUITY
A Subsidiary of Bankers Trust Company
APPLICATION
GOLDEN AMERICAN LIFE INSURANCE COMPANY IS A STOCK COMPANY DOMICILED IN
WILMINGTON, DELAWARE
<TABLE>
<S> <C> <C>
1. OWNER(S) (FIRST, MIDDLE, LAST NAME)
Street, City, State, Zip Code Date of Birth (Mo. Day Yr.)
/ /
Social Security No./TIN
Phone Number(s): / / Male / / Female
2. ANNUITANT (IF OTHER THAN OWNER)
Street, City, State, Zip Code Date of Birth (Mo. Day Yr.)
/ /
Social Security No./TIN
Relation to Owner: / / Male / / Female
3. CONTINGENT ANNUITANT (OPTIONAL)
Street, City, State, Zip Code Date of Birth (Mo. Day Yr.)
/ /
Social Security No./TIN
Relation to Annuitant: / / Male / / Female
4. PRIMARY BENEFICIARY(IES) (IF MORE THAN ONE - INDICATE
%)
Relation to Annuitant:
5. CONTINGENT BENEFICIARY(IES) (IF MORE THAN ONE - INDICATE
%)
Relation to Annuitant:
6. PLAN (CHECK ONE) / / DVA / / Other
7. ANNUITY OPTION AND COMMENCEMENT DATE
Annuity Option (CHECK ONE): / / Variable Annuity Certain / / Income for Life with 10 Years Certain / / Other
Annuity Commencement Date:
/ / Check here for maximum age (specified in the prospectus) or fill in date: / / (month, day, year)
8. (A) INITIAL PREMIUM AND ALLOCATION INFORMATION
Initial Premium Paid $ MAKE CHECK PAYABLE TO GOLDEN AMERICAN LIFE INSURANCE COMPANY
Fill in percentages for initial allocation in INITIAL column below.
(B) OPTIONAL DOLLAR COST AVERAGING ("DCA"): / / CHECK BOX TO ELECT.
(MINIMUM OF $10,000 MUST BE ALLOCATED TO THE DIVISION CHECKED BELOW)
Amount of Monthly Transfer $ (minimum $250)
Division Transferred From: / / Limited Maturity Bond Division or
/ / Liquid Asset Division
Divisions Transferred To: Fill in percentages in DCA column below.
ACCOUNT DIVISION INVESTMENT ADVISER (A) INITIAL
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. %
THE MANAGED GLOBAL ACCOUNT WARBURG, PINCUS COUNSELLORS, INC. %
EMERGING MARKETS BANKERS TRUST COMPANY %
LIMITED MATURITY BOND BANKERS TRUST COMPANY %
LIQUID ASSET BANKERS TRUST COMPANY %
TOTAL 100%
<CAPTION>
ACCOUNT DIVISION (B) DCA
MULTIPLE ALLOCATION %
FULLY MANAGED %
ALL-GROWTH %
CAPITAL APPRECIATION %
VALUE EQUITY %
RISING DIVIDENDS %
REAL ESTATE %
NATURAL RESOURCES %
THE MANAGED GLOBAL ACCOUNT %
EMERGING MARKETS %
LIMITED MATURITY BOND BANKERS TRUST COMPANY -----------------
LIQUID ASSET BANKERS TRUST COMPANY -----------------
100%
</TABLE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY, CUSTOMER SERVICE CENTER, P.O. Box 8794,
Wilmington, DE 19899-8794
<PAGE>
<TABLE>
<S> <C> <C>
9. OPTIONAL SYSTEMATIC PARTIAL WITHDRAWALS
FREQUENCY: / / Monthly or / / Quarterly START DATE: / (month, day).
WITHDRAWAL: / / % of Accumulation Value or / / $.
(THE MINIMUM WITHDRAWAL IS $100, NOT TO EXCEED 1.25% MONTHLY / 3.75% QUARTERLY OF THE ACCUMULATION VALUE.)
WITHHOLDING ELECTION INFORMATION (MUST BE COMPLETED IF SYSTEMATIC PARTIAL WITHDRAWALS ARE CHOSEN)
A. / / I do not want to have Federal income tax withheld.
B. / / I want to have Federal income tax withheld from each withdrawal using the number of allowances and marital status
indicated. (You may also designate an ADDITIONAL amount in Section "C".)
Allowances ; / / Single / / Married / / Married, but withhold at a higher single rate.
C. / / I want the following ADDITIONAL amount withheld from each withdrawal $. (You must also complete Section "B".)
SEE PAGE A1 OF THE PROSPECTUS FOR WITHHOLDING ELECTION INSTRUCTIONS.
10. 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.
11. TAX-QUALIFIED PLANS IF YOU ARE FUNDING A QUALIFIED PLAN, PLEASE SPECIFY WHAT TYPE:
/ / IRA / / IRA Rollover / / SEP/IRA / / Other
12. REPLACEMENT Will the contract applied for replace any existing annuity or life insurance on the annuitant's life? /
/ No / / Yes IF "YES", PLEASE OUTLINE IN THE REMARKS SECTION.
13. REMARKS
14. READ THE FOLLOWING STATEMENTS CAREFULLY AND SIGN BELOW:
- - BY SIGNING BELOW I ACKNOWLEDGE RECEIPT OF THE PROSPECTUS. I UNDERSTAND THAT THIS CONTRACT'S CASH SURRENDER VALUE MAY
INCREASE OR DECREASE ON ANY DAY DEPENDING ON THE INVESTMENT RESULTS. NO MINIMUM CASH SURRENDER VALUE IS GUARANTEED. THIS
CONTRACT IS IN ACCORD WITH MY ANTICIPATED FINANCIAL NEEDS.
- -I AGREE THAT, TO THE BEST OF MY KNOWLEDGE AND BELIEF, ALL STATEMENTS AND ANSWERS IN THE APPLICATION ARE COMPLETE AND TRUE
AND MAY BE RELIED UPON IN DETERMINING WHETHER TO ISSUE THE CONTRACT. MY ANSWERS WILL FORM A PART OF ANY CONTRACT TO BE
ISSUED, AND ONLY THE OWNER AND GOLDEN AMERICAN HAVE THE AUTHORITY TO MODIFY THIS APPLICATION.
- -IF GOLDEN AMERICAN AMENDS THE APPLICATION AS INDICATED IN THE AMENDMENTS SECTION BELOW, I WILL APPROVE OF THE CHANGE BY
ACCEPTING THE CONTRACT WHERE PERMITTED BY STATE REGULATION. I UNDERSTAND THAT ANY CHANGE IN PLAN, ANNUITY OPTION, BENEFITS
APPLIED FOR, OR AGE AT ISSUE MUST BE AGREED TO IN WRITING.
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)
DO YOU HAVE REASON TO BELIEVE THAT THE CONTRACT APPLIED FOR WILL REPLACE ANY EXISTING ANNUITY OR LIFE INSURANCE ON THE
LIFE OF THE ANNUITANT? / / YES / / NO
(In Florida Only) Florida License ID#
Agent Signature Print Name & No. of Agent Social Security
No. Broker/Dealer/Branch
AMENDMENTS TO THE APPLICATION
</TABLE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY, CUSTOMER SERVICE CENTER, P.O. Box 8794,
Wilmington, DE 19899-8794
GAL-DVA-5/95
<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-5/95
<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-1035-5/95
<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-5/95
<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 3107 5/96
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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 VARIABLE ANNUITY PROSPECTUS
GOLDENSELECT DVA SERIES 100
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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 of $25,000 or more and is permitted to make
additional premium payments.
The contract is funded by two separate accounts, Separate Account B ("Account
B") and Separate Account D ("Account D") (collectively, the "Accounts").
Thirteen 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.
Part I of this prospectus describes the contract and provides background
information regarding Account B and Account D. Part II of this prospectus
(beginning on page 39) 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 fourteen divisions currently available
under the contract in any way you choose, subject to certain restrictions. You
may change the allocation of your accumulation value up to five times per
contract year free of charge.
You may surrender the contract for its cash surrender value at any time before
the annuity commencement date provided the annuitant and owner are living. The
cash surrender value will vary daily with the investment results of the
contract. We do not guarantee any minimum cash surrender value. You may make
partial withdrawals under the contract, subject to certain restrictions.
We will pay a death benefit to the beneficiary if the annuitant (when there is
no contingent annuitant) or owner dies prior to the annuity commencement date.
See 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 May 1, 1996 relating to
the Accounts 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.
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ISSUED BY: DISTRIBUTED BY: ADMINISTERED AT:
Golden American Life Directed Services, Inc. Customer Service Center
Insurance Company Wilmington, Delaware 19801 Mailing Address: P.O. Box 8794
Wilmington, Delaware 19899-8794
1-800-366-0066
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PROSPECTUS DATED: MAY 1, 1996
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TABLE OF CONTENTS
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PAGE
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DEFINITION OF TERMS.................................. 3
FEE TABLE............................................ 5
SUMMARY OF THE CONTRACT.............................. 7
CONDENSED FINANCIAL INFORMATION...................... 10
Index of Investment Experience
Financial Statements
Performance Related Information
PART I
Introduction....................................... 13
FACTS ABOUT THE COMPANY AND THE ACCOUNTS............. 14
Golden American
The Accounts
Account B Divisions
The Managed Global Account of Account D
Changes Within the Accounts
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
Your Right to Reallocate
Dollar Cost Averaging Option
What Happens if a Division is Not Available
Your Accumulation Value
Accumulation Value in Each Division
Measurement of Investment Experience
Cash Surrender Value
Surrendering to Receive the Cash Surrender Value
Partial Withdrawals
Proceeds Payable to the Beneficiary
Reports to Owners
When We Make Payments
CHARGES AND FEES..................................... 27
Charge Deduction Division
Charges Deducted from the Accumulation Value
Charges Deducted from the Divisions
Trust Expenses
Operating Expenses of Account D
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CHOOSING AN INCOME PLAN.............................. 29
The Income Plan
Annuity Commencement Date Selection
Frequency Selection
The Annuity Options
Payment When Named Person Dies
OTHER INFORMATION.................................... 30
Other Contract Provisions
Contract Changes -- Applicable Tax Law
Your Right to Cancel or Exchange Your Contract
Other Contract Changes
Group or Sponsored Arrangements
Selling the Contract
Reinsurance
REGULATORY INFORMATION............................... 32
Voting Rights
State Regulation
Legal Proceedings
Legal Matters
Experts
FEDERAL TAX CONSIDERATIONS........................... 33
Introduction
Golden American Tax Status
Taxation of Non-Qualified Annuities
Taxation of Individual Retirement Annuities
ADDITIONAL CONSIDERATIONS............................ 37
Distribution-at-Death Rules
Taxation of Death Benefit Proceeds
Transfer of Annuity Contracts
Section1035 Exchanges
Assignments
Multiple Contracts Rule
PART II
Introduction....................................... 39
THE MANAGED GLOBAL ACCOUNT OF ACCOUNT D.............. 40
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
STATEMENT OF ADDITIONAL INFORMATION.................. 51
Table of Contents
APPENDIX............................................. A1
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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
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DEFINITION OF TERMS
ACCOUNTS
Separate Account B and Separate Account D.
ACCUMULATION VALUE
The amount that the contract provides for investment at any time. Initially,
this amount is equal to the premium paid. Thereafter, the accumulation value
will reflect the premiums paid, investment experience, charges deducted and
partial withdrawals taken.
ANNUITANT
The person designated by the owner to receive the annuity payments and whose
death initiates payment of the death benefit.
ANNUITY COMMENCEMENT DATE
The date on which annuity payments begin.
ANNUITY OPTIONS
Options the owner selects that determine the form and amount of annuity
payments.
ANNUITY PAYMENT
The periodic payment an annuitant receives. It may be either a fixed or a
variable amount based on the annuity option chosen.
ATTAINED AGE
The issue age of the annuitant plus the number of full years elapsed since the
contract date.
BENEFICIARY
The person designated to receive benefits in the case of the death of the
annuitant (when there is no contingent annuitant) or owner.
BUSINESS DAY
Any day the New York Stock Exchange ("NYSE") is open for trading, exclusive of
Federal holidays, or any day on which the SEC requires that mutual funds, unit
investment trusts or other investment portfolios be valued.
CASH SURRENDER VALUE
The amount the owner receives if the owner surrenders the contract.
CHARGE DEDUCTION DIVISION
The Liquid Asset Division, which is the division from which all charges are
deducted if so designated on the application or enrollment form, or later
elected by the owner.
CONTINGENT ANNUITANT
The person designated by the owner who, upon the annuitant's death prior to the
annuity commencement date, becomes the annuitant.
CONTRACT
The entire contract consisting of the basic contract, the application or
enrollment form and any riders or endorsements.
CONTRACT ANNIVERSARY
The anniversary of the contract date.
CONTRACT DATE
The date on which we have received the initial premium and upon which we begin
determining the contract values. It may or may not be the same as the issue
date. This date is used to determine contract months, processing dates, years
and anniversaries.
CONTRACT PROCESSING DATES
The days when we deduct certain charges from the accumulation value. If the
contract processing date is not a valuation date, it will be on the next
succeeding valuation date. The contract processing dates will be once each year
on the contract anniversary.
CONTRACT PROCESSING PERIOD
The period between successive contract processing dates unless it is the first
contract processing period. In that case, it is the period from the contract
date to the first contract processing date.
CONTRACT YEAR
The period between contract anniversaries.
CUSTOMER SERVICE CENTER
Where service is provided to our contract owners. The mailing address and
telephone number of the Customer Service Center are shown on the cover.
DEFERRED ANNUITY
A contract which provides for the accumulation of funds that will reflect
investment experience. These funds may be applied under an annuity option at the
annuity commencement date.
ENDORSEMENTS
An endorsement changes or adds provisions to the contract.
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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.
FREE LOOK PERIOD
The period of time within which the contract owner may examine the contract and
return it for a refund.
GENERAL ACCOUNT
The account which contains all of our assets other than those held in our
separate accounts.
INDEX OF INVESTMENT EXPERIENCE
The index that measures the performance of a separate account division.
INITIAL PREMIUM
The payment amount required to put a contract into effect.
ISSUE AGE
The annuitant's age on his or her last birthday on or before the contract date.
ISSUE DATE
The date the contract is issued at our Customer Service Center.
OWNER
The person who owns the contract and is entitled to exercise all rights under
the contract. This person's death also initiates payment of the death benefit.
RIDER
A rider adds benefits to the contract.
SPECIALLY DESIGNATED DIVISION
The Liquid Asset Division. Distributions from a portfolio underlying a division
(or from a division of Separate Account D) in which reinvestment is not
available will be allocated to this division unless you specify otherwise.
VALUATION DATE
The day at the end of a valuation period when each division is valued.
VALUATION PERIOD
Each business day together with any non-business days before it.
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FEE TABLE
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OWNER TRANSACTION EXPENSES (deducted from accumulation value)
DISTRIBUTION FEE (ANNUAL SALES LOAD) AS A PERCENTAGE OF THE INITIAL AND EACH ADDITIONAL PREMIUM,
deducted at the end of each contract processing period following receipt of each premium (or at the
time of surrender if surrendered before the end of a contract processing period) over a ten year
period from the date we receive and accept each premium payment..................................... 0.65%(1)
EXCESS ALLOCATION CHARGE for each allocation change in excess of the five free allocation changes
allowed per contract year........................................................................... $25
PARTIAL WITHDRAWAL CHARGE (2.0% of the withdrawal for each additional conventional partial withdrawal
after the first in a contract year) not to exceed:.................................................. $25
ANNUAL CONTRACT FEES (deducted from the accumulation value)
ADMINISTRATIVE CHARGE................................................................................ $0
SEPARATE ACCOUNT ANNUAL EXPENSES (percentage of assets in each separate account division)
MORTALITY AND EXPENSE RISK CHARGE.................................................................... 1.25 %(1)
ASSET BASED ADMINISTRATIVE CHARGE.................................................................... 0.10 %
Total Separate Account Annual Expenses............................................................... 1.35 %
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TRUST ANNUAL EXPENSES (based on combined assets of the indicated groups of
Series)
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OTHER TOTAL
SERIES FEES(2) EXPENSES(3) EXPENSES
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Multiple Allocation, Fully Managed, Capital
Appreciation, Rising Dividends, All-Growth, 1.00% 0.01% 1.01%
Real Estate, Natural Resources, Value Equity,
Strategic Equity, and Small Cap Series:
Emerging Markets Series: 1.50% 0.03% 1.53%
Limited Maturity Bond and Liquid Asset Series: 0.60% 0.01% 0.61%
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THE MANAGED GLOBAL ACCOUNT ANNUAL EXPENSES AFTER REIMBURSEMENT (percentage of
average net assets)
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MANAGEMENT TOTAL
AND OTHER ANNUAL
ASSETS ADVISORY FEES EXPENSES EXPENSES(4)
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$0 to $500 million...................................................... 1.00 % 0.25% 1.25%
in excess of $500 million............................................... 0.80 % 0.25% 1.05%
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(1) We also offer a DVA through another prospectus, which is a contract with a
different charging structure.
(2) Fees decline as combined assets increase (see Part I, Account B Divisions
and the Trust prospectus for details).
(3) Other expenses generally consist of independent trustees fees and expenses.
(4) Reflects any expense reimbursement or waiver through December 31, 1995. See
Part I, The Managed Global Account of Account D. In the absence of expense
reimbursement or waiver, the total annual expenses would have been 1.34% of
the Global Account's average daily net assets for 1995.
5
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FEE TABLE (CONTINUED)
EXAMPLE:
Whether you surrender or do not 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:
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DIVISION ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
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Multiple Allocation....................................... $ 29.96 $ 91.26 $ 154.49 $ 321.64
Fully Managed............................................. 29.96 91.26 154.49 321.64
Capital Appreciation...................................... 29.96 91.26 154.49 321.64
Rising Dividends.......................................... 29.96 91.26 154.49 321.64
All-Growth................................................ 29.96 91.26 154.49 321.64
Real Estate............................................... 29.96 91.26 154.49 321.64
Natural Resources......................................... 29.96 91.26 154.49 321.64
Value Equity.............................................. 29.96 91.26 154.49 321.64
Strategic Equity.......................................... 29.96 91.26 154.49 321.64
Small Cap................................................. 29.96 91.26 154.49 321.64
Emerging Markets.......................................... 35.06 106.42 179.47 369.98
Global Account............................................ 32.37 98.43 166.34 344.75
Limited Maturity Bond..................................... 26.21 80.01 135.76 284.46
Liquid Asset.............................................. 26.21 80.01 135.76 284.46
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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.
In the example, 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.
The purpose of the fee table is to assist you in understanding the various costs
and expenses that you may bear directly or indirectly. The fee table reflects
expenses of the Accounts as well as the Trust. Premium taxes may also be
applicable. See Part I, Charges and Fees, PREMIUM TAXES. For a complete
description of contract costs and expenses and the charges and expenses for
Account D, see the section titled Charges and Fees in Part I of this prospectus.
For a more complete description of the Trust's costs and expenses, see the Trust
prospectus.
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.
6
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SUMMARY OF THE CONTRACT
This prospectus has been designed to provide you with information regarding the
contract and the Accounts which fund the contract. Information concerning the
divisions of Account B is set forth in the Trust prospectus. Part II of this
prospectus, beginning on page 39, 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 its attached
application or enrollment form and any riders or endorsements, constitutes the
entire agreement between you and us and should be retained.
This prospectus has been designed to provide you with the necessary information
to make a decision on purchasing the contract offered by Golden American and
funded by the Accounts.
You have a choice of investments. We do not promise that your accumulation value
will increase. Depending on the contract's investment experience for funds
invested in the Accounts, the accumulation value, cash surrender value and death
benefit may increase or decrease on any day. You bear the investment risk.
DESCRIPTION OF THE CONTRACT
The contract is designed to establish retirement benefits for two types of
purchasers. The first type of purchaser is one who is eligible to participate
in, and purchases a contract for use with, 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 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 1/2 for
qualified plans, except for rollover contributions). The minimum initial premium
is $25,000 for qualified and non-qualified plans. In connection with qualified
plans, we will only accept rollover contributions of $25,000 or more as the
initial premium. We also offer a DVA through another prospectus, which is a
contract with a different charging structure. 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. We will take under
consideration and may refuse to accept a premium payment if the sum of all
premium payments received under the contract totals more than $1,500,000.
THE DIVISIONS
Each of the fourteen divisions offered under this prospectus have their own
distinct investment objectives and policies. There are thirteen divisions of
Account B currently available under the contract. 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 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.
SURRENDERING YOUR CONTRACT
The cash surrender value varies each day depending on investment results. We do
not guarantee any minimum cash surrender value. You may surrender the contract
and receive its cash 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.
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SUMMARY OF THE CONTRACT (CONTINUED)
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 take conventional partial withdrawals once per
contract year without charge. Alternatively, you may elect in advance to take
systematic partial withdrawals on a monthly or quarterly basis. If you have an
IRA contract, 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. See Part I, Partial Withdrawals.
DOLLAR COST AVERAGING
Under this option, you may choose to have a specified dollar amount transferred
from either the Limited Maturity Bond Division or Liquid Asset Division to the
other divisions on a monthly basis with the objective of shielding your
investment from short term price fluctuations. See Part I, Dollar Cost Averaging
Option.
YOUR RIGHT TO CANCEL THE CONTRACT
You may cancel your contract within the free look period which is a ten day
period of time beginning when you receive the contract. For purposes of
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 annuitant (when
there is no contingent annuitant) or an owner dies prior to the annuity
commencement date. See Part I, Proceeds Payable to the Beneficiary. We may
reduce the death benefit proceeds payable under certain group or sponsored
arrangements. See Part I, Group or Sponsored Arrangements.
CONTRACT PROCESSING PERIODS
The first contract processing period begins with the contract date and ends at
the close of business on the first contract processing date. All subsequent
contract processing periods begin at the close of business on the most recent
contract processing date and extend to the close of business on the next
contract processing date. There is one contract processing period each year.
DEDUCTIONS FOR CHARGES AND FEES
We invest the entire amount of the initial and any additional premium payments
in the divisions you select, subject to certain restrictions we impose. See Part
I, Restrictions on Allocation of Premium Payments. We then periodically deduct
certain amounts 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. We may also reduce certain charges for
contracts purchased in combination with certain flexible premium variable life
products that we offer. Charges are deducted proportionately from all divisions
in which you are invested, unless you have elected the Charge Deduction
Division. The charges we deduct are:
DISTRIBUTION FEE
We deduct a sales load in an annual amount of 0.65% of each premium at the end
of each contract processing period (or at the time of surrender if surrendered
before the end of the processing period) for a period of ten years from the
date we receive and accept each premium payment.
We also offer through other prospectuses, other DVAs which are contracts with
a different charging structures.
MORTALITY AND EXPENSE RISK CHARGE
We charge each division of the Accounts with a daily asset based charge for
mortality and expense risks equivalent to an annual rate of 1.25%.
PREMIUM TAXES
Generally, premium taxes are incurred on the annuity commencement date, and a
charge for premium taxes is then deducted from the accumulation value on such
date. Some jurisdictions impose a premium tax at the time the initial or
additional premiums are paid, regardless of the annuity commencement date.
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SUMMARY OF THE CONTRACT (CONTINUED)
EXCESS ALLOCATION CHARGE
The first five allocation changes in any contract year may be made without
charge. Each subsequent allocation change is subject to a $25 excess
allocation charge.
PARTIAL WITHDRAWAL CHARGE
If you take more than one conventional partial withdrawal during a contract
year, we impose a charge of the lesser of $25 and 2.0% of the amount withdrawn
for each additional conventional partial withdrawal. See Part I, Partial
Withdrawals, Conventional Partial Withdrawal Option.
ASSET BASED ADMINISTRATIVE CHARGE
We charge each division of the Accounts with a daily asset based charge to
cover contract administration equivalent to an annual rate of 0.10%.
TRUST EXPENSES
There are fees and expenses deducted from each Series. The investment
performance of the Series and deductions for fees and expenses from the Trust
will affect your accumulation value. Please read the Trust prospectus for
details.
OPERATING EXPENSES OF ACCOUNT D
There are management and other operating expenses deducted from Account D. The
investment performance of the Global Account and the deduction of operating
expenses of Account D will affect your accumulation value. For information on
the operating expenses of Account D, see Part I, Charges and Fees.
TAX PENALTIES
The ultimate effect of Federal income taxes on the amounts held under an annuity
contract, on annuity payments and on the economic benefits to the owner,
annuitant or beneficiary depends on Golden American's tax status and upon the
tax status of the individuals concerned. In general, an owner is not taxed on
increases in value under an annuity contract until some form of distribution is
made under it. There may be tax penalties if you make a withdrawal or surrender
the contract before reaching age 59 1/2. See Part I, Federal Tax Considerations.
9
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CONDENSED FINANCIAL INFORMATION
INDEX OF INVESTMENT EXPERIENCE
The upper table gives the index of investment experience for each division of
Account B and for the Global Account on their respective commencement of
operations and on December 31, 1989, 1990, 1991, 1992, 1993, 1994 and 1995, as
applicable. The index of investment experience is equal to the value of a unit
for each division of the Accounts. The total value of each division as of the
end of each period indicated is shown in the lower table.
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INDEX OF INVESTMENT EXPERIENCE
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DIVISION 1/25/89 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94
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Multiple Allocation.... $10.00 $ 10.76 $ 11.12 $ 13.16 $ 13.22 $ 14.50 $ 14.13
Fully Managed.......... 10.00 10.38 9.78 12.46 13.06 13.86 12.68
Capital Appreciation... --(1) (--1) (--1) (--1) 10.99 11.74 11.40
Rising Dividends....... --(3) (--3) (--3) (--3) (--3) 10.28 10.20
All-Growth............. 10.00 10.71 9.74 13.03 12.52 13.16 11.58
Real Estate............ 10.00 9.85 7.65 10.08 11.32 13.10 13.74
Natural Resources...... 10.00 11.71 9.91 10.31 9.17 13.57 13.73
Value Equity........... --(4) (--4) (--4) (--4) (--4) (--4) (--4)
Strategic Equity....... --(5) (--5) (--5) (--5) (--5) (--5) (--5)
Small Cap.............. --(6) (--6) (--6) (--6) (--6) (--6) (--6)
Emerging Markets....... --(3) (--3) (--3) (--3) (--3) 12.40 10.38
Global Account......... --(2) (--2) (--2) (--2) 10.01 10.48 9.03
Limited Maturity
Bond.................. 10.00 10.83 11.55 12.65 13.09 13.71 13.36
Liquid Asset........... 10.00 10.64 11.31 11.78 11.98 12.13 12.41
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TOTAL ACCUMULATION VALUE
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DIVISION 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94
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<S> <C> <C> <C> <C> <C> <C> <C>
Multiple Allocation.... $15,556,366 $23,963,356 $57,739,245 $115,124,744 $273,158,122 $297,507,994
Fully Managed.......... 5,333,885 5,414,160 9,834,436 37,352,585 108,290,963 98,836,207
Capital Appreciation... (--1) (--1) (--1) 18,366,222 86,798,642 88,344,684
Rising Dividends....... (--3) (--3) (--3) (--3) 14,387,382 50,384,765
All-Growth............. 3,077,542 4,528,380 11,159,814 23,418,811 56,055,565 70,623,784
Real Estate............ 650,003 309,556 696,180 3,600,461 28,772,896 36,936,728
Natural Resources...... 2,320,696 2,460,399 2,646,183 2,882,417 21,436,544 32,746,767
Value Equity........... (--4) (--4) (--4) (--4) (--4) (--4)
Strategic Equity....... (--5) (--5) (--5) (--5) (--5) (--5)
Small Cap.............. (--6) (--6) (--6) (--6) (--6) (--6)
Emerging Markets....... (--3) (--3) (--3) (--3) 30,488,589 59,747,048
Global Account......... (--2) (--2) (--2) 38,699,402 88,477,493 86,208,555
Limited Maturity
Bond.................. 2,595,966 8,009,970 15,935,184 39,861,202 71,622,231 71,573,009
Liquid Asset........... 2,190,649 8,419,953 9,224,303 12,769,536 16,497,588 45,364,989
<CAPTION>
DIVISION 12/31/95
- ----------------------- ------------
<S> <C> <C>
Multiple Allocation.... $ 16.58
Fully Managed.......... 15.10
Capital Appreciation... 14.63
Rising Dividends....... 13.19
All-Growth............. 13.98
Real Estate............ 15.80
Natural Resources...... 14.99
Value Equity........... 13.34
Strategic Equity....... 10.00
Small Cap.............. (--6)
Emerging Markets....... 9.20
Global Account......... 9.56
Limited Maturity
Bond.................. 14.73
Liquid Asset........... 12.92
DIVISION 12/31/95
- ----------------------- ------------
<S> <C> <C>
Multiple Allocation.... $305,499,995
Fully Managed.......... 117,325,242
Capital Appreciation... 121,047,204
Rising Dividends....... 80,341,660
All-Growth............. 91,960,166
Real Estate............ 34,814,825
Natural Resources...... 26,991,780
Value Equity........... 28,447,742
Strategic Equity....... 8,030,333
Small Cap.............. (--6)
Emerging Markets....... 36,887,958
Global Account......... 72,375,222
Limited Maturity
Bond.................. 67,838,218
Liquid Asset........... 36,490,508
</TABLE>
- --------------------------
(1) The Capital Appreciation Division became available for investment on May
4, 1992 starting with an index of investment experience of $10.00.
(2) The Global Account Division of Account D became available for investment
on October 21, 1992 starting with an index of investment experience of
$10.00
(3) The Rising Dividends and Emerging Markets Divisions became available for
investment on October 4, 1993 starting with an index of investment
experience of $10.00.
(4) The Value Equity Division became available for investment on January 1,
1995 starting with an index of investment experience of $10.00.
(5) The Strategic Equity Division became available for investment on October
2, 1995 starting with an index of investment experience of $10.00.
(6) The Small Cap Division became available for investment on January 2, 1996
starting with an index of investment experience of $10.00.
In order to provide for continuity in results, the above table is based on
charges for the contract described in this prospectus. Contracts issued prior to
May 1, 1993, were based on lower asset charges and, thus, would have higher
values for the indices of investment experience.
10
<PAGE>
CONDENSED FINANCIAL INFORMATION (CONTINUED)
FINANCIAL STATEMENTS
The audited financial statements of Separate Account B (as well as the auditors'
report thereon), the audited financial statements of The Managed Global Account
of Separate Account D (as well as the auditors' report thereon) and the audited
financial statements of Golden American Life Insurance Company (as well as the
auditors' reports thereon) are included in the Statement of Additional
Information.
PERFORMANCE RELATED INFORMATION
Performance information for the divisions of the Accounts, 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 distribution
fee, the asset based administrative charge and the mortality and expense risk
charge. Quotations of total return may simultaneously be shown for other periods
that do not take into account certain contractual charges such as the
distribution fee 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.
11
<PAGE>
(This page has been left blank intentionally.)
12
<PAGE>
PART I
INTRODUCTION THE FOLLOWING INFORMATION IN PART I DESCRIBES THE CONTRACT AND
THE SEPARATE ACCOUNTS WHICH FUND THE CONTRACT, ACCOUNT B AND ACCOUNT D. ACCOUNT
B INVESTS IN MUTUAL FUND PORTFOLIOS OF THE TRUST. ACCOUNT D INVESTS DIRECTLY IN
SECURITIES.
13
<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, 1995 Golden American had stockholder's equity of
approximately $98.1 million and total assets of approximately $1.2 billion,
including approximately $1.05 billion 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, 1995, 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 $104 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. Also, 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.
Equitable of Iowa Companies ("Equitable of Iowa") and Whitewood Properties
Corp., a subsidiary of Bankers Trust Company, have entered into a definitive
agreement providing for the acquisition by Equitable of Iowa of all interest
in BT Variable, Inc. BT Variable, Inc., an indirect subsidiary of Bankers
Trust Company, is the corporate parent of Golden American and DSI.
The acquisition, which is subject to the approval of the appropriate
regulators and satisfaction of certain other customary conditions set
forth in the agreement, is expected to close during the second half of 1996.
With assets of $10 billion as of March 31, 1996, Equitable of Iowa is the
holding company for Equitable Life Insurance Company of Iowa, USG Annuity &
Life Company, Locust Street Securities, Inc., and Equitable Investment
Services, Inc.
THE ACCOUNTS
All obligations under the contract are general obligations of Golden American.
The Accounts 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 the Accounts are kept separate from our general
account and any other separate accounts we may have. We may offer other variable
annuity contracts investing in the Accounts which are not discussed in this
prospectus. The Accounts may also invest in other series which are not available
to the contract described in this prospectus.
We own all the assets in the Accounts. Income and realized and unrealized gains
or losses from assets in an Account are credited to or charged against that
Account without regard to other income, gains or losses in our other investment
accounts. As required, the assets in an Account are at least equal to the
reserves and other liabilities of that Account. These assets may not be charged
with liabilities from any other business we conduct.
They may, however, be subject to liabilities arising from divisions of the
Accounts whose assets are attributable to other variable annuity contracts
supported by the Accounts. 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.
14
<PAGE>
FACTS ABOUT THE COMPANY AND THE ACCOUNTS (CONTINUED)
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. 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 may also have 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 Trust pays DSI for its services a monthly fee based on the following
percentages 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.
- --------------------------------------------------------------------------------
<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, Value Equity, 0.90% of next $1.5 billion; and
Strategic Equity, and Small Cap Series: 0.85% of amount in excess of $3.5 billion
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>
- --------------------------------------------------------------------------------
15
<PAGE>
FACTS ABOUT THE COMPANY AND THE ACCOUNTS (CONTINUED)
The following divisions invest in shares of the Series designated.
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
Invests primarily in common stocks. The Series also may invest in fixed income
securities and money market instruments to preserve its principal value during
uncertain or declining market conditions. The Series' strategy is based on the
premise that, from time to time, certain asset classes are more attractive
long term investments than others.
PORTFOLIO MANAGER
T. Rowe Price Associates, Inc.
CAPITAL APPRECIATION DIVISION
CAPITAL APPRECIATION SERIES
OBJECTIVE
Long-term capital growth.
INVESTMENTS
Invests in common stocks and preferred stock that will be allocated among
various categories of stocks referred to as "components" which consist of the
following: (i) The Growth Component -- Securities that the portfolio manager
believes have the following characteristics: stability and quality of 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.
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
E.I.I. Realty Securities, Inc.
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
16
<PAGE>
FACTS ABOUT THE COMPANY AND THE ACCOUNTS (CONTINUED)
VALUE EQUITY DIVISION
VALUE EQUITY SERIES
OBJECTIVE
Capital appreciation, with dividend income as a secondary objective.
INVESTMENTS
Investment primarily in equity securities of U.S. and foreign issuers which,
when purchased, meet quantitative standards 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
STRATEGIC EQUITY DIVISION
STRATEGIC EQUITY SERIES
OBJECTIVE
Long term capital appreciation.
INVESTMENTS
Investment primarily in equity securities based on various equity market
timing techniques. The amount of the Series' assets allocated to equities
shall vary from time to time to seek positive investment performance from
advancing equity markets and to reduce exposures to equities when risk/reward
characteristics are believed to be less attractive.
PORTFOLIO MANAGER
Zweig Advisors Inc.
SMALL CAP DIVISION
SMALL CAP SERIES
OBJECTIVE
Long term capital appreciation.
INVESTMENTS
Investment primarily in equity securities of companies that, at the time of
purchase, have a total market capitalization -- present market value per share
multiplied by the total number of shares outstanding -- of less than $1
billion.
PORTFOLIO MANAGER
Fred Alger Management, Inc.
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
17
<PAGE>
FACTS ABOUT THE COMPANY AND THE ACCOUNTS (CONTINUED)
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.
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.
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 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 through
December 31, 1996, 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.
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, PAGE 39.
CHANGES WITHIN THE ACCOUNTS
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 the Accounts, 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 the Accounts, 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.
18
<PAGE>
FACTS ABOUT THE CONTRACT
THE OWNER
You are the owner. You are also the annuitant unless another annuitant is named
in the application or enrollment form. You have the rights and options described
in the contract. One or more persons may own the contract.
Death of an owner activates the death benefit provision. In the case of a sole
owner who dies prior to the annuity commencement date, we will pay the
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, the beneficial
owner of the trust will be treated as the owner of the contract solely for the
purpose of activating the death benefit provision. See Contracts Owned by
Non-Natural Persons.
THE ANNUITANT
The annuitant will receive the annuity benefits of the contract if living on the
annuity commencement date. If the annuitant dies before the annuity commencement
date, and a contingent annuitant has been named, the contingent annuitant
becomes the annuitant. Once named, neither the annuitant nor the contingent
annuitant, if any, may be changed at any time.
If there is no contingent annuitant when the annuitant dies prior to the annuity
commencement date, we will pay the beneficiary the death benefit then due. The
beneficiary will be as provided in the beneficiary designation then in effect.
If no beneficiary designation is in effect, or if there is no designated
beneficiary living, the owner will be the beneficiary. If the annuitant was the
sole owner and there is no beneficiary designation, the annuitant's estate will
be the beneficiary.
THE BENEFICIARY
The beneficiary is the person to whom we pay death benefit proceeds if the
annuitant (when there is no contingent annuitant) or owner dies prior to the
annuity commencement date. We pay death benefit proceeds to the primary
beneficiary. See Proceeds Payable to the Beneficiary.
If the beneficiary dies before the annuitant or owner, the death benefit
proceeds are paid to the contingent beneficiary, if any. If there is no
surviving beneficiary, we pay the death benefit proceeds to the owner (if other
than the annuitant). If the owner was the annuitant, we pay any death benefit
proceeds to the annuitant's estate.
One or more persons who must be individuals may be named as beneficiary or
contingent beneficiary. In the case of more than one beneficiary, we will assume
any death benefit proceeds are to be paid in equal shares to the surviving
beneficiaries. You may specify other than equal shares.
You have the right to change beneficiaries during the annuitant's lifetime
unless you have designated an irrevocable beneficiary. When an irrevocable
beneficiary has been designated, you and the irrevocable beneficiary must act
together to exercise the rights and options under the contract.
CHANGE OF OWNER OR BENEFICIARY
During the annuitant's lifetime and while the contract is in effect, you may
transfer ownership of the contract (if purchased in connection with a non-
qualified plan) subject to our published rules at the time of the change. You
may also change the beneficiary. To make either of these changes, you must send
us written notice of the change in a form satisfactory to us. The change will
take effect as of the day the notice is signed. The change will not affect any
payment made or action taken by us before recording the change at our Customer
Service Center. See Additional Considerations, Transfer of Annuity Contracts,
and Assignments.
AVAILABILITY OF THE CONTRACT
We can issue a contract if both the annuitant and the owner are not older than
age 85.
TYPES OF CONTRACTS
QUALIFIED CONTRACTS
The contract may be issued as an Individual Retirement Annuity or in
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
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FACTS ABOUT THE CONTRACT (CONTINUED)
both Individual Retirement Annuities and individual retirement accounts, we
will only accept a $25,000 rollover contribution as the minimum initial
premium.
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 the Customer Service Center. The annuitant named on the application
or enrollment form may not be changed at any time.
PREMIUMS
You purchase the contract with an initial premium. After the end of the free
look period, you may make additional premium payments. See Making Additional
Premium Payments. The minimum initial premium is $25,000 for qualified and
non-qualified contracts. In connection with qualified plans, we will only accept
rollover contributions of $25,000 or more as the initial premium. We also offer
other DVAs through other prospectuses which are contracts with different
charging structures.
We may refuse a premium payment if an initial premium or the sum of all premium
payments is more than $1,500,000. We may change the minimum initial or
additional premium requirements for certain group or sponsored arrangements. See
Group or Sponsored Arrangements.
QUALIFIED PLANS
For IRA contracts, the annual premium on behalf of any individual contract may
not exceed $2,000. Provided your spouse does not make a contribution to an
IRA, you may set up a spousal IRA even if your spouse has earned some
compensation during the year. The maximum deductible amount for a spousal IRA
program is the lesser of $2,250 or 100% of your compensation reduced by the
contribution (if any) made by you for the taxable year to your own IRA.
However, no more than $2,000 can go to either your or your spouse's IRA in any
one year. For example, $1,750 may go to your IRA and $500 to your spouse's
IRA. These maximums are not applicable if the premium is the result of a
rollover from another qualified plan.
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 of a completed application or enrollment form. We may retain the
initial premium for up to five days while attempting to complete an incomplete
application or enrollment form. If the application or enrollment form cannot be
made complete within five valuation days, the applicant or enrollee will be
informed of the reasons for the delay and the initial premium will be returned
immediately unless the applicant or enrollee specifically consents to our
retaining the initial premium until the application or enrollment form is made
complete. Thereafter, all premiums will be accepted on the day received.
We will accept, by agreement with broker-dealers who use wire transmittals,
transmittal of initial and additional premium payments by wire order from the
broker-dealer to the Customer Service Center. Such transmittals must be
accompanied by a simultaneous telephone facsimile transmission containing the
essential information we require to open an account and allocate the premium
payment.
Premium payments accepted via wire order and accompanying facsimile
transmissions will be invested at the value next determined following receipt.
Wire orders not accompanied by facsimile
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FACTS ABOUT THE CONTRACT (CONTINUED)
transmissions, or accompanied by facsimile transmissions which do not contain
the essential information we require to open an account and allocate the premium
payment, may be retained for a period not exceeding five business days while an
attempt is made to obtain the required facsimile transmission. If the required
facsimile transmission cannot be obtained within five business days, the
Customer Service Center will inform the broker-dealer, on behalf of the
applicant/enrollee, of the reasons for the delay and return the premium payment
immediately to the broker-dealer for return to the applicant/enrollee, unless
the applicant/enrollee specifically consents to allow us to retain the premium
payment until the required facsimile transmission is received by the Customer
Service Center.
We will issue the contract; however, until we have received and accepted at the
Customer Service Center a properly completed application or enrollment form, we
reserve the right to rescind the contract. If an application or enrollment form
is not received within ten days of receipt of the initial premium via wire
order, or if an incomplete application or enrollment form is received and cannot
be completed within ten days of receipt of the initial premium, the amount of
the initial premium, with any gain, will be returned to the broker-dealer for
return to the applicant/enrollee. In no event will less than the full amount of
the initial premium be returned to the applicant/enrollee.
On the date we receive and accept your initial or additional premium payment:
(1) We allocate the initial premium among the
divisions according to your instructions, subject to any restrictions. See
Restrictions on Allocation of Premium Payments. For additional premium
payments, the accumulation value will increase by the amount of the premium.
If we do not receive instructions from you, the increase in the accumulation
value will be allocated among the divisions in proportion to the amount of
accumulation value in each division as of the date we receive and accept the
additional premium payment.
(2) For an initial premium, we calculate the
distribution fee and any charge for premium taxes, if applicable. When an
additional premium payment is made we increase any distribution fee and any
charge for premium taxes, if applicable. These charges will be collected by
us from the contract's accumulation value. HOWEVER, WE CURRENTLY WAIVE THE
DEDUCTION OF THE CHARGE FOR PREMIUM TAXES. (See Charges and Fees, PREMIUM
TAXES).
(3) For an initial premium, we calculate the
guaranteed death benefit. When an additional premium payment is made we increase
the guaranteed death benefit.
ELECTRONIC DATA TRANSMISSION OF
APPLICATION INFORMATION
In certain states, we will also accept, by agreement with broker-dealers who
use electronic data transmissions of application information, wire
transmittals of initial premium payments from the broker-dealer to the
Customer Service Center for purchase of the contract. Contact the Customer
Service Center to find out about state availability.
Upon receipt of the electronic data and wire transmittal, we will open an
account and allocate the premium payment according to the client's
instructions. Based on the information provided, we will generate an
application or enrollment form and contract to be forwarded to the
applicant/enrollee for signature.
During the period from receipt of the initial premium until the signed
application or enrollment form is received, the owner may not execute any
financial transactions with respect to the contract unless such transactions
are requested in writing and signature guaranteed.
RESTRICTIONS ON ALLOCATION OF
PREMIUM PAYMENTS
We may require that the initial premium be allocated to the Specially 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 Measurement of Investment Experience, INDEX
OF INVESTMENT EXPERIENCE AND UNIT VALUE.
YOUR RIGHT TO REALLOCATE
You may reallocate your accumulation value among the divisions of the Accounts
at the end of the free look period. You are allowed five allocation changes per
contract year without charge. There will be a charge of $25 deducted from the
accumulation value for each additional allocation change. When a reallocation is
made, we redeem shares of the Series underlying the divisions you are
transferring from at their net asset value. Reinvestment is then made in shares
of the Series of the divisions you are
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FACTS ABOUT THE CONTRACT (CONTINUED)
transferring to at their net asset value. To make a reallocation change, you
must provide us with satisfactory notice at our Customer Service Center.
RESTRICTIONS ON REALLOCATIONS
Some restrictions may apply based on the free look provisions of the state
where the contract is issued. See Your Right to Cancel or Exchange Your
Contract.
DOLLAR COST AVERAGING OPTION
If you have at least $10,000 of accumulation value in the Limited Maturity Bond
Division or the Liquid Asset Division, you may choose to have a specified dollar
amount transferred from this division to other divisions in the Accounts on a
monthly basis. The main objective of dollar cost averaging is to attempt to
shield your investment from short term price fluctuations. Since the same dollar
amount is transferred to other divisions each month, more units are purchased in
a division if the value per unit is low and less units are purchased if the
value per unit is high.
Therefore, a lower than average value per unit may be achieved over the long
term. This plan of investing allows investors to take advantage of market
fluctuations but does not assure a profit or protect against a loss in declining
markets. See Measurement of Investment Experience, INDEX OF INVESTMENT
EXPERIENCE AND UNIT VALUE.
This dollar cost averaging option may be elected at the time the application or
enrollment form is completed or at a later date. The minimum amount that may be
transferred each month is $250. The maximum amount which may be transferred is
equal to the accumulation value in the Limited Maturity Bond Division or the
Liquid Asset Division when elected, divided by 12.
The transfer date will be the same calendar day each month as the contract date.
The dollar amount will be allocated to the divisions in which you are invested
in proportion to your accumulation value in each division unless you specify
otherwise. If, on any transfer date, the accumulation value is equal to or less
than the amount you have elected to have transferred, the entire amount will be
transferred and the option will end. You may change the transfer amount once
each contract year, or cancel this option by sending us satisfactory notice to
the Customer Service Center at least seven days before the next transfer date.
Any allocation under this option will not be included in determining if the
excess allocation charge will apply.
WHAT HAPPENS IF A DIVISION IS
NOT AVAILABLE
When a distribution is made from an investment portfolio supporting a division
of Account B 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 as an
allocation change of the accumulation value for purposes of the number of free
allocation changes permitted. When a distribution from a portfolio or division
cannot be reinvested in the portfolio due to the unavailability of securities
for acquisition, we will notify you promptly after the allocation has occurred.
If within 30 days you allocate the accumulation value from the Specially
Designated Division to other divisions of your choice, such allocations are not
counted as an allocation change of the accumulation value for purposes of the
number of free allocation changes permitted.
YOUR ACCUMULATION VALUE
Your accumulation value is the sum of the amounts in each of the divisions in
which you are invested, and is the amount available for investment at any time.
You select the divisions to which to allocate the accumulation value. We adjust
your accumulation value on each Valuation Date to reflect the divisions'
investment performance and on each contract processing date to reflect the
removal of any charges. The accumulation value is applied to your choice of an
annuity option on the annuity commencement date. See Choosing an Income Plan.
You may choose up to fourteen divisions and allocate your accumulation value
among them in any way you choose.
ACCUMULATION VALUE IN EACH DIVISION
ON THE CONTRACT DATE
On the contract date, the accumulation value is allocated to each division as
specified on the
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FACTS ABOUT THE CONTRACT (CONTINUED)
application or enrollment form, unless the contract is issued in a state that
requires the return of premium payments during the free look period, in which
case, your initial premium will be allocated to the Specially Designated
Division during the free look period. See Your Right to Cancel or Exchange
Your Contract.
ON EACH VALUATION DATE
At the end of each subsequent valuation period, the amount of accumulation
value in each division will be calculated as follows:
(1) We take the accumulation value in the
division at the end of the preceding valuation period.
(2) We multiply (1) by the division's net rate of
return for the current valuation period.
(3) We add (1) and (2).
(4) We add to (3) any additional premium
payments allocated to the division during the current valuation period.
(5) We add or subtract allocations to or from
that division during the current valuation period.
(6) We subtract from (5) any partial withdrawals
and any associated charges allocated to that division during the current
valuation period.
(7) We subtract from (6) the amounts allocated
to that division for:
(a) any contract fees; and
(b) any distribution fee and any charge for
premium taxes. HOWEVER, WE CURRENTLY WAIVE THE DEDUCTION OF THE CHARGE
FOR PREMIUM TAXES. (See Charges and Fees, PREMIUM TAXES.)
All amounts in (7) are allocated to each division in the proportion that (6)
bears to the accumulation value, unless the Charge Deduction Division has been
specified.
MEASUREMENT OF INVESTMENT EXPERIENCE
INDEX OF INVESTMENT EXPERIENCE
AND UNIT VALUE
The investment experience of a division is deter-
mined 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 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 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.
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FACTS ABOUT THE CONTRACT (CONTINUED)
(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 daily charge for
mortality and expense risks for each day in the valuation period.
(9) We subtract from (8) the asset based
administrative charge for each day in the valuation period.
NET RATE OF RETURN FOR A DIVISION
OF THE ACCOUNTS
The net rate of return for a division during a valuation period is the
experience factor for that valuation period minus one.
CASH SURRENDER VALUE
Your contract's cash surrender value fluctuates daily with the investment
results of the divisions you have selected. We do not guarantee any minimum. On
any date before the annuity commencement date while the contract is in effect,
the cash surrender value is calculated as follows:
(1) We take the contract's accumulation value;
(2) We deduct any incurred distribution fee and
any unrecovered charge for premium taxes. (See Charges and Fees, PREMIUM
TAXES);
(3) We deduct any charges incurred but not yet
deducted.
SURRENDERING TO RECEIVE THE
CASH SURRENDER VALUE
The contract may be surrendered by the owner at any time while the annuitant is
living and before the annuity commencement date.
A surrender will be effective on the date your written request and the contract
are received by us at our Customer Service Center and the cash surrender value
is determined accordingly as of that date. All benefits under the contract will
then be terminated as of that date. You may receive the cash surrender value in
a single sum payment or apply it under one or more annuity options. See The
Annuity Options. We will usually pay the cash surrender value within seven days
but we may delay payment as described in the When We Make Payments provision.
PARTIAL WITHDRAWALS
Prior to the annuity commencement date, while the annuitant is living and the
contract is in effect, you may take partial withdrawals from the accumulation
value by sending satisfactory notice to the Customer Service Center. Unless you
specify otherwise, the amount of the withdrawal will be taken in proportion to
the amount of accumulation value in each division in which you are invested.
There are three options available for selecting partial withdrawals, the
Conventional Partial Withdrawal Option, the Systematic Partial Withdrawal Option
and the IRA Partial Withdrawal Option. All three options are described below.
Partial withdrawals may not be repaid.
CONVENTIONAL PARTIAL WITHDRAWAL OPTION
After the free look period, you may take a conventional partial withdrawal
once each contract year without charge. If you take more than one conventional
partial withdrawal in a contract year, we impose a charge of the lesser of $25
and 2.0% of the amount withdrawn. The minimum amount you may withdraw under
this option is $1,000. In no event may a conventional partial withdrawal or a
combination of a conventional partial withdrawal and systematic partial
withdrawals received or expected to be received during the contract year,
exceed 25% of the accumulation value as of the date of the current withdrawal.
Also, in no event may a combination of a conventional partial withdrawal and
IRA partial withdrawals received or expected to be received during a contract
year, exceed 25% of the accumulation value as of the date of the conventional
partial withdrawal.
SYSTEMATIC PARTIAL WITHDRAWAL OPTION
This option may be elected at the time the application or enrollment form is
completed, or at a later date. This option may be elected to commence in a
contract year where a conventional partial withdrawal has been taken. However,
it may not be elected while the IRA partial withdrawal option is in effect.
You may choose to receive systematic partial withdrawals on a monthly or
quarterly basis from the accumulation value in the divisions of the Accounts.
The commencement of payments under this option may not be elected to start
sooner than 28 days after the contract issue date. You
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FACTS ABOUT THE CONTRACT (CONTINUED)
select the date of the quarter or month when the withdrawals will be made but
no later than the 28th day of the month. If no date is selected, the
withdrawals will be made on the same calendar day of each month as the
contract date. You may select a dollar amount or a percentage of the
accumulation value as the amount of your 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 the accumulation value on
the withdrawal date, the amount withdrawn will be reduced so that it equals
such percentage. For example, if a $2,500 monthly withdrawal was elected and
on the withdrawal date 1.25% of the accumulation value equaled $1,500, the
withdrawal amount would be reduced to $1,500. If a percentage is selected and
the amount to be systematically withdrawn based on that percentage would be
less than the minimum of $100, we would increase the amount to $100 provided
it does not exceed the maximum percentage. If it is below the maximum
percentage we will send the minimum. If it is above the maximum percentage we
will send the amount and then cancel the option. For example, if you selected
1.0% to be systematically withdrawn on a monthly basis and that amount equaled
$90, and since $100 is less than 1.25% of the accumulation value, we would
send $100. If 1.0% equaled $75, since $100 is more than 1.25% of the
accumulation value we would send $75 and then cancel the option. In such a
case, in order to receive systematic partial withdrawals in the future, you
would be required to submit a new notice to our Customer Service Center.
You may change the amount or percentage of your withdrawal once each contract
year or cancel this option at any time by sending satisfactory notice to us at
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.
In no event may a systematic partial withdrawal or a combination of a
conventional partial withdrawal and systematic partial withdrawals received or
expected to be received during the contract year, exceed 25% of the
accumulation value as of the date of the current 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
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FACTS ABOUT THE CONTRACT (CONTINUED)
this option at any time by sending us satisfactory notice to our Customer
Service Center at least seven days prior to the next scheduled withdrawal
date.
PARTIAL WITHDRAWALS IN GENERAL
CONSULT YOUR TAX ADVISOR REGARDING THE TAX CONSEQUENCES ASSOCIATED WITH TAKING
PARTIAL WITHDRAWALS. A partial withdrawal made before the taxpayer reaches age
59 1/2 may result in imposition of a tax penalty of 10% of the taxable portion
withdrawn. Please refer to Federal Tax Considerations for more details.
PROCEEDS PAYABLE TO THE BENEFICIARY
If either the annuitant (when there is no contingent annuitant) or owner dies
prior to the annuity commencement date, we will pay the beneficiary the death
benefit proceeds under the contract. Such amount may be received in a single sum
or applied to any of the annuity options. See The Annuity Options. If we do not
receive a request to apply the death benefit proceeds to an annuity option, a
single sum distribution will be made. We may reduce the death benefit proceeds
payable under certain group or sponsored arrangements. See Part I, Group or
Sponsored Arrangements.
If the annuitant and owner are both age 75 or younger at issue the death benefit
is the greater of the accumulation value and the guaranteed death benefit.
MAXIMUM GUARANTEED DEATH BENEFIT
This amount is calculated as follows:
(1) We determine the total premiums paid;
(2) We multiply (1) by two;
(3) We determine the total partial withdrawals
taken; and
(4) We subtract (3) from (2).
GUARANTEED DEATH BENEFIT
On the contract date the guaranteed death benefit is equal to the initial
premium. On subsequent valuation dates, the guaranteed death benefit is
calculated as follows:
(1) We take the guaranteed death benefit from
the prior valuation date;
(2) We calculate interest on (1) for the current
valuation period at an annual rate of 7% (THE GUARANTEED DEATH BENEFIT
INTEREST RATE), except that with respect to amounts in the Liquid Asset
Division, the interest rate applied to such amounts will be the net rate
of return for the Liquid Asset Division during the current valuation
period, if it is less than 7%;
(3) We add (1) and (2);
(4) We add to (3) any additional premiums paid
during the current valuation period; and,
(5) We subtract from (4) any partial withdrawals
made during the current valuation period.
If (5) is greater than the maximum guaranteed death benefit, we will pay the
maximum guaranteed death benefit.
If the annuitant or owner is age 76 or older at issue, the death benefit is
the greater of:
(1) The cash surrender value; and
(2) The sum of the premiums paid, less any
partial withdrawals.
HOW TO CLAIM PAYMENTS TO BENEFICIARY
We must receive due proof of the death of the annuitant or owner (such as an
official death certificate) at our Customer Service Center before we will make
any payments to the beneficiary. We will calculate the death benefit as of the
date we receive due proof of death. The beneficiary should contact our
Customer Service Center for instructions.
REPORTS TO OWNERS
We will send you a report once each contract quarter within 31 days after the
end of each contract quarter. The report will show the accumulation value, the
cash surrender value, and the death benefit as of the end of the contract
quarter.
The report will also show the allocation of the accumulation value as of such
date and the amounts deducted from or added to the accumulation value since the
last report. The report will also include any other information that may be
currently required by the insurance supervisory official of the jurisdiction in
which the contract is delivered.
We will also send you copies of any shareholder reports of the portfolios or
securities in which the Accounts invest, as well as any other reports, notices
or documents required by law to be furnished to contract owners.
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FACTS ABOUT THE CONTRACT (CONTINUED)
WHEN WE MAKE PAYMENTS
We will pay death benefit proceeds and the cash surrender value within seven
days after our Customer Service Center receives all the information needed to
process the payment.
However, we may delay payment of amounts derived from the divisions if it is not
practical for us to value or dispose of shares of the Accounts because:
(1) The NYSE is closed for trading;
(2) The SEC determines that a state of emergency
exists;
(3) An order or pronouncement of the SEC permits
a delay for the protection of contract owners; or,
(4) The check used to pay the premium has not
cleared through the banking system. This may take up to 15 days.
During such times, as to amounts allocated to the divisions, we may delay:
(1) Determination and payment of any cash
surrender value;
(2) Determination and payment of any death
benefit if death occurs before the annuity commencement date;
(3) Allocation changes of the accumulation value;
or,
(4) Application under an annuity option of the
accumulation value.
CHARGES AND FEES
CHARGE DEDUCTION DIVISION
You may specify on the application or enrollment form if you wish to use the
Charge Deduction Division Option. If you so specify, all charges against the
accumulation value will be deducted from the Liquid Asset Division. If the
amount of the charge is greater than the amount in the division, the charge will
be deducted proportionately from all the divisions in which you are invested.
You may also choose to elect or cancel this option while the contract is in
force by sending us satisfactory notice to our Customer Service Center. If you
do not elect this option, the charges will be deducted proportionately from all
the divisions in which you are invested.
CHARGES DEDUCTED FROM THE
ACCUMULATION VALUE
We invest the entire amount of the initial and any additional premium payments
in the divisions you select, subject to certain restrictions. See Restrictions
on Allocation of Premium Payments. We then periodically deduct certain amounts
from your accumulation value. We may reduce certain fees and charges, including
any distribution fees, surrender, administration, and mortality and expense risk
charges, under group or sponsored arrangements. See Group or Sponsored
Arrangements. Charges are deducted proportionately from all divisions in which
you are invested, unless you have elected the Charge Deduction Division. The
charges we deduct are:
DISTRIBUTION FEE
We deduct a sales load in an annual amount of 0.65% of each premium. This
charge is incurred at the beginning of each contract processing period and
deducted at the end of each contract processing period (or at the time of
surrender if surrendered before the end of a contract processing period) for a
period of ten years from the date we receive and accept each premium payment.
We also offer a DVA through another prospectus, which is a contract with a
different charging structure.
PREMIUM TAXES
We make a charge for state and local premium taxes in certain states which can
range from 0% to 3.5% of premium. The charge depends on the annuitant's state
of residence. We reserve the right to change this amount to conform with
changes in the law or if the annuitant or owner changes state of residence, as
applicable.
Premium taxes are generally incurred on the annuity commencement date and a
charge for such premium taxes is then deducted from your accumulation value on
such date. However, some jurisdictions impose a premium tax at the time the
initial and additional premiums are paid, regardless of the annuity
commencement date. In those states we initially advance the amount of the
charge for premium taxes to your accumulation value and then deduct it in
equal installments on each contract processing date over a six year period,as
applicable.
Currently, in those states where we advance the charge for premium taxes, we
will waive the deduction of the applicable installments of the charge for
premium taxes on each contract processing date. However, we will deduct the
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CHARGES AND FEES (CONTINUED)
unrecovered charge for premium taxes (not including installments which were
waived) when determining the cash surrender value payable if you surrender
your contract. We reserve the right to deduct the total amount of the charge
for premium taxes previously waived and unrecovered on the annuity
commencement date.
In those cases when we advance the charge for premium taxes, since the charge
for premium taxes is advanced to the accumulation value, a positive net rate
of return will give a higher cash surrender value and a negative net rate of
return will give a lower cash surrender value than would be the case had the
charge for premium taxes been deducted from your premium payment.
EXCESS ALLOCATION CHARGE
We allow you five free allocation changes between divisions per contract year.
For each additional allocation change, we will charge you $25 at the time each
allocation change is processed. This amount represents the maximum we will
charge. The charge is deducted from the division(s) from which each such
reallocation is made in proportion to the amount being transferred from each
such division unless you have chosen to use the Charge Deduction Division. The
excess allocation charge is set at a level that is not designed to produce
profit for Golden American or any affiliate. Any allocation(s) or transfer(s)
due to the election of the Dollar Cost Averaging Option 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.
PARTIAL WITHDRAWAL CHARGE
If you take more than one conventional partial withdrawal during a contract
year, we impose a charge of the lesser of $25 and 2.0% of the amount withdrawn
for each additional conventional partial withdrawal. The charge is deducted
from the division(s) from which each such partial withdrawal is made in
proportion to the amount being withdrawn from each division unless you have
chosen to use the Charge Deduction Division. See Partial Withdrawals,
CONVENTIONAL PARTIAL WITHDRAWAL OPTION.
CHARGES DEDUCTED FROM THE DIVISIONS
Mortality and Expense Risk Charge The daily charge is at the rate of 0.003446%
(equivalent to an annual rate of 1.25%) on the assets in each division.
Approximately 0.60% of this annual charge is allocated to the mortality risk and
0.65% is allocated to the expense 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 of the
Accounts, to compensate Golden American for administrative expenses under the
contract. The daily charge is at a rate of 0.000276% (equivalent to an annual
rate of 0.10%) on the assets in each division.
This asset based administrative charge 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.
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CHARGES AND FEES (CONTINUED)
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 annuitant under an income plan. We will make these
payments under the annuity option chosen in the application or enrollment form
or as subsequently changed. You may change an annuity option by making a written
request to us at least 30 days prior to the annuity commencement date of the
contract. The amount of the payments will be determined by applying the
accumulation value on the annuity commencement date in accordance with The
Annuity Options section below. See When We Make Payments.
You may also elect an annuity option on surrender of the contract for its cash
surrender value or, you may choose one or more annuity options for the payment
of death benefit proceeds while it is in effect and before the annuity
commencement date. If, at the time of the annuitant's or owner's death, no
option has been chosen for paying death benefit proceeds, the beneficiary may
choose an option within one year.
The minimum monthly annuity income payment that we will make is $20. We may
require that a single sum payment be made if the accumulation value is less than
$2,000 or if the calculated monthly annuity income payment is less than $20. For
each option we will issue a separate written agreement putting the option into
effect. Before we pay any annuity benefits, we require the return of the
contract. If your contract has been lost, we will require that you complete and
return the applicable lost contract form. Various factors will affect the level
of annuity benefits including the annuity option chosen, the assumed interest
rate used and the investment results of the division(s) in which the
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 in the application or enrollment form.
You may select any date following the third contract anniversary but before the
contract processing date in the month following the annuitant's 90th birthday.
If you do not select a date, the annuity commencement date will be in the month
following the annuitant's 90th birthday. However, in the state of Pennsylvania
the annuity commencement date may not be later than in the month following the
annuitant's 85th birthday for annuitants with an issue age of 80 and under. 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.
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CHOOSING AN INCOME PLAN (CONTINUED)
THE ANNUITY OPTIONS
There are four options to choose from as shown below. Options 1 through 3 are
fixed and option 4 is variable. For a fixed option, the accumulation value is
transferred to the general account.
OPTION 1. INCOME FOR A FIXED PERIOD
Payment is made in equal installments for a fixed number of years based on the
accumulation value as of the annuity commencement date. We guarantee that each
monthly payment will be at least the amount set forth in the contract.
Guaranteed amounts for annual, semi-annual and quarterly payments are
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
annuitant reaches age 59 1/2.
OPTION 2. INCOME FOR LIFE
Payment is made in equal monthly installments and guaranteed for at least a
period certain. The period certain can be 10 or 20 years. Other periods
certain are available on request. A refund certain may be chosen instead.
Under this arrangement, income is guaranteed until payments equal the amount
applied. If the person named lives beyond the guaranteed period, payments
continue until his or her death.
WE GUARANTEE THAT EACH PAYMENT WILL BE AT LEAST THE AMOUNT SET FORTH IN THE
CONTRACT CORRESPONDING TO THE PERSON'S AGE ON HIS OR HER LAST BIRTHDAY BEFORE
THE OPTION'S EFFECTIVE DATE. AMOUNTS FOR AGES NOT SHOWN IN THE CONTRACT ARE
AVAILABLE UPON REQUEST.
OPTION 3. JOINT LIFE INCOME
This option is available if there are two persons named to receive payments.
At least one of the persons named must be either the owner or beneficiary of
the contract. Monthly payments are guaranteed and are made as long as at least
one of the named persons is living. There is no minimum number of payments.
Monthly payment amounts are available upon request.
OPTION 4. ANNUITY PLAN
An amount can be used to buy any single premium annuity we offer on the
option's effective date.
PAYMENT WHEN NAMED PERSON DIES
When the person named to receive payment dies, we will pay any amounts still due
as provided by the option agreement. The amounts still due are determined as
follows:
(1) For options 1, 2, or any remaining guaranteed
payments, payments will be continued. Under options 1 and 2, the discounted
values of the remaining guaranteed payments may be paid in a single sum.
This means we deduct the amount of the interest each remaining guaranteed
payment would have earned had it not been paid out early. The discount
interest rate is 3% for option 1 and 3.50% for option 2 per year. We will
however, base the discount interest rate on the interest rate used to
calculate the payments for options 1 and 2 if such payments were not based
on the tables in the contract.
(2) For option 3, no amounts are payable after
both named persons have died.
(3) For option 4, the annuity agreement will state
the amount due, if any.
OTHER INFORMATION
OTHER CONTRACT PROVISIONS
IN CASE OF ERRORS ON THE APPLICATION OR ENROLLMENT FORM
If an age or sex given in the application or enrollment form is misstated, the
amounts payable or benefits provided by the contract shall be those that the
premium payment would have bought at the correct age or sex.
SENDING NOTICE TO US
Any written notices, inquiries or requests should be sent to our Customer
Service Center. Please include your name, your contract number and, if you are
not the annuitant, the name of the annuitant.
ASSIGNING THE CONTRACT AS COLLATERAL
You may assign a non-qualified contract as collateral security for a loan or
other obligation. This does not change the ownership. However, your rights and
any beneficiary's rights are subject to the terms of the assignment. See
Additional Considerations, Transfer of Annuity Contracts, and Assignments. An
assignment may have Federal tax consequences. See Federal Tax Considerations.
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OTHER INFORMATION (CONTINUED)
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 us at our
Customer Service Center. We will refund the accumulation value plus any
charges we deducted, and the contract will be voided as of the date we receive
the contract and your request. Some states require that we return the premium
paid. In these states, we require that your premium be allocated to the
Specially Designated Division during the free look period. If you exercise
your right to cancel, we will return the greater of (a) the premium invested
and (b) the accumulation value of your contract plus any amounts deducted
under the contract or by the Trust for taxes, charges or fees. If you do not
choose to exercise your right to cancel during the free look period, then at
the end of the free look period your money will be invested in the division(s)
chosen by you, based on the index of investment experience next computed for
each division. See Measurement of Investment Experience, INDEX OF EXPERIENCE
AND UNIT VALUE.
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 distribution fee,
surrender, administration, and mortality and expense risk charges. We may also
change the minimum initial and additional premium requirements, or reduce the
death benefit proceeds payable. Group arrangements include those in which a
trustee or an employer, for example, purchases contracts covering a group of
individuals on a group basis. Sponsored arrangements include those in which an
employer allows us to sell contracts to its employees on an individual basis.
Our costs for sales, administration, and mortality generally vary with the size
and stability of the group among other factors. We take all these factors into
account when reducing charges. To qualify for reduced charges, a group or
sponsored arrangement must meet certain requirements, including our 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 distribution fee 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 the Accounts 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.
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OTHER INFORMATION (CONTINUED)
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 0.75% of average annual contract assets per year
over the life of the contract.
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.
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.
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
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REGULATORY INFORMATION (CONTINUED)
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 Myles R. Tashman, Executive Vice President 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 financial statements of Golden American Life Insurance Company, Separate
Account B and The Managed Global Account of Separate Account D, appearing in the
Statement of Additional Information and in the Registration Statement have been
audited by Ernst & Young LLP, independent auditors, as set forth in their
reports thereon appearing in the Statement of Additional Information and in the
Registration Statement and are included in reliance upon such reports given upon
the authority of such firm as experts in accounting and auditing.
FEDERAL TAX CONSIDERATIONS
INTRODUCTION
The contract is designed for use by individuals or groups in retirement plans
which are qualified under Section 408 or non-qualified under the provisions of
the Internal Revenue Code of 1986, as amended (the "Code"). The ultimate effect
of Federal income taxes on the amounts paid for the contract, on the investment
return on assets held under the contract, on annuity payments and on the
economic benefits to the owner, annuitant or beneficiary depends upon the terms
of the contract, upon Golden American's tax status and upon the tax status of
the individuals concerned.
The following discussion is general in nature and is not intended as tax advice.
Each person concerned should consult a competent tax advisor. No attempt is made
to consider any applicable state or other tax laws. Moreover, the discussion is
based upon Golden American's understanding of the Federal income tax laws as
they are currently interpreted. No representation is made regarding the
likelihood of continuation of the Federal income tax laws, the Treasury
Regulations, or the current interpretations by the Internal Revenue Service (the
"IRS"). For a discussion of Federal income taxes as they relate to the 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 the Accounts are
reinvested and taken into account in determining the accumulation value. 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. (For purposes of this
rule, the amount of any indebtedness that is secured by a pledge or assignment
of the contract is treated as a payment received on account of a partial
withdrawal from the contract.) However, this rule applies only if (1) the
investments of the Accounts 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.
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 the Accounts,
are to be
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FEDERAL TAX CONSIDERATIONS (CONTINUED)
"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 division.
If the Accounts failed to comply with these diversification standards, the
contract would not be treated as an annuity contract for Federal income tax
purposes and the owner would generally be taxable currently on the income on
the contract (as defined in the tax law) beginning with the first period of
non-diversification. Golden American expects that the Accounts, 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 the Accounts, 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 the Accounts. 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
the Accounts.
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 the Accounts, that treatment might apply on a prospective basis. However,
if the ruling or regulations were not considered to set forth a new
position, an owner might retroactively be determined to be the owner of the
assets of the Accounts.
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
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FEDERAL TAX CONSIDERATIONS (CONTINUED)
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.
In addition to the foregoing, if the contract's annuity commencement date
occurs at a time when the annuitant is at an advanced age, such as over age
85, it is possible that the owner will be taxable currently on the annual
increase in the accumulation value. The remainder of this discussion assumes
that the contract will be treated as an annuity contract for Federal income
tax purposes.
2. WITHDRAWALS PRIOR TO THE ANNUITY COMMENCEMENT DATE
Code 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
conventional or systematic partial withdrawal from a contract prior to the
annuity commencement date will be treated as taxable income to the extent the
amount held under the contract immediately before the withdrawal occurs
exceeds the "investment in the contract." The "investment in the contract" is
defined in the Code as that portion, if any, of premium payments by or on
behalf of an individual under a contract which was not excluded from the
individual's gross income at the time of such payment less any amounts
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.
3. ANNUITY PAYMENTS AND WITHDRAWALS ON OR AFTER THE ANNUITY COMMENCEMENT DATE
Proceeds of a total surrender of the contract after the annuity commencement
date are taxable to the extent the proceeds exceed the investment in the
contract. In addition, proceeds of a partial withdrawal after the annuity
commencement date are fully taxable. Also, a portion of each annuity payment
under the contract is taxable if the value of the contract exceeds the
investment in the contract. The taxable portion of an annuity payment will be
subject to tax at ordinary income tax rates.
For fixed annuity payments, the taxable portion of each payment is determined
by using a formula known as the "exclusion ratio," which establishes the ratio
that the investment in the contract (allocated to the fixed annuity option)
bears to the total expected amount of fixed 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.
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FEDERAL TAX CONSIDERATIONS (CONTINUED)
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 a qualified plan; (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 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
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.
Under the Internal Revenue Code, distributions from qualified retirement plans,
including Individual Retirement Annuities, Simplified Employee Pensions, and Tax
Sheltered Annuities, generally must
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FEDERAL TAX CONSIDERATIONS (CONTINUED)
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. It is possible that the death benefit could be viewed as
violating the prohibition on investment in life insurance contracts with the
result that the contract would not be viewed as satisfying the requirements of
an IRA.
Subject to certain direct rollover and mandatory withholding requirements
(discussed below), amounts generally may be "rolled over" from a qualified
retirement plan to an Individual Retirement Annuity (or from an Individual
Retirement Annuity or individual retirement account to an Individual 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 403(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.
ADDITIONAL CONSIDERATIONS
DISTRIBUTION-AT-DEATH RULES
In order to be treated as an annuity contract for Federal tax purposes, a
non-qualified contract must provide the following two distribution rules: (a) if
any holder dies on or after the annuity commencement date, and before the entire
interest 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 the holder dies before
the annuity commencement date, his or her 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
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ADDITIONAL CONSIDERATIONS (CONTINUED)
within one year after the date of death. If the beneficiary is the surviving
spouse of the holder, the contract (together with the deferral of tax on the
accrued and future income thereunder) may be continued in the name of the
spouse. Before the annuity commencement date, the holder will generally be the
owner, and after the annuity commencement date, the holder generally may be the
annuitant and the owner.
Where the holder is not an individual, solely for the purpose of the
distribution at death rules, the primary annuitant is considered the holder. The
primary annuitant is the individual the events in the life of whom are of
primary importance in affecting the timing or amount of payment under a
contract. Finally, in the case of joint holders, the distribution will be
required at the death of the first of the holders to die.
TAXATION OF DEATH BENEFIT PROCEEDS
Amounts may be distributed from a non-qualified contract because of the death of
an owner or annuitant. Generally, such amounts are includible in the income of
the recipient as follows: (a) if distributed in a lump sum, they are taxed in
the same manner as a full surrender of the contract, as described above, or (b)
if distributed under an annuity option, they are taxed in the same manner as
annuity payments, as described above.
TRANSFER OF ANNUITY CONTRACTS
Transfers of non-qualified annuity contracts for less than the full and adequate
consideration will trigger tax on the gain in the contract, at the time of such
transfer, with the transferee getting a step-up in basis for the amount included
in the owner's income. Such a transfer could result on the annuity commencement
date if the annuitant is not the owner or the owner's spouse. This provision
does not apply to transfers between spouses or incident to a divorce.
SECTION1035 EXCHANGES
Code Section1035 provides that no gain or loss shall be recognized on the
exchange of an annuity contract for another. If the exchanged contract was
issued prior to August 14, 1982, the tax rules which formerly provided that the
surrender was taxable only to the extent the amount received exceeds the owner's
investment in the contract, will continue to apply to the new contract. In
contrast, contracts issued on or after January 19, 1985, in a Code Section1035
exchange are treated as new contracts for purposes of the penalty tax and
distribution-at-death rules. Special rules and procedures apply to Code
Section1035 transactions. Prospective owners wishing to take advantage of Code
Section1035 should consult their tax advisors.
ASSIGNMENTS
A transfer of ownership, a collateral assignment, or the designation of an
annuitant or other beneficiary who is not also the owner may result in tax
consequences to the owner, annuitant or beneficiary that are not discussed
herein. An owner contemplating such a transfer or assignment of a contract
should contact a competent tax advisor with respect to the potential tax effects
of such a transaction.
MULTIPLE CONTRACTS RULE
For purposes of determining the amount of any distribution under Code
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 Section72(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.
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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 (GLOBAL ACCOUNT)
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
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THE MANAGED GLOBAL ACCOUNT OF ACCOUNT D (CONTINUED)
guaranteed by the U.S. Government, its agencies, or instrumentalities ("U.S.
Government Securities"); (2) obligations 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 Ratings Group ("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 protect 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.
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THE MANAGED GLOBAL ACCOUNT OF ACCOUNT D (CONTINUED)
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 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
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THE MANAGED GLOBAL ACCOUNT OF ACCOUNT D (CONTINUED)
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 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 1001 Jefferson Street, Wilmington, Delaware 19801. 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," Bankers Trust is
under contract to divest its ownership of the stock of Golden American and DSI.
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
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THE MANAGED GLOBAL ACCOUNT OF ACCOUNT D (CONTINUED)
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.
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, through
December 31, 1996, 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, a Senior Managing Director or E.M.
Warburg, Pincus & Co., Inc. ("EMW"), has been with Warburg, Pincus since 1989,
before which time he was chief investment officer and director of Fiduciary
Trust Company International. P. Nicholas Edwards, Nicholas P. W. Horsley, Harold
W. Ehrlich and Vincent J. McBride also exercise significant portfolio management
responsibilities with respect to the Global Account. Mr. Edwards, a Senior Vice
President of Warburg, Pincus, has been with Warburg Pincus since August 1995,
before which time he was a director at Jardine Fleming Investment Advisers,
Tokyo. Mr. Horsley, a Senior Vice President of Warburg, Pincus, has been with
Warburg, Pincus since 1993, before which time he was a director, portfolio
manager and analyst at Barclays deZoete Wedd in New York City. Mr. Ehrlich, a
Senior Vice President with Warburg, Pincus, has been with Warburg, Pincus since
February 1995, before which time he was a senior vice president, portfolio
manager and analyst at Templeton Investment Counsel Inc. Mr. McBride has been
with Warburg, Pincus since 1994. Prior to joining Warburg, Pincus, Mr. McBride
was an international equity analyst at Smith Barney Inc. from 1993 to 1994 and
at General Electric Investment Corporation from 1992 to 1993. From 1989 to 1992
he was a portfolio manager/analyst at United Jersey Bank.
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THE MANAGED GLOBAL ACCOUNT OF ACCOUNT D (CONTINUED)
As of February 29, 1996, Warburg, Pincus managed approximately $14.0 billion of
assets, including approximately $7.7 billion of investment company assets. The
Portfolio Manager is a wholly-owned subsidiary of Warburg, Pincus Counsellors
G.P., a New York general partnership which has no business other than being a
holding company of Warburg, Pincus and its subsidiaries. EMW is deemed to
control Warburg, Pincus through its ownership of a class of voting preferred
stock of Warburg, Pincus.
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. First Data
Corporation 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 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,
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THE MANAGED GLOBAL ACCOUNT OF ACCOUNT D (CONTINUED)
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 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.
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THE MANAGED GLOBAL ACCOUNT OF ACCOUNT D (CONTINUED)
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. 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
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THE MANAGED GLOBAL ACCOUNT OF ACCOUNT D (CONTINUED)
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 the 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 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
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THE MANAGED GLOBAL ACCOUNT OF ACCOUNT D (CONTINUED)
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 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.
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THE MANAGED GLOBAL ACCOUNT OF ACCOUNT D (CONTINUED)
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 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 is 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.
50
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE
COMPANY
DEFERRED
VARIABLE
A Subsidiary of Bankers Trust Company
ANNUITY
APPLICATION
GOLDEN AMERICAN LIFE INSURANCE COMPANY IS A STOCK COMPANY DOMICILED IN
WILMINGTON, DELAWARE
<TABLE>
<S> <C> <C>
1. OWNER(S) (FIRST, MIDDLE, LAST NAME)
Street, City, State, Zip Code Date of Birth (Mo. Day Yr.)
/ /
Social Security No./TIN
Phone Number(s): o Male o Female
2. ANNUITANT (IF OTHER THAN OWNER)
Street, City, State, Zip Code Date of Birth (Mo. Day Yr.)
/ /
Social Security No./TIN
Relation to Owner: o Male o Female
3. CONTINGENT ANNUITANT (OPTIONAL)
Street, City, State, Zip Code Date of Birth (Mo. Day Yr.)
/ /
Social Security No./TIN
Relation to Annuitant: o Male o Female
4. PRIMARY BENEFICIARY(IES) (IF MORE THAN ONE - INDICATE
%)
Relation to Annuitant:
5. CONTINGENT BENEFICIARY(IES) (IF MORE THAN ONE - INDICATE
%)
Relation to Annuitant:
6. PLAN (CHECK ONE) o DVA o Other
7. ANNUITY OPTION AND COMMENCEMENT DATE
Annuity Option (CHECK ONE): o Variable Annuity Certain o Income for Life with 10 Years Certain o Other
Annuity Commencement Date:
o Check here for maximum age (specified in the prospectus) or fill in date: / / (month, day, year)
8. (A) INITIAL PREMIUM AND ALLOCATION INFORMATION
Initial Premium Paid $ MAKE CHECK PAYABLE TO GOLDEN AMERICAN LIFE INSURANCE COMPANY
Fill in percentages for initial allocation in INITIAL column below.
(B) OPTIONAL DOLLAR COST AVERAGING ("DCA"): o CHECK BOX TO ELECT.
(MINIMUM OF $10,000 MUST BE ALLOCATED TO THE DIVISION CHECKED BELOW)
Amount of Monthly Transfer $ (minimum $250)
Division Transferred From: o Limited Maturity Bond Division or
o Liquid Asset Division
Divisions Transferred To: Fill in percentages in DCA column below.
ACCOUNT DIVISION INVESTMENT ADVISER (A) INITIAL
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. %
THE MANAGED GLOBAL ACCOUNT WARBURG, PINCUS COUNSELLORS, INC. %
EMERGING MARKETS BANKERS TRUST COMPANY %
LIMITED MATURITY BOND BANKERS TRUST COMPANY %
LIQUID ASSET BANKERS TRUST COMPANY %
TOTAL 100%
<CAPTION>
ACCOUNT DIVISION (B) DCA
MULTIPLE ALLOCATION %
FULLY MANAGED %
ALL-GROWTH %
CAPITAL APPRECIATION %
VALUE EQUITY %
RISING DIVIDENDS %
REAL ESTATE %
NATURAL RESOURCES %
THE MANAGED GLOBAL ACCOUNT %
EMERGING MARKETS %
LIMITED MATURITY BOND BANKERS TRUST COMPANY ------------
LIQUID ASSET BANKERS TRUST COMPANY ------------
100%
</TABLE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY, CUSTOMER SERVICE CENTER, P.O. Box 8794,
Wilmington, DE 19899-8794
<PAGE>
<TABLE>
<S> <C> <C>
9. OPTIONAL SYSTEMATIC PARTIAL WITHDRAWALS
FREQUENCY: o Monthly or o Quarterly START DATE: / (month, day).
WITHDRAWAL: o % of Accumulation Value or o $.
(THE MINIMUM WITHDRAWAL IS $100, NOT TO EXCEED 1.25% MONTHLY / 3.75% QUARTERLY OF THE ACCUMULATION VALUE.)
WITHHOLDING ELECTION INFORMATION (MUST BE COMPLETED IF SYSTEMATIC PARTIAL WITHDRAWALS ARE CHOSEN)
A. o I do not want to have Federal income tax withheld.
B. o I want to have Federal income tax withheld from each withdrawal using the number of allowances and marital status
indicated. (You may also designate an ADDITIONAL amount in Section "C".)
Allowances ; o Single o Married o Married, but withhold at a higher single rate.
C. o I want the following ADDITIONAL amount withheld from each withdrawal $. (You must also complete Section "B".)
SEE PAGE A1 OF THE PROSPECTUS FOR WITHHOLDING ELECTION INSTRUCTIONS.
10. 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.
11. TAX-QUALIFIED PLANS IF YOU ARE FUNDING A QUALIFIED PLAN, PLEASE SPECIFY WHAT TYPE:
o IRA o IRA Rollover o SEP/IRA o Other
12. REPLACEMENT Will the contract applied for replace any existing annuity or life insurance on the annuitant's life? o No
o Yes IF "YES", PLEASE OUTLINE IN THE REMARKS SECTION.
13. REMARKS
14. READ THE FOLLOWING STATEMENTS CAREFULLY AND SIGN BELOW:
- - BY SIGNING BELOW I ACKNOWLEDGE RECEIPT OF THE PROSPECTUS. I UNDERSTAND THAT THIS CONTRACT'S CASH SURRENDER VALUE MAY
INCREASE OR DECREASE ON ANY DAY DEPENDING ON THE INVESTMENT RESULTS. NO MINIMUM CASH SURRENDER VALUE IS GUARANTEED. THIS
CONTRACT IS IN ACCORD WITH MY ANTICIPATED FINANCIAL NEEDS.
- -I AGREE THAT, TO THE BEST OF MY KNOWLEDGE AND BELIEF, ALL STATEMENTS AND ANSWERS IN THE APPLICATION ARE COMPLETE AND TRUE
AND MAY BE RELIED UPON IN DETERMINING WHETHER TO ISSUE THE CONTRACT. MY ANSWERS WILL FORM A PART OF ANY CONTRACT TO BE
ISSUED, AND ONLY THE OWNER AND GOLDEN AMERICAN HAVE THE AUTHORITY TO MODIFY THIS APPLICATION.
- -IF GOLDEN AMERICAN AMENDS THE APPLICATION AS INDICATED IN THE AMENDMENTS SECTION BELOW, I WILL APPROVE OF THE CHANGE BY
ACCEPTING THE CONTRACT WHERE PERMITTED BY STATE REGULATION. I UNDERSTAND THAT ANY CHANGE IN PLAN, ANNUITY OPTION, BENEFITS
APPLIED FOR, OR AGE AT ISSUE MUST BE AGREED TO IN WRITING.
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)
DO YOU HAVE REASON TO BELIEVE THAT THE CONTRACT APPLIED FOR WILL REPLACE ANY EXISTING ANNUITY OR LIFE INSURANCE ON THE
LIFE OF THE ANNUITANT? o YES o NO
(In Florida Only) Florida License ID#
Agent Signature Print Name & No. of Agent Social Security
No. Broker/Dealer/Branch
AMENDMENTS TO THE APPLICATION
</TABLE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY, CUSTOMER SERVICE CENTER, P.O. Box 8794,
Wilmington, DE 19899-8794
GAL-DVA-5/95
<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-5/95
<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-1035-5/95
<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-5/95
<PAGE>
APPENDIX
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)
- - 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.
A1
<PAGE>
(This page has been left blank intentionally.)
<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 3207 5/96
<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: MAY 1, 1996
<PAGE>
TABLE OF CONTENTS
ITEM PAGE
---- ----
INTRODUCTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
PART I
Description of Golden American Life Insurance Company . . . . . . . . . . . . 1
Safekeeping of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
The Administrator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Independent Auditors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Distribution of Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Performance Information . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
IRA Partial Withdrawal Option . . . . . . . . . . . . . . . . . . . . . . . . 6
Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
PART II
Securities and Investment Techniques. . . . . . . . . . . . . . . . . . . . . 7
U.S. Government Securities. . . . . . . . . . . . . . . . . . . . . . . . . 7
Debt Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Short Sales Against the Box . . . . . . . . . . . . . . . . . . . . . . . . 8
Futures Contracts and Options on Futures Contracts. . . . . . . . . . . . . 8
Options on Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Options on Securities Indexes . . . . . . . . . . . . . . . . . . . . . . .10
Foreign Currency Transactions . . . . . . . . . . . . . . . . . . . . . . .10
Options on Foreign Currencies . . . . . . . . . . . . . . . . . . . . . . .12
Repurchase Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . .12
Banking Industry and Savings Industry Obligations . . . . . . . . . . . . .12
Commercial Paper. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
When Issued or Delayed Delivery Securities. . . . . . . . . . . . . . . . .14
Investment Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . .14
Management of Separate Account D. . . . . . . . . . . . . . . . . . . . . . .15
The Manager . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
Portfolio Manager . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
Custodian and Portfolio Accounting Agent. . . . . . . . . . . . . . . . . . .19
Portfolio Transactions and Brokerage. . . . . . . . . . . . . . . . . . . . .19
Purchase and Pricing of the Global Account. . . . . . . . . . . . . . . . . .21
Financial Statements of Separate Account B. . . . . . . . . . . . . . . . . .22
Financial Statements of The Managed Global Account of Separate Account D. . .22
Appendix - Description of Bond Ratings
<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,
1995, Golden American had over $98.1 million in stockholders' equity and
approximately $1.2 billion in total assets, including approximately $1.05
billion of separate account assets. Golden American is authorized to do
business in all jurisdictions except New York. Golden American offers variable
annuities and variable life insurance.
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 in 1995 and 1994 were
$749,741 and $816,264, respectively.
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 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.
1
<PAGE>
INDEPENDENT AUDITORS
Ernst & Young LLP, 2001 Market Street, Philadelphia, Pennsylvania 19103,
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, Golden American incurred
$311,000 for such services. The agreement was terminated as of January 1, 1994.
DSI acts as the principal underwriter (as defined in the Securities Act of
1933 and the Investment Company Act of 1940, as amended) of the variable
insurance products issued by Golden American which, as of December 31, 1994, are
sold primarily through two broker/dealer institutions. For the years ended
1995, 1994 and 1993, commissions paid by Golden American to DSI aggregated
$8,440,000, $17,569,000 and $34,260,00, 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. In 1995, the service agreement between DSI and Golden
American was amended to provide for a management fee from DSI to Golden American
for managerial and supervisory services provided by Golden American. This fee,
calculated as a percentage of average assets in the variable separate accounts,
was $986,650 for 1995.
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%.
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:
2
<PAGE>
365/7
Effective Yield = [(Base Period Return) +1) ] - 1
For the 7-day period March 22, 1996 to March 29, 1996, the current yield of
the Liquid Asset Division was 3.78% and the effective yield of the Division was
3.85%.
SEC STANDARD 30-DAY YIELD FOR NON-MONEY MARKET DIVISIONS
Quotations of yield for the remaining divisions will be based on all
investment income per Unit (accumulation value divided by the index of
investment experience) earned during a particular 30-day period, less expenses
accrued during the period ("net investment income"), and will be computed by
dividing net investment income by the value of an accumulation unit on the last
day of the period, according to the following formula:
6
YIELD = 2 [ ( a - b +1) - 1]
-----
cd
Where:
[a] equals the net investment income earned during the
period by the Series attributable to shares owned by
a division
[b] equals the expenses accrued for the period (net of
reimbursements)
[c] equals the average daily number of Units outstanding
during the period based on the index of investment
experience
[d] equals the value (maximum offering price) per index
of investment experience on the last day of the
period
Yield on divisions of Account B is earned from the increase in net asset
value of shares of the Series in which the Division invests and from dividends
declared and paid by the Series, which are automatically reinvested in shares of
the Series. Yield on the Global Account is earned from the increase in asset
value of shares of the securities in which the Global Account invests.
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:
n
P(1+T) =ERV
Where:
(1) [P] equals a hypothetical initial premium payment of
$1,000
(2) [T] equals an average annual total return
(3) [n] equals the number of years
(4) [ERV] equals the ending redeemable value of a
hypothetical $1,000 initial premium payment made at
the beginning of the period (or fractional portion
thereof)
All total return figures reflect the deduction of the maximum sales load,
the administrative charges, and the mortality and expense risk charges. The SEC
requires that an assumption be made that the contract owner surrenders the
entire contract at the end of the one, five and 10 year periods (or, if less, up
to the life of the 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.
3
<PAGE>
<TABLE>
<CAPTION>
One Year Period Five Year Period Inception to
Division Ending 12/31/95 Ending 12/31/95 12/31/95 Inception Date
- -------- --------------- ---------------- ------------ --------------
<S> <C> <C> <C> <C>
Multiple Allocation 11.68% 7.66%* 7.14%* 1/25/89
Fully Managed 13.44% 8.41%* 5.65%* 1/25/89
Capital Appreciation 22.79% N/A 9.87%* 5/4/92
Rising Dividends 23.69% N/A 10.98% 10/4/93
All-Growth 15.13% 7.00%* 4.47%* 1/25/89
Real Estate 9.35% 15.24%* 6.26%* 1/25/89
Natural Resources 3.52% 7.72%* 5.47%* 1/25/89
Value Equity 27.84% N/A 27.84% 1/1/95
Strategic Equity N/A N/A -5.70%* 10/2/95
Small Cap N/A N/A N/A 1/2/96
Emerging Markets -17.07% N/A -6.09% 10/4/93
Global Account .18%* N/A -3.10%* 10/21/92
Limited Maturity Bond 4.54% 4.23%* 5.31%* 1/25/89
Liquid Asset -1.60% 1.87%* 3.29%* 1/25/89
- -----------------------------------------------------------------------------------------------
</TABLE>
* Total return calculation reflects partial waiver of fees and expenses.
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:
n
[P(1+T) ]=ERV
Where:
(1) [P] equals a hypothetical initial premium
payment of $1,000
(2) [T] equals an average annual total return
(3) [n] equals the number of years
(4) [ERV] equals the ending redeemable value of a
hypothetical $1,000 initial premium payment made at the
beginning of the period (or fractional portion thereof)
assuming certain loading and charges are zero.
All total return figures reflect the deduction of the mortality and expense risk
charge and the administrative charges, but not the deduction of the maximum
sales load and the annual contract fee.
AVERAGE ANNUALIZED TOTAL RETURN FOR PERIODS ENDING 12/31/95 -- NON-STANDARDIZED
<TABLE>
<CAPTION>
One Year Period Five Year Period Inception to
Division Ending 12/31/95 Ending 12/31/95 12/31/95 Inception Date
- -------- --------------- ---------------- ------------ --------------
<S> <C> <C> <C> <C>
Multiple Allocation 17.80% 8.72%* 7.96%* 1/25/89
Fully Managed 19.57% 9.43%* 6.51%* 1/25/89
Capital Appreciation 28.95% N/A 11.35%* 5/4/92
Rising Dividends 29.85% N/A 13.59% 10/4/93
All-Growth 21.26% 8.04%* 5.34%* 1/25/89
Real Estate 15.47% 16.13%* 7.21%* 1/25/89
Natural Resources 9.62% 8.86%* 6.39%* 1/25/89
Value Equity 34.02% N/A 34.02% 1/1/95
Strategic Equity N/A N/A .38%* 10/2/95
Small Cap N/A N/A N/A 1/2/96
Emerging Markets -11.03% N/A -3.31% 10/4/93
Global Account 6.27%* N/A -1.08%* 10/21/92
Limited Maturity Bond 10.64% 5.40%* 6.12%* 1/25/89
Liquid Asset 4.48% 3.08%* 4.14%* 1/25/99
- -----------------------------------------------------------------------------------------------
</TABLE>
* Total return calculation reflects partial waiver of fees and expenses.
4
<PAGE>
Performance information for a division may be compared, in reports and
promotional literature, to: (i) the Standard & Poor's 500 Stock Index ("S&P
500"), Dow Jones Industrial Average ("DJIA"), Donoghue Money Market
Institutional Averages, or other indices that measure performance of a pertinent
group of securities so that investors may compare a division's results with
those of a group of securities widely regarded by investors as representative of
the securities markets in general; (ii) other groups of variable annuity
separate accounts or other investment products tracked by Lipper Analytical
Services, a widely used independent research firm which ranks mutual funds and
other investment companies by overall performance, investment objectives, and
assets, or tracked by other services, companies, publications, or persons who
rank such investment companies on overall performance or other criteria; and
(iii) the Consumer Price Index (measure for inflation) to assess the real rate
of return from an investment in the contract. Unmanaged indices may assume the
reinvestment of dividends but generally do not reflect deductions for
administrative and management costs and expenses.
Performance information for any division reflects only the performance of a
hypothetical contract under which accumulation value is allocated to a division
during a particular time period on which the calculations are based.
Performance information should be considered in light of the investment
objectives and policies, characteristics and quality of the portfolio of the
Series of the Trust in which the Account B divisions invest and the 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 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):
5
<PAGE>
ILLUSTRATION OF CALCULATION OF IIE
EXAMPLE 1.
1. IIE, beginning of period . . . . . . . . . . . . . . . . . . $1.80000000
2. Value of securities, beginning of period . . . . . . . . . . . . .$21.20
3. Change in value of securities. . . . . . . . . . . . . . . . . . . .$.50
4. Gross investment return (3) divided by (2) . . . . . . . . . . .02358491
5. Less daily mortality and expense charge. . . . . . . . . . . . .00002477
6. Less asset based administrative charge . . . . . . . . . . . . .00000276
7. Net investment return (4) minus (5) minus (6). . . . . . . . . .02355738
8. Net investment factor (1.000000) plus (7). . . . . . . . . . .1.02355738
9. IIE, end of period (1) multiplied by (8) . . . . . . . . . . $1.84240328
ILLUSTRATION OF PURCHASE OF UNITS (ASSUMING NO STATE PREMIUM TAX)
EXAMPLE 2.
1. Initial Premium Payment. . . . . . . . . . . . . . . . . . . . . $100.00
2. IIE on effective date of purchase (see Example 1) . . . . . .$1.8000000
3. Number of Units purchased [(1) divided by (2)] . . . . . . . . .55.55556
4. IIE for valuation date following purchase (see Example 1). . $1.84240328
5. Accumulation Value in account for valuation date
following purchase [(3) multiplied by (4)]. . . . . . . . . . . $102.36
IRA PARTIAL WITHDRAWAL OPTION
If the contract owner has an IRA contract and will attain age 70 1/2 in the
current calendar year, distributions will be made in accordance with the
requirements of Federal tax law. This option is available to assure that the
required minimum distributions from qualified plans under the Internal Revenue
Code (the "Code") are made. Under the Code, distributions must begin no later
than April 1st of the calendar year following the calendar year in which the
contract owner attains age 70 1/2. If the required minimum distribution is not
withdrawn, there may be a penalty tax in an amount equal to 50% of the
difference between the amount required to be withdrawn and the amount actually
withdrawn. Even if the IRA Partial Withdrawal Option is not elected,
distributions must nonetheless be made in accordance with the requirements of
Federal tax law.
Golden American notifies the contract owner of these regulations with a
letter mailed on January 1st of the calendar year in which the contract owner
reaches age 70 1/2 which explains the IRA Partial Withdrawal Option and supplies
an election form. If electing this option, the owner specifies whether the
withdrawal amount will be based on a life expectancy calculated on a single life
basis (contract owner's life only) or, if the contract owner is married, on a
joint life basis (contract owner's and spouse's lives combined). The contract
owner selects the payment mode on a monthly, quarterly or annual basis. If the
payment mode selected on the election form is more frequent than annually, the
payments in the first calendar year in which the option is in effect will be
based on the amount of payment modes remaining when Golden American receives the
completed election form.
Golden American calculates the IRA Partial Withdrawal amount each year
based on the minimum distribution rules. We do this by dividing the
accumulation value by the life expectancy. In the first year withdrawals begin,
we use the accumulation value as of the date of the first payment. Thereafter,
we use the accumulation value on December 31st of each year. The life
expectancy is recalculated each year. Certain minimum distribution rules govern
payouts if the designated beneficiary is other than the contract owner's spouse
and the beneficiary is more than ten years younger than the contract owner.
6
<PAGE>
OTHER INFORMATION
Registration statements have been filed with the Securities and Exchange
Commission under the Securities Act of 1933 as amended, with respect to the
Contracts discussed in this Statement of Additional Information. Not all of the
information set forth in the registration statements, amendments and exhibits
thereto has been included in this Statement of Additional Information.
Statements contained in this Statement of Additional Information concerning the
content of the Contracts and other legal instruments are intended to be
summaries. For a complete statement of the terms of these documents, reference
should be made to the instruments filed with the Securities and Exchange
Commission.
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.
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
7
<PAGE>
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 Ratings Group ("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 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
8
<PAGE>
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 ("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.
9
<PAGE>
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 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
10
<PAGE>
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 (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.
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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 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
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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 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
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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 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 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:
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(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; and
(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 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
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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:
NAME AND ADDRESS
POSITION WITH ACCOUNT D
BUSINESS AFFILIATIONS AND PRINCIPAL OCCUPATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
Terry L. Kendall* Chairman of the Board Managing Director, Bankers Trust Company;
Golden American Life and President President, Director, and Chief Executive Officer,
Insurance Co. Golden American Life Insurance Com[any;
1001 Jefferson Street President, Director, and Chief Executive Officer,
Wilmington, DE 19801 BT VAriable, Inc.; Chairman and Chief Executive
Officer of Directed Services, Inc. Chairman
of the Board and President of The GCG Trust; formerly
President and Chief Executive Officer,
United Pacific Life Insurance Company (1983-1993)
Robert A. Grayson Governor Co-founder, Grayson Associates, Inc.; Adjunct
Grayson Associates Professor of Marketing, New York University
108 Loma Media Road School of Business Administration; Member of
Santa Barbara, CA the Board of the Board of Trustees of The GCG
93103 Trust; former Director, The Golden Financial
Group, Inc.; former Senior Vice President,
David & Charles Advertising.
John L. Murphy* Governor Managing Director, Bankers Trust Company and
32 Talmadgeville Road group head of Bankers Trust Global Investors;
Darien, CT 06820 Member of the Board of Trustees of The GCG
Trust. Mr. Murphy joined Bankers Trust
Company in 1969 and has served as a Managing
Director since 1986.
Roger B. Vincent Governor President, Springwell Corporation; Director,
230 Park Avenue Petralone, Inc.; Member of the Board of Trustees
New York, NY 10169 of The GCG Trust; formerly, Managing Director,
Bankers Trust Company.
M. Norvel Young Governor Chancellor Emeritus and Board of Regents,
Pepperdine University Pepperdine University; Director of Imperial
Malibu, CA 90263 Bancorp, Imperial Bank, Imperial Trust Co. and
20th Century Christian Publishing Company;
Member of the Board of Trustees of The GCG
Trust. Formerly: Chancellor, Pepperdine
University, 1971 to 1984; President, Pepperdine
University, 1957 to 1971; Director, National
Conference of Christians and Jews, 1978 to 1982.
Barnett Chernow Executive Vice President Executive Vice President, BT Variable, Inc.;
Golden American Life Executive Vice President, Golden American Life
Insurance Co. Insurance Company; Executive Vice President,
1001 Jefferson Street Directed Services, Inc.; October 1993 to present;
Wilmington, DE 19801 Senior Vice President and Chief Financial
Officer, Reliance Insurance Company, August
1977 to July 1993.
Mitchell R. Katcher Executive Vice President Executive Vice President, BT Variable, Inc.;
Golden American Life Executive Vice President, Golden American Life
Insurance Co. Insurance Company; Executive Vice President,
1001 Jefferson Street Directed Services, Inc.; 1991 to 1993, Consulting
Wilmington, DE 19801 Actuary, Tillinghast; prior to 1991, Senior Vice
President and Chief Actuary, Monarch Financial Services, Inc.
Edward C. Wilson Executive Vice President Executive Vice President, BT Variable, Inc.;
Golden American Life Executive Vice President, Golden American Life
Insurance Co. Insurance Company; Executive Vice President,
1001 Jefferson Street Directed Services, Inc.; August 1994 to
Wilmington, DE 19801 December 1995, Senior Managing Director, Van
Eck Global; July 1990 to August 1994. Vice
President and National Sales Manager, Keyport
Life Insurance Company.
Myles R. Tashman Secretary Executive Vice President and Secretary,
Golden American Life Insurance Company;
Golden American Life Executive Vice President, BT Variable,
Insurance Co. Inc.; Executive Vice President and
1001 Jefferson Street Secretary, Directed Services, Inc.;
Wilmington, DE 19801 Secretary of The GCG Trust; formerly
Senior Vice President and General
Counsel, United Pacific Life Insurance
Company (1986-1993).
,
Mary Bea Wilkinson Treasurer Senior Vice President and Treasurer, Golden
Golden American Life American Life Insurance Company; Senior Vice
Insurance Co. President and Treasurer, BT Variable, Inc.;
1001 Jefferson Street President and Treasurer, Directed Services, Inc.
Wilmington, DE 19801 Assistant Vice President, CIGNA Insurance
Companies, August 1993 to October 1993;
various positions with United Pacific Life
Insurance Company, January 1987 to July 1993,
and was Vice President and Controller
; upon leaving.
Stephen J. Preston Controller Senior Vice President, Chief Actuary and
Golden American Life Controller, Golden American Life Insurance
Insurance Co. Company; Senior Vice President, BT Variable;
1001 Jefferson Street Senior Vice President, Directed Services, Inc.;
Wilmington, DE 19801 From September 1993 through November 1993,
Senior Vice President and Actuary for Mutual
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.
</TABLE>
__________________________
*Messrs. Kendall and Murphy are "interested persons" of the
Account (as that term is defined in the Investment Company Act
of 1940) because of their affiliations with the Manager and its
affiliated companies as shown above.
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 1001 Jefferson Street, Suite 400, Wilmington,
Delaware 19801. 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 (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 last continued by the Board of Governors in
September 1995 and shall continue in effect until October 1996, 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
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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 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
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<PAGE>
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
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.
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
20
<PAGE>
for evaluating the reasonableness of commissions paid to broker-dealers that are
affiliated with the Portfolio Manager and will review these procedures
periodically.
21
<PAGE>
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.
22
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, 1995
Combined Statement of Operations for the Year ended December 31, 1995
Combined Statements of Changes in Net Assets for the Years ended
December 31, 1995 and 1994
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 listed below appear in the Annual Report of The Managed Global
Account of Separate Account D which was filed with the SEC and is incorporated
by reference in this Statement of Additional Information .
Report of Independent Auditors
Financial Statements -- Audited
Statement of Assets and Liabilities as of December 31, 1995
Statement of Operations for the Year ended December 31, 1995
Statements of Changes in Net Assets for the Years ended December 31,
1995 and 1994
Statement of Investments as of December 31, 1995
Notes to Audited Financial Statements
FINANCIAL STATEMENTS OF GOLDEN AMERICAN LIFE INSURANCE COMPANY
The audited financial statements of Golden American Life Insurance Company
listed below are prepared in accordance with generally accepted accounting
principles ("GAAP") and are incorporated by reference in this Statement of
Additional Information from the GoldenSelect DVA PLUS Deferred Combination
Variable and Fixed Annuity Prospectus, dated May, 1996, which was filed with the
SEC.
Report of Independent Auditors
Financial Statements -- GAAP
Balance Sheets as of December 31, 1995, 1994 and 1993
Statements of Operations for the Years ended December 31, 1995, 1994
and 1993
Statement changes in Stockholder's Equity for the Years ended
December 31, 1995, 1994 and 1993
Statements of Cash Flows for the Years ended December 31, 1995, 1994
and 1993
Notes to Audited Financial Statements
23
<PAGE>
<PAGE>
ANNUAL REPORT
FOR
SEPARATE ACCOUNT B
------------------
DECEMBER 31, 1995
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
SEPARATE ACCOUNT B
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Auditors.................................................................................... B-1
Statement of Assets and Liabilities............................................................................... B-2
Combined Statements of Operations................................................................................. B-3
Combined Statements of Changes in Net Assets...................................................................... B-7
Notes to Financial Statements..................................................................................... B-11
</TABLE>
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Variable Annuity Contract Owners
Separate Account B
We have audited the accompanying statement of assets and liabilities of
Separate Account B (the 'Account') as of December 31, 1995 and the related
combined statements of operations and changes in net assets for each of the
three years in the period then ended. These fianancial statements are the
responsibility of the Account's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1995, by correspondence with
the custodian. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Separate Account B at
December 31, 1995, and the related combined statements of operations and changes
in net assets for each of the three years in the period then ended in conformity
with generally accepted accounting principles.
ERNST & YOUNG LLP
Philadelphia, Pennsylvania
February 12, 1996
B-1
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
SEPARATE ACCOUNT B
DECEMBER 31, 1995
(AMOUNTS IN THOUSANDS)
<S> <C>
ASSETS
Investment in The GCG Trust, at Net Asset Value:
Liquid Asset Series, 36,511 shares (Cost -- $36,511)............................................................... $ 36,511
Limited Maturity Bond Series, 6,087 shares (Cost -- $64,804)....................................................... 67,870
Natural Resources Series, 1,796 shares (Cost -- $25,708)........................................................... 27,008
All-Growth Series, 6,678 shares (Cost -- $85,681).................................................................. 92,018
Real Estate Series, 2,758 shares (Cost -- $32,426)................................................................. 34,836
Fully Managed Series, 8,519 shares (Cost -- $109,183).............................................................. 117,394
Multiple Allocation Series, 24,417 shares (Cost -- $293,213)....................................................... 305,697
Capital Appreciation Series, 8,965 shares (Cost -- $107,313)....................................................... 121,118
Rising Dividends Series, 6,044 shares (Cost -- $64,959)............................................................ 80,391
Emerging Markets Series, 4,074 shares (Cost -- $45,132)............................................................ 36,913
Market Manager Series, 495 shares (Cost -- $5,008)................................................................. 5,951
Value Equity Series, 2,159 shares (Cost -- $26,592)................................................................ 28,462
Strategic Equity Series, 803 shares (Cost -- $8,008)............................................................... 8,035
----------
Total Invested Assets (Cost -- $904,538)........................................................................... 962,204
LIABILITIES
Payable to Golden American for Charges and Fees (Note 3).............................................................. 1,326
----------
Total Net Assets................................................................................................... $ 960,878
----------
----------
NET ASSETS
For Variable Annuity Insurance Contracts.............................................................................. $ 924,596
Retained in Separate Account B by Golden American (Note 3)............................................................ 36,282
----------
Total Net Assets................................................................................................... $ 960,878
----------
----------
</TABLE>
B-2
<PAGE>
Separate Account B
Combined Statements of Operations
Years ended December 31, 1995, 1994 and 1993
(amounts in thousands)
<TABLE>
<CAPTION>
Divisions Investing In
-------------------------------------------------------------------------------------------
Liquid Asset Series Limited Maturity Bond Series Natural Resources Series
--------------------------- ----------------------------- -----------------------------
1995 1994 1993 1995 1994 1993 1995 1994 1993
------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment Income
Dividends $ 2,242 $ 1,444 $ 390 $ -- $ 3,501 $ 2,606 $ 570 $ 287 $ 104
Capital gain distribution -- -- 1 -- -- 289 -- 540 --
------- ------- ------- ------- ------- ------- ------- ------- -------
Total investment income 2,242 1,444 391 -- 3,501 2,895 570 827 104
Expenses
Mortality and expense risk and
administrative charges 411 362 139 700 736 550 284 283 95
------- ------- ------- ------- ------- ------- ------- ------- -------
Net investment income (loss) 1,831 1,082 252 (700) 2,765 2,345 286 544 9
------- ------- ------- ------- ------- ------- ------- ------- -------
Net realized gain (loss) on
investments -- -- -- (138) 66 677 1,545 1,686 427
------- ------- ------- ------- ------- ------- ------- ------- -------
Unrealized appreciation
(depreciation)
of investments
Beginning of period -- -- -- (4,836) (408) 27 805 2,954 (341)
End of period -- -- -- 3,066 (4,836) (408) 1,300 805 2,954
------- ------- ------- ------- ------- ------- ------- ------- -------
Net change in unrealized
appreciation
(depreciation)
of investments -- -- -- 7,902 (4,428) (435) 495 (2,149) 3,295
------- ------- ------- ------- ------- ------- ------- ------- -------
Net increase (decrease) in net
assets resulting from operations $ 1,831 $ 1,082 $ 252 $ 7,064 $(1,597) $ 2,587 $ 2,326 $ 81 $ 3,731
======= ======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
B-3
<PAGE>
<TABLE>
<CAPTION>
Separate Account B
Combined Statements of Operations
Years ended December 31, 1995, 1994 and 1993
(amounts in thousands)
Divisions Investing In
--------------------------------------------------------------------------------------------------------
All-Growth Series Real Estate Series Fully Managed Series
-------------------------------- ---------------------------------- -------------------------------
1995 1994 1993 1995 1994 1993 1995 1994 1993
-------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment Income
Dividends $ 4,685 $ 668 $ 202 $ 1,399 $ 1,863 $ 810 $ 2,846 $ 2,839 $ 1,566
Capital gain distribution -- -- -- -- -- -- -- -- 1,549
-------- -------- -------- -------- -------- -------- -------- -------- --------
Total investment income 4,685 668 202 1,399 1,863 810 2,846 2,839 3,115
Expenses
Mortality and expense
risk and administrative
charges 833 613 380 347 348 170 1,101 1,079 731
-------- -------- -------- -------- -------- -------- -------- -------- --------
Net investment
income (loss) 3,852 55 (178) 1,052 1,515 640 1,745 1,760 2,384
-------- -------- -------- -------- -------- -------- -------- -------- --------
Net realized gain
(loss) on
investments 1,011 77 477 369 539 514 1,311 1,060 525
-------- -------- -------- -------- -------- -------- -------- -------- --------
Unrealized appreciation
(depreciation) of
investments
Beginning of period (4,165) 3,650 1,002 (1,015) (374) 175 (8,104) 4,425 2,725
End of period 6,336 (4,165) 3,650 2,410 (1,015) (374) 8,210 (8,104) 4,425
-------- -------- -------- -------- -------- -------- -------- -------- --------
Net change in unrealized
appreciation
(depreciation)
of investments 10,501 (7,815) 2,647 3,425 (641) (549) 16,314 (12,529) 1,700
-------- -------- -------- -------- -------- -------- -------- -------- --------
Net increase (decrease)
in net assets
resulting from
operations $ 15,364 $ (7,683) $ 2,946 $ 4,846 $ 1,413 $ 605 $ 19,370 $ (9,709) $ 4,609
======== ======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
B-4
<PAGE>
<TABLE>
<CAPTION>
Separate Account B
Combined Statements of Operations
Years ended December 31, 1995, 1994 and 1993
(amounts in thousands)
Divisions Investing In
------------------------------------------------------------------------------------------------------
Multiple Allocation Series Capital Appreciation Rising Dividends Series
---------------------------------- ------------------------------- ------------------------------
1995 1994 1993 1995 1994 1993 1995 1994 1993(a)
-------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment Income
Dividends $ 21,644 $ 10,656 $ 5,181 $ 10,216 $ 1,777 $ 933 $ 567 $ 685 $ 19
Capital gain
distribution -- -- 11,777 -- -- 188 -- -- --
-------- -------- -------- -------- -------- -------- -------- -------- --------
Total investment
income 21,644 10,656 16,958 10,216 1,777 1,121 567 685 19
Expenses
Mortality and
expense risk and
administrative
charges 3,043 2,955 1,833 1,065 909 554 648 368 14
-------- -------- -------- -------- -------- -------- -------- -------- --------
Net investment
income (loss) 18,601 7,701 15,125 9,151 868 567 (81) 317 5
-------- -------- -------- -------- -------- -------- -------- -------- --------
Net realized gain
(loss) on investments 4,715 2,844 295 2,221 1,427 247 776 55 --
-------- -------- -------- -------- -------- -------- -------- -------- --------
Unrealized appreciation
(depreciation) of
investments
Beginning of period (13,754) 3,296 2,624 (726) 4,005 1,050 (605) 221 --
End of period 12,485 (13,754) 3,296 13,805 (726) 4,005 15,432 (605) 221
-------- -------- -------- -------- -------- -------- -------- -------- --------
Net change in unrealized
appreciation
(depreciation)
of investments 26,239 (17,050) 672 14,531 (4,731) 2,955 16,037 (826) 221
-------- -------- -------- -------- -------- -------- -------- -------- --------
Net increase (decrease)
in net assets
resulting from
operations $ 49,555 $ (6,505) $ 16,092 $ 25,903 $ (2,436) $ 3,769 $ 16,732 $ (454) $ 226
======== ======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
- ------------------------------------------------------------------------
(a) Commencement of operations, October, 1993
B-5
<PAGE>
<TABLE>
<CAPTION>
Separate Account B
Combined Statements of Operations
Years ended December 31, 1995, 1994 and 1993
(amounts in thousands)
Division Investing In
-------------------------------------------------------------------------
Value Strategic
Market Equity Equity
Emerging Markets Series Manager Series Series Series Combined
------------------------------- ----------------- ------- ------- --------------------------------
1995 1994 1993(a) 1995 1994(b) 1995(c) 1995(d) 1995 1994 1993
-------- --------- ------- ------- ------ ------- ------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment Income
Dividends $ 6 $ -- $ -- $ 203 $ 7 $ 711 $ 19 $ 45,108 $ 23,727 $ 11,812
Capital gain
distribution -- 2,686 -- -- -- -- -- -- 3,226 13,803
-------- --------- ------- ------- ------ ------- ------- --------- --------- --------
Total investment
income 6 2,686 -- 203 7 711 19 45,108 26,953 25,615
Expenses
Mortality and
expense risk and
administrative
charges 440 561 24 -- -- 110 12 8,994 8,214 4,490
-------- --------- ------- ------- ------ ------- ------- --------- --------- --------
Net investment
income (loss) (434) 2,125 (24) 203 7 601 7 36,114 18,739 21,125
-------- --------- ------- ------- ------ ------- ------- --------- --------- --------
Net realized
gain (loss)
on investments (7,448) 836 -- 29 -- 687 (1) 5,077 8,590 3,161
-------- --------- ------- ------- ------ ------- ------- --------- --------- --------
Unrealized
appreciation
(depreciation) of
investments
Beginning of period (9,822) 3,971 -- (1) -- -- -- (42,223) 21,740 7,261
End of period (8,219) (9,822) 3,971 942 (1) 1,870 28 57,665 (42,223) 21,740
-------- --------- ------- ------- ------ ------- ------- --------- --------- --------
Net change in
unrealized
appreciation
(depreciation)
of investments 1,603 (13,793) 3,971 943 (1) 1,870 28 99,888 (63,963) 14,479
-------- --------- ------- ------- ------ ------- ------- --------- --------- --------
Net increase
(decrease)
in net assets
resulting from
operations $ (6,279) $(10,832) $ 3,947 $ 1,175 $ 6 $ 3,158 $ 34 $141,079 $(36,634) $ 38,765
======== ========= ======= ======= ====== ======= ======= ========= ========= ========
</TABLE>
- ------------------------------------------------------------------------
(a) Commencement of operations, October, 1993
(b) Commencement of operations, November, 1994
(c) Commencement of operations, January, 1995
(d) Commencement of operations, October, 1995
B-6
<PAGE>
<TABLE>
<CAPTION>
Separate Account B
Combined Statements of Changes in Net Assets
Years ended December 31, 1995, 1994 and 1993
(amounts in thousands)
Division Investing In
--------------------------------------------------------------------------------------------------------
Liquid Asset Series Limited Maturity Bond Series Natural Resources Series
-------------------------------- -------------------------------- --------------------------------
1995 1994 1993 1995 1994 1993 1995 1994 1993
-------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease)
in net assets
Operations:
Net investment
income (loss) $ 1,831 $ 1,082 $ 252 $ (700) $ 2,765 $ 2,345 $ 286 $ 544 $ 9
Net realized gain
(loss) on
investments -- -- -- (138) 66 677 1,545 1,686 427
Net change in
unrealized
appreciation
(depreciation)
of
investments -- -- -- 7,902 (4,428) (435) 495 (2,149) 3,295
Net increase
(decrease) in net
assets resulting
from operations -------- -------- -------- -------- -------- -------- -------- -------- --------
1,831 1,082 252 7,064 (1,597) 2,587 2,326 81 3,731
-------- -------- -------- -------- -------- -------- -------- -------- --------
Policy related
transactions:
Premiums 11,323 43,297 22,808 7,579 32,041 54,680 2,111 8,595 10,191
Net transfers
among Divisions
and Guaranteed
Interest
Division
of Golden
American (5,926) 4,159 (15,605) (6,694) (22,002) (19,820) (6,167) 5,716 5,177
Surrenders and
other
withdrawals (11,794) (18,470) (3,497) (9,461) (7,604) (5,188) (3,402) (2,768) (465)
Policy related
charges and
fees (4,309) (1,201) (229) (2,224) (887) (498) (624) (314) (80)
-------- -------- -------- -------- -------- -------- -------- -------- --------
Net increase
(decrease)
in net assets
resulting from
policy related
transactions (10,706) 27,785 3,477 (10,800) 1,548 29,174 (8,082) 11,229 14,823
-------- -------- -------- -------- -------- -------- -------- -------- --------
Net increase
(decrease)
in net assets (8,875) 28,867 3,729 (3,736) (49) 31,761 (5,756) 11,310 18,554
Net assets:
Beginning of
period 45,366 16,499 12,770 71,573 71,622 39,861 32,746 21,436 2,882
-------- -------- -------- -------- -------- -------- -------- -------- --------
End of period $ 36,491 $ 45,366 $ 16,499 $ 67,837 $ 71,573 $ 71,622 $ 26,990 $ 32,746 $ 21,436
======== ======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
B-7
<PAGE>
<TABLE>
<CAPTION>
Separate Account B
Combined Statements of Changes in Net Assets
Years ended December 31, 1995, 1994 and 1993
(amounts in thousands)
Divisions Investing In
-------------------------------------------------------------------------------------------------------------
All-Growth Series Real Estate Series Fully Managed Series
--------------------------------- ---------------------------------- -----------------------------------
1995 1994 1993 1995 1994 1993 1995 1994 1993
--------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease)
in net assets
Operations:
Net investment
income (loss) $ 3,852 $ 55 $ (178) $ 1,052 $ 1,515 $ 640 $ 1,745 $ 1,760 $ 2,384
Net realized gain
(loss) on
investments 1,011 77 477 369 539 514 1,311 1,060 525
Net change in
unrealized
appreciation
depreciation)
of
investments 10,501 (7,815) 2,647 3,425 (641) (549) 16,314 (12,529) 1,700
Net increase
(decrease)
in net assets
resulting
from operations --------- --------- --------- --------- --------- --------- --------- --------- ---------
15,364 (7,683) 2,946 4,846 1,413 605 19,370 (9,709) 4,609
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Policy related
transactions:
Premiums 11,880 18,242 34,573 1,928 9,862 22,416 10,129 21,742 70,789
Net transfers
among
Divisions and
Guaranteed
Interest
Division
of Golden
American 6,292 9,624 (2,152) (2,903) 208 4,008 5,315 (11,098) 109
Surrenders and
other
withdrawals (10,712) (4,906) (2,430) (4,799) (2,919) (1,717) (13,651) (9,050) (4,050)
Policy related
charges
and fees (1,489) (709) (303) (1,193) (401) (141) (2,673) (1,341) (517)
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Net increase
(decrease)
in net assets
resulting
from policy
related
transactions 5,971 22,251 29,688 (6,967) 6,750 24,566 (880) 253 66,331
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Net increase
(decrease)
in net assets 21,335 14,568 32,634 (2,121) 8,163 25,171 18,490 (9,456) 70,940
Net assets:
Beginning of
period 70,621 56,053 23,419 36,934 28,771 3,600 98,837 108,293 37,353
--------- --------- --------- --------- --------- --------- --------- --------- ---------
End of period $ 91,956 $ 70,621 $ 56,053 $ 34,813 $ 36,934 $ 28,771 $ 117,327 $ 98,837 $ 108,293
========= ========= ========= ========= ========= ========= ========= ========= =========
</TABLE>
See Accompanying Notes.
B-8
<PAGE>
<TABLE>
<CAPTION>
Separate Account B
Combined Statements of Changes in Net Assets
Years ended December 31, 1995, 1994 and 1993
(amounts in thousands)
Divisions Investing In
---------------------------------------------------------------------------------------------
Multiple Allocation Series Capital Appreciation Rising Dividends Series
------------------------------ ----------------------------- -------------------------------
1995 1994 1993 1995 1994 1993 1995 1994 1993(a)
---------- -------- -------- --------- -------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
Operations:
Net investment income (loss) $ 18,601 $ 7,701 $ 15,125 $ 9,151 $ 868 $ 567 $ (81) $ 317 $ 5
Net realized gain (loss) on
investments 4,715 2,844 295 2,221 1,427 247 776 55 --
Net change in unrealized
appreciation (depreciation)
of investments 26,239 (17,050) 672 14,531 (4,731) 2,955 16,037 (826) 221
--------- -------- -------- -------- ------- ------- ------- ------- -------
Net increase (decrease) in net
assets resulting
from operations 49,555 (6,505) 16,092 25,903 (2,436) 3,769 16,732 (454) 226
--------- -------- -------- -------- ------- ------- ------- ------- -------
Policy related transactions:
Premiums 17,865 74,594 150,789 9,240 19,196 63,986 11,968 25,150 11,566
Net transfers among Divisions
and Guaranteed Interest
Division of Golden American (9,426) (9,842) 5,675 12,826 (6,163) 3,403 12,320 15,544 2,633
Surrenders and other withdrawals (42,733) (30,150) (12,915) (13,162) (7,902) (2,393) (9,800) (3,844) (25)
Policy related charges and fees (7,267) (3,746) (1,609) (2,104) (1,149) (331) (1,263) (399) (12)
--------- -------- -------- -------- ------- ------- ------- ------- -------
Net increase (decrease) in net
assets resulting from policy
related transactions (41,561) 30,856 141,940 6,800 3,982 64,665 13,225 36,451 14,162
--------- -------- -------- -------- ------- ------- ------- ------- -------
Net increase (decrease)
in net assets 7,994 24,351 158,032 32,703 1,546 68,434 29,957 35,997 14,388
Net assets:
Beginning of period 297,508 273,157 115,125 88,346 86,800 18,366 50,385 14,388 --
--------- -------- -------- -------- ------- ------- ------- ------- -------
End of period $ 305,502 $297,508 $273,157 $121,049 $88,346 $86,800 $80,342 $50,385 $14,388
========= ======== ======== ======== ======= ======= ======= ======= =======
</TABLE>
- ------------------------------------------------------------------------
(a) Commencement of operations, October, 1993
B-9
<PAGE>
<TABLE>
<CAPTION>
Separate Account B
Combined Statements of Changes in Net Assets
Years ended December 31, 1995, 1994 and 1993
(amounts in thousands)
Divisions Investing In
-----------------------------------------------------------------
Value Strategic
Market Manager Equity Equity
Emerging Markets Series Series Series Series Combined
------------------------------- --------------- -------- ------- ----------------------------
1995 1994 1993(a) 1995 1994(b) 1995(c) 1995(d) 1995 1994 1993
----------- ------- -------- ------ -------- -------- ------- -------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
Operations:
Net investment income
(loss) $ (434) $ 2,125 $ (24) $ 203 $ 7 $ 601 $ 7 $ 36,114 $ 18,739 $ 21,125
Net realized gain (loss)
on investments (7,448) 836 -- 29 -- 687 (1) 5,077 8,590 3,162
Net change in unrealized
appreciation (depreciation)
of investments 1,603 (13,793) 3,971 943 (1) 1,870 28 99,888 (63,963) 14,477
-------- -------- ------- ------ ------ ------- ------ --------- -------- --------
Net increase (decrease) in
net assets resulting
from operations (6,279) (10,832) 3,947 1,175 6 3,158 34 141,079 (36,634) 38,764
-------- -------- ------- ------ ------ ------- ------ --------- -------- --------
Policy related transactions:
Premiums 8,150 30,113 13,923 2,298 1,414 9,018 3,240 106,729 284,246 455,721
Net transfers among Divisions
and Guaranteed Interest Division
of Golden American (15,911) 14,778 12,702 301 1,335 17,110 4,868 12,005 2,259 (3,870)
Surrenders and other withdrawals (7,740) (4,285) (62) (767) -- (776) (172) (128,969) (91,898) (32,742)
Policy related charges and fees (1,079) (517) (21) (553) (3) (63) 61 (24,780) (10,667) (3,741)
-------- -------- ------- ------ ------ ------- ------ --------- -------- --------
Net increase (decrease) in net
assets resulting from policy
related transactions (16,580) 40,089 26,542 1,279 2,746 25,289 7,997 (35,015) 183,940 415,368
-------- -------- ------- ------ ------ ------- ------ --------- -------- --------
Net increase (decrease)
in net assets (22,859) 29,257 30,489 2,454 2,752 28,447 8,031 106,064 147,306 454,132
Net assets:
Beginning of period 59,746 30,489 -- 2,752 -- -- -- 854,814 707,508 253,376
-------- -------- ------- ------ ------ ------- ------ --------- -------- --------
End of period $ 36,887 $ 59,746 $30,489 $5,206 $2,752 $28,447 $8,031 $ 960,878 $854,814 $707,508
======== ======== ======= ====== ====== ======= ====== ========= ======== ========
</TABLE>
- ------------------------------------------------------------------------
(a) Commencement of operations, October, 1993
(b) Commencement of operations, November, 1994
(c) Commencement of operations, January, 1995
(d) Commencement of operations, October, 1995
B-10
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
SEPARATE ACCOUNT B
DECEMBER 31, 1995
1. ORGANIZATION
Separate Account B (the 'Account') was established on June 14, 1988, by
Golden American Life Insurance Company ('Golden American'), under Minnesota
insurance law to support the operations of variable annuity contracts
('Contracts'). Effective September 30, 1992, Golden American became a
wholly-owned subsidiary of BT Variable, Inc. ('BTV'), an indirect wholly-owned
subsidiary of Bankers Trust Company ('Bankers Trust'). Previously, Golden
American was owned by Mutual Benefit Life Insurance Company in Rehabilitation
('Mutual Benefit'). In a transaction that closed on September 30, 1992, Bankers
Trust acquired from Mutual Benefit, in accordance with the terms of an Exchange
Agreement, all of the issued and outstanding capital stock of Golden American
and Directed Services, Inc. ('DSI'), an affiliate of Golden American, and
certain related assets and contributed them to BTV. The transaction had no
effect on the accompanying financial statements. Golden American is primarily
engaged in the issuance of variable insurance products and is licensed as a life
insurance company in the District of Columbia and all states except New York.
Effective December 30, 1993, Golden American was redomesticated from the State
of Minnesota to the State of Delaware.
Operations of the Account commenced on January 25, 1989. Golden American
provides for variable accumulation and benefits under the contracts by crediting
annuity considerations to one or more divisions within the Account or to the
Golden American Guaranteed Interest Division, the Golden American Fixed Interest
Division, the Fixed Separate Account, and the Managed Global Division of
Separate Account D, which are not part of the Account, as elected by the
Contractowners. The assets of the Account are owned by Golden American. The
portion of the Account's assets applicable to Contracts will not be chargeable
with liabilities arising out of any other business Golden American may conduct,
but obligations of the Account, including the promise to make benefit payments,
are obligations of Golden American.
The Account makes available, under Golden Select Contracts, thirteen investment
divisions: the Liquid Asset, the Limited Maturity Bond, the Natural Resources,
the All-Growth, the Real Estate, the Fully Managed, the Multiple Allocation, the
Capital Appreciation, the Rising Dividends (commenced operations October, 1993),
the Emerging Markets (commenced operations on October 4, 1993), the Market
Manager (commenced operations November, 1994) the Value Equity (commenced
operations January, 1995) and the Strategic Equity (commenced operations
October, 1995) Divisions ('Divisions'). The assets in each Division are
invested in shares of a designated series ('Series') of a mutual fund, The GCG
Trust (the 'Trust'). The Account also includes The Fund For Life Division, which
is not included in the accompanying financial statements, and which ceased to
accept new Contracts effective December 31, 1994.
The Account is a unit investment trust and is registered with the Securities and
Exchange Commission under the Investment Company Act of 1940, as amended.
The net assets maintained in the Account provide the basis for the periodic
determination of the amount of benefits under the Contracts. The net assets may
not be less than the amount required under state law to provide for death
benefits (without regard to the minimum death benefit guarantee) and other
Contract benefits. Additional assets are held in Golden American's general
account to cover the contingency that the guaranteed minimum death benefit might
exceed the death benefit which would have been payable in the absence of such
guarantee. Golden American has entered into reinsurance agreements with
unaffiliated reinsurers to cover substantially all the insurance risk under the
Contracts. Golden American remains liable to the extent that the reinsurers do
not meet their obligations under the reinsurance agreements.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the significant accounting policies of the
Account:
USE OF ESTIMATES: The preparation of the financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
INVESTMENTS: Investments are made in shares of a Series of the Trust and are
valued at the net asset value per share of the respective Series of the Trust.
Investment transactions in each Series of the Trust are recorded on the trade
date. Distributions of net investment income and capital gains of each Series of
the Trust are recognized on the ex-distribution date. Realized gains and losses
on redemptions of the shares of the Series of the Trust are determined on the
identified cost basis.
For the years ended December 31, 1995 and 1994 the cost of purchases of shares
of the Trust aggregated $228,738,000 and $352,605,000, respectively and the
proceeds from sales of shares of the Trust aggregated $226,848,000 and
$149,774,000, respectively.
B-11
- --------------------------------------------------------------------------------
<PAGE>
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
SEPARATE ACCOUNT B
DECEMBER 31, 1995
2. SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
FEDERAL INCOME TAXES: Operations of the Account form a part of, and are taxed
with, the total operations of Golden American which is taxed as a life insurance
company under the Internal Revenue Code. Earnings and realized capital gains of
the Account attributable to the Contractowners are excluded in the determination
of the federal income tax liability of Golden American.
3. CHARGES AND FEES
Under the terms of the Contracts, certain charges are allocated to the Contracts
to cover Golden American's expenses in connection with the issuance and
administration of the Contracts. Following is a summary of these charges:
MORTALITY AND EXPENSE RISK CHARGES: Golden American assumes mortality and
expense risks related to the operations of the Account and, in accordance with
the terms of the Contracts, deducts a daily charge from the assets of the
Account at annual rates of .80%, .90%, 1.25%, 1.10%, 1.25% and 1.40% of the
assets attributable to the DVA 80, DVA 100, DVA Series 100, DVA Plus-Standard,
DVA Plus-Annual Ratchet, and DVA Plus-7% Solution, respectively to cover these
risks.
ASSET BASED ADMINISTRATIVE CHARGE: A daily charge at an annual rate of .10% is
deducted from assets attributable to DVA 100 and DVA Series 100 Contracts. A
daily charge at an annual rate of .15% is deducted from the assets attributable
to DVA Plus Contracts.
MINIMUM DEATH BENEFIT GUARANTEE CHARGE: For certain Contracts, a minimum death
benefit guarantee charge of up to $1.20 per $1,000 of guaranteed death benefit
per Contract year is deducted from the accumulation value of Deferred Annuity
Contracts on each Contract processing date.
PREMIUM TAXES: For certain contracts, premium taxes are deducted, where
applicable, from the accumulation value of each Contract. The amount and timing
of the deduction depend on the annuitant's state of residence and currently
ranges up to 3.5% of premiums.
OTHER CONTRACT CHARGES: An administrative charge of $40 per Contract year is
deducted from accumulation value of Deferred Annuity Contracts to cover ongoing
administrative expenses. The charge is deducted on the Contract processing date
at the end of the Contract processing period. This charge has been waived for
certain offerings of the Contract.
DEFERRED SALES LOAD: Under contracts offered prior to October 1995, a sales load
of up to 7 1/2% was applicable to each premium payment for sales-related
expenses as specified in the Contracts. For DVA Series 100 the sales load is
deducted in equal annual installments over the period the Contract is in force,
not to exceed 10 years. For other DVA 80 and DVA 100 Contracts, although the
sales load is chargeable to each premium when it is received by Golden American,
the amount of such charge is initially advanced by Golden American to
Contractowners and included in the accumulation value and then deducted in equal
installments on each Contract processing date over a period of six years. Upon
surrender of the Contract, the unamortized deferred sales load is deducted from
the accumulation value by Golden American. In addition, when partial withdrawal
limits are exceeded, a portion of the unamortized deferred sales load is
deducted.
CONTINGENT DEFERRED SALES CHARGE: Under DVA Plus Contracts issued subsequent to
September 1995, a contingent sales charge ('Surrender Charges') 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 a premium
payment is received. The Surrender Charges are imposed at a rate of 7% during
the first two complete years after purchase declining to 6%, 5%, 4%, 3%, and 1%
after the second, third, fourth, fifth, and sixth years, respectively.
The net assets retained in the Account by Golden American in the accompanying
financial statements represent the unamortized deferred sales load, surrender
charges and premium taxes advanced by Golden American, noted above.
B-12
- --------------------------------------------------------------------------------
<PAGE>
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
SEPARATE ACCOUNT B
DECEMBER 31, 1995
3. CHARGES AND FEES--(CONTINUED)
Net assets retained in the Account by Golden American are as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994
----------------- -----------------
(AMOUNTS IN THOUSANDS)
<S> <C> <C>
Balance at beginning of year.............................................. $ 44,008 $ 37,364
Sales load advanced and additions to surrender charges.................... 6,572 16,138
Premium tax advanced...................................................... 76 73
Net transfer (to) from Separate Account D, Fixed Account and Golden
American................................................................ (1,303) 666
Amortization of deferred sales load, surrender charges and premium tax.... (13,071) (10,233)
----------------- -----------------
Balance at end of year.................................................... $ 36,282 $ 44,008
----------------- -----------------
----------------- -----------------
</TABLE>
4. OTHER RELATED PARTY TRANSACTIONS
DSI, a registered broker/dealer, acts as the distributor and principal
underwriter (as defined in the Securities Act of 1933 and the Investment Company
Act of 1940, as amended) of the Contracts issued through the Account. For 1995
and 1994, fees paid by Golden American to DSI aggregated $7,621,000 and
$15,939,000 respectively.
B-13
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
SEPARATE ACCOUNT B
DECEMBER 31, 1995
5. UNIT VALUES
Presented below is accumulation unit value information for units outstanding by
Contract type as of December 31, 1995
<TABLE>
<CAPTION>
TOTAL UNIT
SERIES UNITS UNIT VALUE VALUE
- ------------------------------------------------------------------------------------ ------------ ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Liquid Asset
DVA 80......................................................................... 398,563 $ 13.429 $ 5,352
DVA 100........................................................................ 2,096,044 13.243 27,757
DVA Series 100................................................................. 70,999 12.921 917
DVA Plus -- Standard........................................................... 37,887 13.029 494
DVA Plus -- Annual Ratchet..................................................... 62,084 12.895 801
DVA Plus -- 7% Solution........................................................ 93,239 12.762 1,190
-------------
36,511
Limited Maturity Bond
DVA 80......................................................................... 206,399 15.307 3,160
DVA 100........................................................................ 4,103,020 15.095 61,935
DVA Series 100................................................................. 14,356 14.729 212
DVA Plus -- Standard........................................................... 26,976 14.865 401
DVA Plus -- Annual Ratchet..................................................... 11,834 14.711 174
DVA Plus -- 7% Solution........................................................ 136,553 14.559 1,988
-------------
67,870
Natural Resources
DVA 80......................................................................... 249,344 15.578 3,884
DVA 100........................................................................ 1,433,795 15.362 22,026
DVA Series 100................................................................. 19,158 14.989 287
DVA Plus -- Standard........................................................... 24,828 15.114 375
DVA Plus -- Annual Ratchet..................................................... 2,847 14.958 42
DVA Plus -- 7% Solution........................................................ 26,605 14.803 394
-------------
27,008
All-Growth
DVA 80......................................................................... 260,857 14.537 3,792
DVA 100........................................................................ 5,828,945 14.335 83,560
DVA Series 100................................................................. 46,215 13.987 647
DVA Plus -- Standard........................................................... 21,908 14.104 309
DVA Plus -- Annual Ratchet..................................................... 16,567 13.959 231
DVA Plus -- 7% Solution........................................................ 251,872 13.814 3,479
-------------
92,018
Real Estate
DVA 80......................................................................... 105,134 16.428 1,727
DVA 100........................................................................ 1,965,015 16.201 31,835
DVA Series 100................................................................. 14,556 15.808 230
DVA Plus -- Standard........................................................... 2,716 15.940 43
DVA Plus -- Annual Ratchet..................................................... 2,910 15.775 46
DVA Plus -- 7% Solution........................................................ 61,143 15.612 955
-------------
34,836
Fully Managed
DVA 80......................................................................... 258,587 15.694 4,058
DVA 100........................................................................ 7,054,994 15.476 109,184
DVA Series 100................................................................. 29,312 15.101 443
DVA Plus -- Standard........................................................... 49,153 15.227 748
DVA Plus -- Annual Ratchet..................................................... 13,988 15.070 211
DVA Plus -- 7% Solution........................................................ 184,364 14.914 2,750
-------------
117,394
Multiple Allocation
DVA 80......................................................................... 1,217,849 17.235 20,989
DVA 100........................................................................ 16,134,381 16.996 274,218
DVA Series 100................................................................. 140,336 16.584 2,327
DVA Plus -- Standard........................................................... 104,463 16.722 1,747
DVA Plus -- Annual Ratchet..................................................... 21,073 16.550 348
DVA Plus -- 7% Solution........................................................ 370,515 16.378 6,068
-------------
305,697
</TABLE>
B-14
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
SEPARATE ACCOUNT B
DECEMBER 31, 1995
5. UNIT VALUES--(CONTINUED)
<TABLE>
<CAPTION>
TOTAL UNIT
SERIES UNITS UNIT VALUE VALUE
------------------------------------------------------------------------------------ ------------ ----------- -------------
(IN THOUSANDS)
<S> <C> <C> <C>
Capital Appreciation
DVA 80......................................................................... 154,271 $ 14.935 $ 2,304
DVA 100........................................................................ 7,627,317 14.825 113,076
DVA Series 100................................................................. 26,783 14.634 392
DVA Plus -- Standard........................................................... 24,117 14.707 355
DVA Plus -- Annual Ratchet..................................................... 16,369 14.627 239
DVA Plus -- 7% Solution........................................................ 326,610 14.548 4,752
-------------
121,118
Rising Dividends
DVA 80......................................................................... 102,616 13.356 1,370
DVA 100........................................................................ 5,536,766 13.296 73,617
DVA Series 100................................................................. 50,637 13.191 668
DVA Plus -- Standard........................................................... 22,934 13.237 304
DVA Plus -- Annual Ratchet..................................................... 36,100 13.194 476
DVA Plus -- 7% Solution........................................................ 300,820 13.151 3,956
-------------
80,391
Emerging Markets
DVA 80......................................................................... 227,757 9.317 2,122
DVA 100........................................................................ 3,533,661 9.275 32,775
DVA Series 100................................................................. 30,591 9.202 281
DVA Plus -- Standard........................................................... 15,670 9.234 145
DVA Plus -- Annual Ratchet..................................................... 12,465 9.204 115
DVA Plus -- 7% Solution........................................................ 160,820 9.174 1,475
-------------
36,913
Market Manager
DVA 100........................................................................ 480,472 12.386 5,951
Value Equity
DVA 80......................................................................... 202,148 13.417 2,712
DVA 100........................................................................ 1,676,442 13.391 22,449
DVA Series 100................................................................. 10,226 13.345 136
DVA Plus -- Standard........................................................... 34,272 13.374 458
DVA Plus -- Annual Ratchet..................................................... 23,394 13.356 313
DVA Plus -- 7% Solution........................................................ 179,453 13.339 2,394
-------------
28,462
Strategic Equity
DVA 80......................................................................... 137,215 10.013 1,374
DVA 100........................................................................ 362,606 10.009 3,629
DVA Series 100................................................................. 26,760 9.999 267
DVA Plus -- Standard........................................................... 76,095 10.014 762
DVA Plus -- Annual Ratchet..................................................... 47,478 10.011 475
DVA Plus -- 7% Solution........................................................ 152,633 10.009 1,528
-------------
8,035
-------------
Total........................................................................ $ 962,204
-------------
-------------
</TABLE>
B-15
<PAGE>
APPENDIX: DESCRIPTION OF BOND RATINGS
Excerpts from Moody's Investors Service, Inc. ("Moody's) description of its
bond ratings:
Aaa: Judged to be the best quality; they carry the smallest degree of
investment risk.
Aa: Judged to be of high quality by all standards; together with the Aaa
group, they comprise what are generally known as high grade bonds.
A: Possess many favorable investment attributes and are to be considered
as "upper medium grade obligations."
Baa: Considered as medium grade obligations, i.e., they are neither highly
protected nor poorly secured; interest payments and principal security
appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of
time.
Ba: Judged to have speculative elements; their future cannot be considered
as well assured.
B: Generally lack characteristics of the desirable investment.
Caa: Are of poor standing; such issues may be in default or there may be
present elements of danger with respect to principal or interest.
Ca: Speculative in a high degree; often in default.
C: Lowest rate class of bonds; regarded as having extremely poor
prospects.
Moody's also applies numerical indicators 1, 2 and 3 to rating categories. The
modifier 1 indicates that the security is in the higher end of its rating
category; 2 indicates a mid-range ranking; and 3 indicates a ranking toward the
lower end of the category.
Excerpts from Standard & Poor's Rating Group ("Standard & Poor's") description
of its bond ratings:
AAA: Highest grade obligations; capacity to pay interest and repay
principal is extremely strong.
AA: Also qualify as high grade obligations; a very strong capacity to pay
interest and repay principal and differs from AAA issues only in small
degree.
A: Regarded as upper medium grade; they have a strong capacity to pay
interest and repay principal although it is somewhat more susceptible to
the adverse effects of changes in circumstances and economic conditions
than debt in higher rated categories.
BBB: Regarded as having an adequate capacity to pay interest and repay
principal; whereas it normally exhibits adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to
lead to a weakened capacity than in higher rated categories -- this group
is the lowest which qualifies for commercial bank investment.
BB, B,
CCC,
CC: Predominantly speculative with respect to capacity to pay interest and
repay principal in accordance with terms of the obligation: BB indicates
the lowest degree of speculation and CC the highest.
Standard & Poor's applies indicators "+," no character, and "-" to its rating
categories. The indicators show relative standing within the major rating
categories.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
GOLDENSELECT DVA SERIES 100
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: MAY 1, 1996
<PAGE>
TABLE OF CONTENTS
-------------------
ITEM PAGE
- ---- ----
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
PART I
Description of Golden American Life Insurance Company. . . . . . . . . . . .1
Safekeeping of Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . .1
The Administrator. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Distribution of Contracts. . . . . . . . . . . . . . . . . . . . . . . . . .2
Performance Information. . . . . . . . . . . . . . . . . . . . . . . . . . .2
IRA Partial Withdrawal Option. . . . . . . . . . . . . . . . . . . . . . . .5
Other Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
PART II
Securities and Investment Techniques . . . . . . . . . . . . . . . . . . . .6
U.S. Government Securities . . . . . . . . . . . . . . . . . . . . . . . .6
Debt Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
Short Sales Against the Box. . . . . . . . . . . . . . . . . . . . . . . .7
Futures Contracts and Options on Futures Contracts . . . . . . . . . . . .7
Options on Securities. . . . . . . . . . . . . . . . . . . . . . . . . . .8
Options of Securities Indexes. . . . . . . . . . . . . . . . . . . . . . .9
Foreign Currency Transactions. . . . . . . . . . . . . . . . . . . . . . .9
Options on Foreign Currencies. . . . . . . . . . . . . . . . . . . . . . 10
Repurchase Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . 11
Banking Industry and Savings Industry Obligations. . . . . . . . . . . . 11
Commercial Paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
When Issued or Delayed Delivery Securities . . . . . . . . . . . . . . . 12
Investment Restrictions. . . . . . . . . . . . . . . . . . . . . . . . . . 12
Management of Separate Account of Account D. . . . . . . . . . . . . . . . 14
The Manager. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Portfolio Manager. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Custodian and Portfolio Accounting Agent . . . . . . . . . . . . . . . . . 17
Portfolio Transactions and Brokerage . . . . . . . . . . . . . . . . . . . 17
Purchase and Pricing of the Global Account . . . . . . . . . . . . . . . . 18
Financial Statements of Separate Account B . . . . . . . . . . . . . . . . 20
Financial Statements of The Managed Global Account of Separate Account D . 20
Appendix - Description of Bond Ratings
<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 (beginning on page 7) 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,
1995, Golden American had over $98.1 million in stockholders' equity and
approximately $1.2 billion in total assets, including approximately $1.05
billion of separate account assets. Golden American is authorized to do
business in all jurisdictions except New York. Golden American offers variable
annuities and variable life insurance.
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 in 1995 and 1994 were $749,741 and
$816,264, respectively.
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 services aggregated $2,701,000 and
$209,000, respectively. The agreement was terminated as of January 1, 1994.
In addition, BT Variable provided to Golden American certain of its personnel to
perform management, administrative and clerical services and the use of certain
of its facilities. BT Variable charged Golden American for such expenses and
all other general and administrative costs, first on the basis of direct charges
when identifiable, and second allocated based on the estimated amount of time
spent by BT Variable's employees on behalf of Golden American. For the year
1993 and the period from September 30, 1992 to December 31, 1992, BT Variable
allocated to Golden American $1,503,000 and $450,000, respectively. The
agreement was terminated on January 1, 1994.
INDEPENDENT AUDITORS
Ernst & Young LLP, 2001 Market Street, Philadlephia, Pennsylvania 19103,
independent auditors, will perform annual audits of Golden American and the
Accounts.
<PAGE>
DISTRIBUTION OF CONTRACTS
Prior to 1994, Golden American had entered into agreements with DSI to perform
services related to the management of its investments and the distribution of
its products. For the year 1993, Golden American incurred $311,000 for such
services. The agreement was terminated as of January 1, 1994.
DSI acts as the principal underwriter (as defined in the Securities Act of 1933
and the Investment Company Act of 1940, as amended) of the variable insurance
products issued by Golden American which, as of December 31, 1994, are sold
primarily through two broker/dealer institutions. For the years ended 1995,
1994 and 1993, commissions paid by Golden American to DSI aggregated $8,440,000,
$17,569,000 and $34,260,000 respectively.
Golden American provided to DSI certain of its personnel to perform management,
administrative and clerical services and the use of certain facilities. Golden
American charged DSI for such expenses and all other general and administrative
costs, 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. In
1995, the service agreement between DSI and Golden American was amended to
provide for a management fee from DSI to Golden American for managerial and
supervisory services provided by Golden American. This fee calculated as a
percentage of average assets in the variable separate accounts, was $986,650 for
1995.
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 6.5% of premium, and any applicable premium tax that
can range from 0% to 3.5%.
SEC STANDARD MONEY MARKET DIVISION YIELDS
Current yield for the Liquid Asset Division will be based on the change in the
value of a hypothetical investment (exclusive of capital changes) 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:
365/7
Effective Yield = [(Base Period Return) + 1) ] - 1
For the 7-day period March 22, 1996 toMarch 29, 1996, the current yield of
the Liquid Asset Division was 3.42% and the effective yield of the Division was
3.48%.
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:
<PAGE>
6
YIELD = 2 [ ( a - b +1) - 1]
-----
cd
Where:
[a] equals the net investment income earned during the period by the
Series attributable to shares owned by a division
[b] equals the expenses accrued for the period (net of reimbursements)
[c] equals the average daily number of Units outstanding during the
period based on the index of investment experience
[d] equals the value (maximum offering price) per index of investment
experience on the last day of the period
Yield on divisions of Account B is earned from the increase in net asset value
of shares of the Series in which the Division invests and from dividends
declared and paid by the Series, which are automatically reinvested in shares of
the Series. Yield on the Global Account is earned from the increase in asset
value of shares of the securities in which the Global Account invests.
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:
n
P(1+T) =ERV
Where:
(1) [P] equals a hypothetical initial premium payment of $1,000
(2) [T] equals an average annual total return
(3) [n] equals the number of years
(4) [ERV] equals the ending redeemable value of a hypothetical $1,000
initial premium payment made at the beginning of the period (or
fractional portion thereof)
All total return figures reflect the deduction of the maximum sales load, the
asset based administrative charge, and the mortality and expense risk charge.
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 PERIODS ENDING 12/31/95 -- STANDARDIZED
<TABLE>
<CAPTION>
One Year Period Five Year Period Inception to
Division Ending 12/31/95 Ending 12/31/95 12/31/95 Inception Date
- -------- --------------- --------------- -------- --------------
<S> <C> <C> <C> <C>
Multiple Allocation 16.68% 7.78%* 7.02%* 1/25/89
Fully Managed 18.44% 8.51%* 5.55%* 1/25/89
Capital Appreciation 27.76% N/A 10.31%* 5/4/92
Rising Dividends 28.65% N/A 12.29% 10/4/93
All-Growth 20.12% 7.12%* 4.37%* 1/25/89
Real Estate 14.37% 15.24%* 6.19%* 1/25/89
Natural Resources 8.55% 7.87%* 5.39%* 1/25/89
Value Equity 32.80% N/A 32.80% 1/1/95
Strategic Equity N/A N/A -.63%* 10/2/95
Small Cap N/A N/A N/A 1/2/96
Emerging Markets -11.97% N/A -4.46% 10/4/93
Global Account 5.22%* N/A -2.23%* 10/21/92
Limited Maturity Bond 9.57% 4.44%* 5.19%* 1/25/89
Liquid Asset 3.45% 2.09%* 3.18%* 1/25/89
- ----------------------------
</TABLE>
* Total return calculation reflects partial waiver of fees and expenses.
<PAGE>
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:
n
[P(1+T) ]=ERV
Where:
(1) [P] equals a hypothetical initial premium payment of $1,000
(2) [T] equals an average annual total return
(3) [n] equals the number of years
(4) [ERV] equals the ending redeemable value of a hypothetical $1,000
initial premium payment made at the beginning of the period (or
fractional portion thereof) assuming certain loading and charges
are zero.
All total return figures reflect the deduction of the mortality and expense risk
charge and the administrative charges, but not the deduction of the maximum
sales load.
AVERAGE ANNUALIZED TOTAL RETURN FOR PERIODS ENDING 12/31/95 -- NON-STANDARDIZED
<TABLE>
<CAPTION>
One Year Period Five Year Period Inception to
Division Ending 12/31/95 Ending 12/31/95 12/31/95 Inception Date
- -------- --------------- --------------- -------- --------------
<S> <C> <C> <C> <C>
Multiple Allocation 17.39% 8.34%* 7.57%* 1/25/89
Fully Managed 19.14% 9.04%* 6.13%* 1/25/89
Capital Appreciation 28.50% N/A 10.95%* 5/4/92
Rising Dividends 29.39% N/A 13.19% 10/4/93
All-Growth 20.83% 7.65%* 4.96%* 1/25/89
Real Estate 15.06% 15.71%* 6.83%* 1/25/89
Natural Resources 9.23% 8.47%* 6.02%* 1/25/89
Value Equity 33.56% N/A 33.56% 1/1/95
Strategic Equity N/A N/A .02%* 10/2/95
Small Cap N/A N/A N/A 1/2/96
Emerging Markets -11.35% N/A -3.65% 10/4/93
Global Account 5.89%* N/A -1.41%* 10/21/92
Limited Maturity Bond 10.25% 5.03%* 5.75%* 1/25/89
Liquid Asset 4.11% 2.72%* 3.77%* 1/25/89
- ----------------------------
</TABLE>
* Total return calculation reflects partial waiver of fees and expenses.
Performance information for a division may be compared, in reports and
promotional literature, to: (i) the Standard & Poor's 500 Stock Index ("S&P
500"), Dow Jones Industrial Average ("DJIA"), Donoghue Money Market
Institutional Averages, or other indices that measure performance of a pertinent
group of securities so that investors may compare a division's results with
those of a group of securities widely regarded by investors as representative of
the securities markets in general; (ii) other groups of variable annuity
separate accounts or other investment products tracked by Lipper Analytical
Services, a widely used independent research firm which ranks mutual funds and
other investment companies by overall performance, investment objectives, and
assets, or tracked by other services, companies, publications, or persons who
rank such investment companies on overall performance or other criteria; and
(iii) the Consumer Price Index (measure for inflation) to assess the real rate
of return from an investment in the Contract. Unmanaged indices may assume the
reinvestment of dividends but generally do not reflect deductions for
administrative and management costs and expenses.
Performance information for any division reflects only the performance of a
hypothetical Contract under which accumulation value is allocated to a division
during a particular time period on which the calculations are based.
Performance information should be considered in light of the investment
objectives and policies, characteristics and quality of the portfolio of the
<PAGE>
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 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
<TABLE>
<CAPTION>
EXAMPLE 1.
<S> <C>
1. IIE, beginning of period . . . . . . . . . . . . . . . . . $1.80000000
2. Value of securities, beginning of period . . . . . . . . . . . .$21.20
3. Change in value of securities. . . . . . . . . . . . . . . . . . .$.50
4. Gross investment return (3) divided by (2) . . . . . . . . . .02358491
5. Less daily mortality and expense charge. . . . . . . . . . . .00003446
6. Less asset based administrative charge . . . . . . . . . . . .00000276
7. Net investment return (4) minus (5) minus (6). . . . . . . . .02354769
8. Net investment factor (1.000000) plus(7) . . . . . . . . . .1.02354769
9. IIE, end of period (1) multiplied by (8) . . . . . . . . . $1.84238584
</TABLE>
ILLUSTRATION OF PURCHASE OF UNITS (ASSUMING NO STATE PREMIUM TAX)
<TABLE>
<CAPTION>
EXAMPLE 2.
<S> <C>
1. Initial Premium Payment. . . . . . . . . . . . . . . . . . ....$100.00
2. IIE on effective date of purchase (see Example 1). . . . . .$1.8000000
3. Number of Units purchased [(1) divided by (2)] . . . . . . . .55.55556
4. IIE for valuation date following purchase (see Example 1). $1.84238584
5. Accumulation Value in account for valuation date following
purchase [(3) multiplied by (4)] . . . . . . . . . . . . . . . $102.35
</TABLE>
<PAGE>
IRA PARTIAL WITHDRAWAL OPTION
If the contract owner has an IRA contract and will attain age 70 1/2 in the
current calendar year, distributions will be made in accordance with the
requirements of Federal tax law. This option is available to assure that the
required minimum distributions from qualified plans under the Internal Revenue
Code (the "Code") are made. Under the Code, distributions must begin no later
than April 1st of the calendar year following the calendar year in which the
contract owner attains age 70 1/2. If the required minimum distribution is not
withdrawn, there may be a penalty tax in an amount equal to 50% of the
difference between the amount required to be withdrawn and the amount actually
withdrawn. Even if the IRA partial withdrawal option is not elected,
distributions must nonetheless be made in accordance with the requirements of
Federal tax law.
Golden American notifies the contract owner of these regulations with a letter
mailed on January 1st of the calendar year in which the contract owner reaches
age 70 1/2 which explains the IRA Partial Withdrawal Option and supplies an
election form. If electing this option, the owner specifies whether the
withdrawal amount will be based on a life expectancy calculated on a single life
basis (contract owner's life only) or, if the contract owner is married, on a
joint life basis (contract owner's and spouse's 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.
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
<PAGE>
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 Ratings Group ("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 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.
<PAGE>
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 ("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 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.
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
<PAGE>
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.
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 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
<PAGE>
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 (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.
<PAGE>
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 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
<PAGE>
(other than overnight deposits), if, in the aggregate, more than 15% of its
assets would 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 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
<PAGE>
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 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; and
(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.)
<PAGE>
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 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 the principal officers, their
business addresses, and principal occupation(s) during the past five years are
as follows:
<TABLE>
<S> <C> <C>
Terry L. Kendall* Chairman of the Board Managing Director, Bankers Trust Company;
Golden American Life and President President, Director, and Chief Executive
Insurance Co. Officer, Golden American Life Insurance
1001 Jefferson Street Company; President, Director, and Chief
Wilmington, DE 19801 Executive Officer, BT Variable, Inc.; Chairman
and Chief Executive Officer of Directed
Services, Inc.; Chairman of the Board and
President of The GCG Trust; formerly,
President and Chief Executive Officer, United
Pacific Life Insurance Company (1983-1993).
Robert A. Grayson Governor Co-founder, Grayson Associates, Inc.; Adjunct
Grayson Associates Professor of Marketing, New York University
108 Loma Media Road School of Business Administration; Member of
Santa Barbara, CA the Board of the Board of Trustees of The GCG
93103 Trust; former Director, The Golden Financial
Group, Inc.; former Senior Vice President,
David & Charles Advertising.
John L. Murphy* Governor Managing Director, Bankers Trust Company and
32 Talmadgeville Road group head of Bankers Trust Global Investors;
Darien, CT 06820 Member of the Board of Trustees of The GCG
Trust. Mr. Murphy joined Bankers Trust
Company in 1969 and has served as a Managing
Director since 1986.
Roger B. Vincent Governor President, Springwell Corporation; Director,
<PAGE>
230 Park Avenue Petralone, Inc.; Member of the Board of
New York, NY 10169 Trustees of The GCG Trust; formerly, Managing
Director, Bankers Trust Company.
M. Norvel Young Governor Chancellor Emeritus and Board of Regents,
Pepperdine University Pepperdine University; Director of Imperial
Malibu, CA 90263 Bancorp, Imperial Bank, Imperial Trust Co. and
20th Century Christian Publishing Company;
Member of the Board of Trustees of The GCG
Trust. Formerly: Chancellor, Pepperdine
University, 1971 to 1984; President, Pepperdine
University, 1957 to 1971; Director, National
Conference of Christians and Jews, 1978 to 1982.
Barnett Chernow Executive Vice Executive Vice President, BT Variable, Inc.;
Golden American Life President Executive Vice President, Golden American Life
Insurance Co. Insurance Company; Executive Vice President,
1001 Jefferson Street Directed Services, Inc.; Senior Vice President
Wilmington, DE 19801 and Chief Financial Officer, Reliance Insurance
Company, August 1977 to July 1993.
Mitchell R. Katcher Executive Vice Executive Vice President, BT Variable, Inc.;
Golden American Life President Executive Vice President, Golden American Life
Insurance Co. Insurance Company; Executive Vice President,
1001 Jefferson Street Directed Services, Inc.; 1991 to 1993,
Wilmington, DE 19801 Consulting Actuary, Tillinghast; prior to 1991,
Senior Vice President and Chief Actuary,
Monarch Financial Services, Inc.
Edward C. Wilson Executive Vice Executive Vice President, BT Variable, Inc.;
Golden American Life President Executive Vice President, Golden American Life
Insurance Co. Insurance Company; Executive Vice President,
1001 Jefferson Street Directed Services, Inc.; August 1994 to
Wilmington, DE 19801 December 1995, Senior Managing Director, Van
Eck Global; July 1990 to August 1994, Vice
President and National Sales Manager, Keyport
Life Insurance Company.
Myles R. Tashman Secretary Executive Vice President and Secretary, Golden
Golden American Life American Life Insurance Company; Executive
Insurance Co. Vice President, BT Variable, Inc.; Executive
1001 Jefferson Street Vice President and Secretary, Directed Services,
Wilmington, DE 19801 Inc.; Secretary if the GCG Trust; formerly,
Senior Vice President and General Counsel,
United Pacific Life Insurance Company (1986-
1993).
Mary Bea Wilkinson Treasurer Senior Vice President and Treasurer, Golden
Golden American Life American Life Insurance Company; Senior
Insurance Co. Vice President and Treasurer, BT Variable,
1001 Jefferson Street Inc.; President and Treasurer, Directed Services,
Wilmington, DE 19801 Inc.; Assistant Vice President, CIGNA
Insurance Companies, August 1993 to
October 1993; various positions with United
Pacific Life Insurance Company, January 1987
to July 1993, and was Vice President and
<PAGE>
Controller upon leaving.
Stephen J. Preston Controller Senior Vice President, Chief Actuary and
Golden American Life Controller, Golden American Life Insurance
Insurance Co. Company; Senior Vice President, BT Variable;
1001 Jefferson Street Senior Vice President, Directed Services, Inc.;
Wilmington, DE 19801 From September 1993 through November 1993,
Senior Vice President and Actuary for Mutual
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.
</TABLE>
- -------------------------
*Messrs. Kendall and Murphy are "interested persons" of the
Account (as that term is defined in the Investment Company Act of
1940) because of their affiliations with the Manager and its
affiliated companies as shown above.
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 1001 Jefferson Street, Suite 400, Wilmington,
Delaware 19801. 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 (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 last continued in September 1995 and shall continue
in effect until October 1996, and from year to year thereafter, provided such
continuance is approved annually by (i) the holders of a majority of the
outstanding
<PAGE>
voting securities of Account D or by the Board of Governors, and (ii) 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 was approved by the
Board of Governors including a majority of the Board of Governors who are not
parties to the Management Agreement, or interested persons of such parties, at a
meeting held on August 12, 1992. 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 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 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
<PAGE>
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.
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.
<PAGE>
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.
<PAGE>
FINANCIAL STATEMENTS OF SEPARATE ACCOUNT B
The audited Financial Statements of Separate Account B are listed below and
included in this Statement of Additional Information:
Report of Independent Auditors
Financial Statements -- Audited
Statement of Assets and Liabilities as of December 31, 1995
Combined Statement of Operations for the Year ended December 31, 1995
Combined Statements of Changes in Net Assets for the Years ended
December 31, 1995 and 1994
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 listed below appear in the Annual Report of The Managed Global
Account of Separate Account D which was filed with the SEC and is incorporated
by reference in this Statement of Additional Information .
Report of Independent Auditors
Financial Statements -- Audited
Statement of Assets and Liabilities as of December 31, 1995
Statement of Operations for the Year ended December 31, 1995
Statements of Changes in Net Assets for the Year ended December 31,
1995 and 1994
Statement of Investments as of December 31, 1995
Notes to Audited Financial Statements
FINANCIAL STATEMENTS OF GOLDEN AMERICAN LIFE INSURANCE COMPANY
The audited financial statements of Golden American Life Insurance Company
listed below are prepared in accordance with generally accepted accounting
principles ("GAAP") and are incorporated by reference in this Statement of
Additional Information from the GoldenSelect DVA PLUS Deferred Combination
Variable and Fixed Annuity Prospectus, dated May, 1996, which was filed with the
SEC.
Report of Independent Auditors
Financial Statements -- GAAP
Balance Sheets as of December 31, 1995 and 1994
Statements of Operations for the Years ended December 31, 1995, 1994
and 1993
Statements of Changes in Stockholder's Equity for the Years ended
December 31, 1995, 1994 and 1993
Statements of Cash Flows for the Years ended December 31, 1995, 1994
and 1993
Notes to Audited Financial Statements
<PAGE>
ANNUAL REPORT
FOR
SEPARATE ACCOUNT B
------------------
DECEMBER 31, 1995
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
SEPARATE ACCOUNT B
Page
----
Report of Independent Auditors..................................... B-1
Statement of Assets and Liabilities................................ B-2
Combined Statements of Operations.................................. B-3
Combined Statements of Changes in Net Assets....................... B-7
Notes to Financial Statements...................................... B-11
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Variable Annuity Contract Owners
Separate Account B
We have audited the accompanying statement of assets and liabilities of
Separate Account B (the 'Account') as of December 31, 1995 and the related
combined statements of operations and changes in net assets for each of the
three years in the period then ended. These fianancial statements are the
responsibility of the Account's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1995, by correspondence with
the custodian. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Separate Account B at
December 31, 1995, and the related combined statements of operations and changes
in net assets for each of the three years in the period then ended in conformity
with generally accepted accounting principles.
ERNST & YOUNG LLP
Philadelphia, Pennsylvania
February 12, 1996
B-1
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
SEPARATE ACCOUNT B
DECEMBER 31, 1995
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investment in The GCG Trust, at Net Asset Value:
Liquid Asset Series, 36,511 shares (Cost --$36,511)............ $ 36,511
Limited Maturity Bond Series, 6,087 shares (Cost -- $64,804)... 67,870
Natural Resources Series, 1,796 shares (Cost -- $25,708)....... 27,008
All-Growth Series, 6,678 shares (Cost -- $85,681).............. 92,018
Real Estate Series, 2,758 shares (Cost -- $32,426)............. 34,836
Fully Managed Series, 8,519 shares (Cost -- $109,183).......... 117,394
Multiple Allocation Series, 24,417 shares (Cost -- $293,213)... 305,697
Capital Appreciation Series, 8,965 shares (Cost -- $107,313)... 121,118
Rising Dividends Series, 6,044 shares (Cost -- $64,959)........ 80,391
Emerging Markets Series, 4,074 shares (Cost -- $45,132)........ 36,913
Market Manager Series, 495 shares (Cost -- $5,008)............. 5,951
Value Equity Series, 2,159 shares (Cost -- $26,592)............ 28,462
Strategic Equity Series, 803 shares (Cost -- $8,008)........... 8,035
----------
Total Invested Assets (Cost -- $904,538)....................... 962,204
LIABILITIES
Payable to Golden American for Charges and Fees (Note 3).......... 1,326
----------
Total Net Assets............................................... $ 960,878
----------
----------
NET ASSETS
For Variable Annuity Insurance Contracts.......................... $ 924,596
Retained in Separate Account B by Golden American (Note 3)........ 36,282
----------
Total Net Assets............................................... $ 960,878
----------
----------
</TABLE>
B-2
<PAGE>
Separate Account B
Combined Statements of Operations
Years ended December 31, 1995, 1994 and 1993
(amounts in thousands)
<TABLE>
<CAPTION>
Divisions Investing In
-------------------------------------------------------------------------------------------
Liquid Asset Series Limited Maturity Bond Series Natural Resources Series
--------------------------- ----------------------------- -----------------------------
1995 1994 1993 1995 1994 1993 1995 1994 1993
------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment Income
Dividends $ 2,242 $ 1,444 $ 390 $ -- $ 3,501 $ 2,606 $ 570 $ 287 $ 104
Capital gain distribution -- -- 1 -- -- 289 -- 540 --
------- ------- ------- ------- ------- ------- ------- ------- -------
Total investment income 2,242 1,444 391 -- 3,501 2,895 570 827 104
Expenses
Mortality and expense risk and
administrative charges 411 362 139 700 736 550 284 283 95
------- ------- ------- ------- ------- ------- ------- ------- -------
Net investment income (loss) 1,831 1,082 252 (700) 2,765 2,345 286 544 9
------- ------- ------- ------- ------- ------- ------- ------- -------
Net realized gain (loss) on
investments -- -- -- (138) 66 677 1,545 1,686 427
------- ------- ------- ------- ------- ------- ------- ------- -------
Unrealized appreciation
(depreciation)
of investments
Beginning of period -- -- -- (4,836) (408) 27 805 2,954 (341)
End of period -- -- -- 3,066 (4,836) (408) 1,300 805 2,954
------- ------- ------- ------- ------- ------- ------- ------- -------
Net change in unrealized
appreciation
(depreciation)
of investments -- -- -- 7,902 (4,428) (435) 495 (2,149) 3,295
------- ------- ------- ------- ------- ------- ------- ------- -------
Net increase (decrease) in net
assets resulting from operations $ 1,831 $ 1,082 $ 252 $ 7,064 $(1,597) $ 2,587 $ 2,326 $ 81 $ 3,731
======= ======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
B-3
<PAGE>
Separate Account B
Combined Statements of Operations
Years ended December 31, 1995, 1994 and 1993
(amounts in thousands)
<TABLE>
<CAPTION>
Divisions Investing In
--------------------------------------------------------------------------------------------------------
All-Growth Series Real Estate Series Fully Managed Series
-------------------------------- -------------------------------- --------------------------------
1995 1994 1993 1995 1994 1993 1995 1994 1993
-------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment Income
Dividends $ 4,685 $ 668 $ 202 $ 1,399 $ 1,863 $ 810 $ 2,846 $ 2,839 $ 1,566
Capital gain distribution -- -- -- -- -- -- -- -- 1,549
-------- -------- -------- -------- -------- -------- -------- -------- --------
Total investment income 4,685 668 202 1,399 1,863 810 2,846 2,839 3,115
Expenses
Mortality and expense
risk and administrative
charges 833 613 380 347 348 170 1,101 1,079 731
-------- -------- -------- -------- -------- -------- -------- -------- --------
Net investment
income (loss) 3,852 55 (178) 1,052 1,515 640 1,745 1,760 2,384
-------- -------- -------- -------- -------- -------- -------- -------- --------
Net realized gain
(loss) on
investments 1,011 77 477 369 539 514 1,311 1,060 525
-------- -------- -------- -------- -------- -------- -------- -------- --------
Unrealized appreciation
(depreciation) of
investments
Beginning of period (4,165) 3,650 1,002 (1,015) (374) 175 (8,104) 4,425 2,725
End of period 6,336 (4,165) 3,650 2,410 (1,015) (374) 8,210 (8,104) 4,425
-------- -------- -------- -------- -------- -------- -------- -------- --------
Net change in unrealized
appreciation
(depreciation)
of investments 10,501 (7,815) 2,647 3,425 (641) (549) 16,314 (12,529) 1,700
-------- -------- -------- -------- -------- -------- -------- -------- --------
Net increase (decrease)
in net assets
resulting from
operations $ 15,364 $ (7,683) $ 2,946 $ 4,846 $ 1,413 $ 605 $ 19,370 $ (9,709) $ 4,609
======== ======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
B-4
<PAGE>
Separate Account B
Combined Statements of Operations
Years ended December 31, 1995, 1994 and 1993
(amounts in thousands)
<TABLE>
<CAPTION>
Divisions Investing In
------------------------------------------------------------------------------------------------------
Multiple Allocation Series Capital Appreciation Rising Dividends Series
-------------------------------- -------------------------------- --------------------------------
1995 1994 1993 1995 1994 1993 1995 1994 1993(a)
-------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment Income
Dividends $ 21,644 $ 10,656 $ 5,181 $ 10,216 $ 1,777 $ 933 $ 567 $ 685 $ 19
Capital gain
distribution -- -- 11,777 -- -- 188 -- -- --
-------- -------- -------- -------- -------- -------- -------- -------- --------
Total investment
income 21,644 10,656 16,958 10,216 1,777 1,121 567 685 19
Expenses
Mortality and
expense risk and
administrative
charges 3,043 2,955 1,833 1,065 909 554 648 368 14
-------- -------- -------- -------- -------- -------- -------- -------- --------
Net investment
income (loss) 18,601 7,701 15,125 9,151 868 567 (81) 317 5
-------- -------- -------- -------- -------- -------- -------- -------- --------
Net realized gain
(loss) on investments 4,715 2,844 295 2,221 1,427 247 776 55 --
-------- -------- -------- -------- -------- -------- -------- -------- --------
Unrealized appreciation
(depreciation) of
investments
Beginning of period (13,754) 3,296 2,624 (726) 4,005 1,050 (605) 221 --
End of period 12,485 (13,754) 3,296 13,805 (726) 4,005 15,432 (605) 221
-------- -------- -------- -------- -------- -------- -------- -------- --------
Net change in unrealized
appreciation
(depreciation)
of investments 26,239 (17,050) 672 14,531 (4,731) 2,955 16,037 (826) 221
-------- -------- -------- -------- -------- -------- -------- -------- --------
Net increase (decrease)
in net assets
resulting from
operations $ 49,555 $ (6,505) $ 16,092 $ 25,903 $ (2,436) $ 3,769 $ 16,732 $ (454) $ 226
======== ======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
- ------------------------------------------------------------------------
(a) Commencement of operations, October, 1993
B-5
<PAGE>
Separate Account B
Combined Statements of Operations
Years ended December 31, 1995, 1994 and 1993
(amounts in thousands)
<TABLE>
<CAPTION>
Division Investing In
-------------------------------------------------------------------------
Value Strategic
Market Equity Equity
Emerging Markets Series Manager Series Series Series Combined
------------------------------- ----------------- ------- ------- --------------------------------
1995 1994 1993(a) 1995 1994(b) 1995(c) 1995(d) 1995 1994 1993
-------- --------- ------- ------- ------ ------- ------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment Income
Dividends $ 6 $ -- $ -- $ 203 $ 7 $ 711 $ 19 $ 45,108 $ 23,727 $ 11,812
Capital gain
distribution -- 2,686 -- -- -- -- -- -- 3,226 13,803
-------- --------- ------- ------- ------ ------- ------- --------- --------- --------
Total investment
income 6 2,686 -- 203 7 711 19 45,108 26,953 25,615
Expenses
Mortality and
expense risk and
administrative
charges 440 561 24 -- -- 110 12 8,994 8,214 4,490
-------- --------- ------- ------- ------ ------- ------- --------- --------- --------
Net investment
income (loss) (434) 2,125 (24) 203 7 601 7 36,114 18,739 21,125
-------- --------- ------- ------- ------ ------- ------- --------- --------- --------
Net realized
gain (loss)
on investments (7,448) 836 -- 29 -- 687 (1) 5,077 8,590 3,161
-------- --------- ------- ------- ------ ------- ------- --------- --------- --------
Unrealized
appreciation
(depreciation) of
investments
Beginning of period (9,822) 3,971 -- (1) -- -- -- (42,223) 21,740 7,261
End of period (8,219) (9,822) 3,971 942 (1) 1,870 28 57,665 (42,223) 21,740
-------- --------- ------- ------- ------ ------- ------- --------- --------- --------
Net change in
unrealized
appreciation
(depreciation)
of investments 1,603 (13,793) 3,971 943 (1) 1,870 28 99,888 (63,963) 14,479
-------- --------- ------- ------- ------ ------- ------- --------- --------- --------
Net increase
(decrease)
in net assets
resulting from
operations $ (6,279) $(10,832) $ 3,947 $ 1,175 $ 6 $ 3,158 $ 34 $141,079 $(36,634) $ 38,765
======== ========= ======= ======= ====== ======= ======= ========= ========= ========
</TABLE>
- ------------------------------------------------------------------------
(a) Commencement of operations, October, 1993
(b) Commencement of operations, November, 1994
(c) Commencement of operations, January, 1995
(d) Commencement of operations, October, 1995
B-6
<PAGE>
Separate Account B
Combined Statements of Changes in Net Assets
Years ended December 31, 1995, 1994 and 1993
(amounts in thousands)
<TABLE>
<CAPTION>
Division Investing In
--------------------------------------------------------------------------------------------------------
Liquid Asset Series Limited Maturity Bond Series Natural Resources Series
-------------------------------- -------------------------------- --------------------------------
1995 1994 1993 1995 1994 1993 1995 1994 1993
-------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease)
in net assets
Operations:
Net investment
income (loss) $ 1,831 $ 1,082 $ 252 $ (700) $ 2,765 $ 2,345 $ 286 $ 544 $ 9
Net realized gain
(loss) on
investments -- -- -- (138) 66 677 1,545 1,686 427
Net change in
unrealized
appreciation
(depreciation)
of
investments -- -- -- 7,902 (4,428) (435) 495 (2,149) 3,295
Net increase
(decrease) in net
assets resulting
from operations -------- -------- -------- -------- -------- -------- -------- -------- --------
1,831 1,082 252 7,064 (1,597) 2,587 2,326 81 3,731
-------- -------- -------- -------- -------- -------- -------- -------- --------
Policy related
transactions:
Premiums 11,323 43,297 22,808 7,579 32,041 54,680 2,111 8,595 10,191
Net transfers
among Divisions
and Guaranteed
Interest
Division
of Golden
American (5,926) 4,159 (15,605) (6,694) (22,002) (19,820) (6,167) 5,716 5,177
Surrenders and
other
withdrawals (11,794) (18,470) (3,497) (9,461) (7,604) (5,188) (3,402) (2,768) (465)
Policy related
charges and
fees (4,309) (1,201) (229) (2,224) (887) (498) (624) (314) (80)
-------- -------- -------- -------- -------- -------- -------- -------- --------
Net increase
(decrease)
in net assets
resulting from
policy related
transactions (10,706) 27,785 3,477 (10,800) 1,548 29,174 (8,082) 11,229 14,823
-------- -------- -------- -------- -------- -------- -------- -------- --------
Net increase
(decrease)
in net assets (8,875) 28,867 3,729 (3,736) (49) 31,761 (5,756) 11,310 18,554
Net assets:
Beginning of
period 45,366 16,499 12,770 71,573 71,622 39,861 32,746 21,436 2,882
-------- -------- -------- -------- -------- -------- -------- -------- --------
End of period $ 36,491 $ 45,366 $ 16,499 $ 67,837 $ 71,573 $ 71,622 $ 26,990 $ 32,746 $ 21,436
======== ======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
B-7
<PAGE>
Separate Account B
Combined Statements of Changes in Net Assets
Years ended December 31, 1995, 1994 and 1993
(amounts in thousands)
<TABLE>
<CAPTION>
Divisions Investing In
-------------------------------------------------------------------------------------------------------------
All-Growth Series Real Estate Series Fully Managed Series
--------------------------------- ---------------------------------- -----------------------------------
1995 1994 1993 1995 1994 1993 1995 1994 1993
--------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease)
in net assets
Operations:
Net investment
income (loss) $ 3,852 $ 55 $ (178) $ 1,052 $ 1,515 $ 640 $ 1,745 $ 1,760 $ 2,384
Net realized gain
(loss) on
investments 1,011 77 477 369 539 514 1,311 1,060 525
Net change in
unrealized
appreciation
depreciation)
of
investments 10,501 (7,815) 2,647 3,425 (641) (549) 16,314 (12,529) 1,700
Net increase
(decrease)
in net assets
resulting
from operations --------- --------- --------- --------- --------- --------- --------- --------- ---------
15,364 (7,683) 2,946 4,846 1,413 605 19,370 (9,709) 4,609
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Policy related
transactions:
Premiums 11,880 18,242 34,573 1,928 9,862 22,416 10,129 21,742 70,789
Net transfers
among
Divisions and
Guaranteed
Interest
Division
of Golden
American 6,292 9,624 (2,152) (2,903) 208 4,008 5,315 (11,098) 109
Surrenders and
other
withdrawals (10,712) (4,906) (2,430) (4,799) (2,919) (1,717) (13,651) (9,050) (4,050)
Policy related
charges
and fees (1,489) (709) (303) (1,193) (401) (141) (2,673) (1,341) (517)
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Net increase
(decrease)
in net assets
resulting
from policy
related
transactions 5,971 22,251 29,688 (6,967) 6,750 24,566 (880) 253 66,331
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Net increase
(decrease)
in net assets 21,335 14,568 32,634 (2,121) 8,163 25,171 18,490 (9,456) 70,940
Net assets:
Beginning of
period 70,621 56,053 23,419 36,934 28,771 3,600 98,837 108,293 37,353
--------- --------- --------- --------- --------- --------- --------- --------- ---------
End of period $ 91,956 $ 70,621 $ 56,053 $ 34,813 $ 36,934 $ 28,771 $ 117,327 $ 98,837 $ 108,293
========= ========= ========= ========= ========= ========= ========= ========= =========
</TABLE>
See Accompanying Notes.
B-8
<PAGE>
Separate Account B
Combined Statements of Changes in Net Assets
Years ended December 31, 1995, 1994 and 1993
(amounts in thousands)
<TABLE>
<CAPTION>
Divisions Investing In
---------------------------------------------------------------------------------------------
Multiple Allocation Series Capital Appreciation Rising Dividends Series
------------------------------ ----------------------------- -------------------------------
1995 1994 1993 1995 1994 1993 1995 1994 1993(a)
---------- -------- -------- --------- -------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
Operations:
Net investment income (loss) $ 18,601 $ 7,701 $ 15,125 $ 9,151 $ 868 $ 567 $ (81) $ 317 $ 5
Net realized gain (loss) on
investments 4,715 2,844 295 2,221 1,427 247 776 55 --
Net change in unrealized
appreciation (depreciation)
of investments 26,239 (17,050) 672 14,531 (4,731) 2,955 16,037 (826) 221
--------- -------- -------- -------- ------- ------- ------- ------- -------
Net increase (decrease) in net
assets resulting
from operations 49,555 (6,505) 16,092 25,903 (2,436) 3,769 16,732 (454) 226
--------- -------- -------- -------- ------- ------- ------- ------- -------
Policy related transactions:
Premiums 17,865 74,594 150,789 9,240 19,196 63,986 11,968 25,150 11,566
Net transfers among Divisions
and Guaranteed Interest
Division of Golden American (9,426) (9,842) 5,675 12,826 (6,163) 3,403 12,320 15,544 2,633
Surrenders and other withdrawals (42,733) (30,150) (12,915) (13,162) (7,902) (2,393) (9,800) (3,844) (25)
Policy related charges and fees (7,267) (3,746) (1,609) (2,104) (1,149) (331) (1,263) (399) (12)
--------- -------- -------- -------- ------- ------- ------- ------- -------
Net increase (decrease) in net
assets resulting from policy
related transactions (41,561) 30,856 141,940 6,800 3,982 64,665 13,225 36,451 14,162
--------- -------- -------- -------- ------- ------- ------- ------- -------
Net increase (decrease)
in net assets 7,994 24,351 158,032 32,703 1,546 68,434 29,957 35,997 14,388
Net assets:
Beginning of period 297,508 273,157 115,125 88,346 86,800 18,366 50,385 14,388 --
--------- -------- -------- -------- ------- ------- ------- ------- -------
End of period $ 305,502 $297,508 $273,157 $121,049 $88,346 $86,800 $80,342 $50,385 $14,388
========= ======== ======== ======== ======= ======= ======= ======= =======
</TABLE>
- ------------------------------------------------------------------------
(a) Commencement of operations, October, 1993
B-9
<PAGE>
Separate Account B
Combined Statements of Changes in Net Assets
Years ended December 31, 1995, 1994 and 1993
(amounts in thousands)
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------
Value Strategic
Market Manager Equity Equity
Emerging Markets Series Series Series Series Combined
------------------------------ --------------- -------- ------- ----------------------------
1995 1994 1993(a) 1995 1994(b) 1995(c) 1995(d) 1995 1994 1993
--------- -------- -------- ------ -------- -------- ------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
Operations:
Net investment income
(loss) $ (434) $ 2,125 $ (24) $ 203 $ 7 $ 601 $ 7 $ 36,114 $ 18,739 $ 21,125
Net realized gain (loss)
on investments (7,448) 836 -- 29 -- 687 (1) 5,077 8,590 3,162
Net change in unrealized
appreciation (depreciation)
of investments 1,603 (13,793) 3,971 943 (1) 1,870 28 99,888 (63,963) 14,477
-------- -------- ------- ------ ------ ------- ------ --------- -------- --------
Net increase (decrease) in
net assets resulting
from operations (6,279) (10,832) 3,947 1,175 6 3,158 34 141,079 (36,634) 38,764
-------- -------- ------- ------ ------ ------- ------ --------- -------- --------
Policy related transactions:
Premiums 8,150 30,113 13,923 2,298 1,414 9,018 3,240 106,729 284,246 455,721
Net transfers among Divisions
and Guaranteed Interest Division
of Golden American (15,911) 14,778 12,702 301 1,335 17,110 4,868 12,005 2,259 (3,870)
Surrenders and other withdrawals (7,740) (4,285) (62) (767) -- (776) (172) (128,969) (91,898) (32,742)
Policy related charges and fees (1,079) (517) (21) (553) (3) (63) 61 (24,780) (10,667) (3,741)
-------- -------- ------- ------ ------ ------- ------ --------- -------- --------
Net increase (decrease) in net
assets resulting from policy
related transactions (16,580) 40,089 26,542 1,279 2,746 25,289 7,997 (35,015) 183,940 415,368
-------- -------- ------- ------ ------ ------- ------ --------- -------- --------
Net increase (decrease)
in net assets (22,859) 29,257 30,489 2,454 2,752 28,447 8,031 106,064 147,306 454,132
Net assets:
Beginning of period 59,746 30,489 -- 2,752 -- -- -- 854,814 707,508 253,376
-------- -------- ------- ------ ------ ------- ------ --------- -------- --------
End of period $ 36,887 $ 59,746 $30,489 $5,206 $2,752 $28,447 $8,031 $ 960,878 $854,814 $707,508
======== ======== ======= ====== ====== ======= ====== ========= ======== ========
</TABLE>
- ------------------------------------------------------------------------
(a) Commencement of operations, October, 1993
(b) Commencement of operations, November, 1994
(c) Commencement of operations, January, 1995
(d) Commencement of operations, October, 1995
B-10
- --------------------------------------------------------------------------------
<PAGE>
NOTES TO FINANCIAL STATEMENTS
SEPARATE ACCOUNT B
DECEMBER 31, 1995
1. ORGANIZATION
Separate Account B (the 'Account') was established on June 14, 1988, by
Golden American Life Insurance Company ('Golden American'), under Minnesota
insurance law to support the operations of variable annuity contracts
('Contracts'). Effective September 30, 1992, Golden American became a
wholly-owned subsidiary of BT Variable, Inc. ('BTV'), an indirect wholly-owned
subsidiary of Bankers Trust Company ('Bankers Trust'). Previously, Golden
American was owned by Mutual Benefit Life Insurance Company in Rehabilitation
('Mutual Benefit'). In a transaction that closed on September 30, 1992, Bankers
Trust acquired from Mutual Benefit, in accordance with the terms of an Exchange
Agreement, all of the issued and outstanding capital stock of Golden American
and Directed Services, Inc. ('DSI'), an affiliate of Golden American, and
certain related assets and contributed them to BTV. The transaction had no
effect on the accompanying financial statements. Golden American is primarily
engaged in the issuance of variable insurance products and is licensed as a life
insurance company in the District of Columbia and all states except New York.
Effective December 30, 1993, Golden American was redomesticated from the State
of Minnesota to the State of Delaware.
Operations of the Account commenced on January 25, 1989. Golden American
provides for variable accumulation and benefits under the contracts by crediting
annuity considerations to one or more divisions within the Account or to the
Golden American Guaranteed Interest Division, the Golden American Fixed Interest
Division, the Fixed Separate Account, and the Managed Global Division of
Separate Account D, which are not part of the Account, as elected by the
Contractowners. The assets of the Account are owned by Golden American. The
portion of the Account's assets applicable to Contracts will not be chargeable
with liabilities arising out of any other business Golden American may conduct,
but obligations of the Account, including the promise to make benefit payments,
are obligations of Golden American.
The Account makes available, under Golden Select Contracts, thirteen investment
divisions: the Liquid Asset, the Limited Maturity Bond, the Natural Resources,
the All-Growth, the Real Estate, the Fully Managed, the Multiple Allocation, the
Capital Appreciation, the Rising Dividends (commenced operations October, 1993),
the Emerging Markets (commenced operations on October 4, 1993), the Market
Manager (commenced operations November, 1994) the Value Equity (commenced
operations January, 1995) and the Strategic Equity (commenced operations
October, 1995) Divisions ('Divisions'). The assets in each Division are
invested in shares of a designated series ('Series') of a mutual fund, The GCG
Trust (the 'Trust'). The Account also includes The Fund For Life Division, which
is not included in the accompanying financial statements, and which ceased to
accept new Contracts effective December 31, 1994.
The Account is a unit investment trust and is registered with the Securities and
Exchange Commission under the Investment Company Act of 1940, as amended.
The net assets maintained in the Account provide the basis for the periodic
determination of the amount of benefits under the Contracts. The net assets may
not be less than the amount required under state law to provide for death
benefits (without regard to the minimum death benefit guarantee) and other
Contract benefits. Additional assets are held in Golden American's general
account to cover the contingency that the guaranteed minimum death benefit might
exceed the death benefit which would have been payable in the absence of such
guarantee. Golden American has entered into reinsurance agreements with
unaffiliated reinsurers to cover substantially all the insurance risk under the
Contracts. Golden American remains liable to the extent that the reinsurers do
not meet their obligations under the reinsurance agreements.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the significant accounting policies of the
Account:
USE OF ESTIMATES: The preparation of the financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
INVESTMENTS: Investments are made in shares of a Series of the Trust and are
valued at the net asset value per share of the respective Series of the Trust.
Investment transactions in each Series of the Trust are recorded on the trade
date. Distributions of net investment income and capital gains of each Series of
the Trust are recognized on the ex-distribution date. Realized gains and losses
on redemptions of the shares of the Series of the Trust are determined on the
identified cost basis.
For the years ended December 31, 1995 and 1994 the cost of purchases of shares
of the Trust aggregated $228,738,000 and $352,605,000, respectively and the
proceeds from sales of shares of the Trust aggregated $226,848,000 and
$149,774,000, respectively.
B-11
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
SEPARATE ACCOUNT B
DECEMBER 31, 1995
2. SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
FEDERAL INCOME TAXES: Operations of the Account form a part of, and are taxed
with, the total operations of Golden American which is taxed as a life insurance
company under the Internal Revenue Code. Earnings and realized capital gains of
the Account attributable to the Contractowners are excluded in the determination
of the federal income tax liability of Golden American.
3. CHARGES AND FEES
Under the terms of the Contracts, certain charges are allocated to the Contracts
to cover Golden American's expenses in connection with the issuance and
administration of the Contracts. Following is a summary of these charges:
MORTALITY AND EXPENSE RISK CHARGES: Golden American assumes mortality and
expense risks related to the operations of the Account and, in accordance with
the terms of the Contracts, deducts a daily charge from the assets of the
Account at annual rates of .80%, .90%, 1.25%, 1.10%, 1.25% and 1.40% of the
assets attributable to the DVA 80, DVA 100, DVA Series 100, DVA Plus-Standard,
DVA Plus-Annual Ratchet, and DVA Plus-7% Solution, respectively to cover these
risks.
ASSET BASED ADMINISTRATIVE CHARGE: A daily charge at an annual rate of .10% is
deducted from assets attributable to DVA 100 and DVA Series 100 Contracts. A
daily charge at an annual rate of .15% is deducted from the assets attributable
to DVA Plus Contracts.
MINIMUM DEATH BENEFIT GUARANTEE CHARGE: For certain Contracts, a minimum death
benefit guarantee charge of up to $1.20 per $1,000 of guaranteed death benefit
per Contract year is deducted from the accumulation value of Deferred Annuity
Contracts on each Contract processing date.
PREMIUM TAXES: For certain contracts, premium taxes are deducted, where
applicable, from the accumulation value of each Contract. The amount and timing
of the deduction depend on the annuitant's state of residence and currently
ranges up to 3.5% of premiums.
OTHER CONTRACT CHARGES: An administrative charge of $40 per Contract year is
deducted from accumulation value of Deferred Annuity Contracts to cover ongoing
administrative expenses. The charge is deducted on the Contract processing date
at the end of the Contract processing period. This charge has been waived for
certain offerings of the Contract.
DEFERRED SALES LOAD: Under contracts offered prior to October 1995, a sales load
of up to 7 1/2% was applicable to each premium payment for sales-related
expenses as specified in the Contracts. For DVA Series 100 the sales load is
deducted in equal annual installments over the period the Contract is in force,
not to exceed 10 years. For other DVA 80 and DVA 100 Contracts, although the
sales load is chargeable to each premium when it is received by Golden American,
the amount of such charge is initially advanced by Golden American to
Contractowners and included in the accumulation value and then deducted in equal
installments on each Contract processing date over a period of six years. Upon
surrender of the Contract, the unamortized deferred sales load is deducted from
the accumulation value by Golden American. In addition, when partial withdrawal
limits are exceeded, a portion of the unamortized deferred sales load is
deducted.
CONTINGENT DEFERRED SALES CHARGE: Under DVA Plus Contracts issued subsequent to
September 1995, a contingent sales charge ('Surrender Charges') 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 a premium
payment is received. The Surrender Charges are imposed at a rate of 7% during
the first two complete years after purchase declining to 6%, 5%, 4%, 3%, and 1%
after the second, third, fourth, fifth, and sixth years, respectively.
The net assets retained in the Account by Golden American in the accompanying
financial statements represent the unamortized deferred sales load, surrender
charges and premium taxes advanced by Golden American, noted above.
B-12
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
SEPARATE ACCOUNT B
DECEMBER 31, 1995
3. CHARGES AND FEES--(CONTINUED)
Net assets retained in the Account by Golden American are as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994
----------------- -----------------
(AMOUNTS IN THOUSANDS)
<S> <C> <C>
Balance at beginning of year.............................................. $ 44,008 $ 37,364
Sales load advanced and additions to surrender charges.................... 6,572 16,138
Premium tax advanced...................................................... 76 73
Net transfer (to) from Separate Account D, Fixed Account and Golden
American................................................................ (1,303) 666
Amortization of deferred sales load, surrender charges and premium tax.... (13,071) (10,233)
----------------- -----------------
Balance at end of year.................................................... $ 36,282 $ 44,008
----------------- -----------------
----------------- -----------------
</TABLE>
4. OTHER RELATED PARTY TRANSACTIONS
DSI, a registered broker/dealer, acts as the distributor and principal
underwriter (as defined in the Securities Act of 1933 and the Investment Company
Act of 1940, as amended) of the Contracts issued through the Account. For 1995
and 1994, fees paid by Golden American to DSI aggregated $7,621,000 and
$15,939,000 respectively.
B-13
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
SEPARATE ACCOUNT B
DECEMBER 31, 1995
5. UNIT VALUES
Presented below is accumulation unit value information for units outstanding by
Contract type as of December 31, 1995
<TABLE>
<CAPTION>
TOTAL UNIT
SERIES UNITS UNIT VALUE VALUE
- ------------------------------------------------------------------------------------ ------------ ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Liquid Asset
DVA 80......................................................................... 398,563 $ 13.429 $ 5,352
DVA 100........................................................................ 2,096,044 13.243 27,757
DVA Series 100................................................................. 70,999 12.921 917
DVA Plus -- Standard........................................................... 37,887 13.029 494
DVA Plus -- Annual Ratchet..................................................... 62,084 12.895 801
DVA Plus -- 7% Solution........................................................ 93,239 12.762 1,190
-------------
36,511
Limited Maturity Bond
DVA 80......................................................................... 206,399 15.307 3,160
DVA 100........................................................................ 4,103,020 15.095 61,935
DVA Series 100................................................................. 14,356 14.729 212
DVA Plus -- Standard........................................................... 26,976 14.865 401
DVA Plus -- Annual Ratchet..................................................... 11,834 14.711 174
DVA Plus -- 7% Solution........................................................ 136,553 14.559 1,988
-------------
67,870
Natural Resources
DVA 80......................................................................... 249,344 15.578 3,884
DVA 100........................................................................ 1,433,795 15.362 22,026
DVA Series 100................................................................. 19,158 14.989 287
DVA Plus -- Standard........................................................... 24,828 15.114 375
DVA Plus -- Annual Ratchet..................................................... 2,847 14.958 42
DVA Plus -- 7% Solution........................................................ 26,605 14.803 394
-------------
27,008
All-Growth
DVA 80......................................................................... 260,857 14.537 3,792
DVA 100........................................................................ 5,828,945 14.335 83,560
DVA Series 100................................................................. 46,215 13.987 647
DVA Plus -- Standard........................................................... 21,908 14.104 309
DVA Plus -- Annual Ratchet..................................................... 16,567 13.959 231
DVA Plus -- 7% Solution........................................................ 251,872 13.814 3,479
-------------
92,018
Real Estate
DVA 80......................................................................... 105,134 16.428 1,727
DVA 100........................................................................ 1,965,015 16.201 31,835
DVA Series 100................................................................. 14,556 15.808 230
DVA Plus -- Standard........................................................... 2,716 15.940 43
DVA Plus -- Annual Ratchet..................................................... 2,910 15.775 46
DVA Plus -- 7% Solution........................................................ 61,143 15.612 955
-------------
34,836
Fully Managed
DVA 80......................................................................... 258,587 15.694 4,058
DVA 100........................................................................ 7,054,994 15.476 109,184
DVA Series 100................................................................. 29,312 15.101 443
DVA Plus -- Standard........................................................... 49,153 15.227 748
DVA Plus -- Annual Ratchet..................................................... 13,988 15.070 211
DVA Plus -- 7% Solution........................................................ 184,364 14.914 2,750
-------------
117,394
Multiple Allocation
DVA 80......................................................................... 1,217,849 17.235 20,989
DVA 100........................................................................ 16,134,381 16.996 274,218
DVA Series 100................................................................. 140,336 16.584 2,327
DVA Plus -- Standard........................................................... 104,463 16.722 1,747
DVA Plus -- Annual Ratchet..................................................... 21,073 16.550 348
DVA Plus -- 7% Solution........................................................ 370,515 16.378 6,068
-------------
305,697
</TABLE>
B-14
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
SEPARATE ACCOUNT B
DECEMBER 31, 1995
5. UNIT VALUES--(CONTINUED)
<TABLE>
<CAPTION>
TOTAL UNIT
SERIES UNITS UNIT VALUE VALUE
------------------------------------------------------------------------------------ ------------ ----------- -------------
(IN THOUSANDS)
<S> <C> <C> <C>
Capital Appreciation
DVA 80......................................................................... 154,271 $ 14.935 $ 2,304
DVA 100........................................................................ 7,627,317 14.825 113,076
DVA Series 100................................................................. 26,783 14.634 392
DVA Plus -- Standard........................................................... 24,117 14.707 355
DVA Plus -- Annual Ratchet..................................................... 16,369 14.627 239
DVA Plus -- 7% Solution........................................................ 326,610 14.548 4,752
-------------
121,118
Rising Dividends
DVA 80......................................................................... 102,616 13.356 1,370
DVA 100........................................................................ 5,536,766 13.296 73,617
DVA Series 100................................................................. 50,637 13.191 668
DVA Plus -- Standard........................................................... 22,934 13.237 304
DVA Plus -- Annual Ratchet..................................................... 36,100 13.194 476
DVA Plus -- 7% Solution........................................................ 300,820 13.151 3,956
-------------
80,391
Emerging Markets
DVA 80......................................................................... 227,757 9.317 2,122
DVA 100........................................................................ 3,533,661 9.275 32,775
DVA Series 100................................................................. 30,591 9.202 281
DVA Plus -- Standard........................................................... 15,670 9.234 145
DVA Plus -- Annual Ratchet..................................................... 12,465 9.204 115
DVA Plus -- 7% Solution........................................................ 160,820 9.174 1,475
-------------
36,913
Market Manager
DVA 100........................................................................ 480,472 12.386 5,951
Value Equity
DVA 80......................................................................... 202,148 13.417 2,712
DVA 100........................................................................ 1,676,442 13.391 22,449
DVA Series 100................................................................. 10,226 13.345 136
DVA Plus -- Standard........................................................... 34,272 13.374 458
DVA Plus -- Annual Ratchet..................................................... 23,394 13.356 313
DVA Plus -- 7% Solution........................................................ 179,453 13.339 2,394
-------------
28,462
Strategic Equity
DVA 80......................................................................... 137,215 10.013 1,374
DVA 100........................................................................ 362,606 10.009 3,629
DVA Series 100................................................................. 26,760 9.999 267
DVA Plus -- Standard........................................................... 76,095 10.014 762
DVA Plus -- Annual Ratchet..................................................... 47,478 10.011 475
DVA Plus -- 7% Solution........................................................ 152,633 10.009 1,528
-------------
8,035
-------------
Total........................................................................ $ 962,204
-------------
-------------
</TABLE>
B-15
<PAGE>
APPENDIX: DESCRIPTION OF BOND RATINGS
Excerpts from Moody's Investors Service, Inc. ("Moody's) description of its bond
ratings:
Aaa: Judged to be the best quality; they carry the smallest degree of
investment risk.
Aa: Judged to be of high quality by all standards; together with the Aaa
group, they comprise what are generally known as high grade bonds.
A: Possess many favorable investment attributes and are to be considered
as "upper medium grade obligations."
Baa: Considered as medium grade obligations, i.e., they are neither highly
protected nor poorly secured; interest payments and principal security
appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of
time.
Ba: Judged to have speculative elements; their future cannot be considered
as well assured.
B: Generally lack characteristics of the desirable investment.
Caa: Are of poor standing; such issues may be in default or there may be
present elements of danger with respect to principal or interest.
Ca: Speculative in a high degree; often in default.
C: Lowest rate class of bonds; regarded as having extremely poor
prospects.
Moody's also applies numerical indicators 1, 2 and 3 to rating categories. The
modifier 1 indicates that the security is in the higher end of its rating
category; 2 indicates a mid-range ranking; and 3 indicates a ranking toward the
lower end of the category.
Excerpts from Standard & Poor's Rating Group ("Standard & Poor's") description
of its bond ratings:
AAA: Highest grade obligations; capacity to pay interest and repay
principal is extremely strong.
AA: Also qualify as high grade obligations; a very strong capacity to pay
interest and repay principal and differs from AAA issues only in small
degree.
A: Regarded as upper medium grade; they have a strong capacity to pay
interest and repay principal although it is somewhat more susceptible to
the adverse effects of changes in circumstances and economic conditions
than debt in higher rated categories.
BBB: Regarded as having an adequate capacity to pay interest and repay
principal; whereas it normally exhibits adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to
lead to a weakened capacity than in higher rated categories -- this group
is the lowest which qualifies for commercial bank investment.
BB, B,
CCC,
CC: Predominantly speculative with respect to capacity to pay interest and
repay principal in accordance with terms of the obligation: BB indicates
the lowest degree of speculation and CC the highest.
Standard & Poor's applies indicators "+," no character, and "-" to its rating
categories. The indicators show relative standing within the major rating
categories.
<PAGE>
