485BPOS 1 a2191540z485bpos.txt 485BPOS Registration Nos. 333-141045/811-22024 Advantage IV UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 Post-Effective Amendment No. 2 and/or REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 Amendment No. 7 COMMONWEALTH ANNUITY SEPARATE ACCOUNT A OF COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (Exact Name of Registrant) COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (Name of Depositor) 132 Turnpike Road, Suite 210 Southborough, Massachusetts 01772 Telephone: (508) 460-2400 (Address of Depositor's Principal Executive Office) Scott D. Silverman, Vice President, General Counsel and Corporate Secretary Commonwealth Annuity and Life Insurance Company 132 Turnpike Road, Suite 210 Southborough, Massachusetts 01772 Telephone: (508) 460-2400 (Name and Address of Agent for Service of Process) It is proposed that this filing will become effective: |_| immediately upon filing pursuant to paragraph (b) of Rule 485 |X| on May 1, 2009 pursuant to paragraph (b) of Rule 485 |_| 60 days after filing pursuant to paragraph (a) (1) of Rule 485 |_| on (date) pursuant to paragraph (a) (1) of Rule 485 |_| this post-effective amendment designates a new effective date for a previously filed post-effective amendment VARIABLE ANNUITY CONTRACTS Pursuant to Reg. Section 270.24f-2 of the Investment Company Act of 1940 ("1940 Act"), Registrant has registered an indefinite amount of its securities under the Securities Act of 1933 ("1933 Act"). The Rule 24f-2 Notice for the issuer's fiscal year ended December 31, 2008 was filed on or before March 30, 2009. PROSPECTUS FOR FLEXIBLE PREMIUM FIXED AND VARIABLE DEFERRED ANNUITY CONTRACTS ------------------------ COMMONWEALTH ANNUITY SEPARATE ACCOUNT A ------------------------ COMMONWEALTH ANNUITY ADVANTAGE IV VARIABLE ANNUITY ISSUED BY COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY HOME OFFICE: SERVICE CENTER MAILING ADDRESS: 132 Turnpike Road, Suite 210 P.O. Box 758550 Southborough, MA 01772 Topeka, Kansas 66675-8550 1-866-297-7531 1-800-457-8803
This Prospectus describes flexible premium fixed and variable deferred annuity contracts (the "Contract") issued by Commonwealth Annuity and Life Insurance Company ("we" "Company" or "Commonwealth Annuity"). The Contract is designed to provide annuity benefits for retirement which may or may not qualify for certain federal tax advantages. This Prospectus describes both Qualified Contracts and Non-Qualified Contracts, and the Contract may be purchased by natural persons, or by trusts or custodial accounts that hold the Contract as agent for and for the sole benefit of a natural person. The Contract is not available for sale to other types of purchasers without our prior approval. INVESTING IN THE CONTRACT INVOLVES RISKS, INCLUDING POSSIBLE LOSS OF SOME OR ALL OF YOUR INVESTMENT. REPLACING YOUR EXISTING ANNUITY OR LIFE INSURANCE POLICY WITH THE CONTRACT MAY NOT BE TO YOUR ADVANTAGE. The Contract may be purchased only if the older Owner and Annuitant have not attained age 80. THE CONTRACTS ARE NOT INSURED BY THE FDIC. THEY ARE OBLIGATIONS OF THE ISSUING INSURANCE COMPANY AND NOT A DEPOSIT OF, OR GUARANTEED BY, ANY BANK OR SAVINGS INSTITUTION AND ARE SUBJECT TO RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL. THIS PROSPECTUS CONTAINS IMPORTANT INFORMATION ABOUT THE CONTRACTS THAT YOU SHOULD KNOW BEFORE INVESTING. YOU SHOULD READ IT BEFORE INVESTING AND KEEP IT FOR FUTURE REFERENCE. WE HAVE FILED A STATEMENT OF ADDITIONAL INFORMATION ("SAI") WITH THE SECURITIES AND EXCHANGE COMMISSION. THE CURRENT SAI HAS THE SAME DATE AS THIS PROSPECTUS AND IS INCORPORATED BY REFERENCE IN THIS PROSPECTUS. YOU MAY OBTAIN A FREE COPY BY WRITING US AT OUR SERVICE CENTER OR CALLING 1-800-457-8803. A TABLE OF CONTENTS FOR THE SAI APPEARS AT THE END OF THIS PROSPECTUS. YOU MAY ALSO FIND THIS PROSPECTUS AND OTHER INFORMATION ABOUT THE SEPARATE ACCOUNT REQUIRED TO BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ("SEC") AT THE SEC'S WEB SITE AT HTTP://WWW.SEC.GOV. THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. PROSPECTUS DATED MAY 1, 2009. You may allocate Purchase Payments and/or transfer Contract Value to the Fixed Account or to one or more of the variable Investment Options, each of which is a Subaccount of the Commonwealth Annuity Separate Account A. Currently, you may choose among Subaccounts that invest in the following Insurance Funds: GOLDMAN SACHS VARIABLE INSURANCE TRUST (SERVICE SHARES) - Goldman Sachs VIT Capital Growth Fund - Goldman Sachs VIT Core Fixed Income Fund - Goldman Sachs VIT Equity Index Fund - Goldman Sachs VIT Government Income Fund - Goldman Sachs VIT Growth & Income Fund - Goldman Sachs VIT Growth Opportunities Fund - Goldman Sachs VIT Money Market Fund - Goldman Sachs VIT Strategic International Equity Fund - Goldman Sachs VIT Structured Small Cap Equity Fund - Goldman Sachs VIT Structured U.S. Equity Fund AIM VARIABLE INSURANCE FUNDS (SERIES II SHARES) - AIM V.I. Core Equity Fund - AIM V.I. Leisure Fund ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND, INC. (CLASS B) - AllianceBernstein VPS Intermediate Bond Portfolio - AllianceBernstein VPS International Value Portfolio - AllianceBernstein VPS Small Cap Growth Portfolio - AllianceBernstein VPS Small/Mid Cap Value Portfolio FRANKLIN TEMPLETON INSURANCE PRODUCTS TRUST (CLASS 2) - FT VIP Franklin Income Securities Fund - FT VIP Franklin Small Cap Value Securities Fund - FT VIP Mutual Global Discovery Securities Fund - FT VIP Mutual Shares Securities Fund - FT VIP Templeton Global Asset Allocation Fund - FT VIP Templeton Growth Securities Fund JANUS ASPEN SERIES (SERVICE SHARES) - Janus Aspen Enterprise Portfolio - Janus Aspen Forty Portfolio - Janus Aspen Perkins Mid Cap Value Portfolio 2 OPPENHEIMER VARIABLE ACCOUNT FUNDS (SERVICE SHARES) - Oppenheimer Balanced Fund/VA - Oppenheimer Global Securities Fund/VA - Oppenheimer Main Street Small Cap Fund-Registered Trademark-/VA - Oppenheimer Strategic Bond Fund/VA PIONEER VARIABLE CONTRACTS TRUST (CLASS I) - Pioneer Growth Opportunities VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST (CLASS II) - Pioneer Cullen Value VCT Portfolio - Pioneer Emerging Markets VCT Portfolio - Pioneer Mid Cap Value VCT Portfolio In addition, Qualified Contracts also may choose among Subaccounts that invest in the following Publicly-Available Funds: - Goldman Sachs Balanced Strategy Portfolio (Class A) - Goldman Sachs Equity Growth Strategy Portfolio (Class A) - Goldman Sachs Growth and Income Strategy Portfolio (Class A) - Goldman Sachs Growth Strategy Portfolio (Class A) - Goldman Sachs International Real Estate Security Fund - Goldman Sachs Real Estate Securities Fund (Class A) - Goldman Sachs Tollkeeper Fund (Class A) Many of the Publicly-Available Funds are also available for direct purchase outside of an annuity or life insurance policy. If you purchase shares of these funds directly from a broker-dealer or mutual fund company, you will not pay Contract fees or charges, but you also will not have Annuity Options available. Because of the additional Contract fees and charges, which affect Contract Value and Subaccount returns, you should refer only to performance information regarding the Publicly-Available Funds available through us, rather than to information that may be available through alternate sources. If you elect the Guaranteed Lifetime Withdrawal Benefit ("GLWB") Rider, we will restrict the Investment Options to which you may allocate Purchase Payments and transfer Contract Value. (See "GUARANTEED LIFETIME WITHDRAWAL BENEFIT") 3 TABLE OF CONTENTS
PAGE -------- DEFINITIONS................................................................ 6 SUMMARY OF EXPENSES........................................................ 9 DISTRIBUTION COSTS......................................................... 12 SUMMARY.................................................................... 13 COMMONWEALTH ANNUITY, THE SEPARATE ACCOUNT AND THE FUNDS................... 16 Commonwealth Annuity and Life Insurance Company....................... 16 The Separate Account.................................................. 16 The Funds............................................................. 16 FIXED ACCOUNT.............................................................. 25 THE CONTRACTS.............................................................. 27 A. GENERAL INFORMATION.............................................. 27 1. Purchase Payments........................................... 27 2. Free Look Period............................................ 27 3. Owners, Annuitants, and Beneficiaries....................... 28 4. Assignment.................................................. 29 B. THE ACCUMULATION PERIOD.......................................... 29 1. Application of Purchase Payments............................ 29 2. Accumulation Unit Value..................................... 30 3. Contract Value.............................................. 31 4. Transfers During The Accumulation Period.................... 31 5. Disruptive Trading.......................................... 33 6. Withdrawals and Surrenders During The Accumulation Period... 35 7. Death Benefits.............................................. 36 8. No Withdrawal Charge Rider.................................. 40 9. Guaranteed Lifetime Withdrawal Benefit ("GLWB") Rider--GLWB Plus For One and GLWB Plus For Two........................ 41 10. Loans....................................................... 66 11. Telephone and Facsimile Transactions........................ 68 CONTRACT CHARGES AND EXPENSES.............................................. 69 A. ASSET-BASED CHARGES.............................................. 69 B. CONTRACT FEE..................................................... 70 C. WITHDRAWAL CHARGE................................................ 70 D. COMMUTATION CHARGE............................................... 75 E. INVESTMENT MANAGEMENT FEES AND OTHER EXPENSES.................... 75 F. STATE PREMIUM TAXES.............................................. 76 G. REDUCTION OR ELIMINATION OF CERTAIN CHARGES...................... 76 THE ANNUITY PERIOD......................................................... 77 PAYMENTS TO CONTRACT OWNERS................................................ 83 FEDERAL TAX MATTERS........................................................ 84 A. INTRODUCTION..................................................... 84 B. OUR TAX STATUS................................................... 84 C. TAXATION OF ANNUITIES IN GENERAL................................. 84 D. QUALIFIED PLANS.................................................. 88 E. FEDERAL INCOME TAX WITHHOLDING................................... 92 F. OTHER TAX ISSUES................................................. 92 G. SPECIAL TAX CONSIDERATIONS FOR OPTIONAL BENEFITS................. 93 DISTRIBUTION OF CONTRACTS.................................................. 93 VOTING RIGHTS.............................................................. 94
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PAGE -------- REPORTS TO CONTRACT OWNERS AND INQUIRIES................................... 95 DOLLAR COST AVERAGING...................................................... 95 AUTOMATIC ASSET REBALANCING................................................ 96 SYSTEMATIC WITHDRAWAL PLAN................................................. 96 SPECIAL CONSIDERATIONS..................................................... 97 LEGAL PROCEEDINGS.......................................................... 97 TABLE OF CONTENTS--STATEMENT OF ADDITIONAL INFORMATION..................... 97 FINANCIAL STATEMENTS....................................................... 97 APPENDIX A--COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY DEFERRED FIXED AND VARIABLE ANNUITY IRA, ROTH IRA AND SIMPLE IRA DISCLOSURE STATEMENT..................................................... A-1 A. REVOCATION....................................................... A-1 B. STATUTORY REQUIREMENTS........................................... A-1 C. ROLLOVERS AND DIRECT TRANSFERS FOR IRAS AND SIMPLE IRAS.......... A-2 D. CONTRIBUTION LIMITS AND ALLOWANCE OF DEDUCTION FOR IRAS.......... A-3 E. SEP IRAS......................................................... A-4 F. SIMPLE IRaS...................................................... A-4 G. TAX STATUS OF THE CONTRACT AND DISTRIBUTIONS FOR IRAS AND SIMPLE IRAs........................................................... A-4 H. REQUIRED DISTRIBUTIONS FOR IRAS AND SIMPLE IRAs.................. A-5 I. ROTH IRAS........................................................ A-5 J. ELIGIBILITY AND CONTRIBUTIONS FOR ROTH IRAs...................... A-6 K. ROLLOVERS, TRANSFERS AND CONVERSIONS TO ROTH IRAs................ A-6 L. INCOME TAX CONSEQUENCES OF ROTH IRAs............................. A-7 M. TAX ON EXCESS CONTRIBUTIONS...................................... A-8 N. TAX ON PREMATURE DISTRIBUTIONS................................... A-8 O. EXCISE TAX REPORTING............................................. A-9 P. BORROWING........................................................ A-9 Q. REPORTING........................................................ A-9 R. ESTATE TAX....................................................... A-9 S. FINANCIAL DISCLOSURE............................................. A-9 APPENDIX B--GLWB EXAMPLE #1................................................ B-1 APPENDIX C--GLWB EXAMPLE #2................................................ C-1 APPENDIX D--GLWB EXAMPLE #3................................................ D-1 APPENDIX E--CONDENSED FINANCIAL INFORMATION................................ E-1
5 DEFINITIONS The following terms as used in this Prospectus have the indicated meanings: ACCUMULATION PERIOD--The period between the Date of Issue of a Contract and the Annuity Date. ACCUMULATION UNIT--A unit of measurement used to determine the value of each Subaccount during the Accumulation Period. Each Subaccount will have an Accumulation Unit for each combination of charges. ANNUITANT--The person(s) during whose lifetime the annuity is to be paid. When two people are named as joint Annuitants, the term "Annuitant" means the joint Annuitants or the survivor. ANNUITY DATE--The Valuation Date on which annuity payments are to commence. Subject to state variation, the Annuity Date may not be after the Valuation Date on or next following the later of the original older Owner's or Annuitant's 90th birthday. ANNUITY OPTION--One of several forms in which annuity payments can be made. ANNUITY PERIOD--The period starting on the Annuity Date during which we make annuity payments to you. ANNUITY UNIT--A unit of measurement used to determine the amount of Variable Annuity payments after the first payment. BENEFICIARY--The person designated to receive any benefits under a Contract upon your death. (see Primary Beneficiary and Contingent Beneficiary). CODE--The Internal Revenue Code of 1986, as amended. COMPANY ("WE", "US", "OUR", "COMMONWEALTH ANNUITY")--Commonwealth Annuity and Life Insurance Company. CONTINGENT BENEFICIARY--The person designated to receive any benefits under a Contract upon your death should all Primary Beneficiaries predecease you. In the event that a Contingent Beneficiary predeceases you, the benefits will be distributed pro rata to the surviving Contingent Beneficiaries. If there are no surviving Contingent Beneficiaries, the benefits will be paid to your estate (see Beneficiary and Primary Beneficiary). CONTRACT--A Flexible Premium Fixed and Variable Deferred Annuity Contract. CONTRACT ANNIVERSARY--The same date each year as the Date of Issue. If there is no Valuation Date in a year that coincides with the Date of Issue, the Contract Anniversary is the next Valuation Date. CONTRACT VALUE--The sum of your Fixed Account Contract Value and Separate Account Contract Value. CONTRACT YEAR--A period of twelve consecutive months starting on the Date of Issue or on any Contract Anniversary. CONTRIBUTION YEAR--Each Contract Year in which a Purchase Payment is made and each later year measured from the start of the Contract Year when the Purchase Payment was made. We only refer to Contribution Years for purposes of calculating the withdrawal charge. For example, if you make an initial Purchase Payment of $15,000 and then during the fourth Contract Year you make an additional Purchase Payment of $10,000, the fifth Contract Year will be the fifth Contribution Year with respect to the initial Purchase Payment (and earnings attributable to that Purchase Payment) and the second Contribution Year with respect to the $10,000 Purchase Payment (and earnings attributable to that Purchase Payment). DATE OF ISSUE--The date on which the first Contract Year commences. 6 DEBT--The principal of any outstanding loan from the Fixed Account Contract Value, plus any accrued interest. FIXED ACCOUNT--A portion of a Contract that is supported by the assets of our General Account. We guarantee a minimum rate of interest on Purchase Payments allocated and Contract Value transferred to the Fixed Account. FIXED ACCOUNT CONTRACT VALUE--The value of your interest in the Fixed Account. FIXED ANNUITY--An annuity under which we guarantee the amount of each annuity payment; it does not vary with the investment experience of a Subaccount. FREE WITHDRAWAL AMOUNT--The guaranteed amount you may withdraw each Contract Year without incurring a withdrawal charge. FUND OR FUNDS--An investment company or separate series thereof, in which Subaccounts of the Separate Account invest. GENERAL ACCOUNT--All our assets other than those allocated to any legally segregated separate account. INVESTMENT OPTION--The Subaccounts and the Fixed Account available under the Contract for allocation of Purchase Payments and/or transfers of Contract Value. MONTHIVERSARY--The same date each month as the Date of Issue. If the Date of Issue falls on the 29th, 30th, or 31st and there is no corresponding date in a subsequent month, the Monthiversary will be the last date of that month. If there is no Valuation Date in the calendar month that coincides with the Date of Issue, the Monthiversary is the next Valuation Date. NON-QUALIFIED CONTRACT--A Contract which does not receive favorable tax treatment under Section 401, 403, 408, 408A or 457 of the Code. OWNER ("CONTRACT OWNER", "YOU", "YOUR", "YOURS")--The person designated in the Contract as having the privileges of Ownership. The Contract may be owned by natural persons, or by trusts or custodial accounts that hold the Contract as agent for and for the sole benefit of a natural person. When two people are named as joint Owners, the term "Owner" means the joint Owners or the survivor. Joint Owners are not permitted if the Contract is owned by a non-natural person. PRIMARY BENEFICIARY--The person designated to receive any benefits under a Contract upon your death. In the event that a Primary Beneficiary predeceases you, the benefits will be distributed pro rata to the surviving Primary Beneficiaries. In the event that all Primary Beneficiaries predecease you, proceeds will be paid to the surviving Contingent Beneficiaries (see Beneficiary and Contingent Beneficiary). PURCHASE PAYMENTS--The dollar amount we receive in U.S. currency to buy the benefits the Contract provides. QUALIFIED CONTRACT--A Contract issued in connection with a retirement plan which receives favorable tax treatment under Sections 401, 403, 408, 408A or 457 of the Code. SEPARATE ACCOUNT--Commonwealth Annuity Separate Account A. SEPARATE ACCOUNT CONTRACT VALUE--The sum of your interests in the Subaccount(s). SERVICE CENTER--P.O. Box 758550, Topeka, Kansas 66675-8550, 1-800-457-8803. SUBACCOUNTS--The subdivisions of the Separate Account, the assets of which consist solely of shares of the corresponding Fund. 7 VALUATION DATE--Each day when the New York Stock Exchange is open for trading. The close of business on each Valuation Date is generally 3:00 p.m. Central time. VALUATION PERIOD--The interval of time between two consecutive Valuation Dates. VARIABLE ANNUITY--An annuity with payments varying in amount in accordance with the investment experience of the Subaccount(s) in which you have an interest. WITHDRAWAL VALUE--The amount you will receive upon full surrender or the amount applied upon annuitization of the Contract. It is equal to the Contract Value minus Debt, any applicable withdrawal charge, premium taxes, and minus any applicable contract fee and pro rata portion of the GLWB Rider charge. Federal and state income taxes and penalty taxes also may reduce the amount you receive if you surrender the Contract. 8 SUMMARY OF EXPENSES THE FOLLOWING TABLES DESCRIBE THE FEES AND EXPENSES THAT YOU WILL PAY WHEN BUYING, OWNING, AND SURRENDERING THE CONTRACT. THE FIRST TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU WILL PAY AT THE TIME THAT YOU BUY THE CONTRACT, SURRENDER THE CONTRACT, OR TRANSFER CONTRACT VALUE AMONG INVESTMENT OPTIONS. CONTRACT OWNER TRANSACTION EXPENSES(1) Sales Load Imposed on Purchase Payments..................... None Maximum Withdrawal Charge(2) (as a percentage of Purchase Payments (and earnings attributable to Purchase Payments) withdrawn, surrendered, or annuitized):................... 6% Qualified Plan Loan Interest Rate Charged:(3)............... 5.50% State Premium Taxes(4)...................................... 0% to 3.50%
------------------------ (1) During the Annuity Period, we deduct a commutation charge if you request a lump sum payment with respect to: 1) any remaining annuity payments in the certain period under Annuity Options 1, 3, or 5 upon the death of an Annuitant; or 2) any remaining annuity payments under Annuity Option 1. Please see "COMMUTATION CHARGE." (2) In certain circumstances we may reduce or waive the withdrawal charge. In addition, a Contract Owner may withdraw the Free Withdrawal Amount each Contract Year without incurring a withdrawal charge. If you withdraw more than the Free Withdrawal Amount, we may impose a withdrawal charge on the excess. We impose a withdrawal charge on the withdrawal of each Purchase Payment (and earnings attributable to that Purchase Payment) made within the previous 6 Contribution Years, as follows:
CONTRIBUTION YEAR WITHDRAWAL CHARGE ----------------- ----------------- First....................................................... 6% Second...................................................... 5% Third....................................................... 4% Fourth...................................................... 3% Fifth....................................................... 2% Sixth....................................................... 1% Seventh +................................................... 0%
Total withdrawal charges assessed under a Contract will never exceed 9% of the total Purchase Payments made under the Contract. For more information on the withdrawal charge, including an example of how we calculate the withdrawal charge, see "WITHDRAWAL CHARGE." (3) Loans are only available under certain qualified plans. The loan interest rate charged varies if the plan is subject to the Employee Retirement Income Security Act of 1974 ("ERISA"). For such plans, the loan interest rate charged is based on the Moody's Corporate Bond Yield Average--Monthly Average Corporates, rounded to the nearest 0.25%. While a loan is outstanding, we will credit the value securing the loan with interest at the daily equivalent of the annual loan interest rate charged reduced by 2.5%, instead of the current interest rate credited to the Fixed Account. However, this rate will never be lower than the minimum guaranteed Fixed Account interest rate (See "LOANS"). (4) For a discussion of state premium taxes, please see "STATE PREMIUM TAXES" THE NEXT TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU WILL PAY PERIODICALLY DURING THE TIME THAT YOU OWN THE CONTRACT, NOT INCLUDING FUND FEES AND EXPENSES. 9 PERIODIC EXPENSES Annual Contract Fee (deducted from Contract Value)(5)....... $30.00 Separate Account Annual Expenses (as a percentage of Separate Account Contract Value) Mortality and Expense Risk Charge....................... 1.15% Administration Charge................................... 0.15% ------ Total Separate Account Annual Expenses without the Step-Up Death Benefit........................................... 1.30% ====== Optional Step-Up Death Benefit Charge(6)................ 0.20% ------ Total Separate Account Annual Expenses including Step-Up Death Benefit........................................... 1.50% ====== Additional Rider Charges: Guaranteed Lifetime Withdrawal Benefit ("GLWB") Rider (as a percentage of the Lifetime Income Base): GLWB Plus For One(7) Maximum Charge:......................................... 1.00% Current Charge:......................................... 0.50% GLWB Plus For Two(8) Maximum Charge:......................................... 1.50% Current Charge:......................................... 0.75% No Withdrawal Charge Rider (as a percentage of Contract Value).................................................... 0.35%
------------------------ (5) We will waive this fee for Contracts with Contract Value of $50,000 or more as of the Valuation Date we would otherwise deduct the fee. We assess the contract fee at the end of each calendar quarter and upon surrender or annuitization. (6) The Optional Step-Up Death Benefit Charge does not apply to amounts allocated to the Fixed Account. (7) We reserve the right to increase the charge to a maximum of 1.00% on an annual basis if we Step-Up the Lifetime Income Base to equal the Contract Value. (8) We reserve the right to increase the charge to a maximum of 1.50% on an annual basis if we Step-Up the Lifetime Income Base to equal the Contract Value. THE NEXT TABLE SHOWS THE LOWEST AND HIGHEST TOTAL OPERATING EXPENSES CHARGED BY THE FUNDS FOR THE YEAR ENDED DECEMBER 31, 2008 THAT YOU MAY PAY PERIODICALLY DURING THE TIME THAT YOU OWN THE CONTRACT. CURRENT AND FUTURE EXPENSES COULD BE HIGHER OR LOWER THAN THOSE SHOWN IN THE FOLLOWING TABLE. MORE DETAIL CONCERNING EACH FUND'S FEES AND EXPENSES IS CONTAINED IN THE PROSPECTUS FOR EACH FUND.
LOWEST--HIGHEST --------------- Total Annual Fund Operating Expenses (expenses that are deducted from Fund assets, including management fees, distribution and/or service (12b-1) fees, and other expenses, prior to any fee waivers or expense reimbursements)........................................... 0.69% - 2.05%
The advisers and/or other service providers of certain Funds have agreed to reduce their fees and/ or reimburse the Funds' expenses in order to keep the Funds' expenses below specified limits. The expenses of certain Funds are reduced by contractual fee reduction and expense reimbursement arrangements, while other Funds have voluntary fee reduction and/or expense reimbursement arrangements that may be terminated at any time. The lowest and highest Total Annual Fund Operating Expenses for all Funds after all fee reductions and expense reimbursements, respectively, are 0.60% and 2.05% respectively for the year ended December 31, 2008. Each fee reduction and/or expense reimbursement arrangement is described in the relevant Fund's prospectus. 10 THE FUND'S INVESTMENT MANAGER OR ADVISER PROVIDED THE ABOVE EXPENSES FOR THE FUNDS. WE HAVE NOT INDEPENDENTLY VERIFIED THE ACCURACY OF THE INFORMATION. EXAMPLE THIS EXAMPLE IS INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN THE CONTRACT WITH THE COST OF INVESTING IN OTHER VARIABLE ANNUITY CONTRACTS. THESE COSTS INCLUDE CONTRACT OWNER TRANSACTION EXPENSES, CONTRACT FEES, SEPARATE ACCOUNT ANNUAL EXPENSES, AND FUND FEES AND EXPENSES. The Example assumes that you invest $10,000 in the Contract for the time periods indicated and that your Contract includes the Step-Up Death Benefit, the No Withdrawal Charge Rider, and the GLWB Plus For Two Rider (at the maximum charge). If these features were not elected, the expense figures shown below would be lower. The Example also assumes that your investment has a 5% return each year and assumes the maximum fees and expenses of any of the Funds, prior to any fee waivers or expense reimbursements. If these arrangements were considered, the expenses shown would be lower. Although your actual costs may be higher or lower, based on these assumptions, your costs would be: IF YOU SURRENDER YOUR CONTRACT AT THE END OF THE APPLICABLE PERIOD:
1 YEAR 3 YEARS 5 YEARS 10 YEARS ------ --------- --------- --------- $564.00 $1,704.00 $2,859.00 $5,795.00
IF YOU ANNUITIZE YOUR CONTRACT AT THE END OF THE APPLICABLE PERIOD UNDER ANNUITY OPTION 2, 3, 4, OR 5, OR UNDER ANNUITY OPTION 1 FOR A PERIOD OF 10 YEARS OF MORE:
1 YEAR 3 YEARS 5 YEARS 10 YEARS ------ --------- --------- --------- $564.00 $1,704.00 $2,859.00 $5,795.00
IF YOU ANNUITIZE YOUR CONTRACT AT THE END OF THE APPLICABLE PERIOD UNDER ANNUITY OPTION 1 FOR A PERIOD OF LESS THAN 10 YEARS:
1 YEAR 3 YEARS 5 YEARS 10 YEARS ------ --------- --------- --------- $536.00 $1,704.00 $2,859.00 $5,795.00
IF YOU DO NOT SURRENDER YOUR CONTRACT AT THE END OF THE APPLICABLE PERIOD:
1 YEAR 3 YEARS 5 YEARS 10 YEARS ------ --------- --------- --------- $536.00 $1,704.00 $2,859.00 $5,795.00
The Example assumes that you invest $10,000 in the Contract for the time periods indicated and that your Contract includes the Step-Up Death Benefit and the GLWB Plus For Two Rider (at the maximum charge). If these features were not elected, the expense figures shown below would be lower. The Example also assumes that your investment has a 5% return each year and assumes the maximum fees and expenses of any of the Funds, prior to any fee waivers or expense reimbursements. If these arrangements were considered, the expenses shown would be lower. Although your actual costs may be higher or lower, based on these assumptions, your costs would be: IF YOU SURRENDER YOUR CONTRACT AT THE END OF THE APPLICABLE PERIOD:
1 YEAR 3 YEARS 5 YEARS 10 YEARS ------ --------- --------- --------- $1,067.00 $1,959.00 $2,875.00 $5,519.00
11 IF YOU ANNUITIZE YOUR CONTRACT AT THE END OF THE APPLICABLE PERIOD UNDER ANNUITY OPTION 2, 3, 4, OR 5, OR UNDER ANNUITY OPTION 1 FOR A PERIOD OF 10 YEARS OF MORE:
1 YEAR 3 YEARS 5 YEARS 10 YEARS ------ --------- --------- --------- $529.00 $1,604.00 $2,700.00 $5,519.00
IF YOU ANNUITIZE YOUR CONTRACT AT THE END OF THE APPLICABLE PERIOD UNDER ANNUITY OPTION 1 FOR A PERIOD OF LESS THAN 10 YEARS:
1 YEAR 3 YEARS 5 YEARS 10 YEARS ------ --------- --------- --------- $1,067.00 $1,959.00 $2,875.00 $5,519.00
IF YOU DO NOT SURRENDER YOUR CONTRACT AT THE END OF THE APPLICABLE PERIOD:
1 YEAR 3 YEARS 5 YEARS 10 YEARS ------ --------- --------- --------- $529.00 $1,604.00 $2,700.00 $5,519.00
The fee table and Example should not be considered a representation of past or future expenses and charges of the Subaccounts. Your actual expenses may be greater or less than those shown. The Example assumes no transfers were made and does not include the deduction of state premium taxes, which may be assessed before or upon surrender or annuitization or any taxes or penalties you may be required to pay if you surrender the Contract. Similarly, the 5% annual rate of return assumed in the Example is not intended to be representative of past or future performance of any Subaccount. DISTRIBUTION COSTS For information concerning the compensation we pay for sales of the Contract, see "DISTRIBUTION OF CONTRACTS." 12 SUMMARY The summary does not contain all information that may be important. Read the entire Prospectus and the Contract before deciding to invest. States may require variations to the Contract. If a state variation applies, it will appear in the Contract, an endorsement to the Contract, or a supplement to this Prospectus. The Contract provides for tax-deferred investments and annuity benefits. Both Qualified Contracts and Non-Qualified Contracts are described in this Prospectus. You may make Purchase Payments under the Contract, subject to certain minimum limitations and other restrictions. You may make Purchase Payments to Non-Qualified Contracts and Contracts issued as Individual Retirement Annuities ("IRAs") by authorizing us to draw on your account via check or electronic debit ("Pre-Authorized Checking ("PAC") Agreement"). (See "PURCHASE PAYMENTS") We do not deduct a sales charge from any Purchase Payment. We provide for variable accumulations and benefits for amounts allocated to one or more Subaccounts selected by you. Each Subaccount invests in a corresponding Fund. (See "THE FUNDS") Purchase Payments and Contract Value allocated to the Separate Account will vary with the investment performance of the Funds you select. We also provide for fixed accumulations and benefits for amounts allocated to the Fixed Account. We credit Purchase Payments and Contract Value allocated to the Fixed Account with interest daily at a rate periodically declared by us at our discretion, but not less than the minimum guaranteed rate. (See "FIXED ACCOUNT") The investment risk under the Contract is borne by you, except to the extent that Purchase Payments and Contract Value are allocated to the Fixed Account and are therefore guaranteed to earn at least the minimum guaranteed rate. Transfers among Subaccounts are permitted before and after the Annuity Date, if allowed by your qualified plan and subject to limitations. Restrictions apply to transfers into and out of the Fixed Account. (See "TRANSFERS DURING THE ACCUMULATION PERIOD" and "TRANSFERS DURING THE ANNUITY PERIOD") You may make partial withdrawals from the Contract or surrender the Contract, subject to certain restrictions. (See "WITHDRAWALS AND SURRENDERS DURING THE ACCUMULATION PERIOD") You may withdraw up to the Free Withdrawal Amount in any Contract Year without assessment of a withdrawal charge. If you withdraw an amount in excess of the Free Withdrawal Amount, the excess may be subject to a withdrawal charge. We also may assess a withdrawal charge upon surrender of the Contract, although we will first apply the Free Withdrawal Amount. The withdrawal charge is assessed as a percentage of each Purchase Payment and earnings attributable to that Purchase Payment withdrawn or surrendered during the first 6 Contribution Years following our receipt of the Purchase Payment. The withdrawal charge starts at 6% in the first Contribution Year and reduces each subsequent Contribution Year. We do not assess a withdrawal charge on any Purchase Payment (or earnings attributable to that Purchase Payment) withdrawn or surrendered more than six Contribution Years following our receipt of that Purchase Payment. We also may apply a withdrawal charge upon annuitization to amounts attributable to Purchase Payments (and earnings attributable to those Purchase Payments) in their sixth Contribution Year or earlier. (See "WITHDRAWAL CHARGE") If you elect the No Withdrawal Charge Rider for an additional fee, we will not assess any withdrawal charge upon partial withdrawal or surrender of the Contract during the Accumulation Period or upon annuitization. See "NO WITHDRAWAL CHARGE RIDER" for a description of the Rider, including its charges and restrictions. Withdrawals and surrenders will have tax consequences, which may include the amount of the withdrawal being subject to income tax and in some circumstances an additional 10% penalty tax. 13 Withdrawals also reduce your Contract Value and your death benefit. Certain withdrawals also may reduce the value of the guarantees provided by the GLWB Rider. (See "GUARANTEED LIFETIME WITHDRAWAL BENEFIT") Withdrawals are permitted from Contracts issued in connection with Section 403(b) qualified plans only under limited circumstances. (See "WITHDRAWALS AND SURRENDERS DURING THE ACCUMULATION PERIOD" and "FEDERAL TAX MATTERS") We offer Automatic Asset Rebalancing, Dollar Cost Averaging, and a Systematic Withdrawal Plan. (See "AUTOMATIC ASSET REBALANCING," "DOLLAR COST AVERAGING," and "SYSTEMATIC WITHDRAWAL PLAN") If you die before the Annuity Date, we will pay the Beneficiary a death benefit. We also offer for an additional charge the Step-Up Death Benefit, which provides an optional enhanced death benefit if certain conditions are met. See "DEATH BENEFITS." We provide for an additional charge a Guaranteed Lifetime Withdrawal Benefit Rider ("GLWB Rider"), which, subject to certain conditions, makes the following guarantees: Prior to the Lifetime Income Date, we will make the Guaranteed Withdrawal Amount available for Non-Excess Withdrawals each Contract Year or we will pay it in monthly installments as Settlement Payments if your Contract enters the Benefit Phase before the Lifetime Income Date, until the Guaranteed Withdrawal Balance is reduced to zero. If your Contract Value is greater than zero on the Lifetime Income Date, we will make the Lifetime Income Amount available for Non-Excess Withdrawals each Contract Year on and after the Lifetime Income Date (if you have not annuitized your Contract) or we will pay it in monthly installments as Settlement Payments on and after the Maximum Annuity Date (if you elect the GLWB Rider annuitization option on the Maximum Annuity Date) or if your Contract enters the Benefit Phase prior to the Maximum Annuity Date. This guarantee applies on and after the Lifetime Income Date, while a Covered Person is living or until the Guaranteed Withdrawal Balance is reduced to zero, if later. After the Covered Person's death (or the death of the last surviving Covered Person in the case of the GLWB Plus for Two), your Beneficiary will receive the remaining Guaranteed Withdrawal Balance as a lump sum death benefit (if greater than the standard death benefit or any optional death benefit you elected) in certain cases or in monthly installments as Settlement Payments (until the Guaranteed Withdrawal Balance is reduced to zero) in others. This guarantee applies even if the Covered Person dies (or the last surviving Covered Person dies in the case of GLWB Plus For Two) on or after the Maximum Annuity Date, if you elect the GLWB Rider annuitization option on the Maximum Annuity Date. Currently, the GLWB Rider is only available to Qualified Contracts. You should consult with a qualified tax adviser prior to electing the Rider for further information on tax rules affecting Qualified Contracts, including IRAs. (See "GUARANTEED LIFETIME WITHDRAWAL BENEFIT") In addition to the withdrawal charge, we assess a mortality and expense risk charge, an administration charge, a contract fee, and applicable premium taxes. (See "CONTRACT CHARGES AND EXPENSES") We also charge for the Step-Up Death Benefit (see "DEATH BENEFITS"), the GLWB Rider (see "GUARANTEED LIFETIME WITHDRAWAL BENEFIT"), and the No Withdrawal Charge Rider (see "NO WITHDRAWAL CHARGE RIDER"). The Funds will incur certain management fees and other expenses. (See "SUMMARY OF EXPENSES," "INVESTMENT MANAGEMENT FEES AND OTHER EXPENSES," and the Funds' prospectuses.) We may assess a commutation charge during the Annuity Period when calculating lump sum payments with respect to any remaining periodic payments in the certain period under Annuity Options 1, 3 and 5 upon the death of an Annuitant during the Annuity Period and, for Annuity Option 1, upon election to cancel remaining payments. (See "ANNUITY PERIOD--ANNUITY OPTIONS") Currently, the Contracts may be purchased in connection with retirement plans qualifying either under Section 401 or 403(b) of the Code or as individual retirement annuities including Roth IRAs. The Contracts are also available in connection with state and municipal deferred compensation plans and non-qualified deferred compensation plans. A Contract purchased in connection with a qualified 14 plan does not provide any additional tax deferred treatment of earnings beyond the treatment that is already provided by the qualified plan itself. (See "TAXATION OF ANNUITIES IN GENERAL" and "QUALIFIED PLANS") Therefore, the tax deferral provided by the Contract is not necessary for Contracts used in qualified plans, so for such plans the Contract should be purchased for other features and benefits, such as the Fixed Account's minimum interest rate guarantee, the standard death benefit, the Step-Up Death Benefit, the GLWB Rider, or the Annuity Options. You have the right within the "free look" period (generally ten days, subject to state variation) after receiving the Contract to cancel the Contract by delivering or mailing it to us. If you decide to return your Contract for a refund during the "free look" period, also include a letter instructing us to cancel the Contract. Upon receipt by us, the Contract will be cancelled and amounts refunded. The amount of the refund depends on the state where issued. Generally the refund will be the Contract Value as of the Valuation Date on which we receive your Contract at our Service Center. In the states that require the return of Purchase Payments, we will return the greater of Purchase Payments and Contract Value as of the Valuation Date on which we receive your Contract at our Service Center. In addition, a special "free look" provision applies in some circumstances to Contracts issued as Individual Retirement Annuities, Simplified Employee Pensions--IRAs or as Roth Individual Retirement Annuities (although for such Contracts, if the amount returned would be less than the Contract Value we will return the Contract Value). (See "FREE LOOK PERIOD") Certain provisions of the Contract may be different than the general description in this Prospectus, and certain riders and options may not be available, because of legal restrictions in your state. See your Contract for specific variations since any such state variations will be included in your Contract or in riders or endorsements attached to your Contract. See your agent or contact us for specific information that may be applicable to your state. You can generally exchange all or a portion of one annuity contract for another, or a life insurance policy for an annuity contract, in a "tax-free exchange' under Section 1035 of the Code. If you are thinking about a 1035 exchange, you should compare the old contract and the Contract described in this Prospectus carefully. Remember that if you exchange another contract for the Contract described in this Prospectus, you might have to pay a withdrawal charge and tax, including a possible penalty tax, on your old contract, AND there will be a new withdrawal charge period for the Contract. Also, other charges may be higher (or lower) and the benefits may be different. If the exchange does not qualify for Section 1035 treatment, you may have to pay federal income and penalty taxes on the exchange. You should not exchange another contract for the Contract described in this Prospectus unless you determine, after knowing all the facts, that the exchange is in your best interest (the person selling you the Contract will generally earn a commission if you buy the Contract through an exchange or otherwise). If you contemplate such an exchange, you should consult a tax adviser to discuss the potential tax effects of such a transaction. We offer other variable annuity contracts that have different policy features. However, these other contracts also have different charges that would affect your Subaccount performance and Contract Value. To obtain more information about these other contracts, contact our Service Center or your agent. 15 COMMONWEALTH ANNUITY, THE SEPARATE ACCOUNT AND THE FUNDS COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY Commonwealth Annuity and Life Insurance Company ("we," "Commonwealth Annuity" or the "Company") is a life insurance company organized under the laws of Delaware in July 1974. Prior to December 31, 2002, Commonwealth Annuity (then known as Allmerica Financial Life Insurance and Annuity Company or "Allmerica Financial") was a direct subsidiary of First Allmerica Financial Life Insurance Company ("First Allmerica"), which in turn was a direct subsidiary of The Hanover Insurance Group ("THG," formerly Allmerica Financial Corporation). Effective December 31, 2002, the Company became a Massachusetts domiciled insurance company and a direct subsidiary of THG. On December 30, 2005, THG completed the closing of the sale of the Company to The Goldman Sachs Group, Inc. ("Goldman Sachs"), 85 Broad Street, New York, NY 10004. On September 1, 2006, Allmerica Financial officially changed its name to Commonwealth Annuity and Life Insurance Company. Commonwealth Annuity is subject to the laws of the state of Massachusetts governing insurance companies and to regulation by the Commissioner of Insurance of Massachusetts. In addition, Commonwealth Annuity is subject to the insurance laws and regulations of other states and jurisdictions in which it is licensed to operate. As of December 31, 2008, Commonwealth Annuity had under $6 billion combined assets and $12 billion of life insurance in force. Its principal office is located at 132 Turnpike Road, Suite 210, Southborough, MA 01772, Telephone 1-866-297-7531. Subject to the provisions of the Contract, units of the Subaccounts under the Contract are offered on a continuous basis. THE SEPARATE ACCOUNT We established the Commonwealth Annuity Separate Account A on February 9, 2007 pursuant to Massachusetts law. The SEC does not supervise the management, investment practices or policies of the Separate Account or Commonwealth Annuity. Benefits provided under the Contracts are our obligations. Although the assets in the Separate Account are our property, they are held separately from our other assets and are not chargeable with liabilities arising out of any other business we may conduct. Income, capital gains and capital losses, whether or not realized, from the assets allocated to the Separate Account are credited to or charged against the Separate Account without regard to the income, capital gains and capital losses arising out of any other business we may conduct. Each Subaccount of the Separate Account invests exclusively in shares of one of the corresponding Funds. We may add or delete Subaccounts in the future. Not all Subaccounts may be available in all jurisdictions, under all Contracts or in all retirement plans. The Separate Account purchases and redeems shares from the Funds at net asset value. We redeem shares of the Funds as necessary to provide benefits, to deduct Contract charges and fees, and to transfer assets from one Subaccount to another as requested by Owners. All dividends and capital gains distributions received by the Separate Account from a Fund are reinvested in that Fund at net asset value and retained as assets of the corresponding Subaccount. THE FUNDS SELECTION OF FUNDS. We select the Funds offered through the Contract, and we may consider various factors, including, but not limited to asset class coverage, the strength of the investment adviser's (and/or subadviser's) reputation and tenure, brand recognition, performance, and the capability and qualification of each investment firm. We also consider whether the Fund or one of its 16 service providers (E.G., the investment adviser, administrator, distributor, and/or their affiliates) will make payments to us or our affiliates, as described below. We review the Funds periodically and may remove a Fund or limit its availability to new Purchase Payments and/or transfers of Contract Value if we determine that the Fund no longer meets one or more of the selection criteria, and/or if the Fund has not attracted significant allocations from Contract Owners. You are responsible for choosing the Subaccounts and the amounts allocated to each that are appropriate for your own individual circumstances and your investment goals, financial situation, and risk tolerance. Since you bear the investment risk of investing in the Subaccounts, we encourage you to thoroughly investigate all of the information regarding the Funds that is available to you, including each Fund's prospectus, statement of additional information, and annual and semi/annual reports. Other sources such as the Fund's website or newspapers and financial and other magazines provide more current information, including information about any regulatory actions or investigations relating to a Fund. After you select Subaccounts for your initial Purchase Payment, you should monitor and periodically reevaluate your allocations to determine if they are still appropriate. YOU BEAR THE RISK OF ANY DECLINE IN YOUR CONTRACT VALUE RESULTING FROM THE PERFORMANCE OF THE SUBACCOUNTS YOU HAVE CHOSEN. We do not provide investment advice and we do not recommend or endorse any of the particular Funds available as Investment Options in the Contract. THE FUNDS. The Separate Account invests in shares of registered, open-end management investment companies. There are two types of Funds generally offered under the Contract: - INSURANCE FUNDS: Insurance Funds are available solely to variable annuity or life insurance contracts and certain qualified retirement plans. (See "FEDERAL TAX MATTERS") Nonqualified Contracts generally can invest only in Insurance Funds. All Contracts, both Qualified and Nonqualified, may choose among Subaccounts that invest in the following Insurance Funds: GOLDMAN SACHS VARIABLE INSURANCE TRUST (SERVICE SHARES) - Goldman Sachs VIT Capital Growth Fund - Goldman Sachs VIT Core Fixed Income Fund - Goldman Sachs VIT Equity Index Fund - Goldman Sachs VIT Government Income Fund - Goldman Sachs VIT Growth & Income Fund - Goldman Sachs VIT Growth Opportunities Fund - Goldman Sachs VIT Money Market Fund - Goldman Sachs VIT Strategic International Equity Fund - Goldman Sachs VIT Structured Small Cap Equity Fund - Goldman Sachs VIT Structured U.S. Equity Fund AIM VARIABLE INSURANCE FUNDS (SERIES II SHARES) - AIM V.I. Core Equity Fund - AIM V.I. Leisure Fund 17 ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND, INC. (CLASS B) - AllianceBernstein VPS Intermediate Bond Portfolio - AllianceBernstein VPS International Value Portfolio - AllianceBernstein VPS Small Cap Growth Portfolio - AllianceBernstein VPS Small/Mid Cap Value Portfolio FRANKLIN TEMPLETON INSURANCE PRODUCTS TRUST (CLASS 2) - FT VIP Templeton Global Asset Allocation Fund - FT VIP Templeton Growth Securities Fund - FT VIP Franklin Income Securities Fund - FT VIP Franklin Small Cap Value Securities Fund - FT VIP Mutual Global Discovery Securities Fund - FT VIP Mutual Shares Securities Fund JANUS ASPEN SERIES (SERVICE SHARES) - Janus Aspen Forty Portfolio - Janus Aspen Enterprise Portfolio - Janus Aspen Perkins Mid Cap Value Portfolio OPPENHEIMER VARIABLE ACCOUNT FUNDS (SERVICE SHARES) - Oppenheimer Balanced Fund/VA - Oppenheimer Global Securities Fund/VA - Oppenheimer Main Street Small Cap Fund/VA - Oppenheimer Strategic Bond Fund/VA PIONEER VARIABLE CONTRACTS TRUST (CLASS I) - Pioneer Growth Opportunities VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST (CLASS II) - Pioneer Cullen Value VCT Portfolio - Pioneer Emerging Markets VCT Portfolio - Pioneer Mid Cap Value VCT Portfolio The Insurance Funds provide investment vehicles for variable life insurance and variable annuity contracts and, in some cases, certain qualified retirement plans. Shares of the Insurance Funds are sold only to insurance company separate accounts and qualified retirement plans. In addition to selling shares to our separate accounts, shares of the Insurance Funds may be sold to separate accounts of other insurance companies. It is conceivable that in the future it may be disadvantageous for variable life insurance separate accounts and variable annuity separate accounts of other companies, or for variable life insurance separate accounts, variable annuity separate accounts, and qualified retirement plans to invest simultaneously in the Insurance Funds. Currently, neither we nor the Insurance Funds 18 foresee any such disadvantages to variable life insurance Owners, variable annuity Owners, or qualified retirement plans. The Insurance Funds must monitor events to identify material conflicts between such Owners and determine what action, if any, should be taken. In addition, if we believe an Insurance Fund's response to any of those events or conflicts insufficiently protects Owners, we will take appropriate action. - PUBLICLY-AVAILABLE FUNDS. Publicly-Available Funds are "publicly-available," I.E., shares can be purchased by the public directly without purchasing a variable annuity or life insurance contract. ONLY QUALIFIED CONTRACTS MAY INVEST IN THESE PUBLICLY-AVAILABLE FUNDS. - Goldman Sachs Balanced Strategy Portfolio (Class A) - Goldman Sachs Equity Growth Strategy Portfolio (Class A) - Goldman Sachs Growth and Income Strategy Portfolio (Class A) - Goldman Sachs Growth Strategy Portfolio (Class A) - Goldman Sachs International Real Estate Security Fund (Class A) - Goldman Sachs Real Estate Securities Fund (Class A) - Goldman Sachs Tollkeeper Fund (Class A) The Publicly-Available Funds are also available for direct purchase outside of an annuity or life insurance policy. If you purchase shares of these funds directly from a broker-dealer or mutual fund company, you will not pay Contract fees or charges, but you also will not have Annuity Options available. Because of the additional Contract fees and charges, which affect Contract Value and Subaccount returns, you should refer only to performance information regarding the Publicly-Available Funds available through us, rather than to information that may be available through alternate sources. NOTE: If you elect the GLWB Rider, we will restrict the Investment Options to which you may allocate Purchase Payments and transfer Contract Value. (See "GUARANTEED LIFETIME WITHDRAWAL BENEFIT") 19 SEC REGISTRATION DOES NOT INVOLVE SEC SUPERVISION OF THE FUNDS' MANAGEMENT, INVESTMENT PRACTICES OR POLICIES. THE ASSETS OF EACH FUND ARE HELD SEPARATE FROM THE ASSETS OF THE OTHER FUNDS, AND EACH FUND HAS ITS OWN DISTINCT INVESTMENT OBJECTIVE AND POLICIES. EACH FUND OPERATES AS A SEPARATE INVESTMENT FUND, AND THE INVESTMENT PERFORMANCE OF ONE FUND HAS NO EFFECT ON THE INVESTMENT PERFORMANCE OF ANY OTHER FUND.
INSURANCE FUND PORTFOLIO NAME INVESTMENT OBJECTIVE INVESTMENT ADVISER -------------- --------------------------- --------------------------- --------------------------- Goldman Sachs Variable Goldman Sachs VIT Capital Seeks long term growth of Goldman Sachs Asset Insurance Trust (Service Growth Fund capital. Management, LP Shares) Goldman Sachs Variable Goldman Sachs VIT Core Seeks a total return Goldman Sachs Asset Insurance Trust (Service Fixed Income Fund consisting of capital Management, LP Shares) appreciation and income that exceeds the total return of the Lehman Brothers Aggregate Bond Index. Goldman Sachs Variable Goldman Sachs VIT Equity Seeks to achieve investment Goldman Sachs Asset Insurance Trust (Service Index Fund results that correspond Management, LP Shares) to the aggregate price and yield performance of a benchmark index that measures the investment returns of large capitalization stocks. Goldman Sachs Variable Goldman Sachs VIT Seeks a high level of Goldman Sachs Asset Insurance Trust (Service Government Income Fund current income, Management, LP Shares) consistent with safety of principal. Goldman Sachs Variable Goldman Sachs VIT Growth & Seeks long-term growth of Goldman Sachs Asset Insurance Trust (Service Income Fund capital and growth of Management, LP Shares) income. Goldman Sachs Variable Goldman Sachs VIT Growth Seek long term growth of Goldman Sachs Asset Insurance Trust (Service Opportunities Fund capital. Management, LP Shares) Goldman Sachs Variable Goldman Sachs VIT Money Seeks to maximize current Goldman Sachs Asset Insurance Trust (Service Market Fund income to the extent Management, LP Shares) consistent with the preservation of capital and the maintenance of liquidity by investing exclusively in high quality money market instruments. Goldman Sachs Variable Goldman Sachs VIT Strategic Seeks long-term capital Goldman Sachs Asset Insurance Trust (Service International Equity Fund appreciation. Management International Shares) Goldman Sachs Variable Goldman Sachs VIT Seeks long-term growth of Goldman Sachs Asset Insurance Trust (Service Structured Small Cap capital. Management, LP Shares) Equity Fund Goldman Sachs Variable Goldman Sachs VIT Seeks long-term growth of Goldman Sachs Asset Insurance Trust (Service Structured U.S. Equity capital and dividend Management, LP Shares) Fund income. AIM Variable Insurance AIM V.I. Core Equity Fund Seeks growth of capital. Invesco Aim Advisors, Inc. Funds (Series II Shares)
20
INSURANCE FUND PORTFOLIO NAME INVESTMENT OBJECTIVE INVESTMENT ADVISER -------------- --------------------------- --------------------------- --------------------------- AIM Variable Insurance AIM V.I. Leisure Fund Seeks capital growth. Invesco Aim Advisors, Inc. Funds (Series II Shares) AllianceBernstein Variable AllianceBernstein VPS Seeks to maximize current AllianceBernstein L.P Products Series Fund, Intermediate Bond income and price Inc. (Class B) Portfolio appreciation with undue risk. AllianceBernstein Variable AllianceBernstein VPS Seeks long-term growth of AllianceBernstein L.P Products Series Fund, International Value capital. Inc. (Class B) Portfolio AllianceBernstein Variable AllianceBernstein VPS Small Seeks long-term growth of AllianceBernstein L.P Products Series Fund, Cap Growth Portfolio capital. Inc. (Class B) AllianceBernstein Variable AllianceBernstein VPS Seeks long-term growth of AllianceBernstein L.P Products Series Small/ Mid Cap Value capital. Fund, Inc. (Class B) Portfolio Franklin Templeton Variable FT VIP Franklin Income Seeks to maximize income Franklin Advisers, Inc. Insurance Products Trust Securities Fund while maintaining (Class 2) prospects for capital appreciation. Franklin Templeton Variable FT VIP Franklin Small Cap Seeks long-term total Franklin Advisory Insurance Products Trust Value Securities Fund return. Services, LLC (Class 2) Franklin Templeton Variable FT VIP Mutual Global Seeks capital appreciation. Franklin Mutual Insurance Products Trust Discovery Securities Fund Advisers, LLC (Class 2) (formerly FT VIP Mutual Discovery Securities Fund) Franklin Templeton Variable FT VIP Mutual Shares Seeks capital appreciation, Franklin Mutual Insurance Products Trust Securities Fund with income as a Advisers, LLC (Class 2) secondary goal. Franklin Templeton Variable FT VIP Templeton Global Seeks high total return. Templeton Investment Insurance Products Trust Asset Allocation Fund Council, LLC (Class 2) Franklin Templeton Variable FT VIP Templeton Growth Seeks long-term capital Templeton Global Advisors Insurance Products Trust Securities Fund growth. Limited (Class 2) Janus Aspen Series (Service Janus Aspen Forty Portfolio Seeks long-term growth of Janus Capital Shares) capital. Management LLC Janus Aspen Series (Service Janus Aspen Enterprise Seeks long-term growth of Janus Capital Shares) Portfolio (formerly Janus capital. Management LLC Mid Cap Growth Portfolio) Janus Aspen Series (Service Janus Aspen Perkins Mid Cap Seeks capital appreciation. Janus Capital Shares) Value Portfolio (formerly Management LLC Janus Mid Cap Value Portfolio) Oppenheimer Variable Oppenheimer Balanced Seeks a high total OppenheimerFunds, Inc. Account Funds (Service Fund/VA investment return, which Shares) includes current income and capital appreciation in the value of its shares.
21
INSURANCE FUND PORTFOLIO NAME INVESTMENT OBJECTIVE INVESTMENT ADVISER -------------- --------------------------- --------------------------- --------------------------- Oppenheimer Variable Oppenheimer Global Seeks long-term capital OppenheimerFunds, Inc. Account Funds (Service Securities Fund/VA appreciation by investing Shares) a substantial portion of its assets in securities of foreign issuers, "growth-type" companies, cyclical industries and special situations that are considered to have appreciation possibilities. Oppenheimer Variable Oppenheimer Main Street Seeks capital appreciation. OppenheimerFunds, Inc. Account Funds (Service Small Cap Shares) Fund-Registered Trademark-/VA Oppenheimer Variable Oppenheimer Strategic Bond Seeks a high level of OppenheimerFunds, Inc. Account Funds (Service Fund/VA current income Shares) principally derived from interest on debt securities. Pioneer Variable Contracts Pioneer Growth Growth of capital. Pioneer Investment Trust (Class I) Opportunities VCT Management, Inc. Portfolio Pioneer Variable Contracts Pioneer Cullen Value VCT Capital appreciation. Pioneer Investment Trust (Class II) Portfolio Current income is a Management, Inc. secondary objective. Pioneer Variable Contracts Pioneer Emerging Markets Long-term growth of Pioneer Investment Trust (Class II) VCT Portfolio capital. Management, Inc. Pioneer Variable Contracts Pioneer Mid Cap Value VCT Capital appreciation by Pioneer Investment Trust (Class II) Portfolio investing in a Management, Inc. diversified portfolio of securities consisting primarily of common stocks.
RETAIL FUND* INVESTMENT OBJECTIVE INVESTMENT ADVISER ------------ ------------------------------------- ----------------------------------- Goldman Sachs Balanced Strategy Seeks current income and long-term Goldman Sachs Asset Management, LP Portfolio (Class A) capital appreciation. Goldman Sachs Equity Growth Strategy Seeks long-term capital appreciation. Goldman Sachs Asset Management, LP Portfolio (Class A) Goldman Sachs Growth and Income Seeks long-term capital appreciation Goldman Sachs Asset Management, LP Strategy Portfolio (Class A) and current income. Goldman Sachs Growth Strategy Seeks long-term capital appreciation Goldman Sachs Asset Management, LP Portfolio (Class A) and secondarily current income. Goldman Sachs International Real Seeks total return comprised of long- Goldman Sachs Asset Management, LP Estate Security Fund (Class A) term growth of capital and dividend income. Goldman Sachs Real Estate Securities Seeks total return comprised of long- Goldman Sachs Asset Management, LP Fund (Class A) term growth of capital and dividend income. Goldman Sachs Tollkeeper Fund Seeks long-term growth of capital. Goldman Sachs Asset Management, LP (Class A)
------------------------------ * Each retail fund's most recently ended fiscal year is December 31, 2008. 22 THE FUNDS MAY NOT ACHIEVE THEIR STATED OBJECTIVES. MORE DETAILED INFORMATION, INCLUDING A DESCRIPTION OF RISKS INVOLVED IN INVESTING IN THE FUNDS, IS FOUND IN THE FUNDS' PROSPECTUSES ACCOMPANYING THIS PROSPECTUS AND STATEMENTS OF ADDITIONAL INFORMATION AVAILABLE FROM US UPON REQUEST. Although the investment objectives and policies of certain Funds are similar to the investment objectives and policies of other funds that may be managed or sponsored by the same investment adviser, subadviser, manager, or sponsor, we do not represent or assure that the investment results will be comparable to those of any other fund, even where the investment adviser, subadviser, or manager is the same. Certain Funds available through the Contract have names similar to funds not available through the Contract. The performance of a fund not available through the Contract does not indicate performance of a similarly named Fund available through the Contract. Differences in fund size, actual investments held, fund expenses, and other factors all contribute to differences in fund performance. For all these reasons, you should expect investment results to differ. PLEASE NOTE THAT THERE CAN BE NO ASSURANCE THAT ANY MONEY MARKET FUND WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE PER SHARE. DURING EXTENDED PERIODS OF LOW INTEREST RATES, AND DUE IN PART TO CONTRACT FEES AND EXPENSES, THE YIELDS OF ANY SUBACCOUNT INVESTING IN A MONEY MARKET FUND MAY ALSO BECOME EXTREMELY LOW AND POSSIBLY NEGATIVE. CERTAIN PAYMENTS WE RECEIVE WITH REGARD TO THE FUNDS. We and our distributor, Epoch Securities, Inc., (the "Distributor") may receive payments from the Funds or their service providers (E.G., the investment adviser, administrator, distributor, and/or their affiliates). These payments may be used for a variety of purposes, including payment of expenses that we (and our affiliates) incur in promoting, marketing, and administering the Contract and, in our role as an intermediary, the Funds. We (and our affiliates) may profit from these payments. The amount of payments we receive from the Fund's service providers is based on a percentage of the assets of the particular Fund attributable to the Contract as well as certain other variable insurance products that we and/or our affiliates may issue or administer. These percentages are negotiated and vary with each Fund. These payments may be derived, in whole or in part, from the investment advisory fee deducted from Fund assets. Contract Owners, through their indirect investment in the Funds, bear the costs of these investment advisory fees (see the Funds' prospectuses for more information). Some service providers may pay us significantly more than others and the amount we receive may be substantial. These percentages currently range from 0.00% to 0.22%, and as of the date of this prospectus, we were receiving payments from each Fund's service providers. Additionally, certain of the Funds make payments to us or the Distributor under their distribution plans (12b-1 plans). The payment rates currently range from 0.09% to 0.25% based on the amount of assets invested in those Funds. Payments made out of the assets of the Funds will reduce the amount of assets that otherwise would be available for investment, and will reduce the return on your investment. The dollar amount of future asset-based fees is not predictable because these fees are a percentage of the Fund's average net assets, which can fluctuate over time. If, however, the value of the Funds goes up, then so would the payment to us or to the Distributor. Conversely, if the value of the Fund goes down, payments to us or to the Distributor would decrease. We and/or the Distributor also may directly or indirectly receive additional amounts or different percentages of assets under management from some of the Funds' service providers with regard to other variable insurance products we or our affiliates may issue or administer. CHANGE OF INVESTMENTS We reserve the right to make additions to, deletions from, or substitutions for the shares held by the Separate Account or that the Separate Account may purchase. If investment in the Funds is no 23 longer possible, in our judgment becomes inappropriate for the purposes of the Contract, or for any other reason in our sole discretion, we may substitute another fund without your consent. The substituted fund may have different fees and expenses. Substitution may be made with respect to existing investments or the investment of future premiums, or both. However, no such substitution will be made without the approval of the Securities and Exchange Commission, if required. Furthermore, we may close Subaccounts to allocations of Purchase Payments or Contract Value, or both, at any time in our sole discretion. The Funds, which sell their shares to the Subaccounts pursuant to participation agreements, also may terminate these agreements and discontinue offering their shares to the Subaccounts. We may establish additional Subaccounts of the Separate Account, each of which would invest in a new fund, or in shares of another investment company. New Subaccounts may be established when, at our discretion, marketing needs or investment conditions warrant. New Subaccounts may be made available to existing Owners as we determine. We may also eliminate or combine one or more Subaccounts, transfer assets, or substitute one Subaccount for another Subaccount, if, in our discretion, marketing, tax, or investment conditions warrant. We will notify you of any such changes. If we deem it to be in the best interests of persons having voting rights under the Contract, we may deregister the Separate Account under the Investment Company Act of 1940 (the "1940 Act"), make any changes required by the 1940 Act, operate the Separate Account as a management investment company under the 1940 Act or any other form permitted by law, transfer all or a portion of the assets of a Subaccount or separate account to another Subaccount or separate account pursuant to a combination or otherwise, and create new separate accounts. Before we make certain changes we may need approval of the Securities and Exchange Commission and applicable state insurance departments. We will notify you of any changes. 24 FIXED ACCOUNT Amounts allocated or transferred to the Fixed Account are part of our General Account, supporting insurance and annuity obligations. Interests in the Fixed Account are not registered under the Securities Act of 1933 ("1933 Act"), and the Fixed Account is not registered as an investment company under the 1940 Act. Accordingly, neither the Fixed Account nor any interests therein generally are subject to the provisions of the 1933 or 1940 Acts. We have been advised that the staff of the SEC has not reviewed the disclosures in this Prospectus relating to the Fixed Account. Disclosures regarding the Fixed Account, however, are subject to the general provisions of the federal securities laws relating to the accuracy and completeness of statements made in prospectuses. This Prospectus describes only the aspects of the Contract involving the Separate Account unless we refer to fixed accumulation and annuity elements. The Fixed Account is part of the Company's General Account which is made up of all of the general assets of the Company other than those allocated to separate accounts. Allocations to the Fixed Account become part of the assets of the Company and are used to support insurance and annuity obligations. The General Account is not segregated or insulated from the claims of the insurance company's creditors. Any amounts allocated to the Fixed Account or amounts that we guarantee in excess of your Contract Value are subject to our financial strength and claim's paying ability, and are subject to the risk that the insurance company may not be able to cover, or may default on, its obligations under those guarantees. The Fixed Account Contract Value includes: 1. your Purchase Payments allocated to the Fixed Account; 2. amounts transferred from a Subaccount to the Fixed Account at your request; and 3. the interest credited to amounts so allocated or transferred. We reduce the Fixed Account Contract Value when you make transfers and withdrawals from the Fixed Account, as well as when we assess Contract fees and charges against the Fixed Account. We reserve the right to not allow you to allocate Purchase Payments or transfer Contract Value to the Fixed Account if the Fixed Account interest rate applicable to such amounts would be less than or equal to 3%. We guarantee that Purchase Payments allocated and Contract Value transferred to the Fixed Account earn, on a daily basis, a minimum fixed interest rate not less than the minimum interest rate allowed by state law. At our discretion, we may credit interest in excess of the minimum guaranteed rate. With respect to each Purchase Payment allocation or Contract Value transfer to the Fixed Account, we reserve the right to change the rate of excess interest credited, although we will not declare or change any excess interest rate more frequently than once every twelve months. We also reserve the right to declare different rates of excess interest depending on when amounts are allocated or transferred to the Fixed Account and whether the source of the amount is Purchase Payments allocated or Contract Value transferred. This means that amounts at any designated time may be credited with a different rate of excess interest than the rate previously credited to such amounts and to amounts allocated or transferred at any other designated time, and that these rates of excess interest may differ based on the source of the amount. You bear the risk that no excess interest will be credited. We will declare a current Fixed Account interest rate for each Purchase Payment allocated and for each transfer of Contract Value to the Fixed Account. The amount allocated or transferred will be credited that rate through the end of the calendar month in which the Purchase Payment or transfer request is received and for twelve additional calendar months thereafter. At the beginning of each subsequent guarantee period of twelve calendar months, we will declare the Fixed Account interest rate 25 applicable for that period. We reserve the right to declare the current Fixed Account interest rate based upon: the Date of Issue; the date we receive a Purchase Payment, the date of any transfer of Contract Value to the Fixed Account, and whether the source is a Purchase Payment allocated or Contract Value transferred. While there is a loan, we will credit the portion of the Fixed Account Contract Value securing the Debt with interest at the daily equivalent of the annual loan interest rate charged reduced by 2.5%, instead of the current interest rate credited to the Fixed Account. However, this rate will never be lower than the minimum guaranteed Fixed Account interest rate. If you elect the GLWB Rider, you may not allocate Purchase Payments or transfer Contract Value to the Fixed Account. (See "GUARANTEED LIFETIME WITHDRAWAL BENEFIT") 26 THE CONTRACTS A. GENERAL INFORMATION We reserve the right to accept or refuse to issue the Contract at our sole discretion. 1. PURCHASE PAYMENTS You may make Purchase Payments under the Contract during the Accumulation Period, subject to the restrictions set forth below. We will not accept Purchase Payments after the date of death of an Owner or on or after the older Owner's or Annuitant's 80th birthday. We reserve the right to waive or modify any Purchase Payment limitation and to not accept any Purchase Payment. Please note that if you elect the GLWB Rider, there may be additional limitations on Purchase Payments (see "GUARANTEED LIFETIME WITHDRAWAL BENEFIT"). The minimum initial and subsequent Purchase Payment for a Qualified Contract is $50. However, if annualized contribution amounts from a payroll or salary deduction plan are equal to or greater than $600, we accept a periodic payment under $50. For a Non-Qualified Contract the minimum initial Purchase Payment is $2,500 and the minimum subsequent Purchase Payment is $500. You may make Purchase Payments to Non-Qualified Contracts and Contracts issued as IRAs by authorizing us to draw on your account via check or electronic debit through a Pre-Authorized Checking (PAC) Agreement. For Purchase Payments made pursuant to a PAC Agreement, the following minimum Purchase Payment provisions apply: - The minimum initial Purchase Payment to an IRA made pursuant to a PAC Agreement is $100. - The minimum initial Purchase Payment to a Non-Qualified Contract made pursuant to a PAC Agreement is $1,000 unless you also own an existing Contract, in which case the minimum is $100. - The minimum subsequent Purchase Payment made pursuant to a PAC Agreement is $100. The maximum cumulative Purchase Payments that may be made under the Contract is $1,000,000 without Company approval. We will aggregate multiple Contracts you own for purposes of the $1,000,000 limitation. In addition, for Qualified Contracts, the maximum annual amount of Purchase Payments may be limited by the retirement plan funded by the Contract. You may allocate your Purchase Payments to the Subaccounts and/or the Fixed Account. The minimum amount of Purchase Payments that may be allocated to any Subaccount is $50. The maximum amount of Purchase Payments that may be allocated to the Fixed Account in any Contract Year is $1,000,000 for Qualified Contracts and $100,000 for Non-Qualified Contracts. We will aggregate multiple Contracts you own for purposes of this limitation. Purchase Payments that are made under a systematic investment program that has been approved by us are not subject to this limitation. However, we reserve the right to modify or terminate this provision and subject all Purchase Payments to the $100,000 limitation. We reserve the right to not allow you to allocate Purchase Payments to the Fixed Account if the Fixed Account interest rate applicable to such Purchase Payments would be less than or equal to 3%. 2. FREE LOOK PERIOD You may examine a Contract and return it for a refund during the "free look" period. The length of the free look period depends upon the state in which the Contract is issued. However, it will be at least 10 days from the date you receive the Contract. Upon receipt by us, the Contract will be cancelled and amounts refunded. The amount of the refund depends on the state in which the Contract is issued. Generally the refund will be the Contract Value as of the Valuation Date on which we receive 27 your Contract at our Service Center. Some states require the return of all Purchase Payments. In those states, we will return the greater of Purchase Payments and Contract Value as of the Valuation Date on which we receive your Contract at our Service Center. In addition, while a special "free look" provision applies in some circumstances to Contracts issued as Individual Retirement Annuities, Simplified Employee Pensions--IRAs or as Roth Individual Retirement Annuities, if the amount returned would be less than the Contract Value, we will return the Contract Value as of the Valuation Date on which we receive the Contract at our Service Center. (See APPENDIX A--COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY DEFERRED FIXED AND VARIABLE ANNUITY IRA, ROTH IRA AND SIMPLE IRA DISCLOSURE STATEMENT.) IF YOU DECIDE TO RETURN YOUR CONTRACT FOR A REFUND DURING THE "FREE LOOK" PERIOD, PLEASE ALSO INCLUDE A LETTER INSTRUCTING US TO CANCEL YOUR CONTRACT. 3. OWNERS, ANNUITANTS, AND BENEFICIARIES Please note that naming different persons as Owner(s), Annuitant(s), and Beneficiary(ies) can have important impacts on whether death benefits, annuity payments, and rider benefits are paid and on whose life payments are based. Carefully consider the potential consequences under various scenarios when naming Owners, Annuitants, and Beneficiaries, and consult your agent. If you elect the GLWB Rider, there are restrictions on naming and changing Owners, Annuitants, and Beneficiaries. (See "GUARANTEED LIFETIME WITHDRAWAL BENEFIT") BENEFICIARIES. You designate the Beneficiary. During the Accumulation Period and prior to the death of an Owner, you may change a Beneficiary at any time by signing our form. After the Annuity Date, the Beneficiary may be changed prior to the death of an Owner or the Annuitant. However, in the case of joint Owners, the surviving joint Owner is automatically the Primary Beneficiary and cannot be changed. No Beneficiary change is binding on us until we receive it. We assume no responsibility for the validity of any Beneficiary change. Under a Qualified Contract, the provisions of the applicable plan may prohibit a change of Beneficiary. (See "FEDERAL TAX MATTERS") You may change the Beneficiary if you send a written change form to our Service Center. Changes are subject to the following: 1. The change must be filed while you are alive 2. The Contract must be in force at the time you file a change; 3. Such change must not be prohibited by the terms of an existing assignment, Beneficiary designation, or other restriction; 4. Such change will take effect when we receive it. However, action taken by us before the change form was received will remain in effect; 5. The request for change must provide information sufficient to identify the new Beneficiary; and 6. In the case of joint Owners, we will consider the designation of a Beneficiary other than the surviving joint Owner to be a Contingent Beneficiary. In the event that all Primary Beneficiaries predecease you, we will pay the death benefit proceeds to the surviving Contingent Beneficiaries. In the event that a Contingent Beneficiary predeceases you, we will distribute the benefits pro rata to the surviving Contingent Beneficiaries. If there are no surviving Contingent Beneficiaries, we will pay the benefits to your estate. When multiple Beneficiaries are involved, we can not determine the death benefit proceeds until we receive the complete death benefit claim in good order, that is, receipt of proper elections from all 28 Beneficiaries as well as proof of death. The Valuation Date on which we receive all required paperwork is the date the Contract is tendered for redemption and the date for calculation of the benefits. OWNERS. You may add or change an Owner by written request to our Service Center with our prior approval, prior to the death of an Owner. Any replacement or additional Owner must not have attained age 80 prior to the Valuation Date we receive your request. ANNUITANTS. For Contracts with natural Owners, prior to the Annuity Date, you may add or change an Annuitant, by written request to our Service Center. For Contracts with non-natural Owners, prior to the Annuity Date, you may add or change an Annuitant with our prior approval. Additionally, for Contracts with non-natural Owners, any replacement or additional Annuitant must not have attained age 80 prior to the Valuation Date we receive your request. On or after the Annuity Date, you may not change or add an Annuitant for Contracts with natural or non-natural Owners. There must be at least one Annuitant at all times. If an Annuitant who is not an Owner dies prior to the Annuity Date, the youngest Owner will become the new Annuitant unless there is a surviving joint Annuitant or a new Annuitant is otherwise named. We will not pay a death benefit upon the death of an Annuitant unless the sole Owner is a non-natural person. We will pay a death benefit of Withdrawal Value upon a change of Annuitant if the sole Owner is a non-natural person. Joint Annuitants are only permitted in Non-Qualified Contracts. 4. ASSIGNMENT During the Accumulation Period and prior to the death of an Owner, you may assign a Non-Qualified Contract at any time by signing our form. No assignment is binding on us until we receive it, and we assume no responsibility for the validity of any assignment. Generally, an interest in a Qualified Contract may not be assigned. If an assignment of the Contract is in effect on the Annuity Date, we reserve the right to pay the assignee, in one sum, that portion of the Withdrawal Value to which the assignee appears to be entitled. Also, amounts payable during the Annuity Period may not be assigned or encumbered (to the extent permitted by law, annuity payments are not subject to levy, attachment or other judicial process for the payment of the payee's debts or obligations). An assignment may subject you to immediate tax liability and may subject you to a 10% tax penalty. (See "FEDERAL TAX MATTERS") B. THE ACCUMULATION PERIOD 1. APPLICATION OF PURCHASE PAYMENTS You select allocation of Purchase Payments to the Subaccount(s) and the Fixed Account, if permitted. When you allocate Purchase Payments to a Subaccount, we credit Accumulation Units to that Subaccount based on the value of an Accumulation Unit, as computed after we receive the Purchase Payment at our Service Center. If we receive a Purchase Payment at our Service Center before the close of business on the Valuation Date, we will credit Accumulation Units based on Accumulation Unit values determined at the end of that Valuation Date. If we receive a Purchase Payment at our Service Center on or after the close of business on the Valuation Date, we will credit Accumulation Units based Accumulation Unit values determined at the end of the next Valuation Date. Purchase Payments allocated to the Fixed Account begin earning interest one day after we receive them. We will credit an initial Purchase Payment no later than the end of the second Valuation Date following the Valuation Date we receive the Purchase Payment at our Service Center, provided that the Purchase Payment is preceded or accompanied by an application that contains sufficient information to establish an account and properly credit such Purchase Payment. 29 After the initial purchase, we determine the number of Accumulation Units credited by dividing the Purchase Payment allocated to a Subaccount by the Subaccount's Accumulation Unit value, as computed after we receive the Purchase Payment. After we determine the number of Accumulation Units credited, the number of Accumulation Units will not change due to investment experience. Accumulation Unit value varies to reflect the investment experience of the Subaccount and the assessment of charges against the Subaccount. We reduce the number of Accumulation Units when we assess the contract fee and the GLWB Rider charge. If we are not provided with information sufficient to establish a Contract or to properly credit the initial Purchase Payment, we will promptly request the necessary information. If the requested information is not furnished within five business days after we receive the initial Purchase Payment, or if we determine that we cannot otherwise issue the Contract within the five day period, we will return the initial Purchase Payment to you, unless you consent to our retaining the initial Purchase Payment until the application is completed. If we receive the information sufficient to establish a Contract, we will issue the Contract and allocate the Purchase Payment no later than the end of the second Valuation Date following the Valuation Date we receive the missing information. We may issue a Contract without a signed application if: - an agent's broker-dealer provides us with application information, electronically or in writing, - we receive the initial Purchase Payment, and - you confirm in writing, after the Contract is delivered, that all information in the Contract is correct. If you submit your application, initial Purchase Payment, and/or subsequent Purchase Payments to your agent, we will not begin processing your purchase order until we receive the application and Purchase Payment from your agent's broker-dealer. Some of the Funds reserve the right to delay or refuse purchase requests from the Separate Account, as may be further described in their prospectuses and/or statements of additional information. Therefore, if you request a transaction under your Contract that is part of a purchase request delayed or refused by a Fund, we will be unable to process your request. In that event, we will notify you promptly in writing or by telephone. If you elect the GLWB Rider, we will restrict the Investment Options to which you may allocate Purchase Payments. (See "GUARANTEED LIFETIME WITHDRAWAL BENEFIT") 2. ACCUMULATION UNIT VALUE Each Subaccount has Accumulation Unit values for each combination of asset based charges. When Purchase Payments are allocated to a Subaccount, the number of units credited is based on the Subaccount's applicable Accumulation Unit value at the end of the current Valuation Period. When amounts are transferred out of or deducted from a Subaccount, units are redeemed in a similar manner. Generally, we determine the value of an Accumulation Unit as of the close of business on each Valuation Date. The Accumulation Unit value at the end of each subsequent Valuation Period is the relevant investment experience factor for that Valuation Period times the Accumulation Unit value for the preceding Valuation Period. Each Subaccount has its own investment experience factor for each combination of charges. The investment experience of the Separate Account is calculated by applying the investment experience factor to the Accumulation Unit value in each Subaccount during a Valuation Period. 30 The investment experience factor of a Subaccount for any Valuation Period is determined by the following formula: (1 divided by 2) minus 3, where: (1) is: - the net asset value per share of the Fund held in the Subaccount as of the end of the current Valuation Period; plus - the per share amount of any dividend or capital gain distributions made by the Fund held in the Subaccount, if the "ex-dividend" date occurs during the current Valuation Period; plus or minus - a charge or credit for any taxes reserved for the current Valuation Period which we determine have resulted from the investment operations of the Subaccount; (2) is the net asset value per share of the Fund held in the Subaccount as of the end of the preceding Valuation Period; and (3) is the factor representing asset-based charges (the mortality and expense risk charge, the administration charge, the Step-Up Death Benefit charge (if you elect the Step-Up Death Benefit), and the No Withdrawal Charge Rider fee (if you elect the No Withdrawal Charge Rider)). 3. CONTRACT VALUE On any Valuation Date, the Contract Value equals the total of: - the number of Accumulation Units credited to each Subaccount, times - the value of a corresponding Accumulation Unit for each Subaccount, plus - your interest in the Fixed Account. 4. TRANSFERS DURING THE ACCUMULATION PERIOD During the Accumulation Period, you may transfer Contract Value among the Subaccounts and the Fixed Account subject to the following provisions: - The minimum amount which may be transferred is $500 for each Subaccount and Fixed Account or, if smaller, the remaining amount in the Fixed Account or a Subaccount. - No partial transfer will be made if the remaining Contract Value of the Fixed Account or any Subaccount will be less than $100 unless the transfer will eliminate your interest in such account. - Total transfers out of the Fixed Account in any Contract Year may not exceed 25% of the value of the Fixed Account as of the prior Contract Anniversary or, in the case of transfers in the first Contract Year, the Date of Issue. Transfers made under a systematic investment program approved by us are not currently subject to this limitation, but we reserve the right to impose this or a modified limitation on such transfers in the future. The entire Fixed Account Contract Value may be transferred if a transfer out of the Fixed Account would otherwise result in a Fixed Account Contract Value less than $5,000. - We will limit a transfer out of the Fixed Account to an amount that equals the Fixed Account Contract Value less Debt, less any premium taxes and withdrawal charge that would apply to the total withdrawal of the Fixed Account Contract Value at the time that you make the transfer, and less interest for one calendar year on any loan at the time that you make the transfer. 31 - Total transfers into the Fixed Account in any Contract Year, that would be credited a current interest rate of 3% or less, may not exceed 25% of Contract Value as of the prior Contract Anniversary or, in the case of transfers in the first Contract Year, the Date of Issue. Transfers made under a systematic investment program approved by us are not currently subject to this limitation, but we reserve the right to impose this or a modified limitation on such transfers in the future. - We reserve the right to not allow any transfer into the Fixed Account if the Fixed Account interest rate applicable to such transfer would be less than or equal to 3%. - If you request a transfer from a specific Subaccount or from the Fixed Account, we will transfer Purchase Payments (and earnings attributable to those Purchase Payments) previously allocated or transferred to that Subaccount or to the Fixed Account, in the chronological order in which we received such Purchase Payments in the Contract. Otherwise, we will transfer Purchase Payments (and earnings attributable to those Purchase Payments) previously allocated or transferred to all Subaccounts and the Fixed Account in which you have an interest, in the chronological order in which we received such Purchase Payments in the Contract. - You must request transfers in excess of $250,000 per Contract, per day, through standard United States mail. We reserve the right to require transfers into and out of one Subaccount in excess of $50,000, per Contract, per day, to be requested through standard United States mail. Any transfer request must clearly specify the amount which is to be transferred and the names of the Subaccounts and/or the Fixed Account that are affected. If you authorize a third party to transact transfers on your behalf, we will reallocate the Contract Value pursuant to the third party's instructions. However, we take no responsibility for any third party asset allocation or investment advisory service or program. We may suspend, limit, or cancel acceptance of a third party's instructions at any time and may restrict the Investment Options available for transfer under third party authorizations. We will make transfers pursuant to proper written or telephone instructions to our Service Center that specify in detail the requested changes. Transfers involving a Subaccount will be based upon the Accumulation Unit values determined following our receipt of complete transfer instructions. If we receive a transfer request at our Service Center before the close of business on the Valuation Date, we will process the request based on Accumulation Unit values determined at the end of that Valuation Date. If we receive a transfer request at our Service Center on or after the close of business on the Valuation Date, we will process the request based on Accumulation Unit values determined at the end of the next Valuation Date. If you or your authorized representative call us to request a telephone transfer but have not given instructions to us prior to the close of business on the Valuation Date, even if due to our delay in answering your call, we will consider your telephone transfer request to be received after the close of business on the Valuation Date. We may suspend, modify or terminate the transfer provisions. If you submit a request for a transfer that is no longer permitted, we will notify you in writing that the transaction is not permissible. Some of the Funds reserve the right to delay or refuse purchase requests from the Separate Account, as may be further described in their prospectuses and/or statements of additional information. Therefore, if you request a transaction under your Contract that is part of a purchase request delayed or refused by a Fund, we will be unable to process your request. In that event, we will notify you promptly in writing or by telephone. If you elect the GLWB Rider, we will restrict the Investment Options to which you may transfer Contract Value. (See "GUARANTEED LIFETIME WITHDRAWAL BENEFIT") 32 5. DISRUPTIVE TRADING The Contract is not designed for use by individuals, professional market timing organizations, or other entities that engage in short-term trading, frequent transfers, programmed transfers or transfers that are large in relation to the total assets of a Fund (collectively, "Disruptive Trading"). These activities may require the Fund to maintain undesirable large cash positions or frequently buy or sell portfolio securities. Such transfers may dilute the value of the Fund's shares, interfere with the efficient management of the Fund's portfolio, and increase brokerage and administrative costs of the Funds. As a result, Disruptive Trading may adversely affect a Fund's ability to invest effectively in accordance with its investment objectives and policies, and may harm other Contract Owners and other persons who may have an interest in the Contract (E.G. Annuitants and Beneficiaries.) In order to protect our Contract Owners and the Funds from potentially harmful trading activity, we utilize certain policies and procedures that are designed to detect and prevent disruptive trading among the Funds (the "Disruptive Trading Procedures"). Our Disruptive Trading Procedures consider certain factors in order to identify Disruptive Trading activity, including the following: - the number of transfers made over a period of time; - the length of time between transfers; - whether the transfers follow a pattern that appears to be designed to take advantage of short term market fluctuations, particularly within certain Funds; - the dollar amount(s) requested for transfers; and - whether the transfers are part of a group of transfers made by a third party on behalf of several individual Contract Owners; and - the investment objectives and/or size of the Funds. We may increase our monitoring of Contract Owners who engage in what we perceive to be disruptive trading, including investigating the transfer patterns within multiple contracts owned by the same Contract Owners. We may also investigate any patterns of disruptive trading identified by the Funds that may not have been captured by our Disruptive Trading Procedures. If we determine you are engaged in disruptive trading, we may take one or more actions in an attempt to halt such trading. Your ability to make transfers is subject to modification or restriction if we determine, in our sole opinion, that your exercise of the transfer privilege may disadvantage or potentially harm the rights or interests of other Contract Owners (or others having an interest in the Contract). Our restrictions may take various forms, but under our current Disruptive Trading Procedures will include loss of telephone, fax, overnight mail, or Internet transfers. This means that we would accept only written transfer requests with an original signature transmitted to us at our Service Center and only by standard United States mail. We may also restrict the transfer privileges of others acting on your behalf, including your agent or an asset allocation or investment advisory service. We may also limit the number of transfers you may make during a calendar year and we may limit the number of times you may transfer Contract Value into particular Subaccounts during a calendar YEAR. Subject to the terms of the Contract, we reserve the right to impose, without prior notice, additional or alternate restrictions on allocations and transfers that we determine, in our sole discretion, will disadvantage or potentially hurt the rights or interests of other Contract Owners or other holders of the Funds. We will reverse any transactions inadvertently processed in contravention of our restrictions within two days of the date the inadvertently processed transaction occurred. Our Disruptive Trading Procedures may vary among the Subaccounts. Some of the Funds have reserved the right to temporarily or permanently refuse payments or transfer requests from us if, in the judgment of the Fund's investment adviser, the Fund would be unable to invest effectively in 33 accordance with its investment objective or policies, or would otherwise potentially be adversely affected. If a Fund refuses a transfer request from us, we may not be able to effect certain allocations or transfers that a Contract Owner has requested. Some Funds may impose redemption fees on short-term trading (i.e., redemptions of mutual fund shares within a certain number of business days after purchase). We reserve the right to administer and collect any such redemption fees on behalf of the Funds. The Funds may have adopted their own policies and procedures with respect to excessive trading of their respective shares, and we reserve the right to enforce these policies and procedures. The prospectuses for the Funds describe any such policies and procedures, which may be more or less restrictive than the policies and procedures we have adopted. You should be aware that we currently may not have the contractual obligation or the operational capacity to apply the Funds' excessive trading policies and procedures. However, under SEC rules, we are required to: (1) enter into a written agreement with each Fund or its principal underwriter that obligates us to provide to the Fund promptly upon request certain information about the trading activity of individual Contract Owners, and (2) execute instructions from the Fund to restrict or prohibit further purchases or transfers by specific Contract Owners who violate the excessive trading policies established by the Fund. You should be aware that the purchase and redemption orders received by the Funds generally are "omnibus" orders from intermediaries such as retirement plans or separate accounts funding variable insurance contracts. The omnibus orders reflect the aggregation and netting of multiple orders from individual retirement plan participants and/or individual Owners of variable insurance contracts. The omnibus nature of these orders may limit the Funds' ability to apply their respective disruptive trading policies and procedures. We cannot guarantee that the Funds (and thus our Contract Owners) will not be harmed by transfer activity relating to the retirement plans and/or other insurance companies that may invest in the Funds. In addition, if a Fund believes that an omnibus order we submit may reflect one or more transfer requests from Contract Owners engaged in disruptive trading activity, the Fund may reject the entire omnibus order. We will apply our Disruptive Trading Procedures consistently without special arrangement, waiver, or exception. However, the Company's ability to detect and deter Disruptive Trading and to consistently apply the Disruptive Trading Procedures may be limited by operational systems and technological limitations. Contract Owners seeking to engage in such transfer activities may employ a variety of strategies to avoid detection. Because identifying Disruptive Trading involves judgments that are inherently subjective, the Company cannot provide assurances that its Disruptive Trading Procedures will detect every Contract Owner who engages in disruptive trading. In addition, the terms of some contracts previously issued by the Company, historical practices or actions, litigation, or certain regulatory restrictions may limit the Company's ability to apply transfer or other restrictions. If we are unable to detect Disruptive Trading or are unable to restrict Disruptive Trading because of contract provisions or other reasons, you may experience dilution in the value of your Fund shares. There may be increased brokerage and administrative costs within the Funds, which may result in lower long-term returns for your investments. Additionally, because other insurance companies and/or retirement plans may invest in the Funds, we cannot guarantee that the Funds will not suffer harm from disruptive trading within the variable contracts issued by other insurance companies or among Investment Options available to retirement plan participants. 34 6. WITHDRAWALS AND SURRENDERS DURING THE ACCUMULATION PERIOD You may make a partial withdrawal subject to the restrictions set forth below. You also may withdraw all of the Withdrawal Value and surrender the Contract. You should carefully consider taking partial withdrawals or surrendering your Contract, as the following may apply: - You may withdraw up to the Free Withdrawal Amount in any Contract Year and we will not assess a withdrawal charge. However, if you withdraw more than the Free Withdrawal Amount in any Contract Year, the excess amount withdrawn may be subject to a withdrawal charge. We also may assess a withdrawal charge upon surrender of the Contract, although we will first apply the Free Withdrawal Amount. (See "WITHDRAWAL CHARGE") - Withdrawals and surrenders may be subject to federal and state income tax and a 10% penalty tax. (See "FEDERAL TAX MATTERS") - Partial withdrawals reduce your Contract Value and your death benefit. (See "DEATH BENEFITS") Certain withdrawals also may reduce the value of the guarantees provided by the GLWB Rider. (See "GUARANTEED LIFETIME WITHDRAWAL BENEFIT") - Your ability to withdraw or surrender may be limited by the terms of a qualified plan such as Section 403(b) plans. (See "FEDERAL TAX MATTERS") - We may assess the contract fee and a pro rata portion of the GLWB Rider charge upon full surrender. (See "CONTRACT FEE" and "GLWB RIDER CHARGE") - We may assess premium taxes on partial withdrawals and surrenders. (See "STATE PREMIUM TAXES") You may request a partial withdrawal subject to the following: - The partial withdrawal must be at least $500 from each Investment Option from which the withdrawal is requested, or the full amount of the Investment Option, if smaller. - You must leave at least $100 in each Investment Option after a withdrawal unless the account is eliminated by the withdrawal. - We will limit a withdrawal from the Fixed Account to an amount that equals the Fixed Account Contract Value less Debt, less any premium taxes and withdrawal charge that would apply to the total withdrawal of the Fixed Account Contract Value at the time that you make the withdrawal, and less interest for one calendar year on any loan at the time that you make the withdrawal. - At least $500 of Contract Value must remain in the Contract after the withdrawal or we will surrender your Contract (which means that withdrawal charges, federal and state income taxes and tax penalties, and premium taxes may apply). - Direct transfers, rollovers, and 1035 exchanges are not permitted if there is an outstanding loan. - If you request a withdrawal from a specific Subaccount or from the Fixed Account, we will reduce Purchase Payments (and earnings attributable to those Purchase Payments) previously allocated or transferred to that Subaccount or to the Fixed Account, in the chronological order in which we received such Purchase Payments in the Contract. Otherwise, withdrawals will reduce Purchase Payments (and earnings attributable to those Purchase Payments) previously allocated or transferred to all Subaccounts and the Fixed Account in which you have an interest, in the chronological order in which we received such Purchase Payments in the Contract. Election to withdraw (including the withdrawal amount) shall be made in writing to us at our Service Center and should be accompanied by the Contract if surrender is requested. The Withdrawal Value attributable to the Subaccounts is determined on the basis of the Accumulation Unit values 35 calculated after we receive the request. If we receive a withdrawal or surrender request at our Service Center before the close of business on the Valuation Date, we will process the request based on Accumulation Unit values determined at the end of that Valuation Date. If we receive a withdrawal or surrender request at our Service Center on or after the close of business on the Valuation Date, we will process the request based on Accumulation Unit values determined at the end of the next Valuation Date. If your Contract was issued pursuant to a 403(b) plan, we generally are required to confirm, with your 403(b) plan sponsor or otherwise, that withdrawals, transfers or surrenders you request comply with applicable tax requirements and to decline requests that are not in compliance. We will defer such payments you request until all information required under the tax law has been received. By requesting a withdrawal, transfer or surrender, you consent to the sharing of confidential information about you, the Contract, and transactions under the Contract and any other 403(b) contracts or accounts you have under the 403(b) plan among us, your employer or plan sponsor, any plan administrator or recordkeeper, and other product providers. A participant in the Texas Optional Retirement Program ("ORP") must obtain a certificate of termination from the participant's employer before a Contract can be redeemed. The Attorney General of Texas has ruled that participants in the ORP may redeem their interest in a Contract issued pursuant to the ORP only upon termination of employment in Texas public institutions of higher education, or upon retirement, death or total disability. Participants in the Texas Optional Retirement System may transfer their Withdrawal Value to another approved provider as permitted under the Texas Optional Retirement System. In those states adopting similar requirements for optional retirement programs, we will follow similar procedures. Please note that the ORP does not restrict transfers within a Contract, and thus participants are permitted to make transfers of Contract Value among the Investment Options. If you elect the GLWB Rider, special withdrawal rules apply. (See "GUARANTEED LIFETIME WITHDRAWAL BENEFIT") 7. DEATH BENEFITS The following section describes the death benefits we currently make available under the Contract if an Owner dies before the Annuity Date. We will calculate the death benefit on the Valuation Date we receive due proof of the Owner's death. Any death benefit payment we make in excess of your Contract Value is subject to our financial strength and claims-paying ability. STANDARD DEATH BENEFIT If you have not elected the Step-Up Death Benefit and an Owner's death occurs prior to the older Owner's 75th birthday, the death benefit will be equal to the greater of (A) or (B), less any premium taxes, where: (A) = The Contract Value less Debt, on the Valuation Date we receive due proof of death; (B) = The Purchase Payment Value (described below) less Debt, on the Valuation Date we receive due proof of death. If you have not elected the Step-Up Death Benefit and an Owner's death occurs on or after the older Owner's 75th birthday, the death benefit will be equal to (A) above, less any premium taxes. The Purchase Payment Value on the Date of Issue is equal to the initial Purchase Payment , less any premium taxes. We will increase the Purchase Payment Value by the amount of each subsequent 36 Purchase Payment, less any premium taxes. The Purchase Payment Value after a withdrawal will be equal to the lesser of: (a) The Purchase Payment Value immediately prior to the withdrawal minus the amount of the withdrawal (including any withdrawal charges, premium taxes, and federal and state income taxes and penalty taxes); or (b) The Purchase Payment Value immediately prior to the withdrawal multiplied by the Proportional Reduction Factor below. The Proportional Reduction Factor is equal to (1) divided by (2), where: (1) is the Contract Value after the withdrawal, and (2) is the Contract Value immediately prior to the withdrawal. EXAMPLE: Contract Value = $80,000 Purchase Payment Value = $100,000 Debt = $0 If a withdrawal (including any withdrawal charges, premium taxes, and federal and state income taxes and penalty taxes) of $20,000 is taken, we follow the steps below to recalculate the Purchase Payment Value after the withdrawal: - STEP 1: We calculate the Contract Value after the withdrawal. This is the Contract Value immediately prior the withdrawal minus the amount of the withdrawal (including any withdrawal charges, premium taxes, and federal and state income taxes and penalty taxes). ($80,000 - $20,000 = $60,000) - STEP 2: We calculate the Proportional Reduction Factor. The Proportional Reduction Factor is the Contract Value after the withdrawal divided by the Contract Value immediately prior to the withdrawal. ($60,000 / $80,000 = 75%) - STEP 3: We calculate the Purchase Payment Value after the withdrawal. This is the lesser of: (a) The Purchase Payment Value immediately prior to the withdrawal minus the amount of the withdrawal (including any withdrawal charges, premium taxes, and federal and state income taxes and penalty taxes) = $100,000 - $20,000 = $80,000 (b) The Purchase Payment Value immediately prior to the withdrawal multiplied by the Proportional Reduction Factor = $100,000 x 75% = $75,000 = Lesser of $80,000 and $75,000 = $75,000 If you elect the GLWB Rider, we may pay a death benefit in excess of the standard death benefit. (See "GUARANTEED LIFETIME WITHDRAWAL BENEFIT") STEP-UP DEATH BENEFIT We currently offer one optional enhanced death benefit under the Contract--the Step-Up Death Benefit. We may discontinue the offering of the Step-Up Death Benefit at any time. The Step-Up Death Benefit may not be available in all states. The calculation of benefits under the Step-Up Death Benefit changes after you attain age 81 and certain increases in benefits cease after that age. Therefore, the Step-Up Death Benefit may not be appropriate depending on your proximity to age 81. Prior to electing the Step-Up Death Benefit, you 37 should carefully consider the benefits available based on your age and consult with your financial adviser to assist you in determining whether to elect the Step-Up Death Benefit. You may elect the Step-Up Death Benefit only if the older Owner is age 79 or younger at the Date of Issue. We deduct a daily charge from your Contract Value for the Step-Up Death Benefit equal to 0.20%, on an annual basis. (See "STEP-UP DEATH BENEFIT CHARGE") We do not assess a charge for the Step-Up Death Benefit on amounts allocated to the Fixed Account. You may elect the Step-Up Death Benefit only on the initial Contract application. You cannot elect the Step-Up Death Benefit after the Date of Issue. If you elect the Step-Up Death Benefit, the death benefit will be equal to the greater of (A) or (B), less any premium taxes, where: (A) = The Contract Value less Debt, on the Valuation Date we receive due proof of death; (B) = The Step-Up Value (described below) less Debt, on the Valuation Date we receive due proof of death. The Step-Up Value on the Date of Issue is equal to the initial Purchase Payment, less any premium taxes. We will increase the Step-Up Value by the amount of each subsequent Purchase Payment, less any premium taxes. The Step-Up Value after a withdrawal will be equal to the lesser of: 1) The Step-Up Value immediately prior to the withdrawal minus the amount of the withdrawal (including any withdrawal charges, premium taxes, and federal and state income taxes and penalty taxes); or 2) The Step-Up Value immediately prior to the withdrawal multiplied by the Proportional Reduction Factor below. The Proportional Reduction Factor is equal to (a) divided by (b), where: a) is the Contract Value after the withdrawal, and b) is the Contract Value immediately prior to the withdrawal. On each Contract Anniversary prior to the older Owner's 81st birthday, we will recalculate the Step-Up Value to equal the greater of: 1) The Contract Value on that Contract Anniversary; and 2) The current Step-Up Value on that Contract Anniversary. If an Owner dies prior to a Contract Anniversary and the Valuation Date we receive due proof of death falls on or after that anniversary, we will not recalculate the Step-Up Value on that anniversary. See the "STANDARD DEATH BENEFIT" above for an example of how we adjust the death benefit values for withdrawals. You may not terminate the Step-Up Death Benefit once it is in effect. It will remain in force unless it is terminated as set forth below. The Step-Up Death Benefit will automatically terminate on the earliest of: 1. the Annuity Date; 2. the Valuation Date that we receive due proof of death of the Owner (in the case of a spousal continuation, the spouse may elect the Step-Up Death Benefit if we offer it at that time) ; or 3. termination or surrender of the Contract. All charges for the Step-Up Death Benefit will cease upon termination. 38 If you elect the GLWB Rider, we may pay a death benefit in excess of the Step-Up Death Benefit. (See "GUARANTEED LIFETIME WITHDRAWAL BENEFIT") PAYMENT OF DEATH BENEFITS If there is only one Owner under the Contract, we will pay the death benefit to the Beneficiary upon the death of such Owner before the Annuity Date. Upon the death of a joint Owner before the Annuity Date, we will pay the death benefit to the surviving joint Owner. We will pay the death benefit upon the first to die of any joint Owners. If any Owner is not a natural person, we will treat each Annuitant under the Contract as an Owner for death benefit payment purposes and we will pay the death benefit upon the death of any Annuitant. If any Owner is not a natural person, we will treat each Annuitant under the Contract as an Owner for death benefit payment purposes and we will pay the death benefit of Withdrawal Value upon the change of any Annuitant. We will pay the death benefit to the Beneficiary (or joint Owner, if applicable) after we receive due proof of death. We will then have no further obligation under the Contract. The Valuation Date on which we receive all required paperwork is the date the Contract is tendered for redemption and the date for calculation of the benefits. Due proof of death means our receipt of a certified death certificate and all necessary claim paperwork, the return of the Contract and such other information we may require to process the death benefit. If we receive due proof of death at our Service Center before the close of business on the Valuation Date, we will calculate the death benefit based on Accumulation Unit values determined at the end of that Valuation Date. If we receive a due proof of death at our Service Center on or after the close of business on the Valuation Date, we will calculate the death benefit based on Accumulation Unit values determined at the end of the next Valuation Date. When multiple Beneficiaries are involved, death benefits cannot be determined until we receive the complete death benefit claim in good order, that is, receipt of proper elections from all Beneficiaries as well as proof of death. The death benefit may be paid in a lump sum. The Beneficiary (or the surviving joint Owner) may defer this sum for up to five years from the date of death. Instead of a lump sum payment, the Beneficiary or the surviving joint Owner, as the case may be, may elect to have the death benefit distributed as stated in Annuity Option 1 for a period not to exceed the Beneficiary's (or the surviving joint Owner's) life expectancy; or Annuity Option 2 or 3 based upon the life expectancy of the Beneficiary (or the surviving joint Owner) provided with respect to Annuity Option 3 that such life expectancy exceeds the certain period of 10 years. (See "THE ANNUITY PERIOD" for a description of the Annuity Options.) The Beneficiary (or the surviving joint Owner) must make this election within 60 days of the time we receive due proof of death, and distribution under these annuity payment options must commence within one year of the date of death. If the death benefit is requested in a form other than a lump sum and the death benefit is greater than the Contract Value, we will credit the amount of the death benefit that exceeds the Contract Value to the Goldman Sachs VIT Money Market Subaccount. If, however, the Goldman Sachs VIT Money Market Subaccount is not available as an Investment Option under the Contract at that time, then we will credit the death benefit among the Investment Options in the same proportion that the value of each Investment Option bears to the total Contract Value. In most cases, when a death benefit is paid in a lump sum, we will pay the death benefit by establishing an interest bearing account for the Beneficiary, in the amount of the death benefit. We will send the Beneficiary a checkbook, and the Beneficiary will have access to the account simply by writing a check for all or any part of the amount of the death benefit. The account is part of our General 39 Account. It is not a bank account and it is not insured by the FDIC or any other government agency. As part of our general account, it is subject to the claims of our creditors. We receive a benefit from all amounts left in the account. If the Beneficiary is not a natural person, the Beneficiary must elect that the entire death benefit be distributed within five years of your death. If your spouse is the only Primary Beneficiary when you die, your surviving spouse may elect to be the successor Owner of the Contract by completing the spousal continuation section of the claim form submitted with due proof of your death. The date of continuance of the Contract will be the Valuation Date we receive due proof of your death. Your surviving spouse will become the Annuitant if no Annuitant is living at the time of your death. Spousal continuation will not satisfy minimum required distribution rules for Qualified Contracts other than IRAs. If your surviving spouse elects to become the successor Owner of the Contract on your death, thereby waiving claim to the death benefit otherwise payable, we will not pay out a death benefit on your death. Instead, we will increase the Contract Value on the Valuation Date we receive due proof of your death to equal the death benefit amount otherwise payable (if the death benefit is greater than the Contract Value), subject to the following: - We will credit the amount of the death benefit that exceeds the Contract Value to the Goldman Sachs VIT Money Market Subaccount. If, however, the Goldman Sachs VIT Money Market Subaccount is not available as an Investment Option under the Contract at that time, then we will credit the death benefit among the Investment Options in the same proportion that the value of each Investment Option bears to the total Contract Value. - We will terminate the Step-Up Death Benefit if in effect as of the Valuation Date we receive due proof of your death. - On the date of continuance, your surviving spouse may elect the Step-Up Death Benefit or any optional enhanced death benefit then offered by us. All such death benefits will be subject to the terms and conditions then in effect at the time of continuance. All charges and benefits will be calculated as if the coverage was issued to the surviving spouse on the date of continuance and the Contract Value on the date of continuance resulted from receipt of an initial Purchase Payment in that amount. - We will assess withdrawal charges, if any, only on Purchase Payments (and earnings attributable to those Purchase Payments) we receive after the date of continuance. - Any subsequent spouse of the surviving spouse will not be entitled to continue the Contract upon the death of the surviving spouse. If any Owner dies on or after the Annuity Date, and before the entire interest in the Contract has been distributed, any remaining portion of such interest will be distributed at least as rapidly as under the method of distribution being used as of the date of death. In all events, we will pay or apply the Contract's death benefit in accordance with Sections 72(s) or 401(a)(9) of the Code, as applicable. 8. NO WITHDRAWAL CHARGE RIDER For an additional charge, you may elect the No Withdrawal Charge Rider. You may elect the Rider only on the initial Contract application. You cannot elect the Rider after the Date of Issue. You may not cancel the Rider once it is issued. We may discontinue offering the Rider at any time. The Rider may not be available in all states. 40 If you elect this Rider, we will not deduct any withdrawal charge upon partial withdrawal or surrender of the Contract during the Accumulation Period or upon annuitization. (See "WITHDRAWAL CHARGE") We will deduct a daily charge for the Rider from your Contract Value, equal to 0.35%, on an annual basis. The Rider will remain in force unless it is terminated as set forth below. The Rider will automatically terminate on the earliest of: 1. the Valuation Date as of which the Contract is terminated; or 2. the Annuity Date. 3. the Valuation Date that we receive due proof of death of the Owner (in the case of a spousal continuation, the spouse may elect the Rider if we offer it at that time). Please remember that withdrawals and surrenders will have tax consequences, which may include the amount of the withdrawal being subject to income tax and in some circumstances an additional 10% penalty tax. Withdrawals also reduce your Contract Value and your death benefit. (See "DEATH BENEFITS") Certain withdrawals also may reduce the value of the guarantees provided by the GLWB Rider. (See "GUARANTEED LIFETIME WITHDRAWAL BENEFIT") We encourage you to talk to your agent and carefully consider whether the No Withdrawal Charge Rider is right for you. 9. GUARANTEED LIFETIME WITHDRAWAL BENEFIT ("GLWB") RIDER--GLWB PLUS FOR ONE AND GLWB PLUS FOR TWO The following are definitions of important terms we use in connection with describing the Guaranteed Lifetime Withdrawal Benefit ("GLWB") Rider: 41 DEFINITIONS COVERED PERSON is: - The person (or persons in the case of GLWB Plus For Two) whose life we use to determine the Lifetime Income Date and the duration of the monthly Settlement Payments on and after the Benefit Phase Start Date (if such date occurs on or after the Lifetime Income Date) or the Maximum Annuity Date (if you elect the GLWB Rider annuitization option on the Maximum Annuity Date). The Rider's benefits are based on the life of the Covered Person(s). If the Contract is owned by a non-natural person, we will treat the older Annuitant on the Date of Issue as the older Owner for purposes of determining the Covered Person. MAXIMUM ANNUITY DATE means: - The latest Valuation Date on which annuity payments may commence. GUARANTEED WITHDRAWAL BALANCE means: - The total amount we guarantee to be available to you (or your Beneficiary after your death) as Non-Excess Withdrawals or as monthly Settlement Payments if you meet the Rider's conditions. - On the Date of Issue, the initial Guaranteed Withdrawal Balance is equal to your initial Purchase Payment (less any premium taxes). See "GUARANTEED AMOUNTS" below for information on how the Guaranteed Withdrawal Balance is affected by Non-Excess and Excess Withdrawals and additional Purchase Payments. GUARANTEED WITHDRAWAL AMOUNT means: - The ANNUAL amount we guarantee to make available for Non-Excess Withdrawals each Contract Year prior to the Lifetime Income Date or to pay in monthly installments as Settlement Payments on and after the Benefit Phase Start Date (if such date occurs before the Lifetime Income Date), until the Guaranteed Withdrawal Balance is reduced to zero. - On the Date of Issue, the initial Guaranteed Withdrawal Amount is equal to 5% of the initial Guaranteed Withdrawal Balance. See "GUARANTEED AMOUNTS" below for information on how the Guaranteed Withdrawal Amount is affected by Non-Excess and Excess Withdrawals and additional Purchase Payments. LIFETIME INCOME BASE means: - The amount that is used to determine the Lifetime Income Amount on and after the Lifetime Income Date and the charge for the GLWB Rider. - On the Date of Issue, the initial Lifetime Income Base is equal to your initial Purchase Payment (less any premium taxes). See "GUARANTEED AMOUNTS" below for information on how the Lifetime Income Base is affected by Non-Excess and Excess Withdrawals, additional Purchase Payments, and any Bonuses or Step-Ups. LIFETIME INCOME AMOUNT means: - The ANNUAL amount we guarantee to make available for Non-Excess Withdrawals each Contract Year on and after the Lifetime Income Date or to pay in monthly installments as Settlement Payments on and after the Benefit Phase Start Date (if such date occurs on or after the Lifetime Income Date) or the Maximum Annuity Date (if you elect the GLWB Rider annuitization option on the Maximum Annuity Date), while a Covered Person is living or until the Guaranteed Withdrawal Balance is reduced to zero, if later. - On the Lifetime Income Date, the initial Lifetime Income Amount is equal to 5% of your Lifetime Income Base on that date (subject to a maximum of $250,000). We do not calculate the 42 Lifetime Income Amount prior to the Lifetime Income Date. See "GUARANTEED AMOUNTS" below for information on how the Lifetime Income Amount is affected by Non-Excess and Excess Withdrawals, additional Purchase Payments, and any Bonuses or Step-Ups. LIFETIME INCOME DATE means: - The Contract Anniversary on or after the Covered Person reaches age 65, or the Date of Issue if the Covered Person is age 65 or older at the time of purchase of the Contract. In the case of GLWB Plus For Two, we use the life of the older Covered Person to determine the Lifetime Income Date. If the older Covered Person dies before the Lifetime Income Date and the surviving Covered Person chooses to continue the Contract, we will use the life of the surviving Covered Person to redetermine the Lifetime Income Date. GROSS WITHDRAWAL means: - The amount of a partial or full withdrawal from the Contract. This amount will be subject to any withdrawal charges, premium taxes, federal and state income taxes and penalty taxes, and, in the case of a full surrender, the contract fee and a pro rata portion of the GLWB Rider charge, as applicable. NON-EXCESS WITHDRAWAL means a Gross Withdrawal that: - does NOT cause total Gross Withdrawals during a Contract Year beginning PRIOR TO the Lifetime Income Date to exceed the Guaranteed Withdrawal Amount; or - does NOT cause total Gross Withdrawals during a Contract Year beginning ON OR AFTER the Lifetime Income Date to exceed the Lifetime Income Amount; or - is taken under a "life expectancy" program established by us (see "LIFE EXPECTANCY DISTRIBUTIONS" below) if no Gross Withdrawals are taken that are not part of the program. Any Gross Withdrawals that are taken that are not part of the program and any future "life expectancy" program withdrawals that are taken during that Contract Year may be considered Excess Withdrawals. EXCESS WITHDRAWAL means a Gross Withdrawal that: - causes total Gross Withdrawals during a Contract Year beginning PRIOR TO the Lifetime Income Date to exceed the Guaranteed Withdrawal Amount (or if such total withdrawals have already exceeded the Guaranteed Withdrawal Amount); or - causes total Gross Withdrawals during a Contract Year beginning ON OR AFTER the Lifetime Income Date to exceed the Lifetime Income Amount (or if such total withdrawals have already exceeded the Lifetime Income Amount). - Note: If Gross Withdrawals are currently being taken under a "life expectancy" program established by us (see "LIFE EXPECTANCY DISTRIBUTIONS" below), any Gross Withdrawals that are taken that are not part of the program and any future "life expectancy" program withdrawals that are taken during that Contract Year may be considered Excess Withdrawals. SETTLEMENT PAYMENTS mean: - Payments we make to you on and after the Benefit Phase Start Date or the Maximum Annuity Date (if you elect the GLWB Rider annuitization option on the Maximum Annuity Date). These payments may be subject to premium taxes as well as federal and state income taxes and penalty taxes. 43 BENEFIT PHASE occurs: - when the Contract Value is reduced to zero due to: - a Non-Excess Withdrawal; OR - poor market performance; OR - the assessment of Contract fees and charges, including the GLWB Rider charge - AND either the Guaranteed Withdrawal Balance or the Lifetime Income Amount immediately after any of the above occurs is greater than zero. STEP-UP means: - An increase in the Lifetime Income Base on certain anniversary dates due to positive market performance as reflected in your Contract Value. BONUS means: - An increase in the Lifetime Income Base if you do not take withdrawals during a specified period of time. CURRENTLY, THE GLWB RIDER IS ONLY AVAILABLE TO QUALIFIED CONTRACTS. YOU SHOULD CONSULT WITH A QUALIFIED TAX ADVISER PRIOR TO ELECTING THE RIDER FOR FURTHER INFORMATION ON TAX RULES AFFECTING QUALIFIED CONTRACTS, INCLUDING IRAS. If you are concerned that poor investment performance in the Subaccounts may adversely impact the amount of money you can withdraw from your Contract, we offer for an additional charge an optional Guaranteed Lifetime Withdrawal Benefit Rider ("GLWB Rider"). In general, and subject to certain conditions, the GLWB Rider guarantees the following: 1. Prior to the Lifetime Income Date: We will make the GUARANTEED WITHDRAWAL AMOUNT available for Non-Excess Withdrawals each Contract Year or we will pay it in monthly installments as Settlement Payments if your Contract enters the Benefit Phase before the Lifetime Income Date, until the Guaranteed Withdrawal Balance is reduced to zero. If you limit your withdrawals to Non-Excess Withdrawals, we will only decrease the Guaranteed Withdrawal Balance by the amount of each withdrawal and we will not decrease the Guaranteed Withdrawal Amount. If you begin receiving monthly Settlement Payments, we will reduce the Guaranteed Withdrawal Balance by the amount of each payment. Your initial Guaranteed Withdrawal Balance is equal to your initial Purchase Payment (less any premium taxes). Your initial Guaranteed Withdrawal Amount is equal to 5% of your initial Guaranteed Withdrawal Balance. 2. If your Contract Value is greater than zero on the Lifetime Income Date: We will make the LIFETIME INCOME AMOUNT available for Non-Excess Withdrawals each Contract Year on and after the Lifetime Income Date (if you have not annuitized your Contract) or we will pay it in monthly installments as Settlement Payments on and after the Maximum Annuity Date (if you elect the GLWB Rider annuitization option on the Maximum Annuity Date) or if your Contract enters the Benefit Phase prior to the Maximum Annuity Date. This guarantee applies on and after the Lifetime Income Date, while a Covered Person is living or until the Guaranteed Withdrawal Balance is reduced to zero, if later. If you limit your withdrawals to Non-Excess Withdrawals, we will only decrease the Guaranteed Withdrawal Balance by the amount of each withdrawal and we will not decrease the Lifetime Income Amount. If you begin receiving monthly Settlement Payments, we will reduce the Guaranteed Withdrawal Balance by the amount of each payment. 44 3. After the Covered Person's death (or the death of the last surviving Covered Person in the case of the GLWB Plus for Two), your Beneficiary will receive the remaining Guaranteed Withdrawal Balance as a lump sum death benefit (if greater than the standard death benefit or any optional death benefit you elected) in certain cases or in monthly installments as Settlement Payments (until the Guaranteed Withdrawal Balance is reduced to zero) in others. This guarantee applies even if the Covered Person dies (or the last surviving Covered Person dies in the case of GLWB Plus For Two) on or after the Maximum Annuity Date, if you elect the GLWB Rider annuitization option on the Maximum Annuity Date. The Guaranteed Withdrawal Amount is only available prior to the Lifetime Income Date. The Lifetime Income Amount is only available on and after the Lifetime Income Date (if your Contract Value is greater than zero on the Lifetime Income Date). If you take ANY withdrawals prior to the Lifetime Income Date, the Lifetime Income Amount may be lower than the Guaranteed Withdrawal Amount that was previously available. If we increase the Lifetime Income Base for a Bonus or a Step-Up, we will increase the Lifetime Income Amount and it may be higher than the Guaranteed Withdrawal Amount that was previously available. As described in more detail below, we will increase the Guaranteed Withdrawal Balance, Lifetime Income Base, and Lifetime Income Amount (on or after the Lifetime Income Date) when you make additional Purchase Payments, subject to limits. As described in more detail below, we may increase the Guaranteed Withdrawal Amount (prior to the Lifetime Income Date) when you make additional Purchase Payments. We make the above guarantees subject to the rules below: a) You limit your withdrawals each Contract Year to Non-Excess Withdrawals. b) You do not annuitize under one of the Annuity Options in the Contract. c) You do not terminate or surrender the Contract. d) There is no divorce prior to the Benefit Phase Start Date e) In the case of the GLWB Plus For One, a Non-Qualified Contract with joint Owners must be continued if the Owner who is not the Covered Person dies. f) In the case of the GLWB Plus For Two, if a Covered Person who is an Owner dies, the other Covered Person (if living) must continue the Contract. THE GUARANTEED LIFETIME WITHDRAWAL BENEFIT DOES NOT GUARANTEE CONTRACT VALUE OR THE PERFORMANCE OF ANY INVESTMENT OPTION IMPORTANT: We offer two coverage options: where the GLWB Rider covers one Covered Person ("GLWB Plus For One") and where the GLWB Rider covers two Covered Persons ("GLWB Plus For Two"). If both Owners of a Non-Qualified Contract are spouses, or if there is one Owner and a spouse who is the sole Beneficiary, you must choose whether there will be one or two Covered Persons. Please pay careful attention to this designation, as it will impact the GLWB Rider charge and whether the guarantees provided by the GLWB Rider will continue for the life of the surviving spouse. IMPORTANT CONSIDERATIONS THE ADDITION OF THE GLWB RIDER TO YOUR CONTRACT MAY NOT BE IN YOUR INTEREST SINCE AN ADDITIONAL MONTHLY CHARGE IS IMPOSED FOR THIS BENEFIT AND THE COVERED PERSON(S) MUST REACH THE LIFETIME INCOME DATE AND REMAIN LIVING TO RECEIVE CERTAIN BENEFITS. SINCE THE WITHDRAWAL BENEFIT OF THE GLWB RIDER IS ACCESSED THROUGH REGULAR NON-EXCESS WITHDRAWALS, THE GLWB RIDER MAY NOT BE APPROPRIATE FOR OWNERS WHO DO NOT FORESEE A NEED FOR LIQUIDITY AND WHOSE PRIMARY OBJECTIVE IS TO TAKE MAXIMUM 45 ADVANTAGE OF THE TAX DEFERRAL ASPECT OF THE CONTRACT. CERTAIN QUALIFIED CONTRACTS MAY HAVE WITHDRAWAL RESTRICTIONS WHICH MAY LIMIT THE BENEFIT OF THE RIDER. YOU SHOULD CONSULT WITH YOUR TAX AND FINANCIAL PROFESSIONALS ON THIS MATTER, AS WELL AS OTHER TAX MATTERS ASSOCIATED WITH THE GLWB RIDER, AND DETERMINE WHETHER THE GLWB RIDER IS SUITABLE FOR YOU. ALSO, THE GLWB RIDER LIMITS THE INVESTMENT OPTIONS OTHERWISE AVAILABLE UNDER THE CONTRACT AND CONTAINS AGE CAPS, PURCHASE PAYMENT LIMITATIONS, AND RESTRICTIONS ON AN OWNER'S RIGHTS AND BENEFITS AT CERTAIN AGES AND VALUES. YOU SHOULD CAREFULLY CONSIDER EACH OF THESE FACTORS BEFORE DECIDING IF THE GLWB RIDER IS SUITABLE FOR YOUR NEEDS, ESPECIALLY AT OLDER AGES. Please carefully consider the following before electing the GLWB Rider: - All withdrawals, including Non-Excess Withdrawals and Excess Withdrawals, reduce your Contract Value and death benefit. Federal and state income taxes may apply, as well as a 10% federal penalty tax if a withdrawal occurs before the Owner(s) reach(es) age 59 1/2. - You may only allocate Purchase Payments and transfer Contract Value among certain Investment Options (see "INVESTMENT OPTION RESTRICTIONS" below). - We impose additional limitations on Purchase Payments (see "MAKING ADDITIONAL PURCHASE PAYMENTS" below). - You may not cancel the Rider once it is issued. - You will begin paying the GLWB Rider charge as of the first Monthiversary following the Date of Issue, even if you do not begin taking withdrawals for many years. If you choose not to take withdrawals, we will not refund the GLWB Rider charge. - Unless the sole Owner is a non-natural person, the Owner and Annuitant must be the same individual (additional Annuitants are not permitted), and if your Contract has joint Owners, each Owner must be an Annuitant. - You cannot change or add any Owner, joint Owner, Annuitant, or joint Annuitant, unless such change is permitted by us in connection with death or divorce. If you elect GLWB Plus For Two, or you elect GLWB Plus For One and your Contract has joint Owners, you also cannot change or add any Beneficiary, unless such change is permitted by us in connection with death or divorce. - There are restrictions regarding who may be named as an Owner, joint Owner, Annuitant, joint Annuitant, and Beneficiary (see "NAMING OF OWNERS, ANNUITANTS, AND BENEFICIARIES" below). - Any Settlement Payments that we make are subject to our financial strength and claims-paying ability. YOU SHOULD NOT PURCHASE THE GLWB RIDER IF: - you expect to take Excess Withdrawals because such Excess Withdrawals may significantly reduce or eliminate the value of the guarantees provided by the Rider; or - you do not expect to begin taking Non-Excess Withdrawals before the Annuity Date. PURCHASING THE GLWB RIDER Currently, the GLWB Rider is only available to Qualified Contracts. You may elect the Rider only on the initial Contract application. You cannot elect the Rider after the Date of Issue. In the case of GLWB Plus For One, you may only elect the Rider if the Covered Person has not attained age 76. In the case of joint Owners, the age of the older Owner determines eligibility. Where 46 the Owner is a non-natural person, we determine eligibility by the age of the older Annuitant on the Date of Issue. In the case of GLWB Plus For Two, you may only elect the Rider if the older Covered Person has not attained age 76. Also, both Covered Persons must have birthdates less than 6 years apart from each other. For example, assume you purchase a Contract on November 1, 2007 and you wish to select GLWB Plus For Two: - EXAMPLE 1: You are born July 1, 1942 and your spouse is born June 1, 1948. Since your birthdates are 5 years and 11 months apart, you may elect GLWB Plus For Two. - Example 2: You are born July 1, 1942 and your spouse is born August 1, 1948. Since your birthdates are 6 years and 1 month apart, you may NOT elect GLWB Plus For Two. We require due proof of age before issuing the Rider. We reserve the right to accept or refuse to issue the GLWB Rider at our sole discretion. We may discontinue offering the Rider at any time. The Rider may not be available in all states. COVERED PERSONS If both Owners of a Non-Qualified Contract are spouses, or if there is one Owner and a spouse who is the sole Beneficiary, you must choose whether there will be one or two Covered Persons. Please pay careful attention to this designation, as it will impact the GLWB Rider charge and whether the guarantees provided by the GLWB Rider will continue for the life of the surviving spouse. You must choose either the GLWB Plus For One or the GLWB Plus For Two when you elect the GLWB Rider. In the case of GLWB Plus For One, the Covered Person is the person whose life we use to determine the Lifetime Income Date and the duration of the monthly Settlement Payments on and after the Benefit Phase Start Date (if such date occurs on or after the Lifetime Income Date) or the Maximum Annuity Date (if you elect the GLWB Rider annuitization option on the Maximum Annuity Date). If there is more than one Owner, the Covered Person will be the older Owner on the Date of Issue. If the Contract is owned by a non-natural person, we will treat the older Annuitant on the Date of Issue as the older Owner for purposes of determining the Covered Person. In the case of GLWB Plus For Two, you and your spouse will be the Covered Persons whose lives we use to determine the Lifetime Income Date and the duration of the monthly Settlement Payments on and after the Benefit Phase Start Date (if such date occurs on or after the Lifetime Income Date) or the Maximum Annuity Date (if you elect the GLWB Rider annuitization option on the Maximum Annuity Date). We determine the Covered Person(s) at the time you elect the Rider. A Covered Person cannot be added or changed after the Date of Issue. NAMING OF OWNERS, ANNUITANTS, AND BENEFICIARIES Unless the sole Owner is a non-natural person, the Owner and Annuitant must be the same individual (additional Annuitants are not permitted), and if your Contract has joint Owners, each Owner must be an Annuitant. If the Owner is a non-natural person, we will treat each Annuitant as an Owner under the GLWB Rider, and all Owner provisions and restrictions apply to such Annuitants. You cannot change or add any Owner, joint Owner, Annuitant, or joint Annuitant, unless such change is permitted by us in connection with death or divorce. If you elect GLWB Plus For Two, or you elect GLWB Plus For One and your Contract has joint Owners, you also cannot change or add any Beneficiary, unless such change is permitted by us in connection with death or divorce. 47 IF YOU DO NOT HAVE A SPOUSE ON THE DATE OF ISSUE: - You may only elect GLWB Plus For One. You must be named as the sole Owner, and any Beneficiary may be named. You will be the Covered Person. IF YOU HAVE A SPOUSE ON THE DATE OF ISSUE: For Qualified Contracts: - Under the Code, only one spouse may be named as the sole Owner. - If you elect GLWB Plus For One, any Beneficiary may be named (spouse or non-spouse). The Covered Person will be the sole Owner. - If you elect GLWB Plus For Two, the other spouse must be named as the sole Beneficiary. The Covered Persons will be the sole Owner and the sole Beneficiary. For Non-Qualified Contracts, you must choose one of the following options: 1) one spouse is named as the sole Owner - If you elect GLWB Plus For One, any Beneficiary may be named (spouse or non-spouse). The Covered Person will be the sole Owner. - If you elect GLWB Plus For Two, the other spouse must be named as the sole Beneficiary. The Covered Persons will be the sole Owner and the sole Beneficiary. OR: 2) both spouses are named as joint Owners and Beneficiaries - If you elect GLWB Plus For One, the Covered Person will be the older Owner - If you elect GLWB Plus For Two, the Covered Persons will be both Owners. A spouse must qualify as a "spouse" under the Code. INVESTMENT OPTION RESTRICTIONS If you elect the GLWB Rider, you may only allocate your Purchase Payments and transfer your Contract Value among the following Investment Options: - Goldman Sachs Balanced Strategy Portfolio (Class A) - Goldman Sachs Growth and Income Strategy Portfolio (Class A) - Goldman Sachs Growth Strategy Portfolio (Class A) - Goldman Sachs VIT Money Market Fund (Service Shares) YOU MAY NOT ALLOCATE ANY PORTION OF YOUR PURCHASE PAYMENTS OR CONTRACT VALUE TO ANY INVESTMENT OPTION NOT LISTED ABOVE. YOU MAY NOT ALLOCATE PURCHASE PAYMENTS OR TRANSFER CONTRACT VALUE TO THE FIXED ACCOUNT. You should consult with your financial adviser to assist you in determining whether the Investment Options available with the GLWB Rider are best suited for your financial needs and risk tolerance. We reserve the right to impose additional restrictions on Investment Options at any time. GLWB RIDER CHARGE We assess an additional monthly charge for the GLWB Rider that compensates us for the costs and risks we assume in providing the benefits under the Rider. 48 - In the case of GLWB Plus For One, on the Date of Issue, the monthly GLWB Rider charge, which we will deduct from your Contract Value on each Monthiversary, is equal to 0.50% of the Lifetime Income Base on that Monthiversary. - In the case of GLWB Plus For Two, on the Date of Issue, the monthly GLWB Rider charge, which we will deduct from your Contract Value on each Monthiversary, is equal to 0.75% of the Lifetime Income Base on that Monthiversary. WE RESERVE THE RIGHT TO INCREASE THE GLWB RIDER CHARGE ON THE EFFECTIVE DATE OF EACH STEP-UP. WE GUARANTEE, HOWEVER, THAT THE MONTHLY GLWB RIDER CHARGE WILL NEVER EXCEED 1.00% FOR GLWB PLUS FOR ONE OR 1.50% FOR GLWB PLUS FOR TWO, OF THE LIFETIME INCOME BASE ON EACH MONTHIVERSARY. If we decide to increase the GLWB Rider charge at the time of a Step-Up, then you will receive advance notice and be given the opportunity of no less than 30 days to decline the automatic Step-Up by notifying us at our Service Center in writing. We will deduct a pro rata share of the monthly GLWB Rider charge from the amount otherwise due: 1) If you take an Excess Withdrawal on any date other than a Monthiversary and such withdrawal reduces the Contract Value to zero. 2) On the Annuity Date. 3) Upon surrender of the Contract. All charges for the GLWB Rider will cease upon termination (see "TERMINATING THE GLWB RIDER" below). When we deduct the charge for the GLWB Rider , we will reduce Purchase Payments (and earnings attributable to those Purchase Payments) in the chronological order in which we received such Purchase Payments. GUARANTEED AMOUNTS THE GUARANTEED WITHDRAWAL BALANCE. On the Date of Issue, the initial Guaranteed Withdrawal Balance is equal to your initial Purchase Payment (less any premium taxes). Your Guaranteed Withdrawal Balance can never be more than $5 million. Your Guaranteed Withdrawal Balance will never be less than zero. THE LIFETIME INCOME BASE. On the Date of Issue, the initial Lifetime Income Base is equal to your initial Purchase Payment (less any premium taxes). The amount of the GLWB Rider charge and the Lifetime Income Amount will increase if the Lifetime Income Base increases. Your Lifetime Income Base can never be more than $5 million. Your Lifetime Income Base will never be less than zero. NOTE: The Guaranteed Withdrawal Balance and Lifetime Income Base are not cash values or surrender values, are not available to Owners, are not minimum returns for any Subaccount, and are not guarantees of any Contract Value. THE GUARANTEED WITHDRAWAL AMOUNT. On the Date of Issue, the initial Guaranteed Withdrawal Amount is equal to 5% of the initial Guaranteed Withdrawal Balance. Your Guaranteed Withdrawal Amount can never be more than $250,000. THE LIFETIME INCOME AMOUNT. On the Lifetime Income Date, the initial Lifetime Income Amount is equal to 5% of your Lifetime Income Base on that date. We do not calculate the Lifetime Income Amount prior to the Lifetime Income Date. Your Lifetime Income Amount can never be more than $250,000. 49 NOTE: If you take any withdrawals prior to the Lifetime Income Date, the initial amount of the Lifetime Income Amount may be less than the previously available Guaranteed Withdrawal Amount. Non-Excess Withdrawals, Excess Withdrawals, additional Purchase Payments, Bonuses, and Step-Ups may have an effect on the value of the Guaranteed Withdrawal Balance, the Lifetime Income Base, the Guaranteed Withdrawal Amount, and the Lifetime Income Amount, as follows: IF: THEN: You take a Non-Excess Withdrawal - we will decrease your Guaranteed Withdrawal Balance; - prior to the Lifetime Income Date: - we will decrease your Lifetime Income Base; and - we will not change your Guaranteed Withdrawal Amount; - on or after the Lifetime Income Date: - we will not change your Lifetime Income Base; and - we will not change your Lifetime Income Amount. (See "TAKING WITHDRAWALS" below) You take an Excess Withdrawal - we will decrease your Guaranteed Withdrawal Balance; - we will decrease your Lifetime Income Base; - prior to the Lifetime Income Date: - we will decrease your Guaranteed Withdrawal Amount; - on or after the Lifetime Income Date: - we will decrease your Lifetime Income Amount. (See "TAKING WITHDRAWALS" below) IF: THEN: You make an additional Purchase Payment - we will increase your Guaranteed Withdrawal Balance; - we will increase your Lifetime Income Base; - prior to the Lifetime Income Date: - we will recalculate your Guaranteed Withdrawal Amount; - on or after the Lifetime Income Date: - we will increase your Lifetime Income Amount. (See "MAKING ADDITIONAL PURCHASE PAYMENTS" below) We apply a Bonus and/or Step-Up - we will not change your Guaranteed Withdrawal Balance; - we will not change your Guaranteed Withdrawal Amount; - we will increase your Lifetime Income Base; and - on or after the Lifetime Income Date: - we will increase your Lifetime Income Amount; (See "BONUS" and "STEP-UP" below)
TAKING WITHDRAWALS IMPORTANT CONSIDERATIONS You may be assessed charges and penalties if you take withdrawals: - Although we currently do not assess a withdrawal charge on Non-Excess Withdrawals, we reserve the right to do so (unless you have elected the No Withdrawal Charge Rider for an additional charge). We will assess a withdrawal charge on Excess Withdrawals if such 50 withdrawals would otherwise be subject to a withdrawal charge. If we assess a withdrawal charge on a Non-Excess Withdrawal or an Excess Withdrawal, we will calculate and impose the charge in the same manner that we would for any partial withdrawal. All withdrawals, including Non- Excess Withdrawals and Excess Withdrawals, will reduce the remaining Free Withdrawal Amount in any Contract Year. (See "WITHDRAWAL CHARGE" and "NO WITHDRAWAL CHARGE RIDER") - All withdrawals, including Non-Excess Withdrawals and Excess Withdrawals, reduce your Contract Value and death benefit. Federal and state income taxes may apply, as well as a 10% federal penalty tax if a withdrawal occurs before the Owner(s) reach(es) age 59 1/2. (See "FEDERAL TAX MATTERS") You should carefully consider when to begin taking Non-Excess Withdrawals. - You may reduce the value of the guarantees provided by the GLWB Rider, depending on when you begin taking Non-Excess Withdrawals. For example, because Non-Excess Withdrawals taken prior to the Lifetime Income Date reduce your Lifetime Income Base, such withdrawals will result in a lower initial Lifetime Income Amount (when calculated on the Lifetime Income Date). - If you delay taking Non-Excess Withdrawals, you may be paying for a benefit you are not using. Please consult your financial adviser as to the appropriate time for you to begin taking Non-Excess Withdrawals. NON-EXCESS WITHDRAWALS IF: THEN: You take a Non-Excess Withdrawal prior 1. We will decrease the Guaranteed Withdrawal Balance to the Lifetime Income Date: by the amount of the withdrawal. 2. We will decrease the Lifetime Income Base to equal the GREATER of: - the Lifetime Income Base immediately amount prior to the withdrawal minus the of the withdrawal; OR - the Lifetime Income Base immediately prior to the withdrawal multiplied by the Proportional Reduction Factor. 3. Your Guaranteed Withdrawal Amount will not change. THE PROPORTIONAL REDUCTION FACTOR IS EQUAL TO YOUR CONTRACT VALUE AFTER THE WITHDRAWAL DIVIDED BY YOUR CONTRACT VALUE IMMEDIATELY PRIOR THE WITHDRAWAL. IF: THEN: You take a Non-Excess Withdrawal on or 1. We will decrease the Guaranteed Withdrawal Balance after the Lifetime Income Date: by the amount of the withdrawal. 2. Your Lifetime Income Base will not change. 3. Your Lifetime Income Amount will not change.
THE LIFETIME INCOME AMOUNT MAY BE LESS THAN THE GUARANTEED WITHDRAWAL AMOUNT PREVIOUSLY AVAILABLE IF YOU TAKE ANY WITHDRAWALS BEFORE YOUR LIFETIME INCOME DATE. NOTE: If you choose to receive only a part of, or none of, your Guaranteed Withdrawal Amount or Lifetime Income Amount, as applicable, in any given Contract Year, you should understand that annual Non-Excess Withdrawals are not cumulative. You cannot carry over any unused Non-Excess Withdrawals to any future Contract Years. 51 EXCESS WITHDRAWALS IF: THEN: You take an Excess Withdrawal prior to 1. We will decrease the Guaranteed Withdrawal Balance the Lifetime Income Date: to equal the LESSER of: - the Guaranteed Withdrawal Balance immediately prior to the withdrawal minus the amount of the withdrawal; OR - the Guaranteed Withdrawal Balance immediately prior to the withdrawal multiplied by the Proportional Reduction Factor. 2. We will decrease the Guaranteed Withdrawal Amount to equal the Guaranteed Withdrawal Amount immediately prior to the withdrawal multiplied by the Proportional Reduction Factor. 3. We will decrease the Lifetime Income Base to equal the Lifetime Income Base immediately prior to the withdrawal multiplied by the Proportional Reduction Factor. THE PROPORTIONAL REDUCTION FACTOR IS EQUAL TO YOUR CONTRACT VALUE AFTER THE WITHDRAWAL DIVIDED BY YOUR CONTRACT VALUE IMMEDIATELY PRIOR THE WITHDRAWAL. IF: THEN: You take an Excess Withdrawal on or 1. We will decrease the Guaranteed Withdrawal Balance after the Lifetime Income Date: to equal the LESSER of: - the Guaranteed Withdrawal Balance immediately prior to the withdrawal minus the amount of the withdrawal; OR - the Guaranteed Withdrawal Balance immediately prior to the withdrawal multiplied by the Proportional Reduction Factor. 2. We will decrease the Lifetime Income Base to equal the Lifetime Income Base immediately prior to the withdrawal multiplied by the Proportional Reduction Factor. 3. We will decrease the Lifetime Income Amount to equal 5% of the new Lifetime Income Base. THE PROPORTIONAL REDUCTION FACTOR IS EQUAL TO YOUR CONTRACT VALUE AFTER THE WITHDRAWAL DIVIDED BY YOUR CONTRACT VALUE IMMEDIATELY PRIOR THE WITHDRAWAL.
THE GLWB RIDER IS DESIGNED FOR YOU TO TAKE NON-EXCESS WITHDRAWALS EACH CONTRACT YEAR. YOU SHOULD NOT PURCHASE THE GLWB RIDER IF YOU INTEND TO TAKE EXCESS WITHDRAWALS. - EXCESS WITHDRAWALS COULD REDUCE YOUR GUARANTEED WITHDRAWAL BALANCE AND LIFETIME INCOME BASE BY SUBSTANTIALLY MORE THAN THE ACTUAL AMOUNT OF THE WITHDRAWAL. THIS MEANS THAT THE AMOUNT OF TOTAL GROSS WITHDRAWALS YOU MAKE AND/OR MONTHLY SETTLEMENT PAYMENTS YOU RECEIVE UNDER THE RIDER COULD BE LESS THAN THE TOTAL OF YOUR PURCHASE PAYMENTS (LESS ANY PREMIUM TAXES). - EXCESS WITHDRAWALS MAY REDUCE OR EVEN ELIMINATE YOUR FUTURE GUARANTEED WITHDRAWAL AMOUNT AND FUTURE LIFETIME INCOME AMOUNT. - WE WILL SURRENDER YOUR CONTRACT, AND YOU WILL LOSE THE GUARANTEES PROVIDED BY THE GLWB RIDER, IF YOUR CONTRACT VALUE IS REDUCED TO ZERO DUE TO EXCESS WITHDRAWALS. YOU WILL NOT RECEIVE ANY FURTHER BENEFITS UNDER THE GLWB RIDER. 52 MAKING ADDITIONAL PURCHASE PAYMENTS You may make additional Purchase Payments at any time prior to the earlier of the Benefit Phase Start Date or the Covered Person's 76th birthday (or the older Covered Person's 76th birthday in the case of GLWB Plus For Two), subject to the limitations discussed below. PURCHASE PAYMENTS PRIOR TO THE LIFETIME INCOME DATE. If we receive a Purchase Payment prior to the Lifetime Income Date, we will increase the Guaranteed Withdrawal Balance and the Lifetime Income Base by the amount of the Purchase Payment (less any premium taxes) (subject to a maximum limit of $5 million). We also will recalculate the Guaranteed Withdrawal Amount to equal the greater of: - the Guaranteed Withdrawal Amount immediately before the Purchase Payment; or - 5% of the Guaranteed Withdrawal Balance immediately after the Purchase Payment. PURCHASE PAYMENTS ON OR AFTER THE LIFETIME INCOME DATE. If we receive a Purchase Payment on or after the Lifetime Income Date, we will increase the Guaranteed Withdrawal Balance and the Lifetime Income Base by the amount of the Purchase Payment (less any premium taxes) (subject to a maximum limit of $5 million). On and after the Lifetime Income Date, we will increase the Lifetime Income Amount every time we increase the Lifetime Income Base due to our receipt of a Purchase Payment. The new Lifetime Income Amount will equal 5% of the new Lifetime Income Base following the Purchase Payment. PURCHASE PAYMENT LIMITATIONS. Please note the following limits on Purchase Payments: - We reserve the right to refuse to accept additional Purchase Payments at any time to the extent permitted in the state we issue your Contract. - You must obtain our prior approval if your Contract Value immediately following an additional Purchase Payment would exceed $1,000,000. We will aggregate multiple Contracts you own for purposes of the $1,000,000 limitation. - We will not accept an additional Purchase Payment on or after the first Contract Anniversary without our prior approval if the total of your Purchase Payments on and after the first Contract Anniversary would exceed $100,000. If you own a Qualified Contract, we will waive our requirement for prior approval of any Purchase Payments made in connection with a systematic investment program approved by us. We will aggregate multiple Contracts you own for purposes of the $100,000 limitation. All other limitations on Purchase Payments, as set forth in "Purchase Payments," also apply. We reserve the right to impose additional limitations on Purchase Payments at any time. BONUS A Bonus is available for a limited time (the "Bonus Period"). The Bonus is an incentive for you to defer taking withdrawals until after the Bonus Period. The Bonus Period begins on the first Contract Anniversary and ends on the earlier of: - the 10th Contract Anniversary; or - the Contract Anniversary immediately following the Contract Year in which the Covered Person (or the older original Covered Person in the case of GLWB Plus For Two) reaches age 80. If you have never taken a withdrawal, we will increase the Lifetime Income Base by a Bonus on each Contract Anniversary during the Bonus Period (subject to the maximum Lifetime Income Base 53 limit of $5 million). Each time you qualify for a Bonus, we will increase the Lifetime Income Base by an amount equal to 5% multiplied by total Purchase Payments (less any premium taxes). On and after the Lifetime Income Date, we will increase the Lifetime Income Amount every time we increase the Lifetime Income Base due to a Bonus. The new Lifetime Income Amount will equal 5% of the new Lifetime Income Base after the Bonus. We will apply any Bonus before we determine if a Step-Up applies on any Contract Anniversary. Once you take a withdrawal, we will not apply any future Bonuses to the Lifetime Income Base. NOTE: A Bonus increases the Lifetime Income Base, but it is not available in cash and has no effect on your Contract Value. STEP-UP If your Contract Value on any "Step-Up Date" during the "Step-Up Period" is greater than the Lifetime Income Base on that date, we will automatically increase your Lifetime Income Base to equal the Contract Value (subject to the maximum Lifetime Income Base limit of $5 million). On and after the Lifetime Income Date, we will increase the Lifetime Income Amount every time we increase the Lifetime Income Base due to a Step-Up. The new Lifetime Income Amount will equal 5% of the new Lifetime Income Base following the Step-Up. We will apply any Bonus before we determine if a Step-Up applies on any Contract Anniversary. STEP-UP PERIOD. The Step-Up Period begins on the Date of Issue and ends on the Contract Anniversary immediately following the Contract Year in which the Covered Person (or the older original Covered Person in the case of GLWB Plus For Two) reaches age 90. NO STEP-UPS WILL OCCUR AFTER THE END OF THE STEP-UP PERIOD. STEP-UP DATES. During the Step-Up Period, we schedule the Step-Up Dates for the 3rd, 6th, and 9th Contract Anniversary after the Date of Issue and every Contract Anniversary thereafter (E.G., the 10th, 11th, 12th, etc.) while the GLWB Rider is in effect, and on the Lifetime Income Date. INCREASE IN GLWB RIDER CHARGE: If we Step-Up the Lifetime Income Base, we reserve the right to increase the monthly GLWB Rider charge up to a maximum of 1.00% for GLWB Plus For One or 1.50% for GLWB Plus For Two, on an annual basis, of the Lifetime Income Base on each Monthiversary (see "GLWB RIDER CHARGE" above). If we decide to increase the GLWB Rider charge at the time of a Step-Up, you will receive advance notice and be given the opportunity of no less than 30 days to decline the automatic Step-Up by notifying us at our Service Center in writing. If you decline an automatic Step-Up, you will have the option to elect to Step-Up the Lifetime Income Base within 30 days of subsequent Step-Up Dates by submitting a written request to our Service Center. If you decide to Step-Up the Lifetime Income Base, we will thereafter resume automatic Step-Ups. BENEFIT PHASE The Contract enters the Benefit Phase IF: - the Contract Value is reduced to zero due to: - a Non-Excess Withdrawal; OR - poor market performance; OR - the assessment of Contract fees and charges, including the GLWB Rider charge 54 - AND either the Guaranteed Withdrawal Balance or the Lifetime Income Amount immediately after any of the above occurs is greater than zero. The date the Contract enters the Benefit Phase is called the Benefit Phase Start Date. Note that the Contract will only be eligible to enter the Benefit Phase if: - In the case of GLWB Plus For One: 1. the Covered Person was the sole Owner on the Date of Issue and the Covered Person lives until the Benefit Phase Start Date; OR 2. both Owners live until the Benefit Phase Start Date (in the case of a Non-Qualified Contract with joint Owners); or 3. a Non-Qualified Contract with joint Owners is continued if the Owner who is not a Covered Person dies, and the Covered Person then lives until the Benefit Phase Start Date. - In the case of GLWB Plus For Two: 1. both Covered Persons live until the Benefit Phase Start Date; OR 2. a Covered Person who is not an Owner dies and the surviving Covered Person lives until the Benefit Phase Start Date; OR 3. the Contract is continued after the death of an Owner and the surviving Covered Person then lives until the Benefit Phase Start Date. On the Benefit Phase Start Date we will terminate the GLWB Rider and all other rights and benefits under the Contract, including death benefits and any additional riders. We will not accept additional Purchase Payments and we will not deduct the GLWB Rider charge after the Benefit Phase Start Date. During the Benefit Phase, we will pay you monthly Settlement Payments. Total monthly Settlement Payments received in the Benefit Phase (by you or your Beneficiary) will not be less than the Guaranteed Withdrawal Balance on the Benefit Phase Start Date, unless your Beneficiary chooses to commute any remaining monthly Settlement Payments on the death of the Covered Person (or the death of the last surviving Covered Person in the case of GLWB Plus For Two). NOTE: If the Benefit Phase Start Date occurs before the Lifetime Income Date, monthly Settlement Payments will continue until the Guaranteed Withdrawal Balance is reduced to zero. You may receive as few as one monthly Settlement Payment if the Guaranteed Withdrawal Balance is reduced to zero after the first monthly Settlement Payment. If the Benefit Phase Start Date occurs on or after the Lifetime Income Date, monthly Settlement Payments will continue while a Covered Person is living or until the Guaranteed Withdrawal Balance is reduced to zero, if later. You may receive as few as one monthly Settlement Payment if the Guaranteed Withdrawal Balance is equal to zero on the Benefit Phase Start Date (or is reduced to zero after the first monthly Settlement Payment) and the Covered Person dies (or last surviving Covered Person dies in the case of GLWB Plus for Two) before the next monthly Settlement Payment. Changes to Owners and Beneficiaries on and after the Benefit Period Start Date are subject to the same restrictions that would apply if the Contract entered the Annuity Period. (See "OWNERS, ANNUITANTS, AND BENEFICIARIES") 55 IF THE BENEFIT PHASE START DATE OCCURS BEFORE THE LIFETIME INCOME DATE: If the Guaranteed Withdrawal Balance on the Benefit Phase Start Date is less than or equal to $2,000: - The first and only Settlement Payment that we will pay you on the Benefit Phase Start Date will be equal to the Guaranteed Withdrawal Balance. If the Guaranteed Withdrawal Balance on the Benefit Phase Start Date is greater than $2,000: - The first monthly Settlement Payment that we will pay you on the Benefit Phase Start Date will be equal to the lesser of: - the Guaranteed Withdrawal Amount minus total Gross Withdrawals taken during the current Contract Year (but in no event less than zero) plus the Guaranteed Withdrawal Amount divided by twelve; or - the Guaranteed Withdrawal Balance. - We will decrease the Guaranteed Withdrawal Balance by the amount of the first monthly Settlement Payment. If the Guaranteed Withdrawal Balance following the first monthly Settlement Payment is greater than zero, we will pay you recurring monthly Settlement Payments (beginning one month after the Benefit Phase Start Date) equal to the Guaranteed Withdrawal Amount divided by twelve, and we will reduce the Guaranteed Withdrawal Balance by the amount of each payment until the Guaranteed Withdrawal Balance is equal to zero. If the Covered Person dies (or the last surviving Covered Person dies in the case of GLWB Plus For Two) and the Guaranteed Withdrawal Balance has not been reduced to zero, monthly Settlement Payments will continue to the Beneficiary until the Guaranteed Withdrawal Balance is reduced to zero. The last monthly Settlement Payment may be less than the remaining Guaranteed Withdrawal Amount divided by twelve. EXAMPLE: If: The Guaranteed Withdrawal Balance on the Benefit Phase Start Date = $20,100 The Guaranteed Withdrawal Amount = $6,000 Total Gross Withdrawals taken during the current Contract Year = $3,000 The first monthly Settlement Payment will be equal to $3,500 (= Minimum ($20,100, $6,000 - $3,000 + ($6,000 / 12))). The Guaranteed Withdrawal Balance after the first monthly Settlement Payment will be equal to $16,600 (= $20,100 - $3,500). Thereafter, we will pay you monthly Settlement Payments of $500 (= $6,000 / 12), and we will reduce the Guaranteed Withdrawal Balance by $500 for each monthly Settlement Payment, until the Guaranteed Withdrawal Balance is reduced to zero. If the Covered Person dies (or the last surviving Covered Person dies in the case of GLWB Plus For Two) and the Guaranteed Withdrawal Balance has not been reduced to zero, the monthly Settlement Payments of $500 will continue to the Beneficiary until the Guaranteed Withdrawal Balance is reduced to zero. In this example, the Guaranteed Withdrawal Balance will be reduced to $100 (= $20,100 - 1 X $3,500 - 33 X $500) after the 34th payment. Therefore, the last monthly Settlement Payment (the 35th payment) will be equal to $100. - If you die, the Beneficiary may commute any remaining monthly Settlement Payments at an interest rate of 5%. 56 IF THE BENEFIT PHASE START DATE OCCURS ON OR AFTER THE LIFETIME INCOME DATE: - The first monthly Settlement Payment that we will pay you on the Benefit Phase Start Date will be equal to the Lifetime Income Amount minus total Gross Withdrawals taken during the current Contract Year (but in no event less than zero) plus the Lifetime Income Amount divided by twelve. - You will then receive recurring monthly Settlement Payments (beginning one month after the Benefit Phase Start Date) for the rest of the Covered Person's life (or the last surviving Covered Person's life in the case of GLWB Plus For Two) equal to the Lifetime Income Amount divided by twelve. We will reduce the Guaranteed Withdrawal Balance by the amount of each monthly Settlement Payment we make to you. If the Covered Person dies (or the last surviving Covered Person dies in the case of GLWB Plus For Two) and the Guaranteed Withdrawal Balance has not been reduced to zero, monthly Settlement Payments will continue to the Beneficiary until the Guaranteed Withdrawal Balance is reduced to zero. The last monthly Settlement Payment may be less than the Lifetime Income Amount divided by twelve. EXAMPLE: If: The Guaranteed Withdrawal Balance on the Benefit Phase Start Date = $20,100 The Lifetime Income Amount = $6,000 Total Gross Withdrawals taken during the current Contract Year = $3,000 The first monthly Settlement Payment will be equal to $3,500 (= Minimum ($20,100, $6,000 - $3,000 + ($6,000 / 12)). The Guaranteed Withdrawal Balance after the first monthly Settlement Payment will be equal to $16,600 (= $20,100 - $3,500). Thereafter, we will pay you monthly Settlement Payments of $500 (= $6,000 / 12) for the rest of the Covered Person's life (or for the rest of the last surviving Covered Person's life in the case of GLWB Plus For Two). We will reduce the Guaranteed Withdrawal Balance by $500 for each of these payments as we make them. If the Covered Person dies (or the last surviving Covered Person dies in the case of GLWB Plus For Two) and the Guaranteed Withdrawal Balance has not been reduced to zero, the monthly Settlement Payments of $500 will continue to your Beneficiary until the Guaranteed Withdrawal Balance is reduced to zero. In this example, the Guaranteed Withdrawal Balance will be reduced to $100 (= $20,100 - 1 X $3,500 - 33 X $500) after the 34th payment. If the Covered Person has died (or if the last surviving Covered Person has died in the case of GLWB Plus For Two) before the 35th payment, the last monthly Settlement Payment (the 35th payment) will be equal to $100, otherwise we will continue to make monthly Settlement Payments of $500 until the Covered Person's death (or the last surviving Covered Person's death in the case of GLWB Plus For Two). NOTE: Under Qualified Contracts, we may make higher monthly Settlement Payments before the Guaranteed Withdrawal Balance is reduced to zero, if we determine that we must do so based on our calculations of your minimum required distribution. In this case, after the Guaranteed Withdrawal Balance is reduced to zero, we will make monthly Settlement Payments equal to the Lifetime Income Amount divided by twelve, provided that a Covered Person is still living at that time. - If you die, the Beneficiary may commute any remaining monthly Settlement Payments at an interest rate of 5%. NOTE: If there is one living Covered Person on the Benefit Phase Start Date and the Benefit Phase Start Date occurs on or after the Lifetime Income Date, the duration of monthly Settlement Payments on and after the Benefit Phase Start Date will be based on that Covered Person's life only, regardless of 57 who is named as an Annuitant. If there are two living Covered Persons on the Benefit Phase Start Date and the Benefit Phase Start Date occurs on or after the Lifetime Income Date, the duration of monthly Settlement Payments on and after the Benefit Phase Start Date will be based on both Covered Person's lives, regardless of who is named as an Annuitant. NOTE: In the event of divorce, there are cases where we will terminate the GLWB Rider on the Valuation Date that we receive due proof of divorce or the Valuation Date that we receive due proof of death of the first Owner to die. In some cases, the Contract will not be eligible to enter the Benefit Phase after the date of divorce. See "DIVORCE" below. GLWB RIDER DEATH BENEFIT GLWB RIDER DEATH BENEFIT BEFORE THE BENEFIT PHASE START DATE If the GLWB Rider Death Benefit is payable in the situations outlined below, the GLWB Rider Death Benefit will be equal to the greater of (A) or (B), less any premium taxes, where: (A) = The Contract Value on the Valuation Date we receive due proof of death (B) = The Guaranteed Withdrawal Balance on the Valuation Date we receive due proof of death
We will calculate any GLWB Rider Death Benefit on the Valuation Date we receive due proof of death. 1) GLWB PLUS FOR ONE If an Owner's death occurs before the Benefit Phase Start Date and the Beneficiary elects to take the Contract death benefit as a lump sum under our current administrative procedures, the following will apply: IF: THEN: The Covered Person is the deceased - We will pay the GLWB Rider Death Benefit instead Owner: of the standard death benefit or any optional death benefit you elected if the GLWB Rider Death Benefit is greater. - We will terminate the GLWB Rider on the Valuation Date we receive due proof of death. The Covered Person is NOT the deceased - We will NOT pay the GLWB Rider Death Benefit. Owner: - We will terminate the GLWB Rider on the Valuation Date we receive due proof of death. NOTE: THIS SITUATION CAN ONLY ARISE IF JOINT OWNERS ARE NAMED ON THE DATE OF ISSUE.
If an Owner's death occurs before the Benefit Phase Start Date and the Beneficiary elects NOT to take the Contract death benefit as a lump sum, the following will apply: IF: THEN: The Covered Person is the deceased - We will pay the GLWB Rider Death Benefit instead Owner, the Beneficiary is the of the standard death benefit or any optional death deceased Owner's surviving spouse, benefit you elected if the GLWB Rider Death Benefit and the Beneficiary chooses NOT to is greater. continue the Contract: - We will terminate the GLWB Rider on the Valuation Date we receive due proof of death.
58 The Covered Person is the deceased - We will apply the GLWB Rider Death Benefit instead Owner, the Beneficiary is the of the standard death benefit or any optional death deceased Owner's surviving spouse, benefit you elected if the GLWB Rider Death Benefit and the Beneficiary chooses to is greater. continue the Contract: - We will terminate the GLWB Rider on the Valuation Date we receive due proof of death. The Covered Person is the deceased - We will pay the GLWB Rider Death Benefit instead Owner and the Beneficiary is NOT the of the standard death benefit or any optional death deceased Owner's surviving spouse: benefit you elected if the GLWB Rider Death Benefit is greater. - We will terminate the GLWB Rider on the Valuation Date we receive due proof of death. IF: THEN: The Covered Person is NOT the deceased - We will NOT apply the GLWB Rider Death Benefit. Owner, the sole Beneficiary is the - We will NOT terminate the GLWB Rider--the Rider deceased Owner's surviving spouse, will continue unchanged. and the Beneficiary chooses to - The surviving owner may add or change any continue the Contract: Beneficiary (spouse or non-spouse). NOTE: THIS SITUATION CAN ONLY ARISE IF JOINT OWNERS ARE NAMED ON THE DATE OF ISSUE. The Covered Person is NOT the deceased - We will NOT pay the GLWB Rider Death Benefit. Owner, the sole Beneficiary is the - We will terminate the GLWB Rider on the Valuation deceased Owner's surviving spouse, Date we receive due proof of death. and the Beneficiary chooses NOT to continue the Contract: NOTE: THIS SITUATION CAN ONLY ARISE IF JOINT OWNERS ARE NAMED ON THE DATE OF ISSUE.
2) GLWB PLUS FOR TWO If an Owner's death occurs before the Benefit Phase Start Date and the Beneficiary elects to take the Contract death benefit as a lump sum under our current administrative procedures, the following will apply: - If the Covered Person is the deceased Owner and the Beneficiary is not the other Covered Person: 1. We will pay the GLWB Rider Death Benefit instead of the standard death benefit1. or any optional death benefit you elected if the GLWB Rider Death Benefit is greater. 2. We will terminate the GLWB Rider on the Valuation Date we receive due proof of death. NOTE: THIS SITUATION CAN ARISE ONLY IF BOTH OF THE COVERED PERSONS HAVE DIED. - Otherwise, we will not pay the GLWB Rider Death Benefit and we will terminate the GLWB Rider on the Valuation Date we receive due proof of death. If an Owner's death occurs before the Benefit Phase Start Date and the Beneficiary elects NOT to take the Contract death benefit as a lump sum, the following will apply: IF: THEN: The Covered Person is the deceased - We will pay the GLWB Rider Death Benefit instead Owner and the Beneficiary is not the of the standard death benefit or any optional death other Covered Person: benefit you elected if the GLWB Rider Death Benefit is greater.
59 NOTE: THIS SITUATION CAN ARISE ONLY IF - We will terminate the GLWB Rider on the Valuation BOTH OF THE COVERED PERSONS HAVE Date we receive due proof of death. DIED. IF: THEN: A Covered Person is the deceased Owner, - We will NOT apply the GLWB Rider Death Benefit. the Beneficiary is the deceased - We will NOT terminate the GLWB Rider--the Rider Owner's surviving spouse (and the will continue unchanged. other Covered Person), and the - If the Beneficiary (who is the surviving spouse) Beneficiary chooses to continue the was not an Owner of the Contract, the Beneficiary Contract: will become the new Owner and new Annuitant. The new or surviving Owner may add or change any Beneficiary (spouse or non-spouse). NOTE: THIS SITUATION CAN ARISE IF ONLY ONE OF THE COVERED PERSONS HAS DIED. A Covered Person is the deceased Owner, - We will NOT pay the GLWB Rider Death Benefit. the Beneficiary is the deceased - We will terminate the GLWB Rider on the Valuation Owner's surviving spouse (and the Date we receive due proof of death. other Covered Person), and the Beneficiary chooses NOT to continue the Contract: NOTE: THIS SITUATION CAN ARISE IF ONLY ONE OF THE COVERED PERSONS HAS DIED.
In the case of GLWB Plus For Two, the Rider will continue unchanged and we will not pay the GLWB Rider Death Benefit upon the death of a Covered Person who is not an Owner. In this case, the surviving Owner may add or change any Beneficiary (spouse or non-spouse). We will pay or apply any GLWB Rider Death Benefit due upon the death of an Owner before the Benefit Phase Start Date in the same manner that we pay or apply the Contract death benefit when an Owner's death occurs before the Annuity Date and, in all circumstances, in accordance with Sections 72(s) or 401(a)(9) of the Code, as applicable. Please note that Contract continuation will not satisfy required minimum distribution rules for Qualified Contracts other than IRAs. Consult a tax adviser for more information. GLWB RIDER DEATH BENEFIT ON OR AFTER THE BENEFIT PHASE START DATE If a Covered Person (or the last surviving Covered Person, in the case of GLWB Plus For Two) dies on or after the Benefit Phase Start Date, we will continue to make the same recurring monthly Settlement Payments that were being made prior to the Covered Person's death to the Beneficiary until the Guaranteed Withdrawal Balance is reduced to zero. If the Benefit Phase Start Date occurs before the Lifetime Income Date, then the last monthly Settlement Payment may be less than the Guaranteed Withdrawal Amount divided by twelve. If the Benefit Phase Start Date occurs on or after the Lifetime Income Date, then the last monthly Settlement Payment may be less than the Lifetime Income Amount divided by twelve. We will pay or apply any GLWB Rider Death Benefit due upon the death of an Owner on or after the Benefit Phase Start Date in the same manner that we pay or apply the Contract death benefit when an Owner's death occurs on or after the Annuity Date and, in all circumstances, in accordance with Sections 72(s) or 401(a)(9) of the Code, as applicable. In some cases, the amount of each monthly 60 Settlement Payment we make to the Beneficiary may be greater than the minimum distribution that might otherwise be required. NOTE: In the event of divorce, there are cases where we will terminate the GLWB Rider on the Valuation Date that we receive due proof of divorce or the Valuation Date that we receive due proof of death of the first Owner to die. In some cases, the GLWB Rider Death Benefit will not be payable on the death of an Owner, as outlined above, after the date of divorce. See "DIVORCE" below.
ANNUITIZATION On the Annuity Date, you must elect one of the following Options: Option 1: Elect to surrender the Contract, and we will terminate the GLWB Rider and pay you the Withdrawal Value (see "WITHDRAWALS AND SURRENDERS DURING THE ACCUMULATION PERIOD"); Option 2: Elect to receive annuity payments under your Contract, and we will terminate the GLWB Rider and apply your Withdrawal Value as of the Annuity Date to an Annuity Option (see "ANNUITY PERIOD"); OR If the Maximum Annuity Date has been reached, elect to apply your Withdrawal Value to the GLWB Rider annuitization option. Under the GLWB Rider annuitization option, we will pay you monthly Settlement Payments equal to the Lifetime Income Amount divided by twelve for the rest of the Covered Person's life (or the last surviving Covered Person's life in the case of GLWB Plus For Two), beginning Option 3: on the Maximum Annuity Date. We will reduce the Guaranteed Withdrawal Balance by the amount of each monthly Settlement Payment we make to you. If the Covered Person dies (or the last surviving Covered Person dies in the case of GLWB Plus For Two) and the Guaranteed Withdrawal Balance has not been reduced to zero, monthly Settlement Payments will continue to the Beneficiary until the Guaranteed Withdrawal Balance is reduced to zero. The last monthly Settlement Payment may be less than the Lifetime Income Amount divided by twelve. NOTE: Total monthly Settlement Payments received on and after the Maximum Annuity Date (by you or your Beneficiary) will not be less than the Guaranteed Withdrawal Balance on the Maximum Annuity Date, unless your Beneficiary chooses to commute any remaining monthly Settlement Payments on the death of the Covered Person (or the death of the last surviving Covered Person in the case of GLWB Plus For Two). NOTE: You may receive as few as one monthly Settlement Payment if the Guaranteed Withdrawal Balance is equal to zero on the Maximum Annuity Date (or is reduced to zero after the first monthly Settlement Payment) and the Covered Person dies (or last surviving Covered Person dies in the case of GLWB Plus for Two) before the next monthly Settlement Payment. NOTE: Under Qualified Contracts, we may make higher monthly Settlement Payments before the Guaranteed Withdrawal Balance is reduced to zero, if we determine that we must do so based on our calculations of your minimum required distribution. In this case, after the Guaranteed Withdrawal Balance is reduced to zero, we will make monthly Settlement Payments equal to the Lifetime Income Amount divided by twelve, provided that a Covered Person is still living at that time.
If you die, the Beneficiary may commute any remaining monthly Settlement Payments at an interest rate of 5%. 61 EXAMPLE: If: The Contract has reached the Maximum Annuity Date The Withdrawal Value on the Maximum Annuity Date = $2,000 The Guaranteed Withdrawal Balance on the Maximum Annuity Date = $17,100 The Lifetime Income Amount = $6,000 You elect Option 3 above We will pay you monthly Settlement Payments of $500 (= $6,000 / 12) for the rest of the Covered Person's life (or the last surviving Covered Person's life in the case of GLWB Plus For Two). We will reduce the Guaranteed Withdrawal Balance by $500 for each of these payments as we make them. If the Covered Person dies (or the last surviving Covered Person dies in the case of GLWB Plus for Two) and the Guaranteed Withdrawal Balance has not been reduced to zero, the monthly Settlement Payments of $500 will continue to your Beneficiary until the Guaranteed Withdrawal Balance is reduced to zero. In this example, the Guaranteed Withdrawal Balance will be reduced to $100 (= $17,100 - 34 X $500) after the 34th payment. If the Covered Person has died (or the last surviving Covered Person has died in the case of GLWB Plus For Two) before the 35th payment, the last monthly Settlement Payment (the 35th payment) will be equal to $100, otherwise we will continue to make monthly Settlement Payments of $500 until the Covered Person's death (or the last surviving Covered Person's death in the case of GLWB Plus For Two). Please consult your financial adviser as to which option is most appropriate for you. Note that you will only be eligible to elect Option 3 on the Maximum Annuity Date if: - In the case of GLWB Plus For One: 1. the Covered Person was the sole Owner on the Date of Issue and the Covered Person lives until the Maximum Annuity Date; or 2. both Owners live until the Maximum Annuity Date (in the case of a Non-Qualified Contract with joint Owners); or 3. a Non-Qualified Contract with joint Owners is continued if the Owner who is not a Covered Person dies, and the Covered Person then lives until the Maximum Annuity Date. - In the case of GLWB Plus For Two: 1. both Covered Persons live until the Maximum Annuity Date; OR 2. a Covered Person who is not an Owner dies and the surviving Covered Person lives until the Maximum Annuity Date; or 3. the Contract is continued after the death of an Owner and the surviving Covered Person then lives until the Maximum Annuity Date. If the Contract reaches the Maximum Annuity Date, and you elect Option 3 above, and there is one living Covered Person at that time, the duration of monthly Settlement Payments on and after the Maximum Annuity Date will be based on that Covered Person's life only, regardless of who is named as an Annuitant. If the Contract reaches the Maximum Annuity Date, and you elect Option 3 above, and there are two living Covered Persons at that time, the duration of monthly Settlement Payments on and after the Maximum Annuity Date will be based on both Covered Person's lives, regardless of who is named as an Annuitant. We must receive written notification of your election of one of the above Options at least 15 days before the Annuity Date. If the Maximum Annuity Date has been reached and we have not received an 62 election, you will be deemed to elect the Option (Option 2 or Option 3) that would result in the higher initial monthly payment on the Maximum Annuity Date. We will not deduct the GLWB Rider charge after the Annuity Date. LOANS The Loan privilege described in the Contract is not available if you elect the GLWB Rider. DIVORCE In the event of divorce, the former spouses must provide due proof of divorce to us at our Service Center. WE MAKE A LIMITED NUMBER OF EXCEPTIONS (IDENTIFIED BELOW) WITH RESPECT TO CHANGING AN OWNER AND/OR BENEFICIARY IN CONNECTION WITH DIVORCE. THE COVERED PERSON (OR BOTH COVERED PERSONS IN THE CASE OF GLWB PLUS FOR TWO) MAY LOSE GLWB RIDER BENEFITS IN THE EVENT OF DIVORCE. 1) If the date of divorce occurs prior to the Benefit Phase Start Date and the Annuity Date: - If due proof of divorce indicates that one of the following changes is to be made to an Owner and/or Beneficiary (effective as of the date of divorce), we will permit the change and the GLWB Rider will continue: 1. If the Contract has joint Owners and both Owners are Covered Persons, we will permit one of the Owners to be removed from the Contract. 2. If the Contract has joint Owners and only one of the Owners is a Covered Person, we will permit the Owner who is not a Covered Person to be removed from the Contract. 3. If the Contract has a sole Owner, we will permit the Owner to be removed from the Contract if the sole Beneficiary who is also a Covered Person becomes the sole Owner of the Contract. 4. If the Contract has a sole Beneficiary who is a Covered Person, we will permit the sole Beneficiary to be removed from the Contract. 5. If the Contract has a sole Owner, and the Owner is the only Covered Person, we will permit the Owner to change or add any Beneficiary (spouse or non-spouse). After the change or removal of an Owner and/or Beneficiary, the remaining Owner (who will be the only Covered Person) may change or add any Beneficiary (spouse or non-spouse). Any amounts withdrawn from the Contract in connection with or following the divorce will be treated as Non-Excess Withdrawals or Excess Withdrawals as the case may be, pursuant to the above "Taking Withdrawals" provisions. NOTE: In the case of GLWB Plus for Two, we will treat the removal of a Covered Person in the same manner as if Covered Person had been removed due to death. - If due proof of divorce indicates that there are to be no changes to an Owner and/or Beneficiary (effective as of the date of divorce): - If the date of death of the first former spouse to die occurs prior to the Benefit Phase Start Date, then either: - The GLWB Rider will continue if the deceased former spouse was not an Owner of the Contract. No GLWB Rider Death Benefit will be payable in connection with this death. The surviving Owner may then change or add any Beneficiary (spouse or non-spouse). 63 OR: - We will terminate the GLWB Rider on the Valuation Date we receive due proof of death of the first former spouse to die, if the former spouse was an Owner of the Contract. If the first former spouse to die was the only Covered Person on the date of death, we will pay the GLWB Rider Death Benefit instead of the standard death benefit or any optional death benefit elected if the GLWB Rider Death Benefit is greater. Otherwise, no GLWB Rider Death Benefit will be payable in connection with this death. - If both former spouses are still living on the Benefit Phase Start Date, we will split the monthly Settlement Payments according to the instructions we receive as part of the due proof of divorce. Prior to our receipt of due proof of divorce, we will make monthly Settlement Payments in the manner prescribed by the Owner pursuant to the terms of the Rider. - If the Maximum Annuity Date has been reached, and both former spouses are still living on that date, and you elect the GLWB Rider annuitization option on that date, we will split the monthly Settlement Payments according to the instructions we receive as part of the due proof of divorce. Prior to our receipt of due proof of divorce, we will make monthly Settlement Payments in the manner prescribed by the Owner pursuant to the terms of the Rider. - If due proof of divorce indicates that an Owner and/or Annuitant and/or Beneficiary is to be changed, added, or removed (effective as of the date of divorce), and it is not specifically permitted above, the Rider will terminate on the earlier of the Valuation Date we receive due proof of divorce or the Valuation Date we receive due proof of death of the first Owner to die. The Contract will not be eligible to enter the Benefit Phase after the date of divorce and no GLWB Rider Death Benefit will be payable on the death of an Owner after the date of divorce. In this case, we will refund any GLWB Rider charges between the date of divorce and the date that the GLWB Rider is terminated. 2) If the date of divorce occurs on or after the Benefit Phase Start Date: - We will split the monthly Settlement Payments according to the instructions we receive as part of the due proof of divorce. Prior to our receipt of due proof of divorce, we will make monthly Settlement Payments in the manner prescribed by the Owner pursuant to the terms of the Rider. 3) If the date of divorce occurs on or after the Maximum Annuity Date and you elected the GLWB Rider annuitization option on the Maximum Annuity Date: - We will split the monthly Settlement Payments according to the instructions we receive as part of the due proof of divorce. Prior to our receipt of due proof of divorce, we will make monthly Settlement Payments in the manner prescribed by the Owner pursuant to the terms of the Rider. OTHER PROVISIONS If you elect the GLWB Rider, all other provisions of your Contract and this Prospectus that do not conflict with the provisions of the GLWB Rider apply, such as "Transfers During the Accumulation Period" and "Withdrawals and Surrenders During the Accumulation Period." 64 TERMINATING THE GLWB RIDER You may not terminate the GLWB Rider once it is in effect. However, we will terminate the GLWB Rider automatically upon the earliest of: - the Valuation Date that the Contract Value, the Guaranteed Withdrawal Balance, and the Lifetime Income Amount all equal zero (we will treat this as a surrender); - the Annuity Date; - the Benefit Phase Start Date; - the Valuation Date we receive due proof of an Owner's death, in certain circumstances (see "GLWB RIDER DEATH BENEFIT" above); - the Valuation Date we receive due proof of divorce or the Valuation Date we receive due proof of the death of the first Owner to die after divorce, in certain circumstances (see "DIVORCE" above); or - termination or surrender of the Contract. Once the GLWB Rider terminates, it cannot be reelected or reinstated. All charges for the GLWB Rider will cease upon termination. MISSTATEMENT OF AGE If any Owner or Covered Person's age has been misstated, we may change the Covered Person in the case of GLWB Plus for One. We will terminate the GLWB Rider if the Contract would not have been eligible to elect the GLWB Rider on the Date of Issue had the correct age been provided. We may also adjust the Lifetime Income Date, Guaranteed Withdrawal Balance, Guaranteed Withdrawal Amount, Lifetime Income Base, Lifetime Income Amount, Contract Value, the amount of previous charges for the GLWB Rider, GLWB Rider Death Benefits, and/or the amount of any Settlement Payments, as applicable, to the correct amount had the correct age been provided. If there is any underpayment of monthly Settlement Payments, we will pay the amount of the underpayment in one sum. We will deduct any overpayment of monthly Settlement Payments from the current or succeeding monthly Settlement Payment(s) due under the GLWB Rider. Interest not to exceed 3% compounded annually will be credited to any underpayment or charged to any overpayment of monthly Settlement Payments. EXAMPLES Please refer to Appendices B, Appendix C, and Appendix D for hypothetical examples that illustrate the benefits under the GLWB Rider. FEDERAL TAX ISSUES As with any distribution from the Contract, tax consequences may apply to GLWB Rider distributions. The application of certain tax rules, particularly those rules relating to distributions resulting from a GLWB Rider, are not entirely clear. In this regard, we intend to treat monthly Settlement Payments received by you under the GLWB Rider after the Contract enters into the Benefit Phase as annuity payments for tax purposes. (However, we intend to treat any portion of the first monthly Settlement Payment that is in excess of the Guaranteed Withdrawal Amount divided by twelve (if the Benefit Phase Start Date occurs before the Lifetime Income Date) or the Lifetime Income Amount divided by twelve (if the Benefit Phase Start Date occurs on or after the Lifetime Income Date), as fully taxable to you. In addition, if the Benefit Phase Start Date occurs before the Lifetime Income Date and the Guaranteed Withdrawal Balance on the Benefit Phase Start Date is less than or 65 equal to $2,000, we intend to treat this Settlement Payment as a surrender payment for tax purposes.) We intend to treat the payments made to you prior to the Benefit Phase as withdrawals for tax purposes. (See "FEDERAL TAX MATTERS--TAXATION OF ANNUITIES IN GENERAL") The GLWB Rider provides benefits that differ from those traditionally offered under variable annuity contracts. If this Rider is in effect, the Covered Person(s) or his or her Beneficiary may be entitled to monthly Settlement Payments even if the Contract Value is zero. Such monthly Settlement Payments may be fully includible in income, if the investment in the Contract has been fully recovered. LIFE EXPECTANCY DISTRIBUTIONS You may request us in writing, in a form acceptable to us, to pay you withdrawals that we determine to be part of a series of substantially equal periodic payments over your "life expectancy" (or the joint life expectancies of both Covered Persons, if you elected GLWB Plus For Two). For purposes of the GLWB Rider, withdrawals under our Life Expectancy Distribution program are distributions within a calendar year that are intended to be paid to you as required or contemplated by Code Section 401(a)(9), Section 403(b)(10), Section 408(b)(3), or Section 408A(c), as the case may be (we sometimes refer to these as "Required Minimum Distributions"). You may take any Required Minimum Distributions related to this Contract from this Contract or from any other Contract you may own. Under our Life Expectancy Distribution program, we do not consider withdrawals under other Contracts you may own when calculating "life expectancy" distributions. In some cases there may be other acceptable methods of calculating the required distribution amount. You must accept our calculation of the minimum distribution amount in order to participate in our Life Expectancy Distribution program and to avoid potential Excess Withdrawal treatment. In some cases there may be other acceptable methods of calculating the required distribution amount. We reserve the right to make any changes we deem necessary to comply with the Code and Treasury Regulations. We base our "life expectancy" calculations on our understanding and interpretation of the requirements under tax law applicable to required minimum distributions. You should discuss these matters with your tax adviser prior to electing GLWB Rider. We will treat withdrawals under our Life Expectancy Distribution program as Non-Excess Withdrawals, if no other Gross Withdrawals are taken while the program is in effect. Any Gross Withdrawals that are taken that are not part of the program and any future Life Expectancy program withdrawals that are taken during that Contract Year may be considered Excess Withdrawals. (See "TAKING WITHDRAWALS" above). 10. LOANS The Owner of a Contract issued as a tax sheltered annuity under Section 403(b) of the Code or with a qualified plan under Code Section 401, may request a loan (if permitted by the qualified plan) any time during the Accumulation Period. Only one loan may be outstanding on a Contract at a given time. The outstanding loan must be repaid in full before the next loan may be granted. The requirements and limitations governing the availability of loans, including the maximum amount that a participant may take as a loan, are subject to the rules in the Code, IRS regulations, and our procedures in effect at the time a loan is made. In the case of loans made under Contracts which are subject to the Employee Retirement Income Security Act of 1974 ("ERISA"), additional requirements and limitations will apply such as those under the terms of the plan, Department of Labor regulations and ERISA. Because the rules governing loans under Code Section 403(b) contracts and ERISA qualified plans are complicated, you should consult your tax adviser before exercising the loan privilege. Failure to meet the requirements for loans may result in adverse income tax consequences to you. The 66 loan agreement you sign will describe the restrictions and limitations applicable to the loan at the time you apply. For loans subject to ERISA, you also may wish to consult your plan administrator. The maximum loan available is the Fixed Account Contract Value, less any premium taxes and withdrawal charge that would apply to the total withdrawal of the Fixed Account Contract Value at the time that you make the loan, and less interest for one calendar year on the loan at the time that you make the loan. Federal tax law further restricts the total amount of your plan loans to the lesser of (i) 50,000, reduced by the excess of the highest outstanding balance of your loans during the one-year period preceding the date of a loan, over the outstanding balance of your loans, or (ii) the greater of 50% of your plan account value or $10,000. We may defer granting a loan for six months from the date we receive the written loan request at our Service Center. Federal tax law requires loans to be repaid in a certain manner and over a certain period of time. For example, loans generally are required to be repaid within five years (except in cases where the loan was used to acquire the principal residence of the plan participant), with repayments made at least quarterly and in substantially level amortized payments over the term of the loan. Failure to make a loan repayment when due will result in adverse tax income tax consequences to you. Interest will be charged on your loan amount. If your Contract is not subject to ERISA, the interest rate charged is 5.5%. If your Contract is subject to ERISA, the interest rate charged is based on Moody's Corporate Bond Yield Average--Monthly Average Corporates (rounded to the nearest 0.25%). We are not responsible for determining whether this rate is a "reasonable interest rate" as required by ERISA and we make no representations to that effect. While a loan is outstanding, we will credit the value securing the loan with interest at the daily equivalent of the annual loan interest rate charged reduced by 2.5%, instead of the current interest rate credited to the Fixed Account. This rate will never be lower than the minimum guaranteed Fixed Account interest rate. If there is an outstanding loan balance when the Contract is surrendered or annuitized, or when a death benefit is paid, the amount payable will be reduced by the amount of the loan outstanding plus accrued interest. In addition, loans, whether or not repaid, will have a permanent effect on the Contract Value because the investment results of the Investment Options will apply only to the unborrowed portion of the Contract Value. The longer a loan is unpaid, the greater the effect is likely to be. The effect could be favorable or unfavorable. If investment results are greater than the rate being credited on amounts held in your loan account while your loan is unpaid, your Contract Value will not increase as rapidly as it would have if no loan were unpaid. If investment results are below that rate, your Contract Value will be greater than it would have been had no loan been outstanding. We will apply any repayment of Debt first to reduce that part of the Debt that can be attributed to interest, and then to that part of the Debt that can be attributed to principal. You may repay the Debt in full or in part at any time prior to the Annuity Date. If the Debt equals or exceeds the Fixed Account Contract Value, less any premium taxes and withdrawal charge that would apply to the total withdrawal of the Fixed Account Contract Value, your interest in the Fixed Account will terminate. The termination occurs thirty-one days after we mail notice of termination to your last known address and that of any assignee of record. If we receive a loan request at our Service Center before the close of business on the Valuation Date, we will process the request based on Accumulation Unit values determined at the end of that Valuation Date. If we receive a loan request at our Service Center on or after the close of business on the Valuation Date, we will process the request based on Accumulation Unit values determined at the end of the next Valuation Date. 67 Please note that if you elect the GLWB Rider, the loan privilege is not available to you. (See "GUARANTEED LIFETIME WITHDRAWAL BENEFIT") 11. TELEPHONE AND FACSIMILE TRANSACTIONS We currently permit requests for transfers to be submitted by telephone by calling 1-800-457-8803. Before telephone transfer instructions will be honored, you must complete a telephone transfer authorization. We also currently permit requests for certain financial transaction to be submitted by facsimile at 1-785-228-4539. We reserve the right to discontinue telephone and/or facsimile requests at any time. We will employ reasonable procedures to determine that these transactions are genuine. There are risks associated with telephone and facsimile transactions that do not occur if an original handwritten request is submitted. Anyone authorizing or making telephone or facsimile requests bears those risks. We will not be liable for any liability or losses resulting from unauthorized or allegedly unauthorized telephone or facsimile requests that we believe are genuine. We may record telephone requests. Also, telephone and facsimile transactions may not always be available, and telephone and facsimile systems, whether yours, your service provider's or your agent's, can experience outages or slowdowns for a variety of reasons (such as natural disasters, man-made disasters, or simply because of a high number of calls or facsimiles (which is likely to occur during periods of high market turbulence)). These outages or slowdowns may prevent or delay our receipt and/or processing of your request. If you are experiencing problems, you should make your request in writing to our Service Center. 68 CONTRACT CHARGES AND EXPENSES We deduct the following charges and expenses: - mortality and expense risk charge, - contract fee, - withdrawal charge, - commutation charge, - premium tax, - administration charge, - Step-Up Death Benefit Charge, - GLWB Rider charge, and - No Withdrawal Charge Rider fee. We may receive compensation from the investment advisers of the Funds for services related to the Funds. (See "THE FUNDS") Subject to certain expense limitations, investment management fees and other Fund expenses are indirectly borne by you. The fees and charges we deduct under the Contract may result in a profit to us. A. ASSET-BASED CHARGES 1. MORTALITY AND EXPENSE RISK CHARGE We deduct a daily charge from your Separate Account Contract Value equal to 1.15%, on an annual basis, of Separate Account Contract Value. The mortality and expense risk charge reimburses us for mortality and expense risks. We deduct this charge during both the Accumulation Period and the Annuity Period. Variable Annuity payments reflect the investment experience of each Subaccount but are not affected by changes in actual mortality experience or by actual expenses we incur. Our mortality risk arises from two obligations. The first obligation we assume is to pay a standard death benefit that may be greater than the Withdrawal Value. The second obligation we assume is to continue making annuity payments to the Owner for the entire life of the Annuitant under Annuity Options involving life contingencies. We assume the risk that Annuitants will live beyond actuarial life expectancies. We also assume the risk that all administrative expenses including Contract maintenance costs, administrative costs, data processing costs, and costs of other services may exceed the mortality and expense risk charge. We expect to profit from the mortality and expense risk charge. We may use any profits for any lawful purpose including covering distribution costs. 2. ADMINISTRATION CHARGE We deduct a daily charge from your Separate Account Contract Value equal to 0.15%, on an annual basis, of Separate Account Contract Value. The administration charge reimburses us for expenses incurred for administering the Contracts. These expenses include your inquiries, changes in allocations, reports to you, Contract maintenance costs, and data processing costs. The administration 69 charge covers the average anticipated administrative expenses incurred while the Contracts are in force. There is not necessarily a direct relationship between the amount of the charge and the administrative costs of the particular Contract. 3. STEP-UP DEATH BENEFIT CHARGE If you elect the Step-Up Death Benefit, we will deduct a daily charge from your Contract Value equal to 0.20%, on an annual basis, of Separate Account Contract Value. This charge covers the cost and risk of providing the benefits guaranteed by the Step-Up Death Benefit. We do not assess a charge for the Step-Up Death Benefit on amounts allocated to the Fixed Account. 4. GLWB RIDER CHARGE We assess an additional monthly charge for the GLWB Rider that compensates us for the costs and risks we assume in providing the benefits under the Rider. - In the case of GLWB Plus For One, the monthly GLWB Rider charge, which we will deduct from your Contract Value on each Monthiversary, is equal to 0.50%, on an annual basis, of the Lifetime Income Base on that Monthiversary. - In the case of GLWB Plus For Two, the monthly GLWB Rider charge, which we will deduct from your Contract Value on each Monthiversary, is equal to 0.75%, on an annual basis, of the Lifetime Income Base on that Monthiversary. We reserve the right to increase the GLWB Rider charge on the effective date of each Step-Up. We guarantee, however, that the monthly GLWB Rider charge will never exceed 1.00% (for GLWB Plus For One) and 1.50% (for GLWB Plus For Two), on an annual basis, of the Lifetime Income Base on each Monthiversary. We also assess a pro rata portion of the charge upon surrender or annuitization. 5. NO WITHDRAWAL CHARGE RIDER FEE If you elect the No Withdrawal Charge Rider, we will deduct a daily charge from your Contract Value equal to 0.35%, on an annual basis, of Contract Value. We impose this charge to reimburse us for Contract sales expense, including commissions and other distribution, promotion, and acquisition expenses. B. CONTRACT FEE During the Accumulation Period, we deduct a quarterly contract fee from your Contract Value that is equal to $30, on an annual basis. We will waive this fee for Contracts with Contract Value of $50,000 or more as of the end of each calendar quarter we would otherwise deduct the fee. The contract fee reimburses us for expenses incurred in establishing and maintaining Contract records. We assess the contract fee at the end of each calendar quarter and upon surrender or annuitization. When we deduct the contract fee, we will reduce Purchase Payments (and earnings attributable to those Purchase Payments) in the chronological order in which we received such Purchase Payments. C. WITHDRAWAL CHARGE We impose a withdrawal charge to reimburse us for Contract sales expense, including commissions and other distribution, promotion, and acquisition expenses. For purposes of calculating the withdrawal charge on partial withdrawals and surrenders, we assume that amounts are withdrawn from Purchase Payments (and earnings attributable to those Purchase Payments) in the chronological order in which 70 they were received. We apply the withdrawal charge on each Purchase Payment (and earnings attributable to that Purchase Payment) withdrawn or surrendered during the first 6 Contribution Years following our receipt of the Purchase Payment. A Contribution Year is each Contract Year in which a Purchase Payment is made and each later year measured from the start of the Contract Year when the Purchase Payment was made. We do not impose the withdrawal charge on any Purchase Payment (or earnings attributable to that Purchase Payment) withdrawn or surrendered more than six Contribution Years following our receipt of that Purchase Payment. We calculate the withdrawal charge separately for each Purchase Payment (and earnings attributable to that Purchase Payment). Total withdrawal charges assessed under a Contract will never exceed 9% of the total Purchase Payments made under the Contract. Each Contract Year we guarantee that you can withdraw up to the Free Withdrawal Amount without incurring a withdrawal charge. We also apply the Free Withdrawal Amount upon full surrender of the Contract. The Free Withdrawal Amount, which will never be less than zero, is equal to (a + b) multiplied by 10% - c, where: a) is Contract Value less Debt prior to the withdrawal or surrender; b) is previous partial withdrawals made during the Contract Year (whether or not subject to withdrawal charges); and c) is previous partial withdrawals made during the Contract Year that were not subject to withdrawal charges. If you elect the GLWB Rider, Non-Excess Withdrawals and Excess Withdrawals will reduce the remaining Free Withdrawal Amount in any Contract Year. (See Guaranteed Lifetime Withdrawal Benefit") If you withdraw an amount in excess of the Free Withdrawal Amount, we may impose a withdrawal charge on the excess. At the time of the withdrawal or surrender, we will determine whether the amount withdrawn includes Purchase Payments (and earnings attributable to those Purchase Payments) that were made within the previous six Contribution Years. We will determine the withdrawal charge percentage for each Purchase Payment and earnings attributable to that Purchase Payment withdrawn as follows:
CONTRIBUTION YEAR WITHDRAWAL CHARGE ----------------- ----------------- First....................................................... 6% Second...................................................... 5% Third....................................................... 4% Fourth...................................................... 3% Fifth....................................................... 2% Sixth....................................................... 1% Seventh +................................................... 0%
WITHDRAWAL CHARGE EXAMPLE THIS EXAMPLE ILLUSTRATES THE CALCULATION OF THE FREE WITHDRAWAL AMOUNT AND WITHDRAWAL CHARGE --The values shown below assume that a Contract is issued to an Owner who is 50 years old on the Date of Issue. --A initial Purchase Payment of $10,000 is received on the Date of Issue. No additional Purchase Payments are received and no premium taxes apply. 71 --All values shown below are beginning of year (and prior to any partial withdrawal requested) except for Line (5) which is middle of year.
COLUMN (2) (3) (4) (5) (6) (7) (8) (9) --------------------- -------- -------- ---------- ------------ ------------ ---------- ---------- ---------- HYPOTHETICAL CONTRACT WITHDRAWAL VALUE WITHDRAWAL FREE WITHOUT CONTRACT PURCHASE PARTIAL BEFORE CONTRIBUTION CHARGE WITHDRAWAL WITHDRAWAL LINE YEAR PAYMENT WITHDRAWAL WITHDRAWAL YEAR (%) AMOUNT CHARGE ---- -------- -------- ---------- ------------ ------------ ---------- ---------- ---------- (1).................. 1 $10,000 $10,000 1 6.00% $1,000 (2).................. 2 10,300 2 5.00% 1,030 (3).................. 3 $1,000 10,700 3 4.00% 1,070 $1,000 (4).................. 4 500 9,800 4 3.00% 980 500 (5).................. 4 3,510 9,600 4 3.00% 510 510 (6).................. 5 6,300 5 2.00% 630 (7).................. 6 6,500 6 1.00% 650 (8).................. 7 7,000 7 0.00% 700 (9).................. 8 7,500 8 0.00% 750 (10)................. 9 8,000 9 0.00% 800 (11)................. 10 5,000 8,500 10 0.00% 850 850 COLUMN (10) (11) (12) --------------------- ---------- ---------- ---------- WITHDRAWAL CONTRACT SUBJECT TO WITHDRAWAL VALUE WITHDRAWAL CHARGE AFTER LINE CHARGE ($) WITHDRAWAL ---- ---------- ---------- ---------- (1).................. $10,000 (2).................. 10,300 (3).................. $ 0 $ 0 9,700 (4).................. 0 0 9,300 (5).................. 3,000 90 6,090 (6).................. 6,300 (7).................. 6,500 (8).................. 7,000 (9).................. 7,500 (10)................. 8,000 (11)................. 4,150 0 3,500
COLUMN NOTES: Col (5) Includes the impact of Purchase Payments, partial withdrawals, contract fees and charges, and investment performance. Col (6) A Contribution Year is each Contract Year in which a Purchase Payment is made and each later year measured from the start of the Contract Year in which the Purchase Payment was made. In a Contract with a single Purchase Payment, Contribution Years are equal to Contract Years. Col (7) The withdrawal charge percentage applicable to the withdrawal of a Purchase Payment (and earnings attributable to that Purchase Payment) is based on the Contribution Year of the Purchase Payment (and earnings attributable to the Purchase Payment) being withdrawn. And for purposes of calculating the withdrawal charge on partial withdrawals and surrenders, we assume that amounts are withdrawn from Purchase Payments (and earnings attributable to those Purchase Payments) in the chronological order in which they were received. Col (8) The Free Withdrawal Amount is equal to the greater of $0 and ([(a) plus (b)] x 10% minus (c)) where: (a) = Contract Value less Debt prior to the withdrawal or surrender (b) = previous partial withdrawals made during the Contract Year (whether or not subject to withdrawal charges) (c) = previous partial withdrawals made during the Contract Year that were not subject to withdrawal charges. Col (9) is equal to the lesser of the partial withdrawal or surrender requested and the Free Withdrawal Amount (lesser of Column (4) and Column (8)). Col (10) is equal to the excess of the partial withdrawal or surrender requested over the withdrawal without surrender charge (greater of $0 and (Column (4) less Column (8)). We do not impose the withdrawal charge on any Purchase Payment (or earnings attributable to that Purchase Payment) withdrawn or surrendered more than six Contribution Years following our receipt of that Purchase Payment. Col (11) is equal to the withdrawal subject to a withdrawal charge multiplied by the applicable withdrawal charge % (Column (10) x Column (7)). Col (12) is equal to the hypothetical contract value before withdrawal less the amount of the partial withdrawal or surrender requested (Column (5) less Column (4)). PARTIAL WITHDRAWAL #1--EXPLANATION: Line (3) A partial withdrawal of $1,000 is requested at the beginning of the 3rd Contract Year. The Free Withdrawal Amount is equal to $1,070 (= the greater of $0 and ([$10,700 + $0] x 10% - $0)) using the formula for Column (8) above. The partial withdrawal requested is less than the Free Withdrawal Amount ($1,070), so the entire partial withdrawal is free of withdrawal charges. The Contract Value is reduced for the amount of the partial withdrawal ($10,700 - $1,000 = $9,700). PARTIAL WITHDRAWAL #2 AND PARTIAL WITHDRAWAL #3--EXPLANATION: Line (4) A partial withdrawal of $500 is requested at the beginning of the 4th Contract Year. The Free Withdrawal Amount is equal to $980 (= the greater of $0 and ([$9,800 + $0] x 10% - $0)) using the formula for Column (8) above. The partial withdrawal requested is less than the Free Withdrawal Amount ($980) so the entire partial withdrawal is free of withdrawal charges. The Contract Value is reduced for the amount of the partial withdrawal ($9,800 - $500 = $9,300).
72 Line (5) --A partial withdrawal of $3,510 is requested in the middle of the 4th Contract Year. The Free Withdrawal Amount is equal to $510 (= the greater of $0 and ([$9,600 + $500] x 10% - $500)) using the formula for Column (8) above. In this case, the Free Withdrawal Amount is adjusted for the partial withdrawal that occurred earlier in the same Contract Year. Since the partial withdrawal requested exceeds the Free Withdrawal Amount, $3,000 of the partial withdrawal request is subject to a withdrawal charge ($3,000 = $3,510 - $510). For the purpose of calculating the withdrawal charge, the Purchase Payment (and earnings attributable to the Purchase Payment) from which the partial withdrawal is being withdrawn, is in it's 4th Contribution Year. Therefore, the applicable withdrawal charge percentage is 3% and the withdrawal charge is equal to $90 (= 3% x $3,000). The Contract Value is reduced for the amount of the partial withdrawal ($9,600 - $3,510 = $6,090). --IF AN ADDITIONAL PURCHASE PAYMENT HAD BEEN MADE TO THE CONTRACT: The partial withdrawal requested is less than the initial Purchase Payment (and earnings attributable to that Purchase Payment) so the entire partial withdrawal would have been assumed to be withdrawn from the initial Purchase Payment (and earnings attributable to that Purchase Payment) for purposes of calculating the withdrawal charge. PARTIAL WITHDRAWAL #4--EXPLANATION: Line (11) A partial withdrawal of $5,000 is requested at the beginning of the 10th Contract Year. The Free Withdrawal Amount is equal to $850 (= the greater of $0 and [$8,500 + $0] x 10% - $0)) using the formula for Column (8) above. The partial withdrawal exceeds the Free Withdrawal Amount. As a result, $4,150 of the partial withdrawal request is subject to a withdrawal charge. However, because the amount being withdrawn is taken from a Purchase Payment (and earnings attributable to a Purchase Payment) that was made more than six Contribution Years prior to the partial withdrawal, no withdrawal charge is assessed. The Contract Value is reduced for the amount of the partial withdrawal ($8,500 - $5,000 = $3,500).
For purposes of calculating the withdrawal charge on partial withdrawals and surrenders, we assume that amounts are withdrawn from Purchase Payments and earnings attributable to those Purchase Payments in the chronological order in which they were received. Unless you request otherwise, we deduct any applicable withdrawal charge from the amount of the partial withdrawal. This means that when a withdrawal is requested and a withdrawal charge applies, you will receive a check for less than the amount requested. If you request otherwise and a withdrawal charge applies, we will reduce your Contract Value by the withdrawal charge in addition to the dollar amount sent to you. If you elect the GLWB Rider, please note that although we currently do not assess a withdrawal charge on Non-Excess Withdrawals, we reserve the right to do so (unless you have elected the No Withdrawal Charge Rider for an additional charge). We will assess a withdrawal charge on Excess Withdrawals if such withdrawals would otherwise be subject to a withdrawal charge. If we assess a withdrawal charge on a Non-Excess Withdrawal or an Excess Withdrawal, we will calculate and impose the charge in the same manner that we would for any partial withdrawal. (See "GUARANTEED LIFETIME WITHDRAWAL BENEFIT") Because Contribution Years are based upon the date each Purchase Payment is made, you may be subject to a withdrawal charge even though the Contract may have been issued many years earlier. (For additional details, see "WITHDRAWALS AND SURRENDERS DURING THE ACCUMULATION PERIOD.") For example: - You make a $15,000 Purchase Payment in the first Contract Year. - You make a $10,000 Purchase Payment in the fourth Contract year. - In the fifth Contract Year, the $15,000 Purchase Payment (and earnings attributable to that purchase payment) is in its fifth Contribution year and the $10,000 Purchase Payment (and earnings attributable to that purchase payment) is in its second Contribution Year. The Free Withdrawal Amount and withdrawal charge also generally apply at annuitization to amounts attributable to Purchase Payments (and earnings attributable to those Purchase Payments) in their sixth Contribution Year or earlier. However, we do not assess a withdrawal charge upon annuitization if you select Annuity Option 2, 3, 4, or 5, or if payments under Annuity Option 1 are 73 scheduled to continue for at least ten years. See "THE ANNUITY PERIOD--ANNUITY OPTIONS" for a discussion of the Annuity Options available. Please note that if you elect the No Withdrawal Charge Rider, we will not assess any withdrawal charge upon partial withdrawal or surrender of the Contract during the Accumulation Period or upon annuitization. See "NO WITHDRAWAL CHARGE RIDER" for a description of the Rider, including its charges and restrictions. Currently, we anticipate withdrawal charges will not fully cover distribution expenses. Unrecovered distribution expenses may be recovered from our general assets. Those assets may include proceeds from the mortality and expense risk charge. For Qualified Contracts, we will waive withdrawal charges on partial withdrawals and full surrender if a Contract is surrendered in the sixth Contract Year or later and the Owner is at least 59 (1a)/(2) years old at the time of such surrender. Currently, we do not assess withdrawal charges on required minimum distributions but reserve the right to do so. If we do assess a withdrawal charge, we will calculate and impose the charge in the same manner that we would for any partial withdrawal. We may reduce or eliminate the withdrawal charge if we anticipate that we will incur lower sales expenses or perform fewer services because of economies due to the size of a group, the average contribution per participant, or the use of mass enrollment procedures. Subject to certain exceptions and state approvals, withdrawal charges also are not assessed on withdrawals: - after you have been confined in a skilled health care facility or hospital for at least 90 consecutive days and you remain confined at the time of the request; - within 45 days following your discharge from a skilled health care facility after a confinement of at least 90 days; or - if you become disabled. The confinement must begin prior to your 75th birthday and at least two years after the later of the Date of Issue or the date the waiver endorsement was added to your Contract. The disability must begin prior to your 66th birthday and at least two years after the later of the Date of Issue or the date the waiver endorsement was added to your Contract. We must receive satisfactory proof of your disability. The proof may be a statement from your attending physician or any other proof satisfactory to us. "Disability" is defined as the inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death, or which has lasted or can be expected to last for a continuous period of not less than 12 months. Such disability or confinement must not be due to: - substance abuse, or - mental or personality disorder without a demonstrable organic disease (a degenerative brain disease such as Alzheimer's Disease is considered an organic disease). Skilled Health Care Facility means a place which: - is licensed by the state, or certified if your state certifies such facilities, or operated pursuant to law if your state neither licenses nor certifies such facilities; - provides skilled nursing care under the supervision of a physician; 74 - has twenty-four hour a day nursing services by or under the supervision of a licensed practical nurse (LPN) or a registered nurse (RN); and - keeps a medical record in accordance with accepted professional standards and practices for each patient. Hospital means a place that is licensed by the state as a hospital and is operating within the scope of its license. If your state does not license hospitals, then hospital means a place that is operated as a hospital pursuant to law. Restrictions and provisions related to the above withdrawal charge waiver are described in the Contract endorsements. D. COMMUTATION CHARGE We deduct a commutation charge if you request a lump sum payment with respect to: 1) any remaining periodic payments in the certain period under Annuity Options 1, 3 and 5 upon the death of an Annuitant during the Annuity Period; or 2) any remaining payments under Annuity Option 1. We deduct this charge to compensate us for any losses we might incur as a result of selling assets we hold to make a lump sum payment to you and for administrative costs in processing commuted values. The charge is equal to the following: For a fixed Annuity Option: 1) the present value of any remaining guaranteed Fixed Annuity payments (as of the date of calculation), using a discount rate that is equal to the interest rate used in calculating the initial income payment; LESS 2) the present value of any remaining guaranteed Fixed Annuity payments (as of the date of calculation), using a discount rate that is equal to the interest rate used in calculating the initial income payment plus 1%. For a variable Annuity Option: 1) the present value of any remaining guaranteed Variable Annuity payments (as of the date of calculation), using a discount rate that is equal to the assumed investment rate used in calculating the initial income payment; LESS 2) the present value of any remaining guaranteed Variable Annuity payments (as of the date of calculation), using a discount rate that is equal to the assumed investment rate used in calculating the initial income payment plus 1%. We will determine the present value of any remaining guaranteed Variable Annuity payments by applying the Annuity Unit value next determined after we receive the election to commute the remaining payments at our Service Center. E. INVESTMENT MANAGEMENT FEES AND OTHER EXPENSES Each Fund's net asset value reflects the deductions of investment management fees, Rule 12b-1 fees (if applicable), and certain general operating expenses. Subject to limitations, you indirectly bear these fees and expenses. Further detail is provided in the prospectuses for the Funds' statements of additional information. 75 F. STATE PREMIUM TAXES Certain state and local governments impose a premium tax ranging from 0% to 3.50% of Purchase Payments. If we pay state premium taxes, we will deduct the amount paid from: - Purchase Payments when we receive them, and/or - Partial withdrawals or full surrender, and/or - Death benefits, and/or - Contract Value applied to an Annuity Option at the time annuity payments start, and/or - Annuity payments when we pay them, and/or - If you have elected the GLWB Rider, monthly Settlement Payments when we pay them (see "GUARANTEED LIFETIME WITHDRAWAL BENEFIT"). If we deduct premium taxes from each annuity payment or each monthly Settlement Payment when we pay them, we will reduce each payment by the premium tax percentage multiplied by the amount of each payment until we have recovered an amount equal to the premium tax that we paid. In no case will we deduct a total of more than the premium tax that we paid. See "APPENDIX A--STATE PREMIUM TAX CHART" in the Statement of Additional Information. G. REDUCTION OR ELIMINATION OF CERTAIN CHARGES Contracts may be available for purchase in certain group or sponsored arrangements that qualify for reductions or eliminations of certain charges, the time periods in which such charges apply, or both. Group arrangements include those in which a trustee, an employer or an association purchases Contracts covering a group of individuals. Sponsored arrangements include those in which an employer or association allows us to offer Contracts to its employees or members on an individual basis. The contract fee may be reduced or eliminated if we anticipate lower administrative expenses. In certain other circumstances, sales expenses for Contracts purchased in certain group or sponsored arrangements may be reduced or eliminated and the applicable withdrawal charges may be reduced or eliminated. In determining whether a group or sponsored arrangement qualifies for reduced or eliminated charges, we will consider among other factors: - the size and type of group to which sales are to be made and administrative services provided, and the persistency expected from the group; - the total amount of Purchase Payments to be received and the method in which they will be remitted; - any prior or existing relationship with us; - the level of commission paid to selling broker-dealers; - the purpose for which the Contract is being purchased, and whether that purchase makes it likely that sales costs and administrative expenses will be reduced; and - the frequency of projected surrenders or distributions. We make any reductions or eliminations according to objective guidelines in effect when an application for a Contract is approved. We may change these guidelines from time to time. Any variation in the charges will reflect differences in costs or services and will be offered uniformly to all members of the group or sponsored arrangement. In no event will a charge reduction or elimination be permitted if it is unfairly discriminatory to any person or prohibited by law. 76 THE ANNUITY PERIOD Contracts may be fully annuitized under one of several Annuity Options, which are available either on a fixed or variable basis. However, states may require variations to the Contract. If a state variation applies, it will appear in the Contract, an endorsement to the Contract, or a supplement to this Prospectus. You may annuitize any time after the Valuation Date on or next following one year from the Date of Issue. Annuity payments will begin on the Annuity Date under the Annuity Option you select. You may write to us prior to the payment of the death benefit or the first annuity payment date to request a change of the Annuity Date. Subject to state variation, the Annuity Date may not be after the Valuation Date on or next following the later of the original older Owner's or Annuitant's 90th birthday. (See "FEDERAL TAX MATTERS, 1. TAX DEFERRAL DURING ACCUMULATION PERIOD, DELAYED ANNUITY DATES".) We do not permit partial annuitization. If you elect the GLWB Rider and the Maximum Annuity Date has been reached, you may choose the GLWB Rider annuitization option rather than one of the Annuity Options below. (See "GUARANTEED LIFETIME WITHDRAWAL BENEFIT") 1. ANNUITY PAYMENTS The amount of the first annuity payment depends on: - the selected Annuity Option, and - the Annuity Option rates derived from the mortality tables specified in the Contract (for Annuity options 2, 3, 4, and 5), and - the age and gender of the Annuitant, and - the Withdrawal Value on the Annuity Date, and - the assumed investment rate (if variable annuitization is elected), and - the guaranteed minimum interest rate for annuitizations specified in the Contract (if fixed annuitization is elected). The age of the Annuitant influences the amount of periodic annuity payments because an older Annuitant is expected to have a shorter life span, resulting in larger payments. The sex of the Annuitant influences the amount of periodic payments, where males are expected to have a shorter life span than females, also resulting in larger payments. Under variable annuitization, you will receive the value of a fixed number of Annuity Units each month. An Annuity Unit's value reflects the investment performance of the Subaccount(s) selected. As a result, annuity payments will vary accordingly. If the Annuity Unit Values of the Subaccount(s) in which you invest increase, the amount of your annuity payments will increase. If the Annuity Unit Values of the Subaccount(s) in which you invest decrease, the amount of your annuity payments will decrease. 2. ANNUITY OPTIONS You may elect one of the Annuity Options. We must receive an election of an Annuity Option in writing at our Service Center at least 15 calendar days before the Annuity Date. If no Annuity Option is elected, monthly annuity payments will be made in accordance with Option 3 below if there is one Annuitant on the Annuity Date or under Option 5 if there are joint Annuitants on the Annuity Date. You may change an Annuity Option before the Annuity Date. You cannot change an Annuity Option after the first annuity payment is made. We reserve the right to add additional Annuity Options in the future. 77 An election before the Annuity Date will be revoked by: 1) a subsequent change of Beneficiary, or 2) an assignment of the Contract unless the assignment provides otherwise. The Annuity Option selected must result in an initial payment that is at least equal to our minimum payment, according to our rules, at the time the Annuity Option is chosen. If the selected Annuity Option does not produce an initial payment which meets this minimum, we reserve the right to decrease the payment frequency to quarterly, semi-annually, or annually to meet this minimum, or to make a single lump sum payment. If you die before the Annuity Date, available Annuity Options are limited. The Annuity Options available are: - Option 2 over the lifetime of the Beneficiary, or - Option 1 or 3 with a specified period or certain period no longer than the life expectancy of the Beneficiary. The life expectancy of the Beneficiary must be at least ten years as of the date that he or she elects Option 1 or Option 3. The death benefit distribution must begin no later than one year from your death, unless a later date is permitted by federal regulation. If the Beneficiary is not an individual, the entire interest must be distributed within five years of your death. OPTION 1--INCOME FOR SPECIFIED PERIOD Option 1 provides an annuity payable monthly for ten years. If you must take required minimum distributions from a Qualified Contract, consult a tax advisor before selecting this Option, as it may not satisfy those requirements in all situations. OPTION 2--LIFE INCOME Option 2 provides for an annuity payable monthly over the lifetime of the Annuitant. If Option 2 is elected, annuity payments terminate automatically and immediately on the Annuitant's death without regard to the number or total amount of payments made. Thus, it is possible for you to receive only one payment if death occurred prior to the date the second payment was due. OPTION 3--LIFE INCOME WITH INSTALLMENTS GUARANTEED Option 3 provides an annuity payable monthly for a certain period of 10 years and thereafter during the Annuitant's lifetime. If you must take required minimum distributions from a Qualified Contract, consult a tax advisor before selecting this Option, as it may not satisfy those requirements in all situations. OPTION 4--JOINT AND SURVIVOR ANNUITY Option 4 provides an annuity payable monthly while both Annuitants are living. Upon either Annuitant's death, the monthly income payable continues over the life of the surviving Annuitant at a percentage of the original payment. The percentage payable must be selected at the time the Annuity Option is chosen. The percentages available are 50%, 66 (2)/3%, 75% and 100%. Annuity payments terminate automatically and immediately upon the surviving Annuitant's death without regard to the number or total amount of payments received. 78 OPTION 5--JOINT AND SURVIVOR ANNUITY WITH INSTALLMENTS GUARANTEED Option 5 provides an annuity payable monthly for a certain period of 10 years and thereafter while either Annuitant is alive. If you must take required minimum distributions from a Qualified Contract, consult a tax advisor before selecting this Option, as it may not satisfy those requirements in all situations. When you are choosing an Annuity Option, you should consider that: - for younger Annuitants, selecting Option 2--Life Income, might result in smaller monthly payments than selecting Option 1--Income for Specified Period; for older Annuitants, selecting Option 2--Life Income, might result in larger monthly payments than selecting Option 1--Income for Specified Period. - selecting Option 3--Life Income with Installments Guaranteed, will result in smaller monthly payments than selecting Option 2--Life Income; however, the Owner or Beneficiary may receive more payments under Option 3 if the Annuitant dies before the end of the certain period - selecting Option 4--Joint and Survivor Annuity, will result in smaller monthly payments than selecting Option 2--Life Income. In lieu of monthly payments, you may request quarterly, semi-annual, or annual payments, with our prior approval. 3. ALLOCATION OF ANNUITY Subject to state variation, when you elect an Annuity Option, you may request that we reallocate your Contract Value on the Annuity Date among the Investment Options you choose to arrange for payments on a fixed or variable basis, or a combination of both. A reallocation on the Annuity Date will not be subject to the transfer restrictions that we would normally impose. If we do not receive an election, any Fixed Account Withdrawal Value will be annuitized on a fixed basis and any Separate Account Withdrawal Value will be annuitized on a variable basis. Transfers among the Subaccounts during the Annuity Period are permitted subject to certain limitations. We reserve the right to restrict the number of Subaccounts available during the Annuity Period. You may not transfer to or from the Fixed Account during the Annuity Period. 4. FIXED ANNUITY PAYMENTS We calculate the portion of the Withdrawal Value that you elected to have paid to you as Fixed Annuity payments. We apply an annuity factor for the Annuity Option that you selected to this value to determine the first Fixed Annuity payment. Each Fixed Annuity payment will be equal to the first regardless of investment, mortality or expense experience, unless the Annuity Option selected specifies that there is to be a reduction in payments after the death of an Annuitant. 5. VARIABLE ANNUITY PAYMENTS We calculate the portion of the Withdrawal Value that you elected to have paid to you as Variable Annuity payments from each Subaccount. We apply an annuity factor for the Annuity Option that you selected to this value for each Subaccount to determine the first Variable Annuity payment for that Subaccount. The first Variable Annuity payment for each Subaccount is divided by the Annuity Unit value for that Subaccount to establish the number of Annuity Units per payment for that Subaccount. The number of units will not change after the initial determination unless a transfer occurs or the Annuity Option selected specifies that there is to be a reduction in payments upon the death of an Annuitant. Future Variable Annuity payments are determined by multiplying the number of Annuity 79 Units per payment for each Subaccount by the Annuity Unit value for that Subaccount at the end of the Valuation Date that each annuity payment is due and summing the result. 6. BASIS OF ANNUITY OPTIONS Your Contract will contain tables for each Annuity Option that show the guaranteed monthly payment for each $1,000 applied to an Annuity Option. The guaranteed monthly payments are based on an interest rate (or assumed investment rate if variable annuitization is elected) of 2.50% per year and, where mortality is involved, the "Annuity 2000 Table" developed by the Society of Actuaries projected using Scale G to the year 2015. We may offer annuity rates for Fixed Annuity payments that are more favorable than those contained in the Contract. Any such rates will be applied uniformly to all Owners of the same class. We may also offer Variable Annuity payment options based on assumed investment rates other than 2.50%, but not greater than 5.00%. The tables that we prepare for each annuity option are calculated with an assumed investment rate of 2.50% per annum. If the actual annualized net investment rate in a Subaccount exceeds 2.50% per annum, Variable Annuity payments for that Subaccount will increase. Conversely, if the actual annualized net investment rate for a Subaccount is less than 2.50% per annum, Variable Annuity payments for that Subaccount will decrease. ANNUITY UNIT VALUE. Annuity Unit values are determined independently for each Subaccount. The Annuity Unit value at the end of any Valuation Period is equal to a. multiplied by b. multiplied by c. where: a. is the Annuity Unit value at the end of the preceding Valuation Period b. is the net investment experience factor for the current Valuation Period c. is an interest factor of 0.99993235 for each calendar day in the current Valuation Period. The interest factor offsets the assumed investment rate of 2.5% per annum used in the Contract's annuity tables. A different interest factor will be used if we offer other assumed investment rates. The net investment experience factor for a Subaccount for the current Valuation Period is equal to x. divided by y. where: x. Is the Subaccount's Accumulation Unit value at the end of the current Valuation Period y. Is the Subaccount's Accumulation Unit value at the end of the preceding Valuation Period 7. TRANSFERS DURING THE ANNUITY PERIOD During the Annuity Period, you may, by written request to our Service Center, transfer Contract Value from one Subaccount to another Subaccount, subject to the following limitations: - Transfers among Subaccounts are prohibited during the first year of the Annuity Period; subsequent transfers are limited to one per year. - Your interest in a Subaccount must be transferred in increments of 25%. - Your annuity payments for the Subaccount you are transferring to must be at least $100 after the transfer. Your annuity payments for the Subaccount you are transferring from must be at least $100 after the transfer, unless the transfer will eliminate your interest in the Subaccount. - You may not transfer to or from the Fixed Account. 80 We calculate the number of Annuity Units per payment for the Subaccount you are transferring to, as A multiplied by B divided by C, where: A = The number of Annuity Units per payment for the Subaccount you are transferring from; B = The Annuity Unit value of the Subaccount you are transferring from; and C = The Annuity Unit value of the Subaccount you are transferring to. TRANSFER PROCEDURES--We will make transfers pursuant to proper written or telephone instructions to our Service Center that specify in detail the requested changes. Transfers involving a Subaccount will be based upon the Annuity Unit values determined following our receipt of complete transfer instructions. If we receive a transfer request at our Service Center before the close of business on the Valuation Date, we will process the request based on Annuity Unit values determined at the end of that Valuation Date. If we receive a transfer request at our Service Center on or after the close of business on the Valuation Date, we will process the request based on Annuity Unit values determined at the end of the next Valuation Date. If you or your authorized representative call us to request a telephone transfer but have not given instructions to us prior to the close of business on the Valuation Date, even if due to our delay in answering your call, we will consider your telephone transfer request to be received after the close of business on the Valuation Date. We may suspend, change or terminate the transfer privilege at any time. 8. DEATH PROCEEDS If the Annuitant dies, we will automatically continue any unpaid installments for the remainder of the certain period under Annuity Options 1, 3 or 5. If the Owner elects, we will pay a lump sum payment of the present value of the remaining payments in the certain period. The election to receive the lump sum payment must be made within 60 days of our receipt of due proof of death of the Annuitant or joint Annuitants. We deduct a commutation charge if you request a lump sum payment with respect to: 1) any remaining periodic payments in the certain period under Annuity Options 1, 3 and 5 upon the death of an Annuitant during the Annuity Period; or 2) any remaining payments under Annuity Option 1. The charge is equal to the following: For a fixed Annuity Option: 1) the present value of any remaining guaranteed Fixed Annuity payments (as of the date of calculation), using a discount rate that is equal to the interest rate used in calculating the initial income payment; LESS 2) the present value of any remaining guaranteed Fixed Annuity payments (as of the date of calculation), using a discount rate that is equal to the interest rate used in calculating the initial income payment plus 1%. For a variable Annuity Option: 1) the present value of any remaining guaranteed Variable Annuity payments (as of the date of calculation), using a discount rate that is equal to the assumed investment rate used in calculating the initial income payment; LESS 2) the present value of any remaining guaranteed Variable Annuity payments (as of the date of calculation) , using a discount rate that is equal to the assumed investment rate used in calculating the initial income payment plus 1%. 81 We will determine the present value of any remaining guaranteed Variable Annuity payments by applying the Annuity Unit value next determined after we receive the election to commute the remaining payments at our Service Center. If Annuity Option 2 is elected, annuity payments terminate automatically and immediately upon the Annuitant's death without regard to the number or total amount of payments made. Thus, it is possible that only one payment will be received if death occurred prior to the date the second payment was due. Under Annuity Option 4, Annuity payments terminate automatically and immediately upon the surviving Annuitant's death without regard to the number or total amount of payments received. If an Owner, who is not also an Annuitant, dies after the Annuity Date, the following provisions apply: - If the Owner was the sole Owner, the remaining annuity payments will be payable to the Beneficiary in accordance with the provisions described above. The Beneficiary will become the Owner of the Contract. - If the Contract has joint Owners, the annuity payments will be payable to the surviving joint Owner in accordance with the provisions described above. Upon the death of the surviving joint Owner, the Beneficiary becomes the Owner. 9. PROTECTION OF BENEFITS Unless otherwise provided in the supplementary agreement, the Owner may not commute, anticipate, assign, alienate or otherwise hinder the receipt of any annuity payment. Further, the proceeds of the Contract and any payment under an Annuity Option will be exempt from the claim of creditors and from legal process to the extent permitted by law. 10. AGE, GENDER AND SURVIVAL We may require satisfactory evidence of the age, gender and the continued survival of any person on whose life the income is based. If the Annuitant's age or gender has been misstated, the amount payable under the Contract will be calculated as if those Purchase Payments sent to us had been made at the correct age or gender. Interest not to exceed the lesser of 3% or the maximum allowed by state law compounded each year will be charged to any overpayment or credited to any underpayment against future payments we may make under the Contract. In 1983, the United States Supreme Court held in ARIZONA GOVERNING COMMITTEE V. NORRIS that optional annuity benefits provided under an employee's deferred compensation plan could not, under Title VII of the Civil Rights Act of 1964, vary between men and women on the basis of sex. In addition, legislative, regulatory, or decisional authority of some states may prohibit use of sex-distinct mortality tables under certain circumstances. The Contracts offered by this Prospectus are based upon actuarial tables that distinguish between men and women and, thus, the Contract provides different benefits to men and women of the same age. Accordingly, employers and employee organizations should consider, in consultation with legal counsel, the impact of these authorities on any employment-related benefits program before purchasing the Contract. 82 PAYMENTS TO CONTRACT OWNERS Generally, we will make any death benefit, loan, withdrawal, surrender, or annuity payment to you or effect any transfer within seven days after the Valuation Date we receive your proper request at our Service Center. However, we may suspend or postpone payments of any amount where permitted under applicable federal or state laws, rules, or regulations. We may suspend or defer payments or transfers involving any Subaccount: - during any period when the New York Stock Exchange is closed, - when trading is restricted or the SEC determines an emergency exists, or - as the SEC by order may permit. We also may defer any payment or transfer from the Fixed Account for the period permitted by law. During the deferral period, we will continue to credit interest at the current applicable interest rates. This can never be more than six months after you send us the request. Applicable laws designed to counter terrorism and prevent money laundering might, in certain circumstances, require us to block your ability to make certain transactions and thereby refuse to accept any Purchase Payment or requests for transfers, withdrawals, surrenders, loans, annuitization, or death benefits, until instructions are received from the appropriate regulator. We may also be required to provide additional information about you and your Contract to government regulators. If you have submitted a recent check or draft that has not cleared through the banking system, we have the right to defer payment of a transfer, death benefit, loan, withdrawal, surrender, or annuity payment until such check or draft has been honored. 83 FEDERAL TAX MATTERS A. INTRODUCTION This discussion is not exhaustive and is not intended as tax advice. A qualified tax adviser should always be consulted with regard to the application of the law to individual circumstances. This discussion is based on the Code, Treasury Department regulations, and interpretations existing on the date of this Prospectus. These authorities, however, are subject to change by Congress, the Treasury Department, and the courts. This discussion does not address state or local tax consequences, nor federal estate or gift tax consequences, associated with buying a Contract. IN ADDITION, WE MAKE NO GUARANTEE REGARDING ANY TAX TREATMENT--FEDERAL, STATE, OR LOCAL--OF ANY CONTRACT OR OF ANY TRANSACTION INVOLVING A CONTRACT. B. OUR TAX STATUS We are taxed as a life insurance company and the operations of the Separate Account are treated as a part of our total operations. The Separate Account is not separately taxed as a "regulated investment company." Investment income and capital gains of the Separate Account are not taxed to the extent they are applied under a contract. We do not anticipate that we will incur federal income tax liability attributable to the income and gains of the Separate Account, and therefore we do not intend to provide for these taxes. If we are taxed on investment income or capital gains of the Separate Account, then we may charge the Separate Account to pay these taxes. C. TAXATION OF ANNUITIES IN GENERAL 1. TAX DEFERRAL DURING ACCUMULATION PERIOD Under the Code, except as described below, increases in the Contract Value of a Non-Qualified Contract are generally not taxable to the Owner or Annuitant until received as annuity payments or otherwise distributed. However, certain requirements must be satisfied for this general rule to apply, including: - the Contract must be owned by an individual, - Separate Account investments must be "adequately diversified", - we, rather than you, must be considered the Owner of Separate Account assets for federal tax purposes, and - annuity payments must appropriately amortize Purchase Payments and Contract earnings. NON-NATURAL OWNER. As a general rule, deferred annuity contracts held by "non-natural persons", such as corporations, trusts or similar entities, are not annuity contracts for federal income tax purposes. The investment income on these contracts is taxed each year as ordinary income received or accrued by the non-natural Owner. There are exceptions to this general rule for non-natural Owners. Contracts are generally treated as held by a natural person if the nominal Owner is a trust or other entity holding the contract as an agent for a natural person. However, this special exception does not apply to an employer who is the nominal Owner of a contract under a non-qualified deferred compensation plan for its employees. Additional exceptions to this rule include: - certain Contracts acquired by a decedent's estate due to the death of the decedent, - certain Qualified Contracts, - certain Contracts used with structured settlement agreements, and 84 - certain Contracts purchased with a single premium when the Annuity Date is no later than one year from Contract purchase and substantially equal periodic payments are made at least annually. DIVERSIFICATION REQUIREMENTS. For a Contract to be treated as an annuity for federal income tax purposes, separate account investments must be "adequately diversified". The Treasury Secretary issued regulations prescribing standards for adequately diversifying separate account investments. If the Separate Account 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 taxed on the difference between the contract value and the Purchase Payments. Although we do not control Fund investments, we expect that each Fund will comply with these regulations so that each Subaccount of the Separate Account will be considered "adequately diversified." OWNERSHIP TREATMENT. In some circumstances, owners of variable contracts who retain excessive control over the investment of the underlying separate account assets may be treated as the owners of those assets and may be subject to tax on income produced by those assets. Although published guidance in this area does not address certain aspects of the Contracts, we believe that the Owner of a Contract should generally not be treated as the owner of any assets in the Separate Account, see, however, the discussion below on Publicly Available Funds. We reserve the right to modify the Contracts to bring them into conformity with applicable standards should such modification be necessary to prevent Owners of the Contracts from being treated as the owners of the underlying Separate Account assets. PUBLICLY-AVAILABLE FUNDS. Several of the Funds offered through the Separate Account are also available to the general public The IRS has ruled that investing in mutual funds shares that are "publicly-available," i.e., shares of mutual finds that can be purchased directly without purchasing a variable annuity or life insurance contract, is incompatible with the investment control restrictions described in the previous paragraph. The IRS has ruled that most types of qualified contracts are not subject to the restrictions against investing in publicly-available mutual funds. We therefore believe that Qualified Contracts (other than those issued in connection with non-government 457 plans) may invest in publicly-available funds and remain exempt from current taxation until amounts are distributed or deemed to be distributed from the Contract. HOWEVER, , IF A NON-QUALIFIED CONTRACT INVESTS IN PUBLICLY-AVAILABLE FUNDS, IT WILL NOT BE TREATED AS AN ANNUITY CONTRACT FOR FEDERAL INCOME TAX PURPOSES. For this purpose, a Contract purchased in connection with a non-government sponsored 457 plan is treated as a Non-Qualified Contract. Accordingly, the Publicly-Available Funds under the Separate Account are intended only for Qualified Contracts. While we have established controls to avoid having a Non-qualified Contract invest in the Publicly- Available Funds,the Owner of a Non-Qualified Contract is responsible for ensuring that such an investment does not occur. REQUIRED DISTRIBUTIONS. In order to be treated as an annuity contract for federal income tax purposes, Section 72(s) of the Code requires any Non-Qualified Contract to contain certain provisions specifying how your interest in the Contract will be distributed in the event of the death of an Owner. Specifically, Section 72(s) requires that (a) if any Owner dies on or after the Annuity Date, but prior to the time the entire interest in the Contract has been distributed, the entire interest in the Contract will be distributed at least as rapidly as under the method of distribution being used as of the date of such Owner's death; and (b) if any Owner dies prior to the Annuity Date, the entire interest in the Contract will be distributed within five years after the date of such Owner's death. These requirements will be considered satisfied as to any portion of an Owner's interest which is payable to or for the benefit of a designated Beneficiary and which is distributed over the life of such designated Beneficiary or over a 85 period not extending beyond the life expectancy of that Beneficiary, provided that such distributions begin within one year of the Owner's death. The designated Beneficiary refers to a natural person designated by the Owner as a Beneficiary and to whom ownership of the Contract passes by reason of death. However, if the designated Beneficiary is the surviving spouse of the deceased Owner, the Contract may be continued with the surviving spouse as the new Owner. The Non-Qualified Contracts contain provisions that are intended to comply with these Code requirements, although no regulations interpreting these requirements have yet been issued. We intend to review such provisions and modify them if necessary to assure that they comply with the applicable requirements when such requirements are clarified by regulation or otherwise. Other rules may apply to Qualified Contracts. TRANSFERS, ASSIGNMENTS, OR EXCHANGES OF A CONTRACT. A transfer or assignment of ownership of a Contract, the designation of an Annuitant, the selection of certain Annuity Dates, or the exchange of a Contract may result in certain tax consequences to you that are not discussed herein. An Owner contemplating any such transfer, assignment, or exchange, should consult a tax advisor as to the tax consequences. DELAYED ANNUITY DATES. If the Annuity Date occurs (or is scheduled to occur) when the Annuitant has reached an advanced age (e.g., past age 85), the Contract might not be treated as an annuity for federal income tax purposes. In that event, the income and gains under the Contract would be currently includible in your income. The following discussion assumes that the Contract is treated as an annuity contract for tax purposes and that we are treated as the Owner of Separate Account assets. 2. TAXATION OF PARTIAL AND FULL WITHDRAWALS Partial withdrawals from a Non-Qualified Contract are includible in income to the extent the Contract Value exceeds the "investment in the contract". This amount is referred to as the "income on the contract". Full withdrawals are also includible in income to the extent they exceed the "investment in the contract." Investment in the contract equals the total of Purchase Payments minus any amounts previously received from the Contract that were not includible in your income. All amounts includible in income with respect to the Contract are taxed as ordinary income. Any assignment or pledge (or agreement to assign or pledge) of Contract Value is treated as a withdrawal. Investment in the contract is increased by the amount includible in income with respect to such assignment or pledge. If you transfer a contract interest, without adequate consideration, to someone other than your spouse (or to a former spouse incident to divorce), you will be taxed on the income on the contract. In this case, the transferee's investment in the contract is increased to reflect the increase in your income. The Contract's optional death benefits, if elected, may exceed Purchase Payments or Contract Value. As described in the Prospectus, we impose certain charges with respect to these death benefits. It is possible that those charges (or some portion) could be treated as a partial withdrawal. If your Contract contains a GLWB Rider, the application of certain tax rules, particularly those rules relating to distributions from your Contract, are not entirely clear. In view of this uncertainty, you should consult a tax advisor before purchasing the GLWB Rider. There may be special income tax issues present in situations where the Owner and the Annuitant are not the same person and are not married to one another. A tax adviser should be consulted in those situations. Other rules may apply to Qualified Contracts. 86 3. TAXATION OF ANNUITY PAYMENTS Normally, the portion of each annuity payment taxable as ordinary income equals the payment minus the exclusion amount. The exclusion amount for Variable Annuity payments is the "investment in the contract" allocated to the variable Annuity Option and adjusted for any period certain or refund feature, divided by the number of payments expected to be made. The exclusion amount for Fixed Annuity payments is the payment times the ratio of the investment in the contract allocated to the fixed Annuity Option and adjusted for any period certain or refund feature, to the expected value of the Fixed Annuity payments. Once the total amount of the investment in the contract has been recovered, annuity payments will be fully taxable. If annuity payments stop because the Annuitant dies before the total amount of the investment in the contract is recovered, the unrecovered amount generally is allowed as a deduction to the Annuitant in the last taxable year. 4. TAXATION OF DEATH BENEFITS Amounts may be distributed upon your or the Annuitant's death. Death benefits are includible in income and: - if distributed in a lump sum are taxed like a full withdrawal, or - if distributed under an Annuity Option are taxed like annuity payments. 5. PENALTY TAX ON PREMATURE DISTRIBUTIONS A 10% penalty tax applies to a taxable payment from a Non-Qualified Contract unless: - received on or after you reach age 59 1/2, - received due to your disability, - made to a Beneficiary after your death or, for non-natural Owners, after the primary Annuitant's death, - made as a series of substantially equal periodic payments (at least annually) for your life (or life expectancy) or for the joint lives (or joint life expectancies) of you and a designated Beneficiary (within the meaning of the tax law), - made under a Contract purchased with a single premium when the Annuity Date is no later than one year from Contract purchase and substantially equal periodic payments are made at least annually, - made with annuities used with certain structured settlement agreements. Other exceptions may apply. 6. AGGREGATION OF CONTRACTS The taxable amount of an annuity payment or withdrawal from a Non-Qualified Contract may be determined by combining some or all of the Non-Qualified Contracts you own. For example, if you purchase a Contract and also purchase an immediate annuity at approximately the same time, the IRS may treat the two contracts as one contract. Similarly, if a person transfers part of his interest in one annuity contract to purchase another annuity contract, the IRS might treat the two contracts as one contract. In addition, if you purchase two or more Non-Qualified deferred annuity contracts from the same company (or its affiliates) during any calendar year, these contracts are treated as one contract. The effects of this aggregation are not always clear. However, it could affect the taxable amount of an annuity payment or withdrawal and the amount which might be subject to the 10% penalty tax. 87 7. EXCHANGE OF ANNUITY CONTRACTS We may issue the Contract in exchange for all or part of another annuity contract that you own. Such an exchange will be tax free if certain requirements are satisfied. If the exchange is tax free, your investment in the contract immediately after the exchange will generally be the same as that of the annuity contract exchanged, increased by any additional Purchase Payment made as part of the exchange. Your Contract Value immediately after the exchange may exceed your investment in the contract. That excess may be includible in income should amounts subsequently be withdrawn or distributed from the Contract (e.g., as a partial surrender, full surrender, annuity income payment, or death benefit). If you exchange part of an existing annuity contract for the Contract, the IRS might treat the two contracts as one annuity contract in certain circumstances. (See "AGGREGATION OF CONTRACTS") You should consult your tax adviser in connection with an exchange of all or part of an annuity contract for the Contract. D. QUALIFIED PLANS Currently, the Contracts are also available for use in connection with retirement plans which receive favorable treatment under Sections 401, 403, 408, 408A or 457 of the Code. Contracts offered for use in connection with retirement plans that receive favorable treatment under Sections 401, 403, 408, 408A or 457 of the Code ("Qualified Plans") are referred to as "Qualified Contracts." Numerous special tax rules apply to the participants in Qualified Plans and to Qualified Contracts. We make no attempt in this Prospectus to provide more than general information about use of the Contract with the various types of Qualified Plans. PERSONS INTENDING TO USE THE CONTRACT IN CONNECTION WITH QUALIFIED PLANS SHOULD CONSULT A TAX ADVISER. Under the Code, qualified plans generally enjoy tax-deferred accumulation amounts invested in the plan. Therefore, in considering whether or not to purchase a Contract in a qualified plan, you should consider the Contract's features other than tax deferral, including the availability of lifetime annuity payments and death benefit protection. The tax rules applicable to Qualified Plans vary according to the type of plan and the terms and conditions of the plan. For example, for both withdrawals and annuity payments under certain Qualified Contracts, there may be no "investment in the contract" and the total amount received may be taxable. Also, loans from Qualified Contracts, where allowed, are subject to a variety of limitations, including restrictions as to the amount that may be borrowed, the duration of the loan, the number of allowable loans and the manner in which the loan must be repaid. (You should always consult your tax adviser and retirement plan fiduciary prior to exercising loan privileges.) Both the amount of the contribution that may be made, and the tax deduction or exclusion that you may claim for such contribution, are limited under Qualified Plans. If the Contract is used with a Qualified Plan, you and the Annuitant must be the same individual. If a joint Annuitant is named, all distributions made while the Annuitant is alive must be made to the Annuitant. Also, if a joint Annuitant is named who is not the Annuitant's spouse, the Annuity Options which are available may be limited, depending on the difference in their ages. Furthermore, the length of any guarantee period may be limited in some circumstances to satisfy certain minimum distribution requirements under the Code. Qualified Contracts are subject to special rules specifying the time at which distributions must begin and the amount that must be distributed each year. In the case of Individual Retirement Annuities, distributions of minimum amounts must generally begin by April 1 of the calendar year following the calendar year in which the Owner attains age 70 1/2. The required beginning date for 401, 403 and 457 plans is the April 1 of the calendar year following the later of the year in which the Owner attains age 70 1/2 or retires. There are no required minimum distributions during the Owner's lifetime under Roth IRAs. An excise tax is imposed for the failure to comply with the minimum distribution requirements. This excise tax generally equals 50% of the amount by which a minimum 88 required distribution exceeds the actual distribution. The death benefit or other optional benefits under your Contract may affect the amount of the minimum required distribution that must be taken from your Contract. Pursuant to special legislation, required minimum distributions for the 2009 tax year generally are not required, and 2009 distributions that otherwise would be required minimum distributions may be eligible for rollover. A 10% penalty tax may apply to the taxable amount of payments from Qualified Contracts. For Individual Retirement Annuities, the penalty tax does not apply, for example, to a payment: - received after you reach age 59 1/2, - received after your death or because of your disability, or - made as a series of substantially equal periodic payments (at least annually) for your life (or life expectancy) or for the joint lives (or joint life expectancies) of you and your designated Beneficiary. In addition, the penalty tax does not apply to certain distributions used for qualified first time home purchases or for higher education expenses, or qualified military reservist distributions. Special conditions must be met to qualify for these exceptions. If you wish to take a distribution for these purposes you should consult your tax adviser. Other exceptions may also be available. Qualified Contracts are amended to conform to tax qualification requirements. However, you are cautioned that the rights of any person to any benefits under Qualified Plans may be subject to the terms and conditions of the plans themselves, regardless of the terms and conditions of the Contract. In addition, we are not bound by terms and conditions of Qualified Plans if they are inconsistent with the Contract. 1. QUALIFIED PLAN TYPES INDIVIDUAL RETIREMENT ANNUITIES. The Code permits eligible individuals to contribute to an individual retirement annuity known as an "IRA." IRAs limit the amounts contributed, the persons eligible and the time when distributions start. Also, subject to direct rollover and mandatory withholding requirements, distributions from other types of qualified plans generally may be "rolled over" on a tax-deferred basis into an IRA. The Contract may not fund a "Coverdell Education Savings Account" (formerly known as an "Education IRA"). SIMPLIFIED EMPLOYEE PENSIONS (SEP IRAS). The Code allows employers to establish simplified employee pension plans, using the employees' IRAs. Under these plans the employer may make limited deductible contributions on behalf of the employees to IRAs. Employers and employees intending to use the Contract in connection with these plans should consult a tax adviser. SIMPLE IRAS. The Code permits certain small employers to establish "SIMPLE retirement accounts," including SIMPLE IRAs, for their employees. Under SIMPLE IRAs, certain deductible contributions are made by both employees and employers. SIMPLE IRAs are subject to various requirements, including limits on the amounts that may be contributed, the persons who may be eligible, and the time when distributions may commence. Employers and employees intending to use the Contract in connection with these plans should consult a tax adviser. ROTH IRAS. The Code permits contributions to an IRA known as a "Roth IRA." Roth IRAs differ from other IRAs in certain respects, including: - Roth IRA contributions are never deductible, - "qualified distributions" from a Roth IRA are excludable from income, - mandatory distribution rules do not apply before death, 89 - a rollover to a Roth IRA must be a "qualified rollover contribution," under the Code, - special eligibility requirements apply, and - contributions to a Roth IRA can be made after the Owner has reached age 70 1/2. All or part of an IRA may be converted into a Roth IRA without taking an actual distribution. You may convert by notifying the IRA issuer or trustee. You must be eligible for a qualified rollover contribution to convert an IRA to a Roth IRA. A conversion typically results in the inclusion of some or all of the IRA value in gross income, except that the 10% penalty tax does not apply on the conversion. Persons with adjusted gross incomes in excess of $100,000 or who are married and file a separate return are not eligible to make a qualified rollover contribution or a transfer in a taxable year from a non-Roth IRA to a Roth IRA. Any "qualified distribution", as defined in Code Section 408A, from a Roth IRA is excludible from gross income. A qualified distribution includes a distribution made after you reach age 59 1/2, after your death, because of your disability, or made to a first-time homebuyer. A qualified distribution can only be made after the first five tax years after the year for which you (or your spouse) made a contribution to any Roth IRA established for your benefit. CORPORATE AND SELF-EMPLOYED ("H.R. 10" AND "KEOGH") PENSION AND PROFIT-SHARING PLANS. The Code permits corporate employers to establish types of tax-favored retirement plans for employees. The Self-Employed Individuals Tax Retirement Act of 1962, as amended, commonly referred to as "H.R. 10" or "Keogh" permits self-employed individuals also to establish such tax-favored retirement plans for themselves and their employees. Such retirement plans may permit the purchase of the Contracts in order to provide benefits under the plans. The Contract provides a death benefit that in certain circumstances may exceed the greater of the Purchase Payments and the Contract Value. It is possible that such a death benefit could be characterized as an incidental death benefit. There are limitations on the amount of incidental benefits that may be provided under pension and profit sharing plans. In addition, the provision of such benefits may result in current taxable income to participants. Employers intending to use the Contract in connection with such plans should seek competent advice. TAX-SHELTERED ANNUITIES. Code Section 403(b) permits public school employees and employees of certain types of charitable, educational and scientific organizations to have their employers purchase annuity contracts for them and, subject to certain limitations, to exclude the amount of Purchase Payments from taxable gross income. These annuity contracts are commonly referred to as "tax-sheltered annuities". If you purchase a Contract for such purposes, you should seek competent advice as to eligibility, limitations on permissible amounts of Purchase Payments and other tax consequences associated with the Contracts. In particular, you should consider that the Contract provides optional death benefits that in certain circumstances may exceed the greater of the Purchase Payments and the Contract Value (see "DEATH BENEFITS"). It is possible that such death benefits could be characterized as incidental death benefits. If the death benefit were so characterized, this could result in currently taxable income to you. In addition, there are limitations on the amount of incidental benefits that may be provided under a tax-sheltered annuity. Tax-sheltered annuity contracts must contain restrictions on withdrawals of: - contributions made pursuant to a salary reduction agreement in years beginning after December 31, 1988, - earnings on those contributions, and - earnings after December 31, 1988 on amounts attributable to salary reduction contributions held as of December 31, 1988. 90 These amounts can be paid only if you have reached age 59 1/2, severed employment, died, or becomes disabled (within the meaning of the tax law), or in the case of hardship (within the meaning of the tax law). Amounts permitted to be distributed in the event of hardship are limited to actual contributions; earnings thereon cannot be distributed on account of hardship. Amounts subject to the withdrawal restrictions applicable to Section 403(b)(7) custodial accounts may be subject to more stringent restrictions. (These limitations on withdrawals generally do not apply to the extent you direct us to transfer some or all of the Contract Value to the issuer of another tax-sheltered annuity or into a Section 403(b)(7) custodial account.) For Contracts issued after December 31, 2008, amounts attributable to contributions other than salary reduction contributions generally may not be distributed before severance of employment or occurrence of an event specified in the employer's Section 403(b) plan. If you are a participant in the Texas Optional Retirement Program, you may not take withdrawals before death, disability, retirement, or termination from employment in the Texas public institutions of higher education, as provided in the Texas Optional Retirement Program. (You are, however, permitted to make transfers of Contract Value among the Investment Options.) Pursuant to new tax regulations, we generally are required to confirm, with your 403(b) plan sponsor or otherwise, that withdrawals, transfers or surrenders you request from a 403(b) Contract comply with applicable tax requirements before we process your request. DEFERRED COMPENSATION PLANS OF STATE AND LOCAL GOVERNMENTS AND TAX-EXEMPT ORGANIZATIONS. The Code permits employees of state and local governments and tax-exempt organizations to defer a portion of their compensation without paying current taxes. The employees must be participants in an eligible deferred compensation plan. Generally, a Contract purchased by a state or local government or a tax-exempt organization will not be treated as an annuity contract for federal income tax purposes. Those who intend to use the Contracts in connection with such plans should seek competent advice. 2. DIRECT ROLLOVERS If the Contract is used with a retirement plan that is qualified under Sections 401(a), 403(a), or 403(b) of the Code or with an eligible government deferred compensation plan that is qualified under Section 457(b), any "eligible rollover distribution" from the Contract will be subject to "direct rollover" and mandatory withholding requirements. An eligible rollover distribution generally is any distribution from such a qualified retirement plan, excluding certain amounts such as: - minimum distributions required under Section 401(a)(9) of the Code, - certain distributions for life, life expectancy, or for 10 years or more which are part of a "series of substantially equal periodic payments," and - hardship distributions. Under these requirements, federal income tax equal to 20% of the taxable portion of the eligible rollover distribution will be withheld from the amount of the distribution. Unlike withholding on certain other amounts distributed from the Contract, discussed below, you cannot elect out of withholding with respect to an eligible rollover distribution. However, this 20% withholding will not apply if, instead of receiving the eligible rollover distribution, you elect to have it directly transferred to certain types of qualified retirement plans. Prior to receiving an eligible rollover distribution, a notice will be provided explaining generally the direct rollover and mandatory withholding requirements and how to avoid the 20% withholding by electing a direct rollover. 91 E. FEDERAL INCOME TAX WITHHOLDING We withhold and send to the U.S. Government a part of the taxable portion of each distribution unless you notify us before distribution of an available election not to have any amounts withheld. In certain circumstances, we may be required to withhold tax. The withholding rates for the taxable portion of periodic annuity payments are the same as the withholding rates for wage payments. In addition, the withholding rate for the taxable portion of non-periodic payments (including withdrawals prior to the maturity date and conversions of, or rollovers from, non-Roth IRAs to Roth IRAs) is 10%. The withholding rate for eligible rollover distributions is 20%. F. OTHER TAX ISSUES 1. FEDERAL ESTATE TAXES While no attempt is being made to discuss the federal estate tax implications of the Contract, a purchaser should keep in mind that the value of an annuity contract owned by a decedent and payable to a beneficiary by virtue of surviving the decedent is included in the decedent's gross estate. Depending on the terms of the annuity contract, the value of the annuity included in the gross estate may be the value of the lump sum payment payable to the designated beneficiary or the actuarial value of the payments to be received by the beneficiary. Consult an estate planning advisor for more information. 2. GENERATION-SKIPPING TRANSFER TAX Under certain circumstances, the Code may impose a "generation skipping transfer tax" when all or part of an annuity contract is transferred to, or a death benefit is paid to, an individual two or more generations younger than the Owner. Regulations issued under the Code may require us to deduct the tax from your Contract, or from any applicable payment, and pay it directly to the IRS. 3. ANNUITY PURCHASES BY RESIDENTS OF PUERTO RICO The Internal Revenue Service has ruled that income received by residents of Puerto Rico under life insurance or annuity contracts issued by a Puerto Rico branch of a United States life insurance company is U.S.-source income that is generally subject to United States federal income tax. 4. ANNUITY PURCHASES BY NONRESIDENT ALIENS AND FOREIGN CORPORATIONS The discussion above provides general information regarding U.S. federal income tax consequences to annuity purchasers that are U.S. citizens or residents. Purchasers that are not U.S. citizens or residents will generally be subject to U.S. federal withholding tax on taxable distributions from annuity contracts at a 30% rate, unless a lower treaty rate applies. In addition, purchasers may be subject to state and/or municipal taxes and taxes that may be imposed by the purchaser's country of citizenship or residence. Prospective purchasers are advised to consult with a qualified tax adviser regarding U.S. state, and foreign taxation with respect to an annuity contract purchase. 5. FOREIGN TAX CREDITS We may benefit from any foreign tax credits attributable to taxes paid by certain Funds to foreign jurisdictions to the extent permitted under federal tax law. 6. POSSIBLE TAX LAW CHANGES Although the likelihood of legislative changes is uncertain, there is always the possibility that the tax treatment of the Contract could change by legislation or otherwise. Consult a tax adviser with respect to legislative developments and their effect on the Contract. We have the right to modify the 92 contract in response to legislative changes that could otherwise diminish the favorable tax treatment that annuity contract Owners currently receive. We make no guarantee regarding the tax status of any contact and do not intend the above discussion as tax advice. G. SPECIAL TAX CONSIDERATIONS FOR OPTIONAL BENEFITS At present, the IRS has not provided guidance as to the tax treatment of charges for optional benefits to an annuity contract. The IRS might take the position that each charge associated with these optional benefits is deemed a withdrawal from the Contract subject to current income tax to the extent of any gains and, if applicable, the 10% penalty tax for premature withdrawals. We do not currently report charges for optional benefits as partial withdrawals, but we may do so in the future if we believe that the IRS would require us to report them as such. You should consult a tax adviser before electing any optional benefit riders. Amounts received in a partial withdrawal are taxable to the extent that the Contract Value exceeds the investment in the Contract. There is some uncertainty regarding the effect that certain optional benefits, e.g., the GLWB Rider, might have on the amount that is treated as the Contract Value for this purpose. As a result, the taxable portion of amounts received in a partial withdrawal could be greater or less depending on how such optional benefits are treated for this purpose. The death benefit under a Qualified Contract, or any optional death benefit or other optional benefit rider, may increase the amount of any required minimum distributions. Failure to comply with minimum distribution requirements will result in the imposition of an excise tax, generally 50% of the amount by which the amount required to be distributed exceeds the actual distribution. If you are considering purchasing the GLWB Rider in connection with a Qualified Contract, in certain circumstances your ability to access the withdrawal benefit may be limited by the terms of your plan and/or by applicable law. Always consult your tax adviser before purchasing this Rider in connection with a Qualified Contract. DISTRIBUTION OF CONTRACTS The Contracts are distributed through the principal underwriter for the Separate Account: EPOCH SECURITIES, INC. ("DISTRIBUTOR") ONE NEW YORK PLAZA, NEW YORK, NY 10004 MAILING ADDRESS: 30 HUDSON ST., 27TH FLOOR, JERSEY CITY, NJ 07032 132 TURNPIKE ROAD, SUITE 210, SOUTHBOROUGH, MA 01772 The Distributor is a wholly-owned subsidiary of The Goldman Sachs Group, Inc We reimburse the Distributor for sales of the Contracts by selling firms. We also pay amounts to Distributor that may be used for its operating and other expenses, including: advertising expenses and other expenses of distributing the Contracts. Distributor's management team also may be eligible for non-cash compensation items that we may provide jointly with Distributor. Non-cash items include conferences, seminars and trips (including travel, lodging and meals in connection therewith), entertainment, merchandise and other similar items. SELLING FIRMS. We and Distributor have entered into selling agreements with selling firms for the sale of the Contracts. All selling firms receive commissions and some form of non-cash compensation. Selected selling firms may receive additional compensation, including marketing allowances, persistency payments, preferred status fees and industry conference fees. These commissions and other incentives or payments, if any, are not charged directly to Contract Owners or the Separate Account. We intend to recoup commissions and other sales expenses through fees and charges deducted under the Contract or from our General Account. A portion of the payments made to selling firms may be passed on to 93 their sales representatives in accordance with their internal compensation programs. Those programs may also include other types of cash and non-cash compensation and other benefits. COMPENSATION PAID TO ALL SELLING FIRMS. We and Distributor pay compensation to all selling firms in the form of commissions and certain types of non-cash compensation. The maximum commission payable for contract sales by selling firms is 6.0% of Purchase Payments. Some selling firms may elect to receive a lower commission when a Purchase Payment is made, along with annual trail commissions up to 0.80% of Account Value (less Purchase Payments received within the previous 12 months) for so long as the Contract remains in effect or as agreed in the selling agreement. Distributor may also provide non-cash compensation items that we may provide jointly with Distributor. Non-cash items include expenses for conference or seminar trips and certain gifts. ADDITIONAL COMPENSATION FOR SELECTED SELLING FIRMS. We and Distributor may pay additional compensation to selected selling firms, including marketing allowances, persistency payments, preferred status fees and industry conference fees. Marketing allowances are periodic payments to certain selling firms based on cumulative sales of our variable insurance contracts (including the Contracts). Persistency payments are periodic payments based on account values of our variable insurance contracts (including Account Values of the Contracts) or other persistency standards. Preferred status fees are paid to obtain preferred treatment of the Contracts in selling firms' marketing programs, which may include marketing services and increased access to their sales representatives. Industry conference fees are amounts paid to cover in part the costs associated with sales conferences and educational seminars for selling firms' sales representatives. The additional types of compensation discussed above are not offered to all selling firms. The terms of any particular agreement governing compensation may vary among selling firms and the amounts may be significant. The prospect of receiving, or the receipt of, additional compensation as described above may provide selling firms and/or their sales representatives with an incentive to favor sales of the Contracts over other variable annuity contracts (or other investments) with respect to which a selling firm does not receive additional compensation, or lower levels of additional compensation. You may wish to take such payment arrangements into account when considering and evaluating any recommendation relating to the contracts. For more information about any such arrangements, ask your sales representative for further information about what your sales representative and the selling firm for which he or she works may receive in connection with your purchase of a contract. VOTING RIGHTS Proxy materials in connection with any Fund shareholder meeting are delivered or made available to each Owner with Subaccount interests invested in the Fund as of the record date. Proxy materials include a voting instruction form. It is important that each Owner provide voting instructions to us because we vote all Fund shares proportionately in accordance with instructions received from Owners. This means that we will vote shares for which no timely instructions are received in the same proportion as those shares for which we do receive voting instructions. As a result, a small number of Owners may control the outcome of a vote. We will also vote any Fund shares attributed to amounts we have accumulated in the Subaccounts in the same proportion that Owners vote. A Fund is not required to hold annual shareholders' meetings. Funds hold special meetings as required or deemed desirable for such purposes as electing trustees, changing fundamental policies or approving an investment advisory agreement. Owners have voting rights in a Fund based upon the Owner's proportionate interest in the corresponding Subaccount as measured by units. Owners have voting rights before surrender, or the death of an Owner. Thereafter, the payee entitled to receive Variable Annuity payments has voting rights. During the Annuity Period, voting rights decrease as Annuity Units decrease. 94 REPORTS TO CONTRACT OWNERS AND INQUIRIES Each calendar quarter we send you a statement showing amounts credited to each Subaccount and to the Fixed Account. It also shows the interest rate(s) that we are crediting upon amounts held in the Fixed Account. In addition, if you transfer amounts among the Investment Options or make additional Purchase Payments, you receive written confirmation of these transactions. We will also send a current statement upon your request. We also send you annual and semi-annual reports for the Funds that underlie the Subaccounts in which you invest and a list of the securities held by that Fund. Read all reports carefully. If you find any errors, please contact us promptly to correct them. You will have access to Contract information through the Interactive Voice Response System (IVR) at 1-800-457-8803. You will also be able to access your account information from our website at WWW.COMMONWEALTHANNUITY.COM. You may direct inquiries to the selling agent or may call or write to us at our Service Center. DOLLAR COST AVERAGING Under our Dollar Cost Averaging ("DCA") program, a predesignated portion of any Subaccount is automatically transferred on a monthly, quarterly, semi-annual or annual basis for a specified duration to other Subaccounts or from the Fixed Account to a Subaccount or Subaccounts. If you elect this program, you cannot elect Automatic Asset Rebalancing. There is no charge associated with our DCA program. The theory of a DCA program is that by investing at regular and level increments over time, you will be able to purchase more Accumulation Units when the Accumulation Unit value is relatively low and less Accumulation units when the Accumulation Unit value is relatively high. DCA generally helps reduce the risk of purchasing Accumulation Units when market prices are high and selling when market prices are low. However, participation in the DCA program does not assure you of greater profit from your purchases under the program, nor will it prevent or necessarily reduce losses in a declining market. Moreover, while we refer to this program of periodic transfers generally as Dollar Cost Averaging, periodic transfers from a Subaccount (other than a Subaccount which maintains a stable net asset value), are less likely to produce the desired effect of the DCA program and may have the effect of reducing the average price of the Subaccount shares being redeemed. If you choose to participate in this program you should have the financial ability to continue making transfers through periods of fluctuating markets. The Owner may select any day of the month except for the 29th, 30th or 31st for the DCA transfers to occur. The Dollar Cost Averaging program is available only during the Accumulation Period. You may enroll any time by completing our Dollar Cost Averaging form. We must receive the enrollment form at least five business days before the transfer date. The minimum transfer amount is $100 per Subaccount. At the time Dollar Cost Averaging is elected, the total Contract Value in the Subaccount from which transfers will be made must be at least equal to the amount designated to be transferred on each transfer date times the duration selected. Dollar Cost Averaging ends if: - the number of designated monthly transfers has been completed, - Contract Value in the transferring account is insufficient to complete the next transfer; the remaining amount is transferred, - we receive your written termination at our Service Center at least five business days before the next transfer date, or - the Contract is surrendered or annuitized. 95 If the Fixed Account balance is at least $10,000, you may elect automatic monthly or calendar quarter transfers of interest accrued in the Fixed Account to one or more of the Subaccounts. Transfers are made within five business days of the end of the month or calendar quarter, as applicable. We must receive the enrollment form at least ten days before the end of the month or calendar quarter, as applicable. AUTOMATIC ASSET REBALANCING We currently offer Automatic Asset Rebalancing on a monthly, quarterly, semi-annual, or annual basis. If you elect this program, you cannot elect Dollar Cost Averaging. There is currently no charge for this service. Under Automatic Asset Rebalancing, we will allocate your Purchase Payments and rebalance your Separate Account Contract Value monthly, quarterly, semi-annually, or annually to maintain the particular percentage allocation among the Subaccounts that you select based on your investment goals and risk tolerance. Rebalancing of your Separate Account Contract Value will occur on the initial rebalancing date you select and then each rebalancing date thereafter. The initial date you select cannot be earlier than 30 days from the Date of Issue. If based on your selected date, rebalancing would occur on a date that is not a Valuation Date, the rebalancing will occur on the Valuation Date following your selected date. You may change the frequency of Automatic Asset Rebalancing at any time. We perform this periodic rebalancing to take account of: - increases and decreases in Separate Account Contract Value in each Subaccount due to Subaccount performance, and - increases and decreases in Separate Account Contract Value in each Subaccount due to withdrawals, transfers, and Purchase Payments. You may elect Automatic Asset Rebalancing at any time on or after the Date of Issue by submitting a written request to our Service Center. If you elect Automatic Asset Rebalancing, you must include all Separate Account Contract Value in the program. We allocate all Purchase Payments paid under an automatic investment feature and, unless you instruct us otherwise, all other Purchase Payments in accordance with the particular percentage allocation among the Subaccounts that you have selected. The percentages that you select under Automatic Asset Rebalancing will override any prior percentage allocations that you have chosen and we will allocate all future Purchase Payments. You may change your allocations at any time. Once elected, you may instruct us, in a form satisfactory to us, at any time to terminate the program. We reserve the right to make changes to this program at any time. SYSTEMATIC WITHDRAWAL PLAN We offer a Systematic Withdrawal Plan ("SWP") allowing you to preauthorize periodic withdrawals during the Accumulation Period. You instruct us to withdraw selected amounts from the Fixed Account or from any of the Subaccounts on a monthly, quarterly, semi-annual or annual basis. The SWP is available when you request a minimum $100 periodic payment. If the amounts distributed under the SWP exceed the Free Withdrawal Amount, we may assess the withdrawal charge on those amounts. WITHDRAWALS TAKEN UNDER THE SWP MAY BE SUBJECT TO THE 10% TAX PENALTY ON EARLY WITHDRAWALS AND TO INCOME TAXES AND WITHHOLDING. If you are interested in SWP, you may obtain an application and information concerning this program and its restrictions from us or your agent. We give thirty days' notice if we amend the SWP. The SWP may be terminated at any time by you or us. There is no charge associated with the SWP. 96 SPECIAL CONSIDERATIONS We reserve the right to amend the Contract to meet the requirements of federal or state laws or regulations. We will notify you in writing of these amendments. Your rights under a Contract may be assigned as provided by law. An assignment will not be binding upon us until we receive a written copy of the assignment at our Service Center. Any claim is subject to proof of interest of the assignee. You are solely responsible for the validity or effect of any assignment. You, therefore, should consult a qualified tax adviser regarding the tax consequences, as an assignment may be a taxable event. Only our President, Vice President, Secretary, or Assistant Secretaries may change the Contract. No one else has authority to modify or waive any provision of the Contract. Any change must be in writing. At any time, we may make such changes to the Contract, without your consent, as required to make it conform with any law, regulation, or ruling issued by a government agency. We will notify you of such changes and when required will obtain approval from the appropriate regulatory authority and you. LEGAL PROCEEDINGS There are no legal proceedings to which we, the Separate Account or the Principal Underwriter is a party, or to which the assets of the Separate Account are subject, that are likely to have a material adverse effect on: - the Separate Account; or - the ability of the principal underwriter to perform its contract with the Separate Account; or - on our ability to meet our obligations under the variable annuity contracts funded through the Separate Account. TABLE OF CONTENTS--STATEMENT OF ADDITIONAL INFORMATION The Statement of Additional Information, Table of Contents is: Services to the Separate Account; State Regulation; Experts; Financial Statements; Financial Statements of Commonwealth Annuity and Life Insurance Company; Appendix A State Premium Tax Chart. Please read the Statement of Additional Information in conjunction with this Prospectus. FINANCIAL STATEMENTS Financial Statements are included for the Company and for its Separate Account. 97 APPENDIX A COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY DEFERRED FIXED AND VARIABLE ANNUITY IRA, ROTH IRA AND SIMPLE IRA DISCLOSURE STATEMENT This Disclosure Statement describes the statutory and regulatory provisions applicable to the operation of traditional Individual Retirement Annuities (IRAs), Roth Individual Retirement Annuities (Roth IRAs) and Simple Individual Retirement Annuities (SIMPLE IRAs). Internal Revenue Service regulations require that this be given to each person desiring to establish an IRA, Roth IRA or a SIMPLE IRA. Except where otherwise indicated, IRA discussion includes Simplified Employee Pension IRAs (SEP IRA). Further information can be obtained from Commonwealth Annuity and Life Insurance Company and from any district office of the Internal Revenue Service. Also, see IRS Publication 590, INDIVIDUAL RETIREMENT ARRANGEMENTS (IRAS). This Disclosure Statement is for your general information and is not intended to be exhaustive or conclusive, to apply to any particular person or situation, or to be used as a substitute for qualified legal or tax advice. Please note that the information contained herein is based on current federal income tax law, income tax regulations, and other guidance provided by the IRS. Hence, this information is subject to change upon an amendment of the law or the issuance of further regulations or other guidance. Also, you should be aware that state tax laws may differ from federal tax laws governing such arrangements. You should consult your tax adviser about any state tax consequences of your IRA or Roth IRA, whichever is applicable. A. REVOCATION Within 7 days of the date you signed your enrollment application, you may revoke the Contract and receive back 100% of your money by submitting your request in writing to us at our Service Center. Notice of revocation will be deemed mailed on the date of the postmark (or if sent by certified or registered mail, the date of the certification or registration) if it is deposited in the mail in the United States in an envelope, or other appropriate wrapper, first class postage prepaid, properly addressed. B. STATUTORY REQUIREMENTS The Contract is intended to meet the requirements of Section 408(b) of the Code, Section 408A of the Code for use as a Roth IRA, or of Section 408(p) of the Code for use as a SIMPLE IRA, whichever is applicable. The Contract has not been approved as to form for use as an IRA, Roth IRA or a SIMPLE IRA by the Internal Revenue Service. Such approval by the Internal Revenue Service is a determination only as to form of the Contract, and does not represent a determination on the merits of the Contract. 1. The amount in your IRA, Roth IRA, and SIMPLE IRA, whichever is applicable, must be fully vested at all times and the entire interest of the Owner must be nonforfeitable. 2. The Contract must be nontransferable by the Owner. 3. The Contract must have flexible premiums. 4. For IRAs and SIMPLE IRAs, you must start receiving distributions on or before April 1 of the year following the year in which you reach age 70 1/2 (the required beginning date) (see "Required Distributions"). However, Section 401(a)(9)(A) of the Code (relating to minimum distributions required to commence at age 70 1/2, and the incidental death benefit requirements of Section 401(a) of the Code, do not apply to Roth IRAs. A-1 If you die on or after the date required minimum distributions under Section 401(a)(9) of the Code commence, unless otherwise permitted under applicable law, any remaining interest in the Contract must be distributed at least as rapidly as under the method of distribution being used as of the date of death. If you die before required minimum distributions commence, unless otherwise permitted under applicable law, any remaining interest in the Contract must be distributed to your Beneficiary by December 31 of the calendar year containing the fifth anniversary of your death; except that: (1) if the interest is payable to an individual who is your designated Beneficiary (within the meaning of Section 401(a)(9) of the Code), the designated Beneficiary may receive the entire interest over his or her life, or over a period certain not extending beyond his or her life expectancy, commencing on or before December 31 of the calendar year immediately following the calendar year in which you die; and (2) if the sole designated Beneficiary is your spouse, the Contract may be treated as his or her own IRA, or, where applicable, Roth IRA. 5. Except in the case of a rollover contribution or a direct transfer (see "Rollovers and Direct Transfers"), or a contribution made in accordance with the terms of a Simplified Employee Pension (SEP), all contributions to an IRA, Roth and SIMPLE IRA must be cash contributions which do not exceed certain limits. 6. The Contract must be for the exclusive benefit of you and your Beneficiaries. C. ROLLOVERS AND DIRECT TRANSFERS FOR IRAS AND SIMPLE IRAS 1. A rollover is a tax-free transfer from one retirement program to another that you cannot deduct on your tax return. There are two kinds of tax-free rollover payments to an IRA. In one, you transfer amounts from another IRA. With the other, you transfer amounts from a qualified plan under Section 401(a) of the Code, a qualified annuity under Section 403(a) of the Code, a tax-sheltered annuity or custodial account under Section 403(b) of the Code, or a governmental plan under Section 457(b) of the Code (collectively referred to as "qualified employee benefit plans"). Tax-free rollovers can be made from a SIMPLE IRA to a SIMPLE Individual Retirement Account under Section 408(p) of the Code. An individual can make a tax-free rollover to an IRA from a SIMPLE IRA, or vice-versa, after a two-year period has expired since the individual first participated in a SIMPLE plan. 2. You must complete the rollover by the 60th day after the day you receive the distribution from your IRA or other qualified employee benefit plan or SIMPLE IRA. The failure to satisfy this 60-day requirement may be waived by the Internal Revenue Service in certain circumstances. 3. A rollover distribution may be made to you only once a year. The one-year period begins on the date you receive the rollover distribution, not on the date you roll it over (reinvest it). 4. A trustee-to-trustee transfer to an IRA of funds in an IRA from one trustee or insurance company to another is not a rollover. It is a transfer that is not affected by the one-year waiting period. 5. All or a part of the premium for the Contract used as an IRA may be paid from a rollover from an IRA or qualified employee benefit plan or from a trustee-to-trustee transfer from another IRA. All or part of the premium for the Contract used as a SIMPLE IRA may be paid from a rollover from a SIMPLE Individual Retirement Account or, to the extent permitted by law, from a direct transfer from a SIMPLE IRA. 6. A distribution that is eligible for rollover treatment from a qualified employee benefit plan will be subject to twenty percent (20%) withholding by the Internal Revenue Service even if you roll the distribution over within the 60-day rollover period. One way to avoid this withholding is to make the distribution as a direct transfer to the IRA trustee or insurance company. A-2 D. CONTRIBUTION LIMITS AND ALLOWANCE OF DEDUCTION FOR IRAS 1. In general, the amount you can contribute each year to an IRA is the lesser of (1) 100% of your compensation, or (2) the maximum annual contributions under Section 219(b) of the Code, including "catch-up" contributions for certain individuals age 50 and older. The maximum annual contribution limit for IRA contributions is equal to $5,000 for 2008 and 2009. After 2009, the limit may be indexed annually in $500 increments as determined by the Secretary of Treasury to reflect cost of living increases. An individual who has attained age 50 may make additional "catch-up" IRA contributions. The maximum annual contribution limit for the individual is increased by $1,000 except as otherwise provided by law. If you have more than one IRA, the limit applies to the total contributions made to your own IRAs for the year. Generally, if you work the amount that you earn is compensation. Wages, salaries, tips, professional fees, bonuses and other amounts you receive for providing personal services are compensation. If you own and operate your own business as a sole proprietor, your net earnings reduced by your deductible contributions on your behalf to self-employed retirement plans are compensation. If you are an active partner in a partnership and provide services to the partnership, your share of partnership income reduced by deductible contributions made on your behalf to qualified retirement plans is compensation. All taxable alimony and separate maintenance payments received under a decree of divorce or separate maintenance is compensation. 2. In the case of a married couple filing a joint return, up to the maximum annual contribution can be contributed to each spouse's IRA, even if one spouse has little or no compensation. This means that the total combined contributions that can be made to both IRAs can be as much as $12,000 for 2009 ($5,000 annual contribution for each individual, plus $1,000 for each individual who has attained age 50). 3. In the case of a married couple with unequal compensation who file a joint return, the limit on the deductible contributions to the IRA of the spouse with less compensation is the smaller of: a. The maximum annual contribution, or b. The total compensation of both spouses, reduced by any deduction allowed for contributions to IRAs of the spouse with more compensation. The deduction for contributions to both spouses' IRAs may be further limited if either spouse is covered by an employer retirement plan. 4. If either you or your spouse is an active participants in an employer-sponsored plan and have a certain level of income, the amount of the contribution to your IRA that is deductible is phased out, and in some cases eliminated. If you are an active participant in an employer-sponsored plan, the deductibility of your IRA contribution will be phased out, depending on your adjusted gross income, or combined adjusted gross income in the case of a joint tax return, as follows: JOINT RETURNS: $89,000-$109,000 SINGLE TAXPAYERS: $55,000-$65,000 The phase-out range for married individuals filing separately is $0-$10,000. If you file a joint tax return and are not an active participant in an employer sponsored plan, but your spouse is, the amount of the deductible IRA contribution is phased out for adjusted gross income between $166,000 and $176,000. These amounts may be indexed for cost of living increases in future years. To designate a contribution as nondeductible, you must file IRS Form 8606, NONDEDUCTIBLE IRAS. You may have to pay a penalty if you make nondeductible contributions to an IRA and you do not file Form 8606 with your tax return, or if you overstate the amount of nondeductible contributions on your Form 8606. If you do not report nondeductible contributions, all of the contributions to your traditional A-3 IRA will be treated as deductible, and all distributions from your IRA will be taxed, unless you can show, with satisfactory evidence, that nondeductible contributions were made. 5. Contributions to your IRA for a year can be made at any time up to April 15 of the following year. If you make the contribution between January 1 and April 15, however, you may elect to treat the contribution as made either in that year or in the preceding year. You may file a tax return claiming a deduction for your IRA contribution before the contribution is actually made. You must, however, make the contribution by the due date of your return not including extensions. 6. You cannot make a contribution other than a rollover or transfer contribution to your IRA for the year in which you reach age 70 1/2 or thereafter. 7. A taxpayer may qualify for a tax credit for contributions to an IRA, or for a tax exempton for distributions donated to charity in 2009, depending on the taxpayer's adjusted gross income. E. SEP IRAS 1. SEP IRA rules concerning eligibility and contributions are governed by Code Section 408(k). The maximum deductible contribution for a SEP IRA is the lesser of $49,000 (may be indexed for cost-of-living increases in future years) or 100% of compensation. 2. A SEP must be established and maintained by an employer (corporation, partnership, sole proprietor). F. SIMPLE IRAS 1. A SIMPLE IRA must be established with your employer using a qualified salary reduction agreement. 2. You may elect to have your employer contribute to your SIMPLE IRA, under a qualified salary reduction agreement, an amount (expressed as a percentage of your compensation) not to exceed $11,500 for 2009. After 2009, the limit may be indexed annually, except as otherwise provided by law. In addition to these employee elective contributions, your employer is required to make each year either (1) a matching contribution equal to up to 3 percent, and not less than 1 percent, of your SIMPLE IRA contribution for the year, or (2) a non-elective contribution equal to 2 percent of your compensation for the year (up to $245,000 of compensation in 2009, as may be adjusted for inflation in future years). No other contributions may be made to a SIMPLE IRA. 3. Employee elective contributions and employer contributions (I.E., matching contributions and nonelective contributions) to your SIMPLE IRA are excluded from your gross income. 4. To the extent an individual with a SIMPLE IRA is no longer participating in a SIMPLE plan (E.G., the individual has terminated employment), and two years have passed since the individual first participated in the plan, the individual may treat the SIMPLE IRA as an IRA. G. TAX STATUS OF THE CONTRACT AND DISTRIBUTIONS FOR IRAS AND SIMPLE IRAS 1. Earnings of your IRA annuity contract are not taxed until they are distributed to you. 2. In general, taxable distributions are included in your gross income in the year you receive them. 3. Distributions under your IRA are non-taxable to the extent they represent a return of non-deductible contributions (if any). The non-taxable percentage of a distribution is determined generally by dividing your total undistributed, non-deductible IRA contributions by the value of all your IRAs (including SEPs and rollovers). A-4 4. You cannot choose the special five-year or ten-year averaging that may apply to lump sum distributions from qualified employer plans. H. REQUIRED DISTRIBUTIONS FOR IRAS AND SIMPLE IRAS You must start receiving minimum distributions required under the Contract and Section 401(a)(9) of the Code from your IRA and SIMPLE IRA starting with the year you reach age 70 1/2 (your 70 1/2 year). Ordinarily, the required minimum distribution for a particular year must be received by December 31 of that year. However, you may delay the required minimum distribution for the year you reach age 70 1/2 until April 1 of the following year (I.E., the required beginning date). Annuity payments which begin by April 1 of the year following your 70 1/2 year satisfy the minimum distribution requirement if they provide for non-increasing payments over your life or the lives of you and your designated Beneficiary (within the meaning of Section 401(a)(9) of the Code), provided that, if installments are guaranteed, the guaranty period does not exceed the applicable life or joint expectancy. The applicable life expectancy is your remaining life expectancy or the remaining joint life and last survivor expectancy of you and your designated Beneficiary, determined as set forth in applicable federal income tax regulations. If you have more than one IRA, you must determine the required minimum distribution separately for each IRA; however, you can take the actual distributions of these amounts from any one or more of your IRAs. In addition, the after-death minimum distribution requirements described generally in section B. STATUTORY REQUIREMENTS apply to IRAs and SIMPLE IRAs. If the actual distribution from your Contract is less than the minimum amount that should be distributed in accordance with the minimum distribution requirements mentioned above, the difference generally is an excess accumulation. There is a 50% excise tax on any excess accumulations. If the excess accumulation is due to reasonable error, and you have taken (or are taking) steps to remedy the insufficient distribution, you can request that this 50% excise tax be excused by filing with your tax return an IRS Form 5329, together with a letter of explanation and the excise tax payment. I. ROTH IRAS 1. If your Contract is a special type of individual retirement plan known as a Roth IRA, it will be administered in accordance with the requirements of section 408A of the Code. Roth IRAs are treated the same as other IRAs, except as described here. 2. If your Contract is a Roth IRA, we will send you a Roth IRA endorsement to be attached to, and to amend, your Contract. The Company reserves the right to amend the Contract as necessary or advisable from time to time to comply with future changes in the Code, regulations or other requirements imposed by the IRS to obtain or maintain its approval of the annuity as a Roth IRA. 3. Earnings in your Roth IRA are not taxed until they are distributed to you, and will not be taxed if they are paid as a "qualified distribution," as described to you in section L, below. 4. The minimum distribution requirements that apply to IRAs do not apply to Roth IRAs while the Owner is alive. However, after the death of a Roth IRA Owner, the after-death minimum distribution rules that apply to IRAs also apply to Roth IRAs as though the Roth IRA Owner died before his or her required beginning date. You may not use your Roth IRA to satisfy minimum distribution requirements for traditional IRAs. Nor may you use distributions from an IRA for required distributions from a Roth IRA. A-5 J. ELIGIBILITY AND CONTRIBUTIONS FOR ROTH IRAS 1. Generally, you are eligible to establish or make a contribution to your Roth IRA only if you meet certain income limits. No deduction is allowed for contributions to your Roth IRA. Contributions to your Roth IRA may be made even after you attain age 70 1/2. 2. The maximum aggregate amount of contributions for any taxable year to all IRAs, including all Roth IRAs, maintained for your benefit (the "contribution limit") generally is the lesser of (1) 100% of your compensation, or (2) the maximum annual contributions under Section 219(b) of the Code, including "catch-up" contributions for certain individuals age 50 and older (as discussed in section D, above). The contribution limit for any taxable year is reduced (but not below zero) by the amount which bears the same ratio to such amount as: (a) the excess of (i) your adjusted gross income for the taxable year, over (ii) the "applicable dollar amount," bears to (b) $15,000 (or $10,000 if you are married). For this purpose, "adjusted gross income" is determined under the Code and (1) excludes any amount included in gross income as a result of any rollover from, transfer from, or conversion of an IRA to a Roth IRA, and (2) is reduced by any deductible IRA contribution. In addition, the "applicable dollar amount" is equal to $166,000 for a married individual filing a joint return, $0 for a married individual filing a separate return, and $105,000 for any other individual. These amounts may be indexed for cost of living increases in future years. A "qualified rollover contribution" (discussed in section K, below), and a non-taxable transfer from another Roth IRA, are not taken into account for purposes of determining the contribution limit. K. ROLLOVERS, TRANSFERS AND CONVERSIONS TO ROTH IRAS 1. ROLLOVERS AND TRANSFERS--A rollover may be made to a Roth IRA only if it is a "qualified rollover contribution." A "qualified rollover contribution" is a rollover to a Roth IRA from another Roth IRA or from an IRA, but only if such rollover contribution also meets the rollover requirements for IRAs under Section 408(d)(3). In addition, a transfer may be made to a Roth IRA directly from another Roth IRA or from an IRA. You may not make a qualified rollover contribution or transfer in a taxable year from an IRA to a Roth IRA if (a) your adjusted gross income for the taxable year exceeds $100,000 or (b) you are married and file a separate return. The rollover requirements of Section 408(d)(3) are complex and should be carefully considered before you make a rollover. One of the requirements is that the amount received be paid into another IRA (or Roth IRA) within 60 days after receipt of the distribution. The failure to satisfy this 60-day requirement may be waived by the Internal Revenue Service in certain circumstances. In addition, a rollover contribution from a Roth IRA may be made by you only once a year. The one-year period begins on the date you receive the Roth IRA distribution, not on the date you roll it over (reinvest it) into another Roth IRA. If you withdraw assets from a Roth IRA, you may roll over part of the withdrawal tax free into another Roth IRA and keep the rest of it. A portion of the amount you keep may be included in your gross income. 2. TAXATION OF ROLLOVERS AND TRANSFERS TO ROTH IRAS--A qualified rollover contribution or transfer from a Roth IRA maintained for your benefit to another Roth IRA maintained for your benefit which meets the rollover requirements for IRAs under Section 408(d)(3) is tax-free. A-6 In the case of a qualified rollover contribution or a transfer from an IRA maintained for your benefit to a Roth IRA maintained for your benefit, any portion of the amount rolled over or transferred which would be includible in your gross income were it not part of a qualified rollover contribution or a nontaxable transfer will be includible in your gross income. However, Code Section 72(t) (relating to the 10 percent penalty tax on premature distributions) will not apply. 3. TRANSFERS OF EXCESS IRA CONTRIBUTIONS TO ROTH IRAS--If, before the due date of your federal income tax return for any taxable year (not including extensions), you transfer, from an IRA, contributions for such taxable year (and earnings thereon) to a Roth IRA, such amounts will not be includible in gross income to the extent that no deduction was allowed with respect to such amount. 4. TAXATION OF CONVERSIONS OF IRAS TO ROTH IRAS--All or part of amounts in an IRA maintained for your benefit may be converted into a Roth IRA maintained for your benefit. The conversion of an IRA to a Roth IRA is treated as special type of qualified rollover contribution. Hence, you must be eligible to make a qualified rollover contribution in order to convert an IRA to a Roth IRA. A conversion typically will result in the inclusion of some or all of your IRA's value in gross income, as described above. A conversion of an IRA to a Roth IRA can be made without taking an actual distribution from your IRA. For example, an individual may make a conversion by notifying the IRA issuer or trustee, whichever is applicable. UNDER SOME CIRCUMSTANCES, IT MIGHT NOT BE ADVISABLE TO ROLLOVER, TRANSFER, OR CONVERT ALL OR PART OF AN IRA TO A ROTH IRA. WHETHER YOU SHOULD DO SO WILL DEPEND ON YOUR PARTICULAR FACTS AND CIRCUMSTANCES, INCLUDING, BUT NOT LIMITED TO, SUCH FACTORS AS WHETHER YOU QUALIFY TO MAKE SUCH A ROLLOVER, TRANSFER, OR CONVERSION, YOUR FINANCIAL SITUATION, AGE, CURRENT AND FUTURE INCOME NEEDS, YEARS TO RETIREMENT, CURRENT AND FUTURE TAX RATES, YOUR ABILITY AND DESIRE TO PAY CURRENT INCOME TAXES WITH RESPECT TO AMOUNTS ROLLED OVER, TRANSFERRED, OR CONVERTED, AND WHETHER SUCH TAXES MIGHT NEED TO BE PAID WITH WITHDRAWALS FROM YOUR ROTH IRA (SEE DISCUSSION BELOW OF "NON-QUALIFIED DISTRIBUTIONS"). YOU SHOULD CONSULT A QUALIFIED TAX ADVISER BEFORE ROLLING OVER, TRANSFERRING, OR CONVERTING ALL OR PART OF AN IRA TO A ROTH IRA. 5. SEPARATE ROTH IRAS--Due to the complexity of, and proposed changes to, the tax law, it may be advantageous to maintain amounts rolled over, transferred, or converted from an IRA in separate Roth IRAs from those containing regular Roth IRA contributions. For the same reason, you should consider maintaining a separate Roth IRA for each amount rolled over, transferred, or converted from an IRA. These considerations should be balanced against the additional costs you may incur from maintaining multiple Roth IRAs. You should consult your tax adviser if you intend to contribute rollover, transfer, or conversion amounts to your Contract, or if you intend to roll over or transfer amounts from your Contract to another Roth IRA maintained for your benefit. L. INCOME TAX CONSEQUENCES OF ROTH IRAS 1. QUALIFIED DISTRIBUTIONS--Any "qualified distribution" from a Roth IRA is excludible from gross income. A "qualified distribution" is a payment or distribution which satisfies two requirements. First, the payment or distribution must be (a) made after you attain 59 1/2, (b) made after your death, (c) attributable to your being disabled, or (d) a "qualified special purpose distribution" (I.E., a qualified first-time homebuyer distribution under the Code). Second, the payment or distribution must be made in a taxable year that is at least five years after (1) the first taxable year for which a contribution was made to any Roth IRA established for you, or (2) in the case of a rollover from, or a conversion of, an IRA to a Roth IRA, the taxable year in which the rollover or conversion was made if the payment or distribution is allocable (as determined in the manner set forth in guidance issued by the IRS) to the rollover contribution or conversion (or to income allocable thereto). A-7 2. NONQUALIFIED DISTRIBUTIONS--A distribution from a Roth IRA which is not a qualified distribution is taxed under Code Section 72 (relating to annuities), except that such distribution is treated as made first from contributions to the Roth IRA to the extent that such distribution, when added to all previous distributions from the Roth IRA, does not exceed the aggregate amount of contributions to the Roth IRA. For purposes of determining the amount taxed, (a) all Roth IRAs established for you will be treated as one contract, (b) all distributions during any taxable year from Roth IRAs established for you will be treated as one distribution, and (c) the value of the contract, income on the contract, and investment in the contract, if applicable, will be computed as of the close of the calendar year in which the taxable year begins. An additional tax of 10% is imposed on nonqualified distributions (including amounts deemed distributed as the result of a prohibited loan or use of your Roth IRA as security for a loan) made before the benefited individual has attained age 59 1/2, unless one of the exceptions discussed in Section N applies. M. TAX ON EXCESS CONTRIBUTIONS 1. You must pay a 6% excise tax each year on excess contributions that remain in your Contract. Generally, an excess contribution is the amount contributed to your Contract that is more than you can contribute. The excess is taxed for the year of the excess contribution and for each year after that until you correct it. If contributions to your IRA for a year are more than the contribution limit, you can apply the excess contribution in one year to a later year if the contributions for that later year are less than the maximum allowed for that year. 2. You will not have to pay the 6% excise tax if you withdraw the excess amount by the date your tax return is due including extensions for the year of the contribution. You do not have to include in your gross income an excess contribution that you withdraw from your Contract before your tax return is due if the income earned on the excess was also withdrawn and no deduction was allowed for the excess contribution. You must include in your gross income the income earned on the excess contribution. N. TAX ON PREMATURE DISTRIBUTIONS There is an additional tax on premature distributions from your IRA, Roth IRA, or SIMPLE IRA, equal to 10% of the taxable amount. For premature distributions from a SIMPLE IRA made within the first 2 years you participate in a SIMPLE plan, the additional tax is equal to 25% of the amount of the premature distribution that must be included in gross income. Premature distributions are generally amounts you withdraw before you are age 59 1/2. However, the tax on premature distributions does not apply generally: 1. To amounts that are rolled over or transferred tax free; 2. To a distribution which is made on or after your death, or on account of you being disabled within the meaning of Code Section 72(m)(7); 3. To a distribution which is part of a series of substantially equal periodic payments (made at least annually) over your life or your life expectancy or the joint life or joint life expectancy of you and your Beneficiary; 4. To a distribution which is used for qualified first-time homebuyer expenses, qualified higher education expenses, certain medical expenses, or by an unemployed individual to pay health insurance premiums; or 5. To a distribution mode during a specified time period to a reservist who is called or ordered to active duty for a period in excess of 170 days or for an indefinite period. A-8 O. EXCISE TAX REPORTING Use Form 5329, Additional Taxes Attributable to Qualified Retirement Plans (Including IRAs), Annuities, and Modified Endowment Contracts, to report the excise taxes on excess contributions, premature distributions, and excess accumulations. If you do not owe any IRA, SIMPLE IRA or Roth IRA excise taxes, you do not need Form 5329. Further information can be obtained from any district office of the Internal Revenue Service. P. BORROWING If you borrow money against your Contract or use it as security for a loan, the Contract will lose its classification as an IRA, Roth IRA, or SIMPLE IRA, whichever is applicable, and you must include in gross income the fair market value of the Contract as of the first day of your tax year. In addition, you may be subject to the tax on premature distributions described above. (Note: The Contract does not allow borrowings against it, nor may it be assigned or pledged as collateral for a loan.) Q. REPORTING We will provide you with any reports required by the Internal Revenue Service. R. ESTATE TAX Generally, the value of your IRA, including your Roth IRA, is included in your gross estate for federal estate tax purposes. S. FINANCIAL DISCLOSURE 1. We deduct a daily charge from your Separate Account Contract Value equal to 1.30%, on an annual basis, of Separate Account Contract Value. May vary if optional riders are elected. 2. An annual Contract Fee of $30.00 will be assessed against the Separate Account and Fixed Account Value each Contract Year. 3. Withdrawal charges will be assessed based on the Contract Years elapsed as described in the prospectus under the heading "Withdrawal Charge." 4. The method used to compute and allocate the annual earnings is contained in the Prospectus under the heading "Accumulation Unit Value" for Separate Account Contract Value 5. The growth in value of your Contract is neither guaranteed nor projected but is based on the investment experience of the Separate Account or rates of interest as declared by Commonwealth Annuity. A-9 GUARANTEED LUMP SUM TERMINATION OF DEFERRED FIXED AND VARIABLE ANNUITY COMPLETELY ALLOCATED TO THE FIXED ACCOUNT WITH 2% GUARANTEED EACH YEAR FOR THE FIRST TEN YEARS AND 3% THEREAFTER. (TERMINATION VALUES ARE BASED ON $1,000 ANNUAL CONTRIBUTIONS AT THE BEGINNING OF EACH YEAR.)
END OF TERMINATION END OF TERMINATION END OF TERMINATION END OF TERMINATION YEAR VALUES* YEAR VALUES* YEAR VALUES* YEAR VALUES* --------------------- ----------- -------- ----------- -------- ----------- -------- ----------- 1 928 9 9,424 17 20,750 25 35,235 2 1,891 10 10,607 18 22,379 26 37,299 3 2,881 11 11,929 19 24,057 27 39,424 4 3,899 12 13,292 20 25,785 28 41,614 5 4,945 13 14,696 21 27,565 29 43,868 6 6,021 14 16,142 22 29,398 30 46,191 7 7,128 15 17,633 23 31,287 8 8,264 16 19,168 24 33,232
------------------------ * Includes applicable withdrawal charges GUARANTEED LUMP SUM TERMINATION OF DEFERRED FIXED AND VARIABLE ANNUITY COMPLETELY ALLOCATED TO THE FIXED ACCOUNT WITH 2% GUARANTEED EACH YEAR FOR THE FIRST TEN YEARS AND 3% THEREAFTER. (TERMINATION VALUES ARE BASED ON $5,000 SINGLE PREMIUM.)
END OF TERMINATION END OF TERMINATION END OF TERMINATION END OF TERMINATION YEAR VALUES* YEAR VALUES* YEAR VALUES* YEAR VALUES* --------------------- ----------- -------- ----------- -------- ----------- -------- ----------- 1 4,788 9 5,671 17 6,844 25 8,401 2 4,901 10 5,754 18 7,019 26 8,622 3 5,017 11 5,896 19 7,200 27 8,851 4 5,136 12 6,043 20 7,385 28 9,086 5 5,258 13 6,194 21 7,577 29 9,328 6 5,382 14 6,349 22 7,774 30 9,578 7 5,509 15 6,510 23 7,976 8 5,589 16 6,675 24 8,185
------------------------ * Includes applicable withdrawal charges A-10 APPENDIX B GLWB RIDER--EXAMPLE #1 THIS EXAMPLE ILLUSTRATES THE SETTING OF INITIAL AMOUNTS, THE IMPACT OF BONUSES AND STEP-UPS, THE IMPACT OF ADDITIONAL PURCHASE PAYMENTS, THE IMPACT OF NON-EXCESS AND EXCESS WITHDRAWALS, AND THE CALCULATION OF THE GLWB RIDER DEATH BENEFIT The values shown below assume that: -- a Contract is issued with an initial Purchase Payment of $100,000 and no premium taxes apply -- the Covered Person (or oldest Covered Person in the case of GLWB Plus For Two) is exact age 55 on the Date of Issue -- an Excess Withdrawal equal to the Contract Value is taken in the middle of the 17th Contract Year (the Contract is surrendered) -- we do not exercise our right to increase the GLWB Rider charge on the effective date of any Step-Up of the Lifetime Income Base. The values in the shaded lines below are middle of year values (after the impact of the each assumed transaction). All other values are beginning of the year.
HYPOTHETICAL HYPOTHETICAL LIFETIME AGE OF CONTRACT CONTRACT GUARANTEED INCOME CONTRACT COVERED PURCHASE GROSS VALUE BEFORE VALUE AFTER WITHDRAWAL BASE LINE YEAR PERSON PAYMENT WITHDRAWAL TRANSACTION TRANSACTION BALANCE BONUS --------------------- -------- -------------- --------- ----------- ------------ ------------ ----------- -------- (1) 1 55 $100,000 $ 0 $100,000 $100,000 na (2) 2 56 95,000 95,000 100,000 $5,000 (3) 3 57 110,000 110,000 100,000 5,000 (4) 4 58 117,500 117,500 100,000 5,000 (5) 4 Transaction #1 25,000 110,000 135,000 125,000 na (6) 5 59 130,000 130,000 125,000 6,250 (7) 6 60 115,000 115,000 125,000 6,250 (8) 7 61 110,000 110,000 125,000 6,250 (9) 7 Transaction #2 $ 6,250 118,750 112,500 118,750 na (10) 8 62 $115,000 115,000 118,750 na (11) 9 63 117,500 117,500 118,750 na (12) 9 Transaction #3 10,000 125,000 115,000 108,750 na (13) 10 64 125,000 125,000 108,750 na (14) 11 65 135,000 135,000 108,750 na (15) 12 66 150,000 150,000 108,750 na (16) 13 67 135,000 135,000 108,750 na (17) 13 Transaction #4 7,500 122,500 115,000 101,250 na (18) 14 68 105,000 105,000 101,250 na (19) 15 69 110,000 110,000 101,250 na (20) 16 70 90,000 90,000 101,250 na (21) 16 Transaction #5 65,000 75,000 10,000 13,500 na (22) 17 71 10,500 10,500 13,500 na (23) 17 Transaction #6 11,000 11,000 0 0 na CONTRACT VALUE ON LIFETIME GUARANTEED LIFETIME STEP-UP INCOME WITHDRAWAL INCOME LINE DATE BASE AMOUNT AMOUNT --------------------- -------- -------- ----------- -------- (1) na $100,000 $5,000 na (2) na 105,000 5,000 na (3) na 110,000 5,000 na (4) $117,500 117,500 5,000 na (5) na 142,500 6,250 na (6) na 148,750 6,250 na (7) na 155,000 6,250 na (8) 110,000 161,250 6,250 na (9) na 155,000 6,250 na (10) na 155,000 6,250 na (11) na 155,000 6,250 na (12) na 142,600 5,750 na (13) 125,000 142,600 5,750 na (14) 135,000 142,600 na $7,130 (15) 150,000 150,000 na 7,500 (16) 135,000 150,000 na 7,500 (17) na 150,000 na 7,500 (18) 105,000 150,000 na 7,500 (19) 110,000 150,000 na 7,500 (20) 90,000 150,000 na 7,500 (21) na 20,000 na 1,000 (22) 10,500 20,000 na 1,000 (23) na 0 na 0
B-1 SETTING OF INITIAL AMOUNTS Line (1) -- On the Date of Issue, the Contract Value is equal to the initial Purchase Payment of $100,000. The initial Guaranteed Withdrawal Balance and Lifetime Income Base are set equal to the initial Purchase Payment of $100,000. The Guaranteed Withdrawal Amount is set equal to the 5% of the Guaranteed Withdrawal Balance (5% X $100,000 = $5,000). The Lifetime Income Amount is not calculated prior to the Lifetime Income Date. DETERMINATION OF LIFETIME INCOME DATE => The Lifetime Income Date is the Contract Anniversary on or after the Covered Person (or oldest Covered Person in the case of GLWB Plus for Two) reaches age 65, or the Date of Issue if the Covered Person (or oldest Covered Person in the case of GLWB Plus for Two) is age 65 or older on the Date of Issue. Line (14) In this example the Lifetime Income Date is the first day of the 11th Contract Year. BONUSES & STEP-UPS => The Bonus Period lasts until the earlier of the 10th Contract Anniversary or the Contract Anniversary immediately following the Contract Year in which the Covered Person (or older original Covered Person in the case of GLWB Plus for Two) reaches age 80. No Bonuses will be applied after a withdrawal is taken. => The Step-Up Period begins on the Date of Issue and ends on the Contract Anniversary immediately following the Contract Year in which the Covered Person (or older original Covered Person in the case of GLWB Plus For Two) reaches age 90. During the Step-Up Period, Step-Up dates are scheduled for the 3rd, 6th, and 9th Contract Anniversary and every Contract Anniversary thereafter and the Lifetime Income Date. Line (2) Since no withdrawals have been taken and the Covered Person is within the Bonus Period, the Lifetime Income Base is increased for a Bonus. The Bonus is equal to 5% of total Purchase Payments (= 5% X $100,000 = $5,000). The new Lifetime Income Base after the Bonus is equal to $105,000 (= $100,000 + $5,000). The Guaranteed Withdrawal Amount does not change after a Bonus is applied. Line (4) The 3rd Contract Anniversary is a Step-Up Date and the Contract Value ($117,500) exceeds the Lifetime Income Base after the Bonus is applied ($115,000), so the Lifetime Income Base is Stepped-Up to the Contract Value. Note that the Bonus is applied before we determine if a Step-Up applies. Line (8) The Contract Value ($110,000) is lower than the Lifetime Income Base after the Bonus is applied ($155,000 + $6,250 = $161,250) so the Lifetime Income Base is not Stepped-Up. Line (15) The Contract Value ($150,000) is higher than the Lifetime Income Base ($142,600) so the Lifetime Income Base is Stepped-Up to equal the Contract Value. The Lifetime Income Amount is increased to equal 5% of the new Lifetime Income Base (= 5% X $150,000 = $7,500).
B-2 TRANSACTION #1--IMPACT OF AN ADDITIONAL PURCHASE PAYMENT Line (5) -- We increase the Guaranteed Withdrawal Balance and Lifetime Income Base by the amount of an additional Purchase Payment when we receive it. The Guaranteed Withdrawal Balance after the additional Purchase Payment is equal to $125,000 (= $100,000 + $25,000). The Lifetime Income Base after the additional Purchase Payment equals $142,500 (= $117,500 + $25,000). -- The Guaranteed Withdrawal Amount is recalculated to equal the greater of (a) the Guaranteed Withdrawal Amount immediately before the Purchase Payment; or (b) 5% of the Guaranteed Withdrawal Balance immediately after the Purchase Payment. This is equal to $6,250 which is the greater of (a) = $5,000 or (b) = 5% X $125,000 = $6,250. TRANSACTION #2--IMPACT OF A NON-EXCESS WITHDRAWAL TAKEN PRIOR TO THE LIFETIME INCOME DATE => Prior to the Lifetime Income Date, the Guaranteed Withdrawal Amount is used for the purpose of determining whether a Gross Withdrawal is a Non-Excess Withdrawal or Excess Withdrawal Line (9) A Gross Withdrawal of $6,250 is taken in the middle of the 7th Contract Year. Since the Gross Withdrawal does not cause total Gross Withdrawals taken during the Contract Year to exceed the Guaranteed Withdrawal Amount ($6,250), the Gross Withdrawal is classified as a Non-Excess Withdrawal. According to the terms of the GLWB Rider, amounts are adjusted for a Non-Excess Withdrawal taken prior to the Lifetime Income Date, as follows: -- The new Guaranteed Withdrawal Balance equals the Guaranteed Withdrawal Balance prior to the withdrawal minus the amount of the withdrawal ($118,750 = $125,000 - $6,250) -- The new Lifetime Income Base is equal to the greater of (a) the Lifetime Income Base immediately prior to the withdrawal minus the amount of the withdrawal or (b) the Lifetime Income Base immediately prior to the withdrawal multiplied by the Proportional Reduction Factor*. This is equal to $155,000 which is the greater of (a) = $161,250 - $6,250 = $155,000 or (b) = $161,250 X ($112,500 / $118,750) = $152,763 -- There is no change to the Guaranteed Withdrawal Amount. * The Proportional Reduction Factor is equal to the Contract Value after the withdrawal divided by the Contract Value immediately prior to the withdrawal (= $112,500 / $118,750). Line (9) No future Bonuses will be applied to the Lifetime Income Base after this withdrawal.
B-3 TRANSACTION #3--IMPACT OF AN EXCESS WITHDRAWAL TAKEN PRIOR TO THE LIFETIME INCOME DATE Line (12) A Gross Withdrawal of $10,000 is taken in the middle of the 9th Contract Year. Since the Gross Withdrawal exceeds the Guaranteed Withdrawal Amount ($6,250), the Gross Withdrawal is classified as an Excess Withdrawal. According to the terms of the GLWB Rider, amounts are adjusted for an Excess Withdrawal taken prior to the Lifetime Income Date, as follows: -- The new Guaranteed Withdrawal Balance is equal to the lesser of (a) the Guaranteed Withdrawal Balance immediately prior to the withdrawal minus the amount of the withdrawal or (b) the Guaranteed Withdrawal Balance immediately prior to the withdrawal multiplied by the Proportional Reduction Factor*. This is equal to $108,750 which is the lesser of (a) = $118,750 - $10,000 = $108,750 or (b) = $118,750 X ($115,000 / $125,000) = $109,250. -- The new Lifetime Income Base is equal to the Lifetime Income Base immediately prior to the withdrawal multiplied by the Proportional Reduction Factor ($155,000 X ($115,000 / $125,000) = $142,600). Note that the Lifetime Income Base decreases by more than the amount of the withdrawal. -- The new Guaranteed Withdrawal Amount is equal to the Guaranteed Withdrawal Amount immediately prior to the withdrawal multiplied by the Proportional Reduction Factor ($6,250 X ($115,000 / $125,000) = $5,750). * The Proportional Reduction Factor is equal to the Contract Value after the withdrawal divided by the Contract Value immediately prior to the withdrawal (= $115,000 / $125,000). TRANSACTION #4--IMPACT OF A NON-EXCESS WITHDRAWAL TAKEN ON OR AFTER THE LIFETIME INCOME DATE => On and after the Lifetime Income Date, the Lifetime Income Amount is used for the purpose of determining whether a Gross Withdrawal is a Non-Excess Withdrawal or Excess Withdrawal Line (17) A Gross Withdrawal of $7,500 is taken in the middle of the 13th Contract Year. Since the Gross Withdrawal does not cause total Gross Withdrawals taken during the Contract Year to exceed the Lifetime Income Amount ($7,500), the Gross Withdrawal is classified as a Non-Excess Withdrawal. According to the terms of the GLWB Rider, amounts are adjusted for a Non-Excess Withdrawal taken on or after the Lifetime Income Date, as follows: -- The new Guaranteed Withdrawal Balance equals the Guaranteed Withdrawal Balance prior to the withdrawal minus the amount of the withdrawal ($101,250 = $108,750 - $7,500) -- There is no change to the Lifetime Income Base -- There is no change to the Lifetime Income Amount.
B-4 TRANSACTION #5--IMPACT OF AN EXCESS WITHDRAWAL TAKEN ON OR AFTER THE LIFETIME INCOME DATE Line (21) A Gross Withdrawal of $65,000 is taken in the middle of the 16th Contract Year. Since the Gross Withdrawal exceeds the Lifetime Income Amount ($7,500), the Gross Withdrawal is classified as an Excess Withdrawal. According to the terms of the GLWB Rider, amounts are adjusted for an Excess Withdrawal taken on or after the Lifetime Income Date, as follows: -- The new Guaranteed Withdrawal Balance is equal to the lesser of (a) the Guaranteed Withdrawal Balance immediately prior to the withdrawal minus the amount of the withdrawal or (b) the Guaranteed Withdrawal Balance immediately prior to the withdrawal multiplied by the Proportional Reduction Factor*. This is equal to to $13,500 which is the lesser of (a) = $101,250 - $65,000 = $36,250 or (b) = $101,250 X ($10,000 / $75,000) = $13,500. Note that the Guaranteed Withdrawal Balance decreases by more than the amount of the withdrawal. -- The new Lifetime Income Base is equal to the Lifetime Income Base immediately prior to the withdrawal multiplied by the Proportional Reduction Factor ($150,000 X ($10,000 / $75,000) = $20,000). Note that Lifetime Income Base decreases by more than the amount of the withdrawal. -- The new Lifetime Income Amount is equal to 5% of the new Lifetime Income Base (5% X $20,000 = $1,000). * The Proportional Reduction Factor is equal to the Contract Value after the withdrawal divided by the Contract Value immediately prior to the withdrawal (= $10,000 / $75,000). TRANSACTION #6--IMPACT OF AN EXCESS WITHDRAWAL EQUAL TO THE CONTRACT VALUE TAKEN ON OR AFTER THE LIFETIME INCOME DATE => The Contract does not enter the Benefit Phase after this transaction because the Contract Value is reduced to zero due to an Excess Withdrawal. The Contract is surrendered and the GLWB Rider is terminated because the Contract Value, the Guaranteed Withdrawal Balance, and the Lifetime Income Amount all equal zero. Line (23) A Gross Withdrawal of $11,000 is taken in the middle of the 17th Contract Year. Since the Gross Withdrawal exceeds the Lifetime Income Amount ($1,000), the Gross Withdrawal is classified as an Excess Withdrawal. According to the terms of the GLWB Rider, amounts are adjusted for an Excess Withdrawal taken on or after the Lifetime Income Date, as follows: -- The new Guaranteed Withdrawal Balance is equal to the lesser of (a) the Guaranteed Withdrawal Balance immediately prior to the withdrawal minus the amount of the withdrawal or (b) the Guaranteed Withdrawal Balance immediately prior to the withdrawal multiplied by the Proportional Reduction Factor*. This is equal to to $0 which is the lesser of (a) = $13,500 - $11,000 = $2,500 or (b) = $13,500 X ($0 / $11,000) = $0. -- The new Lifetime Income Base is equal to the Lifetime Income Base immediately prior to the withdrawal multiplied by the Proportional Reduction Factor. This is equal to $0 (= $20,000 X ($0 / $11,000)) -- The new Lifetime Income Amount is equal to 5% of the new Lifetime Income Base (5% X $0 = $0). * The Proportional Reduction Factor is equal to the Contract Value after the withdrawal divided by the Contract Value immediately prior to the withdrawal (= $0 / $11,000).
B-5 GLWB RIDER DEATH BENEFIT => The GLWB Rider Death Benefit may be payable on an Owner's death in certain situations identified in the GLWB Rider. If the GLWB Rider Death Benefit is payable, we will pay (or apply) the GLWB Rider Death Benefit instead of the standard death benefit or any optional death benefit elected, if the GLWB Rider Death Benefit is greater. => The GLWB Rider Death Benefit is equal to the greater of (a) or (b), less any premium taxes, where: (a) = the Contract Value on the Valuation Date we receive due proof of death; and (b) = the Guaranteed Withdrawal Balance on the Valuation Date we receive due proof of death. Line (14) If we were to receive due proof of death of an Owner's death on the 10th Contract Anniversary AND the GLWB Rider Death Benefit is payable on such Owner's death in a situation identified in the GLWB Rider: -- The GLWB Rider Death Benefit would be equal to $135,000 which is the greater of (a) the Contract Value ($135,000) or (b) the Guaranteed Withdrawal Balance ($108,750). Line (20) If we were to receive due proof of death of an Owner's death on the 15th Contract Anniversary AND the GLWB Rider Death Benefit is payable on such Owner's death in a situation identified in the GLWB Rider: -- The GLWB Rider Death Benefit would be equal to $101,250 which is the greater of (a) the Contract Value ($90,000) or (b) the Guaranteed Withdrawal Balance ($101,250).
B-6 APPENDIX C GLWB RIDER--EXAMPLE #2 THIS EXAMPLE ILLUSTRATES A SITUATION WHERE THE BENEFIT PHASE START DATE OCCURS PRIOR TO THE LIFETIME INCOME DATE The values shown below assume that: -- a Contract is issued with an initial Purchase Payment of $150,000 and no premium taxes apply -- the Covered Person (or oldest Covered Person in the case of GLWB Plus For Two) is exact age 55 on the Date of Issue -- the Covered Person (or both surviving Covered Persons in the case of GLWB Plus For Two) lives until the Benefit Period Start Date -- Non-Excess Withdrawals equal to the Guaranteed Withdrawal Amount are taken in the middle of each Contract Year.
LIFETIME CONTRACT AGE OF HYPOTHETICAL GUARANTEED INCOME VALUE ON LIFETIME GUARANTEED CONTRACT COVERED PURCHASE CONTRACT WITHDRAWAL BASE STEP-UP INCOME WITHDRAWAL LINE YEAR PERSON PAYMENT VALUE BALANCE BONUS DATE BASE AMOUNT ---- -------- -------- -------- ------------ ---------- -------- -------- -------- ---------- (1) 1 55 $150,000 $150,000 $150,000 na na $150,000 $7,500 (2) 2 56 127,000 142,500 na na 142,500 7,500 (3) 3 57 111,000 135,000 na na 135,000 7,500 (4) 4 58 95,000 127,500 na $95,000 127,500 7,500 (6) 5 59 67,000 120,000 na na 120,000 7,500 (7) 6 60 30,000 112,500 na na 112,500 7,500 (8) 7 61 18,000 105,000 na 18,000 105,000 7,500 (10) 8 62 11,000 97,500 na na 97,500 7,500 (11) 9 3,000 90,000 na na na na (12) Benefit Period Start Date (13) Benefit Period Start Date + 1 Month (14) Benefit Period Start Date + 2 Months (15) etc HYPOTHETICAL CONTRACT MONTHLY GUARANTEED VALUE BEFORE GROSS SETTLEMENT WITHDRAWAL LINE WITHDRAWAL WITHDRAWAL PAYMENT BALANCE ---- ------------ ---------- ---------- ---------- (1) $138,500 $7,500 na (2) 119,000 7,500 na (3) 103,000 7,500 na (4) 81,000 7,500 na (6) 48,500 7,500 na (7) 24,000 7,500 na (8) 14,500 7,500 na (10) 10,000 7,500 na (11) 2,300 2,300 na $87,700 (12) $5,825 81,875 (13) 625 81,250 (14) 625 80,625 (15)
SETTING OF INITIAL AMOUNTS Line (1) -- On the Date of Issue, the Contract value is equal to the initial Purchase Payment of $150,000. The initial Guaranteed Withdrawal Balance and Lifetime Income Base are set equal to the initial Purchase Payment of $150,000. The Guaranteed Withdrawal Amount is set equal to the 5% of the Guaranteed Withdrawal Balance (5% x $150,000 = $7,500). The Lifetime Income Amount is not calculated prior to the Lifetime Income Date so it is not shown above.
C-1 -- In this example, the Lifetime Income Date would be the first day of the 11th Contract Year (the Contract Anniversary on or after the Covered Person (or oldest Covered Person in the case of GLWB Plus for Two) reaches age 65). BONUSES & STEP-UPS Line (2) No Bonuses are applied to the Lifetime Income Base in this example because a withdrawal is taken in the 1st Contract Year (no future Bonuses are applied to the Lifetime Income Base after a withdrawal). Line (4) The Contract Value on the 3rd Contract Anniversary (a scheduled Step-Up Date that is within the Step-Up Period) is less than the Lifetime Income Base so the Lifetime Income Base is not Stepped-Up. BENEFIT PHASE START DATE Line (11) -- A Gross Withdrawal of $2,300 is taken in the middle of the 9th Contract Year reducing the Contract Value to zero. This withdrawal is a Non-Excess Withdrawal because it does not cause total Gross Withdrawals taken during the Contract Year to exceed the Guaranteed Withdrawal Amount ($7,500). The Guaranteed Withdrawal Balance is reduced by the amount of the Gross Withdrawal ($90,000 - $2,300 = $87,700). -- The Contract enters the Benefit Phase because the Contract Value has been reduced to zero due to a Non-Excess Withdrawal and the remaining Guaranteed Withdrawal Balance is greater than zero. The date that the Contract enters the Benefit Phase is called the Benefit Phase Start Date. The GLWB Rider is terminated on the Benefit Phase Start Date; the remaining Guaranteed Withdrawal Balance and Guaranteed Withdrawal Amount are stored for use in the Benefit Phase. All other GLWB Rider amounts cease to exist on the Benefit Phase Start Date because the GLWB Rider is terminated. Line (12) -- The remaining Guaranteed Withdrawal Balance immediately following the final Gross Withdrawal is greater than $2,000. Therefore, the first monthly Settlement Payment is equal $5,825 which is the lesser of (a) the Guaranteed Withdrawal Amount minus total Gross Withdrawals taken during the current Contract Year plus the Guaranteed Withdrawal Amount divided by twelve, ($7,500 - $2,300 + $7,500 / 12 = $5,825) or (b) the remaining Guaranteed Withdrawal Balance ($87,700). The remaining Guaranteed Withdrawal Balance after the first monthly Settlement Payment is equal to remaining Guaranteed Withdrawal Balance after the final Gross Withdrawal minus the amount of the first monthly Settlement Payment ($81,875 = $87,700 - $5,825). -- Note that the total amount received on the Benefit Phase Start Date ($8,125) is equal to the amount of the final Gross Withdrawal ($2,300) plus the first monthly Settlement Payment ($5,825). Line (15) Monthly Settlement Payments will continue until the Guaranteed Withdrawal Balance is reduced to zero. If the Covered Person dies before the Guaranteed Withdrawal Balance is reduced to zero, monthly Settlement Payments will continue to the Beneficiary until the Guaranteed Withdrawal Balance is reduced to zero.
C-2 APPENDIX D GLWB RIDER - EXAMPLE #3 THIS EXAMPLE ILLUSTRATES A SITUATION WHERE THE BENEFIT PHASE START DATE OCCURS AFTER THE LIFETIME INCOME DATE The values shown below assume that: -- a Contract is issued with an initial Purchase Payment of $120,000 and no premium taxes apply -- the Covered Person (or oldest Covered Person in the case of GLWB Plus For Two) is exact age 68 on the Date of Issue -- the Covered Person (or both surviving Covered Persons in the case of GLWB Plus For Two) lives until the Benefit Period Start Date -- Non-Excess Withdrawals equal to the Lifetime Income Amount are taken in the middle of each Contract Year.
BEGINNING OF YEAR VALUES ------------------------------------------------------------------------------------- LIFETIME CONTRACT AGE OF HYPOTHETICAL GUARANTEED INCOME VALUE ON LIFETIME LIFETIME CONTRACT COVERED PURCHASE CONTRACT WITHDRAWAL BASE STEP-UP INCOME INCOME LINE YEAR PERSON PAYMENT VALUE BALANCE BONUS DATE BASE AMOUNT ---- -------- -------- --------- ------------ ----------- -------- -------- -------- ----------- (1) 1 68 $120,000 $120,000 $120,000 na $120,000 $120,000 $6,000 (2) 2 69 122,000 114,000 na na 120,000 6,000 (3) 3 70 111,000 108,000 na na 120,000 6,000 (4) 4 71 95,000 102,000 na 95,000 120,000 6,000 (6) 5 72 67,000 96,000 na na 120,000 6,000 (7) 6 73 30,000 90,000 na na 120,000 6,000 (8) 7 74 18,000 84,000 na 18,000 120,000 6,000 (10) 8 75 11,000 78,000 na na 120,000 6,000 (11) 9 4,000 72,000 na na na na (12) Benefit Period Start Date (13) Benefit Period Start Date + 1 Month (14) Benefit Period Start Date + 2 Months (15) etc MIDDLE OF YEAR VALUES BENEFIT PHASE -------------------------- ------------------------ HYPOTHETICAL CONTRACT MONTHLY GUARANTEED VALUE BEFORE GROSS SETTLEMENT WITHDRAWAL LINE WITHDRAWAL WITHDRAWAL PAYMENT BALANCE ---- ------------ ----------- ---------- ----------- (1) $121,000 $6,000 na (2) 116,500 6,000 na (3) 103,000 6,000 na (4) 81,000 6,000 na (6) 48,500 6,000 na (7) 24,000 6,000 na (8) 14,500 6,000 na (10) 10,000 6,000 na (11) 3,800 3,800 na $68,200 (12) $2,700 65,500 (13) 500 65,000 (14) 500 64,500 (15)
SETTING OF INITIAL AMOUNTS Line (1) -- On the Date of Issue, the Contract Value is equal to the initial Purchase Payment of $120,000. The initial Guaranteed Withdrawal Balance and Lifetime Income Base are set equal to the initial Purchase Payment of $120,000. In this example, the Lifetime Income Date is equal to the Date of Issue as the Covered Person (or oldest Covered Person in the case of GLWB Plus for Two) is older than age 65 on the Date of Issue. Because the Lifetime Income Date is a Step-Up Date and the Covered Person is within the Step-Up Period, the Contract Value is compared to the Lifetime Income Base to see if a Step-Up applies. The Contract Value ($120,000) and the initial Lifetime Income Base ($120,000) are the same so a Step-Up does not occur. The Lifetime Income Amount is set equal to the 5% of the Lifetime Income Base (5% X $120,000 = $6,000). The Guaranteed Withdrawal Amount is not calculated on or after the Lifetime Income Date so it is not shown above.
D-1 BONUSES & STEP-UPS Line (2) No Bonuses are applied to the Lifetime Income Base in this example because a withdrawal is taken in the 1st Contract Year (no future Bonuses are applied to the Lifetime Income Base after a withdrawal). Line (4) The Contract Value on the 3rd Contract Anniversary (a scheduled Step-Up Date that is within the Step-Up Period) is less than the Lifetime Income Base so the Lifetime Income Base is not Stepped-Up. BENEFIT PHASE START DATE Line (11) -- A Gross Withdrawal of $3,800 is taken in the middle of the 9th Contract Year reducing the Contract Value to zero. This withdrawal is a Non-Excess Withdrawal because it does not cause total Gross Withdrawals taken during the Contract Year to exceed the Lifetime Income Amount ($6,000). The Guaranteed Withdrawal Balance is reduced by the amount of the Gross Withdrawal ($72,000 - $2,300 = $68,200). -- The Contract enters the Benefit Phase because the Contract Value has been reduced to zero due to a Non-Excess Withdrawal and the Lifetime Income Amount is greater than zero. The date that the Contract enters the Benefit Phase is called the Benefit Phase Start Date. The GLWB Rider is terminated on the Benefit Phase Start Date; the remaining Guaranteed Withdrawal Balance and Lifetime Income Amount are stored for use in the Benefit Phase. All other GLWB Rider amounts cease to exist on the Benefit Phase Start Date because the GLWB Rider is terminated. Line (12) -- The first monthly Settlement Payment is equal to the Lifetime Income Amount minus total Gross Withdrawals taken during the current Contract Year plus the Lifetime Income Amount divided by twelve. This is equal to $2,700 (= $6,000 - $3,800 + $6,000 / 12). The remaining Guaranteed Withdrawal Balance after the first monthly Settlement Payment is equal to remaining Guaranteed Withdrawal Balance after the final Gross Withdrawal minus the amount of the first monthly Settlement Payment ($65,500 = $68,200 - $2,700). -- Note that the total amount received on the Benefit Phase Start Date ($6,500) is equal to the amount of the final Gross Withdrawal ($3,800) plus the first monthly Settlement Payment ($2,700). Line (15) Monthly Settlement Payments will continue until the Covered Person dies (or the last surviving Covered Person dies in the case of GLWB Plus for Two). If the Covered Person dies before the Guaranteed Withdrawal Balance is reduced to zero, monthly Settlement Payments will continue to the Beneficiary until the Guaranteed Withdrawal Balance is reduced to zero.
D-2 APPENDIX E CONDENSED FINANCIAL INFORMATION COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY COMMONWEALTH ANNUITY SEPARATE ACCOUNT A The following tables list the Condensed Financial Information of Accumulation Unit values for Accumulation Units outstanding under the Contracts as of December 31, 2008. Table 1 provides the Condensed Financial Information for Contracts without any optional benefit elected with a total Separate Account Charge of 1.30%. Table 2 provides the Condensed Financial Information for Contracts with the Optional Step-Up Death Benefit elected, an additional 0.20% rider charge, resulting in a Separate Account Charge of 1.50%. Table 3 provides the Condensed Financial Information for Contracts with the No Withdrawal Charge Rider elected, resulting in a Separate Account Charge of 1.65%. Table 4 provides the Condensed Financial Information for Contracts with both the Optional Step-Up Death Benefit elected and No Withdrawal Charge Rider elected, resulting in a Separate Account Charge of 1.85%. In the tables below, no number is shown when there were no Accumulation Units outstanding at the end of the period. TABLE 1--CONTRACT WITHOUT OPTIONAL BENEFITS ELECTED (SEPARATE ACCOUNT CHARGES OF 1.30% OF THE DAILY NET ASSETS OF THE SEPARATE ACCOUNT)
YEAR ENDED YEAR ENDED DECEMBER 31ST DECEMBER 31ST SUB-ACCOUNT 2008 2007 ----------- -------------- -------------- GOLDMAN SACHS VIT CAPITAL GROWTH FUND (SERVICE SHARES) Unit Value: Beginning of Period....................................... 1.024 1.000 End of Period............................................. 0.586 1.024 Number of Units Outstanding at End of Period................ 35,564 6,587 GOLDMAN SACHS VIT CORE FIXED INCOME FUND (SERVICE SHARES) Unit Value: Beginning of Period....................................... 1.033 1.000 End of Period............................................. 0.932 1.033 Number of Units Outstanding at End of Period................ 2,966 277 GOLDMAN SACHS VIT EQUITY INDEX FUND (SERVICE SHARES) Unit Value: Beginning of Period....................................... 0.997 1.000 End of Period............................................. 0.617 0.997 Number of Units Outstanding at End of Period................ 6,986 N/A GOLDMAN SACHS VIT GOVERNMENT INCOME FUND (SERVICE SHARES) Unit Value: Beginning of Period....................................... 1.035 1.000 End of Period............................................. 1.054 1.035 Number of Units Outstanding at End of Period................ 11,293 N/A
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YEAR ENDED YEAR ENDED DECEMBER 31ST DECEMBER 31ST SUB-ACCOUNT 2008 2007 ----------- -------------- -------------- GOLDMAN SACHS VIT GROWTH & INCOME FUND (SERVICE SHARES) Unit Value: Beginning of Period....................................... 0.987 1.000 End of Period............................................. 0.639 0.987 Number of Units Outstanding at End of Period................ 12,389 5,803 GOLDMAN SACHS VIT GROWTH OPPORTUNITIES FUND (SERVICE SHARES) Unit Value: Beginning of Period....................................... 1.022 1.000 End of Period............................................. 0.597 1.022 Number of Units Outstanding at End of Period................ 1,612 14 GOLDMAN SACHS VIT MONEY MARKET FUND (SERVICE SHARES) Unit Value: Beginning of Period....................................... 1.012 1.000 End of Period............................................. 1.021 1.012 Number of Units Outstanding at End of Period................ 2,202 357 GOLDMAN SACHS VIT STRATEGIC INTERNATIONAL EQUITY FUND (SERVICE SHARES) Unit Value: Beginning of Period....................................... 1.033 1.000 End of Period............................................. 0.549 1.033 Number of Units Outstanding at End of Period................ 3,522 70 GOLDMAN SACHS VIT STRUCTURED SMALL CAP EQUITY FUND (SERVICE SHARES) Unit Value: Beginning of Period....................................... 0.937 1.000 End of Period............................................. 0.608 0.937 Number of Units Outstanding at End of Period................ 2,522 312 GOLDMAN SACHS VIT STRUCTURED U.S. EQUITY FUND (SERVICE SHARES) Unit Value: Beginning of Period....................................... 0.969 1.000 End of Period............................................. 0.601 0.969 Number of Units Outstanding at End of Period................ 1,470 N/A AIM V.I. CORE EQUITY FUND (SERIES II SHARES) Unit Value: Beginning of Period....................................... 1.012 1.000 End of Period............................................. 0.696 1.012 Number of Units Outstanding at End of Period................ 1,185 N/A AIM V.I. LEISURE FUND (SERIES II SHARES) Unit Value: Beginning of Period....................................... 0.930 1.000 End of Period............................................. 0.522 0.930 Number of Units Outstanding at End of Period................ 808 N/A ALLIANCEBERNSTEIN VPS INTERMEDIATE BOND PORTFOLIO (CLASS B) Unit Value: Beginning of Period....................................... 1.046 1.000 End of Period............................................. 0.982 1.046 Number of Units Outstanding at End of Period................ 501 N/A
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YEAR ENDED YEAR ENDED DECEMBER 31ST DECEMBER 31ST SUB-ACCOUNT 2008 2007 ----------- -------------- -------------- ALLIANCEBERNSTEIN VPS INTERNATIONAL VALUE PORTFOLIO (CLASS B) Unit Value: Beginning of Period....................................... 0.994 1.000 End of Period............................................. 0.458 0.994 Number of Units Outstanding at End of Period................ 3,011 N/A ALLIANCEBERNSTEIN VPS SMALL CAP GROWTH PORTFOLIO (CLASS B) Unit Value: Beginning of Period....................................... 1.027 1.000 End of Period............................................. 0.552 1.027 Number of Units Outstanding at End of Period................ 1,307 28 ALLIANCEBERNSTEIN VPS SMALL/MID CAP VALUE PORTFOLIO (CLASS B) Unit Value: Beginning of Period....................................... 0.945 1.000 End of Period............................................. 0.598 0.945 Number of Units Outstanding at End of Period................ 1,077 N/A FT VIP FRANKLIN INCOME SECURITIES FUND (CLASS 2) Unit Value: Beginning of Period....................................... 1.050 1.000 End of Period............................................. 0.558 0.999 Number of Units Outstanding at End of Period................ 1,293 49 FT VIP FRANKLIN SMALL CAP VALUE SECURITIES FUND (CLASS 2) Unit Value: Beginning of Period....................................... 0.939 1.000 End of Period............................................. 0.621 0.939 Number of Units Outstanding at End of Period................ 5,573 411 FT VIP MUTUAL GLOBAL DISCOVERY SECURITIES FUND (CLASS 2) Unit Value: Beginning of Period....................................... 1.021 1.000 End of Period............................................. 0.721 1.021 Number of Units Outstanding at End of Period................ 8,181 14 FT VIP MUTUAL SHARES SECURITIES FUND (CLASS 2) Unit Value: Beginning of Period....................................... 0.989 1.000 End of Period............................................. 0.614 0.989 Number of Units Outstanding at End of Period................ 11,769 N/A FT VIP TEMPLETON GLOBAL ASSET ALLOCATION FUND (CLASS 2) Unit Value: Beginning of Period....................................... 1.046 1.000 End of Period............................................. 0.773 1.046 Number of Units Outstanding at End of Period................ 428 N/A FT VIP TEMPLETON GROWTH SECURITIES FUND (CLASS 2) Unit Value: Beginning of Period....................................... 1.000 1.000 End of Period............................................. 0.569 1.000 Number of Units Outstanding at End of Period................ 1,692 43
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YEAR ENDED YEAR ENDED DECEMBER 31ST DECEMBER 31ST SUB-ACCOUNT 2008 2007 ----------- -------------- -------------- JANUS ASPEN ENTERPRISE PORTFOLIO (SERVICE SHARES) Unit Value: Beginning of Period....................................... 1.071 1.000 End of Period............................................. 0.594 1.071 Number of Units Outstanding at End of Period................ 2,176 N/A JANUS ASPEN FORTY PORTFOLIO (SERVICE SHARES) Unit Value: Beginning of Period....................................... 1.178 1.000 End of Period............................................. 0.647 1.178 Number of Units Outstanding at End of Period................ 6,017 12 JANUS ASPEN PERKINS MID CAP VALUE PORTFOLIO (SERVICE SHARES) Unit Value: Beginning of Period....................................... 1.002 1.000 End of Period............................................. 0.712 1.002 Number of Units Outstanding at End of Period................ 4,979 1 OPPENHEIMER BALANCED FUND/VA (SERVICE SHARES) Unit Value: Beginning of Period....................................... 0.993 1.000 End of Period............................................. 0.552 0.993 Number of Units Outstanding at End of Period................ 14,298 29 OPPENHEIMER GLOBAL SECURITIES FUND/VA SERVICE SHARES Unit Value: Beginning of Period....................................... 1.001 1.000 End of Period............................................. 0.590 1.001 Number of Units Outstanding at End of Period................ 22,947 2,920 OPPENHEIMER MAIN STREET SMALL CAP FUND-REGISTERED TRADEMARK-/VA SERVICE SHARES Unit Value: Beginning of Period....................................... 0.954 1.000 End of Period............................................. 0.584 0.954 Number of Units Outstanding at End of Period................ 12,693 2,108 OPPENHEIMER STRATEGIC BOND FUND/VA (SERVICE SHARES) Unit Value: Beginning of Period....................................... 1.047 1.000 End of Period............................................. 0.884 1.047 Number of Units Outstanding at End of Period................ 10,859 4 PIONEER CULLEN VALUE VCT PORTFOLIO (CLASS II) Unit Value: Beginning of Period....................................... 1.008 1.000 End of Period............................................. 0.671 1.008 Number of Units Outstanding at End of Period................ 20,954 49 PIONEER EMERGING MARKETS VCT PORTFOLIO (CLASS II) Unit Value: Beginning of Period....................................... 1.154 1.000 End of Period............................................. 0.475 1.154 Number of Units Outstanding at End of Period................ 9,381 842
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YEAR ENDED YEAR ENDED DECEMBER 31ST DECEMBER 31ST SUB-ACCOUNT 2008 2007 ----------- -------------- -------------- PIONEER GROWTH OPPORTUNITIES VCT PORTFOLIO (CLASS I) Unit Value: Beginning of Period....................................... 0.938 1.000 End of Period............................................. 0.598 0.938 Number of Units Outstanding at End of Period................ 685 46 PIONEER MID CAP VALUE VCT PORTFOLIO (CLASS II) Unit Value: Beginning of Period....................................... 0.969 1.000 End of Period............................................. 0.634 0.969 Number of Units Outstanding at End of Period................ 5,153 1,406 GOLDMAN SACHS BALANCED STRATEGY PORTFOLIO (CLASS A) Unit Value: Beginning of Period....................................... 1.012 1.000 End of Period............................................. 0.795 1.012 Number of Units Outstanding at End of Period................ 41,583 985 GOLDMAN SACHS EQUITY GROWTH STRATEGY PORTFOLIO (CLASS A) Unit Value: Beginning of Period....................................... 1.003 1.000 End of Period............................................. 0.568 1.003 Number of Units Outstanding at End of Period................ 25,086 991 GOLDMAN SACHS GROWTH AND INCOME STRATEGY PORTFOLIO (CLASS A) Unit Value: Beginning of Period....................................... 1.012 1.000 End of Period............................................. 0.679 1.012 Number of Units Outstanding at End of Period................ 75,752 1,075 GOLDMAN SACHS GROWTH STRATEGY PORTFOLIO (CLASS A) Unit Value: Beginning of Period....................................... 1.006 1.000 End of Period............................................. 0.602 1.006 Number of Units Outstanding at End of Period................ 95,230 1,519 GOLDMAN SACHS INTERNATIONAL REAL ESTATE SECURITIES FUND (CLASS A) Unit Value: Beginning of Period....................................... 0.953 1.000 End of Period............................................. 0.450 0.953 Number of Units Outstanding at End of Period................ 2,528 N/A GOLDMAN SACHS REAL ESTATE SECURITIES FUND (CLASS A) Unit Value: Beginning of Period....................................... 0.920 1.000 End of Period............................................. 0.536 0.920 Number of Units Outstanding at End of Period................ 70 N/A GOLDMAN SACHS TOLLKEEPER FUND (CLASS A) Unit Value: Beginning of Period....................................... 1.141 1.000 End of Period............................................. 0.614 1.141 Number of Units Outstanding at End of Period................ 449 N/A
E-5 TABLE 2--CONTRACT WITH OPTIONAL STEP-UP DEATH BENEFIT OPTION ELECTED (SEPARATE ACCOUNT CHARGES OF 1.50% OF THE DAILY NET ASSETS OF THE SEPARATE ACCOUNT)
YEAR ENDED YEAR ENDED DECEMBER 31ST DECEMBER 31ST SUB-ACCOUNT 2008 2007 ----------- -------------- -------------- GOLDMAN SACHS VIT CAPITAL GROWTH FUND (SERVICE SHARES) Unit Value: Beginning of Period....................................... 1.023 1.000 End of Period............................................. 0.585 1.023 Number of Units Outstanding at End of Period................ N/A N/A GOLDMAN SACHS VIT CORE FIXED INCOME FUND (SERVICE SHARES) Unit Value: Beginning of Period....................................... 1.032 1.000 End of Period............................................. 0.930 1.032 Number of Units Outstanding at End of Period................ N/A N/A GOLDMAN SACHS VIT EQUITY INDEX FUND (SERVICE SHARES) Unit Value: Beginning of Period....................................... 0.996 1.000 End of Period............................................. 0.616 0.996 Number of Units Outstanding at End of Period................ N/A N/A GOLDMAN SACHS VIT GOVERNMENT INCOME FUND (SERVICE SHARES) Unit Value: Beginning of Period....................................... 1.034 1.000 End of Period............................................. 1.051 1.034 Number of Units Outstanding at End of Period................ N/A N/A GOLDMAN SACHS VIT GROWTH & INCOME FUND (SERVICE SHARES) Unit Value: Beginning of Period....................................... 0.986 1.000 End of Period............................................. 0.637 0.986 Number of Units Outstanding at End of Period................ N/A N/A GOLDMAN SACHS VIT GROWTH OPPORTUNITIES FUND (SERVICE SHARES) Unit Value: Beginning of Period....................................... 1.021 1.000 End of Period............................................. 0.595 1.021 Number of Units Outstanding at End of Period................ N/A N/A GOLDMAN SACHS VIT MONEY MARKET FUND (SERVICE SHARES) Unit Value: Beginning of Period....................................... 1.011 1.000 End of Period............................................. 1.019 1.011 Number of Units Outstanding at End of Period................ N/A N/A GOLDMAN SACHS VIT STRATEGIC INTERNATIONAL EQUITY FUND (SERVICE SHARES) Unit Value: Beginning of Period....................................... 1.033 1.000 End of Period............................................. 0.548 1.033 Number of Units Outstanding at End of Period................ N/A N/A
E-6
YEAR ENDED YEAR ENDED DECEMBER 31ST DECEMBER 31ST SUB-ACCOUNT 2008 2007 ----------- -------------- -------------- GOLDMAN SACHS VIT STRUCTURED SMALL CAP EQUITY FUND (SERVICE SHARES) Unit Value: Beginning of Period....................................... 0.937 1.000 End of Period............................................. 0.607 0.937 Number of Units Outstanding at End of Period................ N/A N/A GOLDMAN SACHS VIT STRUCTURED U.S. EQUITY FUND (SERVICE SHARES) Unit Value: Beginning of Period....................................... 0.968 1.000 End of Period............................................. 0.599 0.968 Number of Units Outstanding at End of Period................ N/A N/A AIM V.I. CORE EQUITY FUND (SERIES II SHARES) Unit Value: Beginning of Period....................................... 1.011 1.000 End of Period............................................. 0.694 1.011 Number of Units Outstanding at End of Period................ N/A N/A AIM V.I. LEISURE FUND (SERIES II SHARES) Unit Value: Beginning of Period....................................... 0.930 1.000 End of Period............................................. 0.520 0.930 Number of Units Outstanding at End of Period................ N/A N/A ALLIANCEBERNSTEIN VPS INTERMEDIATE BOND PORTFOLIO (CLASS B) Unit Value: Beginning of Period....................................... 1.046 1.000 End of Period............................................. 0.979 1.046 Number of Units Outstanding at End of Period................ N/A N/A ALLIANCEBERNSTEIN VPS INTERNATIONAL VALUE PORTFOLIO (CLASS B) Unit Value: Beginning of Period....................................... 0.993 1.000 End of Period............................................. 0.457 0.993 Number of Units Outstanding at End of Period................ N/A N/A ALLIANCEBERNSTEIN VPS SMALL CAP GROWTH PORTFOLIO (CLASS B) Unit Value: Beginning of Period....................................... 1.027 1.000 End of Period............................................. 0.550 1.027 Number of Units Outstanding at End of Period................ N/A N/A ALLIANCEBERNSTEIN VPS SMALL/MID CAP VALUE PORTFOLIO (CLASS B) Unit Value: Beginning of Period....................................... 0.944 1.000 End of Period............................................. 0.597 0.944 Number of Units Outstanding at End of Period................ N/A N/A FT VIP FRANKLIN INCOME SECURITIES FUND (CLASS 2) Unit Value: Beginning of Period....................................... 0.988 1.000 End of Period............................................. 0.692 0.998 Number of Units Outstanding at End of Period................ N/A N/A
E-7
YEAR ENDED YEAR ENDED DECEMBER 31ST DECEMBER 31ST SUB-ACCOUNT 2008 2007 ----------- -------------- -------------- FT VIP FRANKLIN SMALL CAP VALUE SECURITIES FUND (CLASS 2) Unit Value: Beginning of Period....................................... 0.938 1.000 End of Period............................................. 0.619 0.938 Number of Units Outstanding at End of Period................ N/A N/A FT VIP MUTUAL GLOBAL DISCOVERY SECURITIES FUND (CLASS 2) Unit Value: Beginning of Period....................................... 1.020 1.000 End of Period............................................. 0.719 1.020 Number of Units Outstanding at End of Period................ N/A N/A FT VIP MUTUAL SHARES SECURITIES FUND (CLASS 2) Unit Value: Beginning of Period....................................... 0.989 1.000 End of Period............................................. 0.612 0.989 Number of Units Outstanding at End of Period................ N/A N/A FT VIP TEMPLETON GLOBAL ASSET ALLOCATION FUND (CLASS 2) Unit Value: Beginning of Period....................................... 1.045 1.000 End of Period............................................. 0.771 1.045 Number of Units Outstanding at End of Period................ N/A N/A FT VIP TEMPLETON GROWTH SECURITIES FUND (CLASS 2) Unit Value: Beginning of Period....................................... 0.999 1.000 End of Period............................................. 0.568 0.999 Number of Units Outstanding at End of Period................ N/A N/A JANUS ASPEN ENTERPRISE PORTFOLIO (SERVICE SHARES) Unit Value: Beginning of Period....................................... 1.071 1.000 End of Period............................................. 0.593 1.071 Number of Units Outstanding at End of Period................ N/A N/A JANUS ASPEN FORTY PORTFOLIO (SERVICE SHARES) Unit Value: Beginning of Period....................................... 1.177 1.000 End of Period............................................. 0.645 1.177 Number of Units Outstanding at End of Period................ N/A N/A JANUS ASPEN PERKINS MID CAP VALUE PORTFOLIO (SERVICE SHARES) Unit Value: Beginning of Period....................................... 0.999 1.000 End of Period............................................. 0.710 0.999 Number of Units Outstanding at End of Period................ N/A N/A OPPENHEIMER BALANCED FUND/VA (SERVICE SHARES) Unit Value: Beginning of Period....................................... 0.993 1.000 End of Period............................................. 0.551 0.993 Number of Units Outstanding at End of Period................ N/A N/A
E-8
YEAR ENDED YEAR ENDED DECEMBER 31ST DECEMBER 31ST SUB-ACCOUNT 2008 2007 ----------- -------------- -------------- OPPENHEIMER GLOBAL SECURITIES FUND/VA (SERVICE SHARES) Unit Value: Beginning of Period....................................... 1.001 1.000 End of Period............................................. 0.588 1.001 Number of Units Outstanding at End of Period................ N/A N/A OPPENHEIMER MAIN STREET SMALL CAP FUND-REGISTERED TRADEMARK-/VA (SERVICE SHARES) Unit Value: Beginning of Period....................................... 0.953 1.000 End of Period............................................. 0.583 0.953 Number of Units Outstanding at End of Period................ N/A N/A OPPENHEIMER STRATEGIC BOND FUND/VA (SERVICE SHARES) Unit Value: Beginning of Period....................................... 1.047 1.000 End of Period............................................. 0.882 1.047 Number of Units Outstanding at End of Period................ N/A N/A PIONEER CULLEN VALUE VCT PORTFOLIO (CLASS II) Unit Value: Beginning of Period....................................... 1.008 1.000 End of Period............................................. 0.669 1.008 Number of Units Outstanding at End of Period................ N/A N/A PIONEER EMERGING MARKETS VCT PORTFOLIO (CLASS II) Unit Value: Beginning of Period....................................... 1.153 1.000 End of Period............................................. 0.474 1.153 Number of Units Outstanding at End of Period................ N/A N/A PIONEER GROWTH OPPORTUNITIES VCT PORTFOLIO (CLASS I) Unit Value: Beginning of Period....................................... 0.938 1.000 End of Period............................................. 0.596 0.938 Number of Units Outstanding at End of Period................ N/A N/A PIONEER MID CAP VALUE VCT PORTFOLIO (CLASS II) Unit Value: Beginning of Period....................................... 0.969 1.000 End of Period............................................. 0.632 0.969 Number of Units Outstanding at End of Period................ N/A N/A GOLDMAN SACHS BALANCED STRATEGY PORTFOLIO (CLASS A) Unit Value: Beginning of Period....................................... 1.012 1.000 End of Period............................................. 0.793 1.012 Number of Units Outstanding at End of Period................ N/A N/A GOLDMAN SACHS EQUITY GROWTH STRATEGY PORTFOLIO (CLASS A) Unit Value: Beginning of Period....................................... 1.002 1.000 End of Period............................................. 0.566 1.002 Number of Units Outstanding at End of Period................ N/A N/A
E-9
YEAR ENDED YEAR ENDED DECEMBER 31ST DECEMBER 31ST SUB-ACCOUNT 2008 2007 ----------- -------------- -------------- GOLDMAN SACHS GROWTH AND INCOME STRATEGY PORTFOLIO (CLASS A) Unit Value: Beginning of Period....................................... 1.012 1.000 End of Period............................................. 0.677 1.012 Number of Units Outstanding at End of Period................ N/A N/A GOLDMAN SACHS GROWTH STRATEGY PORTFOLIO (CLASS A) Unit Value: Beginning of Period....................................... 1.005 1.000 End of Period............................................. 0.600 1.005 Number of Units Outstanding at End of Period................ N/A N/A GOLDMAN SACHS INTERNATIONAL REAL ESTATE SECURITIES FUND (CLASS A) Unit Value: Beginning of Period....................................... 0.953 1.000 End of Period............................................. 0.449 0.953 Number of Units Outstanding at End of Period................ N/A N/A GOLDMAN SACHS REAL ESTATE SECURITIES FUND (CLASS A) Unit Value: Beginning of Period....................................... 0.919 1.000 End of Period............................................. 0.534 0.919 Number of Units Outstanding at End of Period................ N/A N/A GOLDMAN SACHS TOLLKEEPER FUND (CLASS A) Unit Value: Beginning of Period....................................... 1.140 1.000 End of Period............................................. 0.612 1.140 Number of Units Outstanding at End of Period................ N/A N/A
TABLE 3--CONTRACT WITH NO WITHDRAWAL CHARGE BENEFIT RIDER ELECTED (SEPARATE ACCOUNT CHARGES OF 1.65% OF THE DAILY NET ASSETS OF THE SEPARATE ACCOUNT)
YEAR ENDED YEAR ENDED DECEMBER 31ST DECEMBER 31ST SUB-ACCOUNT 2008 2007 ----------- -------------- -------------- GOLDMAN SACHS VIT CAPITAL GROWTH FUND (SERVICE SHARES) Unit Value: Beginning of Period....................................... 1.022 1.000 End of Period............................................. 0.584 1.022 Number of Units Outstanding at End of Period................ N/A N/A GOLDMAN SACHS VIT CORE FIXED INCOME FUND (SERVICE SHARES) Unit Value: Beginning of Period....................................... 1.032 1.000 End of Period............................................. 0.928 1.032 Number of Units Outstanding at End of Period................ 5,360 1,379 GOLDMAN SACHS VIT EQUITY INDEX FUND (SERVICE SHARES) Unit Value: Beginning of Period....................................... 0.996 1.000 End of Period............................................. 0.614 0.996 Number of Units Outstanding at End of Period................ 929 59
E-10
YEAR ENDED YEAR ENDED DECEMBER 31ST DECEMBER 31ST SUB-ACCOUNT 2008 2007 ----------- -------------- -------------- GOLDMAN SACHS VIT GOVERNMENT INCOME FUND (SERVICE SHARES) Unit Value: Beginning of Period....................................... 1.034 1.000 End of Period............................................. 1.049 1.034 Number of Units Outstanding at End of Period................ N/A N/A GOLDMAN SACHS VIT GROWTH & INCOME FUND (SERVICE SHARES) Unit Value: Beginning of Period....................................... 0.986 1.000 End of Period............................................. 0.636 0.986 Number of Units Outstanding at End of Period................ N/A N/A GOLDMAN SACHS VIT GROWTH OPPORTUNITIES FUND (SERVICE SHARES) Unit Value: Beginning of Period....................................... 1.021 1.000 End of Period............................................. 0.594 1.021 Number of Units Outstanding at End of Period................ N/A N/A GOLDMAN SACHS VIT MONEY MARKET FUND (SERVICE SHARES) Unit Value: Beginning of Period....................................... 1.011 1.000 End of Period............................................. 1.016 1.011 Number of Units Outstanding at End of Period................ N/A N/A GOLDMAN SACHS VIT STRATEGIC INTERNATIONAL EQUITY FUND (SERVICE SHARES) Unit Value: Beginning of Period....................................... 1.032 1.000 End of Period............................................. 0.547 1.032 Number of Units Outstanding at End of Period................ N/A N/A GOLDMAN SACHS VIT STRUCTURED SMALL CAP EQUITY FUND (SERVICE SHARES) Unit Value: Beginning of Period....................................... 0.936 1.000 End of Period............................................. 0.605 0.936 Number of Units Outstanding at End of Period................ N/A N/A GOLDMAN SACHS VIT STRUCTURED U.S. EQUITY FUND (SERVICE SHARES) Unit Value: Beginning of Period....................................... 0.967 1.000 End of Period............................................. 0.598 0.967 Number of Units Outstanding at End of Period................ N/A N/A AIM V.I. CORE EQUITY FUND (SERIES II SHARES) Unit Value: Beginning of Period....................................... 1.010 1.000 End of Period............................................. 0.692 1.010 Number of Units Outstanding at End of Period................ N/A N/A AIM V.I. LEISURE FUND (SERIES II SHARES) Unit Value: Beginning of Period....................................... 0.929 1.000 End of Period............................................. 0.519 0.929 Number of Units Outstanding at End of Period................ N/A N/A
E-11
YEAR ENDED YEAR ENDED DECEMBER 31ST DECEMBER 31ST SUB-ACCOUNT 2008 2007 ----------- -------------- -------------- ALLIANCEBERNSTEIN VPS INTERMEDIATE BOND PORTFOLIO(CLASS B) Unit Value: Beginning of Period....................................... 1.045 1.000 End of Period............................................. 0.977 1.045 Number of Units Outstanding at End of Period................ N/A N/A ALLIANCEBERNSTEIN VPS INTERNATIONAL VALUE PORTFOLIO (CLASS B) Unit Value: Beginning of Period....................................... 0.992 1.000 End of Period............................................. 0.456 0.992 Number of Units Outstanding at End of Period................ N/A N/A ALLIANCEBERNSTEIN VPS SMALL CAP GROWTH PORTFOLIO (CLASS B) Unit Value: Beginning of Period....................................... 1.026 1.000 End of Period............................................. 0.549 1.026 Number of Units Outstanding at End of Period................ N/A N/A ALLIANCEBERNSTEIN VPS SMALL/MID CAP VALUE PORTFOLIO (CLASS B) Unit Value: Beginning of Period....................................... 0.943 1.000 End of Period............................................. 0.596 0.943 Number of Units Outstanding at End of Period................ N/A N/A FT VIP FRANKLIN INCOME SECURITIES FUND (CLASS 2) Unit Value: Beginning of Period....................................... 0.998 1.000 End of Period............................................. 0.690 0.998 Number of Units Outstanding at End of Period................ 5,610 1,425 FT VIP FRANKLIN SMALL CAP VALUE SECURITIES FUND (CLASS 2) Unit Value: Beginning of Period....................................... 0.938 1.000 End of Period............................................. 0.618 0.938 Number of Units Outstanding at End of Period................ N/A N/A FT VIP MUTUAL GLOBAL DISCOVERY SECURITIES FUND (CLASS 2) Unit Value: Beginning of Period....................................... 1.019 1.000 End of Period............................................. 0.717 1.019 Number of Units Outstanding at End of Period................ 7,485 1,512 FT VIP MUTUAL SHARES SECURITIES FUND (CLASS 2) Unit Value: Beginning of Period....................................... 0.988 1.000 End of Period............................................. 0.611 0.988 Number of Units Outstanding at End of Period................ 5,914 1,431 FT VIP TEMPLETON GLOBAL ASSET ALLOCATION FUND (CLASS 2) Unit Value: Beginning of Period....................................... 1.045 1.000 End of Period............................................. 0.769 1.045 Number of Units Outstanding at End of Period................ N/A N/A
E-12
YEAR ENDED YEAR ENDED DECEMBER 31ST DECEMBER 31ST SUB-ACCOUNT 2008 2007 ----------- -------------- -------------- FT VIP TEMPLETON GROWTH SECURITIES FUND (CLASS 2) Unit Value: Beginning of Period....................................... 0.999 1.000 End of Period............................................. 0.567 0.999 Number of Units Outstanding at End of Period................ 5,967 1,416 JANUS ASPEN ENTERPRISE PORTFOLIO (SERVICE SHARES) Unit Value: Beginning of Period....................................... 1.070 1.000 End of Period............................................. 0.592 1.070 Number of Units Outstanding at End of Period................ N/A N/A JANUS ASPEN FORTY PORTFOLIO (SERVICE SHARES) Unit Value: Beginning of Period....................................... 1.176 1.000 End of Period............................................. 0.644 1.176 Number of Units Outstanding at End of Period................ 4,904 N/A JANUS ASPEN PERKINS MID CAP VALUE PORTFOLIO (SERVICE SHARES) Unit Value: Beginning of Period....................................... 0.999 1.000 End of Period............................................. 0.708 0.999 Number of Units Outstanding at End of Period................ N/A N/A OPPENHEIMER BALANCED FUND/VA (SERVICE SHARES) Unit Value: Beginning of Period....................................... 0.992 1.000 End of Period............................................. 0.550 0.992 Number of Units Outstanding at End of Period................ N/A N/A OPPENHEIMER GLOBAL SECURITIES FUND/VA (SERVICE SHARES) Unit Value: Beginning of Period....................................... 1.000 1.000 End of Period............................................. 0.587 1.000 Number of Units Outstanding at End of Period................ N/A N/A OPPENHEIMER MAIN STREET SMALL CAP FUND-REGISTERED TRADEMARK-/VA (SERVICE SHARES) Unit Value: Beginning of Period....................................... 0.953 1.000 End of Period............................................. 0.582 0.953 Number of Units Outstanding at End of Period................ N/A N/A OPPENHEIMER STRATEGIC BOND FUND/VA (SERVICE SHARES) Unit Value: Beginning of Period....................................... 1.046 1.000 End of Period............................................. 0.880 1.046 Number of Units Outstanding at End of Period................ 791 57 PIONEER CULLEN VALUE VCT PORTFOLIO (CLASS II) Unit Value: Beginning of Period....................................... 1.007 1.000 End of Period............................................. 0.668 1.007 Number of Units Outstanding at End of Period................ N/A N/A
E-13
YEAR ENDED YEAR ENDED DECEMBER 31ST DECEMBER 31ST SUB-ACCOUNT 2008 2007 ----------- -------------- -------------- PIONEER EMERGING MARKETS VCT PORTFOLIO (CLASS II) Unit Value: Beginning of Period....................................... 1.153 1.000 End of Period............................................. 0.473 1.153 Number of Units Outstanding at End of Period................ N/A N/A PIONEER GROWTH OPPORTUNITIES VCT PORTFOLIO (CLASS I) Unit Value: Beginning of Period....................................... 0.937 1.000 End of Period............................................. 0.595 0.937 Number of Units Outstanding at End of Period................ N/A N/A PIONEER MID CAP VALUE VCT PORTFOLIO (CLASS II) Unit Value: Beginning of Period....................................... 0.968 1.000 End of Period............................................. 0.631 0.968 Number of Units Outstanding at End of Period................ 929 61 GOLDMAN SACHS BALANCED STRATEGY PORTFOLIO (CLASS A) Unit Value: Beginning of Period....................................... 1.011 1.000 End of Period............................................. 0.792 1.011 Number of Units Outstanding at End of Period................ 252 N/A GOLDMAN SACHS EQUITY GROWTH STRATEGY PORTFOLIO (CLASS A) Unit Value: Beginning of Period....................................... 1.001 1.000 End of Period............................................. 0.565 1.001 Number of Units Outstanding at End of Period................ N/A N/A GOLDMAN SACHS GROWTH AND INCOME STRATEGY PORTFOLIO (CLASS A) Unit Value: Beginning of Period....................................... 1.011 1.000 End of Period............................................. 0.676 1.011 Number of Units Outstanding at End of Period................ 4,435 293 GOLDMAN SACHS GROWTH STRATEGY PORTFOLIO (CLASS A) Unit Value: Beginning of Period....................................... 1.005 1.000 End of Period............................................. 0.599 1.005 Number of Units Outstanding at End of Period................ N/A N/A GOLDMAN SACHS INTERNATIONAL REAL ESTATE SECURITIES FUND (CLASS A) Unit Value: Beginning of Period....................................... 0.952 1.000 End of Period............................................. 0.448 0.952 Number of Units Outstanding at End of Period................ N/A N/A GOLDMAN SACHS REAL ESTATE SECURITIES FUND (CLASS A) Unit Value: Beginning of Period....................................... 0.919 1.000 End of Period............................................. 0.533 0.919 Number of Units Outstanding at End of Period................ N/A N/A
E-14
YEAR ENDED YEAR ENDED DECEMBER 31ST DECEMBER 31ST SUB-ACCOUNT 2008 2007 ----------- -------------- -------------- GOLDMAN SACHS TOLLKEEPER FUND (CLASS A) Unit Value: Beginning of Period....................................... 1.140 1.000 End of Period............................................. 0.611 1.140 Number of Units Outstanding at End of Period................ N/A N/A
TABLE 4--CONTRACT WITH BOTH THE OPTIONAL STEP-UP DEATH BENEFIT OPTION AND NO WITHDRAWAL CHARGE RIDER ELECTED (TOTAL 0.55%) (SEPARATE ACCOUNT CHARGES OF 1.85% OF THE DAILY NET ASSETS OF THE SEPARATE ACCOUNT)
YEAR ENDED YEAR ENDED DECEMBER 31ST DECEMBER 31ST SUB-ACCOUNT 2008 2007 ----------- -------------- -------------- GOLDMAN SACHS VIT CAPITAL GROWTH FUND (SERVICE SHARES) Unit Value: Beginning of Period....................................... 1.022 1.000 End of Period............................................. 0.582 1.022 Number of Units Outstanding at End of Period................ N/A N/A GOLDMAN SACHS VIT CORE FIXED INCOME FUND (SERVICE SHARES) Unit Value: Beginning of Period....................................... 1.031 1.000 End of Period............................................. 0.925 1.031 Number of Units Outstanding at End of Period................ N/A N/A GOLDMAN SACHS VIT EQUITY INDEX FUND (SERVICE SHARES) Unit Value: Beginning of Period....................................... 0.995 1.000 End of Period............................................. 0.613 0.995 Number of Units Outstanding at End of Period................ N/A N/A GOLDMAN SACHS VIT GOVERNMENT INCOME FUND (SERVICE SHARES) Unit Value: Beginning of Period....................................... 1.033 1.000 End of Period............................................. 1.046 1.033 Number of Units Outstanding at End of Period................ N/A N/A GOLDMAN SACHS VIT GROWTH & INCOME FUND (SERVICE SHARES) Unit Value: Beginning of Period....................................... 0.985 1.000 End of Period............................................. 0.634 0.985 Number of Units Outstanding at End of Period................ N/A N/A GOLDMAN SACHS VIT GROWTH OPPORTUNITIES FUND (SERVICE SHARES) Unit Value: Beginning of Period....................................... 1.020 1.000 End of Period............................................. 0.592 1.020 Number of Units Outstanding at End of Period................ N/A N/A
E-15
YEAR ENDED YEAR ENDED DECEMBER 31ST DECEMBER 31ST SUB-ACCOUNT 2008 2007 ----------- -------------- -------------- GOLDMAN SACHS VIT MONEY MARKET FUND (SERVICE SHARES) Unit Value: Beginning of Period....................................... 1.010 1.000 End of Period............................................. 1.014 1.010 Number of Units Outstanding at End of Period................ N/A N/A GOLDMAN SACHS VIT STRATEGIC INTERNATIONAL EQUITY FUND (SERVICE SHARES) Unit Value: Beginning of Period....................................... 1.031 1.000 End of Period............................................. 0.545 1.031 Number of Units Outstanding at End of Period................ N/A N/A GOLDMAN SACHS VIT STRUCTURED SMALL CAP EQUITY FUND (SERVICE SHARES) Unit Value: Beginning of Period....................................... 0.936 1.000 End of Period............................................. 0.604 0.936 Number of Units Outstanding at End of Period................ N/A N/A GOLDMAN SACHS VIT STRUCTURED U.S. EQUITY FUND (SERVICE SHARES) Unit Value: Beginning of Period....................................... 0.967 1.000 End of Period............................................. 0.596 0.967 Number of Units Outstanding at End of Period................ N/A N/A AIM V.I. CORE EQUITY FUND (SERIES II SHARES) Unit Value: Beginning of Period....................................... 1.010 1.000 End of Period............................................. 0.691 1.010 Number of Units Outstanding at End of Period................ N/A N/A AIM V.I. LEISURE FUND (SERIES II SHARES) Unit Value: Beginning of Period....................................... 1.000 End of Period............................................. 0.929 Number of Units Outstanding at End of Period................ N/A ALLIANCEBERNSTEIN VPS INTERMEDIATE BOND PORTFOLIO (CLASS B) Unit Value: Beginning of Period....................................... 1.044 1.000 End of Period............................................. 0.975 1.044 Number of Units Outstanding at End of Period................ N/A N/A ALLIANCEBERNSTEIN VPS INTERNATIONAL VALUE PORTFOLIO (CLASS B) Unit Value: Beginning of Period....................................... 0.992 1.000 End of Period............................................. 0.455 0.992 Number of Units Outstanding at End of Period................ N/A N/A ALLIANCEBERNSTEIN VPS SMALL CAP GROWTH PORTFOLIO (CLASS B) Unit Value: Beginning of Period....................................... 1.025 1.000 End of Period............................................. 0.547 1.025 Number of Units Outstanding at End of Period................ N/A N/A
E-16
YEAR ENDED YEAR ENDED DECEMBER 31ST DECEMBER 31ST SUB-ACCOUNT 2008 2007 ----------- -------------- -------------- ALLIANCEBERNSTEIN VPS SMALL/MID CAP VALUE PORTFOLIO (CLASS B) Unit Value: Beginning of Period....................................... 0.943 1.000 End of Period............................................. 0.594 0.943 Number of Units Outstanding at End of Period................ N/A N/A FT VIP FRANKLIN INCOME SECURITIES FUND (CLASS 2) Unit Value: Beginning of Period....................................... 0.997 1.000 End of Period............................................. 0.688 0.997 Number of Units Outstanding at End of Period................ N/A N/A FT VIP FRANKLIN SMALL CAP VALUE SECURITIES FUND (CLASS 2) Unit Value: Beginning of Period....................................... 0.937 1.000 End of Period............................................. 0.616 0.937 Number of Units Outstanding at End of Period................ N/A N/A FT VIP MUTUAL GLOBAL DISCOVERY SECURITIES FUND (CLASS 2) Unit Value: Beginning of Period....................................... 1.019 1.000 End of Period............................................. 0.715 1.019 Number of Units Outstanding at End of Period................ N/A N/A FT VIP MUTUAL SHARES SECURITIES FUND (CLASS 2) Unit Value: Beginning of Period....................................... 0.988 1.000 End of Period............................................. 0.610 0.988 Number of Units Outstanding at End of Period................ N/A N/A FT VIP TEMPLETON GLOBAL ASSET ALLOCATION FUND (CLASS 2) Unit Value: Beginning of Period....................................... 1.044 1.000 End of Period............................................. 0.767 1.044 Number of Units Outstanding at End of Period................ N/A N/A FT VIP TEMPLETON GROWTH SECURITIES FUND (CLASS 2) Unit Value: Beginning of Period....................................... 0.998 1.000 End of Period............................................. 0.565 0.998 Number of Units Outstanding at End of Period................ N/A N/A JANUS ASPEN ENTERPRISE PORTFOLIO (SERVICE SHARES) Unit Value: Beginning of Period....................................... 1.069 1.000 End of Period............................................. 0.590 1.069 Number of Units Outstanding at End of Period................ N/A N/A JANUS ASPEN FORTY PORTFOLIO (SERVICE SHARES) Unit Value: Beginning of Period....................................... 1.176 1.000 End of Period............................................. 0.642 1.176 Number of Units Outstanding at End of Period................ N/A N/A
E-17
YEAR ENDED YEAR ENDED DECEMBER 31ST DECEMBER 31ST SUB-ACCOUNT 2008 2007 ----------- -------------- -------------- JANUS ASPEN PERKINS MID CAP VALUE PORTFOLIO (SERVICE SHARES) Unit Value: Beginning of Period....................................... 0.998 1.000 End of Period............................................. 0.706 0.998 Number of Units Outstanding at End of Period................ N/a N/A OPPENHEIMER BALANCED FUND/VA (SERVICE SHARES) Unit Value: Beginning of Period....................................... 0.991 1.000 End of Period............................................. 0.548 0.991 Number of Units Outstanding at End of Period................ N/A N/A OPPENHEIMER GLOBAL SECURITIES FUND/VA (SERVICE SHARES) Unit Value: Beginning of Period....................................... 1.000 1.000 End of Period............................................. 0.585 1.000 Number of Units Outstanding at End of Period................ N/A N/A OPPENHEIMER MAIN STREET SMALL CAP FUND-REGISTERED TRADEMARK-/VA (SERVICE SHARES) Unit Value: Beginning of Period....................................... 0.952 1.000 End of Period............................................. 0.580 0.952 Number of Units Outstanding at End of Period................ N/A N/A OPPENHEIMER STRATEGIC BOND FUND/VA (SERVICE SHARES) Unit Value: Beginning of Period....................................... 1.046 1.000 End of Period............................................. 0.877 1.046 Number of Units Outstanding at End of Period................ N/A N/A PIONEER CULLEN VALUE VCT PORTFOLIO (CLASS II) Unit Value: Beginning of Period....................................... 1.006 1.000 End of Period............................................. 0.666 1.006 Number of Units Outstanding at End of Period................ N/A N/A PIONEER EMERGING MARKETS VCT PORTFOLIO (CLASS II) Unit Value: Beginning of Period....................................... 1.152 1.000 End of Period............................................. 0.472 1.152 Number of Units Outstanding at End of Period................ N/A N/A PIONEER GROWTH OPPORTUNITIES VCT PORTFOLIO (CLASS I) Unit Value: Beginning of Period....................................... 0.937 1.000 End of Period............................................. 0.593 0.937 Number of Units Outstanding at End of Period................ N/A N/A PIONEER MID CAP VALUE VCT PORTFOLIO (CLASS II) Unit Value: Beginning of Period....................................... 0.967 1.000 End of Period............................................. 0.629 0.967 Number of Units Outstanding at End of Period................ N/A N/A
E-18
YEAR ENDED YEAR ENDED DECEMBER 31ST DECEMBER 31ST SUB-ACCOUNT 2008 2007 ----------- -------------- -------------- GOLDMAN SACHS BALANCED STRATEGY PORTFOLIO (CLASS A) Unit Value: Beginning of Period....................................... 1.011 1.000 End of Period............................................. 0.789 1.011 Number of Units Outstanding at End of Period................ N/A N/A GOLDMAN SACHS EQUITY GROWTH STRATEGY PORTFOLIO (CLASS A) Unit Value: Beginning of Period....................................... 1.001 1.000 End of Period............................................. 0.564 1.001 Number of Units Outstanding at End of Period................ N/A N/A GOLDMAN SACHS GROWTH AND INCOME STRATEGY PORTFOLIO (CLASS A) Unit Value: Beginning of Period....................................... 1.010 1.000 End of Period............................................. 0.674 1.010 Number of Units Outstanding at End of Period................ N/A N/A GOLDMAN SACHS GROWTH STRATEGY PORTFOLIO (CLASS A) Unit Value: Beginning of Period....................................... 1.004 1.000 End of Period............................................. 0.597 1.004 Number of Units Outstanding at End of Period................ N/A N/A GOLDMAN SACHS INTERNATIONAL REAL ESTATE SECURITIES FUND (CLASS A) Unit Value: Beginning of Period....................................... 0.952 1.000 End of Period............................................. 0.447 0.952 Number of Units Outstanding at End of Period................ N/A N/A GOLDMAN SACHS REAL ESTATE SECURITIES FUND (CLASS A) Unit Value: Beginning of Period....................................... 0.918 1.000 End of Period............................................. 0.532 0.918 Number of Units Outstanding at End of Period................ N/A N/A GOLDMAN SACHS TOLLKEEPER FUND (CLASS A) Unit Value: Beginning of Period....................................... 1.139 1.000 End of Period............................................. 0.609 1.139 Number of Units Outstanding at End of Period................ N/A N/A
E-19 STATEMENT OF ADDITIONAL INFORMATION MAY 1, 2009 FLEXIBLE PREMIUM FIXED AND VARIABLE DEFERRED ANNUITY CONTRACTS ISSUED BY COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY IN CONNECTION WITH COMMONWEALTH ANNUITY SEPARATE ACCOUNT A HOME OFFICE: SERVICE CENTER MAILING ADDRESS: 132 Turnpike Road, Suite 210 P.O. Box 758550 Southborough, MA 01772 Topeka, Kansas 66675-8550 1-866-297-7531 1-800-457-8803 This Statement of Additional Information is not a prospectus. This Statement of Additional Information should be read in conjunction with the Prospectus of the Separate Account dated May 1, 2009. The Prospectus may be obtained from Commonwealth Annuity and Life Insurance Company by writing or calling the Service Center address or telephone number listed above. TABLE OF CONTENTS PAGE ---- SERVICES TO THE SEPARATE ACCOUNT 2 STATE REGULATION 2 EXPERTS 2 FINANCIAL STATEMENTS 3 FINANCIAL STATEMENTS OF COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY APPENDIX A STATE PREMIUM TAX CHART SERVICES TO THE SEPARATE ACCOUNT Commonwealth Annuity and Life Insurance Company ("Commonwealth Annuity") maintains the books and records of Commonwealth Annuity Separate Account A (the "Separate Account"). Commonwealth Annuity holds the assets of the Separate Account. The assets are kept segregated and held separate and apart from the general funds of Commonwealth Annuity. Commonwealth Annuity maintains records of all purchases and redemptions of shares of each Fund by each of the Subaccounts. All expenses incurred in the operations of the Separate Account, except the Contract fees and charges described in the Prospectus, are borne by Commonwealth Annuity. The independent registered public accounting firm for the Separate Account is PricewaterhouseCoopers LLC, 185 Asylum Street, Suite 2400, Hartford, CT, 016103. The aggregate amounts of commissions paid to Epoch Securities, Inc. for sales of all contracts funded by Commonwealth Annuity Separate Account A for the years 2008 and 2007 were $375,369.01 and $1614.56. No commissions or other compensation was received by Epoch Securities, Inc., directly or indirectly, from Commonwealth Annuity Separate Account A Registrant during Commonwealth Annuity Separate Account A's last fiscal year. STATE REGULATION Commonwealth Annuity is subject to the laws of Massachusetts governing insurance companies and to regulation by the Massachusetts Division of Insurance. An annual statement in a prescribed form is filed with the Massachusetts Division of Insurance each year. Commonwealth Annuity's books and accounts are subject to review by the Division of Insurance at all times, and a full examination of its operations is conducted periodically. Such regulation does not, however, involve any supervision of management or investment practices or policies. In addition, Commonwealth Annuity is subject to regulation under the insurance laws of other jurisdictions in which it may operate. In connection with its purchase of the Company in December 2005, Goldman Sachs provided certain written assurances to the Commissioner of the Massachusetts Division of Insurance (the "Commissioner"). More specifically, Goldman Sachs agreed to make capital contributions to the Company, subject to a maximum of $350 million, if necessary to ensure that the Company maintains a risk-based capital ratio of at least 100%, pursuant to Massachusetts Insurance Law. Such assurances have been provided solely to the Commissioner by Goldman Sachs. These assurances are not evidence of indebtedness or an obligation or liability of Goldman Sachs, and do not provide Contract Owners with any specific rights or recourse against Goldman Sachs. EXPERTS The financial statements of the Company at December 31, 2008 and 2007, and for each of the three years in the period ended December 31, 2008, and the financial statements of the Commonwealth Annuity Separate Account A of the Company as of December 31, 2008 and for the periods indicated, included in this Statement of Additional Information constituting part of this Registration Statement, have been so included in reliance on the reports of PricewaterhouseCoopers LLP, the Company's independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting. The financial statements of the Company included herein should be considered only as bearing on the ability of the Company to meet its obligations under the Contract. FINANCIAL STATEMENTS This Statement of Additional Information contains financial statements for Commonwealth Annuity. The financial statements of Commonwealth Annuity should be considered primarily as bearing on our ability to meet our obligations under the Contract. The Contracts are not entitled to participate in our earnings, dividends, or surplus. They should not be considered as bearing on the investment performance of the assets held in the Separate Account. APPENDIX A STATE PREMIUM TAX CHART RATE OF TAX ------------------------- QUALIFIED NON-QUALIFIED STATE PLANS PLANS ----- --------- ------------- California 0.50%* 2.35%* Maine 0.00% 2.00% Nevada 0.00% 3.50%* South Dakota 0.00% 1.25%** West Virginia 1.00%* 1.00%* Wyoming 0.00% 1.00% ---------- * Taxes will be assessed when annuity benefits commence. We reserve the right to deduct taxes earlier if such taxes are assessed by the state. ** The Tax Rate is 0.08% on annuity considerations in excess of $500,000 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders of Commonwealth Annuity and Life Insurance Company: In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, shareholder's equity, comprehensive income and cash flows present fairly, in all material respects, the financial position of Commonwealth Annuity and Life Insurance Company at December 31, 2008 and 2007, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2008 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. /s/ PricewaterhouseCoopers LLP Hartford, Connecticut April 17, 2009 COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (A WHOLLY-OWNED SUBSIDIARY OF THE GOLDMAN SACHS GROUP, INC.) CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2008 2007 -------------------------------------------------------------------------------------- (In millions) ASSETS Investments: Fixed maturities at fair value (amortized cost of $959.7 and $967.2 in 2008 and 2007, respectively) $ 929.3 $ 965.7 Equity securities at fair value (cost of $93.5 and $108.1 in 2008 and 2007, respectively) 68.1 102.7 Policy loans 92.9 106.1 -------- --------- Total investments 1,090.3 1,174.5 -------- --------- Cash and cash equivalents 277.4 57.4 Accrued investment income 12.3 11.3 Reinsurance receivable on paid and unpaid losses, benefits, unearned premiums and modified coinsurance 2,572.6 2,070.0 Value of business acquired (intangible) 146.5 220.4 Deferred policy acquisition costs 118.3 153.3 Deferred federal income taxes 139.3 129.7 Derivative instruments receivable 182.9 29.1 Other assets 74.7 31.9 Separate account assets 3,659.8 6,906.7 -------- --------- Total assets $8,274.1 $10,784.3 ======== ========= LIABILITIES Policy liabilities and accruals: Future policy benefits $3,748.6 $ 3,133.2 Outstanding claims and losses 16.3 9.2 Contractholder deposit funds and other policy liabilities 65.6 46.3 -------- --------- Total policy liabilities and accruals 3,830.5 3,188.7 -------- --------- Derivative instruments payable 57.7 33.7 Collateral on derivative instruments 60.0 -- Accrued expenses and other liabilities 46.5 56.4 Reinsurance payable 25.5 21.4 Separate account liabilities 3,659.8 6,906.7 -------- --------- Total liabilities $7,680.0 $10,206.9 -------- --------- Commitments and contingencies (Notes 17 and 18) SHAREHOLDER'S EQUITY Common stock, $1,000 par value, 10,000 shares authorized, 2,526 shares issued and outstanding $ 2.5 $ 2.5 Additional paid-in capital 466.9 416.9 Accumulated other comprehensive loss (25.0) (3.2) Retained earnings 149.7 161.2 -------- --------- Total shareholder's equity 594.1 577.4 -------- --------- Total liabilities and shareholder's equity $8,274.1 $10,784.3 ======== =========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS. 1 COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (A WHOLLY-OWNED SUBSIDIARY OF THE GOLDMAN SACHS GROUP, INC.) CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2008 2007 2006 ------------------------------------------------------------------------------------------- (In millions) REVENUES Universal life and investment product policy fees $ 189.6 $239.6 $233.0 Net investment income 125.6 137.5 114.5 Net realized investment (losses)/gains (49.6) 5.9 (7.3) Other income 21.6 19.9 16.7 ------------------------- Total revenues 287.2 402.9 356.9 ------------------------- BENEFITS, LOSSES AND EXPENSES Policy benefits, claims, losses and loss adjustment expenses 297.1 141.7 105.2 Policy acquisition expenses 106.9 52.7 39.0 (Gains)/losses on derivative instruments (175.6) 6.8 46.7 Other operating expenses 59.5 70.1 74.9 ------------------------- Total benefits, losses and expenses 287.9 271.3 265.8 ------------------------- (Loss)/income before federal income taxes (0.7) 131.6 91.1 ------------------------- FEDERAL INCOME TAX EXPENSE ------------------------- Deferred federal income tax expense 10.8 34.6 26.2 ------------------------- Net (loss)/income $ (11.5) $ 97.0 $ 64.9 =========================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS. 2 COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (A WHOLLY-OWNED SUBSIDIARY OF THE GOLDMAN SACHS GROUP, INC.) CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
ACCUMULATED OTHER TOTAL ADDITIONAL RETAINED COMPREHENSIVE SHAREHOLDER'S (IN MILLIONS) COMMON STOCK PAID-IN CAPITAL EARNINGS LOSS EQUITY ------------------------------------------------------------------------------------------------------------ BALANCE AT JANUARY 1, 2006 $2.5 $329.9 $ (0.7) $ -- $331.7 Net income 64.9 64.9 Other comprehensive income: Net unrealized losses (1.2) (1.2) Capital contribution 87.0 87.0 --------------------------------------------------------------------- BALANCE AT DECEMBER 31, 2006 $2.5 $416.9 $ 64.2 $ (1.2) $482.4 ===================================================================== Net income 97.0 97.0 Other comprehensive income: Net unrealized losses (2.0) (2.0) --------------------------------------------------------------------- BALANCE AT DECEMBER 31, 2007 $2.5 $416.9 $161.2 $ (3.2) $577.4 ===================================================================== Net loss (11.5) (11.5) Other comprehensive income: Net unrealized losses (21.8) (21.8) Capital contribution 50.0 50.0 --------------------------------------------------------------------- BALANCE AT DECEMBER 31, 2008 $2.5 $466.9 $149.7 $(25.0) $594.1 =====================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS. 3 COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (A WHOLLY-OWNED SUBSIDIARY OF THE GOLDMAN SACHS GROUP, INC.) CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
FOR THE YEARS ENDED DECEMBER 31, 2008 2007 2006 --------------------------------------------------------------------------------------- (In millions) ---------------------- Net (loss)/income $(11.5) $97.0 $64.9 ---------------------- Other comprehensive (loss)/income: Available-for-sale securities, net of policyholder amounts: Net depreciation during the period (33.5) (3.0) (2.0) Benefit for deferred federal income taxes 11.7 1.0 0.8 ---------------------- Total available-for-sales securities (21.8) (2.0) (1.2) ---------------------- Comprehensive (loss)/income $(33.3) $95.0 $63.7 ======================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS. 4 COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (A WHOLLY-OWNED SUBSIDIARY OF THE GOLDMAN SACHS GROUP, INC.) CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2008 2007 2006 ----------------------------------------------------------------------------------------------------------------- (In millions) CASH FLOWS FROM OPERATING ACTIVITIES Net (loss)/income $ (11.5) $ 97.0 $ 64.9 Adjustments to reconcile net (loss)/income to net cash provided by (used in) operating activities: Net realized investment (gains)/losses 49.6 (5.9) 7.3 Non cash derivative activity (172.6) (7.4) 28.5 Net accretion of premiums on investments (1.1) 0.7 (0.8) Net amortization and depreciation 107.5 52.7 39.0 Deferred federal income taxes 10.8 34.6 26.2 Change in deferred policy acquisition costs 13.8 (53.0) (110.0) Change in premiums and notes receivable, net of reinsurance premiums payable 4.1 16.9 (2.6) Change in accrued investment income (1.0) 1.6 7.9 Change in policy liabilities and accruals, net 622.5 (281.5) 1,053.6 Change in reinsurance receivable and modified coinsurance (502.6) 104.8 (1,362.9) Change in expenses and taxes payable (9.9) (4.4) (5.6) Other, net 11.5 (17.0) (5.6) --------- ------- --------- Net cash provided by/(used in) operating activities 121.1 (60.9) (260.1) --------- ------- --------- CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from disposals and maturities of fixed maturities 1,550.8 773.9 2,206.0 Proceeds from disposals of other investments 271.9 19.3 0.6 Purchase of fixed maturities (1,580.2) (662.4) (2,012.1) Purchase of equity securities -- (43.7) (64.4) Purchase of other investments (212.9) (20.3) (1.4) Capital expenditures -- -- (1.5) Net payments related to margin deposits on derivative instruments -- -- (0.1) --------- ------- --------- Net cash provided by investing activities 29.6 66.8 127.1 --------- ------- --------- CASH FLOWS FROM FINANCING ACTIVITIES Deposits in/(withdrawals from) contractholder deposit funds 19.3 (7.4) (17.6) Capital contribution 50.0 -- 86.3 --------- ------- --------- Net cash provided by/(used in) financing activities 69.3 (7.4) 68.7 --------- ------- --------- Net change in cash and cash equivalents 220.0 (1.5) (64.3) Cash and cash equivalents, beginning of period 57.4 58.9 123.2 --------- ------- --------- Cash and cash equivalents, end of period $ 277.4 $ 57.4 $ 58.9 ========= ======= =========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS 5 COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (A WHOLLY-OWNED SUBSIDIARY OF THE GOLDMAN SACHS GROUP, INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2008 1. ORGANIZATION Commonwealth Annuity and Life Insurance Company ("the Company") is a stock life insurance company organized under the laws of Massachusetts, and is a wholly-owned subsidiary of The Goldman Sachs Group, Inc ("Goldman Sachs"). The Company manages blocks of variable annuity, variable universal life insurance, whole life insurance, term life insurance, universal life insurance and minor blocks of group retirement products. In 2007, the Company began issuance of 403(b) variable annuity products. This requires the Company to have an affiliated broker dealer to act as principal underwriter and distributor. The Company signed an agreement with Epoch Securities Inc. ("Epoch"), a Delaware corporation, and a Financial Industry Regulatory Authority ("FINRA") member firm, to serve as principal underwriter for several of the Company's variable products. Epoch is a wholly-owned subsidiary of Goldman Sachs (see Note 18 - Related Party Transactions). Prior to September 1, 2006, the Company was named Allmerica Financial Life Insurance and Annuity Company ("AFLIAC"). On December 30, 2005, Goldman Sachs acquired all outstanding common shares of the Company from The Hanover Insurance Group ("THG") (the "Transaction"). Immediately preceding the Transaction, the Company distributed its ownership in certain wholly-owned subsidiaries, First Allmerica Financial Life Insurance Company ("FAFLIC"), VeraVest Investments, Inc. ("VeraVest"), and Allmerica Financial Investment Management Services, Inc ("AFIMS") directly to THG as a dividend to shareholders. The Company's remaining non-insurance subsidiaries were distributed to FAFLIC as a capital contribution prior to the Transaction. Concurrent with the Transaction, the Company entered into several servicing agreements to provide certain operational and administrative support of its business. Transitional service agreements with THG provided operational support, system and policy conversion support, accounting and other services until December 31, 2006. An operational servicing agreement was executed with Security Benefit Life Insurance Company ("Se2") on December 30, 2005, to provide customer and agent support and perform other key policy administration and operational functions. As of December 31, 2006, these operational functions were transferred to Se2. 2. BASIS OF PRESENTATION The accompanying audited financial statements have been prepared in accordance with generally accepted accounting principles ("US GAAP"). The preparation of financial statements in conformity with US GAAP requires the Company to make estimates and assumptions and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Transaction was accounted for using the purchase method under Statement of Financial Accounting Standards ("SFAS") No. 141, "Business Combinations" ("SFAS No. 141") and SFAS No. 142, "Goodwill and Other Intangible Assets" ("SFAS No. 142") and purchase accounting adjustments were "pushed down" to the Company's financial statements. Under the purchase method of accounting, assets acquired and liabilities assumed were recorded at estimated fair value at the date of purchase, and updated as of December 31, 2008 and December 31, 2007. See Note 4 - Purchase Accounting, for a purchase accounting income statement containing the changes. 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. VALUATION OF INVESTMENTS The Company accounts for its investments in accordance with SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities" ("SFAS No. 115"). At the time of purchase, fixed maturity securities are classified based on the Company's intent as either held-to-maturity, trading or available-for-sale. Fixed maturities and equity securities are classified as available-for-sale. Available-for-sale securities are carried at fair value, with unrealized gains and losses, net of tax, reported in accumulated other comprehensive income, a separate component of shareholder's equity. The amortized cost of fixed maturities is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization is included in investment income. Policy loans are carried principally at unpaid principal balances. Interest income on such loans is recorded as earned using the contractually agreed upon interest rate. Generally, interest is capitalized on the policy's anniversary date. 6 COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (A WHOLLY-OWNED SUBSIDIARY OF THE GOLDMAN SACHS GROUP, INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2008 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) A. VALUATION OF INVESTMENTS (CONTINUED) Realized investment gains and losses, other than those related to separate accounts for which the Company does not bear the investment risk and that meet the conditions for separate account reporting under American Institute of Certified Public Accountants ("AICPA") Statement of Position 03-1, "Accounting and Reporting by Insurance Enterprises for Certain Non-Traditional Long-Duration Contract and for Separate Accounts" ("SOP 03-1"), are reported as a component of revenues based upon specific identification of the investment assets sold. When an other-than-temporary decline in value of a specific investment is deemed to have occurred, the Company reduces the cost basis of the investment to fair value. This reduction is permanent and is recognized as a realized investment loss. Realized investment gains and losses related to separate accounts that meet the conditions for separate account reporting under SOP 03-1 accrue to and are borne by the contract holder. B. FINANCIAL INSTRUMENTS Financial instruments are reflected in the balance sheet on a trade-date basis. The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (the exit price). The Company evaluates and monitors each financial instrument individually and, when appropriate, obtains collateral or other security to minimize losses. Fair value measurements are not adjusted for transaction costs. In the normal course of business, the Company enters into transactions involving various types of financial instruments, including U.S. government and agency securities, liquid mortgage products, investment-grade corporate bonds, money market securities, state, municipal and provincial obligations, swap contracts, option contracts, futures contracts and a high yield mutual fund. The high yield fund invests in high yield, fixed income securities that, at the time of purchase, are non-investment grade. This holding is classified within Equity Securities on the Company's Consolidated Balance Sheets. The Company adopted SFAS No. 157, "Fair Value Measurements" ("SFAS No. 157"), as of the beginning of 2007. SFAS No. 157 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of the fair value hierarchy under SFAS No. 157 are described below: BASIS OF FAIR VALUE MEASUREMENT Level 1 Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities; Level 2 Quoted prices in markets that are not considered to be active or financial instruments for which all significant inputs are observable, either directly or indirectly; Level 3 Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.
A financial instrument's level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. See "Note 3N - New and Adopted Accounting Pronouncements" for a discussion of the impact of adopting SFAS No. 157. During the fourth quarter of 2008, both the Financial Accounting Standards Board ("FASB") and the staff of the Securities and Exchange Commission ("SEC") re-emphasized the importance of sound fair value measurement in financial reporting. In October 2008, the FASB issued FASB Staff Position No. FAS 157-3, "Determining the Fair Value of a Financial Asset When the Market for That Asset is Not Active" ("FSP No. FAS 157-3"). This statement clarifies that determining fair value in an inactive or dislocated market depends on facts and circumstances and requires significant management judgment. This statement specifies that it is acceptable to use inputs based on management estimates or assumptions, or for management to make adjustments to observable inputs to determine fair value when markets are not active and relevant observable inputs are not available. The Company's fair value measurement policies are consistent with the guidance in FSP No. FAS 157-3. 7 COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (A WHOLLY-OWNED SUBSIDIARY OF THE GOLDMAN SACHS GROUP, INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2008 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) B. FINANCIAL INSTRUMENTS (CONTINUED) Credit risk is an essential component of fair value. Cash products (e.g., bonds and loans) and derivative instruments (particularly those with significant future projected cash flows) trade in the market at levels which reflect credit considerations. The Company calculates the fair value of derivative assets by discounting future cash flows at a rate which incorporates counterparty credit spreads and the fair value of derivative liabilities by discounting future cash flows at a rate which incorporates the Company's own credit spreads. In doing so, credit exposures are adjusted to reflect mitigants, namely collateral agreements which reduce exposures based on triggers and contractual posting requirements. The Company manages its exposure to credit risk as it does other market risks and will price, economically hedge, facilitate and intermediate trades which involve credit risk. The Company records liquidity valuation adjustments to reflect the cost of exiting concentrated risk positions, including exposure to the Company's own credit spreads. In determining fair value, the Company separates its financial instruments into two categories: cash instruments and derivative contracts. See "Note 3C - Cash Instruments" and "Note 3D - Derivatives and Hedging Activities" below. C. CASH INSTRUMENTS The Company's cash instruments are generally classified within level 1 or level 2 of the fair value hierarchy because they are valued using quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency. The types of instruments valued based on quoted market prices in active markets include most U.S. government and agency securities, many other sovereign government obligations, and most money market securities. Such instruments are generally classified within level 1 of the fair value hierarchy. In accordance with SFAS No. 157, the Company does not adjust the quoted price for such instruments, even in situations where the Company holds a large position and a sale could reasonably impact the quoted price. The types of instruments valued based on quoted prices in markets that are not active, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency include most investment-grade and high-yield corporate bonds, most mortgage products, state, and municipal obligations. Such instruments are generally classified within level 2 of the fair value hierarchy. Certain cash instruments are classified within level 3 of the fair value hierarchy because they trade infrequently and therefore have little or no price transparency. Such instruments include private equity and subordinated obligations. The transaction price is initially used as the best estimate of fair value. Accordingly, when a pricing model is used to value such an instrument, the model is adjusted so that the model value at inception equals the transaction price. This valuation is adjusted only when changes to inputs and assumptions are corroborated by evidence such as transactions in similar instruments, completed or pending third-party transactions in the underlying investment or comparable entities, subsequent rounds of financing, recapitalizations and other transactions across the capital structure, offerings in the equity or debt capital markets, and changes in financial ratios or cash flows. For positions that are not traded in active markets or are subject to transfer restrictions, valuations are adjusted to reflect illiquidity and/or non-transferability, and such adjustments are generally based on available market evidence. In the absence of such evidence, management's best estimate is used. Recent market conditions, particularly in the fourth quarter of 2008 (characterized by dislocations between asset classes, elevated levels of volatility, and reduced price transparency), have increased the level of management judgment required to value cash trading instruments classified within level 3 of the fair value hierarchy. In particular, management's judgment is required to determine the appropriate risk-adjusted discount rate for cash trading instruments with little or no price transparency as a result of decreased volumes and lower levels of trading activity. In such situations, the Company's valuation is adjusted to approximate rates which market participants would likely consider appropriate for relevant credit and liquidity risks. 8 COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (A WHOLLY-OWNED SUBSIDIARY OF THE GOLDMAN SACHS GROUP, INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2008 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) D. DERIVATIVES AND HEDGING ACTIVITIES Derivative contracts can be exchange-traded or over-the-counter ("OTC"). Exchange-traded derivatives typically fall within level 1 or level 2 of the fair value hierarchy depending on whether they are deemed to be actively traded or not. The Company generally values exchange-traded derivatives within portfolios using models which calibrate to market clearing levels and eliminate timing differences between the closing price of the exchange-traded derivatives and their underlying cash instruments. In such cases, exchange-traded derivatives are classified within level 2 of the fair value hierarchy. As of the Transaction, the Company entered into certain OTC derivatives, primarily equity put options and interest rate swaptions, to hedge certain equity market, credit and interest rate risk. None of these post-transaction instruments qualify for hedge accounting, and are carried at fair value or amounts that approximate fair value. OTC derivatives are valued using market transactions and other market evidence whenever possible, including market-based inputs to models, model calibration to market clearing transactions, broker or dealer quotations or alternative pricing sources with reasonable levels of price transparency. Where models are used, the selection of a particular model to value an OTC derivative depends upon the contractual terms of, and specific risks inherent in, the instrument as well as the availability of pricing information in the market. The Company generally uses similar models to value similar instruments. Valuation models require a variety of inputs, including contractual terms, market prices, yield curves, credit curves, measures of volatility, prepayment rates and correlations of such inputs. For OTC derivatives that trade in liquid markets, such as generic forwards, swaps and options, model inputs can generally be verified and model selection does not involve significant management judgment. Such instruments are typically classified within level 2 of the fair value hierarchy. Certain OTC derivatives trade in less liquid markets with limited pricing information, and the determination of fair value for these derivatives is inherently more difficult. Such instruments are classified within level 3 of the fair value hierarchy. Where the Company does not have corroborating market evidence to support significant model inputs and cannot verify the model to market transactions, transaction price is initially used as the best estimate of fair value. Accordingly, when a pricing model is used to value such an instrument, the model is adjusted so that the model value at inception equals the transaction price. The valuations of these less liquid OTC derivatives are typically based on level 1 and/or level 2 inputs that can be observed in the market, as well as unobservable level 3 inputs. Subsequent to initial recognition, the Company updates the level 1 and level 2 inputs to reflect observable market changes, with resulting gains and losses reflected within level 3. Level 3 inputs are only changed when corroborated by evidence such as similar market transactions, third-party pricing services and/or broker or dealer quotations, or other empirical market data. In circumstances where the Company cannot verify the model value to market transactions, it is possible that a different valuation model could produce a materially different estimate of fair value. When appropriate, valuations are adjusted for various factors such as liquidity, bid/offer spreads and credit considerations. Such adjustments are generally based on available market evidence. In the absence of such evidence, management's best estimate is used. In November 2006, per an investment management agreement with Goldman Sachs Asset Management, L.P. ("GSAM"), the Company began to trade futures contracts. Exchange-traded futures and options are effected through a regulated exchange and positions are marked to market through the Consolidated Statements of Income on a daily basis. The Company has little exposure to credit-related losses in the event of nonperformance by counterparties to such financial instruments. From time to time, futures contracts are terminated. The termination of such contracts would be recognized in income as they are marked to market on a daily basis. Terminations would not materially impact earnings as any payment due upon termination represents one day of market exposure. The clearinghouse guarantees the performance of both counterparties which mitigates credit risk. E. CASH AND CASH EQUIVALENTS Cash and cash equivalents include cash on hand, amounts due from banks and highly liquid overnight deposits held in the ordinary course of business. None of this is restricted or segregated for specific business reasons. Approximately $81.8 million is held at one financial institution at December 31, 2008. 9 COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (A WHOLLY-OWNED SUBSIDIARY OF THE GOLDMAN SACHS GROUP, INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2008 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) F. DEFERRED POLICY ACQUISITION COSTS ("DAC") AND DEFERRED SALES INDUCEMENTS ("DSI") DAC consists of commissions, ceding commissions, and other costs, which vary with, and are primarily related to, the production of revenues. The Company defers sales inducements generated by variable annuities that offer enhanced crediting rates or bonus payments. DAC is amortized over its estimated life in accordance with SFAS No. 97, "Accounting and Reporting by Insurance Enterprises for Certain Long-Duration Contracts and for Realized Gains and Losses from the Sale of Investments" ("SFAS No. 97"). As part of the recording of fair value purchase accounting due to the acquisition of the Company, all DAC and DSI acquired from THG were written down to zero as of the Transaction date. Subsequent to the Transaction, DAC and DSI balances primarily were created via the deferral of ceding commissions and bonus interest credits paid in the reinsurance of in force contracts. DAC and DSI amortization is reviewed periodically and adjusted retrospectively when the Company revises its estimate of current or future gross profits to be recognized from these products. Acquisition costs and sales inducements related to variable annuity products are amortized in proportion to total estimated gross profits from investment yields, mortality, surrender charges and expense margins over the expected life of the contracts. (See Note 14 - Deferred Policy Acquisition Costs for further discussion). G. REINSURANCE Reinsurance accounting is followed for ceded and assumed transactions when the risk transfer provisions of SFAS No. 113, "Accounting and Reporting for Reinsurance of Short-Duration and Long-Duration Contracts," have been met. To meet risk transfer requirements, a long duration reinsurance contract must transfer mortality or morbidity risks, and subject the reinsurer to a reasonable possibility of a significant loss. With respect to ceded reinsurance, the valuation of claims recoverable depends on whether the underlying claim is a reported claim, or a future policy benefit. For reported claims, the Company values reinsurance recoverables at the time the underlying claim is recognized, in accordance with contract terms. For future policy benefits, the Company estimates the amount of reinsurance recoverables based on the terms of the reinsurance contracts and historical reinsurance recovery information and applies that information to the future policy benefit estimates. The reinsurance recoverables are based on what the Company believes are reasonable estimates and the balance is disclosed separately in the financial statements. However, the ultimate amount of the reinsurance recoverable is not known until all claims are settled. Reinsurance contracts do not relieve the Company from its obligations to policyholders. Failure of reinsurers to honor their obligations could result in losses to the Company; consequently, allowances are established for amounts deemed uncollectible. See Note 13 - Reinsurance for further discussion. H. PROPERTY, EQUIPMENT AND CAPITALIZED SOFTWARE Property, equipment, leasehold improvements and capitalized software are stated at cost, less accumulated depreciation and amortization. Depreciation is provided using the straight-line method over the estimated useful lives of the related assets. Certain costs of software developed or obtained for internal use are capitalized and amortized on a straight-line basis over the useful life of the software. Amortization of leasehold improvements is provided using the straight-line method over the lesser of the term of the leases or the estimated useful life of the improvements. The Company tests for the potential impairment of long-lived assets whenever events or changes in circumstances suggest that the carrying amounts may not be fully recoverable in accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-lived Assets." The Company recognizes impairment losses only when the carrying amounts of long-lived assets exceed the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the assets. In such cases, the Company reduces the carrying value of the asset to fair value. Fair values are estimated using discounted cash flow analysis. 10 COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (A WHOLLY-OWNED SUBSIDIARY OF THE GOLDMAN SACHS GROUP, INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2008 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) I. VALUE OF BUSINESS ACQUIRED ("VOBA") VOBA is an intangible asset that reflects the estimated fair value of in-force contracts resulting from the Transaction. VOBA represents the portion of the purchase price that is allocated to the value of the right to receive future cash flows from the business in force at the acquisition date. The methodology for determining the amortization of VOBA is based on SFAS No. 97. Under SFAS No. 97, acquisition costs for variable universal life insurance and variable annuity products are generally amortized over the lives of the policies in relation to the emergence of estimated gross profits ("EGPs") from surrender charges, investment, and mortality net of reinsurance ceded and expense margins and actual realized gain (loss) on investments. Contract lives for variable universal life policies and variable annuities are estimated to be 30 years. The carrying amount of VOBA is adjusted for the effects of realized and unrealized gains and losses on debt securities classified as available-for-sale and certain derivatives. Amortization expense of VOBA reflects an assumption for an expected level of credit-related investment losses. When actual credit-related investment losses are realized, the Company recognize a true-up to our VOBA amortization within realized gain (loss) in the Consolidated Statements of Income reflecting the incremental impact of actual versus expected credit-related investment losses. These actual to expected amortization adjustments can create volatility from period to period in realized gain (loss). VOBA is reviewed periodically to ensure that the unamortized portion does not exceed the expected recoverable amounts. J. SEPARATE ACCOUNTS Separate account assets and liabilities represent segregated funds administered and invested by the Company for the benefit of variable annuity and variable life insurance contractholders. Assets consist principally of mutual funds, bonds, common stocks, and short-term obligations at market value. The investment income and gains and losses of these accounts generally accrue to the contractholders and, therefore, are not included in the Company's net income. However, the Company's net income reflects fees assessed and earned on fund values of these contracts. See Note 6 - Liabilities for Minimum Gurantees under Statement of Position 03-1, Accounting and Reporting by Insurance Enterprises for Certain Nontraditional Long-Duration contracts and for Separate Accounts. Separate account assets representing contract holder funds are measured at fair value and reported as a summary total in the Balance Sheet, with an equivalent summary total reported for related liabilities. The open-ended mutual funds in the separate accounts produce a daily net asset value that is validated with a sufficient level of observable activity to support classification of the fair value measurement as level 1, under SFAS No. 157. K. POLICY LIABILITIES AND ACCRUALS Future policy benefits are liabilities for annuity, life, and health products. Such liabilities are established in amounts adequate to meet the estimated future obligations of policies in force. Future policy benefits for individual life insurance and annuity policies are computed using interest rates ranging from 3.5 % to 11.5 % for annuities and 2.5 % to 6.0 % for life insurance. Mortality, morbidity and withdrawal assumptions for all policies are based on the Company's own experience and industry standards. Liabilities for universal life, variable universal life and variable annuities include deposits received from customers and investment earnings on their fund balances, less administrative charges. Universal life fund balances are also assessed mortality and surrender charges. Liabilities for variable annuities include a reserve for guaranteed minimum death benefits ("GMDB") in excess of contract values. Liabilities for outstanding claims and claims adjustment expenses are estimates of payments to be made on health insurance contracts for reported losses and claims adjustment expenses and estimates of losses and claims adjustment expenses incurred but not reported. These liabilities are determined using case basis evaluations and statistical analyses and represent estimates of the 11 COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (A WHOLLY-OWNED SUBSIDIARY OF THE GOLDMAN SACHS GROUP, INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2008 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) K. POLICY LIABILITIES AND ACCRUALS (CONTINUED) ultimate cost of all claims incurred but not paid. These estimates are continually reviewed and adjusted as necessary; such adjustments are reflected in current operations. Contractholder deposit funds and other policy liabilities include deposit administration funds and immediate participation guarantee funds and consist of deposits received from customers and investment earnings on their fund balances. Policy liabilities and accruals are based on the various estimates discussed above. Although the adequacy of these amounts cannot be assured, the Company believes that policy liability and accruals will be sufficient to meet future obligations of policies in force. The amount of liabilities and accruals, however, could be revised in the near-term if the estimates discussed above are revised. L. PREMIUM, FEE REVENUE AND RELATED EXPENSES Premiums for individual life insurance and individual and group annuity products, excluding universal life and investment-related products, are considered revenue when due. Benefits, losses and related expenses are matched with premiums, resulting in their recognition over the lives of the contracts. This matching is accomplished through the provision for future benefits, estimated and unpaid losses and amortization of deferred policy acquisition costs. Revenues for investment-related products consist of net investment income and contract charges assessed against the fund values. Related benefit expenses include annuity benefit claims for guaranteed minimum death benefits in excess of contract values, and net investment income credited to the fund values after deduction for investment and risk charges. Revenues for universal life products consist of net investment income, with mortality, administration and surrender charges assessed against the fund values. Related benefit expenses include universal life benefit claims in excess of fund values and net investment income credited to universal life fund values. Certain policy charges such as enhanced crediting rates or bonus payments that represent compensation for services to be provided in future periods are classified as deferred sales inducements and amortized over the period benefited using the same assumptions used to amortize deferred acquisition costs. See Note 14 - Deferred Policy Acquisition Costs, for further information regarding revaluation of DAC and deferred sales inducements. M. FEDERAL INCOME TAXES Deferred federal income taxes are generally recognized when assets and liabilities have different values for financial statement and tax reporting purposes, and for other temporary taxable and deductible differences as defined by Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS No. 109"). These differences result primarily from insurance reserves, net operating loss carryforwards, policy acquisition expenses, tax credit carryforwards and deferred sales inducements. In June 2006, the FASB issued Interpretation No. 48, "Accounting for Uncertainty in Income Taxes - an Interpretation of FASB Statement No. 109" ("FIN No. 48"), to create a single model to address accounting for uncertainty in tax positions (See Note 3N - New and Adopted Accounting Pronouncements). N. NEW AND ADOPTED ACCOUNTING PRONOUNCEMENTS In January 2009, the FASB issued FASB Staff Position ("FSP") No. EITF 99-20-1, "Amendments to the Impairment Guidance of EITF Issue No. 99-20," ("FSP EITF 99-20-1"). The FSP amends the impairment guidance of Emerging Issues Task Force ("EITF") Issue No. 99-20, "Recognition of Interest Income and Impairment of Purchased Beneficial Interest and Beneficial Interest that Continue to Be Held by a Transferor in Securitized Financial Assets," by removing the exclusive reliance upon market participant assumptions about future cash flows when evaluating impairment of securities within its scope. FSP EITF 99-20-1 requires companies to follow the impairment guidance in SFAS No. 115, which permits the use of reasonable management judgement of the probability that the holder will be unable to collect all amounts due. The FSP is effective prospectively for interim and annual reporting periods ending after December 15, 2008. The Company adopted the FSP on December 31, 2008 and the adoption did not have a material effect on the Company's financial condition, results of operations or cash flows. 12 COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (A WHOLLY-OWNED SUBSIDIARY OF THE GOLDMAN SACHS GROUP, INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2008 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) N. NEW AND ADOPTED ACCOUNTING PRONOUNCEMENTS (CONTINUED) As discussed above, in October 2008, the FASB issued FSP No. FAS 157-3, which clarifies the application of SFAS No. 157 in an inactive market, without changing its existing principles. The FSP was effective immediately upon issuance. The adoption of FSP No. FAS 157-3 did not have an effect on the Company's financial condition, results of operations or cash flows. In September 2008, the FASB issued FSP No. FAS 133-1 ("FSP No. FAS 133-1") and FIN 45-4 ("FIN 45-4"), "Disclosures about Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement No. 133 and FASB Interpretation No. 45; and Clarification of the Effective Date of FASB Statement No. 161." FSP No. FAS 133-1 and FIN 45-4 requires enhanced disclosures about credit derivatives and guarantees and amends FIN 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others" to exclude credit derivative instruments accounted for at fair value under SFAS No. 133. The FSP is effective for financial statements issued for reporting periods ending after November 15, 2008. Adoption of FSP No. FAS 133-1 and FIN 45-4 did not have an effect on the Company's financial condition, results of operations or cash flows. In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities," which gives entities the option to measure eligible financial assets, financial liabilities and firm commitments at fair value (i.e., the fair value option), on an instrument-by-instrument basis, that are otherwise not accounted for at fair value under other accounting standards. The election to use the fair value option is available at specified election dates, such as when an entity first recognizes a financial asset or financial liability or upon entering into a firm commitment. Subsequent changes in fair value must be recorded in earnings. Additionally, SFAS No. 159 allows for a one-time election for existing positions upon adoption, with the transition adjustment recorded to beginning retained earnings. The Company did not adopted SFAS No. 159 for any portion of its business. In September 2006, the FASB issued SFAS No. 157. SFAS No. 157 clarifies that fair value is an exit price, representing the amount that would be exchanged to sell an asset or transfer a liability in an orderly transaction between market participants. Under FAS No. 157, fair value measurements are not adjusted for transaction costs. SFAS No. 157 nullifies the consensus reached in EITF Issue No. 02-3, "Issues Involved in Accounting for Derivative Contracts Held for Trading Purposes and Contracts Involved in Energy Trading and Risk Management Activities," ("EITF Issue No. 02-3") that prohibited the recognition of day one gain or loss on derivative contracts (and hybrid instruments measured at fair value under SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," as modified by SFAS No. 155) where the Company could not verify all of the significant model inputs to observable market data and verify the model to market transactions. However, SFAS No. 157 requires that a fair value measurement reflect the assumptions market participants would use in pricing an asset or liability based on the best information available. Assumptions include the risks inherent in a particular valuation technique (such as a pricing model) and/or the risks inherent in the inputs to the model. The Company adopted SFAS 157 as of January 1, 2007; adoption did not have a material effect on the Company's financial condition, results of operations or cash flows. In June 2006, the FASB issued FIN No. 48. FIN No. 48 requires that the Company determine whether a tax position is more likely than not to be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. Once it is determined that a position meets this recognition threshold, the position is measured to determine the amount of benefit to be recognized in the financial statements. The Company adopted the provisions of FIN No. 48 as of January 1, 2007; adoption did not have any impact on the Company's financial condition, results of operations or cash flows and did not result in any adjustments to retained earnings. In February 2006, the FASB issued SFAS No. 155, "Accounting for Certain Hybrid Financial Instruments - an amendment of FASB Statements No. 133 and 140" ("SFAS No. 155"). SFAS No. 155 permits an entity to measure at fair value any financial instrument that contains an embedded derivative that otherwise would require bifurcation. As permitted, the Company early adopted SFAS No. 155 in the first quarter of 2006. Adoption did not have a material effect on the Company's financial condition, results of operations or cash flows. In September 2005, the AICPA issued Statement of Position 05-1, "Accounting by Insurance Enterprises for Deferred Acquisition Costs in Connection with Modifications or Exchanges of Insurance Contracts" ("SOP 05-1"). SOP 05-1 provides guidance on 13 COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (A WHOLLY-OWNED SUBSIDIARY OF THE GOLDMAN SACHS GROUP, INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2008 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) N. NEW AND ADOPTED ACCOUNTING PRONOUNCEMENTS (CONTINUED) accounting by insurance companies for deferred acquisition costs on internal replacements of insurance and investment contracts other than those described in SFAS No. 97, "Accounting and Reporting by Insurance Enterprises for Certain Long-Duration Contracts and for Realized Gains and Losses from the Sale of Investments." This statement is effective for internal replacements occurring in fiscal years beginning after December 15, 2006. The Company adopted SOP 05-1 as of January 1, 2007; adoption did not have a material effect on the Company's financial condition, results of operations or cash flows. O. ACCOUNTING STANDARDS NOT YET ADOPTED In April 2009, the FASB issued FSP FAS 157-4, "Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly," ("FSP FAS No. 157-4"). FSP FAS No. 157-4 provides guidance in estimating fair value in accordance with SFAS 157 when the volume and level of activity for an asset or liability have significantly decreased when compared to normal activity. FSP FAS no. 157-4 also provides guidance in identifying circumstances that indicate a transaction is not orderly, which may indicate that further analysis of transactions or quoted market prices is needed and a significant adjustment to these transactions or prices may be necessary to estimate fair value in accordance with SFAS 157. FSP FAS No. 157-4 shall be effective for interim and annual reporting periods ending after June 15, 2009, and shall be applied prospectively. Early adoption is permitted for periods ending after March 15, 2009. Earlier adoption for periods ending before March 15, 2009, is not permitted. The Company will adopt FSP FAS No. 157-4 in 2009; the Company is currently reviewing the impact of adoption of FSP FAS No. 157-4 on the Company's financial condition, results of operations and cash flows. In April 2009, the FASB issued FSP FAS 115-2 and FAS 124-2, "Recognition and Presentation of Other-Than-Temporary Impairments," ("FSP FAS No. 115-2 and FAS 124-2"), which amends the other-than-temporary impairment guidance for debt securities and changes the presentation and disclosure requirements for other-than-temporary impairments on both debt and equity securities. Under FSP FAS No. 115-2 and FAS 124-2, only that portion of an other-than-temporary impairment loss on a debt security related to credit is charged through the income statement, unless the entity intends to or it is more likely than not that the entity will be required to sell the impaired debt security prior to recovery. FSP FAS No. 115-2 and FAS 124-2 shall be effective for interim and annual reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. Earlier adoption for periods ending before March 15, 2009, is not permitted. The Company will adopt FSP FAS No. 115-2 and FAS 124-2 in 2009; the Company is currently reviewing the impact of adoption of FSP FAS No. 115-2 and FAS 124-2 on the Company's financial condition, results of operations and cash flows. In May 2008, the FASB issued SFAS No. 163, "Accounting for Financial Guarantee Insurance Contracts - an interpretation of FASB Statement No. 60." The scope of SFAS No. 163 is limited to financial guarantee insurance (and reinsurance) contracts issued by enterprises that are included within the scope of SFAS No. 60, "Accounting and Reporting by Insurance Enterprises," and that are not accounted for as derivative instruments. SFAS No. 163 excludes from its scope insurance contracts that are similar to financial guarantee insurance, such as mortgage guaranty insurance and credit insurance on trade receivables. SFAS No. 163 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and all interim periods within those fiscal years, except for certain disclosures about the insurance enterprise's risk management activities. Except for certain disclosures, earlier application is not permitted. The Company does not have any contracts with guarantees within the scope of this standard. The Company's adoption of SFAS No. 163 on January 1, 2009 will have no impact on its consolidated financial statements. In March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative Instruments and Hedging Activities" ("SFAS No. 161"). SFAS No. 161 requires enhanced disclosures about an entity's derivative and hedging activities, and is effective for financial statements issued for reporting periods beginning after November 15, 2008, with early application encouraged. Since SFAS No. 161 requires only additional disclosures concerning derivatives and hedging activities, adoption of SFAS No. 161 will not affect the Company's financial condition, results of operations or cash flows. In December 2007, the FASB issued a revision to SFAS No. 141, "Business Combinations." SFAS No. 141(R) requires changes to the accounting for transaction costs, certain contingent assets and liabilities, and other balances in a business combination. In addition, in partial acquisitions, when control is obtained, the acquiring company must measure and record all of the target's assets 14 COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (A WHOLLY-OWNED SUBSIDIARY OF THE GOLDMAN SACHS GROUP, INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2008 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) O. ACCOUNTING STANDARDS NOT YET ADOPTED (CONTINUED) and liabilities, including goodwill, at fair value as if the entire target company had been acquired. The Company will apply the provisions of SFAS No. 141(R) to business combinations occurring after December 31, 2008. Adoption of SFAS No. 141(R) will not affect the Company's financial condition, results of operations or cash flows. In June 2007, the AICPA issued Statement of Position 07-1, "Clarification of the Scope of the Audit and Accounting Guide 'Audits of Investment Companies' and Accounting by Parent Companies and Equity Method Investors for Investments in Investment Companies" ("SOP 07-1") SOP 07-1 clarifies when an entity may apply the provisions of the Audit and Accounting Guide for Investment Companies (the Guide). In February 2008, the FASB issued FSP Statement of Position 07-1-a, "The Effective Date of AICPA Statement of Position 07-1," which indefinitely defers the effective date for SOP 07-01. P. RECLASSIFICATIONS Certain reclassifications have been made to previously reported amounts to conform to the current presentation. 4. PURCHASE ACCOUNTING Goldman Sachs' acquisition of the Company is accounted for by applying SFAS No. 141 through "push down" accounting. Included in the following table is VOBA, which represents the present value of future profits embedded in the acquired contracts. See Note 12 - Value of Business Acquired, for further explanation of VOBA. The assessment of fair value in accordance with SFAS No. 141 included the establishment of intangible assets for VOBA and various state licenses. No specific goodwill was recognized as a result of this assessment. In accordance with SFAS No. 141 the purchase allocation period to identify and record fair value for all assets acquired and liabilities assumed should usually not exceed one year from the transaction date, with the exception of tax adjustments. At the conclusion of 2007 and 2006, additional balance sheet adjustments related to tax items were identified. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed as of December 30, 2005 and purchase accounting adjustments made for the years ended December 31, 2008, December 31, 2007 and December 31, 2006.
EFFECT OF EFFECT OF EFFECT OF PROFORMA DECEMBER 30, ADJUSTMENTS IN ADJUSTMENTS IN ADJUSTMENTS IN DECEMBER 31, FAIR VALUE 2005 2006(1) 2007(2) 2008(2) 2005 ------------------------------------------------------------------------------------------------------------------ (In millions) Assets: Total investments at market value $ 1,391.8 $ -- $ -- $ -- $ 1,391.8 Cash and cash equivalents 123.2 -- -- 123.2 VOBA 318.5 (12.4) (5.8) (8.6) 291.7 Other assets at fair value 1,007.5 18.4 5.6 8.6 1,040.1 Separate account assets 8,578.3 -- -- -- 8,578.3 --------------------------------------------------------------------------- Total assets acquired 11,419.3 6.0 (0.2) -- 11,425.1 Liabilities: Policyholder account balances 2,436.3 5.3 -- -- 2,441.6 Other liabilities at fair value 72.3 -- (0.4) -- 71.9 Separate account liabilities 8,578.3 -- -- -- 8,578.3 --------------------------------------------------------------------------- Total liabilities assumed 11,086.9 5.3 (0.4) -- 11,091.8 Total purchase price $ 332.4 $ 0.7 $ 0.2 $ -- $ 333.3 ===========================================================================
(1) Adjustment to Other assets reflects the combined effect of adjustment to the deferred tax asset (see Note 10), receivables from reinsurers and other accounts receivable. (2) Adjustment to Other assets reflects the effect of adjustment to the deferred tax asset. 15 COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (A WHOLLY-OWNED SUBSIDIARY OF THE GOLDMAN SACHS GROUP, INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2008 4. PURCHASE ACCOUNTING (CONTINUED)
PURCHASE PRICE: ---------------------------------------------- (In millions) Initial payment of purchase price $262.0 FAFLIC ceding commission 8.6 Direct transaction expenses 6.9 Additional deferred purchase price 54.9 Purchase accounting final adjustments 0.9 ------ Total purchase price $333.3 ======
5. SIGNIFICANT TRANSACTIONS On January 1, 2008, the Company reinsured under an assumption agreement a book of business from Fidelity Mutual Life Insurance Company ("FML") comprising primarily whole, term and universal life insurance policies. FML was in rehabilitation under the governance of the State of Pennsylvania, and the Company has no responsibility for the dissolution or future state of FML and any of its remaining legal entity obligations or liabilities. As part of this transaction, the Company paid a ceding commission of $4.3 million and assumed general account reserves of $0.7 billion. During the first quarter of 2008, the Company effectively ceded the entire FML block of business to its affiliate, Columbia Capital Life Reinsurance Company ("Columbia"). In consideration of Columbia's assumption of the business, the Company received a ceding commission of $4.1 million. On May 25, 2007 the Company signed an agreement, effective retroactive to January 1, 2007, with Pacific Life Insurance Company ("Pacific Life") to assume 8% of its variable annuity products sold in 2007. The base annuities were assumed on a modified coinsurance and the benefits provided via riders were assumed on a coinsurance basis. As separate account liabilities were assumed under modified coinsurance terms, ownership of the underlying separate account assets was not transferred and these assets are not reflected in the Consolidated Balance Sheets. The Company assumed general account reserves of $58.2 million and, for the retroactive period prior to signing, recorded a payable to Pacific Life of $12.4 million for the period through May 2007. In February 2008, the Pacific Life contract was recaptured retroactive to January 1, 2008. Concurrent with the recapture, certain derivative options hedging the rider benefits of this treaty were disposed. The recapture of the Pacific Life block resulted in a recapture of $25.5 million in reserves and resulted in a $41.3 million reduction in DAC and reinsurance receivable on paid and unpaid losses, benefits, unearned premiums and modified coinsurance. See Note 13 - Reinsurance for further discussion. On July, 1, 2006, the Company entered into a modified coinsurance agreement with Chase Insurance Life and Annuity Company ("CILAC") to assume 100% of its variable annuity business on a modified coinsurance basis. The Company assumed general account reserves of $1.3 billion and paid a ceding allowance of $85.0 million to CILAC. As separate account liabilities were assumed under modified coinsurance terms, ownership of the underlying separate account assets was not transferred and these assets are not reflected in the Consolidated Balance Sheets. On April 1, 2007, CILAC was merged into Protective Life Insurance Company ("Protective"). 6. LIABILITIES FOR MINIMUM GUARANTEES UNDER STATEMENT OF POSITION 03-1, ACCOUNTING AND REPORTING BY INSURANCE ENTERPRISES FOR CERTAIN NONTRADTIONAL LONG-DURATION CONTRACTS AND FOR SEPARATE ACCOUNTS GUARANTEED MINIMUM DEATH BENEFITS The Company has issued variable annuity contracts with a GMDB feature. The GMDB feature provides annuity contractholders with a guarantee that the benefit received at death will be no less than a prescribed minimum amount. This amount is based on either the net deposits paid into the contract, the net deposits accumulated at a specified rate, the highest historical account value on a 16 COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (A WHOLLY-OWNED SUBSIDIARY OF THE GOLDMAN SACHS GROUP, INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2008 6. LIABILITIES FOR MINIMUM GUARANTEES UNDER STATEMENT OF POSITION 03-1, ACCOUNTING AND REPORTING BY INSURANCE ENTERPRISES FOR CERTAIN NONTRADTIONAL LONG-DURATION CONTRACTS AND FOR SEPARATE ACCOUNTS (CONTINUED) contract anniversary, or more typically, the greatest of these values. If the GMDB is higher than the current account value at the time of death, the Company incurs a cost equal to the difference. The following summarizes the liability for GMDB contracts reflected in the general account. The GMDB exposure includes reinsurance assumed, however modified coinsurance is excluded as it provides negligible GMDB reserves and significant account values:
FOR THE YEARS ENDED DECEMBER 31, 2008 2007 -------------------------------------------------- (In millions) Beginning balance $212.4 $237.0 Provision for GMDB: GMDB expense incurred 25.2 6.4 Volatility (1) 149.5 13.8 --------------- 174.7 20.2 Claims, net of reinsurance: Claims from policyholders (76.7) (44.6) Claims ceded to reinsurers 76.1 41.1 --------------- (0.6) (3.5) GMDB reinsurance premium (71.5) (41.3) --------------- Ending balance $315.0 $212.4 ===============
(1) Volatility reflects the difference between actual and expected investment performance, persistency, age distribution, mortality and other factors that are assumptions within the GMDB reserving model. The reserve represents estimates, over a range of stochastic scenarios, of the present value of future GMDB net benefits expected to be paid less the present value of future GMDB net fees charged to the policyholders. The following information relates to the reserving methodology and assumptions for GMDB at December 31, 2008 and 2007. - The projection model used 500 stochastically generated return scenarios with mean performance ranging from 5% to 10% depending on the underlying fund type. - Implied volatilities by duration were based on a combination of over the counter quotes (when available) and historical volatilities. For 2008, volatility assumptions range from 30% to 45%, varying by equity fund type; 10% for bond funds; and 1% for money market funds. For 2007, volatility assumptions ranged from 20% to 34%, varying by equity fund type; 7% for bond funds; and 1% for money market funds. - The mortality assumptions are factors of the 1994 GMDB table based on age and gender. The overall average factor is 79% of the 1994 GMDB table. Mortality improvement of 1% per year for 10 years is assumed. - The full surrender rate assumption varies from 1% to 50% depending on distribution channel, contract type, policy duration, and attained age. The aggregate projected full surrender rates for 2009 and 2010 are approximately 15% and 16%, respectively (full surrender rates include annuitizations, but they do not reflect partial withdrawals or deaths). - The partial withdrawal rate assumption varies by distribution channel, tax qualified status, and attained age. Total projected partial withdrawals are from 5% - 7% for all years. The following table presents the account value, net amount at risk and average attained age of underlying contractholders for guarantees in the event of death as of December 31, 2008 and 2007. The net amount at risk is the death benefit coverage in force or the amount that the Company would have to pay if all contractholders had died as of the specified date, and represents the excess of the guaranteed benefit over the account value. 17 COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (A WHOLLY-OWNED SUBSIDIARY OF THE GOLDMAN SACHS GROUP, INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2008 6. LIABILITIES FOR MINIMUM GUARANTEES UNDER STATEMENT OF POSITION 03-1, ACCOUNTING AND REPORTING BY INSURANCE ENTERPRISES FOR CERTAIN NONTRADTIONAL LONG-DURATION CONTRACTS AND FOR SEPARATE ACCOUNTS (CONTINUED)
DECEMBER 31, (IN MILLIONS, EXCEPT FOR CONTRACTHOLDER INFORMATION) 2008 2007 ---------------------------------------------------------------------------- Net deposits paid Account value $ 2,623 $ 4,239 Net amount at risk $ 169 $ 26 Average attained age of contractholders 62 61 Ratchet (highest historical account value at specified anniversary dates) Account value $ 777 $ 1,549 Net amount at risk $ 328 $ 60 Average attained age of contractholders 67 66 Roll-up (net deposits accumulated at a specified rate) Account value $ 50 $ 80 Net amount at risk $ 39 $ 17 Average attained age of contractholders 79 78 Higher of ratchet or roll-up Account value $ 2,712 $ 4,849 Net amount at risk $ 2,295 $ 958 Average attained age of contractholders 74 73 Total of guaranteed benefits categorized above Account value $ 6,162 $ 10,717 Net amount at risk $ 2,831 $ 1,061 Average attained age of contractholders (weighted by account value) 68 67 Number of contractholders 181,847 213,958
The above table includes business coinsured from FAFLIC and Protective for both years. 2007 includes reinsurance assumed from Pacific Life. GUARANTEED MINIMUM INCOME BENEFIT Additionally, the Company previously issued variable annuity contracts with a guaranteed minimum income benefit ("GMIB") feature. The GMIB liability as of December 31, 2008 was $34.7 million with a benefit paid of approximately $50.0 thousand. The GMIB liability at December 31, 2007 was $14.2 million with no benefits paid out. Similar to the approach employed to value the GMDB reserve, the fair value reserve for the GMIB feature was computed using a risk neutral approach. The reserve was determined by estimating the present value of future GMIB benefits expected to be paid less the present value of future GMIB fees charged to the policyholders, over a range of stochastic scenarios. SALES INDUCEMENTS The Company's variable annuity product offerings included contracts that offered enhanced crediting rates or bonus payments. These enhanced rates are considered sales inducements under SOP 03-1. As such, the balance of sales inducement assets were required to be reclassified from DAC to other assets upon adoption of SOP 03-1, and amortization of these sales inducements over the life of the contract is required to be reflected as a policy benefit. Amortization of these contracts is required to be computed using the same methodology and assumptions used in amortizing DAC. Deferrred sales inducements at December 31, 2008 reflect bonus interest payments on direct and assumed blocks and are included in "Other assets" in the accompanying Consolidated Balance Sheets. 18 COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (A WHOLLY-OWNED SUBSIDIARY OF THE GOLDMAN SACHS GROUP, INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2008 6. LIABILITIES FOR MINIMUM GUARANTEES UNDER STATEMENT OF POSITION 03-1, ACCOUNTING AND REPORTING BY INSURANCE ENTERPRISES FOR CERTAIN NONTRADTIONAL LONG-DURATION CONTRACTS AND FOR SEPARATE ACCOUNTS (CONTINUED) The following reflects the changes to the deferred sales inducement asset:
FOR THE YEARS ENDED DECEMBER 31, 2008 2007 ----------------------------------------------------- (In millions) Balance at beginning of year $ 8.9 $ -- Block acquisition -- 3.9 Reinsurance treaty recapture (8.9) -- Acquisition expenses deferred 0.5 5.3 Amortized to expense during the year -- (0.3) -------------- Balance at end of year $ 0.5 $ 8.9 ==============
SEPARATE ACCOUNTS WITH CREDITED INTEREST GUARANTEES The Company issued variable annuity and life contracts through its separate accounts for which net investment income and investment gains and losses accrue directly to, and investment risk is borne by, the contractholder. The Company also issued variable annuity and life contracts through separate accounts where the Company contractually guarantees to the contractholder the total deposits made to the contract less any partial withdrawals plus a minimum return. The market value adjusted ("MVA") product attributable to assumed modified coinsurance basis. See further explanation within Note 13 - Reinsurance. The Company had the following variable annuities with guaranteed minimum returns:
DECEMBER 31, 2008 2007 ----------------------------------------------------------- (In millions) Account value $ 36.7 $ 47.2 Range of guaranteed minimum return rates 2.8-6.5% 2.8-6.5%
Account balances of these contracts with guaranteed minimum returns were invested as follows:
DECEMBER 31, 2008 2007 ---------------------------------------------------- (In millions) Asset Type: Fixed maturities $28.7 $40.8 Cash and cash equivalents 16.5 11.5 ------------- Total $45.2 $52.3 =============
7. INVESTMENTS A. FIXED MATURITIES AND EQUITY SECURITIES The Company accounts for its investments in fixed maturities and equity securities, all of which are classified as available-for-sale, in accordance with the provisions of SFAS No. 115. 19 COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (A WHOLLY-OWNED SUBSIDIARY OF THE GOLDMAN SACHS GROUP, INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2008 7. INVESTMENTS (CONTINUED) A. FIXED MATURITIES AND EQUITY SECURITIES (CONTINUED) The amortized cost and fair value of available-for-sale fixed maturities and equity securities were as follows:
DECEMBER 31, 2008 ------------------------------------------------------------------------------------------- GROSS GROSS AMORTIZED UNREALIZED UNREALIZED FAIR COST GAINS LOSSES VALUE ------------------------------------------------------------------------------------------- (In millions) U.S. Treasury securities and U.S. government and agency securities $205.7 $22.3 $ (0.8) $227.2 States and political subdivisions 23.0 2.2 (0.1) 25.1 Corporate fixed maturities 400.7 8.4 (32.4) 376.7 Mortgage-backed securities 330.3 3.1 (33.1) 300.3 ------------------------------------------ Total fixed maturities $959.7 $36.0 $(66.4) $929.3 ========================================== Equity securities $ 93.5 $ -- $(25.4) $ 68.1 ==========================================
DECEMBER 31, 2007 ------------------------------------------------------------------------------------------- GROSS GROSS AMORTIZED UNREALIZED UNREALIZED FAIR COST GAINS LOSSES VALUE ------------------------------------------------------------------------------------------- (In millions) U.S. Treasury securities and U.S. government and agency securities $204.1 $ 5.2 $ -- $209.3 States and political subdivisions 16.1 0.2 -- 16.3 Corporate fixed maturities 428.2 2.0 (10.6) 419.6 Mortgage-backed securities 318.8 3.3 (1.6) 320.5 ------------------------------------------ Total fixed maturities $967.2 $10.7 $(12.2) $965.7 ========================================== Equity securities $108.1 $ -- $ (5.4) $102.7 ==========================================
In connection with AFLIAC's voluntary withdrawal of its license in New York, AFLIAC agreed with the New York Department of Insurance in 1994 to maintain, through a custodial account in New York, a security deposit, the market value of which will equal 102% of all outstanding liabilities of AFLIAC for New York policyholders, claimants and creditors. At December 31, 2008, the amortized cost and fair value of the assets on deposit were $79.4 million and $86.8 million, respectively. At December 31, 2007, the amortized cost and fair value of assets on deposit in New York were $42.4 million and $43.6 million, respectively. In addition, fixed maturities, excluding those securities on deposit in New York, with an amortized cost of $5.3 million and $5.2 million were on deposit with various state and governmental authorities at December 31, 2008 and 2007, respectively. Fair values related to these securities were $6.6 million and $6.0 million at December 31, 2008 and 2007, respectively. The Company entered into various derivative and other arrangements that required assets, such as cash and fixed maturities, to be pledged as collateral. At December 31, 2008, the Company held $60.0 million in cash as collateral, compared to $43.4 million held as fixed maturities at December 31, 2007. The amortized cost and fair value by maturity periods for fixed maturities are shown below. Actual maturities may differ from contractual maturities, because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties, or the Company may have the right to put or sell the obligations back to the issuers. Mortgage backed securities are included in the category representing their ultimate maturity. 20 COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (A WHOLLY-OWNED SUBSIDIARY OF THE GOLDMAN SACHS GROUP, INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2008 7. INVESTMENTS (CONTINUED) A. FIXED MATURITIES AND EQUITY SECURITIES (CONTINUED)
DECEMBER 31, DECEMBER 31, 2008 2008 AMORTIZED COST FAIR VALUE ---------------------------------------------------------------------- (In millions) Due in one year or less $ 65.8 $ 64.2 Due after one year through five years 261.6 264.0 Due after five years through ten years 106.0 112.3 Due after ten years 526.3 488.8 ---------------------- Total $959.7 $929.3 ======================
B. DERIVATIVE INSTRUMENTS Simultaneous to the Transaction, the Company implemented a hedging strategy consisting of long duration equity derivative put options. The hedge is primarily static consisting of quarterly put options. The purpose of the hedge is to protect against increases in GMDB liability in the event that the market grows at a rate below LIBOR. In addition, the Company invests in exchange traded futures and options as part of its overall diversification and total return objectives. On December 12, 2007, the Company implemented an enhancement to its existing hedging strategy by selling short-duration S&P futures to reduce our long delta position. This strategy would help reduce expected volatility from changes in the market and protects the Company from adverse market movements. On May 25, 2007, the Company entered into a reinsurance contract with Pacific Life, accounted for on a coinsurance/modified-coinsurance ("co-modco") basis with respect to the annuity riders and base contracts. Insurance contracts in their entirety do not meet the definition of a derivative instrument, but may contain embedded derivatives. This reinsurance agreement stated that the Company would pay its proportionate share of the present value of the guaranteed future income stream in excess of account value. The riders were accounted for as an embedded derivative under Derivatives Implementation Group issue B25, "Embedded Derivatives: Deferred Variable Annuity Contracts with Payment Alternatives at the end of the Accumulation Period," ("DIG B25"). On February 2008, the contract was recaptured retroactive to January 1, 2008. Concurrent with this recapture, certain derivative options hedging the rider benefits of this treaty were disposed. On July 1, 2006, the Company entered into a reinsurance contract which is accounted for on a modified coinsurance basis. Under a traditional modified coinsurance arrangement, the ceding company owns the assets backing the liabilities and transfers their book investment returns to the reinsurer, including credited related gains or losses. The reinsurance contract represents a hybrid instrument that should be bifurcated into its host contract and embedded derivative components. An embedded derivative exists because the Company is exposed to third-party credit risk. This is accounted for as an embedded derivative under Derivatives Implementation Group issue B36, "Modified Coinsurance Arrangements and Debt Instruments that Incorporate Credit Risk Exposures That Are Unrelated or Only Partially Related to the Creditworthiness of the Obligor Under Those Instruments," ("DIG B36"). The Company does not employ hedge accounting. C. TRADING ACTIVITIES For 2008, the Company recognized a net gain of $175.6 million on its derivatives. For 2007, the Company recognized a net loss of $6.8 million on its derivatives. The derivatives in this program included exchange-traded futures contracts and interest rate swap contracts. The hedges did not qualify for hedge accounting under SFAS No. 133. The core risk the Company seeks to address with its hedging strategy is GMDB exposure. The objective is to protect against increases in GMDB liability in the event that the market grows at a rate below LIBOR, while maintaining some upside potential in rising markets. 21 COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (A WHOLLY-OWNED SUBSIDIARY OF THE GOLDMAN SACHS GROUP, INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2008 7. INVESTMENTS (CONTINUED) C. TRADING ACTIVITIES (CONTINUED) On May 25, 2007, the Company entered into a reinsurance contract which is accounted for on a co-modco basis with respect to the annuity riders and base contracts. Insurance contracts in their entirety do not meet the definition of a derivative instrument, and may contain embedded derivatives. This reinsurance agreement states that the Company will pay its proportionate share of the present value of the guaranteed future income stream in excess of account value. The riders are accounted for as an embedded derivative as defined by DIG B25. In February 2008, the contract was recaptured retroactive to January 1, 2008. D. UNREALIZED GAINS AND LOSSES Unrealized gains and losses on available-for-sale, other securities, and derivative instruments are summarized as follows:
EQUITY FIXED SECURITIES AND DECEMBER 31, MATURITIES OTHER TOTAL ----------------------------------------------------------------------------------------------- (In millions) 2008 Net appreciation/(depreciation), beginning of year $ 0.4 $ (3.6) $ (3.2) ---------------------------------- Net (depreciation) on available-for-sale Securities (28.8) (20.1) (48.9) Net depreciation from the effect on value of business acquired and on policy liabilities 15.4 -- 15.4 Benefit for deferred federal income taxes 4.7 7.0 11.7 ---------------------------------- (8.7) (13.1) (21.8) ---------------------------------- Net depreciation, end of year $ (8.3) $(16.7) $(25.0) ================================== 2007 Net (depreciation)/appreciation, beginning of year $ (2.0) $ 0.8 $ (1.2) ---------------------------------- Net appreciation/(depreciation) on available-for-sale securities 2.8 (6.7) (3.9) Net depreciation from the effect on value of business acquired and on policy liabilities 0.9 -- 0.9 (Provision)/benefit for deferred federal income taxes (1.3) 2.3 1.0 ---------------------------------- 2.4 (4.4) (2.0) ---------------------------------- Net (depreciation)/appreciation, end of year $ 0.4 $ (3.6) $ (3.2) ================================== 2006 Net appreciation, beginning of year $ -- $ -- $ -- ---------------------------------- Net (depreciation)/appreciation on available-for-sale securities (4.3) 1.3 (3.0) Net depreciation from the effect on value of business acquired and on policy liabilities 1.0 -- 1.0 Benefit/(provision) for deferred federal income taxes 1.3 (0.5) 0.8 ---------------------------------- (2.0) 0.8 (1.2) ---------------------------------- Net (depreciation) appreciation, end of year $ (2.0) $ 0.8 $ (1.2) ==================================
22 COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (A WHOLLY-OWNED SUBSIDIARY OF THE GOLDMAN SACHS GROUP, INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2008 7. INVESTMENTS (CONTINUED) E. SECURITIES IN A CONTINUOUS UNREALIZED LOSS POSITION The following table provides information about the Company's fixed maturities and equity securities that have been continuously in an unrealized loss position.
DECEMBER 31, 2008 -------------------------------------------------------------------------------------- GROSS NUMBER OF UNREALIZED FAIR SECURITIES WITH GROSS (IN MILLIONS) LOSSES VALUE UNREALIZED LOSSES -------------------------------------------------------------------------------------- Investment grade fixed maturities (1): 0-6 months $(13.6) $ 52.9 22 7-12 months (22.4) 87.1 22 Greater than 12 months (18.6) 39.4 12 -------------------------------- Total investment grade fixed maturities $(54.6) $179.4 56 -------------------------------- Below investment grade fixed maturities: $ (2.1) $ 11.3 3 -------------------------------- Total fixed maturities $(56.7) $190.7 59 ================================ Equity securities: 0-6 months $(25.4) $ 68.1 1 -------------------------------- Total equity securities $(25.4) $ 68.1 1 ================================
(1) Includes gross unrealized losses for investment grade fixed maturity obligations of the U.S. Treasury, U.S. government and agency securities, states, and political subdivisions of $0.0 million at December 31, 2008.
DECEMBER 31, 2007 -------------------------------------------------------------------------------------- GROSS NUMBER OF UNREALIZED FAIR SECURITIES WITH GROSS (IN MILLIONS) LOSSES VALUE UNREALIZED LOSSES -------------------------------------------------------------------------------------- Investment grade fixed maturities (1): 0-6 months $ (1.7) $ 66.7 28 7-12 months (9.5) 190.9 43 Greater than 12 months (1.0) 19.7 7 -------------------------------- Total investment grade fixed maturities $(12.2) $277.3 78 -------------------------------- Below investment grade fixed maturities: $ -- $ -- -- -------------------------------- Total fixed maturities $(12.2) $277.3 78 ================================ Equity securities: 0-6 months $ (5.4) $102.7 1 -------------------------------- Total equity securities $ (5.4) $102.7 1 ================================
(1) Includes gross unrealized losses for investment grade fixed maturity obligations of the U.S. Treasury, U.S. government and agency securities, states, and political subdivisions of $0.1 million at December 31, 2007. The Company employs a systematic methodology to evaluate declines in fair values below amortized cost for all investments. The methodology utilizes a quantitative and qualitative process ensuring that available evidence concerning the declines in fair value below amortized cost is evaluated in a disciplined manner. In determining whether a decline in fair value below amortized cost is other-than-temporary, the Company evaluates the ability and intent to hold the investment to recovery; the issuer's overall financial condition; the issuer's credit and financial strength ratings; the issuer's financial performance, including earnings trends, dividend 23 COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (A WHOLLY-OWNED SUBSIDIARY OF THE GOLDMAN SACHS GROUP, INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2008 7. INVESTMENTS (CONTINUED) E. SECURITIES IN A CONTINUOUS UNREALIZED LOSS POSITION (CONTINUED) payments, and asset quality; a weakening of the general market conditions in the industry or geographic region in which the issuer operates; the length of time in which the fair value of an issuer's securities remains below cost; and with respect to fixed maturity investments, any factors that might raise doubt about the issuer's ability to pay all amounts due according to the contractual terms. The Company applies these factors to all securities as necessary. F. OTHER The Company had the following concentration of investments at fair value that exceeded 10% of shareholder's equity:
DECEMBER 31, 2008 2007 ----------------------------------- (In millions) Issuer Name: U.S. Treasury $62.5 $ -- GS High Yield Fund $68.1 $102.7
8. INVESTMENT INCOME AND GAINS AND LOSSES A. NET INVESTMENT INCOME The components of net investment income were as follows:
FOR THE YEARS ENDED DECEMBER 31, 2008 2007 2006 -------------------------------------------------------------------------- (In millions) Fixed maturities $ 53.4 $ 53.3 $ 59.9 Equity securities 8.0 7.7 4.4 Policy loans 5.2 7.5 9.2 Short-term investments and miscellaneous income 62.2 71.9 43.9 ------------------------ Gross investment income 128.8 140.4 117.4 Less investment expenses (3.2) (2.9) (2.9) ------------------------ Net investment income $125.6 $137.5 $114.5 ========================
The Company had no fixed maturities on non-accrual status at December 31, 2008, 2007 or 2006. The Company did not have any mortgage loan investments at December 31, 2008 or 2007. The Company had no fixed maturities which were non-income producing at December 31, 2008, 2007 or 2006. 24 COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (A WHOLLY-OWNED SUBSIDIARY OF THE GOLDMAN SACHS GROUP, INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2008 8. INVESTMENT INCOME AND GAINS AND LOSSES (CONTINUED) B. NET REALIZED INVESTMENT GAINS AND LOSSES Realized (losses) and gains on investments were as follows:
FOR THE YEARS ENDED DECEMBER 31, 2008 2007 2006 -------------------------------------------------------------- (In millions) Fixed maturities $(38.0) $4.1 $(7.3) Equity securities (14.5) -- -- Other investments 2.9 1.8 -- --------------------- Net realized investment (losses)/gains $(49.6) $5.9 $(7.3) =====================
The proceeds from voluntary sales of available-for-sale securities and the gross realized gains and gross realized losses on those sales were as follows:
PROCEEDS FROM VOLUNTARY GROSS GROSS FOR THE YEARS ENDED DECEMBER 31, SALES GAINS LOSSES ------------------------------------------------------------------- (In millions) 2008 Fixed maturities $1,550.8 $12.6 $(50.6) 2007 Fixed maturities $ 773.9 $ 5.7 $ 1.6 2006 Fixed maturities $2,213.8 $ 3.3 $ 10.6
The Company recognized other-than-temporary impairments on fixed maturities of $27.5 million and equity securities of $14.5 million in 2008. There were no other-than-temporary impairments in 2007 and 2006 respectively. C. OTHER COMPREHENSIVE INCOME RECONCILIATION The following table provides a reconciliation of gross unrealized gains/(losses) to the net balance shown in the Consolidated Statements of Comprehensive Income:
FOR THE YEARS ENDED DECEMBER 31, 2008 2007 2006 ---------------------------------------------------------------------------------------------------- (In millions) Unrealized (depreciation)/appreciation on available-for-sale securities: Unrealized holding losses arising during period (net of income tax benefit of $30.2, $0.7 and $3.3 million in 2008, 2007 and 2006, respectively) $(56.1) $(1.4) $(5.9) Less: reclassification adjustment for gains/(losses) included in net income (net of income tax (benefit)/expense of $(18.5), $0.3 and $(2.5) million in 2008, 2007 and 2006, respectively) (34.3) 0.6 (4.7) ---------------------- Total available-for-sale securities (21.8) (2.0) (1.2) ---------------------- Net unrealized (depreciation)/appreciation on available-for-sale securities $(21.8) $(2.0) $(1.2) ======================
25 COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (A WHOLLY-OWNED SUBSIDIARY OF THE GOLDMAN SACHS GROUP, INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2008 9. FAIR VALUE DISCLOSURE OF FINANCIAL INSTRUMENTS SFAS No. 107, DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS, as amended by SFAS No. 157, requires disclosure of fair value information about certain financial instruments (insurance contracts, real estate, goodwill and taxes are excluded) for which it is practicable to estimate such values, whether or not these instruments are included in the balance sheet. The fair values presented for certain financial instruments are estimates which, in many cases, may differ significantly from the amounts which could be realized in an orderly transaction. The following methods and assumptions were used to estimate the fair value of each class of financial instruments: CASH AND CASH EQUIVALENTS For these short-term investments, the carrying amount approximates fair value. FIXED MATURITIES Fair values are based on quoted market prices, if available. If a quoted market price is not available, fair values are estimated using independent pricing sources or internally developed pricing models using discounted cash flow analyses which utilize current interest rates for similar financial instruments which have comparable terms and credit. EQUITY SECURITIES Fair values are based on quoted market prices, if available. If a quoted market price is not available, fair values are estimated using independent pricing sources or internally developed pricing models. POLICY LOANS The carrying amount reported in the Consolidated Balance Sheets approximates fair value since policy loans have no defined maturity dates and are inseparable from the insurance contracts. DERIVATIVE INSTRUMENTS Fair values of the Company's derivatives are generally determined using model inputs to observable market data. Derivative instruments include embedded derivatives related to insurance contracts. INVESTMENT CONTRACTS (WITHOUT MORTALITY FEATURES) Liabilities under supplemental contracts without life contingencies are estimated based on current fund balances and other individual contract funds represent the present value of future policy benefits. SEPARATE ACCOUNT ASSETS The estimated fair value of assets held in separate accounts is based on quoted market prices. 26 COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (A WHOLLY-OWNED SUBSIDIARY OF THE GOLDMAN SACHS GROUP, INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2008 9. FAIR VALUE DISCLOSURE OF FINANCIAL INSTRUMENTS (CONTINUED) The estimated fair values of the financial instruments were as follows:
2008 2007 ----------------------------------------- CARRYING FAIR CARRYING FAIR DECEMBER 31, VALUE VALUE VALUE VALUE ------------------------------------------------------------------------------------------------ (In millions) Financial Assets Cash and cash equivalents $ 277.4 $ 277.4 $ 57.4 $ 57.4 Fixed maturities 929.3 929.3 965.7 965.7 Equity securities 68.1 68.1 102.7 102.7 Policy loans 92.9 92.9 106.1 106.1 Derivative instruments receivable 182.9 182.9 29.1 29.1 Separate account assets 3,659.8 3,659.8 6,906.7 6,906.7 ----------------------------------------- $5,210.4 $5,210.4 $8,167.7 $8,167.7 ========================================= Financial Liabilities Derivative instruments payable $ 57.7 $ 57.7 $ 33.7 $ 33.7 Supplemental contracts without life contingencies 31.3 31.3 27.4 27.4 Other individual contract deposit funds 22.5 22.5 20.7 20.7 ----------------------------------------- $ 111.5 $ 111.5 $ 81.8 $ 81.8 =========================================
The following tables set forth by level within the fair value hierarchy financial assets and liabilities accounted for at fair value under SFAS No. 157 as of December 2008. As required by SFAS No. 157, assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.
DECEMBER 31, 2008 LEVEL 1 LEVEL 2 LEVEL 3 TOTAL ---------------------------------------------------------------------------------------------- (In millions) Financial Assets Fixed maturities $ 172.2 $755.4 $ 1.7 $ 929.3 Equity securities -- 68.1 -- 68.1 Derivative instruments receivable -- 182.9 -- 182.9 Separate account assets 3,659.8 -- -- 3,659.8 --------------------------------------- Total assets at fair value $3,832.0 $1,006.4 $1.7 $4,840.1 ======================================= Financial Liabilities Derivative instruments payable $ -- $ 1.4 $56.3 $ 57.7 --------------------------------------- Total liabilities at fair value $ -- $ 1.4 $56.3 $ 57.7 =======================================
27 COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (A WHOLLY-OWNED SUBSIDIARY OF THE GOLDMAN SACHS GROUP, INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2008 9. FAIR VALUE DISCLOSURE OF FINANCIAL INSTRUMENTS (CONTINUED)
DECEMBER 31, 2007 LEVEL 1 LEVEL 2 LEVEL 3 TOTAL ------------------------------------------------------------------------------ (In millions) Financial Assets Fixed maturities $ 107.7 $854.3 $ 3.7 $ 965.7 Equity securities -- 102.7 -- 102.7 Derivative instruments receivable -- 18.0 11.1 29.1 Separate account assets 6,906.7 -- -- 6,906.7 --------------------------------------- Total assets at fair value $7,014.4 $975.0 $14.8 $8,004.2 ======================================= Financial Liabilities Derivative instruments payable $ -- $ 2.6 $31.1 $ 33.7 --------------------------------------- Total liabilities at fair value $ -- $ 2.6 $31.1 $ 33.7 =======================================
LEVEL 3 GAINS AND LOSSES The table below sets forth a summary of changes in the fair value of the Company's level 3 financial assets and liabilities for the year ended December 2008. The table reflects gains and losses for the full year for all financial assets and liabilities categorized as level 3 as at December 31, 2008. As reflected in the table below, the net unrealized loss on level 3 financial assets and liabilities was $28.5 million for the year ended December 2008. CASH INSTRUMENTS The Company's cash instruments are generally classified within level 1 or level 2 of the fair value hierarchy because they are valued using quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency. Certain cash instruments are classified within level 3 of the fair value hierarchy because they trade infrequently and therefore have little or no price transparency. Total cash instruments at fair value classified within level 3 were $1.7 million and $3.7 million as of December 31, 2008 and 2007, respectively. This includes a tax credit investment and a surplus note. DERIVATIVE CONTRACTS - A derivative contract with level 1 and/or level 2 inputs is classified as a level 3 financial instrument in its entirety if it has at least one significant level 3 input. - If there is one significant level 3 input, the entire gain or loss from adjusting only observable inputs (i.e. level 1 and level 2) is still classified as level 3. 28 COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (A WHOLLY-OWNED SUBSIDIARY OF THE GOLDMAN SACHS GROUP, INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2008 9. FAIR VALUE DISCLOSURE OF FINANCIAL INSTRUMENTS (CONTINUED)
LEVEL 3 FINANCIAL ASSETS AND LIABILITIES ----------------------------------------- CASH INSTRUMENTS - DERIVATIVE DECEMBER 31, 2008 ASSETS CONTRACTS TOTAL LOSSES ---------------------------------------------------------------------------------------------- (In millions) Balance, beginning of year $ 3.7 $(20.0) N/A Realized (losses)/gains (0.1) 11.1 11.0 Unrealized (losses) relating to instruments still held at the reporting date (3.3) (25.2) (28.5) Purchases, issuances and settlements 1.4 (11.1) N/A -------------------- Balance, end of year $ 1.7 $(45.2) ====================
CASH INSTRUMENTS - DERIVATIVE DECEMBER 31, 2007 ASSETS CONTRACTS TOTAL LOSSES ---------------------------------------------------------------------------------------------- (In millions) Balance, beginning of year $ 3.7 $ 0.5 N/A Realized (losses) (0.1) -- (0.1) Unrealized gains/(losses) relating to instruments still held at the reporting date 0.1 (31.6) (31.5) Purchases, issuances and settlements -- 11.1 N/A -------------------- Balance, end of year $ 3.7 $(20.0) ====================
29 COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (A WHOLLY-OWNED SUBSIDIARY OF THE GOLDMAN SACHS GROUP, INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2008 10. FEDERAL INCOME TAXES Provisions for federal income taxes have been calculated in accordance with the provisions of Statement No. 109. The federal income tax provision/(benefit) in the Consolidated Statements of Income is shown below:
FOR THE YEARS ENDED DECEMBER 31, 2008 2007 2006 -------------------------------------------------------- (In millions) Federal income tax expense Deferred $10.8 $34.6 $26.2 --------------------- Total $10.8 $34.6 $26.2 =====================
The federal income tax benefit attributable to the consolidated results of operations is different from the amount determined by multiplying income before federal income taxes by the statutory federal income tax rate at 35%. The sources of the difference and the tax effects of each were as follows:
FOR THE YEARS ENDED DECEMBER 31, 2008 2007 2006 --------------------------------------------------------------------- (In millions) Expected federal income tax (benefit)/expense $(0.2) $46.1 $31.9 Prior years' federal income tax adjustment (0.6) (1.1) -- Dividend received deduction (5.2) (8.2) (8.2) Tax credits (0.7) (0.5) (1.1) Valuation allowance 17.2 (1.7) 3.6 Other, net 0.3 -- -- --------------------- Federal income tax expense $10.8 $34.6 $26.2 =====================
30 COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (A WHOLLY-OWNED SUBSIDIARY OF THE GOLDMAN SACHS GROUP, INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2008 10. FEDERAL INCOME TAXES (CONTINUED) Following are the components of the Company's deferred tax assets and liabilities.
DECEMBER 31, 2008 2007 -------------------------------------------------- (In millions) Deferred tax asset Insurance reserves $ 63.5 $ 141.4 Deferred acquisition costs 17.7 22.4 Tax credit carryforwards 9.7 7.8 Loss carryforwards 104.2 63.0 Investments, net 44.9 9.3 Ceding commission 19.5 23.8 Deferred compensation 0.9 0.8 Other, net 6.7 9.0 ----------------- Subtotal deferred tax asset 267.1 277.5 Valuation allowance (34.8) (17.6) ----------------- Total deferred tax asset, net 232.3 $ 259.9 ----------------- Deferred tax liability VOBA $(93.0) $(130.2) ----------------- Total deferred tax liability (93.0) $(130.2) ----------------- Total deferred tax asset, net $139.3 $ 129.7 =================
Deferred income taxes reflect the net tax effects of temporary differences between the financial reporting and tax bases of assets and liabilities. These temporary differences result in taxable or deductible amounts in future years and are measured using the tax rates and laws that will be in effect when such differences are expected to reverse. Gross deferred income tax assets totaled approximately $267.1 million and $277.5 million at December 31, 2008 and 2007, respectively. Gross deferred income tax liabilities totaled approximately $93.0 million and $130.2 million at December 31, 2008 and 2007, respectively. The Company has recorded a valuation allowance against tax benefits from capital losses and tax credit carryforwards. A portion of the valuation allowance against the December 31, 2008 deferred tax asset is due to limitations under Section 382 of the Internal Revenue Code against certain tax benefits. Under SFAS No. 141(R), any future adjustments to deferred tax assets and liabilities established at the inception of the Transaction would be recognized through the Company's Consolidated Statements of Income (including the realization of tax benefits currently offset by valuation allowance). During 2008, an additional valuation allowance of $17.2 million was posted to reduce the tax benefit from realized capital losses incurred in 2008. During 2007, a reduction of $14.0 million was made to the valuation allowance. Of this amount, $1.7 million relates to foreign tax credits generated in 2006 and thus reduces income tax expense. In management's judgment, the remaining gross deferred tax asset will more likely than not be realized through reductions of future taxes, except as otherwise noted. This conclusion is based primarily on a review of expected taxable income and considers all available evidence, both positive and negative. At December 31, 2008, there are available foreign tax credit carryforwards of $9.7 million which will expire beginning in 2013. At December 31, 2008, the Company has net operating loss carryforwards of $247.0 million and capital loss carryforwards of $50.7 million, which begin to expire in 2016 and 2010, respectively. All tax credits, net operating loss carryforwards, and capital loss carryforwards generated prior to 2006 are subject to annual limitations on utilization. This includes $6.1 million of foreign tax credits and $143.9 million of net operating and capital loss carryforwards. The Company's federal income tax returns are routinely audited by the IRS, and when appropriate, provisions are made in the financial statements in anticipation of the results of these audits. THG has agreed to indemnify the Company and Goldman Sachs with respect to tax liabilities for periods before the acquisition as provided in the Transaction. However, the tax attributes carried over from THG are not guaranteed under the Transaction, and accordingly, such attributes may be 31 COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (A WHOLLY-OWNED SUBSIDIARY OF THE GOLDMAN SACHS GROUP, INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2008 10. FEDERAL INCOME TAXES (CONTINUED) adjusted in the future. During 2008, the Company increased acquired pre-acquisition operating loss by approximately $5.6 million. In 2007, the pre-acquisition operating loss was decreased by $7.5 million. The 2008 and 2007 adjustments are the result of IRS audit adjustments to THG. As a result of the 2008 and 2007 adjustments, the Company has reduced the gross net operating loss carryforward by $5.4 million. No post-acquisition periods are currently under audit. In June 2006, the FASB issued FIN No. 48 (See Note 3N - New Accounting and Adopted Pronouncements for further discussion around FIN No. 48). The Company adopted the provisions of FIN No. 48 as of January 1, 2007. The Company believes it does not have any tax positions that fail to meet the more likely than not standard and does not expect any material adverse effects from audit examination, including interest and penalties. The Company believes that its income tax filing positions and deductions will be sustained on audit and does not anticipate any adjustments that will result in a material adverse effect on the Company's financial condition, results of operations, or cash flow. Therefore, no reserves for uncertain income tax positions have been recorded pursuant to FIN 48. The dividends received deduction claimed by the Company is generated by the separate accounts of variable annuity contracts. In Revenue Ruling 2007-61, the IRS issued notice that it intends to publish regulations dealing with the computation of separate account dividends received deductions. The impact and timing of such regulations is unknown at this time, but it is possible that the regulations could reduce the amount of dividends received deduction tax benefit that the Company claims. It is anticipated that any regulations would have a public comment period and would be effective prospectively. The Company will file a stand-alone tax return for the period January 1, 2008 through December 31, 2008. The Company's tax return is ineligible for consolidation into Goldman Sachs until fiscal year end 2012. Any net operating loss carryforwards, capital loss carryforwards or foreign tax credits from prior to the acquisition date of December 30, 2005 can only be used against the income of the Company. 11. DIVIDEND RESTRICTIONS Massachusetts has enacted laws governing the payment of dividends to shareholders by insurers. Massachusetts laws affect the dividend paying ability of the Company. Massachusetts' statute limits the dividends a life insurer may pay in any twelve month period, without the prior permission of the Massachusetts Commissioner of Insurance (the "Commissioner"), to the greater of (i) 10% of its statutory policyholder surplus as of the preceding December 31 or (ii) the individual company's statutory net gain from operations for the preceding calendar year. In addition, under Massachusetts law, no domestic insurer may pay a dividend or make any distribution to its shareholders from other than unassigned funds unless the Commissioner has approved such dividend or distribution. The Company must meet minimum capital and surplus requirements under a risk-based capital ("RBC") formula. RBC is the standard measurement of an insurance company's required capital on a statutory basis. It is based on a formula calculated by applying factors to various assets, premium and statutory reserve items. The formula takes into account the risk characteristics of the insurer, including asset risk, insurance risk, interest rate risk and business risk. Regulatory action is tied to the amount of a company's surplus deficit under the RBC formula. Goldman Sachs has agreed with the Commissioner to continue the previous THG commitment to maintain total adjusted capital levels at a minimum of 200% of the Company's Company Action Level ("CAL") as determined under the risk-based capital formula, which was $82.7 million at December 31, 2008. Total adjusted capital for life insurance companies is defined as statutory capital and surplus, plus asset valuation reserve, plus 50% of dividends apportioned for payment and was $394.0 million at December 31, 2008 for the Company. There were no dividends declared by the Company to Goldman Sachs in 2008 and 2007. 12. VALUE OF BUSINESS ACQUIRED VOBA represents the present value of future profits embedded in the acquired contracts related to the Transaction. VOBA is determined by estimating the net present value of future cash flows expected to result from contracts in force at the date of the 32 COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (A WHOLLY-OWNED SUBSIDIARY OF THE GOLDMAN SACHS GROUP, INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2008 12. VALUE OF BUSINESS ACQUIRED (CONTINUED) Transaction. Future positive cash flows include fees and other charges assessed to the contracts for as long as they remain in force as well as fees collected upon surrender, while future negative cash flows include costs to administer the contracts, and benefit payments including payments under the GMDB provisions of the contracts. VOBA will be amortized over the expected life of the contracts in proportion to estimated gross profits arising principally from investment results, mortality and expense margins, and surrender charges based upon historical and estimated future experience, which is updated periodically. The changes in VOBA for the years ended December 31 were as follows:
(IN MILLIONS) 2008 2007 --------------- Balance at January 1 $220.4 $274.4 Amount capitalized due to purchase accounting (1) (8.6) (5.8) Amortized to expense during the year (80.7) (49.1) Adjustment for unrealized investment losses during the year 15.4 0.9 --------------- Balance at December 31 $146.5 $220.4 ===============
(1) Refer to Footnote 4 - Purchase Accounting for further discussion on purchase accounting On November 1, 2006, VOBA of $1.9 million attributable to the future profits of the deferred fixed annuity business was written off following reinsurance of the block to Columbia (see Note 13 - Reinsurance). Estimated future amortization of VOBA as of December 31, 2008 is as follows: (In millions) 2009 $ 23.4 2010 18.7 2011 15.0 2012 12.0 2013 10.1 ------ 2014 and thereafter 67.3 ------ Total $146.5 ======
13. REINSURANCE The Company seeks to diversify risk and limit its overall financial exposure by reinsuring certain levels of risk in various areas of exposure through acquisition and cessions with other insurance companies or reinsurers. In addition, consistent with the overall business strategy, the Company assumes certain policy risks written by other insurance companies on a coinsurance and modified coinsurance basis. Under a coinsurance arrangement, depending upon the terms of the contract, the reinsurer may share in the risk of loss due to mortality or morbidity, lapses, and the investment risk, if any, inherent in the underlying policy. Modified coinsurance differs from coinsurance in that the assets supporting the reserves are retained by the ceding company while the risk is transferred to the reinsurer. On January 1, 2008, the Company assumption reinsured the book of business from FML comprising primarily whole, term and universal life insurance policies. FML was in rehabilitation under the governance of the State of Pennsylvania, and the Company has no responsibility for the dissolution or future state of FML and any of its remaining legal entity obligations or liabilities. As part of this transaction, the Company paid a ceding commission of $4.3 million and assumed general account reserves of $0.7 billion. During the first quarter of 2008, the Company effectively ceded the entire FML block of business to Columbia. In consideration of Columbia's assumption of the business, the Company received a ceding commission of approximately $4.1 million. 33 COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (A WHOLLY-OWNED SUBSIDIARY OF THE GOLDMAN SACHS GROUP, INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2008 13. REINSURANCE (CONTINUED) On May 25, 2007 the Company entered into an agreement, retroactive to January 1, 2007, to assume 8% of the variable annuity products sold by Pacific Life in 2007. The base annuities were assumed on a modified coinsurance basis and the benefits provided via riders were assumed on a coinsurance basis. General account reserves of $58.2 million were assumed. In February 2008, the contract was recaptured retroactive to January 1, 2008. Certain derivative options hedging the rider benefits of this treaty were disposed. The recapture of the Pacific Life block resulted in a reinsurance recapture fee of $25.5 million with a subsequent reduction in policyholder liabilities and DAC. Due to the accounting treatment for acquiring this block of business, the recapture fee was bifurcated between the May 2007 and post May 2007 components, with the latter portion recognized through the Consolidated Statements of Income. As of November 1, 2006, the Company entered into a coinsurance agreement to cede 100% of its deferred fixed annuity insurance business to Columbia. The Company ceded reserves of $53.9 million. In consideration of Columbia's assumption of $53.9 million in reserves, the Company received a $1.9 million ceding commission. As of December 31, 2008 the Company ceded reserves of $40.2 million. On July, 1, 2006, the Company assumed, on a modified coinsurance basis 100% of the variable annuity business of CILAC. As of April 1, 2007 CILAC was merged into Protective. General account reserves of $1.3 billion were assumed. In consideration, the Company paid an $85.0 million ceding commission. The Company has evaluated the applicability of DIG B36 to its modified coinsurance agreement with Protective. An embedded derivative requiring bifurcation has been identified and liabilities of $56.3 million and $22.8 million as of December, 31 2008 and December, 31 2007, respectively, are reflected on the balance sheet. As of December 31, 2008, the assumed reserves under this contract were $1.2 billion. On December 30, 2005 subsequent to the Transaction, the Company assumed on a coinsurance basis 100% of the General Account liabilities related to FAFLIC's Variable Annuity and Variable Life policies. In consideration of the Company's assumption of these liabilities, FAFLIC transferred to the Company the statutory assets related to this block of business and received from the Company an $8.6 million ceding commission. The assumed reserves were approximately $99.3 million and $83.7 million as of December 31, 2008 and December 31, 2007 respectively. The Company also assumed on a modified coinsurance basis, essentially all of the Separate Account liabilities of FAFLIC. In addition, the MVA product was assumed on a modified coinsurance basis. In accordance with SOP 03-1, MVA liabilities are included as general account liabilities. Reserve liabilities of $1.3 million as of December 31, 2008 have been included in policy liabilities and a reinsurance recoverable of $1.3 million recognized. Reserve liabilities of $2.2 million as of December 31, 2007 have been included in policy liabilities and a reinsurance recoverable of $2.2 million recognized. The December 30, 2005 value of the FAFLIC MVA was recognized in the 2006 adjustments to purchase accounting included within other assets and future policy benefits (See Note 4 - Purchase Accounting). The Company has evaluated the applicability of DIG B36 to its modified coinsurance arrangement to reinsure FAFLIC MVA and has determined that an embedded derivative requiring bifurcation does exist but is not considered to be material. Prior to the Transaction, the Company entered into other reinsurance treaties including the cession of non core traditional life and health business the largest being a universal life insurance treaty representing reinsurance recoverables of $451.6 million and $475.5 million at December 31, 2008 and 2007, respectively. The Company determines the appropriate amount of reinsurance based on evaluation of the risks accepted and on market conditions (including the availability and pricing of reinsurance). The Company evaluates the financial condition of its reinsurers and monitors concentrations of credit risk. Based on its review of its reinsurers' financial statements and reputations in the reinsurance marketplace, the Company believes that its counterparties are financially sound. As of December 31, 2008, the Company's only concentrations of credit risk greater than 10% of the Company's stockholder's equity related to the FML block of business of approximately $0.7 billion reinsured with Columbia. 34 COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (A WHOLLY-OWNED SUBSIDIARY OF THE GOLDMAN SACHS GROUP, INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2008 13. REINSURANCE (CONTINUED) The effects of reinsurance were as follows:
FOR THE YEARS ENDED DECEMBER 31, 2008 2007 2006 ----------------------------------------------------------------------------- (IN MILLIONS) Life and accident and health insurance premiums: Direct $ 16.9 $ 18.3 $ 19.4 Assumed -- -- -- Ceded (16.9) (18.3) (19.4) ------------------------- Net premiums $ -- $ -- $ -- ========================= Life and accident and health insurance and other individual policy benefits, claims, losses and loss adjustment expenses: Direct $ 581.4 $100.8 $109.2 Assumed 44.1 60.6 34.4 Ceded (328.4) (19.7) (38.4) ------------------------- Net policy benefits, claims, losses and loss adjustment expenses $ 297.1 $141.7 $105.2 =========================
14. DEFERRED POLICY ACQUISITION COSTS The following reflects the changes to the deferred policy acquisition asset:
FOR THE YEARS ENDED DECEMBER 31, 2008 2007 2006 ----------------------------------------------------------------------------- (In millions) Balance at beginning of year $153.3 $103.6 $ -- Block acquisition -- 24.2 106.7 Reinsurance treaty recapture (41.3) -- -- Acquisition expenses deferred 4.4 28.8 3.3 Amortized to expense during the year 1.9 (3.3) (6.4) ------------------------ Balance at end of year $118.3 $153.3 $103.6 ========================
In February, 2008 the Pacific Life block was recaptured retroactive to January 1, 2008. The recapture of the Pacific Life block resulted in a $41.3 million reduction in the DAC asset. In January 2008, the Company acquired a block of business from FML and ceded essentially all of the business to Columbia. As a result of the cession, DAC attributed to this block was zero at December 31, 2008. In 2007, the Company acquired 8% of the 2007 variable annuity business of Pacific Life through a modified coinsurance agreement and a block of variable life insurance from Protective through a modified coinsurance agreement, resulting in initial DAC balances of $18.2 million and $6.0 million respectively. In 2006, the Company acquired through a modified coinsurance agreement the variable annuity business of CILAC, whose book of business was subsequently merged into Protective during 2007. This agreement resulted in an initial DAC asset of $106.7 million at inception of the contract. 35 COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (A WHOLLY-OWNED SUBSIDIARY OF THE GOLDMAN SACHS GROUP, INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2008 15. LIABILITIES FOR OUTSTANDING CLAIMS, LOSSES AND LOSS ADJUSTMENT EXPENSES The Company regularly updates its reserve estimates as new information becomes available and further events occur which may impact the resolution of unsettled claims. Reserve adjustments are reflected in results of operations within policy benefits, claims, losses and loss adjustment expenses. Often these adjustments are recognized in periods subsequent to the period in which the underlying policy was written and loss event occurred. These types of subsequent adjustments are described as "prior year reserve development". Such development can be either favorable or unfavorable to the Company's financial results and may vary by line of business. The liability for future policy benefits and outstanding claims and claims adjustment expenses, excluding the effect of reinsurance, related to the Company's accident and health business was $216.0 million and $228.0 million at December 31, 2008 and 2007, respectively. This business consists of the Company's exited individual health businesses. Reinsurance recoverables related to this business were $223.0 million and $227.9 million at December 31, 2008 and 2007 respectively. 16. COMPOSITION OF OTHER ASSETS, LIABILITIES, INCOME AND EXPENSES Other assets consist of the following:
DECEMBER 31, 2008 2007 ------------------------------------------------------------ (In millions) State licenses (intangible asset) $ 2.6 $ 2.6 Accounts receivable 3.0 5.8 Deferred sales inducements 0.5 8.9 Deferred losses on modco 57.2 -- Miscellaneous assets 11.4 14.6 ------------- Total other assets $74.7 $31.9 =============
Accrued expenses and other liabilities consist of the following:
DECEMBER 31, 2008 2007 ------------------------------------------------------------ (In millions) Payables in process $19.3 $26.9 Policyholder liabilities 5.8 11.9 Accrued expenses 4.8 8.9 Miscellaneous liabilities 16.6 8.7 ------------- Total accrued expenses and other liabilities $46.5 $56.4 =============
Other income consists of the following:
DECEMBER 31, 2008 2007 2006 -------------------------------------------------------------------- (In millions) Asset management fees $12.6 $17.4 $15.4 Miscellaneous income 9.0 2.5 1.3 --------------------- Total other income $21.6 $19.9 $16.7 =====================
Other operating expenses consist of the following:
DECEMBER 31, 2008 2007 2006 -------------------------------------------------------------------- (In millions) Taxes, licenses and fees $ 0.3 $ 2.5 $ 3.2 Commission expense 12.5 21.3 19.5 Management and administrative fees 26.8 29.9 23.8 Salaries and benefits 8.7 7.9 5.1 Processing and operational services 2.1 1.8 12.9 Legal and auditing 4.8 3.5 1.3 Miscellaneous operating expenses 4.3 3.2 9.1 --------------------- Total other operating expenses $59.5 $70.1 $74.9 =====================
36 COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (A WHOLLY-OWNED SUBSIDIARY OF THE GOLDMAN SACHS GROUP, INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2008 17. COMMITMENTS On June 19, 2008, the Company signed a professional services agreement with LOGiQ(3) Solutions Corp. ("LOGiQ(3)"). LOGiQ(3) will manage certain aspects of the Company's reinsurance portfolio for a period not less than five years. The Company was allocated certain rental expenses by its parent, primarily for the building lease in Southborough, MA. Rental expenses for these operating leases amounted to $0.3 million and $0.3 million for 2008 and 2007, respectively. The Company does not have lease commitments for the Southborough, MA location. On April 19, 2007 the Company entered into a lease agreement for the Elgin, IL office. As of December 31, 2008, lease commitments relating to this lease were $35.1 thousand for 2009 to 2010 inclusive. The base rent is subject to adjustments for taxes, insurance premiums, water and utilities, heating and cooling and common area charges. Concurrent to the closing of the Transaction, the Company entered into an operational servicing agreement with Security Benefit Life Insurance Company ("Se2"), whereby Se2, as third party administrator, will provide all contract/policy administration for a period of not less than ten years. On October 31, 2007, the Company signed a third party administrator agreement with Transaction Applications Group, Inc. ("TAG") and an application service provider agreement with Professional Data Management Again, Inc ("PDMA"). Commencing January 1, 2008, TAG will act as third party administrator for the Company's whole life insurance, term life insurance and universal life insurance, utilizing a PDMA platform. As of December 31, 2008, the purchase commitments relating to agreements with Se2, TAG, PDMA and LOGiQ(3) were as follows: (in millions) 2009 $12.4 2010 11.7 2011 11.0 2012 10.4 2013 9.1 2014 and thereafter 18.1 ----- Total $72.7 =====
18. CONTINGENCIES REGULATORY AND INDUSTRY DEVELOPMENTS Unfavorable economic conditions may contribute to an increase in the number of insurance companies that are under regulatory supervision. This may result in an increase in mandatory assessments by state guaranty funds, or voluntary payments by solvent insurance companies to cover losses to policyholders of insolvent or rehabilitated companies. Mandatory assessments, which are subject to statutory limits, can be partially recovered through a reduction in future premium taxes in some states. The Company is involved from time to time in judicial, regulatory and arbitration proceedings concerning matters arising in connection with the conduct of its business. THG has agreed to indemnify the Company and Goldman Sachs with respect to certain of these matters as provided in the Stock Purchase Agreement. Management believes, based on currently available information, that the results of such proceedings, in the aggregate, will not have a material adverse effect on the Company's financial condition. Given the inherent difficulty of predicting the outcome of the Company's litigation and regulatory matters, particularly in cases or proceeding in which substantial or indeterminate damages or fines are sought, the Company cannot estimate losses or ranges of losses for cases or proceedings where there is only a reasonable possibility that a loss may be incurred. However, the Company believes that at the present time there are no pending or threatened lawsuits that are reasonably likely to have a material adverse effect on the its consolidated financial position or results of operations. In 1997, a lawsuit on behalf of a putative class was instituted against the Company alleging fraud, unfair or deceptive acts, and breach of contract, misrepresentation, and related claims in the sale of life insurance policies. In November 1998, the Company and the plaintiffs entered into a settlement and in May 1999, the Federal District Court in Worcester, Massachusetts approved the settlement and certified the class for this purpose. In 2007, the Company released $0.4 million in liabilities related to this litigation representing the remaining expenses of its obligation under the settlement. 37 COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (A WHOLLY-OWNED SUBSIDIARY OF THE GOLDMAN SACHS GROUP, INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2008 18. CONTINGENCIES (CONTINUED) LITIGATION (CONTINUED) On July 24, 2002, an action was commenced in the United States District Court for the Northern District of Illinois, Eastern Division. The Plaintiffs, who purchased two variable annuities, were subsequently identified as engaging in frequent transfers of significant sums between sub-accounts that in the Company's opinion constituted "market timing," and were subject to restrictions upon such trading that the Company imposed in December 2001. Plaintiffs allege that such restrictions constituted a breach of the terms of the annuity contracts. In December 2006, a jury returned a verdict of $1.1 million in favor of the plaintiffs; both parties have appealed. In February 2008, the Court of Appeals vacated the $1.1 million verdict. In 2006, THG reached an agreement with the SEC regarding its investigation related to "market timing," "revenue sharing," and other matters, including the marketing support and administrative services arrangements entered into by VeraVest Investments, Inc. in connection with the distribution of life insurance and annuity products issued by unaffiliated insurance companies. The total amount of the settlement is $5.0 million. The Company's share of this settlement was $2.8 million, of which $2.1 million was paid during 2006 and $0.7 million was paid during 2007 representing all outstanding liabilities under this settlement. In addition, the Company is involved, from time to time, in investigations and proceedings by governmental and self-regulatory agencies, which may currently include investigations into such matters as "market timing" in sub-accounts of variable annuity and life products, "revenue sharing" and other matters, and regulatory inquiries into compensation arrangements with brokers and agents. A number of companies have announced settlements of enforcement actions related to such matters with various regulatory agencies, including the SEC, which have included a range of monetary penalties and restitution. The Company is not currently involved in any such investigations or proceedings. 19. RELATED PARTY TRANSACTIONS On December 22, 2008, the Company received a capital contribution of $50.0 million from Goldman Sachs. The additional capital will be used to support future reinsurance transactions. On December 19, 2008, the Company entered into a related party transaction with its affiliate Goldman Sachs & Co ("GSCO") whereby the Company purchased $85.0 million in mortgage back securities utilizing GSCO as the purchasing agent. These assets are included in Fixed Maturities within the Consolidated Balance Sheets. In 2007, the Company signed a distribution and service agreement with its affiliate, Epoch, to serve as principal underwriter and common remitter for certain variable annuity products issued by the Company and its separate accounts. This resulted in expense of $0.2 million and $0.1 million for 2008 and 2007, respectively, for these services. The Company performs certain administrative services on Epoch's behalf. No income was generated for the year ended December 31, 2008 from this agreement. The Company has a management services agreement with its affiliate, GSCO. Under this service agreement, GSCO provides support to the Company in administrative, legal, compliance, technology, operations, financial reporting, human resources, risk management and other areas, and the Company is allocated costs for services received. GSCO charged the Company approximately $3.1 million, $3.0 million and $3.8 million in 2008, 2007 and 2006 respectively, for these services. These amounts are shown within Other operating expenses in the accompanying Consolidated Statements of Income. In 2005, the Company entered into several derivative transactions with its affiliate, Goldman Sachs International ("GSI"). These derivative positions resulted in income of $2.4 million and $10.2 million, and expense of $47.4 million, for 2008, 2007 and 2006, respectively, due to mark to market of the positions. During 2008, the Company entered into a derivative transaction with its affiliate, GSCO, which resulted in income of $13.2 million for 2008. In 2007, the Company entered into several derivative transactions with its affiliate, Goldman Sachs Financial Markets L.L.C ("GSFM"), which resulted in income of $2.6 million and $9.5 million for 2008 and 2007 respectively. The service agreement entered into with GSAM, an affiliate organization that provides investment management services, generated expense of $2.3 million, $2.6 million, and $2.1 million in 2008, 2007 and 2006, respectively. As part of the variable products in the separate account, the Company offers underlying Goldman Sachs Variable Investment Trust funds. Management fees are paid directly to GSAM and certain of these distribution and administration fees are passed to the Company resulting in revenue of $6.9 million, $6.9 million and $7.0 million for the years ended December 31, 2008, 2007 and 2006, respectively. 38 COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (A WHOLLY-OWNED SUBSIDIARY OF THE GOLDMAN SACHS GROUP, INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2008 19. RELATED PARTY TRANSACTIONS (CONTINUED) As of January 1, 2008, the Company reinsured under an assumption agreement the book of business from FML comprising primarily whole, term and universal life insurance policies. As part of this transaction, the Company paid a ceding commission of $4.3 million and assumed general account reserves of $0.7 billion. During the first quarter of 2008, the Company effectively ceded the entire FML block of business to Columbia. In consideration of Columbia's assumption of the business, the Company received a ceding commission of approximately $4.1 million. As of November 1, 2006, the Company entered into a coinsurance agreement to cede 100% of its deferred fixed annuity insurance business to its South Carolina domiciled affiliate, Columbia. In consideration of Columbia's assumption of the liabilities, the Company received a $1.9 million ceding commission. As of December 31, 2008 and December 31, 2007 the Company ceded reserves of $40.2 million and $46.7 million. In 2006, the employees of the Company became participants in The Goldman Sachs Amended and Restated Stock Incentive Plan (the "SIP"). Pursuant to the SIP, Goldman Sachs issued restricted stock units (RSUs) to certain employees of the Company as part of their overall compensation for 2006. Unvested RSUs require future service as a condition of delivery of the underlying shares of Goldman Sachs' common stock generally over a three year period. Delivery of the underlying shares of common stock is also conditioned on the grantee's satisfying certain other requirements as outlined in the award agreement. The Company incurred expenses of $0.3 million, $0.7 million and $1.5 million relating to RSUs for the years ended December 31, 2008, December 31, 2007 and December 31, 2006, respectively. 20. STATUTORY FINANCIAL INFORMATION The Company is required to file annual statements with state regulatory authorities prepared on an accounting basis prescribed or permitted by such authorities (statutory basis), as codified by the National Association of Insurance Commissioners. Statutory surplus differs from shareholders' equity reported in accordance with generally accepted accounting principles primarily because policy acquisition costs are expensed when incurred. Statutory accounting principles require asset valuation and interest maintenance reserves, postretirement benefit costs are based on different assumptions and reflect a different method of adoption, life insurance reserves are based on different assumptions and the recognition of deferred tax assets is based on different recoverability assumptions. Statutory net (loss) income and surplus are as follows:
(UNAUDITED) 2008 2007 2006 -------------------------------------------------------------------------- (In millions) Statutory Net (Loss) Income - Combined Life and Health Companies $(247.1) $ 58.2 $(35.5) Statutory Shareholders' Surplus - Combined Life and Health Companies $ 390.6 $461.4 $368.9
21. SUBSEQUENT EVENTS Effective January 2, 2009, the Company acquired FAFLIC, a subsidiary of THG, comprising primarily traditional life insurance products, group retirement products and a block of Guaranteed Investment Contracts. FAFLIC will be a wholly owned subsidiary of the Company. As part of this transaction, the Company paid a purchase price of $105.8 million and assumed general account reserves of $1.3 billion. 39 COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (A WHOLLY-OWNED SUBSIDIARY OF THE GOLDMAN SACHS GROUP, INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2008 21. SUBSEQUENT EVENTS (CONTINUED) During the second quarter, 2009, the Company will assume via coinsurance the traditional life and fixed annuity blocks of six subsidiaries of American Exchange Life Insurance Company ("American Exchange Life"). American Exchange Life is a wholly owned subsidiary of Universal American Corporation. Under this joint coinsurance agreement, the Company will assume $450.0 million of reserves and pay the collective cedants approximately $78.0 million in ceding commission. In addition, the Company's wholly owned subsidiary, FAFLIC, will assume business from a seventh subsidiary of American Exchange Life, assuming $125.0 million in reserves and incurring an additional ceding commission of approximately $7.0 million. On March 25, 2009, the Company received a capital contribution of $25.0 million from Goldman Sachs. The additional capital will be used to support future reinsurance transactions. On March 30, 2009, the Company entered into a coinsurance and modified coinsurance agreement with The Lincoln National Life Insurance Company ("Lincoln National") to reinsure an in-force block of universal life and variable universal life insurance policies. Under the coinsurance and modified coinsurance agreement, the Company will assume $1.5 billion in reserves and pay the cedant approximately $224.0 million in ceding commission. On March 31, 2009, the Company received a capital contribution of $225.0 million from Goldman Sachs. The additional capital will be used to support the reinsurance transaction with Lincoln National. 40 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors of Commonwealth Annuity and Life Insurance Company and the Contract Owners of Commonwealth Annuity Separate Account A of Commonwealth Annuity and Life Insurance Company: In our opinion, the accompanying statements of assets and liabilities and the related statements of operations and of changes in net assets present fairly, in all material respects, the financial position of each of the sub-accounts constituting Commonwealth Annuity Separate Account A of Commonwealth Annuity and Life Insurance Company at December 31, 2008, the results of each of their operations for the year then ended and the changes in each of their net assets for each of the two years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of Commonwealth Annuity and Life Insurance Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2008 by correspondence with the mutual funds, provide a reasonable basis for our opinion. /s/ PricewaterhouseCoopers LLP Hartford, Connecticut April 8, 2009 COMMONWEALTH ANNUITY SEPARATE ACCOUNT A STATEMENTS OF ASSETS AND LIABILITIES DECEMBER 31, 2008
AIM V.I. ALLIANCE- ALLIANCE- ALLIANCE- CORE EQUITY AIM V.I. BERNSTEIN VPS BERNSTEIN VPS BERNSTEIN VPS FUND LEISURE FUND INTERMEDIATE INTERNATIONAL SMALL CAP SERIES II SERIES II BOND PORTFOLIO VALUE PORTFOLIO GROWTH PORTFOLIO SHARES SHARES CLASS B (a)(b) CLASS B CLASS B ----------- ------------ -------------- --------------- ---------------- ASSETS: Investments in shares of the Underlying Funds, at market value $ 2,188 $ 421 $ 492 $ 10,539 $ 1,380 --------- --------- --------- --------- --------- Total assets 2,188 421 492 10,539 1,380 LIABILITIES: -- -- -- -- -- --------- --------- --------- --------- --------- Net assets $ 2,188 $ 421 $ 492 $ 10,539 $ 1,380 ========= ========= ========= ========= ========= Net asset distribution by category: Commonwealth Annuity Advantage IV $ 824 $ 421 $ 492 $ 1,379 $ 721 Commonwealth Annuity Advantage IV with Optional No Withdrawal Charge Rider -- -- -- -- -- Commonwealth Annuity Preferred Plus 1,364 -- -- 9,160 551 Commonwealth Annuity Preferred Plus with Optional Rider -- -- -- -- 108 --------- --------- --------- --------- --------- $ 2,188 $ 421 $ 492 $ 10,539 $ 1,380 ========= ========= ========= ========= ========= Investments in shares of the Underlying Funds, at cost $ 2,431 $ 677 $ 504 $ 12,060 $ 1,866 Underlying Fund shares held 112 84 47 964 167 Units outstanding and net asset value per unit: Commonwealth Annuity Advantage IV: Units outstanding, December 31, 2008 1,185 808 501 3,011 1,307 Net asset value per unit, December 31, 2008 $0.695688 $0.521780 $0.981920 $0.458155 $0.551561 Commonwealth Annuity Advantage IV with Optional No Withdrawal Charge Rider: Units outstanding, December 31, 2008 -- -- -- -- -- Net asset value per unit, December 31, 2008 $ -- $ -- $ -- $ -- $ -- Commonwealth Annuity Preferred Plus: Units outstanding, December 31, 2008 1,966 -- -- 20,048 1,002 Net asset value per unit, December 31, 2008 $0.693802 $ -- $ -- $0.456895 $0.549951 Commonwealth Annuity Preferred Plus with Optional Rider: Units outstanding, December 31, 2008 -- -- -- -- 197 Net asset value per unit, December 31, 2008 $ -- $ -- $ -- $ -- $0.548464
(a) Fund merger. See Note 1. (b) Name changed. See Note 1. The accompanying notes are an integral part of these financial statements. SA-1 COMMONWEALTH ANNUITY SEPARATE ACCOUNT A STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED) DECEMBER 31, 2008
FT VIP FT VIP FT VIP FT VIP ALLIANCE- FRANKLIN FRANKLIN FRANKLIN MUTUAL BERNSTEIN VPS GLOBAL INCOME SMALL CAP VALUE DISCOVERY SMALL/MID CAP COMMUNICATIONS SECURITIES SECURITIES SECURITIES VALUE PORTFOLIO FUND FUND FUND FUND CLASS B CLASS 2 CLASS 2 CLASS 2 CLASS 2 --------------- -------------- ---------- --------------- ---------- ASSETS: Investments in shares of the Underlying Funds, at market value $ 1,083 $ 928 $ 12,436 $ 9,990 $ 21,658 -------- --------- --------- --------- --------- Total assets 1,083 928 12,436 9,990 21,658 LIABILITIES: -- -- -- -- -- -------- --------- --------- --------- --------- Net assets $ 1,083 $ 928 $ 12,436 $ 9,990 $ 21,658 ======== ========= ========= ========= ========= Net asset distribution by category: Commonwealth Annuity Advantage IV $ 644 $ 722 $ 8,335 $ 3,460 $ 5,896 Commonwealth Annuity Advantage IV with Optional No Withdrawal Charge Rider -- -- 3,873 -- 5,368 Commonwealth Annuity Preferred Plus 439 206 228 6,530 10,144 Commonwealth Annuity Preferred Plus with Optional Rider -- -- -- -- 250 -------- --------- --------- --------- --------- $ 1,083 $ 928 $ 12,436 $ 9,990 $ 21,658 ======== ========= ========= ========= ========= Investments in shares of the Underlying Funds, at cost $ 1,424 $ 1,243 $ 14,982 $ 10,751 $ 25,537 Underlying Fund shares held 110 139 1,097 947 1,366 Units outstanding and net asset value per unit: Commonwealth Annuity Advantage IV: Units outstanding, December 31, 2008 1,077 1,293 12,017 5,573 8,181 Net asset value per unit, December 31, 2008 $0.598419 $0.558093 $0.693611 $0.620762 $0.720626 Commonwealth Annuity Advantage IV with Optional No Withdrawal Charge Rider: Units outstanding, December 31, 2008 -- -- 5,610 -- 7,485 Net asset value per unit, December 31, 2008 $ -- $ -- $0.690336 $ -- $0.717222 Commonwealth Annuity Preferred Plus: Units outstanding, December 31, 2008 736 370 330 10,572 14,106 Net asset value per unit, December 31, 2008 $0.596207 $0.556341 $0.691415 $0.617698 $0.719111 Commonwealth Annuity Preferred Plus with Optional Rider: Units outstanding, December 31, 2008 -- -- -- -- 349 Net asset value per unit, December 31, 2008 $ -- $ -- $ -- $ -- $0.717161
(a) Fund merger. See Note 1. (b) Name changed. See Note 1. The accompanying notes are an integral part of these financial statements. SA-2 COMMONWEALTH ANNUITY SEPARATE ACCOUNT A STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED) DECEMBER 31, 2008
FT VIP FT VIP FT VIP TEMPLETON TEMPLETON GOLDMAN SACHS GOLDMAN SACHS MUTUAL SHARES GLOBAL ASSET GROWTH BALANCED EQUITY GROWTH SECURITIES ALLOCATION SECURITIES STRATEGY STRATEGY FUND FUND FUND PORTFOLIO PORTFOLIO CLASS 2 CLASS 2 CLASS 2 CLASS A CLASS A ------------- ------------ ---------- ------------- ------------- ASSETS: Investments in shares of the Underlying Funds, at market value $ 12,120 $ 6,369 $ 7,410 $ 77,853 $ 17,865 --------- --------- -------- --------- --------- Total assets 12,120 6,369 7,410 77,853 17,865 LIABILITIES: -- -- -- -- -- --------- --------- -------- --------- --------- Net assets $ 12,120 $ 6,369 $ 7,410 $ 77,853 $ 17,865 ========= ========= ======== ========= ========= Net asset distribution by category: Commonwealth Annuity Advantage IV $ 7,228 $ 331 $ 963 $ 33,076 $ 14,248 Commonwealth Annuity Advantage IV with Optional No Withdrawal Charge Rider 3,615 -- 3,381 199 -- Commonwealth Annuity Preferred Plus 1,277 6,038 3,066 44,578 3,617 Commonwealth Annuity Preferred Plus with Optional Rider -- -- -- -- -- --------- --------- -------- --------- --------- $ 12,120 $ 6,369 $ 7,410 $ 77,853 $ 17,865 ========= ========= ======== ========= ========= Investments in shares of the Underlying Funds, at cost $ 15,156 $ 6,321 $ 9,896 $ 83,476 $ 25,876 Underlying Fund shares held 1,029 752 904 9,279 2,222 Units outstanding and net asset value per unit: Commonwealth Annuity Advantage IV: Units outstanding, December 31, 2008 11,769 428 1,692 41,583 25,086 Net asset value per unit, December 31, 2008 $0.614150 $0.772765 $0.569321 $0.795404 $0.567950 Commonwealth Annuity Advantage IV with Optional No Withdrawal Charge Rider: Units outstanding, December 31, 2008 5,914 -- 5,967 252 -- Net asset value per unit, December 31, 2008 $0.611239 $ -- $0.566623 $0.791631 $ -- Commonwealth Annuity Preferred Plus: Units outstanding, December 31, 2008 2,086 7,828 5,405 56,191 6,386 Net asset value per unit, December 31, 2008 $0.612112 $0.771384 $0.567278 $0.793335 $0.566365 Commonwealth Annuity Preferred Plus with Optional Rider: Units outstanding, December 31, 2008 -- -- -- -- -- Net asset value per unit, December 31, 2008 $ -- $ -- $ -- $ -- $ --
(a) Fund merger. See Note 1. (b) Name changed. See Note 1. The accompanying notes are an integral part of these financial statements. SA-3 COMMONWEALTH ANNUITY SEPARATE ACCOUNT A STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED) DECEMBER 31, 2008
GOLDMAN SACHS GOLDMAN SACHS GOLDMAN SACHS GROWTH AND INTERNATIONAL GOLDMAN SACHS GROWTH INCOME REAL ESTATE REAL ESTATE GOLDMAN SACHS STRATEGY STRATEGY SECURITIES SECURITIES TOLLKEEPER PORTFOLIO PORTFOLIO FUND FUND FUND CLASS A CLASS A CLASS A CLASS A CLASS A ------------- ------------- ------------- ------------- ------------- ASSETS: Investments in shares of the Underlying Funds, at market value $ 261,222 $ 64,818 $ 1,326 $ 812 $ 381 --------- --------- --------- --------- --------- Total assets 261,222 64,818 1,326 812 381 LIABILITIES: -- -- -- -- -- --------- --------- --------- --------- --------- Net assets $ 261,222 $ 64,818 $ 1,326 $ 812 $ 381 ========= ========= ========= ========= ========= Net asset distribution by category: Commonwealth Annuity Advantage IV $ 57,303 $ 51,451 $ 1,140 $ 37 $ 275 Commonwealth Annuity Advantage IV with Optional No Withdrawal Charge Rider -- 2,998 -- -- -- Commonwealth Annuity Preferred Plus 203,919 10,369 186 775 -- Commonwealth Annuity Preferred Plus with Optional Rider -- -- -- -- 106 --------- --------- --------- --------- --------- $ 261,222 $ 64,818 $ 1,326 $ 812 $ 381 ========= ========= ========= ========= ========= Investments in shares of the Underlying Funds, at cost $ 347,039 $ 84,762 $ 1,936 $ 1,108 $ 485 Underlying Fund shares held 33,192 7,992 258 98 61 Units outstanding and net asset value per unit: Commonwealth Annuity Advantage IV: Units outstanding, December 31, 2008 95,230 75,752 2,528 70 449 Net asset value per unit, December 31, 2008 $0.601740 $0.679211 $0.450449 $0.535679 $0.613805 Commonwealth Annuity Advantage IV with Optional No Withdrawal Charge Rider: Units outstanding, December 31, 2008 -- 4,435 -- -- -- Net asset value per unit, December 31, 2008 $ -- $0.675998 $ -- $ -- $ -- Commonwealth Annuity Preferred Plus: Units outstanding, December 31, 2008 339,944 15,307 415 1,451 -- Net asset value per unit, December 31, 2008 $0.599860 $0.677385 $0.449219 $0.534193 $ -- Commonwealth Annuity Preferred Plus with Optional Rider: Units outstanding, December 31, 2008 -- -- -- -- 173 Net asset value per unit, December 31, 2008 $ -- $ -- $ -- $ -- $0.610942
(a) Fund merger. See Note 1. (b) Name changed. See Note 1. The accompanying notes are an integral part of these financial statements. SA-4 COMMONWEALTH ANNUITY SEPARATE ACCOUNT A STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED) DECEMBER 31, 2008
GOLDMAN GOLDMAN GOLDMAN GOLDMAN GOLDMAN SACHS VIT SACHS VIT SACHS VIT SACHS VIT SACHS VIT CAPITAL CORE FIXED EQUITY GOVERNMENT GROWTH & GROWTH FUND INCOME FUND INDEX FUND INCOME FUND INCOME FUND SERVICE SHARES SERVICE SHARES SERVICE SHARES SERVICE SHARES SERVICE SHARES -------------- -------------- -------------- -------------- -------------- ASSETS: Investments in shares of the Underlying Funds, at market value $ 22,307 $ 9,148 $ 7,627 $ 453,286 $ 9,718 --------- --------- --------- --------- --------- Total assets 22,307 9,148 7,627 453,286 9,718 LIABILITIES: -- -- -- -- -- --------- --------- --------- --------- --------- Net assets $ 22,307 $ 9,148 $ 7,627 $ 453,286 $ 9,718 ========= ========= ========= ========= ========= Net asset distribution by category: Commonwealth Annuity Advantage IV $ 20,857 $ 2,764 $ 4,312 $ 11,900 $ 7,919 Commonwealth Annuity Advantage IV with Optional No Withdrawal Charge Rider -- 4,973 571 -- -- Commonwealth Annuity Preferred Plus 1,450 1,411 2,744 441,386 1,799 Commonwealth Annuity Preferred Plus with Optional Rider -- -- -- -- -- --------- --------- --------- --------- --------- $ 22,307 $ 9,148 $ 7,627 $ 453,286 $ 9,718 ========= ========= ========= ========= ========= Investments in shares of the Underlying Funds, at cost $ 31,751 $ 9,947 $ 9,695 $ 454,784 $ 12,959 Underlying Fund shares held 3,019 1,038 1,152 44,703 1,216 Units outstanding and net asset value per unit: Commonwealth Annuity Advantage IV: Units outstanding, December 31, 2008 35,564 2,966 6,986 11,293 12,389 Net asset value per unit, December 31, 2008 $0.586461 $0.932213 $0.617274 $1.053752 $0.639148 Commonwealth Annuity Advantage IV with Optional No Withdrawal Charge Rider: Units outstanding, December 31, 2008 -- 5,360 929 -- -- Net asset value per unit, December 31, 2008 $ -- $0.927807 $0.614343 $ -- $ -- Commonwealth Annuity Preferred Plus: Units outstanding, December 31, 2008 2,479 1,517 4,456 420,028 2,823 Net asset value per unit, December 31, 2008 $0.584926 $0.930004 $0.615747 $1.050848 $0.637410 Commonwealth Annuity Preferred Plus with Optional Rider: Units outstanding, December 31, 2008 -- -- -- -- -- Net asset value per unit, December 31, 2008 $ -- $ -- $ -- $ -- $ --
(a) Fund merger. See Note 1. (b) Name changed. See Note 1. The accompanying notes are an integral part of these financial statements. SA-5 COMMONWEALTH ANNUITY SEPARATE ACCOUNT A STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED) DECEMBER 31, 2008
GOLDMAN GOLDMAN GOLDMAN SACHS VIT GOLDMAN SACHS VIT SACHS VIT GOLDMAN GROWTH SACHS VIT STRATEGIC STRUCTURED SACHS VIT OPPORTUNITIES MONEY INTERNATIONAL SMALL CAP STRUCTURED U.S. FUND MARKET FUND EQUITY FUND EQUITY FUND EQUITY FUND SERVICE SHARES SERVICE SHARES SERVICE SHARES SERVICE SHARES SERVICE SHARES -------------- -------------- -------------- -------------- --------------- ASSETS: Investments in shares of the Underlying Funds, at market value $ 6,869 $3,332,584 $ 6,506 $ 1,673 $ 883 --------- ---------- --------- --------- --------- Total assets 6,869 3,332,584 6,506 1,673 883 LIABILITIES: -- -- -- -- -- --------- ---------- --------- --------- --------- Net assets $ 6,869 $3,332,584 $ 6,506 $ 1,673 $ 883 ========= ========== ========= ========= ========= Net asset distribution by category: Commonwealth Annuity Advantage IV $ 962 $ 2,249 $ 1,935 $ 1,534 $ 883 Commonwealth Annuity Advantage IV with Optional No Withdrawal Charge Rider -- -- -- -- -- Commonwealth Annuity Preferred Plus 5,874 3,330,028 4,571 139 -- Commonwealth Annuity Preferred Plus with Optional Rider 33 307 -- -- -- --------- ---------- --------- --------- --------- $ 6,869 $3,332,584 $ 6,506 $ 1,673 $ 883 ========= ========== ========= ========= ========= Investments in shares of the Underlying Funds, at cost $ 7,071 $3,332,584 $ 8,055 $ 2,218 $ 1,057 Underlying Fund shares held 1,935 3,332,584 1,013 240 110 Units outstanding and net asset value per unit: Commonwealth Annuity Advantage IV: Units outstanding, December 31, 2008 1,612 2,202 3,522 2,522 1,470 Net asset value per unit, December 31, 2008 $0.596918 $ 1.021315 $0.549400 $0.608359 $0.600544 Commonwealth Annuity Advantage IV with Optional No Withdrawal Charge Rider: Units outstanding, December 31, 2008 -- -- -- -- -- Net asset value per unit, December 31, 2008 $ -- $ -- $ -- $ -- $ -- Commonwealth Annuity Preferred Plus: Units outstanding, December 31, 2008 9,876 3,269,558 8,338 229 -- Net asset value per unit, December 31, 2008 $0.594792 $ 1.018495 $0.548259 $0.606641 $ -- Commonwealth Annuity Preferred Plus with Optional Rider: Units outstanding, December 31, 2008 55 302 -- -- -- Net asset value per unit, December 31, 2008 $0.593210 $ 1.015719 $ -- $ -- $ --
(a) Fund merger. See Note 1. (b) Name changed. See Note 1. The accompanying notes are an integral part of these financial statements. SA-6 COMMONWEALTH ANNUITY SEPARATE ACCOUNT A STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED) DECEMBER 31, 2008
JANUS ASPEN PERKINS JANUS ASPEN JANUS ASPEN MID CAP PERKINS JANUS ASPEN MID CAP VALUE SMALL COMPANY OPPENHEIMER FORTY GROWTH PORTFOLIO VALUE BALANCED PORTFOLIO PORTFOLIO SERVICE PORTFOLIO FUND/VA SERVICE SHARES SERVICE SHARES SHARES (b) SERVICE SHARES (b) SERVICE SHARES -------------- -------------- ----------- ------------------ --------------- ASSETS: Investments in shares of the Underlying Funds, at market value $ 13,361 $ 8,086 $ 10,429 $ 782 $ 10,548 --------- --------- --------- --------- --------- Total assets 13,361 8,086 10,429 782 10,548 LIABILITIES: -- -- -- -- -- --------- --------- --------- --------- --------- Net assets $ 13,361 $ 8,086 $ 10,429 $ 782 $ 10,548 ========= ========= ========= ========= ========= Net asset distribution by category: Commonwealth Annuity Advantage IV $ 3,895 $ 1,293 $ 3,542 $ 216 $ 7,896 Commonwealth Annuity Advantage IV with Optional No Withdrawal Charge Rider 3,159 -- -- -- -- Commonwealth Annuity Preferred Plus 6,109 6,793 6,887 566 2,621 Commonwealth Annuity Preferred Plus with Optional Rider 198 -- -- -- 31 --------- --------- --------- --------- --------- $ 13,361 $ 8,086 $ 10,429 $ 782 $ 10,548 ========= ========= ========= ========= ========= Investments in shares of the Underlying Funds, at cost $ 16,012 $ 8,201 $ 11,319 $ 917 $ 11,942 Underlying Fund shares held 588 391 980 70 1,259 Units outstanding and net asset value per unit: Commonwealth Annuity Advantage IV: Units outstanding, December 31, 2008 6,017 2,176 4,979 369 14,298 Net asset value per unit, December 31, 2008 $0.647162 $0.594372 $0.711528 $0.586857 $0.552244 Commonwealth Annuity Advantage IV with Optional No Withdrawal Charge Rider: Units outstanding, December 31, 2008 4,904 -- -- -- -- Net asset value per unit, December 31, 2008 $0.644098 $ -- $ -- $ -- $ -- Commonwealth Annuity Preferred Plus: Units outstanding, December 31, 2008 9,466 11,434 9,703 966 4,756 Net asset value per unit, December 31, 2008 $0.645404 $0.594067 $0.709743 $0.585696 $0.551196 Commonwealth Annuity Preferred Plus with Optional Rider: Units outstanding, December 31, 2008 308 -- -- -- 56 Net asset value per unit, December 31, 2008 $0.643656 $ -- $ -- $ -- $0.549612
(a) Fund merger. See Note 1. (b) Name changed. See Note 1. The accompanying notes are an integral part of these financial statements. SA-7 COMMONWEALTH ANNUITY SEPARATE ACCOUNT A STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED) DECEMBER 31, 2008
OPPENHEIMER OPPENHEIMER OPPENHEIMER PIONEER PIONEER GLOBAL MAIN STREET STRATEGIC CULLEN EMERGING SECURITIES SMALL CAP BOND VALUE VCT MARKETS VCT FUND/VA FUND(R)/VA FUND/VA PORTFOLIO PORTFOLIO SERVICE SHARES SERVICE SHARES SERVICE SHARES CLASS II CLASS II -------------- -------------- -------------- --------- ----------- ASSETS: Investments in shares of the Underlying Funds, at market value $ 22,890 $ 10,020 $ 17,409 $ 14,489 $ 26,717 --------- -------- --------- --------- --------- Total assets 22,890 10,020 17,409 14,489 26,717 LIABILITIES: -- -- -- -- -- --------- -------- --------- --------- --------- Net assets $ 22,890 $ 10,020 $ 17,409 $ 14,489 $ 26,717 ========= ======== ========= ========= ========= Net asset distribution by category: Commonwealth Annuity Advantage IV $ 13,534 $ 7,420 $ 9,600 $ 14,065 $ 4,456 Commonwealth Annuity Advantage IV with Optional No Withdrawal Charge Rider -- -- 696 -- -- Commonwealth Annuity Preferred Plus 9,356 2,600 7,079 424 22,227 Commonwealth Annuity Preferred Plus with Optional Rider -- -- 34 -- 34 --------- -------- --------- --------- --------- $ 22,890 $ 10,020 $ 17,409 $ 14,489 $ 26,717 ========= ======== ========= ========= ========= Investments in shares of the Underlying Funds, at cost $ 27,350 $ 12,504 $ 19,005 $ 17,624 $ 34,025 Underlying Fund shares held 1,143 951 3,818 1,605 1,710 Units outstanding and net asset value per unit: Commonwealth Annuity Advantage IV: Units outstanding, December 31, 2008 22,947 12,693 10,859 20,954 9,381 Net asset value per unit, December 31, 2008 $0.589796 $0.584499 $0.884027 $0.671246 $0.475050 Commonwealth Annuity Advantage IV with Optional No Withdrawal Charge Rider: Units outstanding, December 31, 2008 -- -- 791 -- -- Net asset value per unit, December 31, 2008 $ -- $ -- $0.879840 $ -- $ -- Commonwealth Annuity Preferred Plus: Units outstanding, December 31, 2008 15,881 4,461 8,029 634 46,816 Net asset value per unit, December 31, 2008 $0.589142 $0.582903 $0.881713 $0.668980 $0.474777 Commonwealth Annuity Preferred Plus with Optional Rider: Units outstanding, December 31, 2008 -- -- 39 -- 71 Net asset value per unit, December 31, 2008 $ -- $ -- $0.879255 $ -- $0.473484
(a) Fund merger. See Note 1. (b) Name changed. See Note 1. The accompanying notes are an integral part of these financial statements. SA-8 COMMONWEALTH ANNUITY SEPARATE ACCOUNT A STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED) DECEMBER 31, 2008
PIONEER PIONEER GROWTH MID CAP OPPORTUNITIES VCT VALUE VCT PORTFOLIO PORTFOLIO CLASS I CLASS II ----------------- --------- ASSETS: Investments in shares of the Underlying Funds, at market value $ 444 $ 3,962 --------- --------- Total assets 444 3,962 LIABILITIES: -- -- --------- --------- Net assets $ 444 $ 3,962 ========= ========= Net asset distribution by category: Commonwealth Annuity Advantage IV $ 410 $ 3,266 Commonwealth Annuity Advantage IV with Optional No Withdrawal Charge Rider -- 586 Commonwealth Annuity Preferred Plus -- 110 Commonwealth Annuity Preferred Plus with Optional Rider 34 -- --------- --------- $ 444 $ 3,962 ========= ========= Investments in shares of the Underlying Funds, at cost $ 557 $ 5,459 Underlying Fund shares held 34 340 Units outstanding and net asset value per unit: Commonwealth Annuity Advantage IV: Units outstanding, December 31, 2008 685 5,153 Net asset value per unit, December 31, 2008 $0.597747 $0.633722 Commonwealth Annuity Advantage IV with Optional No Withdrawal Charge Rider: Units outstanding, December 31, 2008 -- 929 Net asset value per unit, December 31, 2008 $ -- $0.630722 Commonwealth Annuity Preferred Plus: Units outstanding, December 31, 2008 -- 175 Net asset value per unit, December 31, 2008 $ -- $0.630228 Commonwealth Annuity Preferred Plus with Optional Rider: Units outstanding, December 31, 2008 58 -- Net asset value per unit, December 31, 2008 $0.594052 $ --
(a) Fund merger. See Note 1. (b) Name changed. See Note 1. The accompanying notes are an integral part of these financial statements. SA-9 COMMONWEALTH ANNUITY SEPARATE ACCOUNT A STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2008
AIM V.I. ALLIANCE- ALLIANCE- ALLIANCE- CORE EQUITY AIM V.I. BERNSTEIN VPS BERNSTEIN VPS BERNSTEIN VPS FUND LEISURE FUND INTERMEDIATE INTERNATIONAL SMALL CAP SERIES II SERIES II BOND PORTFOLIO VALUE PORTFOLIO GROWTH PORTFOLIO SHARES SHARES CLASS B (a)(b) CLASS B CLASS B ----------- ------------ -------------- --------------- ---------------- INVESTMENT INCOME: Dividends $ 43 $ 5 $ -- $ 4 $ -- EXPENSES: COMMONWEALTH ANNUITY ADVANTAGE IV: Mortality and expense risk fees 4 2 2 12 7 Administrative expense fees -- -- -- 1 -- ----- ----- ---- ------- ----- Total expenses 4 2 2 13 7 ----- ----- ---- ------- ----- COMMONWEALTH ANNUITY ADVANTAGE IV WITH OPTIONAL NO WITHDRAWAL CHARGE RIDER: Mortality and expense risk fees -- -- -- -- -- Administrative expense fees -- -- -- -- -- ----- ----- ---- ------- ----- Total expenses -- -- -- -- -- ----- ----- ---- ------- ----- COMMONWEALTH ANNUITY PREFERRED PLUS: Mortality and expense risk fees 2 -- -- 19 3 Administrative expense fees 1 -- -- 3 -- ----- ----- ---- ------- ----- Total expenses 3 -- -- 22 3 ----- ----- ---- ------- ----- COMMONWEALTH ANNUITY PREFERRED PLUS WITH OPTIONAL RIDER: Mortality and expense risk fees -- -- -- -- 1 Administrative expense fees -- -- -- -- -- ----- ----- ---- ------- ----- Total expenses -- -- -- -- 1 ----- ----- ---- ------- ----- Total expenses 7 2 2 35 11 ----- ----- ---- ------- ----- Net investment income (loss) 36 3 (2) (31) (11) ----- ----- ---- ------- ----- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Realized gain distributions from portfolio sponsor -- 117 -- 26 -- Net realized gain (loss) from sales of investments (19) (3) -- (368) (189) ----- ----- ---- ------- ----- Net realized gain (loss) (19) 114 -- (342) (189) Change in unrealized gain (loss) (243) (256) (12) (1,520) (486) ----- ----- ---- ------- ----- Net realized and unrealized gain (loss) (262) (142) (12) (1,862) (675) ----- ----- ---- ------- ----- Net increase (decrease) in net assets from operations $(226) $(139) $(14) $(1,893) $(686) ===== ===== ==== ======= =====
(a) Fund merger. See Note 1. (b) Name changed. See Note 1. The accompanying notes are an integral part of these financial statements. SA-10 COMMONWEALTH ANNUITY SEPARATE ACCOUNT A STATEMENTS OF OPERATIONS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2008
FT VIP FT VIP FT VIP FT VIP ALLIANCE- FRANKLIN FRANKLIN FRANKLIN MUTUAL BERNSTEIN VPS GLOBAL INCOME SMALL CAP VALUE DISCOVERY SMALL/MID CAP COMMUNICATIONS SECURITIES SECURITIES SECURITIES VALUE PORTFOLIO FUND FUND FUND FUND CLASS B CLASS 2 CLASS 2 CLASS 2 CLASS 2 --------------- -------------- ---------- --------------- ---------- INVESTMENT INCOME: Dividends $ 1 $ -- $ 255 $ 16 $ 301 EXPENSES: COMMONWEALTH ANNUITY ADVANTAGE IV: Mortality and expense risk fees 5 6 28 21 33 Administrative expense fees -- 1 4 3 4 ----- ----- ------- ----- ------- Total expenses 5 7 32 24 37 ----- ----- ------- ----- ------- COMMONWEALTH ANNUITY ADVANTAGE IV WITH OPTIONAL NO WITHDRAWAL CHARGE RIDER: Mortality and expense risk fees -- -- 52 -- 66 Administrative expense fees -- -- 5 -- 7 ----- ----- ------- ----- ------- Total expenses -- -- 57 -- 73 ----- ----- ------- ----- ------- COMMONWEALTH ANNUITY PREFERRED PLUS: Mortality and expense risk fees 1 1 2 10 22 Administrative expense fees 1 -- -- 1 2 ----- ----- ------- ----- ------- Total expenses 2 1 2 11 24 ----- ----- ------- ----- ------- COMMONWEALTH ANNUITY PREFERRED PLUS WITH OPTIONAL RIDER: Mortality and expense risk fees -- -- -- -- 2 Administrative expense fees -- -- -- -- -- ----- ----- ------- ----- ------- Total expenses -- -- -- -- 2 ----- ----- ------- ----- ------- Total expenses 7 8 91 35 136 ----- ----- ------- ----- ------- Net investment income (loss) (6) (8) 164 (19) 165 ----- ----- ------- ----- ------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Realized gain distributions from portfolio sponsor 19 -- 107 110 564 Net realized gain (loss) from sales of investments (4) (168) (435) (27) (382) ----- ----- ------- ----- ------- Net realized gain (loss) 15 (168) (328) 83 182 Change in unrealized gain (loss) (341) (316) (2,548) (745) (3,883) ----- ----- ------- ----- ------- Net realized and unrealized gain (loss) (326) (484) (2,876) (662) (3,701) ----- ----- ------- ----- ------- Net increase (decrease) in net assets from operations $(332) $(492) $(2,712) $(681) $(3,536) ===== ===== ======= ===== =======
(a) Fund merger. See Note 1. (b) Name changed. See Note 1. The accompanying notes are an integral part of these financial statements. SA-11 COMMONWEALTH ANNUITY SEPARATE ACCOUNT A STATEMENTS OF OPERATIONS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2008
FT VIP FT VIP FT VIP TEMPLETON TEMPLETON GOLDMAN SACHS GOLDMAN SACHS MUTUAL SHARES GLOBAL ASSET GROWTH BALANCED EQUITY GROWTH SECURITIES ALLOCATION SECURITIES STRATEGY STRATEGY FUND FUND FUND PORTFOLIO PORTFOLIO CLASS 2 CLASS 2 CLASS 2 CLASS A CLASS A ------------- ------------ ---------- ------------- ------------- INVESTMENT INCOME: Dividends $ 225 $ 117 $ 67 $ 1,295 $ 486 EXPENSES: COMMONWEALTH ANNUITY ADVANTAGE IV: Mortality and expense risk fees 17 5 5 118 108 Administrative expense fees 2 -- -- 16 14 ------- ----- ------- ------- ------- Total expenses 19 5 5 134 122 ------- ----- ------- ------- ------- COMMONWEALTH ANNUITY ADVANTAGE IV WITH OPTIONAL NO WITHDRAWAL CHARGE RIDER: Mortality and expense risk fees 50 -- 49 1 -- Administrative expense fees 5 -- 5 -- -- ------- ----- ------- ------- ------- Total expenses 55 -- 54 1 -- ------- ----- ------- ------- ------- COMMONWEALTH ANNUITY PREFERRED PLUS: Mortality and expense risk fees 10 14 5 113 19 Administrative expense fees 1 2 1 13 2 ------- ----- ------- ------- ------- Total expenses 11 16 6 126 21 ------- ----- ------- ------- ------- COMMONWEALTH ANNUITY PREFERRED PLUS WITH OPTIONAL RIDER: Mortality and expense risk fees -- -- -- -- -- Administrative expense fees -- -- -- -- -- ------- ----- ------- ------- ------- Total expenses -- -- -- -- -- ------- ----- ------- ------- ------- Total expenses 85 21 65 261 143 ------- ----- ------- ------- ------- Net investment income (loss) 140 96 2 1,034 343 ------- ----- ------- ------- ------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Realized gain distributions from portfolio sponsor 320 147 262 1,270 1,271 Net realized gain (loss) from sales of investments (52) (327) (21) (186) (2,449) ------- ----- ------- ------- ------- Net realized gain (loss) 268 (180) 241 1,084 (1,178) Change in unrealized gain (loss) (3,032) 48 (2,482) (5,601) (7,973) ------- ----- ------- ------- ------- Net realized and unrealized gain (loss) (2,764) (132) (2,241) (4,517) (9,151) ------- ----- ------- ------- ------- Net increase (decrease) in net assets from operations $(2,624) $ (36) $(2,239) $(3,483) $(8,808) ======= ===== ======= ======= =======
(a) Fund merger. See Note 1. (b) Name changed. See Note 1. The accompanying notes are an integral part of these financial statements. SA-12 COMMONWEALTH ANNUITY SEPARATE ACCOUNT A STATEMENTS OF OPERATIONS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2008
GOLDMAN SACHS GOLDMAN SACHS GOLDMAN SACHS GROWTH AND INTERNATIONAL GOLDMAN SACHS GROWTH INCOME REAL ESTATE REAL ESTATE GOLDMAN SACHS STRATEGY STRATEGY SECURITIES SECURITIES TOLLKEEPER PORTFOLIO PORTFOLIO FUND FUND FUND CLASS A CLASS A CLASS A CLASS A CLASS A ------------- ------------- ------------- ------------- ------------- INVESTMENT INCOME: Dividends $ 8,805 $ 1,685 $ 4 $ 10 $ -- EXPENSES: COMMONWEALTH ANNUITY ADVANTAGE IV: Mortality and expense risk fees 255 301 6 -- 1 Administrative expense fees 34 39 1 -- -- -------- -------- ----- ----- ----- Total expenses 289 340 7 -- 1 -------- -------- ----- ----- ----- COMMONWEALTH ANNUITY ADVANTAGE IV WITH OPTIONAL NO WITHDRAWAL CHARGE RIDER: Mortality and expense risk fees -- 32 -- -- -- Administrative expense fees -- 4 -- -- -- -------- -------- ----- ----- ----- Total expenses -- 36 -- -- -- -------- -------- ----- ----- ----- COMMONWEALTH ANNUITY PREFERRED PLUS: Mortality and expense risk fees 888 106 -- 5 -- Administrative expense fees 99 12 -- 1 -- -------- -------- ----- ----- ----- Total expenses 987 118 -- 6 -- -------- -------- ----- ----- ----- COMMONWEALTH ANNUITY PREFERRED PLUS WITH OPTIONAL RIDER: Mortality and expense risk fees -- -- -- -- 1 Administrative expense fees -- -- -- -- -- -------- -------- ----- ----- ----- Total expenses -- -- -- -- 1 -------- -------- ----- ----- ----- Total expenses 1,276 494 7 6 2 -------- -------- ----- ----- ----- Net investment income (loss) 7,529 1,191 (3) 4 (2) -------- -------- ----- ----- ----- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Realized gain distributions from portfolio sponsor 14,322 2,507 -- 51 -- Net realized gain (loss) from sales of investments 357 (181) (71) (6) (1) -------- -------- ----- ----- ----- Net realized gain (loss) 14,679 2,326 (71) 45 (1) Change in unrealized gain (loss) (85,716) (19,917) (610) (293) (105) -------- -------- ----- ----- ----- Net realized and unrealized gain (loss) (71,037) (17,591) (681) (248) (106) -------- -------- ----- ----- ----- Net increase (decrease) in net assets from operations $(63,508) $(16,400) $(684) $(244) $(108) ======== ======== ===== ===== =====
(a) Fund merger. See Note 1. (b) Name changed. See Note 1. The accompanying notes are an integral part of these financial statements. SA-13 COMMONWEALTH ANNUITY SEPARATE ACCOUNT A STATEMENTS OF OPERATIONS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2008
GOLDMAN GOLDMAN GOLDMAN GOLDMAN GOLDMAN SACHS VIT SACHS VIT SACHS VIT SACHS VIT SACHS VIT GROWTH & CAPITAL CORE FIXED EQUITY GOVERNMENT INCOME FUND GROWTH FUND INCOME FUND INDEX FUND INCOME FUND SERVICE SERVICE SHARES SERVICE SHARES SERVICE SHARES SERVICE SHARES SHARES -------------- -------------- -------------- -------------- ----------- INVESTMENT INCOME: Dividends $ -- $ 293 $ 188 $15,407 $ 253 EXPENSES: COMMONWEALTH ANNUITY ADVANTAGE IV: Mortality and expense risk fees 157 16 24 95 84 Administrative expense fees 20 3 4 12 11 ------- ----- ------- ------- ------- Total expenses 177 19 28 107 95 ------- ----- ------- ------- ------- COMMONWEALTH ANNUITY ADVANTAGE IV WITH OPTIONAL NO WITHDRAWAL CHARGE RIDER: Mortality and expense risk fees -- 57 6 -- -- Administrative expense fees -- 5 1 -- -- ------- ----- ------- ------- ------- Total expenses -- 62 7 -- -- ------- ----- ------- ------- ------- COMMONWEALTH ANNUITY PREFERRED PLUS: Mortality and expense risk fees 12 4 4 4,198 4 Administrative expense fees 2 1 1 467 1 ------- ----- ------- ------- ------- Total expenses 14 5 5 4,665 5 ------- ----- ------- ------- ------- COMMONWEALTH ANNUITY PREFERRED PLUS WITH OPTIONAL RIDER: Mortality and expense risk fees -- -- -- -- -- Administrative expense fees -- -- -- -- -- ------- ----- ------- ------- ------- Total expenses -- -- -- -- -- ------- ----- ------- ------- ------- Total expenses 191 86 40 4,772 100 ------- ----- ------- ------- ------- Net investment income (loss) (191) 207 148 10,635 153 ------- ----- ------- ------- ------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Realized gain distributions from portfolio sponsor -- -- 363 -- 1 Net realized gain (loss) from sales of investments (282) (7) (50) (399) (305) ------- ----- ------- ------- ------- Net realized gain (loss) (282) (7) 313 (399) (304) Change in unrealized gain (loss) (9,448) (795) (2,069) (1,499) (3,231) ------- ----- ------- ------- ------- Net realized and unrealized gain (loss) (9,730) (802) (1,756) (1,898) (3,535) ------- ----- ------- ------- ------- Net increase (decrease) in net assets from operations $(9,921) $(595) $(1,608) $ 8,737 $(3,382) ======= ===== ======= ======= =======
(a) Fund merger. See Note 1. (b) Name changed. See Note 1. The accompanying notes are an integral part of these financial statements. SA-14 COMMONWEALTH ANNUITY SEPARATE ACCOUNT A STATEMENTS OF OPERATIONS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2008
GOLDMAN GOLDMAN GOLDMAN GOLDMAN SACHS VIT SACHS VIT GOLDMAN SACHS VIT SACHS VIT STRUCTURED GROWTH SACHS VIT STRATEGIC STRUCTURED U.S. OPPORTUNITIES MONEY INTERNATIONAL SMALL CAP EQUITY FUND FUND MARKET FUND EQUITY FUND EQUITY FUND SERVICE SERVICE SHARES SERVICE SHARES SERVICE SHARES SERVICE SHARES SHARES -------------- -------------- -------------- -------------- ----------- INVESTMENT INCOME: Dividends $ -- $31,485 $ 264 $ 15 $ 17 EXPENSES: COMMONWEALTH ANNUITY ADVANTAGE IV: Mortality and expense risk fees 7 15 11 12 4 Administrative expense fees 1 2 2 1 -- ----- ------- ------- ----- ----- Total expenses 8 17 13 13 4 ----- ------- ------- ----- ----- COMMONWEALTH ANNUITY ADVANTAGE IV WITH OPTIONAL NO WITHDRAWAL CHARGE RIDER: Mortality and expense risk fees -- -- -- -- -- Administrative expense fees -- -- -- -- -- ----- ------- ------- ----- ----- Total expenses -- -- -- -- -- ----- ------- ------- ----- ----- COMMONWEALTH ANNUITY PREFERRED PLUS: Mortality and expense risk fees 7 23,976 14 1 1 Administrative expense fees 1 2,664 1 -- -- ----- ------- ------- ----- ----- Total expenses 8 26,640 15 1 1 ----- ------- ------- ----- ----- COMMONWEALTH ANNUITY PREFERRED PLUS WITH OPTIONAL RIDER: Mortality and expense risk fees -- 2 -- -- -- Administrative expense fees -- -- -- -- -- ----- ------- ------- ----- ----- Total expenses -- 2 -- -- -- ----- ------- ------- ----- ----- Total expenses 16 26,659 28 14 5 ----- ------- ------- ----- ----- Net investment income (loss) (16) 4,826 236 1 12 ----- ------- ------- ----- ----- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Realized gain distributions from portfolio sponsor 206 -- 561 4 11 Net realized gain (loss) from sales of investments (170) -- (95) (27) (156) ----- ------- ------- ----- ----- Net realized gain (loss) 36 -- 466 (23) (145) Change in unrealized gain (loss) (200) -- (1,547) (493) (174) ----- ------- ------- ----- ----- Net realized and unrealized gain (loss) (164) -- (1,081) (516) (319) ----- ------- ------- ----- ----- Net increase (decrease) in net assets from operations $(180) $ 4,826 $ (845) $(515) $(307) ===== ======= ======= ===== =====
(a) Fund merger. See Note 1. (b) Name changed. See Note 1. The accompanying notes are an integral part of these financial statements. SA-15 COMMONWEALTH ANNUITY SEPARATE ACCOUNT A STATEMENTS OF OPERATIONS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2008
JANUS ASPEN JANUS ASPEN PERKINS PERKINS SMALL JANUS ASPEN MID CAP COMPANY JANUS ASPEN MID CAP VALUE VALUE OPPENHEIMER FORTY GROWTH PORTFOLIO PORTFOLIO BALANCED PORTFOLIO PORTFOLIO SERVICE SERVICE FUND/VA SERVICE SHARES SERVICE SHARES SHARES (b) SHARES (b) SERVICE SHARES -------------- -------------- ----------- ----------- -------------- INVESTMENT INCOME: Dividends $ -- $ 8 $ 44 $ -- $ 7 EXPENSES: COMMONWEALTH ANNUITY ADVANTAGE IV: Mortality and expense risk fees 18 3 20 1 15 Administrative expense fees 2 -- 2 -- 2 ------- ----- ----- ----- ------- Total expenses 20 3 22 1 17 ------- ----- ----- ----- ------- COMMONWEALTH ANNUITY ADVANTAGE IV WITH OPTIONAL NO WITHDRAWAL CHARGE RIDER: Mortality and expense risk fees 24 -- -- -- -- Administrative expense fees 3 -- -- -- -- ------- ----- ----- ----- ------- Total expenses 27 -- -- -- -- ------- ----- ----- ----- ------- COMMONWEALTH ANNUITY PREFERRED PLUS: Mortality and expense risk fees 8 12 11 3 11 Administrative expense fees 1 2 1 -- 2 ------- ----- ----- ----- ------- Total expenses 9 14 12 3 13 ------- ----- ----- ----- ------- COMMONWEALTH ANNUITY PREFERRED PLUS WITH OPTIONAL RIDER: Mortality and expense risk fees 2 -- -- -- -- Administrative expense fees -- -- -- -- -- ------- ----- ----- ----- ------- Total expenses 2 -- -- -- -- ------- ----- ----- ----- ------- Total expenses 58 17 34 4 30 ------- ----- ----- ----- ------- Net investment income (loss) (58) (9) 10 (4) (23) ------- ----- ----- ----- ------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Realized gain distributions from portfolio sponsor -- 33 140 7 18 Net realized gain (loss) from sales of investments (477) (34) (56) (16) (109) ------- ----- ----- ----- ------- Net realized gain (loss) (477) (1) 84 (9) (91) Change in unrealized gain (loss) (2,651) (116) (889) (135) (1,394) ------- ----- ----- ----- ------- Net realized and unrealized gain (loss) (3,128) (117) (805) (144) (1,485) ------- ----- ----- ----- ------- Net increase (decrease) in net assets from operations $(3,186) $(126) $(795) $(148) $(1,508) ======= ===== ===== ===== =======
(a) Fund merger. See Note 1. (b) Name changed. See Note 1. The accompanying notes are an integral part of these financial statements. SA-16 COMMONWEALTH ANNUITY SEPARATE ACCOUNT A STATEMENTS OF OPERATIONS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2008
OPPENHEIMER OPPENHEIMER OPPENHEIMER PIONEER PIONEER GLOBAL MAIN STREET STRATEGIC CULLEN EMERGING SECURITIES SMALL CAP BOND VALUE VCT MARKETS VCT FUND/VA FUND(R)/VA FUND/VA PORTFOLIO PORTFOLIO SERVICE SHARES SERVICE SHARES SERVICE SHARES CLASS II CLASS II -------------- -------------- -------------- --------- ----------- INVESTMENT INCOME: Dividends $ 43 $ 16 $ 188 $ 36 $ 6 EXPENSES: COMMONWEALTH ANNUITY ADVANTAGE IV: Mortality and expense risk fees 82 50 52 69 35 Administrative expense fees 11 6 7 9 4 ------- ------- ------- ------- -------- Total expenses 93 56 59 78 39 ------- ------- ------- ------- -------- COMMONWEALTH ANNUITY ADVANTAGE IV WITH OPTIONAL NO WITHDRAWAL CHARGE RIDER: Mortality and expense risk fees 2 2 10 -- -- Administrative expense fees -- -- 1 -- -- ------- ------- ------- ------- -------- Total expenses 2 2 11 -- -- ------- ------- ------- ------- -------- COMMONWEALTH ANNUITY PREFERRED PLUS: Mortality and expense risk fees 26 16 30 1 84 Administrative expense fees 3 2 4 -- 9 ------- ------- ------- ------- -------- Total expenses 29 18 34 1 93 ------- ------- ------- ------- -------- COMMONWEALTH ANNUITY PREFERRED PLUS WITH OPTIONAL RIDER: Mortality and expense risk fees -- -- -- -- -- Administrative expense fees -- -- -- -- -- ------- ------- ------- ------- -------- Total expenses -- -- -- -- -- ------- ------- ------- ------- -------- Total expenses 124 76 104 79 132 ------- ------- ------- ------- -------- Net investment income (loss) (81) (60) 84 (43) (126) ------- ------- ------- ------- -------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Realized gain distributions from portfolio sponsor 231 173 45 -- 1,121 Net realized gain (loss) from sales of investments (141) (836) (639) (52) (5,521) ------- ------- ------- ------- -------- Net realized gain (loss) 90 (663) (594) (52) (4,400) Change in unrealized gain (loss) (4,460) (2,461) (1,597) (3,134) (7,309) ------- ------- ------- ------- -------- Net realized and unrealized gain (loss) (4,370) (3,124) (2,191) (3,186) (11,709) ------- ------- ------- ------- -------- Net increase (decrease) in net assets from operations $(4,451) $(3,184) $(2,107) $(3,229) $(11,835) ======= ======= ======= ======= ========
(a) Fund merger. See Note 1. (b) Name changed. See Note 1. The accompanying notes are an integral part of these financial statements. SA-17 COMMONWEALTH ANNUITY SEPARATE ACCOUNT A STATEMENTS OF OPERATIONS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2008
PIONEER PIONEER GROWTH MID CAP OPPORTUNITIES VCT VALUE VCT PORTFOLIO PORTFOLIO CLASS I CLASS II ----------------- --------- INVESTMENT INCOME: Dividends $ -- $ 25 EXPENSES: COMMONWEALTH ANNUITY ADVANTAGE IV: Mortality and expense risk fees 3 29 Administrative expense fees -- 4 ----- ------- Total expenses 3 33 ----- ------- COMMONWEALTH ANNUITY ADVANTAGE IV WITH OPTIONAL NO WITHDRAWAL CHARGE RIDER: Mortality and expense risk fees -- 7 Administrative expense fees -- -- ----- ------- Total expenses -- 7 ----- ------- COMMONWEALTH ANNUITY PREFERRED PLUS: Mortality and expense risk fees -- 1 Administrative expense fees -- -- ----- ------- Total expenses -- 1 ----- ------- COMMONWEALTH ANNUITY PREFERRED PLUS WITH OPTIONAL RIDER: Mortality and expense risk fees -- -- Administrative expense fees -- -- ----- ------- Total expenses 0 -- ----- ------- Total expenses 3 41 ----- ------- Net investment income (loss) (3) (16) ----- ------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Realized gain distributions from portfolio sponsor 29 227 Net realized gain (loss) from sales of investments (27) (254) ----- ------- Net realized gain (loss) 2 (27) Change in unrealized gain (loss) (113) (1,497) ----- ------- Net realized and unrealized gain (loss) (111) (1,524) ----- ------- Net increase (decrease) in net assets from operations $(114) $(1,540) ===== =======
(a) Fund merger. See Note 1. (b) Name changed. See Note 1. The accompanying notes are an integral part of these financial statements. Sa-18 COMMONWEALTH ANNUITY SEPARATE ACCOUNT A STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEARS ENDED DECEMBER 31,
AIM V.I. ALLIANCE- CORE EQUITY AIM V.I. BERNSTEIN VPS FUND LEISURE FUND INTERMEDIATE SERIES II SERIES II BOND PORTFOLIO SHARES SHARES CLASS B (a)(b) ------------ ------------ -------------- 2008 2007 2008 2007 2008 2007 ------ ---- ----- ---- ---- ---- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ 36 $-- $ 3 $-- $ (2) $-- Net realized gain (loss) (19) -- 114 -- -- -- Change in unrealized gain (loss) (243) -- (256) -- (12) -- ------ --- ----- --- ---- --- Net increase (decrease) in net assets from operations (226) -- (139) -- (14) -- ------ --- ----- --- ---- --- FROM CONTRACT TRANSACTIONS: Net purchase payments 2,434 -- 569 -- 516 -- Withdrawals -- -- -- -- -- -- Contract charges (22) -- (9) -- (9) -- Transfers between Sub-Accounts (including Separate Account GPA), net -- -- -- -- -- -- Other transfers from (to) the General Account 2 -- -- -- (1) -- ------ --- ----- --- ---- --- Net increase (decrease) in net assets from contract transactions 2,414 -- 560 -- 506 -- ------ --- ----- --- ---- --- Net increase (decrease) in net assets 2,188 -- 421 -- 492 -- NET ASSETS: Beginning of year -- -- -- -- -- -- ------ --- ----- --- ---- --- End of year $2,188 $-- $ 421 $-- $492 $-- ====== === ===== === ==== ===
(a) Fund merger. See Note 1. (b) Name changed. See Note 1. The accompanying notes are an integral part of these financial statements. SA-19 COMMONWEALTH ANNUITY SEPARATE ACCOUNT A STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31,
ALLIANCE- ALLIANCE- ALLIANCE- BERNSTEIN VPS BERNSTEIN VPS BERNSTEIN VPS INTERNATIONAL SMALL CAP SMALL/MID CAP VALUE PORTFOLIO GROWTH PORTFOLIO VALUE PORTFOLIO CLASS B CLASS B CLASS B --------------- ---------------- --------------- 2008 2007 2008 2007 2008 2007 ------- ---- ------ ---- ------ ---- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ (31) $-- $ (11) $-- $ (6) $-- Net realized gain (loss) (342) -- (189) -- 15 -- Change in unrealized gain (loss) (1,520) -- (486) -- (341) -- ------- --- ------ --- ------ --- Net increase (decrease) in net assets from operations (1,893) -- (686) -- (332) -- ------- --- ------ --- ------ --- FROM CONTRACT TRANSACTIONS: Net purchase payments 5,242 -- 2,784 29 1,429 -- Withdrawals (369) -- (293) -- -- -- Contract charges (62) -- (34) (1) (14) -- Transfers between Sub-Accounts (including Separate Account GPA), net 628 -- (410) -- -- -- Other transfers from (to) the General Account 6,993 -- (9) -- -- -- ------- --- ------ --- ------ --- Net increase (decrease) in net assets from contract transactions 12,432 -- 2,038 28 1,415 -- ------- --- ------ --- ------ --- Net increase (decrease) in net assets 10,539 -- 1,352 28 1,083 -- NET ASSETS: Beginning of year -- -- 28 -- -- -- ------- --- ------ --- ------ --- End of year $10,539 $-- $1,380 $28 $1,083 $-- ======= === ====== === ====== ===
(a) Fund merger. See Note 1. (b) Name changed. See Note 1. The accompanying notes are an integral part of these financial statements. SA-20 COMMONWEALTH ANNUITY SEPARATE ACCOUNT A STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31,
FT VIP FT VIP FT VIP FRANKLIN FRANKLIN FRANKLIN GLOBAL INCOME SMALL CAP VALUE COMMUNICATIONS SECURITIES SECURITIES FUND FUND FUND CLASS 2 CLASS 2 CLASS 2 -------------- --------------- --------------- 2008 2007 2008 2007 2008 2007 ------ ---- ------- ------ ------- ---- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ (8) $-- $ 164 $ (1) $ (19) $ (1) Net realized gain (loss) (168) -- (328) -- 83 -- Change in unrealized gain (loss) (316) -- (2,548) 2 (745) (16) ------ --- ------- ------ ------- ---- Net increase (decrease) in net assets from operations (492) -- (2,712) 1 (681) (17) ------ --- ------- ------ ------- ---- FROM CONTRACT TRANSACTIONS: Net purchase payments 1,777 16 14,204 1,476 5,603 458 Withdrawals (341) -- (712) -- (279) -- Contract charges (21) (1) (110) (3) (57) (5) Transfers between Sub-Accounts (including Separate Account GPA), net -- -- 293 -- 1,035 -- Other transfers from (to) the General Account (10) -- 1 (2) 3,933 -- ------ --- ------- ------ ------- ---- Net increase (decrease) in net assets from contract transactions 1,405 15 13,676 1,471 10,235 453 ------ --- ------- ------ ------- ---- Net increase (decrease) in net assets 913 15 10,964 1,472 9,554 436 NET ASSETS: Beginning of year 15 -- 1,472 -- 436 -- ------ --- ------- ------ ------- ---- End of year $ 928 $15 $12,436 $1,472 $ 9,990 $436 ====== === ======= ====== ======= ====
(a) Fund merger. See Note 1. (b) Name changed. See Note 1. The accompanying notes are an integral part of these financial statements. SA-21 COMMONWEALTH ANNUITY SEPARATE ACCOUNT A STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31,
FT VIP FT VIP MUTUAL FT VIP TEMPLETON DISCOVERY MUTUAL SHARES GLOBAL ASSET SECURITIES SECURITIES ALLOCATION FUND FUND FUND CLASS 2 CLASS 2 CLASS 2 --------------- --------------- ------------ 2008 2007 2008 2007 2008 2007 ------- ------ ------- ------ ------ ---- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ 165 $ (1) $ 140 $ (1) $ 96 $-- Net realized gain (loss) 182 -- 268 -- (180) -- Change in unrealized gain (loss) (3,883) 4 (3,032) (5) 48 -- ------- ------ ------- ------ ------ --- Net increase (decrease) in net assets from operations (3,536) 3 (2,624) (6) (36) -- ------- ------ ------- ------ ------ --- FROM CONTRACT TRANSACTIONS: Net purchase payments 16,337 1,560 7,791 1,578 2,809 -- Withdrawals (683) -- (886) -- (146) -- Contract charges (216) (4) (49) (5) (43) -- Transfers between Sub-Accounts (including Separate Account GPA), net 778 -- 6,328 -- 246 -- Other transfers from (to) the General Account 7,422 (3) (3) (4) 3,539 -- ------- ------ ------- ------ ------ --- Net increase (decrease) in net assets from contract transactions 23,638 1,553 13,181 1,569 6,405 -- ------- ------ ------- ------ ------ --- Net increase (decrease) in net assets 20,102 1,556 10,557 1,563 6,369 -- NET ASSETS: Beginning of year 1,556 -- 1,563 -- -- -- ------- ------ ------- ------ ------ --- End of year $21,658 $1,556 $12,120 $1,563 $6,369 $-- ======= ====== ======= ====== ====== ===
(a) Fund merger. See Note 1. (b) Name changed. See Note 1. The accompanying notes are an integral part of these financial statements. SA-22 COMMONWEALTH ANNUITY SEPARATE ACCOUNT A STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31,
FT VIP TEMPLETON GOLDMAN SACHS GOLDMAN SACHS GROWTH BALANCED EQUITY GROWTH SECURITIES STRATEGY STRATEGY FUND PORTFOLIO PORTFOLIO CLASS 2 CLASS A CLASS A --------------- --------------- --------------- 2008 2007 2008 2007 2008 2007 ------- ------ ------- ------ ------- ------ INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ 2 $ (1) $ 1,034 $ 7 $ 343 $ 13 Net realized gain (loss) 241 -- 1,084 14 (1,178) 20 Change in unrealized gain (loss) (2,482) (4) (5,601) (22) (7,973) (38) ------- ------ ------- ------ ------- ------ Net increase (decrease) in net assets from operations (2,239) (5) (3,483) (1) (8,808) (5) ------- ------ ------- ------ ------- ------ FROM CONTRACT TRANSACTIONS: Net purchase payments 8,277 1,470 36,919 1,000 28,944 1,000 Withdrawals -- -- (1,261) -- (3,154) -- Contract charges (27) (3) (639) (2) (410) (2) Transfers between Sub-Accounts (including Separate Account GPA), net 12 -- 5,899 -- 300 -- Other transfers from (to) the General Account (71) (4) 39,421 -- -- -- ------- ------ ------- ------ ------- ------ Net increase (decrease) in net assets from contract transactions 8,191 1,463 80,339 998 25,680 998 ------- ------ ------- ------ ------- ------ Net increase (decrease) in net assets 5,952 1,458 76,856 997 16,872 993 NET ASSETS: Beginning of year 1,458 -- 997 -- 993 -- ------- ------ ------- ------ ------- ------ End of year $ 7,410 $1,458 $77,853 $ 997 $17,865 $ 993 ======= ====== ======= ====== ======= ======
(a) Fund merger. See Note 1. (b) Name changed. See Note 1. The accompanying notes are an integral part of these financial statements. SA-23 COMMONWEALTH ANNUITY SEPARATE ACCOUNT A STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31,
GOLDMAN SACHS GOLDMAN SACHS GOLDMAN SACHS GROWTH AND INTERNATIONAL GROWTH INCOME REAL ESTATE STRATEGY STRATEGY SECURITIES PORTFOLIO PORTFOLIO FUND CLASS A CLASS A CLASS A ---------------- ---------------- ------------- 2008 2007 2008 2007 2008 2007 -------- ------ -------- ------ ------ ---- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ 7,529 $ 36 $ 1,191 $ 11 $ (3) $-- Net realized gain (loss) 14,679 35 2,326 13 (71) -- Change in unrealized gain (loss) (85,716) (101) (19,917) (26) (610) -- -------- ------ -------- ------ ------ --- Net increase (decrease) in net assets from operations (63,508) (30) (16,400) (2) (684) -- -------- ------ -------- ------ ------ --- FROM CONTRACT TRANSACTIONS: Net purchase payments 89,676 1,841 63,554 1,400 2,151 -- Withdrawals (202) -- (507) -- -- -- Contract charges (610) (17) (794) (13) (25) -- Transfers between Sub-Accounts (including Separate Account GPA), net 215,211 -- 6,331 -- (116) -- Other transfers from (to) the General Account 18,861 -- 11,249 -- -- -- -------- ------ -------- ------ ------ --- Net increase (decrease) in net assets from contract transactions 322,936 1,824 79,833 1,387 2,010 -- -------- ------ -------- ------ ------ --- Net increase (decrease) in net assets 259,428 1,794 63,433 1,385 1,326 -- NET ASSETS: Beginning of year 1,794 -- 1,385 -- -- -- -------- ------ -------- ------ ------ --- End of year $261,222 $1,794 $ 64,818 $1,385 $1,326 $-- ======== ====== ======== ====== ====== ===
(a) Fund merger. See Note 1. (b) Name changed. See Note 1. The accompanying notes are an integral part of these financial statements. SA-24 COMMONWEALTH ANNUITY SEPARATE ACCOUNT A STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31,
GOLDMAN SACHS REAL ESTATE GOLDMAN SACHS GOLDMAN SACHS VIT SECURITIES TOLLKEEPER CAPITAL FUND FUND GROWTH FUND CLASS A CLASS A SERVICE SHARES ------------- ------------- ----------------- 2008 2007 2008 2007 2008 2007 ------ ---- ----- ---- ------- ------ INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ 4 $-- $ (2) $-- $ (191) $ -- Net realized gain (loss) 45 3 (1) -- (282) -- Change in unrealized gain (loss) (293) (3) (105) -- (9,448) 4 ------ --- ----- --- ------- ------ Net increase (decrease) in net assets from operations (244) -- (108) -- (9,921) 4 ------ --- ----- --- ------- ------ FROM CONTRACT TRANSACTIONS: Net purchase payments 1,012 64 496 -- 19,572 6,941 Withdrawals -- -- -- -- (745) -- Contract charges (18) (1) (7) -- (70) (18) Transfers between Sub-Accounts (including Separate Account GPA), net 2 -- -- -- 12 -- Other transfers from (to) the General Account (2) (1) -- -- 6,531 1 ------ --- ----- --- ------- ------ Net increase (decrease) in net assets from contract transactions 994 62 489 -- 25,300 6,924 ------ --- ----- --- ------- ------ Net increase (decrease) in net assets 750 62 381 -- 15,379 6,928 NET ASSETS: Beginning of year 62 -- -- -- 6,928 -- ------ --- ----- --- ------- ------ End of year $ 812 $62 $ 381 $-- $22,307 $6,928 ====== === ===== === ======= ======
(a) Fund merger. See Note 1. (b) Name changed. See Note 1. The accompanying notes are an integral part of these financial statements. SA-25 COMMONWEALTH ANNUITY SEPARATE ACCOUNT A STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31,
GOLDMAN SACHS VIT GOLDMAN SACHS VIT GOLDMAN SACHS VIT CORE FIXED EQUITY GOVERNMENT INCOME FUND INDEX FUND INCOME FUND SERVICE SHARES SERVICE SHARES SERVICE SHARES ----------------- ----------------- ----------------- 2008 2007 2008 2007 2008 2007 ------ ------ ------- ---- -------- ---- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ 207 $ 8 $ 148 $-- $ 10,635 $-- Net realized gain (loss) (7) -- 313 -- (399) -- Change in unrealized gain (loss) (795) (5) (2,069) -- (1,499) -- ------ ------ ------- --- -------- --- Net increase (decrease) in net assets from operations (595) 3 (1,608) -- 8,737 -- ------ ------ ------- --- -------- --- FROM CONTRACT TRANSACTIONS: Net purchase payments 8,226 1,710 9,165 60 104,892 -- Withdrawals -- -- -- -- (16,643) -- Contract charges (40) (4) (45) (1) (179) -- Transfers between Sub-Accounts (including Separate Account GPA), net (152) -- 50 -- (1,076) -- Other transfers from (to) the General Account -- -- 6 -- 357,555 -- ------ ------ ------- --- -------- --- Net increase (decrease) in net assets from contract transactions 8,034 1,706 9,176 59 444,549 -- ------ ------ ------- --- -------- --- Net increase (decrease) in net assets 7,439 1,709 7,568 59 453,286 -- NET ASSETS: Beginning of year 1,709 -- 59 -- -- -- ------ ------ ------- --- -------- --- End of year $9,148 $1,709 $ 7,627 $59 $453,286 $-- ====== ====== ======= === ======== ===
(a) Fund merger. See Note 1. (b) Name changed. See Note 1. The accompanying notes are an integral part of these financial statements. SA-26 COMMONWEALTH ANNUITY SEPARATE ACCOUNT A STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31,
GOLDMAN SACHS VIT GOLDMAN SACHS VIT GROWTH GOLDMAN SACHS VIT GROWTH & OPPORTUNITIES MONEY INCOME FUND FUND MARKET FUND SERVICE SHARES SERVICE SHARES SERVICE SHARES ----------------- ----------------- ----------------- 2008 2007 2008 2007 2008 2007 ------- ------ ------ ---- ---------- ---- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ 153 $ 2 $ (16) $-- $ 4,826 $ 1 Net realized gain (loss) (304) 10 36 2 -- -- Change in unrealized gain (loss) (3,231) (11) (200) (2) -- -- ------- ------ ------ --- ---------- ---- Net increase (decrease) in net assets from operations (3,382) 1 (180) -- 4,826 1 ------- ------ ------ --- ---------- ---- FROM CONTRACT TRANSACTIONS: Net purchase payments 2,530 5,765 2,947 15 841,741 364 Withdrawals (932) -- (330) -- -- -- Contract charges (47) (8) (33) (1) (414) (3) Transfers between Sub-Accounts (including Separate Account GPA), net (15) -- 703 -- 90,419 -- Other transfers from (to) the General Account 5,806 -- 3,748 -- 2,395,650 -- ------- ------ ------ --- ---------- ---- Net increase (decrease) in net assets from contract transactions 7,342 5,757 7,035 14 3,327,396 361 ------- ------ ------ --- ---------- ---- Net increase (decrease) in net assets 3,960 5,758 6,855 14 3,332,222 362 NET ASSETS: Beginning of year 5,758 -- 14 -- 362 -- ------- ------ ------ --- ---------- ---- End of year $ 9,718 $5,758 $6,869 $14 $3,332,584 $362 ======= ====== ====== === ========== ====
(a) Fund merger. See Note 1. (b) Name changed. See Note 1. The accompanying notes are an integral part of these financial statements. SA-27 COMMONWEALTH ANNUITY SEPARATE ACCOUNT A STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31,
GOLDMAN SACHS VIT GOLDMAN SACHS VIT STRATEGIC STRUCTURED GOLDMAN SACHS VIT INTERNATIONAL SMALL CAP STRUCTURED U.S. EQUITY FUND EQUITY FUND EQUITY FUND SERVICE SHARES SERVICE SHARES SERVICE SHARES ----------------- ----------------- ----------------- 2008 2007 2008 2007 2008 2007 ------- ---- ------ ---- ------ ---- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ 236 $-- $ 1 $ -- $ 12 $-- Net realized gain (loss) 466 2 (23) 33 (145) -- Change in unrealized gain (loss) (1,547) (2) (493) (52) (174) -- ------- --- ------ ---- ------ --- Net increase (decrease) in net assets from operations (845) -- (515) (19) (307) -- ------- --- ------ ---- ------ --- FROM CONTRACT TRANSACTIONS: Net purchase payments 7,327 74 1,883 326 1,259 -- Withdrawals (47) -- -- -- (52) -- Contract charges (31) (2) (25) (2) (21) -- Transfers between Sub-Accounts (including Separate Account GPA), net 39 -- 26 -- (2) -- Other transfers from (to) the General Account (9) -- (1) -- 6 -- ------- --- ------ ---- ------ --- Net increase (decrease) in net assets from contract transactions 7,279 72 1,883 324 1,190 -- ------- --- ------ ---- ------ --- Net increase (decrease) in net assets 6,434 72 1,368 305 883 -- NET ASSETS: Beginning of year 72 -- 305 -- -- -- ------- --- ------ ---- ------ --- End of year $ 6,506 $72 $1,673 $305 $ 883 $-- ======= === ====== ==== ====== ===
(a) Fund merger. See Note 1. (b) Name changed. See Note 1. The accompanying notes are an integral part of these financial statements. SA-28 COMMONWEALTH ANNUITY SEPARATE ACCOUNT A STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31,
JANUS ASPEN JANUS ASPEN PERKINS JANUS ASPEN MID CAP MID CAP FORTY GROWTH VALUE PORTFOLIO PORTFOLIO PORTFOLIO SERVICE SHARES SERVICE SHARES SERVICE SHARES (b) -------------- -------------- ------------------ 2008 2007 2008 2007 2008 2007 ------- ---- ------ ---- ------- ---- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ (58) $-- $ (9) $-- $ 10 $-- Net realized gain (loss) (477) -- (1) -- 84 -- Change in unrealized gain (loss) (2,651) -- (116) 1 (889) -- ------- --- ------ --- ------- --- Net increase (decrease) in net assets from operations (3,186) -- (126) 1 (795) -- ------- --- ------ --- ------- --- FROM CONTRACT TRANSACTIONS: Net purchase payments 10,746 15 3,314 44 6,658 14 Withdrawals (703) -- -- -- -- -- Contract charges (79) (1) (23) (1) (57) (1) Transfers between Sub-Accounts (including Separate Account GPA), net 2,782 -- 944 -- 712 -- Other transfers from (to) the General Account 3,787 -- 3,933 -- 3,898 -- ------- --- ------ --- ------- --- Net increase (decrease) in net assets from contract transactions 16,533 14 8,168 43 11,211 13 ------- --- ------ --- ------- --- Net increase (decrease) in net assets 13,347 14 8,042 44 10,416 13 NET ASSETS: Beginning of year 14 -- 44 -- 13 -- ------- --- ------ --- ------- --- End of year $13,361 $14 $8,086 $44 $10,429 $13 ======= === ====== === ======= ===
(a) Fund merger. See Note 1. (b) Name changed. See Note 1. The accompanying notes are an integral part of these financial statements. SA-29 COMMONWEALTH ANNUITY SEPARATE ACCOUNT A STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31,
JANUS ASPEN PERKINS OPPENHEIMER SMALL COMPANY OPPENHEIMER GLOBAL VALUE BALANCED SECURITIES PORTFOLIO FUND/VA FUND/VA SERVICE SHARES (b) SERVICE SHARES SERVICE SHARES ------------------ -------------- --------------- 2008 2007 2008 2007 2008 2007 ----- ---- ------- ---- ------- ------ INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ (4) $-- $ (23) $-- $ (81) $ -- Net realized gain (loss) (9) -- (91) -- 90 -- Change in unrealized gain (loss) (135) -- (1,394) -- (4,460) -- ----- --- ------- --- ------- ------ Net increase (decrease) in net assets from operations (148) -- (1,508) -- (4,451) -- ----- --- ------- --- ------- ------ FROM CONTRACT TRANSACTIONS: Net purchase payments 958 -- 5,437 29 17,547 3,054 Withdrawals -- -- -- -- (494) -- Contract charges (25) -- (44) (1) (77) (9) Transfers between Sub-Accounts (including Separate Account GPA), net (1) -- 6,645 -- 1,038 -- Other transfers from (to) the General Account (2) -- (10) -- 6,282 -- ----- --- ------- --- ------- ------ Net increase (decrease) in net assets from contract transactions 930 -- 12,028 28 24,296 3,045 ----- --- ------- --- ------- ------ Net increase (decrease) in net assets 782 -- 10,520 28 19,845 3,045 NET ASSETS: Beginning of year -- -- 28 -- 3,045 -- ----- --- ------- --- ------- ------ End of year $ 782 $-- $10,548 $28 $22,890 $3,045 ===== === ======= === ======= ======
(a) Fund merger. See Note 1. (b) Name changed. See Note 1. The accompanying notes are an integral part of these financial statements. SA-30 COMMONWEALTH ANNUITY SEPARATE ACCOUNT A STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31,
OPPENHEIMER OPPENHEIMER PIONEER MAIN STREET STRATEGIC CULLEN SMALL CAP BOND VALUE VCT FUND(R)/VA FUND/VA PORTFOLIO SERVICE SHARES SERVICE SHARES CLASS II --------------- -------------- ------------- 2008 2007 2008 2007 2008 2007 ------- ------ ------- ---- ------- ---- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ (60) $ (1) $ 84 $ -- $ (43) $-- Net realized gain (loss) (663) -- (594) -- (52) -- Change in unrealized gain (loss) (2,461) (23) (1,597) 1 (3,134) -- ------- ------ ------- ---- ------- --- Net increase (decrease) in net assets from operations (3,184) (24) (2,107) 1 (3,229) -- ------- ------ ------- ---- ------- --- FROM CONTRACT TRANSACTIONS: Net purchase payments 9,528 2,043 22,615 222 17,808 54 Withdrawals (39) -- (3,036) -- (55) -- Contract charges (77) (8) (214) (6) (19) (4) Transfers between Sub-Accounts (including Separate Account GPA), net 261 -- (1,622) -- (13) -- Other transfers from (to) the General Account 1,520 -- 1,556 -- (53) -- ------- ------ ------- ---- ------- --- Net increase (decrease) in net assets from contract transactions 11,193 2,035 19,299 216 17,668 50 ------- ------ ------- ---- ------- --- Net increase (decrease) in net assets 8,009 2,011 17,192 217 14,439 50 NET ASSETS: Beginning of year 2,011 -- 217 -- 50 -- ------- ------ ------- ---- ------- --- End of year $10,020 $2,011 $17,409 $217 $14,489 $50 ======= ====== ======= ==== ======= ===
(a) Fund merger. See Note 1. (b) Name changed. See Note 1. The accompanying notes are an integral part of these financial statements. SA-31 COMMONWEALTH ANNUITY SEPARATE ACCOUNT A STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31,
PIONEER PIONEER PIONEER EMERGING GROWTH MID CAP MARKETS VCT OPPORTUNITIES VCT VALUE VCT PORTFOLIO PORTFOLIO PORTFOLIO CLASS II CLASS I CLASS II -------------- ----------------- --------------- 2008 2007 2008 2007 2008 2007 -------- ---- ----- ---- ------- ------ INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ (126) $ -- $ (3) $-- $ (16) $ -- Net realized gain (loss) (4,400) -- 2 -- (27) -- Change in unrealized gain (loss) (7,309) 1 (113) -- (1,497) -- -------- ---- ----- --- ------- ------ Net increase (decrease) in net assets from operations (11,835) 1 (114) -- (1,540) -- -------- ---- ----- --- ------- ------ FROM CONTRACT TRANSACTIONS: Net purchase payments 36,913 981 569 44 3,348 1,426 Withdrawals (783) -- (41) -- (546) -- Contract charges (132) (3) (7) (1) (32) (4) Transfers between Sub-Accounts (including Separate Account GPA), net (3,987) -- (7) -- -- -- Other transfers from (to) the General Account 5,562 -- 1 -- 1,310 -- -------- ---- ----- --- ------- ------ Net increase (decrease) in net assets from contract transactions 37,573 978 515 43 4,080 1,422 -------- ---- ----- --- ------- ------ Net increase (decrease) in net assets 25,738 979 401 43 2,540 1,422 NET ASSETS: Beginning of year 979 -- 43 -- 1,422 -- -------- ---- ----- --- ------- ------ End of year $ 26,717 $979 $ 444 $43 $ 3,962 $1,422 ======== ==== ===== === ======= ======
(a) Fund merger. See Note 1. (b) Name changed. See Note 1. The accompanying notes are an integral part of these financial statements. SA-32 COMMONWEALTH ANNUITY SEPARATE ACCOUNT A NOTES TO FINANCIAL STATEMENTS NOTE 1 - ORGANIZATION The Commonwealth Annuity Separate Account A, (the "Separate Account"), which funds the Commonwealth Annuity Advantage IV and Commonwealth Annuity Preferred Plus annuity contracts, is a separate investment account of Commonwealth Annuity and Life Insurance Company ("Commonwealth Annuity"), established on February 15, 2007 for the purpose of separating from the general assets of Commonwealth Annuity those assets used to fund the variable portion of certain variable annuity contracts (the "Contracts") issued by Commonwealth Annuity. Prior to December 30, 2005 ("the Closing Date") Commonwealth Annuity was a wholly-owned subsidiary of The Hanover Insurance Group, Inc. ("THG"). Prior to December 1, 2005 THG was named Allmerica Financial Corporation. On the Closing Date, THG sold Commonwealth Annuity (then known as Allmerica Financial Life Insurance and Annuity Company) and its closed block of variable annuity and variable life business to The Goldman Sachs Group, Inc. ("Goldman Sachs"). Goldman Sachs Asset Management, L.P. ("GSAM"), a subsidiary of Goldman Sachs, is investment advisor to the Goldman Sachs Variable Insurance Trust ("Goldman Sachs VIT") funds. As of December 31, 2008, Epoch Securities, Inc. ("Epoch") is the principal underwriter for the Separate Account. Epoch, an affiliate of Commonwealth Annuity, is a wholly-owned subsidiary of Goldman Sachs. Under applicable insurance law, the assets and liabilities of the Separate Account are clearly identified and distinguished from the other assets and liabilities of Commonwealth Annuity. The Separate Account cannot be charged with liabilities arising out of any other business of Commonwealth Annuity. Commonwealth Annuity's General Account is subject to the claims of creditors. The Separate Account is registered as a unit investment trust under the Investment Company Act of 1940, as amended (the "1940 Act"). Forty-two Sub-Accounts are currently offered by the Separate Account, all of which had activity during the year. Each Sub-Account invests exclusively in one of the funds ("Underlying Funds") that are part of the following fund groups: FUND GROUPS AIM Variable Insurance Funds AllianceBernstein Variable Products Series Fund, Inc. Franklin Templeton Variable Insurance Products Trust Goldman Sachs Trust Goldman Sachs Variable Insurance Trust Janus Aspen Series Oppenheimer Variable Account Funds Pioneer Variable Contracts Trust The fund groups listed above are open-end, diversified management investment companies registered under the 1940 Act. Pursuant to separate agreements and Plans of Reorganization approved by each participating Portfolio's Board and by shareholders of the applicable Closed Funds, the following Underlying Funds were merged after the close of business on the dates shown. The merger was structured as a transfer of all assets of the Closed Fund to the Surviving Fund in exchange for assumption of all liabilities of the Closed Fund by the Surviving Fund and for the issuance and delivery to the Closed Fund's Merger Shares equal in aggregate value to the net value of the assets transferred to the Surviving Fund.
DATE PRIOR FUND NEW FUND ---------- ----------------------------------------- ------------------------------------------- 04/25/2008 AllianceBernstein VPS Americas Government Alliance Bernstein VPS U.S. Government High Income Portfolio Class B Grade Portfolio Class B
The below Underlying Funds were renamed as indicated:
DATE PRIOR FUND NEW FUND ---------- ----------------------------------------- ------------------------------------------- 04/25/2008 Alliance Bernstein VPS U.S. Government AllianceBernstein VPS Intermediate Bond High Grade Portfolio Class B Portfolio Class B 12/31/2008 Janus Aspen Mid Cap Value Janus Aspen Perkins Mid Cap Value Portfolio Portfolio Service Shares Service Shares 12/31/2008 Janus Aspen Small Company Value Janus Aspen Perkins Small Company Value Portfolio Service Shares Portfolio Service Shares
SA-33 COMMONWEALTH ANNUITY SEPARATE ACCOUNT A NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates at the date of the financial statements. Actual results could differ from those estimates. The following is a summary of significant accounting policies followed by the Separate Account in the preparation of its financial statements. INVESTMENTS - Security transactions are recorded as of the trade date. Investments held by the Sub-Accounts are stated at the net asset value per share of the Underlying Funds. Realized investment gains and losses are determined using the average cost method. Dividend income and capital gain distributions are recorded on the ex-distribution date and are reinvested in additional shares of the Underlying Funds at net asset value. FINANCIAL INSTRUMENTS - Commonwealth Annuity adopted Statement of Financial Accounting Standards No. 157, "Fair Value Measurements," ("SFAS No. 157") as of the beginning of 2007. SFAS No. 157 clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Under SFAS No. 157, fair value measurements are not adjusted for transaction costs. SFAS No. 157 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The effect of adopting SFAS No. 157 was not material to Commonwealth Annuity's financial position or results of operations. The three levels of the fair value hierarchy under SFAS No. 157 are described below: Basis of Fair Value Measurement Level 1 Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities; Level 2 Quoted prices in markets that are not active or financial instruments for which all significant inputs are observable, either directly or indirectly; Level 3 Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable. A financial instrument's level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The open-ended mutual funds in the Separate Account produce a daily NAV that is validated with a sufficient level of observable activity to support classification of the fair value measurement as level 1. STATEMENTS OF CHANGES IN NET ASSETS - Contract Owners may allocate their Contract Values to variable investment options in the Separate Account, the Fixed Account and the Guaranteed Period Account. The Fixed Account is a part of Commonwealth Annuity's General Account that guarantees principal and a fixed minimum interest rate. The Guaranteed Period Account is included in Separate Account GPA, a non-registered separate account offered by Commonwealth Annuity, which offers fixed rates of interest for specified periods. Net Purchase Payments represent payments under the Contracts (excluding amounts allocated to the Fixed and Guaranteed Period Accounts) reduced by applicable deductions, charges, and state premium taxes. Contract Charges are deductions from Contract Values for optional rider benefits and annual contract fees. Contract benefits are payments made to Contract Owners and beneficiaries under the terms of the Contracts. Transfers between Sub-Accounts (including Separate Account GPA), net, are amounts that Contract Owners have directed to be moved among variable Sub-Accounts and the Guaranteed Period Account. Other transfers from (to) the General Account include certain transfers from and to contracts in the annuitization phase, reserve adjustments, and withdrawal charges. SA-34 COMMONWEALTH ANNUITY SEPARATE ACCOUNT A NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) FEDERAL INCOME TAXES - The operations of the Separate Account are included in the federal income tax return of Commonwealth Annuity, which is taxed as a life insurance company under Subchapter L of the Internal Revenue Code ("IRC"). Under the current provisions of the IRC, Commonwealth Annuity does not expect to incur federal income taxes on the earnings or realized capital gains attributable to the Separate Account. Based on this, no Federal income tax provision is required. Commonwealth Annuity will review periodically the status of this policy in the event of changes in the tax law. A charge may be made in future years for any federal income taxes that would be attributable to the Contracts. Under the provisions of Section 817(h) of the IRC, a variable annuity contract will not be treated as an annuity contract for federal income tax purposes for any period for which the investments of the segregated asset account on which the contract is based are not adequately diversified. The IRC provides that the "adequately diversified" requirement may be met if the underlying investments satisfy either a statutory safe harbor test or diversification requirements set forth in regulations issued by the Secretary of the Treasury. The Internal Revenue Service has issued regulations under Section 817(h) of the IRC. Commonwealth Annuity believes that the Separate Account satisfies the current requirements of the regulations, and it intends that it will continue to meet such requirements. NOTE 3 - EXPENSES AND RELATED PARTY TRANSACTIONS Commonwealth Annuity makes a daily charge against the net assets of each Sub-Account to compensate for certain mortality and expense risks it has assumed. If the charge for mortality and expense risks isn't sufficient to cover actual mortality experience and expenses, Commonwealth Annuity will absorb the losses. If costs are less than the amounts charged, the difference will be a profit to Commonwealth Annuity. Commonwealth Annuity also makes a daily administrative charge against the net assets of each Sub-Account. Both of these charges are imposed during the accumulation and annuity payout phase. A Contract fee may be deducted from the contract value quarterly during the accumulation phase and upon full surrender or annuitization of the Contract, if the accumulated value is below certain levels. This fee is currently waived for certain types of contracts. When contract value has been allocated to more than one investment option, the Contract fee is deducted from the Purchase Payments and related earnings in the chronological order in which they were received. Subject to state availability, Commonwealth Annuity offers a number of optional riders. A separate daily or monthly charge is made for each rider. SA-35 COMMONWEALTH ANNUITY SEPARATE ACCOUNT A NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 3 - EXPENSES AND RELATED PARTY TRANSACTIONS (CONTINUED) The annual rates of Mortality and Expense Risk Fees, Administrative Expense Fees, Optional Rider Fees, and the maximum dollar amount of the Contract Fee for the year ended are displayed in the table below.
COMMONWEALTH COMMONWEALTH COMMONWEALTH ANNUITY COMMONWEALTH ANNUITY ANNUITY ADVANTAGE IV ANNUITY PREFERRED PLUS ADVANTAGE IV WITH OPTIONAL RIDER(S) PREFERRED PLUS WITH OPTIONAL RIDER Annual Contract Fee (Deducted from Contract Value) $ 30 $ 30 $ 30 $ 30 Separate Account Annual Expenses Mortality and Expense Risk 1.15% 1.15% 1.35% 1.35% Administrative Expense 0.15% 0.15% 0.15% 0.15% Total Separate Account Annual Expense without the Step-Up Death Benefit 1.30% 1.30% 1.50% 1.50% Optional Step-Up Death Benefit Charge N/A 0.20% N/A 0.20% Total Separate Account Annual Expense including Step-Up Death Benefit 1.30% 1.50% 1.50% 1.70% Additional Rider Charges: Guaranteed Lifetime Withdrawal Benefit ("GLWB") Rider (as a percentage of the Lifetime Income base): GLWB Plus for One Maximum Charge: 1.00% 1.00% 1.00% 1.00% Current Charge: 0.50% 0.50% 0.50% 0.50% GLWB Plus for Two Maximum Charge: 1.50% 1.50% 1.50% 1.50% Current Charge: 0.75% 0.75% 0.75% 0.75% No Withdrawal Charge Rider (as a percentage of Contract Value) N/A 0.35% N/A N/A
A surrender charge may be deducted from the accumulated value of the Contract in the case of surrender or partial redemption of the Contract, or at the time annuity payments begin. The amount charged may vary by the product, the age of the Contract Owner, the length of time the Contract has been in force, the category of accumulated value surrendered or redeemed, the time elapsed since the amount surrendered or redeemed was credited to the Contract, and whether the Contract Owner or annuitant are included in certain classes exempt from these charges. Total surrender charges assessed under a Contract will never exceed 8% of the total Purchase Payments (not including Purchase Payment Bonuses) made under the Contract. Some states and municipalities impose premium taxes, which currently range up to 3.5%, on variable annuity contracts. The disclosures above include charges currently assessed to the Contract Owner. There are certain other charges that may be assessed in future periods, at the discretion of Commonwealth Annuity, in accordance with Contract terms. Detailed descriptions of all fees and charges are available in the product prospectuses. During the year ended December 31, 2007 management fees of the Underlying Goldman Sachs VIT and Goldman Sachs Trust ("GST") Funds were paid directly by the funds to GSAM in its capacity as investment manager and administrator of Goldman Sachs VIT funds and GST funds. The Goldman Sachs VIT and GST funds' advisory agreement provided for fees ranging from 0.27% to 1.02% for Goldman Sachs VIT funds and 0.34% to 1.22% for the GST funds based on individual portfolios and average daily net assets. According to a Plan of Distribution and Service pursuant to Rule 12b-1 under the 1940 Act, each fund paid a fee equal to an annual rate of 0.16% to 0.25% for the Goldman Sachs VIT funds and 0.25% for the GST funds of the Fund's average daily net assets. SA-36 COMMONWEALTH ANNUITY SEPARATE ACCOUNT A NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 4 - CONTRACT OWNER AND SPONSOR TRANSACTIONS Transactions from Contract Owners and Sponsor were as follows:
COMMONWEALTH ANNUITY ADVANTAGE IV YEAR ENDED DECEMBER 31, 2008 2007 ---------------------- -------------- UNITS AMOUNT UNITS AMOUNT --------- ---------- ----- ------ AIM V.I. Core Equity Fund Series II Shares Issuance of Units 1,226 $ 1,097 -- $ -- Redemption of Units (41) (35) -- -- --------- ---------- ----- ------ Net increase (decrease) 1,185 $ 1,062 -- $ -- ========= ========== ===== ====== AIM V.I. Leisure Fund Series II Shares Issuance of Units 823 $ 570 -- $ -- Redemption of Units (15) (10) -- -- --------- ---------- ----- ------ Net increase (decrease) 808 $ 560 -- $ -- ========= ========== ===== ====== AllianceBernstein VPS Intermediate Bond Portfolio Class B (a)(b) Issuance of Units 512 $ 517 -- $ -- Redemption of Units (11) (11) -- -- --------- ---------- ----- ------ Net increase (decrease) 501 $ 506 -- $ -- ========= ========== ===== ====== AllianceBernstein VPS International Value Portfolio Class B Issuance of Units 3,851 $ 2,927 -- $ -- Redemption of Units (840) (388) -- -- --------- ---------- ----- ------ Net increase (decrease) 3,011 $ 2,539 -- $ -- ========= ========== ===== ====== AllianceBernstein VPS Small Cap Growth Portfolio Class B Issuance of Units 2,472 $ 2,015 28 $ 29 Redemption of Units (1,193) (832) (1) (1) --------- ---------- ----- ------ Net increase (decrease) 1,279 $ 1,183 27 $ 28 ========= ========== ===== ====== AllianceBernstein VPS Small/Mid Cap Value Portfolio Class B Issuance of Units 1,138 $ 979 -- $ -- Redemption of Units (61) (47) -- -- --------- ---------- ----- ------ Net increase (decrease) 1,077 $ 932 -- $ -- ========= ========== ===== ====== FT VIP Franklin Global Communications Fund Class 2 Issuance of Units 2,012 $ 1,567 15 $ 16 Redemption of Units (733) (426) (1) (1) --------- ---------- ----- ------ Net increase (decrease) 1,279 $ 1,141 14 $ 15 ========= ========== ===== ====== FT VIP Franklin Income Securities Fund Class 2 Issuance of Units 14,353 $ 10,937 51 $ 51 Redemption of Units (2,386) (1,651) (2) (2) --------- ---------- ----- ------ Net increase (decrease) 11,967 $ 9,286 49 $ 49 ========= ========== ===== ====== FT VIP Franklin Small Cap Value Securities Fund Class 2 Issuance of Units 6,041 $ 4,820 415 $ 408 Redemption of Units (880) (740) (4) (4) --------- ---------- ----- ------ Net increase (decrease) 5,161 $ 4,080 411 $ 404 ========= ========== ===== ====== FT VIP Mutual Discovery Securities Fund Class 2 Issuance of Units 9,538 $ 8,253 15 $ 15 Redemption of Units (1,371) (1,011) (1) (1) --------- ---------- ----- ------ Net increase (decrease) 8,167 $ 7,242 14 $ 14 ========= ========== ===== ======
(a) Fund merger. See Note 1. (b) Name changed. See Note 1. SA-37 COMMONWEALTH ANNUITY SEPARATE ACCOUNT A NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 4 - CONTRACT OWNER AND SPONSOR TRANSACTIONS (CONTINUED)
COMMONWEALTH ANNUITY ADVANTAGE IV (CONTINUED) YEAR ENDED DECEMBER 31, 2008 2007 ---------------------- -------------- UNITS AMOUNT UNITS AMOUNT --------- ---------- ----- ------ FT VIP Mutual Shares Securities Fund Class 2 Issuance of Units 16,881 $ 10,726 -- $ -- Redemption of Units (5,112) (3,061) -- -- --------- ---------- ----- ------ Net increase (decrease) 11,769 $ 7,665 -- $ -- ========= ========== ===== ====== FT VIP Templeton Global Asset Allocation Fund Class 2 Issuance of Units 1,073 $ 1,036 -- $ -- Redemption of Units (645) (478) -- -- --------- ---------- ----- ------ Net increase (decrease) 428 $ 558 -- $ -- ========= ========== ===== ====== FT VIP Templeton Growth Securities Fund Class 2 Issuance of Units 1,797 $ 1,255 44 $ 44 Redemption of Units (149) (89) (1) (1) --------- ---------- ----- ------ Net increase (decrease) 1,648 $ 1,166 43 $ 43 ========= ========== ===== ====== Goldman Sachs Balanced Strategy Portfolio Class A Issuance of Units 45,930 $ 38,826 987 $1,000 Redemption of Units (5,332) (4,216) (2) (2) --------- ---------- ----- ------ Net increase (decrease) 40,598 $ 34,610 985 $ 998 ========= ========== ===== ====== Goldman Sachs Equity Growth Strategy Portfolio Class A Issuance of Units 31,383 $ 24,704 993 $1,000 Redemption of Units (7,287) (3,694) (2) (2) --------- ---------- ----- ------ Net increase (decrease) 24,096 $ 21,010 991 $ 998 ========= ========== ===== ====== Goldman Sachs Growth Strategy Portfolio Class A Issuance of Units 102,927 $ 79,660 1,712 $1,752 Redemption of Units (9,216) (7,507) (193) (201) --------- ---------- ----- ------ Net increase (decrease) 93,711 $ 72,153 1,519 $1,551 ========= ========== ===== ====== Goldman Sachs Growth and Income Strategy Portfolio Class A Issuance of Units 84,692 $ 70,691 1,085 $1,101 Redemption of Units (10,015) (8,166) (10) (10) --------- ---------- ----- ------ Net increase (decrease) 74,677 $ 62,525 1,075 $1,091 ========= ========== ===== ====== Goldman Sachs International Real Estate Securities Fund Class A Issuance of Units 2,875 $ 1,991 -- $ -- Redemption of Units (347) (173) -- -- --------- ---------- ----- ------ Net increase (decrease) 2,528 $ 1,818 -- $ -- ========= ========== ===== ====== Goldman Sachs Real Estate Securities Fund Class A Issuance of Units 73 $ 56 -- $ -- Redemption of Units (3) (2) -- -- --------- ---------- ----- ------ Net increase (decrease) 70 $ 54 -- $ -- ========= ========== ===== ====== Goldman Sachs Tollkeeper Fund Class A Issuance of Units 480 $ 364 -- $ -- Redemption of Units (32) (29) -- -- --------- ---------- ----- ------ Net increase (decrease) 448 $ 335 -- $ -- ========= ========== ===== ======
(a) Fund merger. See Note 1. (b) Name changed. See Note 1. SA-38 COMMONWEALTH ANNUITY SEPARATE ACCOUNT A NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 4 - CONTRACT OWNER AND SPONSOR TRANSACTIONS (CONTINUED)
COMMONWEALTH ANNUITY ADVANTAGE IV (CONTINUED) YEAR ENDED DECEMBER 31, 2008 2007 ---------------------- -------------- UNITS AMOUNT UNITS AMOUNT --------- ---------- ----- ------ Goldman Sachs VIT Capital Growth Fund Service Shares Issuance of Units 53,876 $ 41,335 6,599 $6,752 Redemption of Units (24,899) (17,915) (12) (12) --------- ---------- ----- ------ Net increase (decrease) 28,977 $ 23,420 6,587 $6,740 ========= ========== ===== ====== Goldman Sachs VIT Core Fixed Income Fund Service Shares Issuance of Units 3,105 $ 3,044 280 $ 286 Redemption of Units (416) (413) (3) (3) --------- ---------- ----- ------ Net increase (decrease) 2,689 $ 2,631 277 $ 283 ========= ========== ===== ====== Goldman Sachs VIT Equity Index Fund Service Shares Issuance of Units 7,254 $ 5,896 -- $ -- Redemption of Units (267) (183) -- -- --------- ---------- ----- ------ Net increase (decrease) 6,987 $ 5,713 -- $ -- ========= ========== ===== ====== Goldman Sachs VIT Government Income Fund Service Shares Issuance of Units 11,373 $ 11,848 -- $ -- Redemption of Units (80) (83) -- -- --------- ---------- ----- ------ Net increase (decrease) 11,293 $ 11,765 -- $ -- ========= ========== ===== ====== Goldman Sachs VIT Growth & Income Fund Service Shares Issuance of Units 18,381 $ 15,128 5,810 $5,734 Redemption of Units (11,796) (9,585) (7) (7) --------- ---------- ----- ------ Net increase (decrease) 6,585 $ 5,543 5,803 $5,727 ========= ========== ===== ====== Goldman Sachs VIT Growth Opportunities Fund Service Shares Issuance of Units 2,358 $ 1,937 15 $ 15 Redemption of Units (760) (462) (1) (1) --------- ---------- ----- ------ Net increase (decrease) 1,598 $ 1,475 14 $ 14 ========= ========== ===== ====== Goldman Sachs VIT Money Market Fund Service Shares Issuance of Units 6,232 $ 6,345 360 $ 364 Redemption of Units (4,388) (4,466) (3) (3) --------- ---------- ----- ------ Net increase (decrease) 1,844 $ 1,879 357 $ 361 ========= ========== ===== ====== Goldman Sachs VIT Strategic International Equity Fund Service Shares Issuance of Units 3,688 $ 2,766 72 $ 74 Redemption of Units (236) (153) (2) (2) --------- ---------- ----- ------ Net increase (decrease) 3,452 $ 2,613 70 $ 72 ========= ========== ===== ====== Goldman Sachs VIT Structured Small Cap Equity Fund Service Shares Issuance of Units 2,593 $ 1,941 313 $ 312 Redemption of Units (383) (242) (2) (1) --------- ---------- ----- ------ Net increase (decrease) 2,210 $ 1,699 311 $ 311 ========= ========== ===== ====== Goldman Sachs VIT Structured U.S. Equity Fund Service Shares Issuance of Units 1,848 $ 1,283 -- $ -- Redemption of Units (378) (230) -- -- --------- ---------- ----- ------ Net increase (decrease) 1,470 $ 1,053 -- $ -- ========= ========== ===== ======
(a) Fund merger. See Note 1. (b) Name changed. See Note 1. SA-39 COMMONWEALTH ANNUITY SEPARATE ACCOUNT A NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 4 - CONTRACT OWNER AND SPONSOR TRANSACTIONS (CONTINUED)
COMMONWEALTH ANNUITY ADVANTAGE IV (CONTINUED) YEAR ENDED DECEMBER 31, 2008 2007 ---------------------- -------------- UNITS AMOUNT UNITS AMOUNT --------- ---------- ----- ------ Janus Aspen Forty Portfolio Service Shares Issuance of Units 8,121 $ 7,327 13 $ 15 Redemption of Units (2,116) (1,543) (1) (1) --------- ---------- ----- ------ Net increase (decrease) 6,005 $ 5,784 12 $ 14 ========= ========== ===== ====== Janus Aspen Mid Cap Growth Portfolio Service Shares Issuance of Units 2,356 $ 1,536 -- $ -- Redemption of Units (180) (121) -- -- --------- ---------- ----- ------ Net increase (decrease) 2,176 $ 1,415 -- $ -- ========= ========== ===== ====== Janus Aspen Perkins Mid Cap Value Portfolio Service Shares (b) Issuance of Units 6,359 $ 5,467 1 $ 1 Redemption of Units (1,381) (996) -- -- --------- ---------- ----- ------ Net increase (decrease) 4,978 $ 4,471 1 $ 1 ========= ========== ===== ====== Janus Aspen Perkins Small Company Value Porfolio Service Shares (b) Issuance of Units 400 $ 272 -- $ -- Redemption of Units (31) (26) -- -- --------- ---------- ----- ------ Net increase (decrease) 369 $ 246 -- $ -- ========= ========== ===== ====== Oppenheimer Balanced Fund/VA Service Shares Issuance of Units 19,203 $ 11,402 30 $ 29 Redemption of Units (4,934) (2,789) (1) (1) --------- ---------- ----- ------ Net increase (decrease) 14,269 $ 8,613 29 $ 28 ========= ========== ===== ====== Oppenheimer Global Securities Fund/VA Service Shares Issuance of Units 32,030 $ 22,783 2,926 $2,930 Redemption of Units (12,004) (8,159) (6) (6) --------- ---------- ----- ------ Net increase (decrease) 20,026 $ 14,624 2,920 $2,924 ========= ========== ===== ====== Oppenheimer Main Street Small Cap Fund(R)/VA Service Shares Issuance of Units 29,656 $ 21,563 2,116 $2,043 Redemption of Units (19,070) (18,487) (8) (8) --------- ---------- ----- ------ Net increase (decrease) 10,586 $ 3,076 2,108 $2,035 ========= ========== ===== ====== Oppenheimer Strategic Bond Fund/VA Service Shares Issuance of Units 15,136 $ 14,891 6 $ 6 Redemption of Units (4,281) (3,767) (2) (2) --------- ---------- ----- ------ Net increase (decrease) 10,855 $ 11,124 4 $ 4 ========= ========== ===== ====== Pioneer Cullen Value VCT Portfolio Class II Issuance of Units 31,043 $ 24,231 54 $ 54 Redemption of Units (10,138) (7,015) (4) (4) --------- ---------- ----- ------ Net increase (decrease) 20,905 $ 17,216 50 $ 50 ========= ========== ===== ====== Pioneer Emerging Markets VCT Portfolio Class II Issuance of Units 14,696 $ 10,484 844 $ 974 Redemption of Units (6,157) (3,561) (2) (3) --------- ---------- ----- ------ Net increase (decrease) 8,539 $ 6,923 842 $ 971 ========= ========== ===== ======
(a) Fund merger. See Note 1. (b) Name changed. See Note 1. SA-40 COMMONWEALTH ANNUITY SEPARATE ACCOUNT A NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 4 - CONTRACT OWNER AND SPONSOR TRANSACTIONS (CONTINUED)
COMMONWEALTH ANNUITY ADVANTAGE IV (CONTINUED) YEAR ENDED DECEMBER 31, 2008 2007 ---------------------- -------------- UNITS AMOUNT UNITS AMOUNT --------- ---------- ----- ------ Pioneer Growth Opportunities VCT Portfolio Class I Issuance of Units 743 $ 541 47 $ 44 Redemption of Units (104) (61) (1) (1) --------- ---------- ----- ------ Net increase (decrease) 639 $ 480 46 $ 43 ========= ========== ===== ====== Pioneer Mid Cap Value VCT Portfolio Class II Issuance of Units 8,417 $ 6,552 1,409 $1,366 Redemption of Units (4,670) (3,376) (3) (3) --------- ---------- ----- ------ Net increase (decrease) 3,747 $ 3,176 1,406 $1,363 ========= ========== ===== ======
COMMONWEALTH ANNUITY ADVANTAGE IV WITH OPTIONAL NO WITHDRAWAL CHARGE RIDER YEAR ENDED DECEMBER 31, 2008 2007 ---------------------- -------------- UNITS AMOUNT UNITS AMOUNT --------- ---------- ----- ------ FT VIP Franklin Income Securities Fund Class 2 Issuance of Units 4,194 $ 4,001 1,429 $1,425 Redemption of Units (9) (7) (3) (3) --------- ---------- ----- ------ Net increase (decrease) 4,185 $ 3,994 1,426 $1,422 ========= ========== ===== ====== FT VIP Mutual Discovery Securities Fund Class 2 Issuance of Units 6,245 $ 5,801 1,518 $1,545 Redemption of Units (272) (253) (6) (6) --------- ---------- ----- ------ Net increase (decrease) 5,973 $ 5,548 1,512 $1,539 ========= ========== ===== ====== FT VIP Mutual Shares Securities Fund Class 2 Issuance of Units 4,493 $ 4,001 1,436 $1,425 Redemption of Units (9) (7) (5) (5) --------- ---------- ----- ------ Net increase (decrease) 4,484 $ 3,994 1,431 $1,420 ========= ========== ===== ====== FT VIP Templeton Growth Securities Fund Class 2 Issuance of Units 4,561 $ 4,001 1,421 $1,425 Redemption of Units (10) (7) (5) (5) --------- ---------- ----- ------ Net increase (decrease) 4,551 $ 3,994 1,416 $1,420 ========= ========== ===== ====== Goldman Sachs Balanced Strategy Portfolio Class A Issuance of Units 279 $ 240 -- $ -- Redemption of Units (26) (23) -- -- --------- ---------- ----- ------ Net increase (decrease) 253 $ 217 -- $ -- ========= ========== ===== ====== Goldman Sachs Growth and Income Strategy Portfolio Class A Issuance of Units 4,791 $ 4,500 297 $ 300 Redemption of Units (649) (613) (4) (4) --------- ---------- ----- ------ Net increase (decrease) 4,142 $ 3,887 293 $ 296 ========= ========== ===== ====== Goldman Sachs VIT Core Fixed Income Fund Service Shares Issuance of Units 3,990 $ 4,001 1,380 $1,425 Redemption of Units (9) (8) (1) (2) --------- ---------- ----- ------ Net increase (decrease) 3,981 $ 3,993 1,379 $1,423 ========= ========== ===== ======
(a) Fund merger. See Note 1. (b) Name changed. See Note 1. SA-41 COMMONWEALTH ANNUITY SEPARATE ACCOUNT A NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 4 - CONTRACT OWNER AND SPONSOR TRANSACTIONS (CONTINUED)
COMMONWEALTH ANNUITY ADVANTAGE IV WITH OPTIONAL NO WITHDRAWAL CHARGE RIDER (CONTINUED) YEAR ENDED DECEMBER 31, 2008 2007 ---------------------- -------------- UNITS AMOUNT UNITS AMOUNT --------- ---------- ----- ------ Goldman Sachs VIT Equity Index Fund Service Shares Issuance of Units 1,005 $ 900 60 $ 60 Redemption of Units (136) (123) (1) (1) --------- ---------- ----- ------ Net increase (decrease) 869 $ 777 59 $ 59 ========= ========== ===== ====== Janus Aspen Forty Portfolio Service Shares Issuance of Units 9,428 $ 7,676 -- $ -- Redemption of Units (4,524) (3,200) -- -- --------- ---------- ----- ------ Net increase (decrease) 4,904 $ 4,476 -- $ -- ========= ========== ===== ====== Oppenheimer Global Securities Fund/VA Service Shares Issuance of Units 700 $ 627 -- $ -- Redemption of Units (700) (678) -- -- --------- ---------- ----- ------ Net increase (decrease) -- $ (51) -- $ -- ========= ========== ===== ====== Oppenheimer Strategic Bond Fund/VA Service Shares Issuance of Units 2,657 $ 2,820 57 $ 60 Redemption of Units (1,923) (2,023) (1) (1) --------- ---------- ----- ------ Net increase (decrease) 734 $ 797 56 $ 59 ========= ========== ===== ====== Pioneer Mid Cap Value VCT Portfolio Class II Issuance of Units 1,003 $ 900 62 $ 60 Redemption of Units (135) (123) (1) (1) --------- ---------- ----- ------ Net increase (decrease) 868 $ 777 61 $ 59 ========= ========== ===== ======
COMMONWEALTH ANNUITY PREFERRED PLUS YEAR ENDED DECEMBER 31, 2008 2007 ---------------------- -------------- UNITS AMOUNT UNITS AMOUNT --------- ---------- ----- ------ AIM V.I. Core Equity Fund Series II Shares Issuance of Units 2,516 $ 1,851 -- $ -- Redemption of Units (550) (499) -- -- --------- ---------- ----- ------ Net increase (decrease) 1,966 $ 1,352 -- $ -- ========= ========== ===== ====== AllianceBernstein VPS International Value Portfolio Class B Issuance of Units 26,012 $ 12,515 -- $ -- Redemption of Units (5,964) (2,622) -- -- --------- ---------- ----- ------ Net increase (decrease) 20,048 $ 9,893 -- $ -- ========= ========== ===== ====== AllianceBernstein VPS Small Cap Growth Portfolio Class B Issuance of Units 1,275 $ 852 -- $ -- Redemption of Units (272) (151) -- -- --------- ---------- ----- ------ Net increase (decrease) 1,003 $ 701 -- $ -- ========= ========== ===== ====== AllianceBernstein VPS Small/Mid Cap Value Portfolio Class B Issuance of Units 888 $ 575 -- $ -- Redemption of Units (152) (92) -- -- --------- ---------- ----- ------ Net increase (decrease) 736 $ 483 -- $ -- ========= ========== ===== ======
(a) Fund merger. See Note 1. (b) Name changed. See Note 1. SA-42 COMMONWEALTH ANNUITY SEPARATE ACCOUNT A NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 4 - CONTRACT OWNER AND SPONSOR TRANSACTIONS (CONTINUED)
COMMONWEALTH ANNUITY PREFERRED PLUS (CONTINUED) YEAR ENDED DECEMBER 31, 2008 2007 ---------------------- -------------- UNITS AMOUNT UNITS AMOUNT --------- ---------- ----- ------ FT VIP Franklin Global Communications Fund Class 2 Issuance of Units 435 $ 303 -- $ -- Redemption of Units (65) (39) -- -- --------- ---------- ----- ------ Net increase (decrease) 370 $ 264 -- $ -- ========= ========== ===== ====== FT VIP Franklin Income Securities Fund Class 2 Issuance of Units 1,818 $ 1,496 -- $ -- Redemption of Units (1,487) (1,100) -- -- --------- ---------- ----- ------ Net increase (decrease) 331 $ 396 -- $ -- ========= ========== ===== ====== FT VIP Franklin Small Cap Value Securities Fund Class 2 Issuance of Units 14,716 $ 8,585 54 $ 50 Redemption of Units (4,197) (2,430) (1) (1) --------- ---------- ----- ------ Net increase (decrease) 10,519 $ 6,155 53 $ 49 ========= ========== ===== ====== FT VIP Mutual Discovery Securities Fund Class 2 Issuance of Units 18,540 $ 13,782 -- $ -- Redemption of Units (4,434) (3,242) -- -- --------- ---------- ----- ------ Net increase (decrease) 14,106 $ 10,540 -- $ -- ========= ========== ===== ====== FT VIP Mutual Shares Securities Fund Class 2 Issuance of Units 2,353 $ 1,792 155 $ 153 Redemption of Units (418) (270) (4) (4) --------- ---------- ----- ------ Net increase (decrease) 1,935 $ 1,522 151 $ 149 ========= ========== ===== ====== FT VIP Templeton Global Asset Allocation Fund Class 2 Issuance of Units 11,550 $ 8,613 -- $ -- Redemption of Units (3,722) (2,766) -- -- --------- ---------- ----- ------ Net increase (decrease) 7,828 $ 5,847 -- $ -- ========= ========== ===== ====== FT VIP Templeton Growth Securities Fund Class 2 Issuance of Units 5,475 $ 3,073 -- $ -- Redemption of Units (70) (42) -- -- --------- ---------- ----- ------ Net increase (decrease) 5,405 $ 3,031 -- $ -- ========= ========== ===== ====== Goldman Sachs Balanced Strategy Portfolio Class A Issuance of Units 56,970 $ 46,217 -- $ -- Redemption of Units (779) (705) -- -- --------- ---------- ----- ------ Net increase (decrease) 56,191 $ 45,512 -- $ -- ========= ========== ===== ====== Goldman Sachs Equity Growth Strategy Portfolio Class A Issuance of Units 6,608 $ 4,821 -- $ -- Redemption of Units (222) (151) -- -- --------- ---------- ----- ------ Net increase (decrease) 6,386 $ 4,670 -- $ -- ========= ========== ===== ====== Goldman Sachs Growth Strategy Portfolio Class A Issuance of Units 660,618 $ 547,640 272 $ 281 Redemption of Units (320,939) (296,857) (7) (8) --------- ---------- ----- ------ Net increase (decrease) 339,679 $ 250,783 265 $ 273 ========= ========== ===== ======
(a) Fund merger. See Note 1. (b) Name changed. See Note 1. SA-43 COMMONWEALTH ANNUITY SEPARATE ACCOUNT A NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 4 - CONTRACT OWNER AND SPONSOR TRANSACTIONS (CONTINUED)
COMMONWEALTH ANNUITY PREFERRED PLUS (CONTINUED) YEAR ENDED DECEMBER 31, 2008 2007 ---------------------- -------------- UNITS AMOUNT UNITS AMOUNT --------- ---------- ----- ------ Goldman Sachs Growth and Income Strategy Portfolio Class A Issuance of Units 23,831 $ 21,491 -- $ -- Redemption of Units (8,524) (8,070) -- -- --------- ---------- ----- ------ Net increase (decrease) 15,307 $ 13,421 -- $ -- ========= ========== ===== ====== Goldman Sachs International Real Estate Securities Fund Class A Issuance of Units 536 $ 250 -- $ -- Redemption of Units (121) (58) -- -- --------- ---------- ----- ------ Net increase (decrease) 415 $ 192 -- $ -- ========= ========== ===== ====== Goldman Sachs Real Estate Securities Fund Class A Issuance of Units 1,620 $ 1,075 69 $ 63 Redemption of Units (236) (135) (1) (1) --------- ---------- ----- ------ Net increase (decrease) 1,384 $ 940 68 $ 62 ========= ========== ===== ====== Goldman Sachs VIT Capital Growth Fund Service Shares Issuance of Units 3,766 $ 2,941 187 $ 190 Redemption of Units (1,468) (1,061) (6) (6) --------- ---------- ----- ------ Net increase (decrease) 2,298 $ 1,880 181 $ 184 ========= ========== ===== ====== Goldman Sachs VIT Core Fixed Income Fund Service Shares Issuance of Units 1,910 $ 1,773 -- $ -- Redemption of Units (393) (363) -- -- --------- ---------- ----- ------ Net increase (decrease) 1,517 $ 1,410 -- $ -- ========= ========== ===== ====== Goldman Sachs VIT Equity Index Fund Service Shares Issuance of Units 4,460 $ 2,688 -- $ -- Redemption of Units (4) (2) -- -- --------- ---------- ----- ------ Net increase (decrease) 4,456 $ 2,686 -- $ -- ========= ========== ===== ====== Goldman Sachs VIT Government Income Fund Service Shares Issuance of Units 469,485 $ 483,642 -- $ -- Redemption of Units (49,456) (50,858) -- -- --------- ---------- ----- ------ Net increase (decrease) 420,029 $ 432,784 -- $ -- ========= ========== ===== ====== Goldman Sachs VIT Growth & Income Fund Service Shares Issuance of Units 3,173 $ 2,049 32 $ 32 Redemption of Units (380) (250) (2) (2) --------- ---------- ----- ------ Net increase (decrease) 2,793 $ 1,799 30 $ 30 ========= ========== ===== ====== Goldman Sachs VIT Growth Opportunities Fund Service Shares Issuance of Units 14,379 $ 8,054 -- $ -- Redemption of Units (4,503) (2,529) -- -- --------- ---------- ----- ------ Net increase (decrease) 9,876 $ 5,525 -- $ -- ========= ========== ===== ====== Goldman Sachs VIT Money Market Fund Service Shares Issuance of Units 4,018,271 $4,087,365 -- $ -- Redemption of Units (748,713) (762,155) -- -- --------- ---------- ----- ------ Net increase (decrease) 3,269,558 $3,325,210 -- $ -- ========= ========== ===== ======
(a) Fund merger. See Note 1. (b) Name changed. See Note 1. SA-44 COMMONWEALTH ANNUITY SEPARATE ACCOUNT A NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 4 - CONTRACT OWNER AND SPONSOR TRANSACTIONS (CONTINUED)
COMMONWEALTH ANNUITY PREFERRED PLUS (CONTINUED) YEAR ENDED DECEMBER 31, 2008 2007 ---------------------- -------------- UNITS AMOUNT UNITS AMOUNT --------- ---------- ----- ------ Goldman Sachs VIT Strategic International Equity Fund Service Shares Issuance of Units 9,030 $ 5,175 -- $ -- Redemption of Units (692) (509) -- -- --------- ---------- ----- ------ Net increase (decrease) 8,338 $ 4,666 -- $ -- ========= ========== ===== ====== Goldman Sachs VIT Structured Small Cap Equity Fund Service Shares Issuance of Units 573 $ 404 15 $ 14 Redemption of Units (358) (220) (1) (1) --------- ---------- ----- ------ Net increase (decrease) 215 $ 184 14 $ 13 ========= ========== ===== ====== Goldman Sachs VIT Structured U.S. Equity Fund Service Shares Issuance of Units 913 $ 701 -- $ -- Redemption of Units (913) (564) -- -- --------- ---------- ----- ------ Net increase (decrease) -- $ 137 -- $ -- ========= ========== ===== ====== Janus Aspen Forty Portfolio Service Shares Issuance of Units 13,959 $ 8,823 -- $ -- Redemption of Units (4,493) (2,858) -- -- --------- ---------- ----- ------ Net increase (decrease) 9,466 $ 5,965 -- $ -- ========= ========== ===== ====== Janus Aspen Mid Cap Growth Portfolio Service Shares Issuance of Units 15,746 $ 9,191 41 $ 44 Redemption of Units (4,354) (2,438) (1) (1) --------- ---------- ----- ------ Net increase (decrease) 11,392 $ 6,753 40 $ 43 ========= ========== ===== ====== Janus Aspen Perkins Mid Cap Value Portfolio Service Shares (b) Issuance of Units 14,178 $ 9,798 13 $ 13 Redemption of Units (4,487) (3,058) (1) (1) --------- ---------- ----- ------ Net increase (decrease) 9,691 $ 6,740 12 $ 12 ========= ========== ===== ====== Janus Aspen Perkins Small Company Value Porfolio Service Shares (b) Issuance of Units 1,343 $ 905 -- $ -- Redemption of Units (377) (221) -- -- --------- ---------- ----- ------ Net increase (decrease) 966 $ 684 -- $ -- ========= ========== ===== ====== Oppenheimer Balanced Fund/VA Service Shares Issuance of Units 5,454 $ 3,804 -- $ -- Redemption of Units (698) (424) -- -- --------- ---------- ----- ------ Net increase (decrease) 4,756 $ 3,380 -- $ -- ========= ========== ===== ====== Oppenheimer Global Securities Fund/VA Service Shares Issuance of Units 21,130 $ 12,748 124 $ 124 Redemption of Units (5,370) (3,025) (3) (3) --------- ---------- ----- ------ Net increase (decrease) 15,760 $ 9,723 121 $ 121 ========= ========== ===== ====== Oppenheimer Main Street Small Cap Fund(R)/VA Service Shares Issuance of Units 5,092 $ 16,486 -- $ -- Redemption of Units (631) (8,369) -- -- --------- ---------- ----- ------ Net increase (decrease) 4,461 $ 8,117 -- $ -- ========= ========== ===== ======
(a) Fund merger. See Note 1. (b) Name changed. See Note 1. SA-45 COMMONWEALTH ANNUITY SEPARATE ACCOUNT A NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 4 - CONTRACT OWNER AND SPONSOR TRANSACTIONS (CONTINUED)
COMMONWEALTH ANNUITY PREFERRED PLUS (CONTINUED) YEAR ENDED DECEMBER 31, 2008 2007 ---------------------- -------------- UNITS AMOUNT UNITS AMOUNT --------- ---------- ----- ------ Oppenheimer Strategic Bond Fund/VA Service Shares Issuance of Units 10,096 $ 9,274 150 $ 156 Redemption of Units (2,214) (1,931) (3) (3) --------- ---------- ----- ------ Net increase (decrease) 7,882 $ 7,343 147 $ 153 ========= ========== ===== ====== Pioneer Cullen Value VCT Portfolio Class II Issuance of Units 839 $ 592 -- $ -- Redemption of Units (205) (140) -- -- --------- ---------- ----- ------ Net increase (decrease) 634 $ 452 -- $ -- ========= ========== ===== ====== Pioneer Emerging Markets VCT Portfolio Class II Issuance of Units 76,211 $ 42,981 8 $ 8 Redemption of Units (29,402) (12,366) (1) (1) --------- ---------- ----- ------ Net increase (decrease) 46,809 $ 30,615 7 $ 7 ========= ========== ===== ====== Pioneer Mid Cap Value VCT Portfolio Class II Issuance of Units 504 $ 388 -- $ -- Redemption of Units (329) (261) -- -- --------- ---------- ----- ------ Net increase (decrease) 175 $ 127 -- $ -- ========= ========== ===== ======
COMMONWEALTH ANNUITY PREFERRED PLUS WITH OPTIONAL RIDER YEAR ENDED DECEMBER 31, 2008 2007 ---------------------- -------------- UNITS AMOUNT UNITS AMOUNT --------- ---------- ----- ------ AllianceBernstein VPS Small Cap Growth Portfolio Class B Issuance of Units 200 $ 156 -- $ -- Redemption of Units (3) (2) -- -- --------- ---------- ----- ------ Net increase (decrease) 197 $ 154 -- $ -- ========= ========== ===== ====== FT VIP Mutual Discovery Securities Fund Class 2 Issuance of Units 354 $ 312 -- $ -- Redemption of Units (5) (4) -- -- --------- ---------- ----- ------ Net increase (decrease) 349 $ 308 -- $ -- ========= ========== ===== ====== Goldman Sachs Tollkeeper Fund Class A Issuance of Units 175 $ 156 -- $ -- Redemption of Units (3) (2) -- -- --------- ---------- ----- ------ Net increase (decrease) 172 $ 154 -- $ -- ========= ========== ===== ====== Goldman Sachs VIT Growth Opportunities Fund Service Shares Issuance of Units 66 $ 42 -- $ -- Redemption of Units (11) (7) -- -- --------- ---------- ----- ------ Net increase (decrease) 55 $ 35 -- $ -- ========= ========== ===== ====== Goldman Sachs VIT Money Market Fund Service Shares Issuance of Units 307 $ 312 -- $ -- Redemption of Units (5) (5) -- -- --------- ---------- ----- ------ Net increase (decrease) 302 $ 307 -- $ -- ========= ========== ===== ======
(a) Fund merger. See Note 1. (b) Name changed. See Note 1. SA-46 COMMONWEALTH ANNUITY SEPARATE ACCOUNT A NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 4 - CONTRACT OWNER AND SPONSOR TRANSACTIONS (CONTINUED)
COMMONWEALTH ANNUITY PREFERRED PLUS WITH OPTIONAL RIDER (CONTINUED) YEAR ENDED DECEMBER 31, 2008 2007 ---------------------- -------------- UNITS AMOUNT UNITS AMOUNT --------- ---------- ----- ------ Janus Aspen Forty Portfolio Service Shares Issuance of Units 313 $ 312 -- $ -- Redemption of Units (5) (4) -- -- --------- ---------- ----- ------ Net increase (decrease) 308 $ 308 -- $ -- ========= ========== ===== ====== Oppenheimer Balanced Fund/VA Service Shares Issuance of Units 68 $ 42 -- $ -- Redemption of Units (12) (7) -- -- --------- ---------- ----- ------ Net increase (decrease) 56 $ 35 -- $ -- ========= ========== ===== ====== Oppenheimer Strategic Bond Fund/VA Service Shares Issuance of Units 47 $ 42 -- $ -- Redemption of Units (8) (7) -- -- --------- ---------- ----- ------ Net increase (decrease) 39 $ 35 -- $ -- ========= ========== ===== ====== Pioneer Emerging Markets VCT Portfolio Class II Issuance of Units 86 $ 42 -- $ -- Redemption of Units (15) (7) -- -- --------- ---------- ----- ------ Net increase (decrease) 71 $ 35 -- $ -- ========= ========== ===== ====== Pioneer Growth Opportunities VCT Portfolio Class I Issuance of Units 70 $ 42 -- $ -- Redemption of Units (12) (7) -- -- --------- ---------- ----- ------ Net increase (decrease) 58 $ 35 -- $ -- ========= ========== ===== ======
(a) Fund merger. See Note 1. (b) Name changed. See Note 1. SA-47 COMMONWEALTH ANNUITY SEPARATE ACCOUNT A NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 5 - PURCHASES AND SALES OF INVESTMENTS The cost of purchases and proceeds from sales of shares of the Underlying Funds of the Separate Account during the year ended December 31, 2008 were as follows:
INVESTMENT PORTFOLIO PURCHASES SALES -------------------------------------------------------------------- --------- -------- AIM V.I. Core Equity Fund Series II Shares $ 2,958 $ 508 AIM V.I. Leisure Fund Series II Shares 691 11 AllianceBernstein VPS Intermediate Bond Portfolio Class B (a)(b) 514 10 AllianceBernstein VPS International Value Portfolio Class B 13,584 1,157 AllianceBernstein VPS Small Cap Growth Portfolio Class B 2,790 764 AllianceBernstein VPS Small/Mid Cap Value Portfolio Class B 1,445 17 FT VIP Franklin Global Communications Fund Class 2 1,756 359 FT VIP Franklin Income Securities Fund Class 2 15,682 1,735 FT VIP Franklin Small Cap Value Securities Fund Class 2 11,787 1,461 FT VIP Mutual Discovery Securities Fund Class 2 26,629 2,263 FT VIP Mutual Shares Securities Fund Class 2 13,862 222 FT VIP Templeton Global Asset Allocation Fund Class 2 8,190 1,541 FT VIP Templeton Growth Securities Fund Class 2 8,531 76 Goldman Sachs Balanced Strategy Portfolio Class A 84,400 1,756 Goldman Sachs Equity Growth Strategy Portfolio Class A 30,996 3,703 Goldman Sachs Growth Strategy Portfolio Class A 646,797 302,010 Goldman Sachs Growth and Income Strategy Portfolio Class A 84,487 955 Goldman Sachs International Real Estate Securities Fund Class A 2,154 147 Goldman Sachs Real Estate Securities Fund Class A 1,075 25 Goldman Sachs Tollkeeper Fund Class A 494 7 Goldman Sachs VIT Capital Growth Fund Service Shares 26,185 1,076 Goldman Sachs VIT Core Fixed Income Fund Service Shares 8,355 115 Goldman Sachs VIT Equity Index Fund Service Shares 9,846 160 Goldman Sachs VIT Government Income Fund Service Shares 472,782 17,598 Goldman Sachs VIT Growth & Income Fund Service Shares 8,403 908 Goldman Sachs VIT Growth Opportunities Fund Service Shares 8,387 1,162 Goldman Sachs VIT Money Market Fund Service Shares 3,352,543 20,321 Goldman Sachs VIT Strategic International Equity Fund Service Shares 8,661 584 Goldman Sachs VIT Structured Small Cap Equity Fund Service Shares 1,964 76 Goldman Sachs VIT Structured U.S. Equity Fund Service Shares 1,709 495 Janus Aspen Forty Portfolio Service Shares 18,378 1,904 Janus Aspen Mid Cap Growth Portfolio Service Shares 9,019 826 Janus Aspen Perkins Mid Cap Value Portfolio Service Shares (b) 12,335 974 Janus Aspen Perkins Small Company Value Porfolio Service Shares (b) 1,007 75 Oppenheimer Balanced Fund/VA Service Shares 12,642 619 Oppenheimer Global Securities Fund/VA Service Shares 25,920 1,474 Oppenheimer Main Street Small Cap Fund(R)/VA Service Shares 20,062 8,756 Oppenheimer Strategic Bond Fund/VA Service Shares 25,166 5,739 Pioneer Cullen Value VCT Portfolio Class II 17,833 207 Pioneer Emerging Markets VCT Portfolio Class II 46,491 7,923 Pioneer Growth Opportunities VCT Portfolio Class I 603 63 Pioneer Mid Cap Value VCT Portfolio Class II 4,917 626
(a) Fund merger. See Note 1. (b) Name changed. See Note 1. SA-48 COMMONWEALTH ANNUITY SEPARATE ACCOUNT A NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 6 - FINANCIAL HIGHLIGHTS A summary of unit values, units outstanding, income and expense ratios and total return for each Sub-Account for the year ended December 31, 2008 is as follows:
AT DECEMBER 31 FOR THE YEAR ENDED DECEMBER 31 ----------------------------------- ---------------------------------------------------- UNIT UNIT INVESTMENT EXPENSE EXPENSE TOTAL TOTAL VALUE VALUE NET INCOME RATIO RATIO RETURN RETURN UNITS LOWEST HIGHEST ASSETS RATIO LOWEST HIGHEST LOWEST HIGHEST (000s) ($) (4) ($) (4) ($000s) (%) (1) (%) (2) (%) (2) (%) (3)(4) (%) (3)(4) ------ -------- -------- ------- ---------- ------- ------- ---------- ---------- AIM V.I. CORE EQUITY FUND SERIES II SHARES 2008 3 0.693802 0.695688 2 3.76 1.30 1.50 -31.37 -31.23 2007 N/A N/A N/A N/A N/A N/A N/A N/A N/A AIM V.I. LEISURE FUND SERIES II SHARES 2008 1 0.521780 0.521780 -- 1.53 1.30 1.30 -43.92 -43.92 2007 N/A N/A N/A N/A N/A N/A N/A N/A N/A ALLIANCEBERNSTEIN VPS INTERMEDIATE BOND PORTFOLIO CLASS B (A)(B) 2008 1 0.981920 0.981920 -- N/A 1.30 1.30 -6.16 -6.16 2007 N/A N/A N/A N/A N/A N/A N/A N/A N/A ALLIANCEBERNSTEIN VPS INTERNATIONAL VALUE PORTFOLIO CLASS B 2008 23 0.456895 0.458155 11 0.11 1.30 1.50 -53.99 -53.89 2007 N/A N/A N/A N/A N/A N/A N/A N/A N/A ALLIANCEBERNSTEIN VPS SMALL CAP GROWTH PORTFOLIO CLASS B 2008 3 0.548464 0.551561 1 N/A 1.30 1.70 -46.54 -46.31 2007 -- 1.027263 1.027263 -- N/A 1.30 1.30 2.73 2.73 ALLIANCEBERNSTEIN VPS SMALL/MID CAP VALUE PORTFOLIO CLASS B 2008 2 0.596207 0.598419 1 0.13 1.30 1.50 -47.02 -36.65 2007 N/A N/A N/A N/A N/A N/A N/A N/A N/A FT VIP FRANKLIN GLOBAL COMMUNICATIONS FUND CLASS 2 2008 2 0.556341 0.558093 1 N/A 1.30 1.50 -46.98 -46.85 2007 -- 1.050116 1.050116 -- N/A 1.30 1.30 5.01 5.01 FT VIP FRANKLIN INCOME SECURITIES FUND CLASS 2 2008 18 0.690336 0.693611 12 4.15 1.30 1.65 -30.82 -30.58 2007 1 0.997914 0.999093 1 N/A 1.30 1.65 -0.21 -0.09 FT VIP FRANKLIN SMALL CAP VALUE SECURITIES FUND CLASS 2 2008 16 0.617698 0.620762 10 0.61 1.30 1.50 -34.22 -33.88 2007 -- 0.938905 0.938984 -- N/A 1.30 1.50 -6.11 -6.10 FT VIP MUTUAL DISCOVERY SECURITIES FUND CLASS 2 2008 30 0.717161 0.720626 22 3.16 1.30 1.70 -29.64 -29.41 2007 2 1.019405 1.020859 2 N/A 1.30 1.65 1.94 2.09 FT VIP MUTUAL SHARES SECURITIES FUND CLASS 2 2008 20 0.611239 0.614150 12 4.05 1.30 1.65 -38.15 -37.91 2007 2 0.988216 0.989088 2 N/A 1.50 1.65 -1.18 -1.09
(a) Fund merger. See Note 1. (b) Name changed. See Note 1. SA-49 COMMONWEALTH ANNUITY SEPARATE ACCOUNT A NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 6 - FINANCIAL HIGHLIGHTS (CONTINUED)
AT DECEMBER 31 FOR THE YEAR ENDED DECEMBER 31 ----------------------------------- ---------------------------------------------------- UNIT UNIT INVESTMENT EXPENSE EXPENSE TOTAL TOTAL VALUE VALUE NET INCOME RATIO RATIO RETURN RETURN UNITS LOWEST HIGHEST ASSETS RATIO LOWEST HIGHEST LOWEST HIGHEST (000s) ($) (4) ($) (4) ($000s) (%) (1) (%) (2) (%) (2) (%) (3)(4) (%) (3)(4) ------ -------- -------- ------- ---------- ------- ------- ---------- ---------- FT VIP TEMPLETON GLOBAL ASSET ALLOCATION FUND CLASS 2 2008 8 0.771384 0.772765 6 7.46 1.30 1.50 -26.21 -26.13 2007 N/A N/A N/A N/A N/A N/A N/A N/A N/A FT VIP TEMPLETON GROWTH SECURITIES FUND CLASS 2 2008 13 0.566623 0.569321 7 1.56 1.30 1.65 -43.28 -43.07 2007 1 0.998926 1.000113 1 N/A 1.30 1.65 -0.11 0.01 GOLDMAN SACHS BALANCED STRATEGY PORTFOLIO CLASS A 2008 98 0.791631 0.795404 78 6.11 1.30 1.65 -21.81 -21.44 2007 1 1.012447 1.012447 1 8.26 1.30 1.30 1.24 1.24 GOLDMAN SACHS EQUITY GROWTH STRATEGY PORTFOLIO CLASS A 2008 31 0.566365 0.567950 18 4.36 1.30 1.50 -43.57 -43.35 2007 1 1.002630 1.002630 1 15.15 1.30 1.30 0.26 0.26 GOLDMAN SACHS GROWTH STRATEGY PORTFOLIO CLASS A 2008 435 0.599860 0.601740 261 9.86 1.30 1.50 -40.31 -40.19 2007 2 1.005009 1.006034 2 9.56 1.30 1.50 0.50 0.60 GOLDMAN SACHS GROWTH AND INCOME STRATEGY PORTFOLIO CLASS A 2008 95 0.675998 0.679211 65 4.53 1.30 1.65 -33.15 -32.91 2007 1 1.011150 1.012348 1 11.67 1.30 1.65 1.12 1.23 GOLDMAN SACHS INTERNATIONAL REAL ESTATE SECURITIES FUND CLASS A 2008 3 0.449219 0.450449 1 0.51 1.30 1.50 -52.85 -52.76 2007 N/A N/A N/A N/A N/A N/A N/A N/A N/A GOLDMAN SACHS REAL ESTATE SECURITIES FUND CLASS A 2008 2 0.534193 0.535679 1 2.46 1.30 1.50 -41.87 -41.76 2007 -- 0.918981 0.918981 -- N/A 1.50 1.50 -8.10 -8.10 GOLDMAN SACHS TOLLKEEPER FUND CLASS A 2008 1 0.610942 0.613805 -- N/A 1.30 1.70 -46.40 -46.22 2007 N/A N/A N/A N/A N/A N/A N/A N/A N/A GOLDMAN SACHS VIT CAPITAL GROWTH FUND SERVICE SHARES 2008 38 0.584926 0.586461 22 N/A 1.30 1.50 -42.83 -42.70 2007 7 1.023063 1.023559 7 0.21 1.30 1.50 2.31 2.36 GOLDMAN SACHS VIT CORE FIXED INCOME FUND SERVICE SHARES 2008 10 0.927807 0.932213 9 5.13 1.30 1.65 -10.09 -9.77 2007 2 1.031942 1.033177 2 4.25 1.30 1.65 3.19 3.32 GOLDMAN SACHS VIT EQUITY INDEX FUND SERVICE SHARES 2008 12 0.614343 0.617274 8 4.67 1.30 1.65 -38.32 -38.02 2007 -- 0.995958 0.995958 -- N/A 1.65 1.65 -0.40 -0.40
(a) Fund merger. See Note 1. (b) Name changed. See Note 1. SA-50 COMMONWEALTH ANNUITY SEPARATE ACCOUNT A NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 6 - FINANCIAL HIGHLIGHTS (CONTINUED)
AT DECEMBER 31 FOR THE YEAR ENDED DECEMBER 31 ----------------------------------- ---------------------------------------------------- UNIT UNIT INVESTMENT EXPENSE EXPENSE TOTAL TOTAL VALUE VALUE NET INCOME RATIO RATIO RETURN RETURN UNITS LOWEST HIGHEST ASSETS RATIO LOWEST HIGHEST LOWEST HIGHEST (000s) ($) (4) ($) (4) ($000s) (%) (1) (%) (2) (%) (2) (%) (3)(4) (%) (3)(4) ------ -------- -------- ------- ---------- ------- ------- ---------- ---------- GOLDMAN SACHS VIT GOVERNMENT INCOME FUND SERVICE SHARES 2008 431 1.050848 1.053752 453 4.13 1.30 1.50 1.60 1.81 2007 N/A N/A N/A N/A N/A N/A N/A N/A N/A GOLDMAN SACHS VIT GROWTH & INCOME FUND SERVICE SHARES 2008 15 0.637410 0.639148 10 3.32 1.30 1.50 -35.40 -35.25 2007 6 0.986815 0.987135 6 2.95 1.30 1.50 -1.32 -1.29 GOLDMAN SACHS VIT GROWTH OPPORTUNITIES FUND SERVICE SHARES 2008 12 0.593210 0.596918 7 N/A 1.30 1.70 -41.87 -41.59 2007 -- 1.021995 1.021995 -- N/A 1.30 1.30 2.20 2.20 GOLDMAN SACHS VIT MONEY MARKET FUND SERVICE SHARES 2008 3,272 1.015719 1.021315 3,333 1.61 1.30 1.70 0.51 0.93 2007 -- 1.011926 1.011926 -- 1.98 1.30 1.30 1.19 1.19 GOLDMAN SACHS VIT STRATEGIC INTERNATIONAL EQUITY FUND SERVICE SHARES 2008 12 0.548259 0.549400 7 12.81 1.30 1.50 -46.90 -46.83 2007 -- 1.033191 1.033191 -- 8.97 1.30 1.30 3.32 3.32 GOLDMAN SACHS VIT STRUCTURED SMALL CAP EQUITY FUND SERVICE SHARES 2008 3 0.606641 0.608359 2 1.42 1.30 1.50 -35.23 -35.09 2007 -- 0.936782 0.937258 -- 1.15 1.30 1.50 -6.32 -6.27 GOLDMAN SACHS VIT STRUCTURED U.S. EQUITY FUND SERVICE SHARES 2008 1 0.600544 0.600544 1 1.95 1.30 1.30 -38.00 -38.00 2007 N/A N/A N/A N/A N/A N/A N/A N/A N/A JANUS ASPEN FORTY PORTFOLIO SERVICE SHARES 2008 21 0.643656 0.647162 13 0.01 1.30 1.70 -45.28 -45.06 2007 -- 1.177720 1.177720 -- 0.58 1.30 1.30 17.77 17.77 JANUS ASPEN MID CAP GROWTH PORTFOLIO SERVICE SHARES 2008 14 0.594067 0.594372 8 0.60 1.30 1.50 -44.52 -44.52 2007 -- 1.070946 1.070946 -- 0.23 1.50 1.50 7.09 7.09 JANUS ASPEN PERKINS MID CAP VALUE PORTFOLIO SERVICE SHARES (B) 2008 15 0.709743 0.711528 10 1.75 1.30 1.50 -28.97 -28.84 2007 -- 0.999382 1.001880 -- 5.70 1.30 1.50 -0.06 0.19 JANUS ASPEN PERKINS SMALL COMPANY VALUE PORFOLIO SERVICE SHARES (B) 2008 1 0.585696 0.586857 1 N/A 1.30 1.50 -36.87 -36.79 2007 N/A N/A N/A N/A N/A N/A N/A N/A N/A OPPENHEIMER BALANCED FUND/VA SERVICE SHARES 2008 19 0.549612 0.552244 11 0.27 1.30 1.70 -44.62 -44.40 2007 -- 0.993461 0.993461 -- N/A 1.30 1.30 -0.65 -0.65
(a) Fund merger. See Note 1. (b) Name changed. See Note 1. SA-51 COMMONWEALTH ANNUITY SEPARATE ACCOUNT A NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 6 - FINANCIAL HIGHLIGHTS (CONTINUED)
AT DECEMBER 31 FOR THE YEAR ENDED DECEMBER 31 ----------------------------------- ---------------------------------------------------- UNIT UNIT INVESTMENT EXPENSE EXPENSE TOTAL TOTAL VALUE VALUE NET INCOME RATIO RATIO RETURN RETURN UNITS LOWEST HIGHEST ASSETS RATIO LOWEST HIGHEST LOWEST HIGHEST (000s) ($) (4) ($) (4) ($000s) (%) (1) (%) (2) (%) (2) (%) (3)(4) (%) (3)(4) ------ -------- -------- ------- ---------- ------- ------- ---------- ---------- OPPENHEIMER GLOBAL SECURITIES FUND/VA SERVICE SHARES 2008 39 0.589142 0.589796 23 0.47 1.30 1.50 -41.16 -41.11 2007 3 1.001358 1.001458 3 N/A 1.30 1.50 0.14 0.15 OPPENHEIMER MAIN STREET SMALL CAP FUND(R)/VA SERVICE SHARES 2008 17 0.582903 0.584499 10 0.33 1.30 1.50 -38.84 -38.72 2007 2 0.953738 0.953738 2 N/A 1.30 1.30 -4.63 -4.63 OPPENHEIMER STRATEGIC BOND FUND/VA SERVICE SHARES 2008 20 0.879255 0.884027 17 2.48 1.30 1.70 -15.96 -15.61 2007 -- 1.046310 1.046900 -- N/A 1.30 1.65 4.63 4.69 PIONEER CULLEN VALUE VCT PORTFOLIO CLASS II 2008 22 0.668980 0.671246 14 0.57 1.30 1.50 -33.56 -33.42 2007 -- 1.008238 1.008238 -- N/A 1.30 1.30 0.82 0.82 PIONEER EMERGING MARKETS VCT PORTFOLIO CLASS II 2008 56 0.473484 0.475050 27 0.07 1.30 1.70 -58.88 -58.84 2007 1 1.152157 1.154235 1 N/A 1.30 1.50 15.22 15.42 PIONEER GROWTH OPPORTUNITIES VCT PORTFOLIO CLASS I 2008 1 0.594052 0.597747 -- N/A 1.30 1.70 -36.60 -36.30 2007 -- 0.938337 0.938337 -- N/A 1.30 1.30 -6.17 -6.17 PIONEER MID CAP VALUE VCT PORTFOLIO CLASS II 2008 6 0.630722 0.633722 4 0.83 1.30 1.65 -34.85 -34.62 2007 1 0.968078 0.969228 1 N/A 1.30 1.65 -3.19 -3.08
(a) Fund merger. See Note 1. (b) Name changed. See Note 1. (1) These amounts represent the dividends, excluding distributions of capital gains, received by the Sub-Account from the Underlying Fund, net of management fees assessed by the fund manager, divided by the average net assets. These ratios exclude those expenses, such as mortality and expense charges, that result in direct reductions in the unit values. The recognition of investment income by the Sub-Account is affected by the timing of the declaration of dividends by the Underlying Fund in which the Sub-Accounts invest. (2) These ratios represent the annualized contract expenses of the Separate Account, consisting primarily of mortality and expense charges, for each period indicated. The ratios include only those expenses that result in a direct reduction to unit values. Charges made directly to contract owner accounts through the redemption of units and expenses of the Underlying Fund are excluded. (3) These amounts represent the total return for the periods indicated, including changes in the value of the Underlying Fund, and reflect deductions for all items included in the expense ratio. The total return does not include any expenses assessed through the redemption of units; inclusion of these expenses in the calculation would result in a reduction in the total return presented. Investment options with a date notation indicate the effective date of that investment option in the variable account. The total return is calculated for the period indicated or from the effective date through the end of the reporting period. (4) The highest unit value and total return correspond with the product with the lowest expense ratio. The lowest unit value and total return correspond with the product with the highest expense ratio. SA-52 COMMONWEALTH ANNUITY SEPARATE ACCOUNT A NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 7 - SUBSEQUENT EVENT The Board of Trustees of Franklin Templeton Variable Insurance Products Trust approved a proposal to liquidate the shares of the FT VIP Franklin Global Communications Fund Class 2. It is anticipated that the fund will be liquidated on or about April 24, 2009. Any Contract Owners in this Sub-Account will be able to redirect their investments to the other Sub-Accounts offered. SA-53 PART C. OTHER INFORMATION ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS (a) FINANCIAL STATEMENTS Financial Statements Included in Part A None Financial Statements for Commonwealth Annuity and Life Insurance Company (the "Company" and "Depositor") and Financial Statements for Commonwealth Annuity Separate Account A of Commonwealth Annuity and Life Insurance Company Financial Statements Included in Part B Financial Statements Included in Part C None (b) EXHIBITS EXHIBIT 1 Vote of Board of Directors Authorizing Establishment of Registrant dated February 9, 2007 was previously filed on March 2, 2007 in the Initial Registration Statement (File Nos. 333-141045/811-22024), and is incorporated by reference herein. EXHIBIT 2 Not Applicable. Pursuant to Rule 26a-2, the Insurance Company may hold the assets of the Registrant not pursuant to a trust indenture or other such instrument. EXHIBIT 3 (a) Service Agreement dated May 1, 2008 by and between the Epoch Securities, Inc., Commonwealth Annuity and Life Insurance Company, First Allmerica Financial Life Insurance Company and the "Broker-Dealer" was previously filed on April 25, 2008 in Registrant's Post-Effective Amendment No. 29 (Registration Statement No. 33-39702/811-6293), and is incorporated by reference herein. Distribution Agreement and [Distributor] was previously filed on July 18, 2007 in Pre-Effective Amendment No. 1 to Registration Statement (File Nos. 333-141045/811-22024), and is incorporated by reference herein. Form of Distribution Agreement and [broker/dealer] was previously filed on March 2, 2007 in the Initial Registration Statement (File Nos. 333-141045/811-22024), and is incorporated by reference herein. (b) Service Agreement with broker-dealers is was previously filed on July 18, 2007 in Pre-Effective Amendment No. 1 to Registration Statement (File Nos. 333-141045/811-22024), and is incorporated by reference herein. Form of Service Agreement with broker-dealers was previously filed on March 2, 2007 in the Initial Registration Statement (File Nos. 333-141045/811-22024), and is incorporated by reference herein. (c) Form of Selling Agreement by and between Epoch Securities, Inc. ("Epoch"), Commonwealth Annuity and Life Insurance Company and "Broker-Dealer" was previously filed on April 25, 2008 in Post-Effective Amendment No. 1 to Registration Statement (File Nos. 333-141045/811-22024), and is incorporated by reference herein. (d) Underwriting and Administrative Service Agreement dated January 22, 2008 between and among Commonwealth Annuity and Life Insurance Company and Epoch Securities, Inc. was previously filed on April 25, 2008 in Registrant's Post-Effective Amendment No. 29 (Registration Statement No. 33-39702/811-6293), and is incorporated by reference herein. EXHIBIT 4 (a) Policy (3038-07) is was previously filed on July 18, 2007 in Pre-Effective Amendment No. 1 to Registration Statement (File Nos. 333-141045/811-22024), and is incorporated by reference herein. Form of Policy was previously filed on March 2, 2007 in the Initial Registration Statement (File Nos. 333-141045/811-22024), and is incorporated by reference herein. (b) No Withdrawal Charge Rider (4002-07) was previously filed on July 18, 2007 in Pre-Effective Amendment No. 1 to Registration Statement (File Nos. 333-141045/811-22024), and is incorporated by reference herein. Form of No Withdrawal Charge Rider was previously filed on March 2, 2007 in the Initial Registration Statement (File Nos. 333-141045/811-22024), and is incorporated by reference herein. (c) Extended Care Waiver Rider (4009-07) (Nursing Home Rider Endorsement) was previously filed on July 18, 2007 in Pre-Effective Amendment No. 1 to Registration Statement (File Nos. 333-141045/811-22024), and is incorporated by reference herein. Form of Nursing Home Rider Endorsement - Extended Care Waiver on Application of Withdrawal Charges was previously filed on March 2, 2007 in the Initial Registration Statement (File Nos. 333-141045/811-22024), and is incorporated by reference herein. (d) Disability Waiver Rider (4008-07) was previously filed on July 18, 2007 in Pre-Effective Amendment No. 1 to Registration Statement (File Nos. 333-141045/811-22024), and is incorporated by reference herein. Form of Disability Rider was previously filed on March 2, 2007 in the Initial Registration Statement (File Nos. 333-141045/811-22024), and is incorporated by reference herein. (e) Texas Optional Retirement Program Rider (4010-07) was previously filed on July 18, 2007 in Pre-Effective Amendment No. 1 to Registration Statement (File Nos. 333-141045/811-22024), and is incorporated by reference herein. Form of Texas Optional Retirement Program Rider was previously filed on March 2, 2007 in the Initial Registration Statement (File Nos. 333-141045/811-22024), and is incorporated by reference herein. (f) Qualified Plan Rider (401a) (4011-07) was previously filed on July 18, 2007 in Pre-Effective Amendment No. 1 to Registration Statement (File Nos. 333-141045/811-22024), and is incorporated by reference herein. Form of Qualified Plan Rider (401a) was previously filed on March 2, 2007 in the Initial Registration Statement (File Nos. 333-141045/811-22024), and is incorporated by reference herein. (g) TSA-Endorsement 4012-07 (Rev. 12-08) will be filed in April of 2009 in Registrant's Post-Effective Amendment No. 30 (Registration Statement No. 33-39702/811-6293), and is incorporated by reference herein. 333-141045/811-22024), and is incorporated by reference herein. Form of Tax Sheltered Annuity Rider (403b) was previously filed on March 2, 2007 in the Initial Registration Statement (File Nos. 333-141045/811-22024), and is incorporated by reference herein. (h) GLWB Rider - Single Life - Advantage IV (4003-07) was previously filed on July 18, 2007 in Pre-Effective Amendment No. 1 to Registration Statement (File Nos. 333-141045/811-22024), and is incorporated by reference herein. Form of GLWB Rider - Single Life - Advantage IV was previously filed on March 2, 2007 in the Initial Registration Statement (File Nos. 333-141045/811-22024), and is incorporated by reference herein. (i) GLWB Rider - Joint Life - Advantage IV (4004-07) was previously filed on July 18, 2007 in Pre-Effective Amendment No. 1 to Registration Statement (File Nos. 333-141045/811-22024), and is incorporated by reference herein. Form of GLWB Rider - Joint Life - Advantage IV was previously filed on March 2, 2007 in the Initial Registration Statement (File Nos. 333-141045/811-22024), and is incorporated by reference herein. (j) ADV IV Step-Up Death Benefit Rider (4001-07) was previously filed on July 18, 2007 in Pre-Effective Amendment No. 1 to Registration Statement (File Nos. 333-141045/811-22024), and is incorporated by reference herein. Form of Step-Up Rider for Advantage IV was previously filed on March 2, 2007 in the Initial Registration Statement (File Nos. 333-141045/811-22024), and is incorporated by reference herein. (k) 457 Rider (4013-07) was previously filed on July 18, 2007 in Pre-Effective Amendment No. 1 to Registration Statement (File Nos. 333-141045/811-22024), and is incorporated by reference herein. (l) IRA Rider (4014-07) was previously filed on July 18, 2007 in Pre-Effective Amendment No. 1 to Registration Statement (File Nos. 333-141045/811-22024), and is incorporated by reference herein. (m) Simple IRA Rider (4015-07) was previously filed on July 18, 2007 in Pre-Effective Amendment No. 1 to Registration Statement (File Nos. 333-141045/811-22024), and is incorporated by reference herein. (n) Roth IRA Rider (4016-07) was previously filed on July 18, 2007 in Pre-Effective Amendment No. 1 to Registration Statement (File Nos. 333-141045/811-22024), and is incorporated by reference herein. EXHIBIT 5 Form of Application (Advantage IV- AD-401) was previously filed on July 18, 2007 in Pre-Effective Amendment No. 1 to Registration Statement (File Nos. 333-141045/811-22024), and is incorporated by reference herein. Form of Application (Advantage IV and Preferred Plus) was previously filed on March 2, 2007 in the Initial Registration Statement (File Nos. 333-141045/811-22024), and is incorporated by reference herein. EXHIBIT 6 Articles of Organization and Bylaws, as amended of the Company, effective as of September 1, 2006 was previously filed on March 2, 2007 in the Initial Registration Statement (File Nos. 333-141045/811-22024), and is incorporated by reference herein. EXHIBIT 7 Amendment No. 1 and Reinsurance Agreement between Columbia Capital Life Reinsurance Company and Commonwealth Annuity and Life Insurance Company effective January 1, 2008 was previously filed on April 25, 2008 in Registrant's Post-Effective Amendment No. 29 (Registration Statement No. 33-39702/811-6293), and is incorporated by reference herein. EXHIBIT 8(a) Third Party Agreement (TPA) between Security Benefit Life Insurance Co, Security Distributors, Inc and The Goldman Sachs Group, Inc. was previously filed on February 10, 2006 in Registrant's Post-Effective Amendment No. 26 (Registration Statement No. 33-39702/811-6293, and is incorporated by reference herein. EXHIBIT 8(b) Directors' Powers of Attorney are filed herewith. EXHIBIT 9 Opinion of Counsel was previously filed on April 25, 2008 in Registrant's Post-Effective Amendment No. 1 (Registration Nos. 333-141045/811-22024), and is incorporated by reference herein. EXHIBIT 10 Consent of Independent Registered Public Accounting Firm is filed herewith. EXHIBIT 11 None. EXHIBIT 12 None. EXHIBIT 13(a) Amended and Restated Participation Agreement by and among AIM Variable Insurance Funds, Inc., A I M Distributors, Inc. And Commonwealth Annuity And Life Insurance Company dated July 31, 2007 was previously filed on April 25, 2008 in Registrant's Post-Effective Amendment No. 29 (Registration Statement No. 33-39702/811-6293), and is incorporated by reference herein. Form of Amendment dated August 1, 2007 to the AIM Participation Agreement was previously filed on July 18, 2007 in Pre-Effective Amendment No. 1 to Registration Statement (File Nos. 333-141045/811-22024), and is incorporated by reference herein. Amendment dated January 1, 2003 to the AIM Participation Agreement was previously filed on April 28, 2003 in Post-Effective Amendment No. 23 of Registration Statement No. 33-39702/811-6293, and is incorporated by reference herein. Form of Amendment #7 dated May 1, 2002 to the AIM Participation Agreement was previously filed in April 19, 2002 in Post-Effective Amendment No. 22 of Registration Statement No. 33-39702/811-6293, and is incorporated by reference herein. Form of Amendment #6 to the AIM Participation Agreement was previously filed on April 19, 2001 in Post-Effective Amendment No. 19 of Registration Statement No. 33-39702/811-6293, and is incorporated by reference herein. Form of Amendment to AIM Participation Agreement was previously filed in April 2000 in Post-Effective Amendment No. 19 of Registration Statement No. 33-44830/811-6293 and is incorporated by reference herein. Participation Agreement with AIM Variable Insurance Funds, Inc. was previously filed on August 27, 1998 in Post-Effective Amendment No. 3 in Registration Statement No. 333-11377/811-7799, and is incorporated by reference herein. EXHIBIT 13(b) Amended And Restated Participation Agreement among Commonwealth Annuity and Life Insurance Company, AllianceBernstein L.P. and AllianceBernstein Investments, Inc. dated as of August 1, 2007 was previously filed on April 25, 2008 in Registrant's Post-Effective Amendment No. 29 (Registration Statement No. 33-39702/811-6293), and is incorporated by reference herein. Form of Amended and Restated Participation Agreement among Commonwealth Annuity and Life Insurance Company, Alliance Capital Management L.P., and Alliance Fund Distributors, Inc. was previously filed on July 18, 2007 in Pre-Effective Amendment No. 1 to Registration Statement (File Nos. 333-141045/811-22024), and is incorporated by reference herein. EXHIBIT 13(c) Amendment No. 1 dated June 5, 2007 to Amended and Restated Participation Agreement between Franklin Templeton Variable Insurance Products Trust, Franklin/Templeton Distributors, Inc., and Commonwealth Annuity and Life Insurance Company was previously filed on April 25, 2008 in April of 2008 in Registrant's Post-Effective Amendment No. 29 (Registration Statement No. 33-39702/811-6293), and is incorporated by reference herein. Form of Amendment dated August 1, 2007 and the Amended and Restated Participation Agreement dated September 25, 2006 with Franklin Templeton Variable Insurance Products Trust, Franklin/Templeton Distributors, Inc., and Commonwealth Annuity and Life Insurance was previously filed on July 18, 2007 in Pre-Effective Amendment No. 1 to Registration Statement (File Nos. 333-141045/811-22024), and is incorporated by reference herein. EXHIBIT 13(d) Amended And Restated Participation Agreement dated August 1, 2007 by and between Goldman Sachs Variable Insurance Trust, Goldman, Sachs & Co., and Commonwealth Annuity And Life Insurance Company was previously filed on April 25, 2008 in Registrant's Post-Effective Amendment No. 29 (Registration Statement No. 33-39702/811-6293), and is incorporated by reference herein. Form of Amendment dated August 1, 2007 to the Participation Agreement dated January 2, 2006 between Goldman Sachs Variable Insurance Trust, Goldman, Sachs & Co, and Allmerica Financial Life Insurance and Annuity Company was previously filed on July 18, 2007 in Pre-Effective Amendment No. 1 to Registration Statement (File Nos. 333-141045/811-22024), and is incorporated by reference herein. Participation Agreement dated January 2, 2006 between Goldman Sachs Variable Insurance Trust, Goldman, Sachs & Co, and Allmerica Financial Life Insurance and Annuity Company was previously filed on April 28, 2006 in Registrant's Post-Effective Amendment No. 27 (Registration Statement No. 33-39702/811-6293), and is incorporated by reference herein. EXHIBIT 13(e) Participation Agreement dated August 1, 2007 by and between Goldman Sachs Trust, Goldman, Sachs & Co. and Commonwealth Annuity and Life Insurance Company was previously filed on April 25, 2008 in Post-Effective Amendment No. 1 to Registration Statement (File Nos. 333-141045/811-22024), and is incorporated by reference herein. Form of Participation Agreement dated August 1, 2007 with Goldman Sachs Trust was previously filed on July 18, 2007 in Pre-Effective Amendment No. 1 to Registration Statement (File Nos. 333-141045/811-22024), and is incorporated by reference herein. EXHIBIT 13(f) Form of Amendment dated August 1, 2007 to the Participation Agreement with Janus was previously filed on July 18, 2007 in Pre-Effective Amendment No. 1 to Registration Statement (File Nos. 333-141045/811-22024), and is incorporated by reference herein. Amendment dated February 25, 2000 to the Participation Agreement with Janus was previously filed in April 19, 2002 in Post-Effective Amendment No. 22 of Registration Statement No. 33-39702/811-6293, and is incorporated by reference herein. Participation Agreement with Janus was previously filed on April 21, 2000 in Post-Effective Amendment No. 1 of Registration Statement No. 333-87099/811-6293 and is incorporated by reference herein. EXHIBIT 13(g) Amendment dated August 28, 2007 to the Amended and Restated Participation Agreement dated as of May 1, 2000, by and among Oppenheimer Variable Account Funds, Oppenheimerfunds, Inc. and Commonwealth Annuity and Life Insurance Company as amended May 1, 2002 will be filed in April of 2009 in Registrant's Post-Effective Amendment No. 30 (Registration Statement No. 33-39702/811-6293), and is incorporated by reference herein. Form of Amendment dated August 28, 2007 to the Amended and Restated Participation Agreement dated as of May 1, 2000, by and among Oppenheimer Variable Account Funds, Oppenheimerfunds, Inc. and Commonwealth Annuity and Life Insurance Company as amended May 1, 2002 was previously filed on April 25, 2008 in Registrant's Post-Effective Amendment No. 29 (Registration Statement No. 33-39702/811-6293), and is incorporated by reference herein. Form of Amendment dated August 1, 2007 to the Participation Agreement with Oppenheimer Variable Account Funds was previously filed on July 18, 2007 in Pre-Effective Amendment No. 1 to Registration Statement (File Nos. 333-141045/811-22024), and is incorporated by reference herein. Amendment dated May 1, 2002 to the Participation Agreement with Oppenheimer Variable Account Funds was previously filed on April 28, 2003 in Post-Effective Amendment No. 23 of Registration Statement No. 33-39702/811-6293, and is incorporated by reference herein. Form of Amendment dated May 1, 2002 to the Participation Agreement with Oppenheimer Variable Account Funds was previously filed in April 19, 2002 in Post-Effective Amendment No. 22 of Registration Statement No. 33-39702/811-6293, and is incorporated by reference herein. Participation Agreement with Oppenheimer Variable Account Funds was previously filed on August 27, 1998 in Post-Effective Amendment No. 3, and is incorporated by reference herein. EXHIBIT 13(h) Participation Agreement dated September 19, 2007 among Pioneer Variable Contracts Trust, Commonwealth Annuity and Life Insurance Company Pioneer Investment Management, Inc. and Pioneer Funds Distributor, Inc. was previously filed on April 25, 2008 in Post-Effective Amendment No. 1 to Registration Statement (File Nos. 333-141045/811-22024), and is incorporated by reference herein. Form of Participation Agreement among Pioneer Variable Contracts Trust, Commonwealth Annuity and Lie Insurance Company, Pioneer Investment Management, Inc. and Pioneer Funds Distributor, Inc. dated August 1, 2007 was previously filed on July 18, 2007 in Pre-Effective Amendment No. 1 to Registration Statement (File Nos. 333-141045/811-22024), and is incorporated by reference herein. ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR The principal business address of most the following Directors and Officers* is: 85 Broad Street New York, NY 10004 The principal business address of the other following Directors and Officers is: 132 Turnpike Road, Suite 210 Southborough, MA 01772. The principal business address of the following Director** is: 1 New York Plaza New York, NY 10004 The principal business address of the following Officer*** is: 101 Constitution Avenue, NW, Suite 1000 East Washington, DC 20001 DIRECTORS AND PRINCIPAL OFFICERS OF THE COMPANY
NAME POSITION WITH COMPANY ----- --------------------- Allan S. Levine* Chairman of the Board Manda J. D'Agata* Director, Vice President and Treasurer Nicholas Helmuth von Moltke* Director and Senior Vice President J. William McMahon* Director Donald Mullen** Director Michael A. Reardon Director, President, and Chief Executive Officer Michael S. Rotter* Director Laura Bryant Vice President and Chief Operating Officer John Fowler* Vice President Jane S. Grosso Vice President and Controller Jonathan Hecht* Vice President and Actuary Justin MacNeil Vice President Eleanor L. Kitzman*** Senior Vice President and Director of Regulatory Affairs Timothy D. Rogers Vice President and Chief Financial Officer Samuel Ramos* Vice President and Assistant Corporate Secretary Scott D. Silverman Vice President, General Counsel and Corporate Secretary Alan Akihiro Yamamura* Vice President and Chief Risk Officer Margot K. Wallin Vice President and Chief Compliance Officer
ITEM 26. PERSONS UNDER COMMON CONTROL WITH REGISTRANT THE GOLDMAN SACHS GROUP, INC.
NUMBER OF PARENT PARENT ENTITY DESCRIPTION PURPOSE DOMICILE OWNERS NAME OWNERSHIP -------------------------- --------------------------------- ------------ ------ ------------------------------- --------- GOLDMAN, SACHS & CO. Broker/dealer engaging in New York 2 THE GOLDMAN, SACHS & CO. L.L.C. 0.2000% proprietary & agency transactions in fixed income, equity and currency THE GOLDMAN SACHS GROUP, INC. 99.8000% markets; principal provider --------- of the Firm's investment 100.0000% banking services; primary dealer effective 12/74; member NYSE since 1/1/27. THE GOLDMAN, SACHS & CO. General partner of Goldman, Delaware 1 THE GOLDMAN SACHS GROUP, INC. 100.0000% L.L.C. Sachs & Co. THE J. ARON CORPORATION General partner of J. Aron Delaware 1 THE GOLDMAN SACHS GROUP, INC. 100.0000% & Company and J. Aron Holdings L.P. J. ARON HOLDINGS, L.P. General partner of J. Aron Delaware 2 THE J. ARON CORPORATION 0.2000% & Company. THE GOLDMAN SACHS GROUP, INC. 99.8000% --------- 100.0000% THE GOLDMAN SACHS GROUP, Firm's ultimate parent Delaware 0 0.0000% INC. company; leading global investment banking and securities firm that provides a wide range of services worldwide to a substantial and diversified client base. EPOCH SECURITIES, INC. An investment bank that Delaware 1 THE GOLDMAN SACHS GROUP, INC. 100.0000% uses sophisticated technology to connect to individual investors in the United States. SCADBURY UK LIMITED Holding Company England 1 GOLDMAN SACHS GROUP 100.0000% HOLDINGS (U.K.) GS FUNDING EUROPE LIMITED Established as part of an United 1 GS FINANCIAL SERVICES II, LLC 100.0000% SSG Structured Investing Kingdom Group transaction. AMAGANSETT II ASSETS Established as part of an Cayman 1 GS FUNDING EUROPE LIMITED 100.0000% LIMITED SSG Structured Investing Islands Group transaction. SCADBURY FUNDING LIMITED This entity was set up as Cayman 1 SCADBURY UK LIMITED 100.0000% part of an AMSSG Structured Islands Investing Group transaction AMAGANSETT FUNDING LIMITED Established as part of an Cayman 1 GS FUNDING EUROPE LIMITED 100.0000% SSG Structured Investing Islands Group transaction. AMAGANSETT ASSETS This entity was set up as England 2 GS FUNDING EUROPE LIMITED 99.0000% part of an AMSSG Structured Investing Group transaction AMAGANSETT FUNDING LIMITED 1.0000% --------- 100.0000% SCADBURY II ASSETS LIMITED This entity was set up as Cayman 1 SCADBURY UK LIMITED 100.0000% part of an AMSSG Structured Islands Investing Group transaction GSFS PRINCIPAL STRATEGIES part of the Killingholme Cayman 1 GS FINANCIAL SERVICES L.P. 100.0000% restructure in the AmSSG Islands (DEL) business GSTM LLC capital management Delaware 1 THE GOLDMAN SACHS GROUP, INC. 100.0000% GS SERVICIOS FINANCIEROS Trade certain products (OTC Mexico 2 GOLDMAN SACHS GROUP Y 0.0020% DE MEXICO derivatives and Lending COMPANIA, S. DE R.L. DE C.V. respectively) with local Mexican clients that are prohibited from trading GS FINANCIAL SERVICES L.P. 99.9980% with foreign (DEL) counterparties. (E.g. local --------- govt bodies etc). 100.0000% INDEPENDENCE POWER Retail marketer licensed to Delaware 1 J. ARON & COMPANY 100.0000% MARKETING, LLC sell power in the state of Maine. GSTP LLC Aircraft ownership and Delaware 1 THE GOLDMAN SACHS GROUP, INC. 100.0000% leasing GOLDMAN SACHS FINANCIAL OTC derivatives dealer Delaware 1 THE GOLDMAN SACHS GROUP, INC. 100.0000% MARKETS L.L.C. (also commonly known as BD Lite). It currently engages in OTC options on the S&P 500 Index. GSJC 50 HUDSON URBAN Lessee and construction New Jersey 1 THE GOLDMAN SACHS GROUP, INC. 100.0000% RENEWAL L.L.C. agent for construction project in Jersey City. GSJC LAND L.L.C. Land owner for construction Delaware 1 THE GOLDMAN SACHS GROUP, INC. 100.0000% project in Jersey City. GSJC 30 HUDSON URBAN Lessee and construction New Jersey 1 THE GOLDMAN SACHS GROUP, INC. 100.0000% RENEWAL L.L.C. agent for construction project in Jersey City. GSJC MASTER LESSEE L.L.C. Jersey City Property Delaware 1 THE GOLDMAN SACHS GROUP, INC. 100.0000% MLK DRIVE URBAN RENEWAL Lessee and construction New Jersey 1 THE GOLDMAN SACHS GROUP, INC. 100.0000% L.L.C. agent for construction project in Jersey City. PH PIER MANAGEMENT LLC Purchasing, investing in, Delaware 1 GSJC LAND L.L.C. 100.0000% financing, selling, leasing and otherwise dealing with direct and indirect interests in real estate assets (including mortgage loans) and in companies or entities owning, leasing and otherwise operating and maintaining such asset REP ELD GEN-PAR, L.L.C. To serve as General Partner Delaware 1 THE GOLDMAN SACHS GROUP, INC. 100.0000% of REP ELD Real Estate, L.P. CALAIS LNG PROJECT To hold physical Delaware 1 GS POWER HOLDINGS LLC 100.0000% COMPANY, LLC commodities development project. ARCHON GROUP, L.P. Real estate property/asset Delaware 2 THE GOLDMAN SACHS GROUP, INC. 99.0000% manager ARCHON GEN-PAR, INC. 1.0000% --------- 100.0000% ARCHON GEN-PAR, INC. 1% general partner of Delaware 1 THE GOLDMAN SACHS GROUP, INC. 100.0000% Archon Group, L.P. ARCHON GROUP ITALIA, Provides consulting Italy 1 ARCHON INTERNATIONAL, INC. 100.0000% S.R.L. services relating to assignment, acquisition, evaluation and management of immovable assets and/or assignment & management of credits. ARCHON INTERNATIONAL, INC. Holding company for Archon Delaware 1 THE GOLDMAN SACHS GROUP, INC. 100.0000% Italy and Archon Germany ARCHON GROUP DEUTSCHLAND Consultancy on economic and Germany 1 ARCHON INTERNATIONAL, INC. 100.0000% GmbH technical aspects of investment in real estate. Set up to support Archon's activities in Germany.
GOLDMAN SACHS COMMERCIAL To invest / orignate Delaware 2 GOLDMAN SACHS COMMERCIAL 1.0000% MORTGAGE CAPITAL, L.P. commercial mortgagesTo MORTGAGE CAPITAL, LLC invest / orignate commercial mortgages GOLDMAN SACHS BANK USA 99.0000% --------- 100.0000% GOLDMAN SACHS COMMERCIAL general partner of Goldman Delaware 1 GOLDMAN SACHS BANK USA 100.0000% MORTGAGE CAPITAL, LLC Sachs Commerical Mortgage Capital, L.P. SPF ONE IL, LLC Serve as intermediate Delaware 1 MTGLQ INVESTORS, L.P. 100.0000% (intercompany) lender to GS&Co as part of non-recourse financing transaction. Strategic capital planning entity. GS&CO ZURICH REPR. OFFICE Provides sales & mkting for New York 1 GOLDMAN, SACHS & CO. 100.0000% the equity mkt SAVOY ASSOCIATES, LLC Entity is a condominium Delaware 1 REP SVY REALTY HOLDINGS, L.L.C. 100.0000% developer that is engaged in the business of selling its developed properties. GOLDMAN SACHS (FRANCE) 1% owner of Goldman Sachs Delaware 1 THE GOLDMAN SACHS GROUP, INC. 100.0000% FINANCE, L.L.C. Overseas Finance, L.P.; formerly owned 2 Hong Kong companies which have since been liquidated. Non-regulated holding company. AVELO MORTGAGE, L.L.C. Mortgage Lending and Delaware 1 ARCHON GROUP, L.P. 100.0000% Servicing Company (single-family) GOLDMAN SACHS (ASIA) Broker/dealer with dealing Delaware 1 GOLDMAN SACHS HOLDINGS 100.0000% L.L.C. and underwriting business. (HONG KONG) LIMITED Registered in HK with HK Coy Registry. Date of registration in HK 22nd July 1994.Licensed under the HK Securities and Futures Ordinance for the following regulated activities: Type 1 dealing in secur GS KOREAN BRANCH Investment bank New York 1 GOLDMAN SACHS (ASIA) L.L.C. 100.0000% GOLDMAN SACHS (ASIA) Principally engaged in Hong Kong 1 GOLDMAN SACHS HOLDINGS 100.0000% SECURITIES LIMITED dealing in securities adn (HONG KONG) LIMITED listed options on behalf of affiliated companies on The Stock Exchange of Hong Kong Limited. GOLDMAN SACHS Holding company for PT Delaware 2 GOLDMAN SACHS GLOBAL 1.0000% (ASIA PACIFIC) L.L.C. Goldman Sachs Indonesia. HOLDINGS L.L.C. Entity in joint operating agreement with Indonesian GOLDMAN SACHS (CAYMAN) HOLDING 99.0000% firm. Generates investment COMPANY --------- banking fee income. 100.0000% SENNA INVESTMENTS To invest in KAMCO I loans Ireland 1 GS FINANCIAL SERVICES L.P. 100.0000% (IRELAND) LIMITED purchased from Restamove (DEL) Ireland Limited. (Loans classified as non accrual but is continuing to pay interest.); to ring-fence litigious ASSG KAMCO loan positions from other firm assets within a tax-efficient legal entity Goldman Sachs Licensed bank in the U.K. England 1 GOLDMAN SACHS 100.0000% International Ba performs foreign currency INTERNATIONAL BANK option and swap trading and is a deposit-taking institution PEARL TECH L.L.C. To hold partnership Delaware 2 THE GOLDMAN SACHS GROUP, INC. 1.0000% interests in a vehicle which owns a Washington DC office building. GOLDMAN SACHS CREDIT PARTNERS 99.0000% L.P. --------- 100.0000% GOLDMAN SACHS Fund Administration Nova Scotia 1 GOLDMAN SACHS 100.0000% ADMINISTRATION SERVICES ADMINISTRATION SERVICES (CANADA) CO. (CANADA) HOLDINGS LP GOLDMAN SACHS holding company for Goldman Delaware 3 GOLDMAN SACHS 1.0000% ADMINISTRATION SERVICES Sachs Administration ADMINISTRATION SERVICES (CANADA) HOLDINGS LP Services (Canada) Co. (CANADA) HOLDINGS LLC GOLDMAN SACHS GLOBAL HOLDINGS 25.0000% L.L.C. GS FINANCIAL SERVICES L.P. 74.0000% (DEL) --------- 100.0000% GOLDMAN SACHS general partner for Goldman Delaware 1 GS FINANCIAL SERVICES L.P. 100.0000% ADMINISTRATION SERVICES Sachs Administration (DEL) (CANADA) HOLDINGS LLC Services (Canada) Holdings LP GOLDMAN SACHS (CHINA) Formed to set up Delaware 2 THE GOLDMAN SACHS GROUP, INC. 99.0000% L.L.C. Representative Offices in Beijing and Shanghai engaging in liaison GOLDMAN SACHS GLOBAL HOLDINGS 1.0000% activities. L.L.C. --------- 100.0000% ARCHON CAPITAL BANK German Bank holding a Germany 1 ARCHON INTERNATIONAL, INC. 100.0000% DEUTSCHLAND GMBH portfolio of german non-performing loans and a restricted banking licence GOLDMAN SACHS ASSET Asset management1) Korea 1 GOLDMAN SACHS ASSET 100.0000% MANAGEMENT KOREA CO., LTD. Managing, and/or giving MANAGEMENT, L.P. management instructions in respect of the investment trusts under the Indirect Investment Asset Management Business Act (the ???AMBA???);2) Managing investment companies under the AMBA; 3) Distributing indire GS INVESTMENT STRATEGIES Investment Advisory for Canada 1 THE GOLDMAN SACHS GROUP, INC. 100.0000% CANADA INC. Liberty Harbour funds GOLDMAN SACHS CANADA INC. International investment Ontario 1 THE GOLDMAN SACHS GROUP, INC. 100.0000% bank and Canadian broker/dealer specializing in fixed income products; regulated Broker/Dealer; all officers of the company must be registered as such with the regulator. CMLQ INVESTORS COMPANY Hold mortgages. To invest Nova Scotia 2 MLQ, L.L.C. 1.0000% in and hold performing Canadian loans. MTGLQ INVESTORS, L.P. 99.0000% --------- 100.0000% A/C GP (NON-POOLING), Act solely as the general Delaware 2 THE GOLDMAN SACHS GROUP, INC. 10.0000% L.L.C. partner of Archon Capital (Non-Pooling), L.P. GOLDMAN SACHS MORTGAGE COMPANY 50.0000% --------- 60.0000%
GOLDMAN SACHS CANADA Formerly a 1% general Alberta 1 THE GOLDMAN SACHS GROUP, INC. 100.0000% FINANCE INC. partner of Goldman Sachs Canada Finance, L.P. Now a 1% shareholder of Goldman Sachs Canada Finance Co. entity will be dissolved in the near future. GOLDMAN SACHS CANADA Issues commercial paper in Nova Scotia 2 THE GOLDMAN SACHS GROUP, INC. 99.0000% FINANCE CO. Canada and lends the proceeds to regulated and GOLDMAN SACHS CANADA FINANCE 1.0000% unregulated GS affiliates INC. --------- in Canada. 100.0000% GS MEZZCO GP, L.L.C. To act as general partner Delaware 1 GOLDMAN SACHS MORTGAGE 100.0000% of Archon Capital, L.P. COMPANY Provides mezzazine financing. GOLDMAN SACHS CANADA Entity formed during 1996 Nova Scotia 2 THE GOLDMAN, SACHS & CO. L.L.C. 1.0000% CREDIT PARTNERS CO. to participate in the Canadian Senior bank debt THE GOLDMAN SACHS GROUP, INC. 99.0000% business; holds inventory of and trades senior bank debt. --------- 100.0000% GOLDMAN SACHS (ASIA) Primarily engaged in Mauritius 1 GOLDMAN SACHS HOLDINGS 100.0000% FINANCE trading of currencies, (HONG KONG) LIMITED securities and other financial products. GS MEZZCO GP, L.L.C. II Holding company for Archon Delaware 1 GOLDMAN SACHS MORTGAGE 100.0000% Capital Holding, LP.II. COMPANY EXPRESS INVESTMENTS III SPV for ASSG. Direct Malaysia 1 GOLDMAN SACHS HOLDINGS 100.0000% PRIVATE LTD. investement in Philipppine (MAURITIUS) LIMITED based assets (Non-interest accuring). NJLQ (IRELAND) LIMITED ASSG entity to hold the Ireland 1 GS FINANCIAL SERVICES L.P. 100.0000% Jinro loan.Established to (DEL) hold ASSG positions in Korean assets. JADE DRAGON (MAURITIUS) 1) SPV for holding both Mauritius 1 TIGER STRATEGIC 100.0000% LIMITED India and PRC investments. INVESTMENTS LTD 2) Holding company for venture capital companies in India and PRC. GOLDMAN SACHS (ASIA) Holding company. Also bears Delaware 2 GOLDMAN, SACHS & CO. 99.0000% FINANCE HOLDINGS L.L.C. EBC costs for employees transferring to/from Gao GOLDMAN SACHS GLOBAL HOLDINGS 1.0000% Hua entities. L.L.C. --------- 100.0000% MUNI TIC TOC SERIES TRUST Aggregation of multiple United 1 GOLDMAN, SACHS & CO. 100.0000% CONS trusts used in connection States with the municipal tender option bond program (TIC TOC). SINGEL COOL ONE B.V. Holding Company. Maison Netherlands 1 GS FINANCIAL SERVICES L.P. 100.0000% (Management structure (DEL) GAH). Limited partner of Gestion d'Actifs Haussmann, SCA. SINGEL COOL TWO B.V. Holding and Finance. Netherlands 1 GS FINANCIAL SERVICES L.P. 100.0000% Maison (Management (DEL) structure GAH). To act as general partner of Gestion d'Actifs Haussmann SCA. Archon Group France SAS Provides real estate loan France 2 SINGEL COOL ONE B.V. 99.9800% and property asset management as well as SINGEL COOL TWO B.V. 0.0200% underwriting services. --------- 100.0000% ARCHON GROUP FRANCE S.A.S Provides real estate loan France 2 SINGEL COOL ONE B.V. 99.9800% and property asset management as well as SINGEL COOL TWO B.V. 0.0200% underwriting services. --------- 100.0000% TORIIZAKA KAIHATSU TK Holding Hotel assets in Japan 3 THE GOLDMAN SACHS GROUP, INC. 18.5870% Japan. GS STRATEGIC INVESTMENTS JAPAN 23.5000% LLC GK TORIIZAKA KAIHATSU 5.0000% --------- 47.0870% GOLDMAN SACHS GLOBAL Oil and Gas commodity Nova Scotia 1 GOLDMAN SACHS GLOBAL 100.0000% COMMODITIES (CANADA) operating entity COMMODITIES (CANADA) CORPORATION HOLDINGS, LP GOLDMAN SACHS GLOBAL Ownership of a newly formed Delaware 3 GOLDMAN SACHS GLOBAL 1.0000% COMMODITIES (CANADA) Canadian entity which will COMMODITIES (CANADA) HOLDINGS, LP conduct the firms Canadian HOLDINGS LLC commodities business. GOLDMAN SACHS GLOBAL HOLDINGS 25.0000% L.L.C. GS FINANCIAL SERVICES L.P. 74.0000% (DEL) --------- 100.0000% GOLDMAN SACHS GLOBAL Ownership of a newly formed Delaware 1 GS FINANCIAL SERVICES L.P. 100.0000% COMMODITIES (CANADA) Canadian entity which will (DEL) HOLDINGS LLC conduct the firms Canadian commodities business. REP CHW REALTY, L.L.C. To invest in land and land Delaware 1 THE GOLDMAN SACHS GROUP, INC. 100.0000% development. REP ELD REAL ESTATE To invest in land and land Delaware 2 THE GOLDMAN SACHS GROUP, INC. 99.8000% LIMITED PARTNERSHIP development REP ELD GEN-PAR, L.L.C. 0.2000% --------- 100.0000% ELBE FUNDING LIMITED Established as part of an Cayman 1 GOLDMAN SACHS (CAYMAN) 100.0000% SSG Structured Investing Islands HOLDING COMPANY Group transaction. RHYS TRUST Established as part of an Jersey 2 GS FINANCIAL SERVICES L.P. 95.0000% SSG Structured Investing (DEL) Group transaction. GS GLOBAL MARKETS, INC. 5.0000% --------- 100.0000% SAPIEN LIMITED Established as part of an Isle of 1 RHYS TRUST 100.0000% SSG Structured Investing Jersey Group transaction. SARGASSO LIMITED Established as part of an Jersey 1 SAPIEN LIMITED 100.0000% SSG Structured Investing Group transaction. GS CAPITAL PARTNERS 2000 Consolidating employee fund. Delaware 1 THE GOLDMAN SACHS GROUP, INC. 100.0000% EMPLOYEE FUND, L.P. GS ASIAN VENTURE holding company Delaware 3 GOLDMAN SACHS (ASIA) 25.0000% (DELAWARE) L.L.C. FINANCE HOLDINGS L.L.C. GOLDMAN SACHS GLOBAL HOLDINGS 73.0000% L.L.C. GS FINANCIAL SERVICES L.P. 2.0000% (DEL) --------- 100.0000% TIGER STRATEGIC Holding company for ASSG Mauritius 1 GS ASIAN VENTURE 100.0000% INVESTMENTS LTD entities (DELAWARE) L.L.C. PANDA INVESTMENTS LTD Holding company for ASSG Mauritius 1 TIGER STRATEGIC 100.0000% entities INVESTMENTS LTD MLT INVESTMENTS LTD. Holding company for ASSG Mauritius 1 TIGER STRATEGIC 100.0000% entities INVESTMENTS LTD EUSTON ENTERPRISES LIMITED To hold ASSG investments in Hong Kong 1 MLT INVESTMENTS LTD. 100.0000% Tung Fung Development Co. FAIRWAY ENTERPRISES To hold ASSG investments in Hong Kong 1 MLT INVESTMENTS LTD. 100.0000% LIMITED Tung Fung Development Co. GOLDMAN SACHS Principally engaged in Hong Kong 1 GOLDMAN SACHS (CAYMAN) 100.0000% ADMINISTRATION SERVICES providing fund TRUST, LIMITED (ASIA) LIMITED administration services to clients of affiliated companies.
GOLDMAN SACHS Broker/dealer which engages England 2 GOLDMAN SACHS HOLDINGS (U.K.) 99.0000% INTERNATIONAL in proprietary and agency transactions in the fixed GOLDMAN SACHS GROUP HOLDINGS 1.0000% income, equity and currency (U.K.) --------- market, provides investment 100.0000% banking services in Europe GOLDMAN SACHS Provides IBD,Asset, & PWM United 1 GOLDMAN SACHS INTERNATIONAL 100.0000% INTERNATIONAL,DI services out of Dubai Kingdom GOLDMAN SACHS INTL Stockholm branch is an IBD United 1 GOLDMAN SACHS INTERNATIONAL 100.0000% SWEDEN BRAN office Kingdom GSI, SUCURSAL EN ESPANA branch of London, does IBD Spain 1 GOLDMAN SACHS INTERNATIONAL 100.0000% business in Spain GOLDMAN SACHS INTL IBD office locacted in United 1 GOLDMAN SACHS INTERNATIONAL 100.0000% JOHANNESBUR Johannesburg Kingdom FIRST ALLMERICA FINANCIAL Stock insurance corporation Massachusetts 1 COMMONWEALTH ANNUITY AND 100.0000% LIFE INSURANCE COMPANY transacting in the life LIFE INSURANCE COMPANY insurance and annuity businesses. GS EQUITY MARKETS, L.P. Established to segregate Bermuda 2 GSEM (DEL) LLC 99.0000% trading of UK structured equity products; GSEM BERMUDA HOLDINGS, L.P. 1.0000% non-regulated Bermuda based --------- subsidiary which trades 100.0000% structured equity products;Holds hedges to derivative transactions executed by Goldman outside of the US. GSEM trades only with other GOLDMAN SACHS HOLDINGS Non-regulated tax efficient England 1 GOLDMAN SACHS GROUP 100.0000% (U.K.) holding company for U.K. HOLDINGS (U.K.) pass-through entities GS DIRECT PHARMA LIMITED investment in Mauritius 1 GS DIRECT, L.L.C. 100.0000% pharmaceutical company in China REP LKS REALTY, L.L.C. Ownership and investment in Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% office property known as INC. Lakeside Atrium, located in Santa Clara, CA GOLDMAN SACHS (MONACO) In accordance with law no. Monaco 1 GOLDMAN SACHS GROUP 100.0000% S.A.M. 1.194 of 9 July 1997 and HOLDINGS (U.K.) Sovereign Ordinance no. 13.184 of 16 September 1997, as modified, the Minister of State has authorised the company to carry out the following activities: transfer of orders on the financial markets of s GOLDMAN SACHS EUROPE This is the entity used for Isle of 1 GOLDMAN SACHS INTERNATIONAL 100.0000% LIMITED contracting with the firm's Jersey EMEA International Country Advisers. GOLDMAN SACHS MANAGEMENT Set up to oversee a number Ireland 2 THE GOLDMAN SACHS GROUP, INC. 99.0000% (IRELAND) LIMITED of GSAM managed Trusts GOLDMAN SACHS GLOBAL HOLDINGS 1.0000% L.L.C. --------- 100.0000% GOLDMAN SACHS ASSET London-based provider of England 2 GOLDMAN SACHS HOLDINGS (U.K.) 99.0000% MANAGEMENT INTERNATIONAL asset management and investment advisory GOLDMAN SACHS GROUP HOLDINGS 1.0000% services, covering European (U.K.) and other international --------- asset classes. 100.0000% GSPS INVESTMENTS LIMITED GSPS London investment England 1 GSPS STRATEGIES CORP. 100.0000% company THE GOLDMAN SACHS TRUST Established as a limited Delaware 1 THE GOLDMAN SACHS TRUST 100.0000% COMPANY OF DELAWARE purpose trust company. COMPANY, N.A. THE GOLDMAN SACHS TRUST To carry on the business of Federal 1 THE GOLDMAN SACHS GROUP, 100.0000% COMPANY, N.A. banking limited to the INC. exercise of full fiduciary powers and the support of activities incidental to the exercise of these powers. A creature of banking law --it's a national association GOLDMAN SACHS INSURANCE To sell life insurance New York 1 THE GOLDMAN SACHS GROUP, 100.0000% AGENCY, INC. products and receive INC. commissions; broker in the life insurance business PEARL STREET INSURANCE Insures specific hazards Vermont 1 THE GOLDMAN SACHS GROUP, 100.0000% COMPANY, INC. and operational risks of INC. the firm. GOLDMAN SACHS BANK USA OLD UTAH BANK Utah 1 GOLDMAN SACHS BANK USA 100.0000% GSPS STRATEGIES CORP. Setup to trade private Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% equity investments. INC. MONEY PARTNERS FINANCIAL Principal business of NEWCO United 1 GOLDMAN SACHS GROUP 100.0000% COMPANY LIMITED is to act as subparticipant Kingdom HOLDINGS (U.K.) for loans originated by GSIB Milan Branch and the secondary trading of such loans. GOLDMAN SACHS GLOBAL Holds minority interests in Delaware 2 THE GOLDMAN, SACHS & CO. L.L.C. 1.0000% HOLDINGS L.L.C. various subsidiaries THE GOLDMAN SACHS GROUP, INC. 99.0000% --------- 100.0000% GS COMMODITY ASSET holding company of non-us Cayman 1 GS ASIAN VENTURE 100.0000% HOLDINGS (CAYMAN) LTD. investments Islands (DELAWARE) L.L.C. FORRES INVESTMENTS LIMITED Set up as part of rthe Cayman 1 FORRES LLC 100.0000% structured investing trade Islands that will enter into swaps and purchase treasuries. LITTON MORTGAGE SERVICING, 100 % Subsidiary of GS Bank Utah 1 GOLDMAN SACHS BANK USA 100.0000% LLC USA (0247) and 99.99% owner of Litton Loan Servicing LP. LITTON CONSUMER AND 100 % Subsidiary of GS Bank Utah 1 GOLDMAN SACHS BANK USA 100.0000% CORPORATE SERVICING, LLC USA (0247) and .01% owner of Litton Loan Servicing LP. LITTON LOAN SERVICING LP Litton Loan Servicing LP, a Delaware 2 LITTON MORTGAGE SERVICING, LLC 99.9900% Delaware limited partnership, is approved to LITTON CONSUMER AND CORPORATE 0.0100% service mortgage loans. SERVICING, LLC The entity is licensed to conduct business in variuous states and subject to regulation and examination by various agencies and certain states. --------- 100.0000%
GOLDMAN SACHS ISRAEL LLC Single Member Office in Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% Israel. For Regulatory INC. matters contact Robert Charnley or Matthias Bock in London. Israeli investment research entity. GOLDMAN SACHS SERVICES Non-regulated entity; British 1 GOLDMAN, SACHS & CO. 100.0000% LIMITED employer of certain London Virgin I office personnel GS GLOBAL FUNDING (UK) Holds a Far East structured England 1 GOLDMAN SACHS INTERNATIONAL 100.0000% finance deal. GS NEW MARKETS FUND, LLC UIG Delaware 2 THE GOLDMAN SACHS GROUP, INC. 98.0000% GS NEW MARKETS FUND PNR, INC. 2.0000% --------- 100.0000% GS NEW MARKETS FUND PNR, UIG Delaware 1 THE GOLDMAN SACHS GROUP, INC. 100.0000% INC. GOLDMAN SACHS DIRECT Consolidated employee fund Delaware 1 THE GOLDMAN SACHS GROUP, INC. 100.0000% INVESTMENT FUND 2000, L.P. GOLDMAN SACHS (JAPAN) LTD. Holding shares in Goldman British 1 THE GOLDMAN SACHS GROUP, 100.0000% Sachs Japan Co., Ltd. Virgin I INC. GOLDMAN SACHS JAPAN CO., Securities Broker Dealar, Japan 1 GOLDMAN SACHS (JAPAN) LTD. 100.0000% LTD. Investment bank, Money Lender, Real Estate Broker, Financial Ins Financial Instruments business registration according to the enforcement of the Financial Instruments and Exchange Law (FIEL), the amended Securities and Exchange GOLDMAN SACHS REALTY JAPAN Real Estates Business Japan 1 MLQ INVESTORS, L.P. 100.0000% LTD. GOLDMAN SACHS ASSET Registered investment Delaware 2 THE GOLDMAN SACHS GROUP, INC. 99.0000% MANAGEMENT, L.P. adviser. holding company for Goldman Sachs Asset GOLDMAN SACHS GLOBAL HOLDINGS 1.0000% amanagement Japan Limited. L.L.C. --------- 100.0000% STONE STREET PEP To facilitate the Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% TECHNOLOGY FUND 2000, L.P. consolidation of the GSAM INC. employee funds. GOLDMAN SACHS ASSET Investment management of Japan 2 THE GOLDMAN SACHS GROUP, INC. 1.0000% MANAGEMENT CO., LTD. securities investment trusts; discretionary and GOLDMAN SACHS ASSET MANAGEMENT, 99.0000% non-discretionary L.P. investment advisory --------- business since 4/1/02. 100.0000% Established in connection with obtaining a mutual fund license in Japan.Limited license to engage in offering of offshor GOLDMAN SACHS The Company to act as Ireland 1 GOLDMAN SACHS IRELAND 100.0000% ADMINISTRATION SERVICES manager of Goldman Sachs HOLDINGS LIMITED COMPANY LIMITED Global Currency Fund - Dollar Plus, Goldman Sachs Global Currency Fund - Euro Plus, Goldman Sachs Money Market Funds, Goldman Sachs Global Funds, Goldman Sachs Global Multi Manager Funds, Goldman Sachs Select GOLDMAN SACHS INVESTMENTS To hold investments on Bermuda 1 THE GOLDMAN SACHS GROUP, 100.0000% LTD. behalf of yet-to-be formed INC. funds. GS PENSION MANAGEMENT GSAM-related vehicle formed Cayman 2 THE GOLDMAN SACHS GROUP, INC. 99.0000% COMPANY to serve as the general Islands partner of Progressive GOLDMAN SACHS (CAYMAN) HOLDING 1.0000% Pension Management LP; also COMPANY general partner of --------- Progressive Pension 100.0000% Management II, LP; Nenpuku is the indirect limited partner of both entities Goldman Sachs Fund Administration and Luxembourg 2 GOLDMAN SACHS HOLDINGS (U.K.) 1.0000% Management S.A. management of one or several mutual investment GOLDMAN SACHS (UK) L.L.C. 99.0000% funds or investment --------- companies organised under 100.0000% the laws of Luxembourg. Management company for German Bond Fund. GOLDMAN SACHS JAPAN Following services in Japan 1 GOLDMAN SACHS (JAPAN) LTD. 100.0000% HOLDINGS, LTD. response to requests by The Goldman Sachs Group, Inc.???s subsidiaries in Japan and across Asia. 1. Leasing and sub leasing of real estate2. General Administration services including facility management, real estate and other lea PALMWOOD CO., LTD. Holding loans transferred Japan 1 GOLDMAN SACHS REALTY JAPAN 100.0000% from PIAJ, and assets LTD. purchased from Hyogin Factor. GOLDMAN SACHS CREDIT Purchasing Loans. Japan 1 GOLDMAN SACHS REALTY JAPAN 100.0000% PARTNERS (JAPAN), LTD. LTD. GS STRATEGIC INVESTMENTS Invest in TK arrangements Delaware 1 GS FINANCIAL SERVICES L.P. 100.0000% JAPAN LLC in Japan (DEL) JUPITER INVESTMENT CO., ASSG Equity Position. Holds Japan 2 AR HOLDINGS GK 0.0006% LTD. equities for investment. MLQ INVESTORS, L.P. 99.9994% --------- 100.0000% CITRINE INVESTMENT TK Holds a hotel in Osaka, Japan 3 THE GOLDMAN SACHS GROUP, INC. 18.9780% Japan. GS STRATEGIC INVESTMENTS JAPAN 24.1000% LLC CITRINE INVESTMENT CO., LTD. 5.0000% --------- 48.0780% MERCER INVESTMENTS IV SPV for REPIA and ASSG. Malaysia 2 THE GOLDMAN SACHS GROUP, INC. 14.7805% PRIVATE LTD. Equity Investment in PRC Investment SPC. GOLDMAN SACHS HOLDINGS 85.2195% (MAURITIUS) LIMITED --------- 100.0000% EXPRESS SECURITIZATION Invest in Cho Hung bank Korea 1 BEST INVESTMENTS 100.0000% SPECIALTY L.L.C. deal. (DELAWARE) L.L.C. R and G CO., LTD. Invests in non-performing Japan 2 GOLDMAN SACHS REALTY JAPAN LTD. 98.3333% loans. JLQ LLC 1.6667% --------- 100.0000% MERCER INVESTMENTS V SPV for ASSG. Equity Malaysia 1 GOLDMAN SACHS HOLDINGS 100.0000% PRIVATE LTD. investments in Beijing (MAURITIUS) LIMITED Goldman Sachs Consulting Co., Ltd (formerly Shang Er Kang) (PRC On-shore Consulting/Servicing Company).
EXPRESS II SECURITIZATION Invest in Cho Hung bank Korea 1 BEST INVESTMENTS 100.0000% SPECIALTY L.L.C. deal. (DELAWARE) L.L.C. GAC PERSONAL CO., LTD. Purchasing loans from RCC Japan 1 GOLDMAN SACHS REALTY JAPAN 100.0000% (Hyogin loan). Owns loans LTD. and equity in subsidiary (Owns Hyogo Wide Service, Midori Data and Wakaba Hoken Daiko). PHOENIX OXNARD LLC Created for transaction in Delaware 1 MLQ INVESTORS, L.P. 100.0000% Japan GOLDMAN SACHS JBWERE Regulated by the Australian Australia 2 THE GOLDMAN SACHS GROUP, INC. 100.0000% FINANCIAL MARKETS PTY LTD Securities and Investments Commission and transacts J. ARON & COMPANY 0.0000% FICC business in Australia --------- and New Zealand. 100.0000% Essentially, the company transacts with Australian and New Zealand clients and enters into back to back trades with J Aron NY or a ARCHON HOSPITALITY K.K. Management of Hotels Japan 1 GOLDMAN SACHS REALTY JAPAN 100.0000% LTD. LEAF GREEN CO., LTD. Purchasing loans (RCC-MTB) Japan 2 GOLDMAN SACHS (ASIA) FINANCE 0.0000% GOLDMAN SACHS REALTY JAPAN LTD. 100.0000% --------- 100.0000% LINDEN WOOD, LTD. Purchasing unsecured loans Cayman 1 MLQ INVESTORS, L.P. 100.0000% jointly with Nochu Islands SOLAR WIND LTD. Purchasing loans from SMBC Cayman 1 MLQ INVESTORS, L.P. 100.0000% Islands GOLDMAN SACHS MITSUI AAA rated company Delaware 2 GSMMDPGP, INC. 1.0000% MARINE DERIVATIVE established to provide PRODUCTS, L.P. credit rating enhancement GOLDMAN SACHS HOLDINGS 49.0000% to derivative product (NETHERLANDS) B.V. trading. All trades to --------- third parties are back to 50.0000% back with affiliates. AZABU CAPITAL HOLDING CO., Holding Teibow. Japan 1 JUPITER INVESTMENT CO., LTD. 100.0000% LTD. NIHON HOTEL INVESTMENT TK To hold hotels in Japan. Japan 3 THE GOLDMAN SACHS GROUP, INC. 39.4734% GS STRATEGIC INVESTMENTS JAPAN 50.1269% LLC NIHON HOTEL INVESTMENT CO., 10.3998% LTD. --------- 100.0000% NEPHRITE EQUITY CO., LTD. Flagged for SMAP2 dealTK Japan 1 GOLDMAN SACHS REALTY JAPAN LTD. 100.0000% investor of Amethyst Realty Co., Ltd. AMETHYST REALTY TK To hold real estate in Japan Japan 2 NEPHRITE EQUITY CO., LTD. 85.0000% AMETHYST REALTY CO., LTD. 5.0000% --------- 90.0000% OMACHI ONSEN KAIHATSU CO., Flagged for Onsen deal. Japan 1 GOLDMAN SACHS REALTY JAPAN 100.0000% LTD. LTD. TG FUND TK To hold real estate in Japan 2 AMETHYST REALTY TK 99.0000% Japan. TG FUND CO., LTD. 1.0000% --------- 100.0000% GK SAKURAZAKA CAPITAL Flagged for Principal Japan 2 AR HOLDINGS GK 1.0000% Finance Deals MLQ INVESTORS, L.P. 99.0000% --------- 100.0000% YOSHINO HOSPITALITY CO., Created for Ometosando deal Japan 1 GOLDMAN SACHS REALTY JAPAN 100.0000% LTD. LTD. REAL ESTATE CREATION FUND2 Created for Ometosando deal Japan 1 GOLDMAN SACHS REALTY JAPAN 100.0000% CO., LTD. LTD. NAGASAKA KAIHATSU CO., Created for Ometosando deal Japan 1 GOLDMAN SACHS REALTY JAPAN 100.0000% LTD. LTD. YOSHINO KAIHATSU CO., LTD. Created for Ometosando deal Japan 1 GOLDMAN SACHS REALTY JAPAN 100.0000% LTD. STAR GATE REALTY CO., LTD. Created for Ometosando deal Japan 1 GOLDMAN SACHS REALTY JAPAN 100.0000% LTD. REC INVESTMENTS2 CO., LTD. Created for Ometosando deal Japan 1 GOLDMAN SACHS REALTY JAPAN 100.0000% LTD. PIA HOLDINGS CAYMAN Holding Shares. Cayman 1 MLQ INVESTORS, L.P. 100.0000% Islands GS PIA HOLDINGS GK Flagged for PIA deals Japan 2 PIA HOLDINGS CAYMAN 0.4526% MLQ INVESTORS, L.P. 99.5475% --------- 100.0000% GS FINANCIAL SERVICES II, Entity set up as part of an Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% LLC AMSSG structured INC. transaction. To act as a parent company to AFCO 4 and the Amagansett chain of companies. GSMMDPGP, INC. General partner of Goldman Delaware 1 GOLDMAN SACHS BANK USA 100.0000% Sachs Mitsui Marine Derivative Products, L.P. GOLDMAN SACHS GESTION To manage Spanish SICAVs, Spain 1 GOLDMAN SACHS 100.0000% S.G.I.I.C. S.A. discretionary portfolios, (NETHERLANDS) B.V. provide advisory services and distribute funds. WILLIAM STREET LLC William Street LLC will Utah 1 GOLDMAN SACHS BANK USA 100.0000% offer credit commitments and extensions of credit to investment-grade corporate clients. These facilities are predominantly commercial paper facilities, term loans or revolving credit facilities that are intended to provide back-u GSPS ASIA LIMITED SPV for GSPS business in Mauritius 1 GS ASIAN VENTURE 100.0000% Asia (DELAWARE) L.L.C. GSPS DAI VIET LTD. SPV to hold 1 GSPS's Mauritius 1 GSPS ASIA LIMITED 100.0000% investment in Vietnam. GSPS LOTUS LIMITED Not commenced business Mauritius 1 GSPS ASIA LIMITED 100.0000% BLUE LOTUS LIMITED Korea Principal Finance Ireland 1 GS ASIAN VENTURE 100.0000% business for the Asia GSPS (DELAWARE) L.L.C. desk GOLDMAN SACHS HOLDINGS To own the GS limited Netherlands 1 GOLDMAN SACHS BANK USA 100.0000% (NETHERLANDS) B.V. partnership interest in GSMMDP GOLDMAN SACHS (INDIA) Formed to hold Delaware 2 THE GOLDMAN SACHS GROUP, INC. 99.0000% L.L.C. Representative Office in India GOLDMAN SACHS GLOBAL HOLDINGS 1.0000% L.L.C. --------- 100.0000% GS INDIA HOLDINGS Holding company for Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% (DELAWARE) L.L.C. investments into India. INC. GS INDIA HOLDINGS L.P. Holding company for Delaware 3 THE GOLDMAN SACHS GROUP, INC. 74.9900% investments into India. GOLDMAN SACHS GLOBAL HOLDINGS 25.0000% L.L.C. GS INDIA HOLDINGS (DELAWARE) 0.0100% L.L.C. --------- 100.0000% NAM VIET LTD. Holding company for Vietnam Mauritius 1 GSPS ASIA LIMITED 100.0000% investment. GREEN LOTUS LIMITED Investment holding company Mauritius 1 GSPS ASIA LIMITED 100.0000% for a PRC investment for GSPS.Investment holding company for a PRC investment for GSPS. VANTAGE MARKETPLACE to establish a holding Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% HOLDINGS, LLC company for Vantage INC. Marketplace LLC EMBARGO, LLC To purchase portfolios of Delaware 1 MTGLQ INVESTORS, L.P. 80.0000% credit cards receivables.
REC INVESTMENTS TK An ASSG related entity that Japan 2 GS STRATEGIC INVESTMENTS 69.0000% invests in loans. JAPAN LLC REC INVESTMENTS CO., LTD. 5.0000% --------- 74.0000% REAL ESTATE CREATION Acquiring non performing Japan 2 REC INVESTMENTS TK 85.0000% FUND TK loans and realizing them.( Resona Deal ) REAL ESTATE CREATION FUND CO., 5.0000% LTD. --------- 90.0000% MUSASHI CAYMAN CO., LTD. Holding GK Musashi Cayman 1 MLQ INVESTORS, L.P. 100.0000% Islands SHIRE II ASSETS LIMITED Established as part of an Cayman 1 SHIRE UK LIMITED 100.0000% SSG Structured Investing Islands Group transaction. SHIRE FUNDING LIMITED Established as part of an Cayman 1 SHIRE UK LIMITED 100.0000% SSG Structured Investing Islands Group transaction. SHIRE UK LIMITED Holding Company England 1 GOLDMAN SACHS GROUP 100.0000% HOLDINGS (U.K.) BAY WIND TK Real Estate business Japan 3 THE GOLDMAN SACHS GROUP, INC. 6.5200% BAY WIND REALTY FINANCE 5.0000% (CAYMAN) COMPANY SHIGA (DELAWARE) LLC 35.0000% --------- 46.5200% PRIME EQUITY CO., LTD. Dissolved as of 14/10/2008 Japan 1 GOLDMAN SACHS REALTY JAPAN LTD. 100.0000% with Hung Ke Lee as liquidator, liquidation completed as of 19/02/2009. MG PARTNERS TK Invests in real estate. Japan 2 MG PARTNERS CO., LTD. 5.0000% KIRI (DELAWARE) L.L.C. 75.0000% --------- 80.0000% AMAGANSETT FINANCING Established as part of an Cayman 1 GOLDMAN SACHS GROUP 100.0000% LIMITED SSG Structured Investing Islands HOLDINGS (U.K.) Group transaction. GS LONGPORT INVESTMENT Part of structured Delaware 1 GS FINANCIAL SERVICES L.P. 100.0000% CORPORATION transaction with BNP (DEL) Paribas. GS OCEANSIDE INVESTMENTS Part of structured Delaware 1 GS LONGPORT INVESTMENT 100.0000% LLC transaction with BNP CORPORATION Paribas. NORMANDY FUNDING CORP. To capitalize an entity Delaware 1 THE GOLDMAN SACHS GROUP, INC. 100.0000% used to raise 750 million of financing. SOCIETA' ACQUISIZIONE E Purchases non-performing Italy 2 ARCHON GROUP ITALIA, S.R.L. 2.0000% RIFINANZIAMENTO CREDITI Italian mortgage and SRL consumer loan portfolios MTGLQ INVESTORS, L.P. 98.0000% and then securitizes them. --------- 100.0000% GS HULL HOLDING, INC. Holding company for Hull Delaware 1 THE GOLDMAN SACHS GROUP, INC. 100.0000% THE HULL GROUP, L.L.C. To engage directly or Illinois 2 THE GOLDMAN SACHS GROUP, INC. 12.3300% indirectly through trading partnerships or other trading arrangements with GS HULL HOLDING, INC. 87.6700% others in trading & --------- investment activities. 100.0000% Managing member for Hullm Trading Company, L.L.C.To tranfer any and all lawful businesses for which limited li SLK-HULL DERIVATIVES LLC History: 1985 Hull Trading Delaware 1 THE HULL GROUP, L.L.C. 100.0000% Company, an ILL general partnership is formed; 1995 Hull Trading Company is converted to an ILL LLC; 1998 A decision is made to create a holding company structure; Broker/Dealer;SEC File No. 8-51552. The SHD BDW was filed on HULL TRADING UK To carry on business as a England 1 THE HULL GROUP, L.L.C. 100.0000% general commercial company. Proprietary trading firm. Re-registered as unlimited on 16 August 2004 HULL TRADING ASIA LIMITED Holding company. Hong Kong 1 THE GOLDMAN SACHS GROUP, INC. 100.0000% FRANKFURTER MOBILIEN was constituted to acquire Isle of 1 GS FINANCIAL SERVICES L.P. 100.0000% LIMITED and own German share Jersey (DEL) purchases, leases and loans. AKTEAS Srl ESSG Italian Real Estate Italy 1 ELQ INVESTORS, LTD 100.0000% trading entity and controlled and managed by Archon Italy NEG (TPL) LIMITED The principal activity of United 1 ELQ INVESTORS, LTD 100.0000% the Company is to hold an Kingdom investment in Teesside Power Limited, a company established to build and operate a power station on Teesside. SOUTH WALES TPL ESSG related entity United 1 ELQ INVESTORS, LTD 100.0000% INVESTMENTS LIMITED established to hold an Kingdom investment in a power company. WESTERN POWER INVESTMENTS Holding company for England 1 ELQ INVESTORS, LTD 100.0000% LIMITED Teesside Power Limited YELLOW ACQUISITIONS LTD Opportunities Fund SPV to England 1 GS EUROPEAN OPPORTUNITIES 100.0000% hold Yellow NPL Portfolio INVESTMENT FUND B.V. GS CAPITAL FUNDING The entity is setup as part Cayman 1 GS CAPITAL FUNDING (UK) II 100.0000% (CAYMAN) LIMITED of an upcoming Structured Islands LIMITED Investment Group (SSG) transaction. GS CAPITAL FUNDING, INC. The entity is setup as part Delaware 1 GS FINANCIAL SERVICES L.P. 100.0000% of an upcoming Structured (DEL) Investment Group (SSG) transaction. GS CAPITAL FUNDING The entity is setup as part Cayman 1 GOLDMAN SACHS GROUP 100.0000% (CAYMAN) II LIMITED of an upcoming Structured Islands HOLDINGS (U.K.) Investment Group (SSG) transaction. GSFS (CAYMAN) 2002 Set up as part of a Cayman 1 GS FINANCIAL SERVICES L.P. 100.0000% A LIMITED Structured Investing Group Islands (DEL) transaction. The entity will be capitalised by GS Financial Services LP. It's purpose will purely be to sell a third party a put option over the third parties' minority interest in a GS controlled Unit Trus
CONRAD P4 LTD. SPV to purchase the CP4 England 1 ELQ INVESTORS, LTD 100.0000% Porfolio of NPLs from HVB (via HANSEN & SCHUCHT DEBITORENMANAGEMENT GMBH) GS CAPITAL FUNDING (UK) Investment Company England 1 GS CAPITAL FUNDING, INC. 100.0000% II LIMITED SUNE SOLAR FUND I LLC Company founded to support Delaware 1 GS SOLAR POWER I, LLC 100.0000% the installation of solar electric systems. RUBY REALTY TK Holds commercial buildings Japan 3 THE GOLDMAN SACHS GROUP, INC. 39.4734% in Tokyo, Japan. GS STRATEGIC INVESTMENTS JAPAN 50.4388% LLC RUBY REALTY CO., LTD. 10.0878% --------- 100.0000% GK ARAKAWA HOLDING Flagged for Yodoyabashi Japan 1 MLQ INVESTORS, L.P. 100.0000% Deal (REO). Owns real estate beneficiary right. ARAKAWA HOLDING TK To acquire real estate Japan 3 THE GOLDMAN SACHS GROUP, INC. 24.5000% under a deal called Yodoyabashi. GS STRATEGIC INVESTMENTS JAPAN 25.0000% LLC GK ARAKAWA HOLDING 5.0000% --------- 54.5000% GK KAZAHANA Flagged for Joy Park Deal. Japan 1 GOLDMAN SACHS REALTY JAPAN LTD. 100.0000% Owns beneficiary rights of Joy Park Kakogawa. ARCHON JAPAN BRANCH To set up Archon Japan Japan 1 GOLDMAN SACHS REALTY JAPAN LTD. 100.0000% (division of GSRJL) with ots own enity code. Initially set up as Shell Entity 8. GK FUNABIKI Flagged for Onsen Deal. Japan 1 AR HOLDINGS GK 100.0000% Owns Ryokans (Japanese inns) and their employees. GK GEKKO Flagged for Project Taurus. Japan 1 JUPITER INVESTMENT CO., LTD. 100.0000% GK SAYAMA Flagged for Shinjjuku Japan 1 MLQ INVESTORS, L.P. 100.0000% retail REO deal. GK ARISUGAWA FINANCE Flagged for PFS Deal Japan 2 GOLDMAN SACHS REALTY JAPAN LTD. 99.0000% (Project SJ). Owns Loans and Warrants. AR HOLDINGS GK 1.0000% --------- 100.0000% ARISUGAWA FINANCE TK To Invest in Loan and Japan 1 GK ARISUGAWA FINANCE 54.5455% Preferred Shares of AP8, a SPC created by Advantage Partners, a well known MBO fund in Japan GK ASUKA Flagged for Hunet Deal. Japan 1 AR HOLDINGS GK 100.0000% SHINING PARTNERS TK2 Consolidation of Japan Japan 2 GS STRATEGIC INVESTMENTS 95.0000% Entity (to hold SPL JAPAN LLC portfolio) SHINING PARTNERS LTD. 5.0000% --------- 100.0000% SHINING PARTNERS LTD. Tokyo Brach / Nishi-Azabu Cayman 1 MLQ INVESTORS, L.P. 100.0000% Annex, 20-16, Nishi-Azabu Islands 3-chome, Minato-ku, Tokyo. SLK GLOBAL MARKETS Introduces foreign customer England 2 SLK INDEX SPECIALISTS, LLC 0.0000% trades to Spear, Leeds & Kellogg, LP on a GOLDMAN SACHS EXECUTION & 100.0000% fully-disclosed basis. CLEARING, L.P. --------- 100.0000% SLK INDEX SPECIALISTS, LLC Acts as the AMEX specialist New York 1 GOLDMAN SACHS EXECUTION & 100.0000% in index-based derivative CLEARING, L.P. products. Broker Dealer; SEC File No. 8-44563 SPEAR, LEEDS & KELLOGG To act as a specialist on New York 1 GOLDMAN SACHS EXECUTION & 100.0000% SPECIALISTS LLC the New York Stock CLEARING, L.P. Exchange; Broker Dealer; SEC File No. 8-49673 SLK LLC The surviving entity of the New York 1 GSTM LLC 100.0000% 10/30/2000 merger between SLK Acquisition LLC (Goldman merger vehicle) and SLK LLC. The Goldman Sachs Group, Inc. is the Managing Member. SLK Acquisition Holdings, Inc. is the other member. The surviving entity of the 10/30 GOLDMAN SACHS EXECUTION & Broker Dealer; SEC File No. New York 1 SLK LLC 100.0000% CLEARING, L.P. 8-00526; proprietary trading, customer business clearing firm KANSAI REALTY TK ASSG entity engaged in real Japan 2 MG PARTNERS TK 99.0000% estate activities in Japan. KANSAI REALTY CO., LTD. 1.0000% --------- 100.0000% HYOGO WIDE SERVICE CO., Gurantee loan purchased Japan 1 GAC PERSONAL TK 100.0000% LTD. from RCC MIDORI DATA CO., LTD. Gurantee loan purchased Japan 1 GAC PERSONAL TK 100.0000% from RCC WAKABA HOKEN DAIKO CO., Gurantee loan purchased Japan 1 GAC PERSONAL TK 100.0000% LTD. from RCC MINAMI AOYAMA KAIHATSU Holding Real Estate. Japan 1 GOLDMAN SACHS REALTY JAPAN LTD. 100.0000% CO., LTD. GS AYCO HOLDING LLC Parent company to The Ayco Delaware 1 THE GOLDMAN SACHS GROUP, INC. 100.0000% Company, LP, Saratoga Springs, LLC, also is a General Partner for the Ayco Services Agency LP. THE AYCO COMPANY, L.P. Provides financial Delaware 2 GS AYCO HOLDING LLC 99.0000% counseling to individuals employed by corporations. SARATOGA SPRINGS LLC 1.0000% --------- 100.0000% SARATOGA SPRINGS LLC General partners for the Delaware 1 GS AYCO HOLDING LLC 100.0000% Ayco Company LP. THE AYCO SERVICES AGENCY Insurance Agency Delaware 2 GS AYCO HOLDING LLC 1.0000% L.P. THE AYCO COMPANY, L.P. 99.0000% --------- 100.0000% MERCAY CORPORATION Holding Company for two Delaware 1 THE AYCO SERVICES AGENCY L.P. 100.0000% entitis that was established to provide insurance services in particular states. MERCER ALLIED COMPANY L.P. Broker/Dealer. Part of Delaware 2 GS AYCO HOLDING LLC 1.0000% Ayco acquisition. THE AYCO COMPANY, L.P. 99.0000% --------- 100.0000% JUST OPTIONS LLC Just Options is a joint Delaware 1 GOLDMAN SACHS EXECUTION & 100.0000% venture between Peak 6 and CLEARING, L.P. GSEC where we are currently taking a majority share in the company's net losses. Accounting Policy is mandating that we treat this as a consolidating VIE until the situation changes. GK MIYUKI Shelf. Purchasing Loans, Japan 1 GOLDMAN SACHS REALTY JAPAN LTD. 100.0000% Holding Real estates and Securities.& #12539;Flagged for Greens deal.
DOTONBORI KAIHATSU TK To purchase Toei Dotonbori Japan 2 NEPHRITE EQUITY CO., LTD. 94.7368% (Land and movie theatre buidling) in Osaka, Japan GK DOTONBORI KAIHATSU 5.2632% --------- 100.0000% GK UNIVERSAL HOTEL Purchasing loan; Flagged Japan 1 AR HOLDINGS GK 100.0000% MANAGEMENT for Hotel Universal Port Deal. TK UNIVERSAL HOTEL Management company related Japan 3 THE GOLDMAN SACHS GROUP, INC. 18.9780% MANAGEMENT to Citrine deal GS STRATEGIC INVESTMENTS JAPAN LLC 24.1000% GK UNIVERSAL HOTEL MANAGEMENT 5.0000% --------- 48.0780% GSEM (DEL) INC. General partner for GS Delaware 1 THE GOLDMAN SACHS GROUP, INC. 100.0000% Equity Market, L.P. (Bermuda). GSEM (DEL) LLC Holding company for GS Delaware 1 GSEM BERMUDA HOLDINGS, L.P. 100.0000% Equity Market, L.P. (Bermuda). GS PRIME HOLDINGS LLC Acquired as part of the Delaware 1 THE GOLDMAN SACHS GROUP, INC. 100.0000% Linden Venture. FEDERAL BOULEVARD, L.L.C. Established to purchase a Delaware 1 THE GOLDMAN SACHS GROUP, INC. 100.0000% data center. GS POWER HOLDINGS LLC Holding Company Delaware 1 THE GOLDMAN SACHS GROUP, INC. 100.0000% AMERICAN GAS ROYALTY TRUST Part of the VPP Dominion United 1 GOLDMAN, SACHS & CO. 100.0000% Transaction. States SITE 26 HOLDINGS INC. Partial Owner of GS Delaware 1 THE GOLDMAN SACHS GROUP, INC. 100.0000% Headquarter LLC GOLDMAN SACHS HEADQUARTERS Operating entity for Site 26 Delaware 2 THE GOLDMAN SACHS GROUP, INC. 99.8000% LLC SITE 26 HOLDINGS INC. 0.2000% --------- 100.0000% GOLDMAN SACHS MIDDLE EAST Established to hold private England 1 GS MIDDLE EAST (CAYMAN) LTD 100.0000% INVESTMENTS LIMITED equity investments in the Middle East. GOLDMAN SACHS Holding Company Delaware 2 GOLDMAN SACHS GLOBAL HOLDINGS 25.0000% INTERNATIONAL HOLDINGS LLC L.L.C. GSEM (DEL) INC. 75.0000% --------- 100.0000% GS BPC PARKING GARAGE, LLC To hold lease to parking Delaware 1 THE GOLDMAN SACHS GROUP, INC. 100.0000% garage adjacent to GS World Headquarters and enter into an agreement for the management of the garage GSEM (DEL) HOLDINGS, L.P. As part of the GSEM L.P. Delaware 2 GOLDMAN SACHS GLOBAL HOLDINGS 25.0000% restructuring, entity is L.L.C. being formed as part of the holding company structure GSEM (DEL) INC. 75.0000% for GSEM L.P. --------- 100.0000% GSEM BERMUDA HOLDINGS, As part of the GSEM L.P. Bermuda 2 GOLDMAN SACHS GLOBAL HOLDINGS 1.0000% L.P. restructuring, entity is L.L.C. being formed as part of the holding company structure GSEM (DEL) HOLDINGS, L.P. 99.0000% for GSEM L.P. --------- 100.0000% MEP GS INVESTOR LP Limited Partner in an United 2 GOLDMAN SACHS GLOBAL HOLDINGS 1.0000% Investment Fund Kingdom L.L.C. MEP GS INVESTOR (CAYCO) LIMITED 99.0000% --------- 100.0000% GSFS INVESTMENTS III, LLC to hold five opearting Delaware 1 GSFS INVESTMENTS I CORP. 100.0000% leases for the SBD Principal Investing desk PINNACLE PARTNERS GP LLC To consolidate GS Pinnacle Delaware 1 GOLDMAN SACHS INVESTMENTS LTD. 100.0000% Partners, LP BRENTA REAL ESTATE S.R.L. Italian Co., to purchase , Italy 1 ELQ INVESTORS, LTD 100.0000% sell exchange , build and manage properties SOUTH WIND TK An ASSG related entity that Japan 4 THE GOLDMAN SACHS GROUP, INC. 8.1500% holds golf courses and related assets in Japan. GS STRATEGIC INVESTMENTS JAPAN LLC 10.0000% SOUTH WIND REALTY FINANCE (CAYMAN) COMPANY 5.0000% SHIGA (DELAWARE) LLC 35.0000% --------- 58.1500% GS CAPITAL OPPORTUNITIES Established as part of an Delaware 1 THE GOLDMAN SACHS GROUP, INC. 100.0000% LLC SSG Structured Investing Group transaction. GS FINANCING OPPORTUNITIES Established as part of an Delaware 1 GS CAPITAL OPPORTUNITIES LLC 100.0000% LLC SSG Structured Investing Group transaction. GS FUNDING INVESTMENTS Wholly owned direct Cayman 1 SHIRE UK LIMITED 100.0000% LIMITED subsidiary of The Goldman Islands Sachs Group, Inc. May enter into certain financing agreements with GS Group and/or its affiliates from time to time and/or may invest in certain Euro government securities in connection with the issuance of ce TG FUND CO., LTD. Flagged for SMAP2 (JV, Japan 1 AMETHYST REALTY TK 100.0000% Tokyu Livable) AMETHYST REALTY CO., LTD. Flagged for SMAP2, Owns TK Japan 1 MLQ INVESTORS, L.P. 100.0000% Investment and equity in subsidiaries (Owns TG Fund and TG Fund II) EXCELLENT EQUITY CO., LTD. Flagged for REO Deal. Japan 1 GOLDMAN SACHS REALTY JAPAN LTD. 100.0000% (can't be unflagged/liquidated until Feb.22, 2009) BLUE DAISY CO., LTD. Total return SWAP w/Nochu Japan 1 GOLDMAN SACHS REALTY JAPAN LTD. 100.0000% re.Recruit shares. DANDELION INVESTMENTS CO., Mizuho JV (TK contributor Japan 1 GOLDMAN SACHS REALTY JAPAN LTD. 100.0000% LTD. to Green Mountain One) GREEN MOUNTAIN ONE CO., Flagged for Mizuho JW Deal Japan 1 GOLDMAN SACHS REALTY JAPAN LTD. 100.0000% LTD. (Investment vehicle). GK TORIIZAKA KAIHATSU Holding Hotel Assets in Japan 2 GOLDMAN SACHS REALTY JAPAN LTD. 0.8333% Japan. MLQ INVESTORS, L.P. 99.1667% --------- 100.0000% FUKUOKA TOSHI KAIHATSU Flagged for Daiwa House Japan 1 GOLDMAN SACHS REALTY JAPAN LTD. 100.0000% CO., LTD. Deal. Owns real estate (hard assets). GK TAIYO KAIHATSU Flagged for Shibuya Udagawa Japan 1 MLQ INVESTORS, L.P. 100.0000% REO Deal CITRINE INVESTMENT CO., Flagged for Universal Hotel Japan 1 MLQ INVESTORS, L.P. 100.0000% LTD. Deal. TK Investment for Universal Resort TK. GK KASHIWABARA TOSHI Flagged for Kobe Japan 1 GOLDMAN SACHS REALTY JAPAN LTD. 100.0000% KAIHATSU developmemt deal.Owns beneficiary right of Kobe Sannomiya real estate GARDEN PLAZA CAPITAL SRL An investment holding entity Barbados 2 THE GOLDMAN SACHS GROUP, INC. 19.9710% BAEKDU INVESTMENTS LIMITED 30.0000% --------- 49.9710% ZAHEER HOLDINGS To purchase preferred Mauritius 1 JADE DRAGON (MAURITIUS) LIMITED 98.0000% (MAURITIUS) equity for office development carried out by Vatika group in Gurgaon, India
GSI Fundo Investimento GOLDMAN SACHS INTERNATIONAL United 1 GOLDMAN SACHS INTERNATIONAL 100.0000% will own 100% of IFIF Kingdom PROP - GS FUNDO DE JANY fund in Brazil used to BRAZIL 1 J. ARON & COMPANY 100.0000% INVESTIMENTO MULTIMERCADO trade exotic products and CREDITO PRIVADO - in the near future INVESTIMENTO NO EXTERIOR commodities. JEREZ FUNDO DE GSCO fund in Brazil used to BRAZIL 1 GOLDMAN, SACHS & CO. 100.0000% INVESTIMENTO EM DIREITOS trade Mortgages CREDITORIOS NAO- PADRONIZADOS MULTICARTEIRA GARDA FUNDO DE GSBR fund used to trade BRAZIL 1 GOLDMAN SACHS do BRASIL 100.0000% INVESTIMENTO EM DIREITOS Mortgages BANCO MULTIPLO S/A CREDITORIOS NAO- PADRONIZADOS MULTICARTEIRA GOLDMAN SACHS ASSET The company's purpose is to BRAZIL 2 GOLDMAN SACHS GLOBAL HOLDINGS 0.0100% MANAGEMENT BRASIL LTDA. render asset management L.L.C. services, acting as a manager of investment funds GOLDMAN SACHS ASSET MANAGEMENT, and securities portfolios. L.P. 99.9900% --------- 100.0000% NIHON HOTEL INVESTMENT Flagged for multiple hotel Japan 1 MLQ INVESTORS, L.P. 100.0000% CO., LTD. acquisition deal MG PARTNERS CO., LTD. Astoria dealReal estate Japan 1 SOLAR WIND TK 100.0000% business RUBY REALTY CO., LTD. The TK Operator for entity Japan 1 MLQ INVESTORS, L.P. 100.0000% 0462. KANSAI REALTY CO., LTD. Astoria deal; Holding Real Japan 1 MG PARTNERS TK 100.0000% Estate. KAKEGAWA HOLDINGS CO., Flagged for Kakegawa Hotel Japan 1 LINDEN WOOD, LTD. 100.0000% LTD. deal. (Owns beneficiary right of Kakegawa Grand Hotel). SAKURAZAKA KAIHATSU CO., Total return swap with Japan 1 GOLDMAN SACHS REALTY JAPAN LTD. 100.0000% LTD. Aozora re. Recruit Shares KINMIRAI CREATE CO., LTD. Flagged for Jusco deal Japan 1 MLQ INVESTORS, L.P. 100.0000% (acquisition of JUSCO in Shimotsuma, Ibaraki). Owns hard RE asset (Jusco Shimotsuma). BAY WIND II LTD. Investing in Golf Portfolio. Cayman 1 MLQ INVESTORS, L.P. 100.0000% Islands MINATOMARU HOTEL HOLDINGS Flagged for JAL Hotel Japan 1 GOLDMAN SACHS REALTY JAPAN LTD. 100.0000% CO., LTD. SOUTH WIND REALTY FINANCE Purchasing loans secured by Cayman 1 MLQ INVESTORS, L.P. 100.0000% (CAYMAN) COMPANY Nitto Kogyo 30 golf courses Islands (JV w/Nochu) ITO ONSEN MANAGEMENT CO., Flagged for New Onsen deal Japan 1 GOLDMAN SACHS REALTY JAPAN LTD. 100.0000% LTD. (Ebina);Management of Ryokan (Japanese Hotel). TAMATSUKURI ONSEN HOTEL ASSG/REPIA Onsen Japan 1 GOLDMAN SACHS REALTY JAPAN LTD. 100.0000% MANAGEMENT CO., LTD. deal.Managiment of Onsen ryokan( Japanese style Hotel.) ENDEAVOR PRIVATE FUND CO., Flagged for Private Equity Japan 1 MLQ INVESTORS, L.P. 100.0000% LTD. Fund Deal. Holding RE Trust beneficicary Interest. ENDEAVOR PRIVATE FUND TK Investing in real estate. Japan 3 THE GOLDMAN SACHS GROUP, INC. 12.1380% Change from EQPU to Consolidated due to GS STRATEGIC INVESTMENTS JAPAN purchase TK interest from LLC 25.0000% 3rd party ENDEAVOR PRIVATE FUND CO., LTD. 5.0000% --------- 42.1380% HORTENSIA CAYMAN Flagged for Universal Hotel Cayman 2 THE GOLDMAN SACHS GROUP, INC. 19.9770% Deal. Islands GS STRATEGIC INVESTMENTS JAPAN LLC 25.3684% --------- 45.3454% GOLDMAN SACHS do BRASIL Brazilian bank. BRAZIL 2 THE GOLDMAN SACHS GROUP, INC. 99.9000% BANCO MULTIPLO S/A GOLDMAN SACHS GLOBAL HOLDINGS L.L.C. 0.1000% --------- 100.0000% GOLDMAN SACHS Representative office in BRAZIL 2 GOLDMAN, SACHS & CO. 1.0000% REPRESENTACOES LTDA. Sao Paulo, Brazil THE GOLDMAN SACHS GROUP, INC. 99.0000% --------- 100.0000% GK FUJIMIZAKA Flagged for Yamato Life Japan 1 AR HOLDINGS GK 100.0000% Deal. AR HOLDINGS GK Holding equity interest. Japan 2 AR HOLDINGS (DELAWARE) L.L.C. 100.0000% MLQ INVESTORS, L.P. 0.0000% --------- 100.0000% GK GOLDMAN SACHS SSG I Flagged for Project Coin. Japan 1 AR HOLDINGS GK 100.0000% Owns equity for investment. GOLDMAN SACHS PSI JAPAN Flagged for Project Coin. Japan 1 MLQ INVESTORS, L.P. 100.0000% CO., LTD. GK JUPITER INVESTMENT III Flagged as ASSG Equity Japan 1 AR HOLDINGS GK 100.0000% Entity. GK KIRISHIMA PFS Project Neo. Holds Japan 1 AR HOLDINGS GK 100.0000% equity for investment. AR HOLDINGS (DELAWARE) To hold the equity in AR Delaware 1 MLQ INVESTORS, L.P. 100.0000% L.L.C. Holdings GK which will be the parent for some of our future Japanese entities used for ASSG/REPIA acquisitions. GK YAMAMOTO KAIUN HOLDINGS Flagged for Project Japan 2 AR HOLDINGS (DELAWARE) L.L.C. 1.0000% Tugboat.Holding Securities. MLQ INVESTORS, L.P. 84.0000% --------- 85.0000% ASIAN SEA WAYS S.A. Flagged for Project Panama 1 GK YAMAMOTO KAIUN HOLDINGS 100.0000% Tugboat. Owns and operates ships. YAMAMOTO REAL ESTATE CO., Project Tugboat. Japan 1 GK YAMAMOTO KAIUN HOLDINGS 100.0000% LTD. YAMAMOTO KAIUN CO., LTD. Flagged for Project Tugboat. Japan 1 GK YAMAMOTO KAIUN HOLDINGS 100.0000% EMERALD MARINE S.A. Vessel Holding Company Panama 1 GK YAMAMOTO KAIUN HOLDINGS 100.0000% MAY FLOWER MARITIME S.A. Vessel Holding Company Panama 1 GK YAMAMOTO KAIUN HOLDINGS 100.0000% OCEAN BLUELINE S.A. Vessel Holding Company Panama 1 GK YAMAMOTO KAIUN HOLDINGS 100.0000% GOLDMAN SACHS GROUP Y Provide assets and services Mexico 2 THE GOLDMAN SACHS GROUP, 99.0000% COMPANIA, S. DE R.L. DE to Goldman Sachs Mexico INC. C.V. Casa de Bolsa, S.A. de C.V. in Mexico City, or GOLDMAN SACHS GLOBAL HOLDINGS others as deemed L.L.C. 1.0000% appropriate. --------- 100.0000%
GOLDMAN SACHS MEXICO CASA Mexican Broker-Dealer; Mexico 2 THE GOLDMAN SACHS GROUP, INC. 99.9900% DE BOLSA, S.A. DE C.V. Group Inc. owns 43,995,599 shares; Global Holdings GOLDMAN SACHS GLOBAL HOLDINGS owns 4,400 shares; as of L.L.C. 0.0100% 10/30/01 no longer Approved --------- Person and will not 100.0000% actively engage in the securities or advisory business RUBIN LINE LIMITED Vessel Holding Company Liberia 1 GK YAMAMOTO KAIUN HOLDINGS 100.0000% YAMAMOTO MARITIME, S.A. Vessel Holding Company Panama 1 GK YAMAMOTO KAIUN HOLDINGS 100.0000% GOLDMAN SACHS ARGENTINA Representitive Office in Delaware 2 THE GOLDMAN SACHS GROUP, INC. 99.0000% L.L.C. Buenos Aires GOLDMAN SACHS GLOBAL HOLDINGS L.L.C. 1.0000% --------- 100.0000% GS ARGENTINA LLC-BUENOS Rep office that handles Argentina 1 GOLDMAN SACHS ARGENTINA L.L.C. 100.0000% AIRES investment banking activities GOLDMAN SACHS HEDGE FUND An investment adviser. Delaware 2 THE GOLDMAN SACHS GROUP, INC. 99.0000% STRATEGIES LLC GOLDMAN SACHS ASSET MANAGEMENT, L.P. 1.0000% --------- 100.0000% GOLDMAN SACHS LIQUID To facilitate the Delaware 1 THE GOLDMAN SACHS GROUP, INC. 100.0000% TRADING OPPORTUNITIES consolidation of teh GSAM FUND, LLC fund Seed Investments GSAM INDIA HOLDINGS Holding company for an Mauritius 1 GOLDMAN SACHS ASSET 100.0000% LIMITED asset management company MANAGEMENT, L.P. and trustee company in India GOLDMAN SACHS Investment banking Netherlands 1 THE GOLDMAN SACHS GROUP, 100.0000% (NETHERLANDS) B.V. activities; fixed income INC. trader. Executes, clears and carries all types of futures transactions on the MATIF for affiliated entities. GS A320 LLC Established as part of a Delaware 1 GSFS INVESTMENTS I CORP. 100.0000% Private Finance Group Leasing Transaction. GS RJX LEASING LLC Established as part of a Delaware 1 GSFS INVESTMENTS I CORP. 100.0000% Private Finance Group Leasing Transaction. GOLDMAN SACHS (UK) L.L.C. Non-regulated holding Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% company for Goldman Sachs INC. Overseas Limited; established to achieve tax efficiencies within UK group. FLEET TRADE & TRANSPORT Oil shipping and England 1 GOLDMAN SACHS GROUP 100.0000% LIMITED transporting; non-regulated HOLDINGS (U.K.) London based petroleum shipping entity; FLEET TRADE & TRANSPORT Non-regulated petroleum Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% (U.S.A.) LTD. shipping entity. INC. GOLDMAN SACHS GROUP Holding company. England 1 GOLDMAN SACHS (UK) L.L.C. 100.0000% HOLDINGS (U.K.) GOLDMAN SACHS BANK USA To exercise the powers New York 1 THE GOLDMAN SACHS GROUP, 100.0000% conferred by Section 100 of INC. the New York Banking Law. GOLDMAN SACHS (CAYMAN) Trust company; acts as Cayman 2 GOLDMAN SACHS GLOBAL 1.0000% TRUST, LIMITED offshore trust administrator Islands HOLDINGS L.L.C. GOLDMAN SACHS (CAYMAN) HOLDING COMPANY 99.0000% --------- 100.0000% ROTHESAY LIFE LIMITED FSA-regulated Insurance England 1 ROTHESAY LIFE (CAYMAN) 100.0000% Company LIMITED ROTHESAY PENSIONS Employer Sponsor Company United 1 THE GOLDMAN SACHS GROUP, 100.0000% MANAGEMENT LIMITED for Defined Benefit Pension Kingdom INC. Plan GOLDMAN SACHS Licensed bank in the U.K. England 1 GOLDMAN SACHS GROUP 100.0000% INTERNATIONAL BANK performs foreign currency HOLDINGS (U.K.) option and swap trading and is a deposit-taking institution GSLM HOLDINGS, LLC To act as parent of Delaware 1 GOLDMAN SACHS 100.0000% Unlimited Liability UK INTERNATIONAL HOLDINGS LLC entity GSLM HOLDINGS II, LLC To act as parent of Delaware 1 GOLDMAN SACHS 100.0000% Unlimited Liability UK INTERNATIONAL HOLDINGS LLC entity GOLDMAN SACHS PROPERTY Non-regulated UK based England 1 THE GOLDMAN SACHS GROUP, 100.0000% MANAGEMENT entity which holds the INC. leasehold improvements for Peterborough Court and incurs all expenses for operating the building. GS MUNICIPAL PRODUCTS Holds sponsor certificates Delaware 2 GOLDMAN, SACHS & CO. 1.0000% L.L.C. issued in tender option programs. THE GOLDMAN SACHS GROUP, INC. 99.0000% --------- 100.0000% CER HOLDINGS LP holding entity for CER Cayman 2 GSEM (DEL) HOLDINGS, L.P. 99.0000% Investments 1 and all Islands further special purpose vehicles which are incorporated for the business purpose of holding CER HOLDINGS GP 1.0000% CERs --------- 100.0000% CER INVESTMENTS 1 special purpose vehicle to Cayman 1 CER HOLDINGS LP 100.0000% hold carbon emission Islands reduction units (CERs) GSPS (DEL) L.P. holding entity for GSPS Delaware 2 GSPS STRATEGIES CORP. 75.0000% Bermuda Corporation GOLDMAN SACHS GLOBAL HOLDINGS L.L.C. 25.0000% --------- 100.0000% CER HOLDINGS GP general partner to CER Cayman 1 GOLDMAN SACHS GLOBAL 100.0000% Holdings LP Islands HOLDINGS L.L.C. ROTHESAY LIFE (CAYMAN) Insurance holding company Cayman 1 ROTHESAY LIFE, L.L.C. 100.0000% LIMITED for UK insurance business Islands ROTHESAY LIFE, L.L.C. to hold stock in cayman Delaware 2 THE GOLDMAN SACHS GROUP, 75.0000% company INC. GOLDMAN SACHS GLOBAL HOLDINGS L.L.C. 25.0000% --------- 100.0000% MONEY PARTNERS HOLDINGS UK residential mortgage United 1 GOLDMAN SACHS GROUP 100.0000% LIMITED loan originator. Kingdom HOLDINGS (U.K.) GOLDMAN SACHS OVERSEAS Non-regulated Paris based Delaware 2 THE GOLDMAN SACHS GROUP, 99.0000% FINANCE, L.P. entity formed to issue a INC. $1.5 billion French France Note; finance Company; GOLDMAN SACHS (FRANCE) FINANCE, L.L.C. 1.0000% --------- 100.0000% EXCELLENT EQUITY TK Kamata kosan Japan 3 THE GOLDMAN SACHS GROUP, 19.5650% (Residential); Excellent to INC. purchase 2 retail store buildings , 1 hotel plus GS STRATEGIC INVESTMENTS JAPAN parking area ( land), 1 LLC 25.0000% residential and 5 lands. EXCELLENT EQUITY CO., LTD. 5.0000% --------- 49.5650% ELQ INVESTORS, LTD "Holding" company for England 1 MTGLQ INVESTORS, L.P. 100.0000% distressed debt investments PERCIER FINANCE SAS Investment company. France 1 ELQ INVESTORS, LTD 90.0000%
Fleet Properties, Compra e Property company Portugal 2 ELQ INVESTORS, LTD 99.0000% Venda de Im??veis, Lda incorporated in Portugual for the purpose of MTGLQ INVESTORS, L.P. 1.0000% participating in the public --------- auctions of properties held 100.0000% as collateral for the NPL portfolios held by PMF-2, Ltd MONT BLANC ACQUISITIONS Total Return Swap England 1 ELQ INVESTORS, LTD 100.0000% LTD counterparty for the Mont Blanc NPL Portfolio MATTERHORN ACQUISITIONS SPV incorporated for the England 1 GS EUROPEAN OPPORTUNITIES 100.0000% LTD. acquisition of a portfolio INVESTMENT FUND B.V. of NPLs from Delmora Bank in Germany MB ACQUISITIONS B.V. Joint venture company for Netherlands 1 ELQ INVESTORS, LTD 50.0000% the Mont Blanc non-performing loan portfolio GOLDMAN SACHS CREDIT Established to hold a England 1 ELQ INVESTORS, LTD 100.0000% PARTNERS (EUROPE) LTD portfolio of investments. GOLDMAN SACHS POWER L.L.C. DULLES HOLDING CORP. was Delaware 2 J. ARON HOLDINGS, L.P. 99.0000% former name. Established to serve as the exclusive J. ARON & COMPANY 1.0000% advisor to Constellation --------- Power Source Inc. for power 100.0000% trading and risk management. ALKAS REALTY PRIVATE The entity is a SPC which Singapore 2 THE GOLDMAN SACHS GROUP, 19.5650% LIMITED will purchase DBS tower as INC. a rental property in Singapore. BAEKDU INVESTMENTS LIMITED 30.0000% --------- 49.5650% EXCHANGE REALTY SRL Investment holding company Barbados 2 THE GOLDMAN SACHS GROUP, 19.5650% formed for the purpose of INC. investing in real estate in China BAEKDU INVESTMENTS LIMITED 30.0000% --------- 49.5650% CASE G, LLC Purchase retail installment Delaware 1 MTGLQ INVESTORS, L.P. 100.0000% contracts (RICs) and Auto Loans from Banks, Thrifts, Credit Unions, Independent Finance Companies and other Specialty Finance Dealer Related Company. Purchase loans and get leverage or securitize after a couple of years (couldP GSFS INVESTMENTS IV, LLC To hold two operating Delaware 1 GSFS INVESTMENTS I CORP. 100.0000% leases on mining equipment. GOLDMAN SACHS FUTURES Principally engaged in Hong Kong 1 GOLDMAN SACHS HOLDINGS 100.0000% (ASIA) LIMITED dealing in futures (HONG KONG) LIMITED contracts on behalf of affiliated companies on the Hong Kong Futures Exchange Limited ("HKFE"). TRIUMPH INVESTMENTS Primarily established to Ireland 1 BEST II INVESTMENTS 100.0000% (IRELAND) LIMITED hold ASSG positions in (DELAWARE) L.L.C. Korean assets. GS 767 LEASING LLC Established as part of an Delaware 1 GSFS INVESTMENTS I CORP. 100.0000% SSG Structured Investing Group transaction. BLOSSOM HOLDING III BV GS European Opportunities Netherlands 1 GS EUROPEAN OPPORTUNITIES 100.0000% Fund BV subsidary for Ihr INVESTMENT FUND B.V. Platz Investment REP FSB REAL ESTATE, REPIA entity. Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% L.L.C. INC. GS LPII PHASE I REALTY, REPIA entity. Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% LLC INC. MARS EQUITY CO., LTD. Purchasing Loans, Holding Japan 1 GOLDMAN SACHS REALTY JAPAN 100.0000% Real estates and LTD. Securities. OOO GOLDMAN SACHS This entity was set up as Russia 1 GS RBD HOLDINGS, L.P. 100.0000% part of an AMSSG Structured Investing Group transaction GCN CE HOLDINGS The entity will own several Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% CORPORATION micro-ticket machine leases INC. throughout the US and Canada. OOO GOLDMAN SACHS BANK Trade FX and interest rate Russia 1 THE GOLDMAN SACHS GROUP, 100.0000% products. INC. J. ARON & COMPANY Dealer in petroleum, metals New York 2 THE J. ARON CORPORATION 0.2000% (precious and base), grain and coffee/cocoa in the J. ARON HOLDINGS, L.P. 99.8000% spot and forward markets --------- and foreign currency 100.0000% options and maintains seats on various exchanges; Commodities dealer J. ARON & COMPANY The principal activity of Singapore 1 GOLDMAN SACHS FOREIGN 100.0000% (SINGAPORE) PTE. the Company is to trade in EXCHANGE (SINGAPORE) PTE. physical oil and oil related derivative contracts including forwards, swaps, options and futures. GOLDMAN SACHS (SINGAPORE) Holder of a Capital Markets Singapore 1 GOLDMAN SACHS FOREIGN 100.0000% PTE. Services Licence to advise EXCHANGE (SINGAPORE) PTE. on corporate finance, deal in securities, leveraged foreign exchange trading and fund management. GOLDMAN SACHS FOREIGN Non-regulated entity which Singapore 1 GOLDMAN SACHS HOLDINGS 100.0000% EXCHANGE (SINGAPORE) PTE. is a holding company and (HONG KONG) LIMITED deals in foreign exchange and derivative contracts GOLDMAN SACHS FUTURES PTE Clearing of futures and Singapore 1 GOLDMAN SACHS FOREIGN 100.0000% LTD options contracts EXCHANGE (SINGAPORE) PTE. RAINBOW PLAZA CAPITAL SRL Holds a residential Barbados 2 THE GOLDMAN SACHS GROUP, 19.5650% building in Shanghai, China. INC. BAEKDU INVESTMENTS LIMITED 30.0000% --------- 49.5650% GOLDMAN SACHS LONGEVITY UK Proprietary trading England 2 GSLM HOLDINGS, LLC 99.0000% MARKETS (U.K.) entity for the Longevity Markets Group GSLM HOLDINGS II, LLC 1.0000% --------- 100.0000% J. ARON (CHINA) Trading of base metals and People's 1 J. ARON (CHINA) HOLDINGS 100.0000% COMMODITIES TRADING other commodities in China Republic of L.L.C. COMPANY LIMITED China
GS INVESTMENT STRATEGIES Sub-advisor to Liberty Singapore 1 GOLDMAN SACHS FOREIGN 100.0000% (SINGAPORE) PTE Harbor EXCHANGE (SINGAPORE) PTE. EXCHANGE (BEIJING) CO. To hold Exchange Tower in People's 1 EXCHANGE REALTY SRL 100.0000% LIMITED Beijing. Republic of China GARDEN PLAZA CAPITAL CO. To hold Garden Plaza in People's 1 GARDEN PLAZA CAPITAL SRL 100.0000% LTD China. Republic of China SHANGHAI FUJITA TIANSHAN To hold Rainbow Plaza in People's 1 RAINBOW PLAZA CAPITAL SRL 100.0000% HOUSING DEVELOPMENT CO., China. Republic of LTD. China GOLDMAN SACHS (MAURITIUS) Vehicle for investing in Mauritius 1 GS INDIA HOLDINGS L.P. 100.0000% L.L.C. India; holding company for Goldman Schs (India) Securities Private Limited and Goldman Sachs Services Private Limited. The Company was also the holding company for GS joint venture in Kotak Mahindra Capital Company and Kotak Secur GOLDMAN SACHS INVESTMENTS Primarily engaged in Mauritius 1 GS INDIA HOLDINGS L.P. 100.0000% (MAURITIUS) I LIMITED trading of financial products including equity securities in India and other Asian countries. GOLDMAN SACHS (RUSSIA) Business tranferred to J. England 1 GOLDMAN SACHS 100.0000% Aron & Company (U.K.). INTERNATIONAL HOLDINGS LLC Entity to be used to set up an IBD branch in Russia. GOLDMAN SACHS (LABUAN) The principal activities Malaysia 1 GOLDMAN SACHS HOLDINGS 100.0000% INVESTMENT BANK LIMITED include investment banking (HONG KONG) LIMITED and trading of financial products. J.ARON(CHINA)TRADING Trading of base metals and China 1 J. ARON (CHINA) 100.0000% BEIJING other commodities in China. COMMODITIES TRADING COMPANY LIMITED EURO-SPLITTER B.V. Non-regulated Dutch entity Netherlands 1 J. ARON & COMPANY 100.0000% established to invest in a Antilles condensate splitter. LIBERTY HARBOR I GP, LLC General Partner of Liberty Delaware 1 GSCS HOLDINGS II LLC 100.0000% Harbor Master Fund GSCS HOLDINGS I LLC Holding Company of GSCS Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% Holdings II, LLC which in INC. turn holds GS Capital Strategies LLC GSPS BERMUDA CORPORATION to hold equity investments Bermuda 1 GSPS (DEL) L.P. 100.0000% LIMITED for GSPSto hold equity investments for GSPS GOLDMAN SACHS SERVICES Technology and data process India 2 GOLDMAN SACHS (ASIA) 1.0520% PRIVATE LIMITED entity. FINANCE GOLDMAN SACHS (MAURITIUS) 98.9480% L.L.C. --------- 100.0000% GOLDMAN SACHS Business tranferred to England 1 GOLDMAN SACHS HOLDINGS 100.0000% INTERNATIONAL FINANCE Goldman Sachs International (U.K.) GSISPL- Bangalore Branch Foreign Merchant Banking India 1 GOLDMAN SACHS (INDIA) 100.0000% SECURITIES PRIVATE LIMITED GOLDMAN SACHS TRADING AND Sales agent for affiliated Netherlands 2 J. ARON HOLDINGS, L.P. 0.2500% CLEARING SERVICES companies. Non-regulated (NETHERLANDS) B.V. entity established to J. ARON & COMPANY 99.7500% employ traders in Rotterdam. --------- 100.0000% THE EUROPEAN POWER SOURCE Dutch Holding Co for Netherlands 1 THE GOLDMAN SACHS GROUP, 100.0000% COMPANY (B.V.) Pan-European power trading INC. business THE EUROPEAN POWER SOURCE Trading power in the England 1 THE EUROPEAN POWER SOURCE 100.0000% COMPANY (U.K.) LIMITED UK/NETA Environment. COMPANY (B.V.) PATTERSON CAPITAL MARKETS, Futures introducing broker. Illinois 1 THE GOLDMAN SACHS GROUP, 100.0000% LTD. INC. GOLDMAN SACHS (INDIA) Broker/Dealer, merchant India 1 GOLDMAN SACHS (MAURITIUS) 100.0000% SECURITIES PRIVATE LIMITED banking, provide financial L.L.C. services GS RBD HOLDINGS, L.P. Partnership will hold an Delaware 2 GS RBD HOLDINGS I CORP. 99.0000% equity interest in a new Russian broker/dealer GS RBD HOLDINGS II CORP. 1.0000% entity. --------- 100.0000% GS RBD HOLDINGS I CORP. Holding company for a US Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% partnership, which in turn INC. will hold an interest in a new Russian broker/dealer entity. GS RBD HOLDINGS II CORP. Holding company for a US Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% partnership, which in turn INC. will hold an interest in a new Russian broker/dealer entity. GOLDMAN SACHS (MAURITIUS) Holding company for NBFC Mauritius 1 GS INDIA HOLDINGS L.P. 100.0000% NBFC L.L.C. companies in India GOLDMAN SACHS PARIS INC. Investment banking France 2 GOLDMAN, SACHS & CO. 99.0000% ET CIE activities; reception-transmission of GOLDMAN SACHS GLOBAL HOLDINGS 1.0000% orders, equity and equity L.L.C. --------- derivatives; private 100.0000% banking; marketing of asset management products to institutional clients; coutnerparty to derivatives products for mexican institutions GSI Qatar FC branch IBD services out of Quatar United 1 GOLDMAN SACHS INTERNATIONAL 100.0000% financial centre Kingdom GS SITE 25 HOTEL HOLDINGS, Entity to house the holding Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% LLC company for Embassy Suite INC. Hotel Acquisition GS SITE 25 RETAIL, LLC real estate operating Delaware 1 GS SITE 25 RETAIL 100.0000% entity for the retail HOLDINGS, LLC condominium located at 102 North End Avenue, New York, NY GS SITE 25 RETAIL Entity to house holding Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% HOLDINGS, LLC company for the Embassy INC. Suite Retail Acquisition
GS SITE 25 HOTEL, LLC real estate operating Delaware 1 GS SITE 25 HOTEL HOLDINGS, 100.0000% entity for the hotel LLC condominium known as Embassy Suites located at 102 North End Avenue, New York, NY PRATHAM INVESTMENTS AND The company is an existing India 2 GOLDMAN SACHS SERVICES 0.3360% TRADING PRIVATE LIMITED company incorporated in PRIVATE LIMITED India in 1991, under the provisions of Companies GOLDMAN SACHS (MAURITIUS) 99.6640% Act, 1956. It is NBFC L.L.C. --------- registered with the Reserve 100.0000% bank of India as a non-banking financial company. The primary activity has inter-alia involved granting of l GOLDMAN SACHS (UK) L.L.C. Holding company for CIN Delaware 2 GOLDMAN SACHS (UK) L.L.C. 99.0000% III Managemenet GOLDMAN SACHS GROUP HOLDINGS 1.0000% (U.K.) --------- 100.0000% GOLDMAN SACHS ASSET Holding company for CIN England 1 GOLDMAN SACHS (UK) L.L.C. 100.0000% MANAGEMENT HOLDINGS Management which is now III inactive CIN MANAGEMENT British Coal's pension fund England 1 GOLDMAN SACHS ASSET 100.0000% manager (see Other MANAGEMENT HOLDINGS Information) PT GOLDMAN SACHS INDONESIA Dormant company Indonesia 3 GOLDMAN SACHS (ASIA 90.0000% PACIFIC) L.L.C. GOLDMAN SACHS GLOBAL HOLDINGS 0.1000% L.L.C. GOLDMAN SACHS (CAYMAN) HOLDING 9.9000% COMPANY --------- 100.0000% VANTAGE GROUND (MAURITIUS) Shareholder of India SPV Mauritius 1 GS INDIA HOLDINGS L.P. 100.0000% LIMITED which in turn hold land and develop building in Bangalore. SAFFRON PROPERTIES PRIVATE To own / invest in real India 1 VANTAGE GROUND (MAURITIUS) 100.0000% LIMITED estate in India. LIMITED GSIP HOLDCO A LLC holding company Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% INC. GSIP HOLDCO B LLC holding company Delaware 1 GSIP HOLDCO A LLC 100.0000% GOLDMAN SACHS INVESTMENT General Partner to make Cayman 1 GSEM (DEL) HOLDINGS, L.P. 100.0000% PARTNERS HOLDCO CAYMAN nominal investment in GSIP Islands LTD. entities GOLDMAN SACHS (ASIA) Partnership holding company Delaware 5 THE GOLDMAN SACHS GROUP, 14.2637% CORPORATE HOLDINGS L.P. for the AEJ Group. INC. GOLDMAN SACHS (ASIA) FINANCE 13.7827% HOLDINGS L.L.C. GS INDIA HOLDINGS (DELAWARE) 0.0000% L.L.C. GOLDMAN SACHS (DELAWARE) 11.6899% HOLDING CORPORATION --------- 100.0000% GOLDMAN SACHS CHINA The entity is setup for the Mauritius 1 JADE DRAGON (MAURITIUS) 100.0000% STRATEGIC INVESTMENTS purpose of acquiring ASSG LIMITED LIMITED investments. GOLDMAN SACHS CHINA To hold investments in Mauritius 1 GS ASIAN VENTURE 100.0000% INVESTMENTS (MAURITIUS) private and public (DELAWARE) L.L.C. LIMITED companies with operations in the Peoples Republic of China. A Limited Partner of HOPU USD Master Fund I, L.P. VANTAGE STRIDE (MAURITIUS) To hold investments in Mauritius 1 GS ASIAN VENTURE 100.0000% LIMITED financial instruments (DELAWARE) L.L.C. mainly loans and equities in Asia ex-japan. VANTAGE QUEST (MAURITIUS) To hold investments in Mauritius 1 GS ASIAN VENTURE 100.0000% LIMITED financial instruments (DELAWARE) L.L.C. mainly loans and equities in Asia ex-japan. GS GLOBAL COMMODITIES SPC Not commenced business. Cayman 1 GOLDMAN SACHS HOLDINGS 100.0000% Intended to be a segregated Islands (HONG KONG) LIMITED portfolio company GOLDMAN SACHS RE Holding company for ASSG Cayman 1 GS ASIAN VENTURE 100.0000% INVESTMENTS HOLDINGS investments. Islands (DELAWARE) L.L.C. LIMITED OXLEY INVESTMENTS BV Investment holding for ASSG Netherlands 1 GS ASIAN VENTURE 100.0000% Indonesian investments. (DELAWARE) L.L.C. WWD RUBY LIMITED To hold investments in Mauritius 1 VANTAGE STRIDE (MAURITIUS) 100.0000% financial instruments LIMITED mainly loans and equities in Asia ex-japan. EXPRESS INVESTMENTS II SPV for ASSG. Equity Malaysia 1 GOLDMAN SACHS HOLDINGS 100.0000% PRIVATE LTD. investments in Korean (MAURITIUS) LIMITED Investment SPC (50%) and ChoHung Bank joint venture restructuring SPC (49%). (All loans were classified as non-performing loans). GOLDMAN SACHS HOLDINGS Holding company for ASSG Mauritius 2 GOLDMAN SACHS (ASIA) 99.0000% (MAURITIUS) LIMITED investments. FINANCE HOLDINGS L.L.C. GOLDMAN SACHS GLOBAL HOLDINGS 1.0000% L.L.C. --------- 100.0000% LANDPRO INVESTMENTS Affiliate of Baekdu (ASSG Delaware 1 GS FINANCIAL SERVICES L.P. 100.0000% (DELAWARE) L.L.C. flagship entity for GS to (DEL) invest in REO deals in AEJ (Asia excluding Japan)). GOLDMAN SACHS SERVICES Baekdu is an ASSG flagship British 1 GOLDMAN SACHS GLOBAL 100.0000% (B.V.I.) LIMITED entity for GS to invest in Virgin SERVICES II LIMITED REO deals in AEJ (Asia Islands excluding Japan) and Landpro was setup between GS Financial Services L.P. (DEL) and Baekdu for legal/tax reasons. GOLDMAN SACHS (DELAWARE) Holding Company for GS Delaware 3 GOLDMAN, SACHS & CO. 15.6600% HOLDING CORPORATION (Asia) Corporate Holding LP GOLDMAN SACHS GLOBAL HOLDINGS 7.9200% L.L.C. J. ARON & COMPANY 76.4200% --------- 100.0000% DISTRESSED OPPORTUNITIES To hold and invest in Delaware 1 THE GOLDMAN SACHS GROUP, 90.0000% INTERNATIONAL, INC. securities and engage in INC. general commercial activities RESTAMOVE IRELAND LIMITED The Company invests in Ireland 1 GS FINANCIAL SERVICES L.P. 100.0000% financial instruments (DEL) including foreign currencies, securities and other financial products. GS LINDEN POWER HOLDINGS Entity was acquired as part Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% LLC of the Linden venture. INC.
J. ARON (CHINA) HOLDINGS Holding company for the Delaware 1 GOLDMAN SACHS GLOBAL 100.0000% L.L.C. WFOE set up for the HOLDINGS L.L.C. commodities business. SHIPCO HOLDINGS II, LTD. indirect holding company Cayman 1 GOLDMAN SACHS HOLDINGS 100.0000% for shipping assets Islands (HONG KONG) LIMITED GOLDMAN SACHS INVESTMENT General Partner to make Delaware 1 GS INVESTMENT STRATEGIES, 100.0000% PARTNERS GP, LLC nominal investment in GSIP LLC entities GOLDMAN SACHS GLOBAL Employer of certain US Cayman 1 THE GOLDMAN SACHS GROUP, 100.0000% SERVICES I LIMITED citizens/green card holders Islands INC. outside US GOLDMAN SACHS GLOBAL Employer of certain US Cayman 2 GOLDMAN SACHS GLOBAL 1.0000% SERVICES II LIMITED citizens/green card holders Islands HOLDINGS L.L.C. outside US GOLDMAN SACHS (CAYMAN) HOLDING 99.0000% COMPANY --------- 100.0000% WALL STREET ON DEMAND, WSOD Acquisition Corp. Delaware 1 THE GOLDMAN SACHS GROUP, 95.4113% INC. merged into Wall Street On INC. Demand, Inc. on 4/17/06. GOLDMAN SACHS HOUSING AND GNMA issuer/servicer and a New York 2 THE GOLDMAN SACHS GROUP, 99.0000% HEALTH CARE FUNDING non-supervised mortgagee INC. COMPANY under FHA regulationss to originate, process and GOLDMAN SACHS HOUSING AND 1.0000% service FHA insured HEALTH CARE CAPITAL CORPORATION mortgages --------- 100.0000% REP SVY REALTY HOLDINGS, Entity is the holding Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% L.L.C. company that owns Savoy. INC. GSUIG, L.L.C. investment vehicle for UIG Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% INC. GS ACA, LLC Member in Agricultural Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% Company of America Holdings INC. LLC, a joint venture with Duquesne Partners to invest in agricultural (farm) real estate GS-MPIM II, LLC Firm direct investment.GS Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% MPIM II, L.L.C. INC. GOLDMAN SACHS HOUSING AND Originates and services FHA New York 1 THE GOLDMAN SACHS GROUP, 100.0000% HEALTH CARE CAPITAL insured mortgages; General INC. CORPORATION Partner in Goldman Sachs Housing and Health Care Funding Company COMMONWEALTH ANNUITY AND CwA (formerly AFLIAC) Massachusetts 1 THE GOLDMAN SACHS GROUP, 100.0000% LIFE INSURANCE COMPANY contains the variable INC. annuity and variable universal life business acquired from Allmerica Financial Corp. CwA contains the variable annuity and variable universal life business acquired from Allmerica Financial Corp. COMM. ANN. AND LIFE INS. This is an insurance Massachussets 1 THE GOLDMAN SACHS GROUP, 100.0000% CO company organized under the INC. laws of Massachusetts. The Company manages blocks of variable annuity, variable universal life and minor blocks of group retirement products. ARROW CAPITAL REINSURANCE ow Capital Risk Services Bermuda 1 THE GOLDMAN SACHS GROUP, 100.0000% COMPANY, LIMITED Limited).will be the risk INC. taking entity for our property catastrophe reinsurance business. Arrow Capital Re will not have any employees. All reinsurance professionals supporting the business will be employees of GS Risk Adviso EASTPORT CAPITAL CORP. Engage in life settlements Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% business INC. EPF FINANCIAL, LLC Purchaser of life settled Delaware 1 EASTPORT CAPITAL CORP. 100.0000% policies. GS RE HOLDINGS, INC. SPE set up as a Holding Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% entity for Life Settlement INC. Solutions , Inc. LONGMORE CREDIT, LLC premium finance company Delaware 1 GS RE HOLDINGS, INC. 100.0000% ARROW CORPORATE MEMBER Licensed insurance entity Delaware 2 THE GOLDMAN SACHS GROUP, 75.0000% HOLDINGS LLC that facilitates the life INC. settlements agency business,including the GOLDMAN SACHS GLOBAL HOLDINGS 25.0000% premium finance business. L.L.C. --------- 100.0000% QXX INDEX CO., LLC to own and operate the QxX Delaware 1 GS RE HOLDINGS, INC. 100.0000% Longevity/Mortality Index LONGMORE CAPITAL, LLC life settlement companylife Delaware 1 GS RE HOLDINGS, INC. 100.0000% settlement company LONGMORE CREDIT SERVICES, originate and service Life Delaware 1 GS RE HOLDINGS, INC. 100.0000% LLC Finance business GS INVESTMENT STRATEGIES, Asset Management Company Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% LLC INC. ARROW CAPITAL INVESTMENT Bermuda-based investment Bermuda 2 GOLDMAN SACHS RISK 99.0000% SERVICES, LTD. provider and will be ADVISORS, L.P. providing investment management services to GS RISK ADVISORS, INC. 1.0000% Irish Unit Trusts owned by --------- GS. This business is part 100.0000% of the Longevity Markets Group of GS Reinsurance Group. GOLDMAN SACHS IUT An Irish Fund Management Ireland 1 THE GOLDMAN SACHS GROUP, 100.0000% MANAGEMENT LIMITED Company INC. GOLDMAN SACHS RISK Licensed re-Insurance Delaware 2 THE GOLDMAN SACHS GROUP, 99.0000% ADVISORS, L.P. intermediary in NY that can INC. act as re-insurance broker; licensed re-insurance GS RISK ADVISORS, INC. 1.0000% broker in CT. --------- 100.0000% GS RISK ADVISORS, INC. General Partner of GS Risk Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% Advisors, L.P. INC. ARROW CAPITAL RISK Maintains Insurance Bermuda 1 GOLDMAN SACHS RISK 100.0000% SERVICES LIMITED Broker's license in ADVISORS, L.P. Bermuda, effective 3/27/98; reinsurance intermediary that can act as reinsurance broker. GOLDMAN SACHS RISK Reinsurance broker. Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% SERVICES L.L.C. INC. GS EUROPEAN OPPORTUNITIES Subsidiary of ELQ and United 1 ELQ INVESTORS, LTD 100.0000% FUND III L.P. Holdco for Opp Fund 3 Kingdom
GS EUROPEAN INVESTMENT Subdiairy of GS European England 1 GS EUROPEAN OPPORTUNITIES 100.0000% GROUP III LTD. Opportunities Fund III LP FUND III L.P. to trade in loan and bond positions THO B.V. Holding company for Akfen Netherlands 1 ELQ INVESTORS, LTD 100.0000% REIT KYPRIS ACQUISITIONS LTD SPV purchaser for portfolio England 1 GS EUROPEAN OPPORTUNITIES 100.0000% of NPLs from HVB named FUND II L.P. Project Aphrodite POSEIDON ACQUISITIONS LTD ESSG Portfolio SPV for England 1 GS EUROPEAN OPPORTUNITIES 100.0000% Kreta II NPL portfolio in FUND II L.P. the Opportunities Fund II GS EUROPEAN OPPORTUNITIES General partner of the England 1 ELQ INVESTORS, LTD 100.0000% FUND II GP LTD HoldCo LP of the European Opportunities Fund II KAGAWA (DELAWARE) L.L.C. Parent of Leaf Green Delaware 1 GOLDMAN SACHS HOLDINGS 100.0000% TK-2312 (loan SPC) (MAURITIUS) LIMITED BAY WIND REALTY FINANCE Purchasing loans jointly Cayman 1 MLQ INVESTORS, L.P. 100.0000% (CAYMAN) COMPANY with Nochu. Owns equity in Islands subsidiary (Owns TE Capital). RAICHO CO., LTD. Flagged for Omotesando deal. Japan 1 GOLDMAN SACHS REALTY JAPAN 100.0000% LTD. WAKAKUSA KAIHATSU CO., Flagged for Oomotesando Japan 1 GOLDMAN SACHS REALTY JAPAN 100.0000% LTD. Deal. LTD. GK CRYSTAL INVESTMENT Holding SPL. Flagged for Japan 2 GOLDMAN SACHS REALTY JAPAN 1.0000% ASSG SPL Deal. LTD. MLQ INVESTORS, L.P. 99.0000% --------- 100.0000% GK KANAGAWA HOLDING Flagged for Kohnan home Japan 1 MLQ INVESTORS, L.P. 100.0000% center deal. Owns beneficiary rights. GK TAMATSUKURI ONSEN ASSG/REPIA Onsen Japan 1 AR HOLDINGS GK 100.0000% KAIHATSU deal.Managiment of Onsen ryokan( Japanese style Hotel.) GK HAKATA HOTEL HOLDING Flagged for Hotel Japan 1 GOLDMAN SACHS REALTY JAPAN 100.0000% centraza.Holding Hotel. LTD. HAKATA HOTEL HOLDING TK To hold a 197-romm city Japan 3 THE GOLDMAN SACHS GROUP, 18.9623% hotel , Hotel Centraza, in INC. Japan. GS STRATEGIC INVESTMENTS JAPAN 29.0758% LLC GK HAKATA HOTEL HOLDING 1.0000% --------- 49.0381% GK KEISEN KAIHATSU Flagged for Fujiya Deal. Japan 1 MLQ INVESTORS, L.P. 100.0000% Holding hard asset (ginni Building). KEISEN KAIHATSU TK To purchase buildings in Japan 3 THE GOLDMAN SACHS GROUP, 19.5650% Tokyo from Fujiya, a INC. confectionary Co. in Japan. GS STRATEGIC INVESTMENTS JAPAN 25.0000% LLC GK KEISEN KAIHATSU 5.0000% --------- 49.5650% UMEDA KAIHATSU TMK Holding real estate. Japan 1 MLQ INVESTORS, L.P. 100.0000% KAWASAKI HOLDINGS CO., Flagged for Kawasaki Hotel Japan 1 GOLDMAN SACHS REALTY JAPAN 100.0000% LTD. Deal/Owns hotel assets. LTD. Owns beneficiary right of Hotel Nikko Kawasaki. Also owns equity in subsidiary. GK IMPACT HOLDING Flagged for Nihon Birudo Japan 1 GOLDMAN SACHS REALTY JAPAN 100.0000% Deal. Owns hard asset. LTD. IMPACT HOLDING TK To acquire a piece of land Japan 3 THE GOLDMAN SACHS GROUP, 19.5650% with a building in Chiba INC. and rebuild a new shopping center GS STRATEGIC INVESTMENTS JAPAN 25.0000% LLC GK IMPACT HOLDING 5.0000% --------- 49.5650% SENRI CHUO GK Flagged for Osaka Senri Japan 1 GOLDMAN SACHS REALTY JAPAN 100.0000% deal. LTD. SENRI CHUO TK To purchase a building Japan 3 THE GOLDMAN SACHS GROUP, 19.5650% named Senri Life Science INC. Center in Japan. GS STRATEGIC INVESTMENTS JAPAN 25.0000% LLC SENRI CHUO GK 5.0000% --------- 49.5650% PRIME ASSET CO., LTD. Dormant Japan 1 GOLDMAN SACHS REALTY JAPAN 100.0000% LTD. PRIME ASSET TK To purchase real estate and Japan 3 THE GOLDMAN SACHS GROUP, 19.5650% the Juraku 8 building in a INC. commercial area in Japan from KK Juraku. GS STRATEGIC INVESTMENTS JAPAN 25.0000% LLC PRIME ASSET CO., LTD. 5.0000% --------- 49.5650% TG FUND II CO., LTD. Flagged for TG Fund Deal Japan 1 AMETHYST REALTY TK 100.0000% (SMAP 2) TG FUND II TK To purchase 28 assets such Japan 2 AMETHYST REALTY TK 99.0000% as an office, retail and multifamily residential TG FUND II CO., LTD. 1.0000% properties located all over --------- Japan from Yusei Fukushi a 100.0000% pension fund manager for Japan Post. RESTIR INVESTMENT CO., Real EstateFlagged for Japan 1 JUPITER INVESTMENT CO., 50.0000% LTD. Restir Deal. LTD. GOLDMAN SACHS INTL ZURICH Provides sales and mkting Switzerland 1 GOLDMAN SACHS INTERNATIONAL 100.0000% BRAN services for equity mkt GOLDMAN SACHS BANK AG Zurich based bank providing Switzerland 1 THE GOLDMAN SACHS GROUP, 100.0000% financial services to INC. wealthy individual clients, lead-manager of Swiss Franc denominated warrants and providing clearance for Swiss equity securities;Zurich based bank providing financial services to wealthy individual client GSCO BETEILIGUNGS GMBH Established to buy Germany 1 GOLDMAN, SACHS & CO. OHG 100.0000% preferred shares in NetJets, a Swiss based company. GOLDMAN, SACHS & CO. Managing general partner of Germany 1 THE GOLDMAN SACHS GROUP, 100.0000% FINANZ GMBH Goldman, Sachs & Co. oHG, a INC. German general partnership; non regulated GSI, ZWEIGNIEDERLASSUNG Branch of GSI, only FICC & United 1 GOLDMAN SACHS INTERNATIONAL 100.0000% FRANKF equity sales Kingdom GOLDMAN, SACHS & CO. OHG Frankfurt based subsidiary Germany 2 GOLDMAN, SACHS & CO. 1.0000% which provides investment FINANZ GMBH banking services; German bank; documents must be GOLDMAN SACHS (CAYMAN) HOLDING 99.0000% signed by authorized COMPANY persons in Frankfurt; --------- CONSULT WITH ANDREAS 100.0000% KOERNLEIN FOR PROPER SIGNING AUTHORITY. Approved Person.
GOLDMAN SACHS (CAYMAN) Non-regulated holding Cayman 2 THE GOLDMAN SACHS GROUP, 97.0000% HOLDING COMPANY company and General Partner Islands INC. of Goldman Sachs & Co. OHG; parent of The Goldman Sachs GOLDMAN SACHS GLOBAL HOLDINGS (Cayman) Trust Limited L.L.C. 3.0000% --------- 100.0000% Goldman, Sachs Management General Partner of GS Germany 1 GOLDMAN, SACHS & CO. OHG 100.0000% GP GmbH Capital Partners 2000 GmbH & Co. Beteiligungs KG GOLDMAN, SACHS GIVES GMBH Charity Germany 1 GSCO BETEILIGUNGS GMBH 100.0000% GOLDMAN, SACHS & CO. Nominee Company for Germany 1 GOLDMAN, SACHS & CO. OHG 100.0000% VERWALTUNGS GMBH Rhein-Donau Capital Partners Fund and GS Capital Partners II and III (Germany) C.L.P. GOLDMAN SACHS (AO) L.L.C. Rep office in Moscow and Delaware 2 THE GOLDMAN SACHS GROUP, 99.0000% has in past entered into INC. M&A advisory engagements in Russia; does not engage in GOLDMAN SACHS GLOBAL HOLDINGS securities trading or L.L.C. 1.0000% brokerage; As of 1/1/02 --------- once again operating a 100.0000% branch in Russia, taxable by Russian authorities, supplying consultancy servicest KPL HOLDINGS LIMITED Killingholme holding Cayman 1 KPL ACQUISITIONS LIMITED 100.0000% Islands KPL FUNDING LIMITED Killingholme funding Cayman 2 KPL HOLDINGS LIMITED 100.0000% Islands GS KILLINGHOLME CAYMAN INVESTMENTS II LTD 0.0000% --------- 100.0000% KILLINGHOLME POWER GROUP Holding company of the England 1 GOLDMAN SACHS GROUP 100.0000% LIMITED Killingholme group of HOLDINGS (U.K.) companies purchased by ESSG. The group formerly held the Killingholme Power Station before its restructure. KILLINGHOLME GENERATION Established as part of an England 4 KILLINGHOLME HOLDINGS 0.0006% LIMITED SSG Structured Investing LIMITED Group transaction. Scadbury II Assets 50.3165% SCADBURY UK LIMITED 13.3694% Shire Funding Limited 36.3135% --------- 100.0000% KILLINGHOLME POWER Former operating entity for England 1 ELQ INVESTORS, LTD 100.0000% the Killingholme Power station. KILLINGHOLME HOLDINGS Established as part of an England 1 KILLINGHOLME POWER GROUP 100.0000% LIMITED SSG Structured Investing LIMITED Group transaction. GS KILLINGHOLME CAYMAN Is a part of the structured Cayman 1 KILLINGHOLME GENERATION 100.0000% INVESTMENTS LTD. investing trade and will Islands LIMITED enter into Swaps. GSI BRANCH ITALY Branch of GS London, Italy 1 GOLDMAN SACHS INTERNATIONAL 100.0000% investment banking,asset mgmt GOLDMAN SACHS SGR S.P.A. Portfolio management Italy 2 GOLDMAN SACHS HOLDINGS 99.0000% company. Merged with GSI (U.K.) effective 12 November 2008. GOLDMAN SACHS GROUP HOLDINGS (U.K.) 1.0000% --------- 100.0000% V.A.P. 1 VEICOLO Special purpose vehicle for Italy 2 MLQ, L.L.C. 50.0000% ACQUISIZIONEPORTAFOGLI securitization deal. S.R.L. MTGLQ INVESTORS, L.P. 50.0000% --------- 100.0000% GOLDMAN, SACHS & CO. Non-regulated Frankfurt Germany 1 THE GOLDMAN SACHS GROUP, 100.0000% WERTPAPIER GMBH based entity which issues INC. warrants and purchases offsetting OTC options in the fixed income, eqity, commodity and currency markets. GS FINANCE CORP. This finance subsidiary Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% will issue cash settled INC. structured notes. GSSM HOLDING II LLC To act as a holding company Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% for GSSM Holding II Corp INC. GSSM HOLDING II CORP. To hold the Sumitomo Delaware 1 GSSM HOLDING II LLC 100.0000% preferred shares GS LS LEASING LLC For PFG leasing business Delaware 1 GSFS INVESTMENTS I CORP. 100.0000% GOLDMAN SACHS BANK USA HOLDINGS LLC Holding Company (Single Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% Member LL) to hold GS Group INC. Investment in GS Bank USA REP KBY REALTY, L.L.C. Real Estate investment Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% INC. BEESTON INVESTMENTS Korea futures & options Cayman 1 GOLDMAN SACHS (ASIA 100.0000% LIMITED trading. Holds a Foreign Islands PACIFIC) L.L.C. Investor status in Korea (FINI).Maples & Calder is the Cayman Islands agent. CORNWALL INVESTMENTS Futures & options trading Cayman 1 GOLDMAN SACHS (ASIA) 100.0000% LIMITED in Korea. Holds Foreign Islands FINANCE HOLDINGS L.L.C. Investor status (FINI) in Korea and in Taiwan HILLTOP INVESTMENTS Futures & options trading Cayman 1 GOLDMAN SACHS (CAYMAN) 100.0000% LIMITED in Korea. Holds Foreign Islands HOLDING COMPANY Investor status (FINI) in Korea and in Taiwan LANSDALE INVESTMENTS LIMITED Futures & options trading Cayman 1 GS FINANCIAL SERVICES L.P. 100.0000% in Korea. Holds Foreign Islands (DEL) Investor status (FINI) in Korea and in Taiwan Amagansett Assets This entity was set up as United 1 GS FINANCIAL SERVICES II, 100.0000% part of an AMSSG Structured Kingdom LLC Investing Group transaction Amagansett Funding Limited This entity was set up as Cayman 1 GS FUNDING EUROPE 100.0000% part of an AMSSG Structured Islands Investing Group transaction Amagansett II Assets This entity was set up as Cayman 2 Amagansett Funding Limited 99.0000% part of an AMSSG Structured Islands Investing Group transaction GS FUNDING EUROPE 1.0000% --------- 100.0000% GS FUNDING EUROPE This entity was set up as England 1 GS FINANCIAL SERVICES II, 100.0000% part of an AMSSG Structured LLC Investing Group transaction
SCADBURY ASSETS This entity was set up as England 2 Scadbury Funding Limited 1.0000% part of an AMSSG Structured Investing Group transaction SCADBURY UK LIMITED 99.0000% --------- 100.0000% Scadbury Funding Limited This entity was set up as United 1 SCADBURY UK LIMITED 100.0000% part of an AMSSG Structured Kingdom Investing Group transaction Scadbury II Assets This entity was set up as United 1 Scadbury Funding Limited 100.0000% part of an AMSSG Structured Kingdom Investing Group transaction SCADBURY UK LIMITED This entity was set up as United 1 GOLDMAN SACHS GROUP 100.0000% part of an AMSSG Structured Kingdom HOLDINGS (U.K.) Investing Group transaction SHIRE ASSETS Established as part of an England 2 Shire Funding Limited 1.0000% SSG Structured Investing Group transaction. SHIRE UK LIMITED 99.0000% --------- 100.0000% Shire Funding Limited Established as part of an United 1 SHIRE UK LIMITED 100.0000% SSG Structured Investing Kingdom Group transaction. Shire II Assets This entity was set up as United 1 SHIRE UK LIMITED 100.0000% part of a Structured Kingdom Investing Group transaction SHIRE UK LIMITED Established as part of an United 1 GOLDMAN SACHS GROUP 100.0000% SSG Structured Investing Kingdom HOLDINGS (U.K.) Group transaction. FAIRWAY RESOURCES PARTNERS, LP Partnership focused on oil Delaware 1 MTGLQ INVESTORS, L.P. 100.0000% and gas production and ownership of lease acreage. PRNP, LLC To provide the SSG business Delaware 1 MTGLQ INVESTORS, L.P. 100.0000% opportunity to invest on the island of Puerto RicoTo provide the SSG business opportunity to invest on the island of Puerto Rico KRETA ACQUISITIONS LTD SPV to purchase Project England 1 GS EUROPEAN OPPORTUNITIES 100.0000% Kreta NPL Portfolio FUND II L.P. ASAMA ONSEN KAIHATSU CO., LTD. Flagged for Onsen deal. Japan 1 GOLDMAN SACHS REALTY JAPAN Holds Japanese Inn; Holds LTD. 100.0000% equity in subsidiary (Owns Asama Onsen Hotel Mamangement). KAKEGAWA HOLDINGS TK A trustor and Master Lessee Japan 2 KAKEGAWA HOLDINGS CO., LTD. 5.0000% of Kakegawa Grand Hotel. GS FINANCIAL SERVICES L.P. (DEL) 75.0000% --------- 80.0000% GS HONY HOLDINGS I LTD. Investment vehicle for Hony Cayman 1 GS ASIAN VENTURE 100.0000% Capital III Investment Islands (DELAWARE) L.L.C. vehicle for Hony Capital III GS HONY HOLDINGS II LTD. Investment vehicle for the Cayman 1 GS ASIAN VENTURE 100.0000% firm's interest in Hony Islands (DELAWARE) L.L.C. Capital fund III LP GS CAPITAL PARTNERS AUTO GLASS HOLDINGS Investment vehicle for Mauritius 1 THE GOLDMAN SACHS GROUP, 100.0000% Fuyao Auto Glass. INC. GS CAPITAL PARTNERS AURUM HOLDINGS Investment vehicle for Midea Mauritius 1 THE GOLDMAN SACHS GROUP, 100.0000% INC. GS CAPITAL PARTNERS VI The CPVI Employee Fund is Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% EMPLOYEE FUND, L.P. in the process of being INC. deconsolidated as this entity no longer holds anything. GS FUNDING MANAGEMENT Set up as part of a Cayman 1 SHIRE UK LIMITED 100.0000% LIMITED structured transaction Islands containing Interest rate Swaps,Asset swaps and treasuries. GS EQUIPMENT FINANCE II To undertake leasing Cayman 1 SCADBURY UK LIMITED 100.0000% LIMITED business. Islands GS EQUIPMENT FINANCE I To undertake leasing Cayman 1 SCADBURY UK LIMITED 100.0000% LIMITED business. Islands GS LEASING LIMITED Entity is a partnerships Cayman 2 GS LEASING NO.1 LIMITED 90.0000% PARTNERSHIP set up to enter into a Islands finance lease with Tesco Plc. It will acquire assets GS LEASING NO. 3 LIMITED 10.0000% from Tesco and then lease --------- them back in the form of 100.0000% the finance lease. As such the fixed assets do not go on the GS balance sheet. Instead there is a lease receivable. GS LEASING NO.1 LIMITED Entity set up to be the Cayman 1 SCADBURY UK LIMITED 100.0000% general partner Islands (controlling interest) in GS Leasing Limited Partnership. It will invest in the partnership in return for its share of the leasing income. GS LEASING MANAGEMENT LIMITED To undertake leasing Cayman 1 GOLDMAN SACHS GROUP 100.0000% business. Islands HOLDINGS (U.K.) BIRCHFIELD ESTATES LTD To own data site in London England 1 THE GOLDMAN SACHS GROUP, 100.0000% INC. GS Israel LLC-Tel Aviv Branch Single Member Office in Tel Delaware 1 GOLDMAN SACHS ISRAEL LLC 100.0000% Aviv. Israeli investment research entity. GS LEASING NO. 3 LIMITED To hold a 10% stake in GS Cayman 1 SCADBURY UK LIMITED 100.0000% Leasing ( 1344) Islands DHONI CAYMAN HOLDINGS LTD. To invest in Urban Cayman 1 GS ASIAN VENTURE 100.0000% Infrastructure Real Estate Islands (DELAWARE) L.L.C. Fund managed by Reliance Industrieis in India. DHONI CAYMAN LIMITED PARTNERSHIP Private equity vehicle for Cayman 2 DHONI CAYMAN HOLDINGS LTD. 99.0000% GS to invest in Urban Islands Infrastructure Real Estate DHONI CAYMAN GP LTD 1.0000% Investment Fund managed by --------- Urban Infrastructure 100.0000% Capital Advisors.Private equity vehicle for GS to invest in Urban Infrastructure Real Estate Investment Fund managed by Urban Inf DHONI CAYMAN GP LTD Hold an investment Cayman 1 GS ASIAN VENTURE 100.0000% structure in emerging Asian Islands (DELAWARE) L.L.C. mkts
GS DIRECT, L.L.C. Tupe of business: Other - Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% investment fund INC. LFG HOLDINGS, LLC Investment is a market data Delaware 1 GSUIG, L.L.C. 100.0000% base and marketing consulting firm based in Miami GS FUNDING EUROPE I LTD. This entity is to be Cayman 1 GS FUNDING EUROPE 100.0000% involved in a trade Islands undertaken by the structured investment group. It will receive funds from GS European Funding Limited. GS FUNDING EUROPE II LTD. This entity is to be Cayman 2 GS FUNDING EUROPE 10.0000% involved in a trade Islands undertaken by the GS FUNDING EUROPE I LTD. 90.0000% structured investment --------- group. It will receive 100.0000% funds from GS European Funding I Limited. GS PHERECLUS HOLDINGS Firm direct investment Mauritius 1 GS DIRECT, L.L.C. 100.0000% LIMITED holding company. GS DIRECT GD LIMITED Firm direct investment Mauritius 1 GS DIRECT, L.L.C. 100.0000% holding company. GS TREASURE SARL Firm direct investment Luxembourg 1 GS DIRECT, L.L.C. 100.0000% holding company. LIQUIDITY ASSETS HOLDING Established as part of an Cayman 1 MTGLQ INVESTORS, L.P. 100.0000% LIMITED SSG Structured Investing Islands Group transaction. FIRST AVIATION HOLDING Consolidated GS Direct Delaware 1 GS DIRECT, L.L.C. 95.5736% CORP. investment GS LOAN PARTNERS HOLDINGS To invest / lend GS Loan Delaware 1 GOLDMAN SACHS CREDIT 100.0000% LLC Partners LLC and pledge PARTNERS L.P. equity to funding counterpart GS LOAN PARTNERS LLC to purchase and finance Delaware 1 GS LOAN PARTNERS HOLDINGS 100.0000% bank loan inventory LLC GK ITO ONSEN KAIHATSU Flagged for New Onsen Deal Japan 1 AR HOLDINGS GK 100.0000% (Ebina).Management of Ryokan (Japanese Hotel). GK YONAGO KAIKE ONSEN KAIHATSU ASSG/REPIA Onsen Deal Japan 1 AR HOLDINGS GK 100.0000% ARES (REAL ESTATE) B.V. to hold real estate assets Netherlands 1 GS FINANCIAL SERVICES L.P. 50.0000% from the loan workouts in (DEL) Ares Finance s.r.l. ARES FINANCE Srl A securitization vehicle Italy 1 THE GOLDMAN SACHS GROUP, 50.0000% established under Italian INC. law that holds sub-performing assets and has issued debt secured by these assets. PNW, LLC A utilities supplier of Delaware 1 GOLDMAN SACHS LENDING 100.0000% energy and energy-related PARTNERS LLC products. GOLDMAN SACHS REAL ESTATE FUNDING CORP. Acts as the General Partner New York 1 GOLDMAN SACHS BANK USA 100.0000% of Goldman Sachs Mortgage Company GOLDMAN SACHS MORTGAGE COMPANY Goldman Sachs Mortgage New York 2 GOLDMAN SACHS BANK USA 99.0000% Company ("GSMC") purchases closed, independently GOLDMAN SACHS REAL ESTATE funded, first and FUNDING CORP. 1.0000% subordinate-lien --------- residential mortgage loans 100.0000% for its own investment, securitization, or resale. In addition, GSMC provides warehouse and repurchase financing to mortg MLQ INVESTORS, L.P. Hold certain mortgage Delaware 2 THE GOLDMAN SACHS GROUP, properties for liquidation. INC. 99.0000% MLQ, L.L.C. 1.0000% --------- 100.0000% CL INVESTMENTS LIMITED Non-regulated Cayman Island Cayman 1 THE GOLDMAN SACHS GROUP, 100.0000% based entity established to Islands INC. invest in an unaffiliated entity which holds a consumer loan portfolio; contribute equity to a trust which will hold ITT receivables MLQ, L.L.C. General partner of MLQ Delaware 2 THE GOLDMAN SACHS GROUP, Investors, L.P. INC. 99.0000% GOLDMAN SACHS GLOBAL HOLDINGS L.L.C. 1.0000% --------- 100.0000% MAIN STREET MORTGAGE Florida subsidiary acquired Delaware 2 THE GOLDMAN SACHS GROUP, 99.0000% COMPANY, LIMITED to service mortgage INC. PARTNERSHIP portfolios (primarily those held by Goldman Sachs MSMC, INC. 1.0000% Mortgage Company) --------- 100.0000% GS MORTGAGE SECURITIES To act as depositor for Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% CORPORATION II commercial mortgage backed INC. securities deals MTGLQ INVESTORS, L.P. Investor in various real Delaware 2 THE GOLDMAN SACHS GROUP, 99.0000% estate transactions INC. MLQ, L.L.C. 1.0000% --------- 100.0000% STRATEGIC MORTGAGE HOLDINGS, L.P. Hold debt and equity Delaware 2 THE GOLDMAN SACHS GROUP, 99.0000% interests in a Canadian INC. mortgage broker business STRATEGIC MORTGAGE HOLDINGS, 1.0000% INC. --------- 100.0000% STRATEGIC MORTGAGE HOLDINGS, INC. General Partner of Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% Strategic Mortgage INC. Holdings, L. P. SOPAC LLC To hold assets purchased Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% from Southern Pacific INC. Funding Corporation SOUTHERN PACIFIC FUNDING CORPORATION To hold certain mortgage California 1 THE GOLDMAN SACHS GROUP, 100.0000% loans and securities INC. purchased out of bankruptcy. Purchase of S. Pacific Funding Corp. and residuals. GSSLQ, L.L.C. To hold GS ownership Delaware 1 MTGLQ INVESTORS, L.P. 100.0000% interest in SLQ S de R.L. de C.V., a Mexican limited liability company established to purchase rights in distressed assets. SCLQ, S. de R.L. de C.V. To purchase distressed Mexico 1 MTGLQ INVESTORS, L.P. 100.0000% assets in Mexico CDV-1 HOLDING COMPANY GEN-PAR, L.L.C. General partner for CDV-1 Delaware 1 MTGLQ INVESTORS, L.P. 100.0000% Holding Company, L.P. CDV-1,LTD Established to acquire a England 1 CDV-1 HOLDING COMPANY, L.P. 91.6200% portfolio of non-performing loans in the Czech Republic from Ceska konsolidacni agentura.
CDV-1 HOLDING COMPANY, Set up as a partnership to Delaware 2 MTGLQ INVESTORS, L.P. 89.8000% L.P. own CDV-1, Ltd. CDV-1 HOLDING COMPANY GEN-PAR, 0.2000% L.L.C. --------- 90.0000% CDV-2, LTD. To acquire Czech debt England 1 ELQ INVESTORS, LTD 90.0000% PRALQ, LLC To purchase a portfolio of Delaware 1 GOLDMAN SACHS LENDING 100.0000% consumer receivables, PARTNERS LLC primarily auto loans. ARLO LLC To purchase and hold Delaware 1 GOLDMAN SACHS LENDING 100.0000% non-performing loans. PARTNERS LLC GOLDMAN SACHS ASSET BACKED Acquisition and disposition Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% SECURITIES CORP. of asset-backed securities INC. REP MCR REALTY, L.L.C. To acquire and hold 2 Delaware 1 MTGLQ INVESTORS, L.P. 100.0000% non-performing real estate secured loans (McCook and Randolph Assets). DUNVEGAN INVESTMENTS, LTD. Investment company Cayman 1 GOLDMAN SACHS HOLDINGS 100.0000% (dormant). Islands (U.K.) REMARK CAPITAL GROUP, LLC An AMSSG related entity Delaware 1 MTGLQ INVESTORS, L.P. 72.0000% that manages and services portfolios of consumer auto loans. MLQ-MLL, LLC Established to originate Delaware 1 MTGLQ INVESTORS, L.P. 100.0000% and purchase Mezzanine loans on real estate investments. RIO PARANA COMPANHIA Merged survivor of Rio BRAZIL 2 MTGLQ INVESTORS, L.P. 99.9900% SECURITIZADORA DE CREDITOS Potiguar Companhia FINANCEIROS Securitizadora de Creditos GS FINANCIAL SERVICES L.P. 0.0100% Financeiros and this entity. (DEL) --------- 100.0000% AMC REO LLC To hold real estate Delaware 1 MTGLQ INVESTORS, L.P. 100.0000% obligations. GS DO BRASIL CORRETORA Brazilian broker dealer Brazil 1 GOLDMAN SACHS do BRASIL 100.0000% entity that will enable GS BANCO MULTIPLO S/A to trade cash equities and listed options directly with the Brazilian exchange (BOVESPA). JANY Fundo Creditorios To hold FIDC (credit New York 1 J. ARON & COMPANY 100.0000% receivable) instruments. GSMC SPECIALTY LLC Acquire, own and hold Delaware 1 GOLDMAN SACHS MORTGAGE 100.0000% securities backed by, COMPANY secured by or evidencing an interest in loans, notes participations or other assets or rights related to real property or preferred equity in issuers of notes secured by such interest. Enter into agreements rel ASSET MANAGEMENT COMPANY For the purpose of engaging Delaware 1 MTGLQ INVESTORS, L.P. 100.0000% OF AMERICA, L.L.C. (directly or through subsidiary or affiliated companies or both) in any business or activities that may lawfully be angaged in by a limited liability company formed under the Delaware Act. ASSET MANAGEMENT COMPANY Capital restructure. Delaware 2 MTGLQ INVESTORS, L.P. 99.0000% OF AMERICA, L.P. ASSET MANAGEMENT COMPANY OF AMERICA, L.L.C. 1.0000% --------- 100.0000% DAC HOLDINGS I, L.L.C. Holding company for 6 other Delaware 1 GOLDMAN SACHS LENDING 100.0000% special purpose PARTNERS LLC partnerships involved inleveraged lease transactions GOLDMAN SACHS LONDON To own property. To hold England 1 THE GOLDMAN SACHS GROUP, 100.0000% PROPERTY LIMITED property owned by Goldman INC. Sachs Property Management. BEIJING GAO HUA SECURITIES Chinese entity engaged in People's 3 BEIJING GAO WANG VENTURE 33.3333% COMPANY LIMITED underwriting and Republic of CAPITAL proprietary trading of China securities as well as BEIJING DE SHANG VENTURE 33.3333% providing financial CAPITAL COMPANY advisory services. BEIJING HOU FENG VENTURE 33.3333% CAPITAL COMPANY LIMITED --------- 100.0000% GOLDMAN SACHS GAO HUA Sino-foreign Joint Venture People's 2 GOLDMAN SACHS (ASIA) L.L.C. 33.0000% SECURITIES COMPANY LIMITED Company with Beijing Gao Republic of Hua Securities Company China BEIJING GAO HUA SEC CL, BJHQ 67.0000% Limited.Business Scope: --------- Underwriting of shares 100.0000% (incluidng Renminbi donominated ordinary shares and foreign investment shares) and bonds (including government bonds and corporateb BEIJING GAO WANG VENTURE CAPITAL Invests in Beijing Gao Hua People's 1 GOLDMAN SACHS (ASIA) 100.0000% Securities Company Limited. Republic of FINANCE HOLDINGS L.L.C. China BEIJING DE SHANG VENTURE Investor in Beijing Gao Hua People's 1 GOLDMAN SACHS (ASIA) 100.0000% CAPITAL COMPANY Securities Company Limited. Republic of FINANCE HOLDINGS L.L.C. China BEIJING HOU FENG VENTURE Invests in Beijing Gao Hua People's 1 GOLDMAN SACHS (ASIA) 100.0000% CAPITAL COMPANY LIMITED Securities Company Limited. Republic of FINANCE HOLDINGS L.L.C. China BEIJING GAO HUA SEC CL, trading plus exchange seat C hina 1 BEIJING GAO HUA SEC CL, 100.0000% BJTO leasing to mutual funds BJHQ BEIJING GAO HUA SEC CL, trading plus exchange seat China 1 BEIJING GAO HUA SEC CL, 100.0000% SHTO leasing to mutual funds BJHQ BEIJING GAO HUA SEC CL, Beijing headquarters, China 3 BEIJING GAO WANG VENTURE 33.3333% BJHQ proprietary trading w/ CAPITAL china exch BEIJING DE SHANG VENTURE 33.3333% CAPITAL COMPANY BEIJING HOU FENG VENTURE 33.3333% CAPITAL COMPANY LIMITED --------- 100.0000% GSIB Beijing Rep Office Rep Office China 1 GOLDMAN SACHS INTERNATIONAL BANK KEYAKIZAKA FINANCE CO., Purchasing loans.Equity Japan 1 GS FINANCIAL SERVICES L.P. 100.0000% LTD. deals of PFS team. (DEL) GOLDMAN SACHS JAPAN Purchasing Loans Japan 1 GS FINANCIAL SERVICES L.P. 100.0000% FINANCE K.K. (DEL) CMA CO., LTD. Originated loans as money Japan 1 LINDEN WOOD II-S TK 100.0000% lender. LINDEN WOOD II-S TK An ASSG related entity that Cayman 2 LINDEN WOOD IIS LTD. 5.0000% invests in distressed loans. Islands GS FINANCIAL SERVICES L.P. 75.0000% (DEL) --------- 80.0000% LINDEN WOOD IIS LTD. Purchasing unsecured loans Cayman 1 MLQ INVESTORS, L.P. 100.0000% jointly with Nochu Islands MERCHANT SUPPORT CO., LTD. Flagged for Merchant JV Japan 1 GOLDMAN SACHS REALTY JAPAN 100.0000% (Factoring service) LTD.
REAL ESTATE CREATION FUND Resona deal.Purchasing Loan Japan 1 GOLDMAN SACHS REALTY JAPAN 100.0000% CO., LTD. LTD. REC INVESTMENTS CO., LTD. Resona deal Japan 1 GOLDMAN SACHS REALTY JAPAN 100.0000% LTD. GS WIND HOLDINGS LLC To acquire the wind Delaware 1 GSFS INVESTMENTS I CORP. 100.0000% business of Zilkha Renewable Energy LLC GS MACRO INVESTMENTS LLC Vehicle for structured Delaware 2 THE GOLDMAN SACHS GROUP, 11.1110% trades. INC. MTGLQ INVESTORS, L.P. 88.8890% --------- 100.0000% KAWASAKI HOLDINGS TK Owns hotel assets in Japan. Japan 3 THE GOLDMAN SACHS GROUP, 11.5340% INC. GS STRATEGIC INVESTMENTS 23.5000% JAPAN LLC KAWASAKI HOLDINGS CO., LTD. 5.0000% --------- 40.0340% WHITE OCEAN CO., LTD. Purchasing loans from Japan 1 GOLDMAN SACHS REALTY JAPAN 100.0000% Resona (RCC/Resona LTD. Securitization Deal) MERCHANT CAPITAL CO., LTD. Flagged for Merchant JV Japan 1 GOLDMAN SACHS REALTY JAPAN 100.0000% (factoring service) LTD. GS MACRO INVESTMENTS II, In connection with the MEIV Delaware 1 GS MACRO INVESTMENTS LLC 100.0000% LLC transaction. GS MACRO INVESTMENTS I, In connection with the MEIV Delaware 1 GS MACRO INVESTMENTS LLC 100.0000% LLC transaction. FORRES LLC Established as part of an Delaware 1 GOLDMAN SACHS HOLDINGS 100.0000% SSG Structured Investing (U.K.) Group transaction. THE AYCO SERVICES Record insurance revenues New York 1 MERCAY CORPORATION 100.0000% INSURANCE AGENCY, INC. generated in the state of Mass. SAKURAZAKA KAIHATSU TK To invest in the Recruit Japan 1 SAKURAZAKA KAIHATSU CO., 50.0000% deal - Total return Swap. LTD. BLUE DAISY TK Blue Daisy is a vehicle to Japan 1 BLUE DAISY CO., LTD. 50.0000% invest in recruit through its participation in the secondary shares acquired by Nochu. GS MACRO INVESTMENTS III, In connection with the MEIV Delaware 1 GS MACRO INVESTMENTS LLC 100.0000% LLC transaction. GS MACRO INVESTMENTS IV, In connection with the MEIV Delaware 1 GS MACRO INVESTMENTS LLC 100.0000% LLC transaction. DANDELION INVESTMENTS TK Dandelion has made Japan 2 DANDELION INVESTMENTS CO., 5.0000% investments in Green LTD. mountain to acquire non-performing loans from GS FINANCIAL SERVICES L.P. 73.0000% Linden Wood an existing SPC (DEL) of the ASSG business. --------- 78.0000% GREEN MOUNTAIN ONE TK It has been set up jointly Japan 2 GREEN MOUNTAIN ONE CO., 5.0000% with Dandelion Investmenst LTD. YK ("Dandelion") and Mizuho Security , a third party, DANDELION INVESTMENTS TK 55.0000% to acquire nonperforming --------- loans from LindenWood, an 60.0000% existing SPC of the ASSG business. ASHITABA CREATION CO., Holding loan secured by Japan 1 GOLDMAN SACHS REALTY JAPAN 100.0000% LTD. Shinjuku WINDS building LTD. morgage. JAPAN HOTEL & RESORT K.K. Hotel REIT AM company Japan 1 MLQ INVESTORS, L.P. 100.0000% (Regulated) SHINING PARTNERS TK Consolidation of Japan Japan 2 GS STRATEGIC INVESTMENTS 75.0000% Entity (to hold SPL JAPAN LLC portfolio) SHINING PARTNERS LTD. 5.0000% --------- 80.0000% FUKUOKA TOSHI KAIHATSU TK Consolidation of Japan Japan 3 THE GOLDMAN SACHS GROUP, 39.4734% Entity (REO acquisition). INC. To hold Real Estate. GS STRATEGIC INVESTMENTS JAPAN 50.4388% LLC FUKUOKA TOSHI KAIHATSU CO., LTD. 10.0878% --------- 100.0000% KINMIRAI CREATE TK Set up to purchase Mizuho Japan 3 THE GOLDMAN SACHS GROUP, 19.5650% REO JV deal. INC. GS STRATEGIC INVESTMENTS JAPAN 25.0000% LLC KINMIRAI CREATE CO., LTD. 5.0000% --------- 49.5650% GS MACRO INVESTMENTS V, In connection with the MEIV Delaware 1 GS MACRO INVESTMENTS LLC 100.0000% LLC transaction. GK TAKASU Flagged for Jusco Japan 1 AR HOLDINGS GK 100.0000% Shimotsuma Deal (Bridge Finance Provider to Kinmirai) TAKASU TK To provide bridge finance Japan 3 THE GOLDMAN SACHS GROUP, 19.5650% and add-on property INC. adjacent to the existing property. GS STRATEGIC INVESTMENTS 25.0000% JAPAN LLC GK TAKASU 5.0000% --------- 49.5650% GS (CHINA) SHANGHAI REP. Liaison offices for GS Delaware 1 GOLDMAN SACHS (CHINA) 100.0000% OFFIC affiliates L.L.C. GS (CHINA) BEIJING REP. Liaison offices for GS Delaware 1 GOLDMAN SACHS (CHINA) 100.0000% OFFICE affiliates L.L.C. GS (ASIA) LLC THAILAND develops banking invest Delaware 1 GOLDMAN SACHS (ASIA) L.L.C. 100.0000% REP. OF activity & relationships in Thai GS FINANCIAL SERVICES L.P. Holding company for various Delaware 2 THE GOLDMAN, SACHS & CO. 0.1000% (DEL) entites owned wholly or L.L.C. partially by GS that may incur material amounts of THE GOLDMAN SACHS GROUP, INC. 99.9000% foreign income tax; most --------- entities previously owned 100.0000% by GS Capital Markets, L.P.; GS MORTGAGE SECURITIES To issue bonds and/or form Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% CORP. trusts to issue bonds INC. collateralized by pools of mortgage related securities. BEST INVESTMENTS Holding company for Express Delaware 1 GS FINANCIAL SERVICES L.P. 100.0000% (DELAWARE) L.L.C. Securitization Specialty (DEL) L.L.C. and Express II Securitization Specialty L.L.C. GOLDMAN SACHS INVESTMENT To act as an investment Germany 1 GOLDMAN, SACHS & CO. OHG 100.0000% MANAGEMENT GMBH advisor in Germany GOLDMAN SACHS CAPITAL General Partner of Goldman Delaware 1 GOLDMAN SACHS BANK USA 100.0000% MARKETS L.L.C. Sachs Capital Markets, L.P. GOLDMAN SACHS CAPITAL General Partner of Goldman Delaware 2 GOLDMAN SACHS BANK USA 99.0000% MARKETS, L.P. Sachs Capital Markets, L.P. GOLDMAN SACHS CAPITAL MARKETS 1.0000% L.L.C. --------- 100.0000% VANTAGE MARKETPLACE LLC As part of Goldman Sachs' Delaware 1 VANTAGE MARKETPLACE 100.0000% independent research HOLDINGS, LLC platform, Vantage Marketplace LLC's subject matter experts will consult with clients who have contracted the expert's services on specific questions/topics. ELQ HOLDINGS (DEL) LLC Holding company for new Delaware 2 THE GOLDMAN SACHS GROUP, 75.0000% ESSG investing INC. entitiesHolding company for new ESSG investing entities MLQ, L.L.C. 25.0000% --------- 100.0000%
ELQ HOLDINGS (UK) LTD ELQ Holdings (UK) Ltd holds United 1 ELQ HOLDINGS (DEL) LLC 100.0000% ELQ II and ELQ III. As part Kingdom of the firmwide project to reduce the firms effective tax rate, US tax have been reviewing the ESSG structures and have determined that ELQ (func ccy USD) to be sub optimal from a tax perspective and ELQ INVESTORS II LTD ELQ Holdings (UK) Ltd holds United 1 ELQ HOLDINGS (UK) LTD 100.0000% ELQ Investors II Ltd and Kingdom ELQ Investors III Ltd. As part of the firmwide project to reduce the firms effective tax rate, US tax have been reviewing the ESSG structures and have determined that ELQ (func ccy USD) to be sub optima ELQ INVESTORS III LTD ELQ Holdings (UK) Ltd holds United 1 ELQ HOLDINGS (UK) LTD 100.0000% ELQ Investors II Ltd and Kingdom ELQ Investors III Ltd. As part of the firmwide project to reduce the firms effective tax rate, US tax have been reviewing the ESSG structures and have determined that ELQ (func ccy USD) to be sub optima MSMC, INC. General partner of Main Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% Street Mortgage Company INC. Limited Partnership, mortgage servicing company GOLDMAN SACHS CREDIT nation and syndication of Bermuda 2 GSCP (DEL) INC. 99.9900% PARTNERS L.P. commercial loans as well the secondary trading of GSCP (DEL) LLC 0.0100% such loans.Inventory and --------- trade lesser developed 100.0000% country debt and senior bank debt; to invest in assignments and participations in certain bank debt, debt of other lenders and anyo SPECIAL SITUATIONS The primary purpose of the Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% INVESTING GROUP, INC. entity is the buying and INC. selling of bank debt. Additionally, there will be some securities trading. GS GLOBAL FUNDING (CAYMAN) Holding company for Cayman 1 GS FINANCIAL SERVICES L.P. 100.0000% LIMITED Hechshire Limited. Islands (DEL) HECHSHIRE Special purpose vehicle. England 1 SHIRE UK LIMITED 100.0000% Entity established to facilitate structured financing, specifically a loan note issuance by Goldman Sachs International. LUGE LLC Entity established to Delaware 1 MEHETIA HOLDINGS INC. 100.0000% facilitate structured financing. MADISON/SPECIAL SITUATIONS Primarily in the business Delaware 1 SPECIAL SITUATIONS 100.0000% VALUE FUND, LLC of buying bankruptcy trade INVESTING GROUP, INC. claims RTV VENTURES LLC Delaware entity established Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% to service an existing loan INC. portfolio. GS MORTGAGE I PARTNERS, Entity established to Delaware 2 GOLDMAN SACHS MORTGAGE 95.0000% L.P. facilitate structured COMPANY financing. GS MORTGAGE I HOLDINGS, LLC 5.0000% --------- 100.0000% MEHETIA HOLDINGS INC. Parent company of Luge LLC, Delaware 3 GS MEHETIA CORP. 20.0000% Mehetia Inc and Carrera2 LLC GS MEHETIA LLC 50.0000% GS MEHETIA PARTNERSHIP LP 30.0000% --------- 100.0000% GS MEHETIA CORP. Parent company of Mehetia Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% Holdings, Inc. and GS INC. Mehetia Partnership LP. GS MEHETIA LLC Parent company of Mehetia Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% Holdings Inc. INC. GS MEHETIA PARTNERSHIP LP Parent company of GS Delaware 2 GS MEHETIA CORP. 1.0000% Mehetia Holdings Inc. GS MEHETIA LLC 99.0000% --------- 100.0000% MEHETIA INC. Entity established to Delaware 1 MEHETIA HOLDINGS INC. 100.0000% facilitate structured financing. CARRERA2 LLC Entity established to Delaware 1 MEHETIA HOLDINGS INC. 100.0000% facilitate structured financing. GS GLOBAL FUNDING II, CO. Holding company for GS Delaware 2 GOLDMAN SACHS CANADA INC. 23.0800% Global Funding III, Co.Holding company for GS GS FINANCIAL SERVICES L.P. 76.9200% Global Funding III, Co. (DEL) --------- 100.0000% GS GLOBAL FUNDING III, CO. Holding company for GS Delaware 1 GS GLOBAL FUNDING II, CO. 100.0000% Global Funding IV, LLC GS GLOBAL FUNDING IV, LLC Investor in preferred Delaware 1 GS GLOBAL FUNDING III, CO. 100.0000% securities. GS GLOBAL INVESTMENTS, CO. Investor in preferred Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% securities. INC. LIQUIDITY ASSETS LIMITED Established as part of an Cayman 1 LIQUIDITY ASSETS HOLDING 100.0000% SSG Structured Investing Islands LIMITED Group transaction. GS GLOBAL INVESTMENTS III Established as part of an Delaware 1 GS GLOBAL INVESTMENTS, CO. 100.0000% TRUST SSG Structured Investing Group transaction. COUNTY ASSETS LIMITED Entity established to Cayman 1 COUNTY FUNDING 100.0000% facilitate structured Islands financing. COUNTY FUNDING Entity established to England 1 COUNTY UK LIMITED 100.0000% facilitate structured financing. COUNTY UK LIMITED Entity established to Cayman 1 GS GLOBAL INVESTMENTS UK, 100.0000% facilitate structured Islands INC. financing. GS GLOBAL INVESTMENTS UK, Entity established to Delaware 1 GS GLOBAL INVESTMENTS, CO. 100.0000% INC. facilitate structured financing. MADISON/SPECIAL SITUATIONS Joint venture partner to Delaware 1 SPECIAL SITUATIONS 100.0000% VALUE FUND II, LLC purchase small bankrupcy INVESTING GROUP, INC. trade clients. GS GLOBAL PARTNERS LLC Entity established to Delaware 1 GS FINANCIAL SERVICES L.P. 100.0000% facilitate structured (DEL) financing. GS CAPITAL FUNDING (UK) 1 Entity is part of the England 1 GS DIVERSIFIED INVESTMENTS 100.0000% LIMITED European Hedging Strategy LIMITED deal. GS WIND POWER II, LLC Part of a wind energy Delaware 1 GSFS INVESTMENTS I CORP. 100.0000% project.
RAFT RIVER I HOLDINGS, LLC Established as part of an Delaware 1 GSFS INVESTMENTS I CORP. 100.0000% SSG Structured Investing Group transaction. RAFT RIVER ENERGY I LLC Established as part of an Delaware 1 RAFT RIVER I HOLDINGS, LLC 100.0000% SSG Structured Investing Group transaction. BRIDGEWATER ODC, LLC New entity to house a new Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% US data center property INC. HORIZON FUND Fund in Brazil used to Cayman 1 PROP - GS FUNDO DE 100.0000% trade exotic products and Islands INVESTIMENTO MULTIMERCADO in the near future CREDITO PRIVADO - commodities. INVESTIMENTO NO EXTERIOR GS MORTGAGE I HOLDINGS, Entity established to Delaware 1 GOLDMAN SACHS MORTGAGE 100.0000% LLC facilitate structured COMPANY financing. SYNFUEL SOLUTIONS HOLDINGS Holding company for Synfuel Delaware 2 THE GOLDMAN SACHS GROUP, 99.9900% LLC Holdings LLC. INC. GS FINANCIAL SERVICES L.P. (DEL) 0.0100% --------- 100.0000% GS V-1 HOLDINGS, L.P. Entity established to Bermuda 2 GSCP (DEL) INC. 99.9900% facilitate structured financing. GSCP (DEL) LLC 0.0100% --------- 100.0000% GS WIND POWER I, LLC Part of a wind energy Delaware 1 GS FINANCIAL SERVICES L.P. 100.0000% project. (DEL) GS GLOBAL MARKETS, INC. Entity established to Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% facilitate structured INC. financing. GOLDMAN SACHS CAPITAL Established as part of an England 1 GS FINANCIAL SERVICES L.P. 100.0000% INVESTMENTS LIMITED SSG Structured Investing (DEL) Group transaction. GOLDMAN SACHS CAPITAL Established as part of an England 1 GOLDMAN SACHS CAPITAL 100.0000% INVESTMENTS II LIMITED SSG Structured Investing INVESTMENTS LIMITED Group transaction. CAPITAL INVESTMENTS (U.S.) Established as part of an Delaware 1 GOLDMAN SACHS CAPITAL 100.0000% III, L.L.C. SSG Structured Investing INVESTMENTS II LIMITED Group transaction. GSFS INVESTMENTS I CORP. Established as part of an Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% SSG Structured Investing INC. Group transaction. ENERGY CENTER HOLDINGS, Established as part of an Delaware 1 GSFS INVESTMENTS I CORP. 100.0000% LLC SSG Structured Investing Group transaction. K.K. MINATO SAIKEN KAISHU Servicer. Japan 1 MLQ INVESTORS, L.P. 100.0000% GS 737 CLASSICS LEASING Established as part of an Delaware 1 GSFS INVESTMENTS I CORP. 100.0000% LLC SSG Structured Investing Group transaction. GS FUNDING OPPORTUNITIES Issuing shares and Delaware 1 GS FUNDING OPPORTUNITIES 100.0000% LLC effecting transfers, making II LLC distributions, entering into and performing its obligations, and exercising and enforcing its rights under each GS Funding transaction document. GS FUNDING OPPORTUNITIES Issuing shares and Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% II LLC effecting transfers, making INC. distributions, entering into and performing its obligations, and exercising and enforcing its rights under each GS Funding II transaction document. FLURET TRUST Established to facilitate United 2 GS FINANCIAL SERVICES L.P. 95.0000% structured financing. Kingdom (DEL) GS FUNDING OPPORTUNITIES II LLC 5.0000% --------- 100.0000% FLURET LIMITED Established as part of an Isle of 1 FLURET TRUST 100.0000% SSG Structured Investing Jersey Group transaction. HWE HOLDINGS LLC Subsidiary of GS Wind Delaware 1 GS WIND HOLDINGS LLC 100.0000% Holdings LLC GAC PERSONAL TK An ASSG related entity that Japan 2 GAC PERSONAL CO., LTD. 5.0000% purchased residential loans from Chiyoda Life. GS FINANCIAL SERVICES L.P. 95.0000% (DEL) --------- 100.0000% LINDEN WOOD TK An ASSG related entity that Japan 2 LINDEN WOOD, LTD. 5.0000% invests in distressed loans. GS FINANCIAL SERVICES L.P. 75.0000% (DEL) --------- 80.0000% LEAF GREEN TK Acquiring non performing Japan 3 THE GOLDMAN SACHS GROUP, 5.1140% loans and realizing them. INC. LEAF GREEN CO., LTD. 5.0000% KAGAWA (DELAWARE) L.L.C. 45.5125% --------- 100.0000% SOLAR WIND TK An ASSG related entity that Japan 2 SOLAR WIND LTD. 5.0000% invests in distressed loans. KIRI (DELAWARE) L.L.C. 75.0000% --------- 80.0000% GS DIVERSIFIED INVESTMENTS Participate in PBL Delaware 1 GS DIVERSIFIED FUNDING LLC 100.0000% LIMITED structured financing transaction. GS DIVERSIFIED HOLDINGS Participate in PBL Cayman 1 GS DIVERSIFIED FUNDING LLC 100.0000% LIMITED structured financing Islands transaction. GS DIVERSIFIED FUNDING LLC Participate in PBL Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% structured financing INC. transaction. GS SOLAR POWER I, LLC To hold equity interest in Delaware 1 GSFS INVESTMENTS I CORP. 100.0000% solar power investment. LORRAINE FUNDING LIMITED To settle a trust used to Cayman 1 GOLDMAN SACHS (CAYMAN) 100.0000% raise [pound] 750 million Islands HOLDING COMPANY of financing. CHILTERN TRUST Established in connection United 2 GS FINANCIAL SERVICES L.P. 95.0000% with a third party funding Kingdom (DEL) transaction. GS GLOBAL MARKETS, INC. 5.0000% --------- 100.0000% GS DIVERSIFIED FINANCE In connection with Televisa Delaware 1 GS FINANCIAL SERVICES L.P. 100.0000% III, LLC transaction. (DEL) GS DIVERSIFIED FINANCE V, In connection with Televisa Delaware 1 GS FINANCIAL SERVICES L.P. 100.0000% LLC transaction. (DEL) GS DIVERSIFIED HOLDINGS II Engage in potential Delaware 2 GS FINANCIAL SERVICES L.P. 99.9900% LLC structured transaction with (DEL) Azteca. GS DIVERSIFIED FINANCE III, LLC 0.0100% --------- 100.0000% GSCP (DEL) INC. To act as a general partner Delaware 1 GOLDMAN SACHS BANK USA 100.0000% and limited partner in GSCP and to act as the member of GSCP (DEL) LLC. GSCP (DEL) INC. It does not carry on active business. GSCP (DEL) LLC To act as limited partner Delaware 1 GSCP (DEL) INC. 100.0000% for GSCP. It does not carry on active business.
SHIGA (DELAWARE) LLC This entity, a TK investor, Delaware 1 GOLDMAN SACHS (ASIA) 100.0000% was set up to provide FINANCE HOLDINGS L.L.C. equity financing to SPCs which invests in non-performing loans and real estates. KIRI (DELAWARE) L.L.C. Pass-through entity used in Delaware 1 GOLDMAN SACHS (ASIA) 100.0000% connection with TK FINANCE HOLDINGS L.L.C. investing structures. BAY WIND II TK Purchasing unsecured loans Japan 3 THE GOLDMAN SACHS GROUP, 21.8450% jointly with Nochu INC. BAY WIND II LTD. 9.7690% SHIGA (DELAWARE) LLC 68.3860% --------- 100.0000% GS LEASING (KCSR 2005-1) The entity is an equity Delaware 1 GSFS INVESTMENTS I CORP. 100.0000% LLC holder in a leverage lease transaction where the assets are locomotives. MINATOMARU HOTEL HOLDINGS Holds hotels in Narita, Japan 3 THE GOLDMAN SACHS GROUP, 18.9780% TK Naha and Chitose, Japan. INC. GS STRATEGIC INVESTMENTS JAPAN 24.1000% LLC MINATOMARU HOTEL HOLDINGS CO., 5.0000% LTD. --------- 100.0000% GK MUSASHINO KAIHATSU Flagged for Tohoku REO Japan 1 MLQ INVESTORS, L.P. 100.0000% deall.Real Estate KINBLEY REALTY PTE. LTD. Consolidation of AEJ Singapore 1 DHONI CAYMAN HOLDINGS LTD. 100.0000% Entity. To acquire 48units which consists of apartments and townhouses in residential development in Singapore. GK LUIGI Flagged for Shibuya Japan 1 MLQ INVESTORS, L.P. 100.0000% development deal GK KOGANE Flagged for Restir Deal. Japan 2 AR HOLDINGS GK 1.0000% MLQ INVESTORS, L.P. 99.0000% --------- 100.0000% MUSASHINO KAIHATSU TK To acquire three suburban Japan 3 THE GOLDMAN SACHS GROUP, 39.4734% neighborhood shopping INC. centers located in northern part of Japan, such as GS STRATEGIC INVESTMENTS JAPAN 50.4388% Koriyama, Sendai and Aomori LLC Pref. GK MUSASHINO KAIHATSU 10.0878% --------- 100.0000% LUIGI TK To purchase land and Japan 3 THE GOLDMAN SACHS GROUP, 39.4741% develop office building in INC. Shibuya, Tokyo GS STRATEGIC INVESTMENTS JAPAN 46.6119% LLC GK LUIGI 13.9140% --------- 100.0000% I PET CO., LTD An insurance company for Japan 1 JUPITER INVESTMENT CO., 100.0000% pets. Also has equity in LTD. subsidiary. TAKAHAMA KAIHATSU TK To purchase the building Japan 3 THE GOLDMAN SACHS GROUP, 40.2128% which occupied by Tiffany's INC. in Ginza where commercial area in Japan. GS STRATEGIC INVESTMENTS 49.8226% JAPAN LLC GK TAKAHAMA KAIHATSU 9.9646% --------- 100.0000% GK TAKAHAMA KAIHATSU Flagged for Tiffany Japan 2 GOLDMAN SACHS REALTY JAPAN 0.0000% deal.Holding real estate LTD. trust beneficialy intrest. MLQ INVESTORS, L.P. 100.0000% --------- 100.0000% GK DOTONBORI KAIHATSU Flagged for Dotonbori deal. Japan 1 MLQ INVESTORS, L.P. 100.0000% Holding Real estates SAVU PROPERTIES PTE. LTD. Property management. Singapore 2 THE GOLDMAN SACHS GROUP, 20.2250% INC. BAEKDU INVESTMENTS LIMITED 30.0000% --------- 50.2250% KASHIWABARA TOSHI KAIHATSU To acquire Real Estate in Japan 2 NEPHRITE EQUITY CO., LTD. 1.1111% TK Kobe, Japan GK KASHIWABARA TOSHI KAIHATSU 98.8889% --------- 100.0000% GS GUERNSEY INVESTMENTS Subsidiary of MTGLQ to hold United 1 MTGLQ INVESTORS, L.P. 100.0000% LTD 75% of Shilling/Caledonian Kingdom group via Preference shares GOLDMAN SACHS STRATEGIC General investment company England 1 GOLDMAN SACHS 100.0000% INVESTMENTS (U.K.) LIMITED INTERNATIONAL HOLDINGS LLC SHIOHAMA KAIHATSU TK To acquire 3 retail Japan 4 GOLDMAN, SACHS & CO. 0.0000% neighborhood shopping centres in Fukushima Pref. THE GOLDMAN SACHS GROUP, INC. 20.1780% GS STRATEGIC INVESTMENTS JAPAN 25.0000% LLC GK SHIOHAMA KAIHATSU 5.0000% --------- 50.1780% GK SHIOHAMA KAIHATSU Flagged for Michinoku Japan 1 MLQ INVESTORS, L.P. 100.0000% Sendai Deal (beneficiary rights) FANTASIA (CAYMAN) LTD. Pre-IPO investment in Cayman 2 THE GOLDMAN SACHS GROUP, 13.4940% China. The deal entails Islands NC. investment in Equity and debt of real estate GOLDMAN SACHS RE INVESTMENTS 53.3333% developer with most HOLDINGS LIMITED projects in Shenzhen and --------- Chengdu. 66.8273% WWDI INVESTMENTS LTD This involves purchase of Mauritius 1 WWD INVESTMENT HOLDINGS LTD 91.5000% 6.5 Acres of land to develop residential property, luxury hotel and service apartments. Development to commence in Jul 08. Seller is ETA- a Dubai based development company. WWD INVESTMENT HOLDINGS This involves purchase of Mauritius 2 THE GOLDMAN SACHS GROUP, 20.5670% LTD 6.5 Acres of land to INC. develop residential property, luxury hotel and GOLDMAN SACHS RE INVESTMENTS 29.7350% service apartments. HOLDINGS LIMITED Development to commence in --------- Jul 08. Seller is ETA- a 50.3020% Dubai based development company. C.H. WHITE FLOWER Holding GK Frangipani Japan 1 AR HOLDINGS GK 100.0000% WWD TOPAZ INVESTMENTS Investment in Vatika Group, Mauritius 1 WWD INVESTMENT HOLDINGS LTD 100.0000% LIMITED a Gurgaon (India) based real estate developer SAVU INVESTMENTS PTE. LTD. Purchase of 100% shares of Singapore 1 KINBLEY (DELAWARE) LLC III 100.0000% asset holding company Savu Investments Ltd which is holding Hitachi Towers in Singapore. FRANGIPANI TK Entity set up to refinance Japan 1 BLUE SQUARE TK 100.0000% the loan to Takara-Gumi. GK FRANGIPANI Flagged for Project Japan 1 C.H. WHITE FLOWER 100.0000% Manhattan. Owns Loans.Investment vehicle BLUE SQUARE TK Entity set up to refinance Japan 1 NEPHRITE EQUITY CO., LTD. 100.0000% the loan to Takara-Gumi. GS LIQUID TRADING PLATFORM Entity 1 for the Liquid Isle of 1 GOLDMAN SACHS GROUP 100.0000% I PCC Trading Platform Jersey HOLDINGS (U.K.) GS LIQUID TRADING PLATFORM Entity 2 for the Liquid Isle of 1 GOLDMAN SACHS GROUP 100.0000% II LIMITED Trading PlatformEntity 2 Jersey HOLDINGS (U.K.) for the Liquid Trading Platform GK BLUE SQUARE Flagged for Project Japan 1 JUPITER INVESTMENT CO., 100.0000% Manhattan. Holding loan. LTD. GK KITANOMARU Flagged for Shinjuku MOA Japan 1 MLQ INVESTORS, L.P. 100.0000% Deal (Alook). Holds hard asset.
KAIKE ONSEN HOTEL Management of Japan 1 GOLDMAN SACHS REALTY 100.0000% MANAGEMENT CO., LTD. Ryokan.(Japannese JAPAN LTD. Hotel);Flagged for Onsen deal. Housing employees. GK KAIHIN Flagged for Paco Hakodate Japan 1 MLQ INVESTORS, L.P. 100.0000% Deal/Real Estate. Holds hard RE asset. GK SPICA Purchasing Loans. Flagged Japan 1 JLQ LLC 100.0000% for SMBC SPL portfolio acquisition deal (ASSG) KPL FINANCE LIMITED Killingholme trade Cayman 1 KILLINGHOLME GENERATION 100.0000% Islands LIMITED BRM HOLDINGS LLC Business Records Management Delaware 1 GSFS INVESTMENTS I CORP. 100.0000% PMF-1 (BES III) It is not a true legal United 1 ELQ INVESTORS, LTD 100.0000% entity. PMF 1 has a non Kingdom performing porfolio for which the desk needs separate reporting and entity 2398 has been set up to facilitate this. PMF-2 (BES III), LTD It is not a true legal United 1 GS EUROPEAN OPPORTUNITIES 100.0000% entity. PMF 2 has a non Kingdom INVESTMENT FUND B.V. performing porfolio for which the desk needs separate reporting and entity 2399 has been set up to facilitate this. GS EUROPEAN OPPORTUNITIES Purchase through its Netherlands 1 ELQ INVESTORS, LTD 75.0000% INVESTMENT FUND B.V. subsidiaries fixed income securities and portfolio of investments. GS EUROPEAN OPPORTUNITIES Primary activity is to Cayman 1 MTGLQ INVESTORS, L.P. 75.0000% FUND L.P. (CAYMAN) provide subordinated debt Islands to the various Opportunities Fund entities. Note that this Cayman L.P. was formed to replace the existing Delaware L.P. of the same name which was disolved on 28/12/04. DEMAC FINANCIAL SERVICES, Incorporated to provide The Czech 1 MTGLQ INVESTORS, L.P. 91.6200% S.R.O debt servicing and Republic administrative services for CDV-1, Ltd.'s loan assets. PMF-1, LTD. Set up for the purpose of England 1 ELQ INVESTORS, LTD 100.0000% acquiring a portfolio of non-performing Portuguese mortgages PMF-2, LTD Established for the purpose England 1 GS EUROPEAN OPPORTUNITIES 100.0000% of acquiring a 95% INVESTMENT FUND B.V. participation in a portfolio of non-performing Portuguese mortgages from PMF-1, Ltd. GS EUROPEAN INVESTMENT Asset owning subsidiary for England 1 GS EUROPEAN OPPORTUNITIES 100.0000% GROUP II LTD. GS European Opportunities FUND II L.P. Fund II GS EUROPEAN OPPORTUNITIES Holding Partnership for the England 1 ELQ INVESTORS, LTD 75.0000% FUND II L.P. European Opportunities Fund II SANA Acquisitions Ltd Entity set up to hold England 1 GS EUROPEAN OPPORTUNITIES 100.0000% portfolio of non-performing FUND II L.P. German loans MEP GS INVESTOR (CAYCO) Holding Entity Cayman 1 MLQ, L.L.C. 100.0000% LIMITED Islands GS LEASING (KCSR 2007-1) Hold operating leases in Delaware 1 GSFS INVESTMENTS I CORP. 100.0000% LLC airplanes WWD MARBLE LIMITED To hold the shares of a Mauritius 1 WWD INVESTMENT HOLDINGS LTD 100.0000% Real estate entity in India. GK KUROBE Flagged for Greens Hotel Japan 1 MLQ INVESTORS, L.P. 100.0000% Deal 2 (Kitami Acquisition). Owns beneficiary right for Comfort Hotel Kitami. KAIHIN TK To acquire Hotel Paco Japan 3 THE GOLDMAN SACHS GROUP, 22.4550% Hacodate. INC. GS STRATEGIC INVESTMENTS JAPAN 25.0000% LLC GK KAIHIN 5.0000% --------- 52.4550% GSCP MEXICO, S.A. de C.V., Trade certain products (OTC Mexico 2 GOLDMAN SACHS GROUP Y 0.0020% SOFOM, E.N.R. derivatives and Lending COMPANIA, S. DE R.L. DE respectively) with local C.V. Mexican clients. GS FINANCIAL SERVICES L.P. 99.9980% (DEL) --------- 100.0000% KINBLEY (DELAWARE) LLC III An entity for Hitachi Delaware 2 THE GOLDMAN SACHS GROUP, 20.1990% Towers deal INC. GOLDMAN SACHS RE INVESTMENTS 30.0000% HOLDINGS LIMITED --------- 50.1990% GOLDMOUNT AIRCRAFT LEASING Hold operating leases in Ireland 1 GSFS INVESTMENTS I CORP. 100.0000% IRELAND AS LIMITED trains. GS/MC LEASING KDAA, LLC To hold aircraft that are Delaware 1 GSFS INVESTMENTS I CORP. 100.0000% on lease to external parties. GS/MC LEASING SWAA, LLC Hold operating leases in Delaware 1 GSFS INVESTMENTS I CORP. 100.0000% airplanes GS/MC LEASING KLMA, LLC Hold operating leases in Delaware 1 GSFS INVESTMENTS I CORP. 100.0000% airplanes GS LEASING Hold operating leases in Delaware 1 GSFS INVESTMENTS I CORP. 100.0000% (BOEING 737-3T0) LLC airplanes GK MUSASHI Holding Real Japan 1 MUSASHI CAYMAN CO., LTD. 100.0000% estates.Flagged for Uchikanda (Totate) deal. MUSASHI TK To acquire real estate. Japan 3 THE GOLDMAN SACHS GROUP, 22.4600% INC. GS STRATEGIC INVESTMENTS 25.0000% JAPAN LLC GK MUSASHI 5.0000% --------- 52.4600% GOLDMAN SACHS SAUDI ARABIA Established to offer The Kingdom 5 GOLDMAN SACHS HOLDINGS 0.2500% private wealth management, of Saudi (U.K.) securities, asset Arabia management and investment GOLDMAN SACHS GLOBAL 0.2500% banking services. HOLDINGS L.L.C. GSEM (DEL) HOLDINGS, L.P. 0.2500% GOLDMAN SACHS GROUP HOLDINGS 0.2500% (U.K.) --------- 100.0000% GSCP LATIN AMERICA LLC Formed for the purpose of Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% providing loans INC. CITY VIEW PROPERTIES To Purchase a land in India India 1 WWD PEARL LTD 73.0000% PRIVATE LIMITED and develop hotel and residential complex. GREEN BANATELIS LIMITED An entity for City View Cyprus 1 WWDI INVESTMENTS LTD 100.0000% Properties Pvt Ltd. WWD PEARL LTD An entity for City View Mauritius 1 WWDI INVESTMENTS LTD 100.0000% Properties Pvt Ltd. INSTITUTIONAL LIFE It will perform Delaware 1 GS RE HOLDINGS, INC. 52.2235% ADMINISTRATION, LLC administrative functions for life settlements purchased on the Institutional Life Services platform.
ALLMERICA GLOBAL FUNDING, It issued notes to Cayman 1 FIRST ALLMERICA FINANCIAL 100.0000% LLC third-party investors Islands LIFE INSURANCE COMPANY ARCHON UK LIMITED Managing government office England 1 ARCHON GROUP, L.P. 100.0000% buildings in London. AH ORLANDO, L.P. Property manager of Hotel Delaware 1 ARCHON HOSPITALITY, L.P. 100.0000% Royal Plaza ARCHON/PPM L.L.C. An investment Delaware 1 ARCHON GROUP, L.P. 100.0000% entity/partner in former Trillium investment. TNL NETWORK, LTD. Entity is consolidating on Texas 1 ARCHON GROUP, L.P. 100.0000% the books and records of Archon Group, L.P. (enttyt 0100) AGCH GEN-PAR, L.L.C. Real estate property/asset Delaware 1 ARCHON GROUP, L.P. 100.0000% manager (subconsolidating entities) BTS SOLUTIONS, L.L.C. "Behind-The-Scenes" Archon Delaware 1 ARCHON GROUP, L.P. 100.0000% Group servicing entity. GSSLG GEN-PAR, L.L.C. Real estate property/asset Delaware 1 ARCHON GROUP, L.P. 100.0000% manager (subconsolidating entities) TITLE NETWORK, LTD. Entity is consolidating on Texas 2 ARCHON GROUP, L.P. 1.0000% the books and records of Archon Group, L.P. TNL NETWORK, LTD. 99.0000% --------- 100.0000% RE ACQUISITION, L.L.C. Entity is consolidating on Delaware 1 ARCHON GROUP, L.P. 100.0000% the books and records of Archon Group, L.P. ARCHON THAILAND, LLC To serve as Archon Group's Delaware 1 ARCHON GROUP, L.P. 100.0000% branch in Thailand ARCHON HOSPITALITY, L.P. Part of Archon's real Delaware 2 ARCHON GROUP, L.P. 99.0000% estate hospitality platform ARCHON HOSPITALITY GEN-PAR, 1.0000% L.L.C. --------- 100.0000% ARCHON ACQUISITION, LLC Entity is consolidating on Delaware 1 ARCHON GROUP, L.P. 100.0000% the books and records of Archon Group, L.P. (entity 0100) AWH ARCHON GEN-PAR, L.L.C. To act as general partner Delaware 1 ARCHON GROUP, L.P. 100.0000% of Archon Core Plus Real Estate Fund 2005, L.P. ARCHON KOREA, L.L.C. A servicing and asset Korea 2 THE GOLDMAN SACHS GROUP, 51.0000% management company in Korea. INC. ARCHON GROUP, L.P. 49.0000% --------- 100.0000% ARCHON GROUP Real estate property/asset Delaware 2 ARCHON GROUP, L.P. 99.0000% INTERNATIONAL, L.P. manager (subconsolidating entities) ARCHON INTERNATIONAL HOLDINGS, 1.0000% L.L.C. --------- 100.0000% GRUPO ARCHON SOCIEDAD DE To serve as asset manager Delaware 2 ARCHON GROUP, L.P. 99.0000% RESPONSIBILIDAD LIMITADA and/or investor in portfolios in Mexico ARCHON INTERNATIONAL HOLDINGS, 1.0000% L.L.C. --------- 100.0000% ARCHON HOSPITALITY To act as sole general Delaware 1 ARCHON GROUP, L.P. 100.0000% GEN-PAR, L.L.C partner of Archon Hospitality, L.P. ARCHON GROUP CANADA Real estate property/asset Delaware 2 ARCHON GROUP, L.P. 99.0000% HOLDINGS, L.P. manager (subconsolidating entities) AGCH GEN-PAR, L.L.C. 1.0000% --------- 100.0000% ARCHON RESIDENTIAL A multifamily property Delaware 2 ARCHON GROUP, L.P. 99.0000% MANAGEMENT, L.P. management company. ARCHON RESIDENTIAL MANAGEMENT GEN-PAR, INC. 1.0000% --------- 100.0000% ARCHON INTERNATIONAL Entity is consolidating on Delaware 1 ARCHON GROUP, L.P. 100.0000% HOLDINGS, L.L.C. the books and records of Archon Group, L.P. (entity 0100) GS CANADA SPECIALTY Real estate property/asset Nova Scotia 1 ARCHON GROUP CANADA 100.0000% LENDING COMPANY manager (subconsolidating HOLDINGS, L.P. entities) GOLDMAN SACHS SPECIALTY Real estate property/asset Delaware 2 ARCHON GROUP, L.P. 99.0000% LENDING GROUP, L.P. manager (subconsolidating entities) GSSLG GEN-PAR, L.L.C. 1.0000% --------- 100.0000% ARCHON RESIDENTIAL General partner of Archon Delaware 1 ARCHON GROUP, L.P. 100.0000% MANAGEMENT GEN-PAR, INC. Residential Management L.P. JLQ LLC Special purpose company for Cayman 1 GS FINANCIAL SERVICES L.P. 100.0000% purchase of loans. Owns Islands (DEL) equities, convertible bond, put option, etc. NASU URBAN PROPERTIES Holding a Japanese Inn Japan 1 JLQ LLC 100.0000% CO., LTD. Ouan)& #12539; Holding Real Estate. GOLDMAN SACHS REALTY ASIA This entity is a corporate Singapore 1 GOLDMAN SACHS FOREIGN 100.0000% PACIFIC PTE. LTD. entity for Archon, and will EXCHANGE (SINGAPORE) PTE. perform real estate asset management in Singapore and non Japan Asia. It will perform the equivalent functions of GSRJL except for the AEJ region. GK JUPITER INVESTMENT II Flagged for SBIC Deal. Has Japan 1 AR HOLDINGS GK 100.0000% ownership of Japanese limited partnership. ARROW REINSURANCE COMPANY, Licensed insurance company Bermuda 1 THE GOLDMAN SACHS GROUP, 100.0000% LIMITED to act as a "transformer" INC. between traditional insurance and reinsurance markets and the capital markets. Holds casualty bond positions. GOLDMAN SACHS FINANCIAL OTC Derivatives Dealer; Delaware 2 THE GOLDMAN SACHS GROUP, 99.0000% MARKETS, L.P. broker/dealer; SEC File No. INC. 8-51753 GOLDMAN SACHS FINANCIAL MARKETS 1.0000% L.L.C. --------- 100.0000% GOLDMAN SACHS (ASIA) LLC Taiwan brokerage, agency Delaware 1 GOLDMAN SACHS (ASIA) L.L.C. 100.0000% TAIWA trading GSI GOLDMAN SACHS EUROPE UK covered warrants and England 2 GOLDMAN SACHS HOLDINGS 99.0000% agency lending (U.K.) GOLDMAN SACHS GROUP HOLDINGS 1.0000% (U.K.) --------- 100.0000% WILLIAM STREET COMMITMENT Entity set up to extend Delaware 1 GOLDMAN SACHS BANK USA 100.0000% CORPORATION unfunded loan commitments to investment-grade customers of GS Group WILLIAM STREET EQUITY LLC Entity invests in William Delaware 1 GOLDMAN SACHS BANK USA 100.0000% Street Funding Corporation in exchange for equity and mezzanine securities.Entity invests in William Street Funding Corporation in exchange for equity and mezzanine securities. WILLIAM STREET FUNDING Provides sources of Delaware 1 WILLIAM STREET EQUITY LLC 100.0000% CORPORATION liquidity for potential funding of commitments initiated in William Street Commitment Corporation.
GOLDMAN SACHS (JERSEY) To issue warrants Isle of 1 GOLDMAN SACHS INTERNATIONAL 100.0000% LIMITED Jersey WILLIAM STREET CREDIT To extend commitments to Delaware 1 GOLDMAN SACHS BANK USA 100.0000% CORPORATION borrowers during transition over to William Street Corp. GSSM HOLDING (U.K.) To hold firms investments England 1 THE GOLDMAN SACHS GROUP, 100.0000% in SMFG convertible INC. preferreds. GSSM HOLDING LLC Established to hold firm's Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% investments in SMFG INC. convertible preferreds - As of 11-25-05, the SMFG Pref's were held by GS Group, GS EUROPEAN STRATEGIC Primarily invests in non Netherlands 1 GS EUROPEAN OPPORTUNITIES 100.0000% INVESTMENT GROUP B.V. investment grade or INVESTMENT FUND B.V. distressed securities and loans of European companies. GS EUROPEAN INVESTMENT Established to purchase and Netherlands 1 ELQ INVESTORS, LTD 100.0000% GROUP B.V. originate publicly and privately issued fixed income securities. GS EUROPEAN MEZZANINE Established to purchase and Netherlands 1 ELQ INVESTORS, LTD 100.0000% INVESTMENT GROUP originate publicly and privately issued fixed income securities. GOLDMAN SACHS SPECIALTY makes debt and equity Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% LENDING HOLDINGS, INC. investments in middle INC. market companies GOLDMAN SACHS LENDING Primarily originates, Delaware 1 MTGLQ INVESTORS, L.P. 100.0000% PARTNERS LLC sydicates and trades commercial-purpose loans to institutional borrowers GOLDMAN SACHS SPECIALTY To hold loans to be Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% LENDING HOLDINGS, INC. II financed by Norinchukin Bank INC. REMARK FUNDING CO., LLC Purchase retail installment Delaware 1 MTGLQ INVESTORS, L.P. 100.0000% contracts (RICs) and Auto Loans from Banks, Thrifts, Credit Unions, Independent Finance Companies and other Specialty Finance Dealer Related Company. Purchase loans and get leverage or securitize after a couple of years (couldP GOLDMAN SACHS SPECIALTY loans to middle market Cayman 1 GOLDMAN SACHS SPECIALTY 100.0000% LENDING CLO-I, LTD. companies; makes debt and Islands LENDING HOLDINGS, INC. II equity investments in middle market companies CHARLESTON CAPITAL To pursue various District of 1 COLUMBIA CAPITAL LIFE 100.0000% REINSURANCE, LLC opportunities in the Columbia REINSURANCE COMPANY reinsurance business. COLUMBIA CAPITAL LIFE Established to pursue District of 1 THE GOLDMAN SACHS GROUP, 100.0000% REINSURANCE COMPANY various opportunities in Columbia INC. the reinsurance business. GS INVESTMENTS (CAYMAN) Equity investments Cayman 1 GSEM (DEL) HOLDINGS, L.P. 100.0000% LIMITED Islands GS MIDDLE EAST (CAYMAN) Holding Company 1 GSEM (DEL) HOLDINGS, L.P. 100.0000% LTD OPAL RESOURCES LLC To acquire, own, hold, Delaware 1 MTGLQ INVESTORS, L.P. 100.0000% maintain, renew, drill, develop and operate Oil and Gas Interests and related assets and other properties in the continental United States, and the state and federal waters offshore. GSFS IV LLC to warehouse aircrafts Delaware 1 GSFS INVESTMENTS I CORP. 100.0000% TRIUMPH II INVESTMENTS Primarily established to Ireland 1 GS ASIAN VENTURE 100.0000% (IRELAND) LIMITED hold ASSG positions in (DELAWARE) L.L.C. Korean assets. TRIUMPH III INVESTMENTS To hold an array of Dong Ah Ireland 1 BEST II INVESTMENTS 100.0000% (IRELAND) LIMITED Construction Ltd claims (DELAWARE) L.L.C. with a portion guaranteed by Korea Express Co. and certain direct claim of Korea Express Co. GOLDMAN SACHS STRUCTURED Primarily engaged in Cayman 1 GOLDMAN SACHS (ASIA) 100.0000% PRODUCTS (ASIA) LIMITED issuing derivative Islands FINANCE instruments on the Hong Kong exchange. GOLDMAN SACHS BANK Entitiy for Irish Bank Ireland 1 GOLDMAN SACHS IRELAND 100.0000% (EUROPE) PLC DINGS LIMITED GOLDMAN SACHS IRELAND Formerly Goldman Sachs Ireland 2 GOLDMAN SACHS GLOBAL 25.0000% GROUP LIMITED Private Bank Limited. HOLDINGS L.L.C. GOLDMAN SACHS PRIVATE BANK 75.0000% HOLDINGS LLC --------- 100.0000% GOLDMAN SACHS IRELAND Entity for Irish Bank- GSB6 Ireland 1 GOLDMAN SACHS IRELAND 100.0000% HOLDINGS LIMITED GROUP LIMITED GOLDMAN SACHS PRIVATE BANK holding company for Irish Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% HOLDINGS LLC bank structure INC. BEST II INVESTMENTS Primarily established to Delaware 1 GS FINANCIAL SERVICES L.P. 100.0000% (DELAWARE) L.L.C. hold investments in Triumph (DEL) Investments (Ireland) Limited and Triumph III Investments (Ireland) Limited. BAEKDU INVESTMENTS LIMITED Intermediate holding Cayman 1 LANDPRO INVESTMENTS 100.0000% company of ASSG for Islands (DELAWARE) L.L.C. investments with REPIA. GOLDMAN SACHS STRATEGIC Primarily established to Delaware 1 MLT INVESTMENTS LTD. 100.0000% INVESTMENTS (ASIA) L.L.C. hold private equity positions of ASSG
GOLDMAN SACHS (HONG KONG) Acquiring and holding for Hong Kong 2 GOLDMAN SACHS (ASIA) 95.0000% FUNDING PARTNERSHIP investment or otherwise and FINANCE selling, assigning, transferring or otherwise GOLDMAN SACHS (HONG KONG) 5.0000% dealing with bonds or any COMPANY LIMITED other securities issued by --------- any corporation or 100.0000% governmental entity. Negotiating terms, purchasing the Bond (USD Guaranteed Bond du GOLDMAN SACHS INDIA Will hold ASSG assets. Mauritius 1 JADE DRAGON (MAURITIUS) 100.0000% VENTURE CAPITAL LIMITED LIMITED GOLDMAN SACHS STRATEGIC Global Business Licence Mauritius 1 PANDA INVESTMENTS LTD 100.0000% HOLDINGS LIMITED CATEGORY 1. Holding Company for certain PRC investments for ASSG.Changed financial year end from last Friday of November to 31 December, starting from financial year 2009 onwards. GS STRATEGIC INVESTMENTS To hold ASSG positions in Mauritius 1 PANDA INVESTMENTS LTD 100.0000% LIMITED Indian private equities. GOLDMAN SACHS LLC The Company's principal Mauritius 1 HULL TRADING ASIA LIMITED 100.0000% activity is to engage in the trading of financial products. GOLDMAN SACHS STRATEGIC Potentially holding ASSG Delaware 2 EUSTON ENTERPRISES LIMITED 50.0000% INVESTMENTS (DELAWARE) positions L.L.C. FAIRWAY ENTERPRISES LIMITED 50.0000% --------- 100.0000% GRAND STEEL STRATEGIC To hold investments in Cayman 1 GOLDMAN SACHS STRATEGIC 100.0000% INVESTMENT LIMITED Jianlong, a steel Islands INVESTMENTS (ASIA) L.L.C. Manufacturer in China GLOBAL TECHNOLOGIES Investment Holding British 1 MLT INVESTMENTS LTD. 100.0000% INTERNATIONAL LIMITED Virgin Islands GOLDMAN SACHS CHINA Holding Co of Jade Dragon Mauritius 1 JADE DRAGON (MAURITIUS) 100.0000% VENTURE I (MAURITIUS) Venture Investment Limited LIMITED LIMITED GOLDMAN SACHS CHINA Holding Co of Jade Dragon Mauritius 1 JADE DRAGON (MAURITIUS) 100.0000% VENTURE II (MAURITIUS) Venture Investment Limited LIMITED LIMITED JADE DRAGON VENTURE Venture capital company for People's 2 GOLDMAN SACHS CHINA 60.0000% INVESTMENT LIMITED ASSG in the PRC Republic VENTURE I (MAURITIUS) of China LIMITED GOLDMAN SACHS CHINA VENTURE II 40.0000% (MAURITIUS) LIMITED --------- 100.0000% ELEVATECH LIMITED Holding ASSG investments Hong Kong 1 MLT INVESTMENTS LTD. 100.0000% GOLDMAN SACHS HOLDINGS Holding company for AEJ Hong Kong 1 GOLDMAN SACHS (ASIA) 100.0000% (HONG KONG) LIMITED entities CORPORATE HOLDINGS L.P. ARROW CORPORATE MEMBER Entity owns participation England 1 ARROW CORPORATE MEMBER 100.0000% LIMITED in a syndicate at Lloyds HOLDINGS LLC that writes property catastrophe insurance. Arrow Syndicate 1910 Underwrites World property United 1 ARROW CORPORATE MEMBER 100.0000% catastrophe, Lyods mkt Kingdom LIMITED AGALIA CAPITAL LTD. The entity, incorporated in British 1 GOLDMAN SACHS STRATEGIC 75.0000% BVI, is newly acquired by Virgin INVESTMENTS (ASIA) L.L.C. GSSIA (6153) in Dec 07. The Islands entity is 75% owned by GSSIA (6153) upon completion of acquisition. The entity's principal business is investment holding. GOLDMAN SACHS (HONG KONG) Investment holding Hong Kong 1 GOLDMAN SACHS HOLDINGS 100.0000% COMPANY LIMITED (HONG KONG) LIMITED GS REA HOLDINGS, L.L.C. Firm direct investment.GS Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% REA Holdings, L.L.C. INC. GS-MPIM I, LLC Firm direct investment.GS Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% MPIM I, L.L.C. INC. GS REA GOLDENBRIDGE To invest in Delaware 1 GS REA HOLDINGS, L.L.C. 100.0000% HOLDINGS L.L.C. distressed/mezz debt. G.S.Q SPV (1) LIMITED Investment company Nigeria 1 ELQ INVESTORS, LTD 100.0000% TELE SPV LIMITED Investment company Nigeria 1 ELQ INVESTORS, LTD 100.0000% YORAM LIMITED Investment company Nigeria 1 ELQ INVESTORS, LTD 100.0000% GS KILLINGHOLME CAYMAN Structured investing entity Cayman 1 GS KILLINGHOLME CAYMAN 100.0000% INVESTMENTS II LTD Islands INVESTMENTS LTD. GS KILLINGHOLME CAYMAN GSKC III is a new entity Cayman 2 GS KILLINGHOLME CAYMAN 0.0100% INVESTMENTS III that will be party to cross Islands INVESTMENTS LTD. currency basis swaps as part of a larger structured GS KILLINGHOLME CAYMAN 99.9900% deal by the Structured INVESTMENTS II LTD Investing desk in ESSG. As --------- per the derivative booking 100.0000% policy, any entity that enters into derivates must be set up in books an GS KILLINGHOLME CAYMAN GSKC III is a new entity Cayman 3 KILLINGHOLME GENERATION 0.0000% INVESTMENTS IV, L.P. that will be party to cross Islands LIMITED currency basis swaps as part of a larger structured GS KILLINGHOLME CAYMAN 0.0000% deal by the Structured INVESTMENTS LTD. Investing desk in ESSG. As per the derivative booking GS KILLINGHOLME CAYMAN 100.0000% policy, any entity that INVESTMENTS III enters into derivates must --------- be set up in books and 100.0000% records. This entity will be formed on the 5th of February. KPL ACQUISITIONS LIMITED Killingholme acquisitions Cayman 1 KILLINGHOLME GENERATION 100.0000% Islands LIMITED GS LEASING HOLDINGS Entity set up to act as United 1 GOLDMAN SACHS GROUP 100.0000% LIMITED trustee for GS Leasing Kingdom HOLDINGS (U.K.) Investments. The entity will purely have a tiny amount of capital and cash.
GS LOGISTICS HOLDINGS LTD Firm direct investment Mauritius 1 GS DIRECT, L.L.C. 100.0000% hodling company GS CHROMA HOLDINGS LIMITED Mauritius Holding Company Mauritius 1 GS DIRECT, L.L.C. 100.0000% which holds an investment related to the GS Direct (PIA) area. GOLDMAN SACHS TRUSTEE For conducting the mutual India 1 GSAM INDIA HOLDINGS LIMITED 100.0000% COMPANY (INDIA) PRIVATE fund business in India LIMITED GOLDMAN SACHS ASSET For conducting the mutual India 1 GSAM INDIA HOLDINGS LIMITED 100.0000% MANAGEMENT (INDIA) PRIVATE fund business in India LIMITED REP PEB REALTY, L.L.C. Hold real estate investment Delaware 1 GOLDMAN SACHS LENDING 100.0000% PARTNERS LLC REP ALX REALTY, L.L.C. REPIA entity. Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% INC. REP PRS II FTB, L.L.C. Ownership of Fountains at Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% Delray Beach Apartment Homes INC. REP PRS II WTE, L.L.C. Ownership of Waters Edge Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% Apartment Homes INC.
These entities are directly or indirectly controlled by or under common control with the Company. ITEM 27. NUMBER OF CONTRACT OWNERS As of February 28, 2009 there were 391 Contract Owners of qualified Contracts and 6 Contract Owners of non-qualified Contracts. ITEM 28. INDEMNIFICATION RULE 484 UNDERTAKING - Article VI of the Bylaws of the Company states: The Corporation shall indemnify to the full extent permitted by applicable law any person made or threatened to be made a party to any action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that such person's testator or intestate is or was a director, officer or employee of the Corporation or serves or served at the request of the Corporation any other enterprise as a director, officer or employee. Expenses, including attorneys' fees, incurred by any such person in defending any such action, suit or proceeding shall be paid or reimbursed by the Corporation promptly upon receipt by it of an undertaking of such person to repay such expenses if such person if finally adjudicated not to have acted in good faith in the reasonable belief that his or her action was in the best interest of the Corporation or other enterprise. The Corporation shall accept such undertaking without reference to the financial ability of such person to make repayment. Notwithstanding the foregoing, no indemnification shall be provided for any person with respect to any matter as to which such person shall have been finally adjudicated not to have acted in good faith in the reasonable belief that the action was in best interests of the Corporation or other enterprise. No matter disposed of by settlement, compromise, the entry of a consent decree or the entry of any plea in a criminal proceeding, shall of itself be deemed an adjudication of not having acted in good faith in the reasonable belief that the action was in the best interest of the Corporation. The rights provided to any person by this by-law shall be enforceable against the Corporation by such person who shall be presumed to have relied upon it in serving or continuing to serve as director, officer or employee as provided above. No amendment of this by-law shall impair the rights of any person arising at any time with respect to events occurring prior to such amendment. ITEM 29. PRINCIPAL UNDERWRITERS (a) Epoch Securities, Inc. also acts as a principal underwriter for the following: - VEL Account, VEL II Account, VEL Account III, Separate Account SPL-D, Separate Account IMO, Select Account III, Inheiritage Account, Separate Accounts VA-A, VA-B, VA-C, VA-G, VA-H, VA-K, VA-P, Commonwealth Select Separate Account II, Group VEL Account, Separate Account KG, Separate Account KGC, Fulcrum Separate Account, Fulcrum Variable Life Separate Account, Separate Account FUVUL, Separate Account IMO, Commonwealth Annuity Select Separate Account, and Commonwealth Annuity Separate Account A of Commonwealth Annuity and Life Insurance Company - Inheiritage Account, VEL II Account, Separate Account I, Separate Account VA-K, Separate Account VA-P, Allmerica Select Separate Account II, Group VEL Account, Separate Account KG, Separate Account KGC, Fulcrum Separate Account, and Allmerica Select Separate Account of First Allmerica Financial Life Insurance Company. (b) The principal business address of most the following Directors and Officers is: 85 Broad Street New York, NY 10004 The principal business address of the other following Directors and Officers* is: 132 Turnpike Road, Suite 210 Southborough, MA 01772.
NAME POSITION OR OFFICE WITH UNDERWRITER ---- ----------------------------------- Julie Abraham Assistant Secretary Elizabeth E. Beshel Treasurer Steven M. Bunson Assistant Treasurer Richard Cohn Assistant General Counsel and Secretary John S. Daly Director Kathleen Jack Chief Compliance Officer, Securities Underwriting Activities Kenneth L. Josselyn Assistant Secretary Robert A. Mass Compliance Officer Albert P. Meo Finance and Operations Principal Beverly O'Toole Assistant Secretary Stephen R. Pierce Director and Vice President Benjamin J. Rader Assistant Secretary Michael A. Reardon* Director, President, Chief Executive Officer and Chief Operating Officer Margot Kibbe Wallin* Chief Compliance Officer, Variable Products Distribution
(c)indicated in Part B (Statement of Additional Information) in response to Item 20(c), there were no commissions retained by Security Distributors, Inc., the former principal underwriter of the Contracts, for sales of variable contracts funded by the Registrant in 2008 No other commission or other compensation was received by the former principal underwriter, directly or indirectly, from the Registrant during the Registrant's last fiscal year. No commissions or other compensation was received by Epoch Securities, Inc., the current principal underwriter, directly or indirectly, from the Registrant during the Registrant's last fiscal year. ITEM 30. LOCATION OF ACCOUNTS AND RECORDS Each account, book or other document required to be maintained by Section 31(a) of the Investment Company Act of 1940 and Rules 31a-1 to 31a-3 thereunder are maintained for the Company by Security Benefit Life Insurance Company at One Security Benefit Place, Topeka, Kansas. ITEM 31. MANAGEMENT SERVICES The Company provides daily unit value calculations and related services for the Company's separate accounts. ITEM 32. UNDERTAKINGS (a) The Registrant hereby undertakes to file a post-effective amendment to this registration statement as frequently as is necessary to ensure that the audited financial statements in the registration statement are never more than 16 months old for so long as payments under the variable annuity contracts may be accepted. (b) The Registrant hereby undertakes to include as part of the application to purchase a Contract a space that the applicant can check to request a Statement of Additional Information. (c) The Registrant hereby undertakes to deliver a Statement of Additional Information and any financial statements promptly upon written or oral request, according to the requirements of Form N-4. (d) Insofar as indemnification for liability arising under the 1933 Act may be permitted to Directors, Officers and Controlling Persons of Registrant under any registration statement, underwriting agreement or otherwise, Registrant has been advised that, in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the 1933 Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by Registrant of expenses incurred or paid by a Director, Officer or Controlling Person of Registrant in the successful defense of any action, suit or proceeding) is asserted by such Director, Officer or Controlling Person in connection with the securities being registered, Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the 1933 Act and will be governed by the final adjudication of such issue. (e) Commonwealth Annuity and Life Insurance Company hereby represents that the aggregate fees and charges deducted under the Contracts are reasonable in relation to the services rendered, expenses expected to be incurred, and risks assumed by the Company. ITEM 33. REPRESENTATIONS CONCERNING WITHDRAWAL RESTRICTIONS ON SECTION 403(b) PLANS AND UNDER THE TEXAS OPTIONAL RETIREMENT PROGRAM Registrant, a separate account of Commonwealth Annuity and Life Insurance Company ("Company"), states that it is (a) relying on Rule 6c-7 under the 1940 Act with respect to withdrawal restrictions under the Texas Optional Retirement Program ("Program") and (b) relying on the "no-action" letter (Ref. No. IP-6-88) issued on November 28, 1988 to the American Council of Life Insurance, in applying the withdrawal restrictions of Internal Revenue Code Section 403(b)(11). Registrant has taken the following steps in reliance on the letter: 1. Appropriate disclosures regarding the redemption withdrawal restrictions imposed by the Program and by Section 403(b)(11) have been included in the prospectus of each registration statement used in connection with the offer of the Company's variable contracts. 2. Appropriate disclosures regarding the redemption withdrawal restrictions imposed by the Program and by Section 403(b)(11) have been included in sales literature used in connection with the offer of the Company's variable contracts. 3. Sales Representatives who solicit participants to purchase the variable contracts have been instructed to specifically bring the redemption withdrawal restrictions imposed by the Program and by Section 403(b)(11) to the attention of potential participants. 4. A signed statement acknowledging the participant's understanding of (i) the restrictions on redemption withdrawal imposed by the Program and by Section 403(b)(11) and (ii) the investment alternatives available under the employer's arrangement will be obtained from each participant who purchases a variable annuity contract prior to or at the time of purchase. Registrant hereby represents that it will not act to deny or limit a transfer request except to the extent that a Service-Ruling or written opinion of counsel, specifically addressing the fact pattern involved and taking into account the terms of the applicable employer plan, determines that denial or limitation is necessary for the variable annuity contracts to meet the requirements of the Program or of Section 403(b). Any transfer request not so denied or limited will be effected as expeditiously as possible. SIGNATURES Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940 the Registrant certifies that it meets all of the requirements for effectiveness of this Post-Effective Amendment to the Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused this Post-Effective Amendment to the Registration Statement to be signed on its behalf by the undersigned, thereto duly authorized, in the City of Southborough, and Commonwealth of Massachusetts, on the 7th day of April, 2009 COMMONWEALTH ANNUITY SEPARATE ACCOUNT A OF COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY By: /s/ Scott D. Silverman ------------------------------------ Scott D. Silverman, Vice President, General Counsel, and Secretary Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, this Post-Effective Amendment to the Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURES TITLE DATE ---------- ----- ---- /s/ Timothy D. Rogers Vice President and Chief Financial Officer April 7, 2009 ------------------------------------- Timothy D. Rogers Allan S. Levine* Chairman of the Board ------------------------------------- Manda J. D'Agata* Director, Vice President and Treasurer ------------------------------------- J. William McMahon* Director ------------------------------------- Donald R. Mullen* Director ------------------------------------- Michael A. Reardon* Director, President, and Chief Executive Officer ------------------------------------- Michael S. Rotter* Director ------------------------------------- Nicholas Helmuth von Moltke* Director and Senior Vice President ------------------------------------- Jane S. Grosso* Vice President and Controller ------------------------------------- (Chief Accounting Officer)
* Scott D. Silverman, by signing his name hereto, does hereby sign this document on behalf of each of the above-named Directors and Officers of the Registrant pursuant to the Powers of Attorney dated March 19, 2009 duly executed by such persons. /s/ Scott D. Silverman ------------------------------------- Scott D. Silverman, Attorney-in-Fact (Advantage IV) EXHIBIT TABLE Exhibit 8(b) Directors' Powers of Attorney Exhibit 10 Consent of Independent Registered Public Accounting Firm