N-4 1 n4smartd.txt INITIAL REGISTRATION STATEMENT As filed with the Securities and Exchange Registration No. 333-___ Commission on June 22, 2001 Registration No. 811-5626 ------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 SEPARATE ACCOUNT B (EXACT NAME OF REGISTRANT) GOLDEN AMERICAN LIFE INSURANCE COMPANY (NAME OF DEPOSITOR) 1475 Dunwoody Drive West Chester, PA 19380-1478 (Address of Depositor's Principal Executive Offices) (Zip Code) Depositor's Telephone Number, including Area Code (610) 425-3400 Linda E. Senker, Esq. Golden American Life Insurance Company 1475 Dunwoody Drive West Chester, PA 19380-1478 (Name and Address of Agent for Service) ------------------------------------------------------------------------------- Approximate date of Proposed Public Offering: As soon as practicable after the effectiveness of this Registration Statement Title of Securities Being Registered: Interests in a separate account under flexible premium deferred variable annuity contracts. The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. Part A PROFILE AND PROSPECTUS OF SMARTDESIGN ADVANTAGE VARIABLE ANNUITY ING VARIABLE ANNUITIES GOLDEN AMERICAN LIFE INSURANCE COMPANY SEPARATE ACCOUNT B OF GOLDEN AMERICAN LIFE INSURANCE COMPANY PROFILE OF SMARTDESIGN DEFERRED COMBINATION VARIABLE AND FIXED ANNUITY CONTRACT , 2001 1. THE ANNUITY CONTRACT The Contract offered in this prospectus is a deferred combination variable and fixed annuity contract between you and Golden American Life Insurance Company. The Contract features a 2% premium credit option, which is available only at Contract issue. The Contract provides a means for you to invest on a tax-deferred basis in (i) one or more of 36 mutual fund investment portfolios through our Separate Account B and/or (ii) in a fixed account of Golden American with guaranteed interest periods. The investment portfolios are listed on page 4. We currently offer guaranteed interest periods of 6 months, 1, 3, 5, 7 and 10 years in the fixed account. We set the interest rates in the fixed account (which will never be less than 3%) periodically. We may credit a different interest rate for each interest period. The interest you earn in the fixed account as well as your principal is guaranteed by Golden American as long as you do not take your money out before the maturity date for the applicable interest period. If you withdraw your money from the fixed account more than 30 days before the applicable maturity date, we will apply a market value adjustment. A market value adjustment could increase or decrease your contract value and/or the amount you take out. Generally, the investment portfolios are designed to offer a better return than the fixed account. However, this is NOT guaranteed. You may not make any money, and you can even lose the money you invest in the investment portfolios. The Contract offers a choice of death benefit options. You may choose from three option packages which determine your death benefit, minimum premium and annual free withdrawal. Your choice of option package will affect your mortality and expense risk charge. SMARTDESIGN PROFILE PROSPECTUS BEGINS AFTER 109651 Page 12 of this Profile The differences are summarized as follows:
-------------------------------- ------------------------------ ------------------------------- ------------------------------ OPTION PACKAGE I OPTION PACKAGE II OPTION PACKAGE III -------------------------------- ------------------------------ ------------------------------- ------------------------------ -------------------------------- ------------------------------ ------------------------------- ------------------------------ MORTALITY AND EXPENSE RISK CHARGE 1.45% 1.65% 1.80% -------------------------------- ------------------------------ ------------------------------- ------------------------------ -------------------------------- ------------------------------ ------------------------------- ------------------------------ DEATH BENEFIT The greater of: The greatest of: The greatest of: 1) the Standard Death Benefit; 1) the Standard Death Benefit; 1) the Standard Death Benefit; or or or 2) the contract value*. 2) the contract value*; or 2) the contract value*; or 3) the Annual Ratchet death 3) the Annual Ratchet death benefit. benefit; or 4) the 5% Roll-Up death benefit. -------------------------------- ------------------------------ ------------------------------- ------------------------------ -------------------------------- -------------- --------------- --------------- --------------- -------------- --------------- MINIMUM INITIAL PURCHASE Non-Qualified: Qualified: Non-Qualified: Qualified: Non-Qualified: Qualified: PAYMENT $15,000 $1,500 $5,000 $1,500 $5,000 $1,500 -------------------------------- -------------- --------------- --------------- --------------- -------------- --------------- -------------------------------- ------------------------------ ------------------------------- ------------------------------ FREE WITHDRAWALS 10% of your contract value 10% of your contract value 10% of your contract value each contract year, each contract year, each contract year, non-cumulative non-cumulative cumulative to a maximum 30% -------------------------------- ------------------------------ ------------------------------- ------------------------------
* less credits added since or within 12 months prior to death Please see "Purchase and Availability of the Contract", "Death Benefit During the Accumulation Phase", and "Free Withdrawal Amount" for a complete description of the features of each option package. Subject to state availability, you may also elect, for an additional charge, an earnings multiplier benefit rider. Please see page 5 for a description of any applicable charge. The earnings multiplier benefit rider provides a separate death benefit in addition to the death benefit provided under the option package you select. For a description of the earnings multiplier benefit rider, please see page 10. To find out about availability, check with our Customer Service Center. The Contract, like all deferred variable annuity contracts, has two phases: the accumulation phase and the income phase. The accumulation phase is the period between the contract date and the date on which you start receiving the annuity payments under your Contract. The amounts you accumulate during the accumulation phase will determine the amount of annuity payments you will receive. The income phase begins on the annuity start date, which is the date you start receiving regular annuity payments from your Contract. You determine (1) the amount and frequency of premium payments, (2) your investment allocations, (3) transfers between investments, (4) the type of annuity to be paid after the accumulation phase, (5) the beneficiary who will receive the death benefits, (6) the type of death benefit, and (7) the amount and frequency of withdrawals. 2. YOUR ANNUITY PAYMENTS (THE INCOME PHASE) When you want to begin receiving payments form your contract, you may select from the options available. The contract offers several income phase payment options (see "The Income Phase"). In general, you may: o Receive income phase payments for a specified period of time or for life; o Receive income phase payments monthly, quarterly, semi-annually or annually; o Select an income phase payment option that provides for payments to your beneficiary; or o Select an income phase payments that are fixed or vary depending upon the performance of the variable investment options you select. 3. PURCHASE (BEGINNING OF THE ACCUMULATION PHASE) The minimum initial payment to purchase the Contract, and the maximum age at which you may purchase the Contract depend on the option package that you select.
--------------------------- ------------------------------ ------------------------------- ---------------------------- OPTION PACKAGE I OPTION PACKAGE II OPTION PACKAGE III --------------------------- ------------------------------ ------------------------------- ---------------------------- Minimum Initial Payment $15,000 (non-qualified) $5,000 (non-qualified) $5,000 (non-qualified) $1,500 (qualified) $1,500 (qualified) $1,500 (qualified) --------------------------- ------------------------------ ------------------------------- ---------------------------- Maximum Age to Purchase 85 80 80 --------------------------- ------------------------------ ------------------------------- ----------------------------
You may make additional premium payments until age 85. The minimum additional premium payment we will accept is $50 regardless of the option package you select. Under certain circumstances, we may waive the minimum initial and additional premium payment requirement. Any initial or additional premium payment that would cause the contract value of all annuities that you maintain with us to exceed $1,000,000 requires our prior approval. PREMIUM CREDIT OPTION. At the time of application you may elect the premium credit option. If you so elect, a credit will be added to your Contract based on your contract value at the beginning of the first contract year ("initial contract value"). The credit will be allocated among the investment options you have selected in proportion to your initial contract value and will be a minimum of 2% of such contract value. On the third contract anniversary and every three contract years thereafter on a contract anniversary, a new credit will be added to your Contract (a "renewal period") which will be a minimum of 2% of your contract value on the applicable contract anniversary. Each new premium credit will be allocated among your variable investment options in proportion to your contract value in the variable investment options. If you elect not to renew the premium credit option, we will discontinue the option on the contract anniversary at the start of the next renewal period. Once you elect not to renew the premium credit option, it cannot be subsequently resumed. 109651 2 SMARTDESIGN PROFILE We will assess a charge for each premium credit which will be deducted from your contract value for a period of up to three years following the addition of a premium credit. The premium credit option charge will be deducted from your contract value in both the subaccounts and the Fixed Account. The charge will equal 0.60% of your contract value in the subaccounts on an annual basis and will reduce the interest which would otherwise have been credited to your contract value in the Fixed Account by 0.60% on an annual basis. See "Expenses." If you anticipate that you will need to make withdrawals from your Contract during the first three contract years, you may not want to elect the premium credit option. Your sales representative can help you decide if the premium credit option is right for you. THE EXPENSES FOR A CONTRACT PROVIDING A PREMIUM CREDIT, AS THIS CONTRACT DOES, MAY BE HIGHER THAN FOR CONTRACTS NOT PROVIDING A PREMIUM CREDIT. OVER TIME, AND UNDER CERTAIN CIRCUMSTANCES, THE AMOUNT OF THE PREMIUM CREDIT MAY BE MORE THAN OFFSET BY THE ADDITIONAL FEES AND CHARGES ASSOCIATED WITH THE PREMIUM CREDIT. Who may purchase this Contract? The Contract may be purchased by individuals as part of a personal retirement plan (a "non-qualified Contract"), or as a Contract that qualifies for special tax treatment when purchased as either an Individual Retirement Annuity (IRA) or in connection with a qualified retirement plan (each a "qualified Contract"). IRAs and other qualified plans already have the tax-deferral feature found in this Contract. For an additional cost, the Contract provides other benefits including death benefits and the ability to receive a lifetime income. See "Expenses" in this profile. The Contract is designed for people seeking long-term tax-deferred accumulation of assets, generally for retirement or other long-term purposes. The tax-deferred feature is more attractive to people in high federal and state tax brackets. YOU SHOULD NOT BUY THIS CONTRACT: (1) IF YOU ARE LOOKING FOR A SHORT-TERM INVESTMENT; (2) IF YOU CANNOT RISK GETTING BACK LESS MONEY THAN YOU PUT IN; OR (3) IF YOUR ASSETS ARE IN A PLAN WHICH PROVIDES FOR TAX-DEFERRAL AND YOU SEE NO OTHER REASON TO PURCHASE THIS CONTRACT. 4. THE INVESTMENT PORTFOLIOS You can direct your money into (1) the fixed account with guaranteed interest periods of 6 months, and 1, 3, 5, 7 and 10 years, and/or (2) into any one or more of the following mutual fund investment portfolios through our Separate Account B. The investment portfolios are described in the prospectuses for Aetna GET Fund, Aetna Variable Portfolios, Inc., Alliance Variable Products Series Fund, Inc., Brinson Series Trust, Fidelity Variable Insurance Products Portfolios, The GCG Trust, Invesco Variable Investment Funds, Inc., Janus Aspen Series, Pilgrim Variable Insurance Trust, Pilgrim Variable Products Trust, PIMCO Variable Insurance Trust, Pioneer Variable Contracts Trust, Portfolio Partners, Inc., The Prudential Series Fund and Putnam Variable Trust. Keep in mind that while an investment in the fixed account earns a fixed interest rate, an investment in any investment portfolio, depending on market conditions, may cause you to make or lose money. The investment portfolios available under your Contract are: 109651 3 SMARTDESIGN PROFILE
AETNA VARIABLE PORTFOLIOS, INC. JANUS ASPEN SERIES Aetna GET Fund Janus Aspen Series Worldwide Growth Portfolio Aetna Index Plus Large Cap VP PILGRIM VARIABLE INSURANCE TRUST Aetna Index Plus Mid Cap VP Pilgrim VIT Worldwide Growth Fund Aetna Index Plus Small Cap VP PILGRIM VARIABLE PRODUCTS TRUST Aetna Value Opportunity VP Pilgrim VP Convertible Portfolio ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC. Pilgrim VP Growth and Income Portfolio AllianceBernstein Value Portfolio Pilgrim VP LargeCap Growth Portfolio Alliance Growth and Income Portfolio Pilgrim VP MagnaCap Portfolio Alliance Premier Growth Portfolio PIMCO VARIABLE INSURANCE TRUST BRINSON SERIES TRUST PIMCO High Yield Bond Portfolio Brinson Tactical Allocation Portfolio PIONEER VARIABLE CONTRACTS TRUST FIDELITY VARIABLE INSURANCE PRODUCTS PORTFOLIO Pioneer Fund VCT Portfolio Fidelity VIP Equity-Income Portfolio Pioneer Small Company VCT Portfolio Fidelity VIP Growth Portfolio PORTFOLIO PARTNERS, INC. Fidelity VIP II Contrafund Portfolio PPI MFS Capital Opportunities Portfolio THE GCG TRUST THE PRUDENTIAL SERIES FUND, INC. Core Bond Portfolio Prudential Jennison Portfolio Growth and Income Portfolio SP Jennison International Growth Portfolio Liquid Asset Portfolio PUTNAM VARIABLE TRUST Research Portfolio Putnam VT Growth and Income Portfolio Total Return Portfolio Putnam VT International Growth and Income Portfolio Value Equity Portfolio Putnam VT Voyager Fund II Portfolio INVESCO VARIABLE INVESTMENT FUNDS, INC. Invesco VIF Financial Services Fund Invesco VIF Health Sciences Fund Invesco VIF Utilities Fune
RESTRICTED FUNDS. We may designate any investment option as a Restricted Fund and limit the amount you may allocate or transfer to a Restricted Fund. We may establish any such limitation, at our discretion, as a percentage of premium or contract value or as a specified dollar amount and change the limitation at any time. Currently, we have not designated any investment option as a Restricted Fund. We may, with 30 days notice to you, designate any investment portfolio as a Restricted Fund or change the limitations on existing contracts with respect to new premiums added to such investment portfolio and also with respect to new transfers to such investment portfolio. For more detailed information, see "Restricted Funds" in the prospectus for the Contract. 5. EXPENSES The Contract has insurance features and investment features, and there are charges related to each. For the insurance features, the Company deducts a mortality and expense risk charge, an asset-based 109651 4 SMARTDESIGN PROFILE administrative charge and an annual contract administrative charge of $30. We also deduct a charge for the premium credit option, if elected. We deduct the mortality and expense risk charge, the asset-based administrative charge, and the premium credit option charge, if applicable, daily directly from your contact value in the investment portfolios. We also deduct the premium credit option charge from your contract value in the Fixed Account. We will also make a daily deduction, during the guarantee period, of a guarantee charge, equal on an annual basis to the percentage shown below, from amounts allocated to the GET Fund. The mortality and expense risk charge and the asset-based administrative charge, on an annual basis, are as follows:
----------------------------------------------------------------------------------------------------------------------- OPTION OPTION OPTION PACKAGE I PACKAGE II PACKAGE III Mortality & Expense Risk Charge 1.45% 1.65% 1.80% Asset-Based Administrative Charge 0.15% 0.15% 0.15% ----- ----- ----- Total 1.60% 1.80% 1.95% Optional Asset-Based Premium Credit Charge 0.60% 0.60% 0.60% Total With Optional Premium Credit Charge 2.20% 2.40% 2.55% ----------------------------------------------------------------------------------------------------------------------- --------------------------------------------------- ------------------------ -------------------- --------------------- GET Fund Guarantee Charge* 0.50% 0.50% 0.50% --------------------------------------------------- ------------------------ -------------------- --------------------- Total With Optional Premium Credit Charge and GET Fund Guarantee Charge 2.70% 2.90% 3.05% --------------------------------------------------- ------------------------ -------------------- ---------------------
*applied to amounts invested in the GET Fund investment option only. During the income phase, the Mortality & Expense Risk Charge, on an annual basis, is equal to 1.25% of amounts invested in the subaccounts. The Premium Credit Option Charge is also deducted during the income phase, if otherwise applicable. There is currently no Administrative Charge during the income phase. We reserve the right to impose a charge of up to 0.25% during the income phase in the future. If we are imposing this charge when you enter the income phase, it will apply to you during the entire income phase. See "The Income Phase- Charges Deducted." EARNINGS MULTIPLIER BENEFIT RIDER CHARGE If you choose to purchase the earnings multiplier benefit rider, we will deduct a separate quarterly charge for the rider on each quarterly contract anniversary and pro rata when the rider terminates. We deduct the rider charge directly from your contract value in the investment portfolios; if the value in the investment portfolios is insufficient, the rider charge will be deducted from your contract value in the fixed account. The quarterly rider charge is 0.0625% of the contract value (0.25% annually). Each investment portfolio has charges for investment management fees and other expenses. These charges, which vary by investment portfolio, currently range from ____% to ____% annually (see following table) of the portfolio's average daily net asset balance. If you withdraw money from your Contract, or if you begin receiving annuity payments, we may deduct a premium tax of 0%-3.5% to pay to your state. We deduct a surrender charge if you surrender your Contract or withdraw an amount exceeding the free withdrawal amount. The free withdrawal amount for a contract year is 10% of contract value, based on the contract value on the date of withdrawal, less any prior withdrawals in that contract year. Under Option Package III, any unused free withdrawal amount may carry forward to successive contract years, but in no event would the free withdrawal amount at any time exceed 30% of contract value. The following table shows the schedule of the surrender charge that will apply. The surrender charge is a percent of each premium payment withdrawn. COMPLETE YEARS ELAPSED 0 1 2 3+ SINCE PREMIUM PAYMENT SURRENDER CHARGE 6% 5% 4% 0% The following table is designed to help you understand the Contract charges. The "Total Annual Insurance Charges" column is divided into two: One part reflects the mortality and expense risk charge (based on Option Package III), the asset-based administrative charge, the annual contract administrative charge as 0.04% (based on an average contract value of $80,000) the asset-based premium credit option charge of 0.60% and the earnings multiplier benefit rider charge of 0.25%. The second part reflects the same insurance charges, but without the premium credit option charge or the rider charge. The "Total Annual Investment Portfolio Charges" column reflects the portfolio charges for each portfolio and is based on actual expenses as of December 31, 2000, except for (i) portfolios that commenced operations during 2000 or 2001 where the charges have been estimated, and (ii) newly formed portfolios where the charges have been estimated. The column "Total Annual Charges" reflects the sum of the previous two columns. The columns under the heading "Examples" show you how much you would pay under the Contract for a 1-year period and for a 10-year period. As required by the Securities and Exchange Commission, the examples assume that you invested $1,000 in a Contract that earns 5% annually and that you withdraw your money at the end of Year 1 or at the end of Year 10 (based on Option Package III). The 1 Year examples below include a 6% surrender charge. For Years 1 and 10, the examples show the total annual charges assessed during that time and assume that you have elected Option Package III. For these examples, the premium tax is assumed to be 0%. To be updated by amendment 109651 5 SMARTDESIGN PROFILE
EXAMPLES: TOTAL ANNUAL TOTAL ANNUAL CHARGES TOTAL CHARGES AT THE END OF: INSURANCE CHARGES 1 YEAR 10 YEARS WITH PREMIUM W/O PREMIUM TOTAL ANNUAL WITH PREMIUM W/O PREMIUM WITH PREMIUM W/O PREMIUM WITH PREMIUM W/O PREMIUM CREDIT AND CREDIT OR INVESTMENT CREDIT AND CREDIT OR CREDIT AND CREDIT OR CREDIT AND CREDIT OR INVESTMENT RIDER CHARGE RIDER CHARGE PORTFOLIO RIDER CHARGE RIDER CHARGE RIDER CHARGE RIDER CHARGE RIDER CHARGE RIDER CHARGE PORTFOLIO CHARGES TO BE ADDED BY AMENDMENT
The "Total Annual Investment Portfolio Charges" column above reflects current expense reimbursements for applicable investment portfolios. For more detailed information, see "Fees and Expenses" in the prospectus for the Contract. 6. TAXES Under a qualified Contract, your premiums are generally pre-tax contributions and accumulate on a tax-deferred basis. Premiums and earnings are generally taxed as income when you make a withdrawal or begin receiving annuity payments, presumably when you are in a lower tax bracket. Under a non-qualified Contract, premiums are paid with after-tax dollars, and any earnings will accumulate tax-deferred. You will generally be taxed on these earnings, but not on premiums, when you make a withdrawal or begin receiving annuity payments. For owners of most qualified Contracts, when you reach age 70 1/2 (or, in some cases, retire), you will be required by federal tax laws to begin receiving payments from your annuity or risk paying a penalty tax. In those cases, we can calculate and pay you the minimum required distribution amounts at your request. If you are younger than 59 1/2 when you take money out, in most cases, you will be charged a 10% federal penalty tax on the taxable amount withdrawn. 7. WITHDRAWALS You can withdraw your money at any time during the accumulation phase. You may elect in advance to take systematic withdrawals which are described on page 12. Withdrawals above the free withdrawal amount may be subject to a surrender charge. We will apply a market value adjustment if you withdraw your money from the fixed account more than 30 days before the applicable maturity date. Income taxes and a penalty tax may apply to amounts withdrawn. 8. PERFORMANCE The value of your Contract will fluctuate depending on the investment performance of the portfolio(s) you choose. Because the Company did not commence sales of the Contract prior to the date of this prospectus, the Contract has no performance history. 9. DEATH BENEFIT The death benefit, and earnings multiplier benefit, if elected, is payable when the first of the following persons dies: the contract owner, joint owner, or annuitant (if a contract owner is not an individual). Assuming you are the contract owner, if you die during the accumulation phase, your beneficiary will receive a death benefit unless the beneficiary is your surviving spouse and elects to continue the Contract. The death benefit paid depends on the death benefit under the option package that you have chosen. The death benefit value is calculated at the close of the business day on which we receive written notice and due proof of death, as well as required claim forms, at our Customer Service Center (the "claim date"). If your beneficiary elects to delay receipt of the death benefit until a date after the time of your death, the amount of 109651 6 SMARTDESIGN PROFILE the benefit payable in the future may be affected. If you die after the annuity start date and you are the annuitant, your beneficiary will receive the death benefit you chose under the annuity option then in effect. The death benefit may be subject to certain mandatory distribution rules required by federal tax law. There are three option packages available under your Contract. You select an option package at the time of application. The differences in the death benefits under the three option packages are summarized as follows:
--------------------------- ------------------------------ ------------------------------- ---------------------------- OPTION PACKAGE I OPTION PACKAGE II OPTION PACKAGE III --------------------------- ------------------------------ ------------------------------- ---------------------------- --------------------------- ------------------------------ ------------------------------- ---------------------------- DEATH BENEFIT The greater of: The greatest of: The greatest of: (1) the Standard Death (1) the Standard Death (1) the Standard Death Benefit; or Benefit; or Benefit; or (2) the contract value*. (2) the contract value; or (2) the contract value*; (3) the Annual Ratchet or death benefit. (3) the Annual Ratchet death benefit; or (4) the 5% Roll-Up death benefit. --------------------------- ------------------------------ ------------------------------- ---------------------------- -----------------------------------------------------------------------------------------------------------------------
*reduced by the amount of any credits added since or within 12 months prior to death Option Packages II and III are not be available where a Contract is held by joint owners. For purposes of calculating the death benefits, certain investment portfolios and the Fixed Account are designated as "Special Funds." In addition to the Fixed Account, the investment portfolios designated currently as Special Funds are the Liquid Asset Portfolio and the Limited Maturity Bond Portfolio. Selecting a Special Fund may limit or reduce the death benefit. We may in the future stop or suspend offering any of the option packages to new Contracts. A change in ownership of the Contract may affect the amount of the death benefit. Please see ""Death Benefit Choices" in the prospectus for details on the calculation of the death benefits and further details on the effect of withdrawals and transfers to Special Funds on the calculation of the death benefits. TRANSFERABILITY. You may transfer from one option package to another. > Transfers may only occur on a contract anniversary. > A written request for the transfer must be received by us within 60 days before a contract anniversary. > Certain minimum contract values must be met. See "Transfers Between Option Packages" in the Prospectus for more information on transferability and the impact of transfers between option packages on your death benefit. Note: In all cases described above, the amount of the death benefit could be reduced by premium taxes owed and withdrawals not previously deducted. All death benefits may not be available in every state. We may, with 30 days notice to you, designate any investment portfolio as a Special Fund on existing Contracts with respect to new premiums added to such investment portfolio and also with respect to new transfers to such investment portfolio. Keep in mind that selecting a Special Fund may limit or reduce the death benefit. 109651 7 SMARTDESIGN PROFILE For the period during which a portion of the contract value is allocated to a Special Fund, we may, at our discretion, reduce the mortality and expense risk charge attributable to that portion of the contract value. The reduced mortality and expense risk charge will be applicable only during the period contract value is allocated to a Special Fund. EARNINGS MULTIPLIER BENEFIT RIDER. The earnings multiplier benefit rider is an optional rider that provides a separate death benefit in addition to the death benefit provided under the death benefit options available under the option packages. The rider is subject to state availability and is available only for issues ages 75 or under. It may be added at issue of the Contract or on the next contract anniversary following introduction of the rider in a state, if later. The rider provides a benefit equal to a percentage of the gain under the Contract, up to a gain equal to 300% of premiums adjusted for withdrawals ("Maximum Base"). Currently, where the rider is added at issue, the earnings multiplier benefit is equal to 40% (25% for issue ages 70 and above) of the lesser of: 1) the Maximum Base; and 2) the contract value on the claim date (the close of the business day on which we receive written notice and due proof of death, as well as any required paperwork) minus premiums adjusted for withdrawals. If the rider is added to a Contract after issue, the earnings multiplier benefit is equal to 40% (25% for issue ages 70 and above) of the lesser of: 1) 300% of the contract value on the rider effective date, plus subsequent premiums adjusted for subsequent withdrawals; and 2) the contract value on the claim date minus the sum of the contract value on the rider effective date plus subsequent premiums adjusted for subsequent withdrawals. The adjustment to the benefit for withdrawals is pro rata, meaning that the benefit will be reduced by the proportion that the withdrawal bears to the contract value at the time of the withdrawal. There is an extra charge for this feature and once selected, it may not be revoked. The earnings enhancement benefit rider does not provide a benefit if there is no gain under the Contract. As such, the Company would continue to assess a charge for the rider, even though no benefit would be payable at death under the rider if there are no gains under the Contract. Please see [5] for a description of the earnings multiplier benefit rider charge. 10. OTHER INFORMATION FREE LOOK. If you cancel the Contract within 10 days after you receive it, you will receive a refund of the adjusted contract value. We determine your contract value at the close of business on the day we receive your written refund request. For purposes of the refund during the free look period, (i) we adjust your contract value for any market value adjustment (if you have invested in the fixed account), (ii) then we exclude any credit initially applied, and (iii) then we include a refund of any charges deducted from your contract value. Because of the market risks associated with investing in the portfolios and the potential positive or negative effect of the market value adjustment, the contract value returned may be greater or less than the premium payment you paid. Some states require us to return to you the amount of the premium paid, excluding any credit, (rather than the contract value) in which case you will not be subject to investment risk during the free look period. Also, in some states, you may be entitled to a longer free look period. TRANSFERS AMONG INVESTMENT PORTFOLIOS AND THE FIXED ACCOUNT. You can make transfers among your investment portfolios and your investment in the fixed account as frequently as you wish without any current tax implications. The minimum amount for a transfer is $100. There is currently no charge for transfers, and we do not limit the number of transfers allowed. The Company may, in the future, charge a $25 fee for any transfer after the twelfth transfer in a contract year or limit the number of transfers allowed. We also reserve the right to limit the number of transfers you may make and may otherwise modify or terminate transfer privileges if required by our business judgment or in accordance with applicable law. Keep in mind that if you transfer or otherwise withdraw your money from the fixed account more than 30 days before the applicable maturity date, we will apply a market value adjustment. A market value adjustment could increase or decrease your contract value and/or the amount you transfer or withdraw. Keep in mind that transfers between Special Funds and Non-Special Funds will impact your death benefit and benefits under an optional benefit rider, if any. Also, a transfer to a Restricted Fund will not be permitted to the extent that it would increase the contract value in the Restricted Fund to more than the applicable limits following the transfer. Transfers from Restricted Funds are not limited. If the result of multiple transfers is 109651 8 SMARTDESIGN PROFILE to lower the percentage of total contract value in the Restricted Fund, the reallocation will be permitted even if the percentage of contract value in the Restricted Fund is greater than the limit. See "Restricted Funds" in the prospectus for more information. NO PROBATE. In most cases, when you die, the person you choose as your beneficiary will receive the death benefit without going through probate. See "Federal Tax Considerations -- Taxation of Death Benefit Proceeds" in the prospectus for the Contract. ADDITIONAL FEATURES. This Contract has other features you may be interested in. These include: Dollar Cost Averaging. This is a program that allows you to invest a fixed amount of money in the investment portfolios each month, which may give you a lower average cost per unit over time than a single one-time purchase. Dollar cost averaging requires regular investments regardless of fluctuating price levels, and does not guarantee profits or prevent losses in a declining market. This option is currently available only if you have $1,200 or more in the Liquid Asset investment portfolio or in the fixed account with either a 6-month or 1-year guaranteed interest period. Transfers from the fixed account under this program will not be subject to a market value adjustment. If you invest in Restricted Funds, your ability to dollar cost average may be limited. Please see "Transfers Among Your Investments" in the prospectus for more complete information. Systematic Withdrawals. During the accumulation phase, you can arrange to have money sent to you at regular intervals throughout the year. Within limits these withdrawals will not result in any surrender charge. Withdrawals from your money in the fixed account under this program are not subject to a market value adjustment. Of course, any applicable income and penalty taxes will apply on amounts withdrawn. If you invest in Restricted Funds, your systematic withdrawals may be affected. Please see "Withdrawals" in the prospectus for more complete information. Automatic Rebalancing. If your contract value is $10,000 or more, you may elect to have the Company automatically readjust the money between your investment portfolios periodically to keep the blend you select. Investments in the fixed account are not eligible for automatic rebalancing. If you invest in Restricted Funds, automatic rebalancing may be affected. Please see "Transfers Among Your Investments" in the prospectus for more complete information. 11. INQUIRIES If you need more information after reading this profile and the prospectus, please contact us at: CUSTOMER SERVICE CENTER P.O. BOX 2700 WEST CHESTER, PENNSYLVANIA 19380 (800) 366-0066 or your registered representative. 109651 9 SMARTDESIGN PROFILE This page intentionally left blank. -------------------------------------------------------------------------------- GOLDEN AMERICAN LIFE INSURANCE COMPANY -------------------------------------------------------------------------------- SEPARATE ACCOUNT B OF GOLDEN AMERICAN LIFE INSURANCE COMPANY DEFERRED COMBINATION VARIABLE AND FIXED ANNUITY PROSPECTUS SMARTDESIGN -------------------------------------------------------------------------------- , 2001 This prospectus describes SmartDesign, a group and individual deferred variable annuity contract (the "Contract") offered by Golden American Life Insurance Company (the "Company," "we" or "our"). The Contract is available in connection with certain retirement plans that qualify for special federal income tax treatment ("qualified Contracts") as well as those that do not qualify for such treatment ("non-qualified Contracts"). The Contract provides a means for you to invest your premium payments and credits, if applicable, in one or more of 36 mutual fund investment portfolios. You may also allocate premium payments and credits, if applicable, to our Fixed Account with guaranteed interest periods. Your contract value will vary daily to reflect the investment performance of the investment portfolio(s) you select and any interest credited to your allocations in the Fixed Account. The investment portfolios available under your Contract and the portfolio managers are listed on the back of this cover. We will credit your Fixed Interest Allocation(s) with a fixed rate of interest. We set the interest rates periodically. We will not set the interest rate to be less than a minimum annual rate of 3%. You may choose guaranteed interest periods of 6 months, and 1, 3, 5, 7 and 10 years. The interest earned on your money as well as your principal is guaranteed as long as you hold them until the maturity date. If you take your money out from a Fixed Interest Allocation more than 30 days before the applicable maturity date, we will apply a market value adjustment ("Market Value Adjustment"). A Market Value Adjustment could increase or decrease your contract value and/or the amount you take out. You bear the risk that you may receive less than your principal if we make a Market Value Adjustment. For Contracts sold in some states, not all Fixed Interest Allocations or subaccounts are available. You have a right to return a Contract within 10 days after you receive it for a refund of the adjusted contract value, less credits we added, if applicable, (which may be more or less than the premium payments you paid), or if required by your state, the original amount of your premium payment. Longer free look periods apply in some states and in certain situations. This prospectus provides information that you should know before investing and should be kept for future reference. A Statement of Additional Information ("SAI"), dated, , 2001, has been filed with the Securities and Exchange Commission ("SEC"). It is available without charge upon request. To obtain a copy of this document, write to our Customer Service Center at P.O. Box 2700, West Chester, Pennsylvania 19380 or call (800) 366-0066, or access the SEC's website (http://www.sec.gov). The table of contents of the SAI is on the last page of this prospectus and the SAI is made part of this prospectus by reference. THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THE EXPENSES FOR A CONTRACT PROVIDING A PREMIUM CREDIT, AS THIS CONTRACT DOES, MAY BE HIGHER THAN FOR CONTRACTS NOT PROVIDING A PREMIUM CREDIT. OVER TIME, AND UNDER CERTAIN CIRCUMSTANCES, THE AMOUNT OF THE PREMIUM CREDIT MAY BE MORE THAN OFFSET BY THE ADDITIONAL FEES AND CHARGES ASSOCIATED WITH THE PREMIUM CREDIT. AN INVESTMENT IN ANY SUBACCOUNT THROUGH THE AETNA GET FUND, AETNA VARIABLE PORTFOLIOS, INC., ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC., BRINSON SERIES TRUST, FIDELITY VARIABLE INSURANCE PRODUCTS PORTFOLIOS, THE GCG TRUST, INVESCO VARIABLE INVESTMENT FUNDS, INC., JANUS ASPEN SERIES, PILGRIM VARIABLE INSURANCE TRUST, PILGRIM VARIABLE PRODUCTS TRUST, PIMCO VARIABLE INSURANCE TRUST, PIONEER VARIABLE CONTRACTS TRUST, PORTFOLIO PARTNERS, INC., THE PRUDENTIAL SERIES FUND OR PUTNAM VARIABLE TRUST IS NOT A BANK DEPOSIT AND IS NOT INSURED OR GUARANTEED BY ANY BANK OR BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. THIS PROSPECTUS MUST BE ACCOMPANIED BY A CURRENT PROSPECTUS FOR THE AETNA GET FUND, AETNA VARIABLE PORTFOLIOS, INC., ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC., BRINSON SERIES TRUST, FIDELITY VARIABLE INSURANCE PRODUCTS PORTFOLIOS, THE GCG TRUST, INVESCO VARIABLE INVESTMENT FUNDS, INC., JANUS ASPEN SERIES, PILGRIM VARIABLE INSURANCE TRUST, PILGRIM VARIABLE PRODUCTS TRUST, PIMCO VARIABLE INSURANCE TRUST, PIONEER VARIABLE CONTRACTS TRUST, PORTFOLIO PARTNERS, INC., THE PRUDENTIAL SERIES FUND AND PUTNAM VARIABLE TRUST. A LIST OF THE INVESTMENT PORTFOLIOS AND THE MANAGERS ARE LISTED ON THE BACK OF THIS COVER. -------------------------------------------------------------------------------- SMARTDESIGN-109651 The investment portfolios available under your Contract and the portfolio managers are:
AELTUS INVESTMENT MANAGEMENT, INC. JANUS CAPITAL CORPORATION Aetna GET Fund Growth and Income Portfolio Aetna Index Plus Large Cap VP Janus Aspen Series Worldwide Growth Aetna Index Plus Mid Cap VP Portfolio Aetna Index Plus Small Cap VP JENNISON ASSOCIATES, LLC Aetna Value Opportunity VP Prudential Jennison Portfolio ALLIANCE CAPITAL MANAGEMENT L.P. SP Jennison International Growth Portfolio AllianceBernstein Value Portfolio MASSACHUSETTS FINANCIAL SERVICES COMPANY Alliance Growth and Income Portfolio PPI MFS Capital Opportunities Portfolio Alliance Premier Growth Portfolio Research Series BRINSON ADVISORS, INC. Total Return Series Brinson Tactical Allocation Portfolio PACIFIC INVESTMENT MANAGEMENT COMPANY EAGLE ASSET MANAGEMENT, INC. Core Bond Series Value Equity Series PIMCO High Yield Bond Portfolio FIDELITY MANAGEMENT & RESEARCH COMPANY PIONEER INVESTMENT MANAGEMENT, INC. Fidelity VIP Equity-Index Portfolio Pioneer Fund VCT Portfolio Fidelity VIP Growth Portfolio Pioneer Small Company VCT Portfolio Fidelity VIP II Contrafund Portfolio PUTNAM INVESTMENT MANAGEMENT, LLC ING INVESTMENT MANAGEMENT, LLC Putnam VT Growth and Income Portfolio Liquid Asset Portfolio Putnam VT International Growth and Income ING PILGRIM INVESTMENTS, LLC Portfolio Pilgrim VP Convertible Portfolio Putnam VT Voyager Fund II Portfolio Pilgrim VP Growth and Income Portfolio Pilgrim VP LargeCap Growth Portfolio Pilgrim VP MagnaCap Portfolio Pilgrim VIT Worldwide Growth Fund INVESCO FUNDS GROUP, INC. Invesco VIF Financial Services Fund Invesco VIF Health Sciences Fund Invesco VIF Utilities Fund
The above mutual fund investment portfolios are purchased and held by corresponding divisions of our Separate Account B. We refer to the divisions as "subaccounts" and the money you place in the Fixed Account's guaranteed interest periods as "Fixed Interest Allocations" in this prospectus. SMARTDESIGN-109651 -------------------------------------------------------------------------------- TABLE OF CONTENTS -------------------------------------------------------------------------------- PAGE Index of Special Terms..................................... 1 Fees and Expenses.......................................... 2 Performance Information.................................... 12 Accumulation Unit.................................... 12 Net Investment Factor................................ 12 Condensed Financial Information...................... 12 Financial Statements................................. 12 Performance Information.............................. 12 Golden American Life Insurance Company..................... 13 The Trusts................................................. 14 Golden American Separate Account B......................... 15 The Investment Portfolios.................................. 15 Investment Objectives................................ 15 Investment Management Fees........................... 20 GET Fund Restricted Funds..................................... 21 The Fixed Interest Allocation.............................. 22 Selecting a Guaranteed Interest Period............... 22 Guaranteed Interest Rates............................ 22 Transfers from a Fixed Interest Allocation........... 23 Withdrawals from a Fixed Interest Allocation......... 23 Market Value Adjustment.............................. 24 Special Funds.............................................. 25 The Annuity Contract....................................... 25 Contract Date and Contract Year ..................... 25 Annuity Start Date................................... 25 Contract Owner....................................... 25 Annuitant............................................ 26 Beneficiary.......................................... 26 Purchase and Availability of the Contract............ 27 Crediting of Premium Payments........................ 27 Additional Credit to Premium......................... Administrative Procedures............................ 28 Contract Value....................................... 28 Cash Surrender Value................................. 28 Surrendering to Receive the Cash Surrender Value..... 28 The Subaccounts...................................... 30 Addition, Deletion or Substitution of Subaccounts and Other Changes................................. 30 The Fixed Account.................................... 30 Other Contracts......................................... 37 Other Important Provisions.............................. 38 Withdrawals................................................ 38 Regular Withdrawals.................................. 38 Systematic Withdrawals............................... 38 IRA Withdrawals...................................... 40 SMARTDESIGN-109651 i -------------------------------------------------------------------------------- TABLE OF CONTENTS (CONTINUED) -------------------------------------------------------------------------------- PAGE Transfers Among Your Investments........................... 41 Transfers by Third Parties........................... 41 Dollar Cost Averaging................................ 42 Automatic Rebalancing................................ 43 Death Benefit Choices...................................... 44 Death Benefit During the Accumulation Phase.......... 44 Option Package I................................. 44 Option Package II................................ 45 Option Package III............................... 47 Transfers Between Option Packages................ Earnings Multiplier Benefit Rider................ Death Benefit During the Income Phase................ 47 Continuation After Death- Spouse..................... 47 Continuation After Death- Non-Spouse................. 48 Required Distributions upon Contract Owner's Death... 48 Charges and Fees........................................... 49 Charge Deduction Subaccount.......................... 49 Charges Deducted from the Contract Value............. 49 Surrender Charge................................. 49 Waiver of Surrender Charge for Extended Medical Coverage...................................... 49 Free Withdrawal Amount........................... 49 Surrender Charge for Excess Withdrawals.......... 50 Premium Taxes.................................... 50 Administrative Charge............................ 50 Transfer Charge.................................. 50 Charges Deducted from the Subaccounts................ 50 Mortality and Expense Risk Charge................ 50 Asset-Based Administrative Charge................ 51 Asset-Based Premium Credit Option Charge......... Earnings Multiplier Benefit Charge............... 51 Trust Expenses................................... 52 The Annuity Options........................................ 52 Annuitization of Your Contract....................... 52 Selecting the Annuity Start Date..................... 53 Frequency of Annuity Payments........................ 53 The Annuity Options.................................. 53 Income for a Fixed Period........................ 53 Income for Life with a Period Certain............ 53 Joint Life Income................................ 54 Annuity Plan..................................... 54 Payment When Named Person Dies....................... 54 SMARTDESIGN-109651 ii -------------------------------------------------------------------------------- TABLE OF CONTENTS (CONTINUED) -------------------------------------------------------------------------------- PAGE Other Contract Provisions.................................. 54 Reports to Contract Owners........................... 54 Suspension of Payments............................... 54 In Case of Errors in Your Application................ 54 Assigning the Contract as Collateral................. 55 Contract Changes-Applicable Tax Law.................. 55 Free Look............................................ 55 Group or Sponsored Arrangements...................... 55 Selling the Contract................................. 55 Other Information.......................................... 56 Voting Rights........................................ 56 State Regulation..................................... 56 Legal Proceedings.................................... 57 Legal Matters........................................ 57 Experts.............................................. 57 Federal Tax Considerations................................. 57 More Information About Golden American Life Insurance Company.............................................. 65 Financial Statements of Golden American Life Insurance Company.............................................. 85 Statement of Additional Information Table of Contents.................................... 113 Appendix A Market Value Adjustment Examples..................... A1 Appendix B Surrender Charge for Excess Withdrawals Example...... B1 Appendix C Withdrawal Adjustment for 5% Roll-Up Death Benefit Examples........................................... C1 SMARTDESIGN-109651 iii This page intentionally left blank. -------------------------------------------------------------------------------- INDEX OF SPECIAL TERMS -------------------------------------------------------------------------------- The following special terms are used throughout this prospectus. Refer to the page(s) listed for an explanation of each term: SPECIAL TERM PAGE Accumulation Unit 12 Annual Ratchet 46 Annuitant 26 Annuity Start Date 25 Cash Surrender Value 28 Contract Date 25 Contract Owner 25 Contract Value 28 Contract Year 25 Earnings Multiplier Benefit 51 Fixed Interest Allocation 22 Free Withdrawal Amount 49 Market Value Adjustment 24 Net Investment Factor 12 Restricted Fund 21 Rider Date 31 5% Roll-up 45 Special Fund 25 Standard Death Benefit 44 The following terms as used in this prospectus have the same or substituted meanings as the corresponding terms currently used in the Contract: TERM USED IN THIS PROSPECTUS CORRESPONDING TERM USED IN THE CONTRACT Accumulation Unit Value Index of Investment Experience Annuity Start Date Annuity Commencement Date Contract Owner Owner or Certificate Owner Contract Value Accumulation Value Transfer Charge Excess Allocation Charge Fixed Interest Allocation Fixed Allocation Free Look Period Right to Examine Period Guaranteed Interest Period Guarantee Period Subaccount(s) Division(s) Net Investment Factor Experience Factor Regular Withdrawals Conventional Partial Withdrawals Withdrawals Partial Withdrawals SMARTDESIGN-109651 1 -------------------------------------------------------------------------------- FEES AND EXPENSES -------------------------------------------------------------------------------- CONTRACT OWNER TRANSACTION EXPENSES* Surrender Charge: COMPLETE YEARS ELAPSED 0 1 2 3+ SINCE PREMIUM PAYMENT SURRENDER CHARGE 6% 5% 4% 0% Transfer Charge................................... $25 per transfer, if you make more than 12 transfers in a contract year ** * If you invested in a Fixed Interest Allocation, a Market Value Adjustment may apply to certain transactions. This may increase or decrease your contract value and/or your transfer or surrender amount. ** We currently do not impose this charge, but may do so in the future. ANNUAL CONTRACT ADMINISTRATIVE CHARGE* Administrative Charge............................. $30 (We waive this charge if the total of your premium payments is $50,000 or more or if your contract value at the end of a contract year is $50,000 or more.) * We deduct this charge on each contract anniversary and on surrender. * There is currently no Administrative Charge during the income phase. We reserve the right to impose a charge of up to 0.25% during the income phase in the future. If we are imposing this charge when you enter the income phase, it will apply to you during the entire income phase. SEPARATE ACCOUNT ANNUAL CHARGES*
----------------------------------------------------------------------------------------------------------------------- OPTION PACKAGE I OPTION PACKAGE II OPTION PACKAGE III Mortality & Expense Risk Charge** 1.45% 1.65% 1.80% Asset-Based Administrative Charge 0.15% 0.15% 0.15% ----- ----- ----- Total 1.60% 1.80% 1.95% Optional Asset-Based Premium Credit 0.60% 0.60% 0.60% Charge Total With Optional Premium Credit Charge 2.20% 2.40% 2.55% GET Fund Guarantee Charge*** 0.50% 0.50% 0.50% Total With Optional Premium Credit Charge and GET Fund Guarantee Charge 2.70% 2.90% 3.05% -----------------------------------------------------------------------------------------------------------------------
* As a percentage of average daily assets in each subaccount. The Separate Account Annual Charges are deducted daily. ** During the income phase, the Mortality & Expense Risk Charge, on an annual basis, is equal to 1.25% of amounts invested in the subaccounts. The Premium Credit Option Charge is also deducted during the income phase, if otherwise applicable. *** The GET Fund guarantee Charge is deducted daily during the guarantee period from amounts allocated to the GET Fund investment option. Please see page __ for a description of the GET Fund guarantee. SMARTDESIGN-109651 2 EARNINGS MULTIPLIER BENEFIT RIDER CHARGE* Quarterly Charge................................. 0.0625% of contract value (0.25% annually) * We deduct the rider charge from the subaccounts in which you are invested on each quarterly contract anniversary and pro rata on termination of the Contract; if the value in the subaccounts is insufficient, the rider charge will be deducted from the Fixed Interest Allocation(s) nearest maturity, and the amount deducted may be subject to a Market Value Adjustment. TO BE UPDATED BY AMENDMENT THE AETNA VARIABLE PORTFOLIOS, INC. ANNUAL EXPENSES (as a percentage of the average daily net assets of a portfolio):
------------------------------------------------------------------------------------------------------------------------- TOTAL TOTAL EXPENSES MANAGEMENT SERVICE OTHER FUND EXPENSE AFTER EXPENSE PORTFOLIO FEE FEE EXPENSES EXPENSES REIMBURSEMENT REIMBURSEMENT ------------------------------------------------------------------------------------------------------------------------- Aetna GET Fund 0.60% 0.00% 0.15% 0.75% 0.00% 0.75% Aetna Index Plus Large Cap 0.35% 0.25% 0.09% 0.69% 0.00% 0.69% Aetna Index Plus Mid Cap 0.40% 0.25% 0.22% 0.87% 0.02% 0.85% Aetna Index Plus Small Cap 0.40% 0.25% 0.46% 1.11% 0.26% 0.85% Aetna Value Opportunity 0.60% 0.25% 0.15% 1.00% 0.00% 1.00% -------------------------------------------------------------------------------------------------------------------------
THE ALLIANCE VARIABLE PRODUCT SERIES FUND EXPENSES (as a percentage of the average daily net assets of a portfolio):
------------------------------------------------------------------------------------------------------------------------- TOTAL TOTAL EXPENSES MANAGEMENT SERVICE OTHER FUND EXPENSE AFTER EXPENSE PORTFOLIO FEE FEE EXPENSES EXPENSES REIMBURSEMENT REIMBURSEMENT ------------------------------------------------------------------------------------------------------------------------- AllianceBernstein 0.75% 0.25% 0.00% 1.00% 0.00% 1.00% Alliance Growth and Income 0.63% 0.25% 0.00% 0.88% 0.00% 0.88% Alliance Premier Growth 1.00% 0.25% 0.00% 1.25% 0.00% 1.25% -------------------------------------------------------------------------------------------------------------------------
THE BRINSON SERIES TRUST EXPENSES (as a percentage of the average daily net assets of a portfolio):
------------------------------------------------------------------------------------------------------------------------- TOTAL TOTAL EXPENSES MANAGEMENT SERVICE OTHER FUND EXPENSE AFTER EXPENSE PORTFOLIO FEE FEE EXPENSES EXPENSES REIMBURSEMENT REIMBURSEMENT ------------------------------------------------------------------------------------------------------------------------- Brinson Tactical Allocation 0.50% 0.25% 0.00% 0.75% 0.00% 0.75% -------------------------------------------------------------------------------------------------------------------------
THE FIDELITY VARIABLE INSURANCE PRODUCTS PORTFOLIO EXPENSES (as a percentage of the average daily net assets of a portfolio):
------------------------------------------------------------------------------------------------------------------------- TOTAL TOTAL EXPENSES MANAGEMENT SERVICE OTHER FUND EXPENSE AFTER EXPENSE PORTFOLIO FEE FEE EXPENSES EXPENSES REIMBURSEMENT REIMBURSEMENT ------------------------------------------------------------------------------------------------------------------------- Fidelity VIP Growth 0.57% 0.25% 0.09% 0.91% 0.00% 0.91% Fidelity VIP Equity-Income 0.48% 0.25% 0.10% 0.83% 0.00% 0.83% Fidelity VIP II Contrafund 0.57% 0.25% 0.10% 0.92% 0.00% 0.92% -------------------------------------------------------------------------------------------------------------------------
THE GCG TRUST ANNUAL EXPENSES (as a percentage of the average daily net assets of a portfolio): ----------------------------------------------------------------------------- MANAGEMENT OTHER TOTAL PORTFOLIO FEE(1) EXPENSES(2) EXPENSES(3) ----------------------------------------------------------------------------- Liquid Asset 0.54% 0.01% 0.55% Core Bond 1.00% 0.01% 1.01% Growth and Income 1.10% 0.01% 1.11% Total Return 0.88% 0.01% 0.89% Value Equity 0.94% 0.01% 0.95% Research 0.88% 0.01% 0.89% ----------------------------------------------------------------------------- (1) Fees decline as the total assets of certain combined portfolios increase. See the prospectus for the GCG Trust for more information. (2) Other expenses generally consist of independent trustees fees and certain expenses associated with investing in international markets. Other expenses are based on actual expenses for the year ended December 31, 2000, except for (i) portfolios that commenced operations in 2000 and 2001, and (ii) newly formed portfolios where the charges have been estimated. (3) Total Expenses are based on actual expenses for the fiscal year ended December 31, 2000. THE INVESCO VARIABLE INVESTMENT FUNDS, INC. EXPENSES (as a percentage of the average daily net assets of a portfolio):
------------------------------------------------------------------------------------------------------------------------- TOTAL TOTAL EXPENSES MANAGEMENT SERVICE OTHER FUND EXPENSE AFTER EXPENSE PORTFOLIO FEE FEE EXPENSES EXPENSES REIMBURSEMENT REIMBURSEMENT ------------------------------------------------------------------------------------------------------------------------- Invesco VIF-Financial Services 0.75% 0.00% 0.34% 1.09% 0.00% 1.09% Invesco VIF-Health Sciences 0.75% 0.00% 0.32% 1.07% 0.00% 1.07% Invesco VIF-Utilities 0.60% 0.00% 0.81% 1.41% 0.19% 1.22% -------------------------------------------------------------------------------------------------------------------------
The Janus Aspen Series Expenses (as a percentage of the average daily net assets of a portfolio):
------------------------------------------------------------------------------------------------------------------------- TOTAL TOTAL EXPENSES MANAGEMENT SERVICE OTHER FUND EXPENSE AFTER EXPENSE PORTFOLIO FEE FEE EXPENSES EXPENSES REIMBURSEMENT REIMBURSEMENT ------------------------------------------------------------------------------------------------------------------------- Janus Aspen Series Worldwide Growth Portfolio 0.65% 0.25% 0.05% 0.95% 0.01% 0.94% -------------------------------------------------------------------------------------------------------------------------
THE PIMCO VARIABLE INSURANCE TRUST ANNUAL EXPENSES (as a percentage of the average daily net assets of a portfolio):
-------------------------------------------------------------------------------------------------------------------------- OTHER EXPENSES TOTAL EXPENSES MANAGEMENT SERVICE OTHER AFTER EXPENSE AFTER EXPENSE PORTFOLIO FEE FEE EXPENSES(1) REIMBURSEMENT(2) REIMBURSEMENT(2) -------------------------------------------------------------------------------------------------------------------------- PIMCO High Yield Bond 0.25% 0.15% 0.35% 0.35% 0.75% --------------------------------------------------------------------------------------------------------------------------
(1) "Other Expenses" reflects a 0.35% administrative fee for the High Yield Bond Portfolio. (2) PIMCO has contractually agreed to reduce total annual portfolio operating expenses to the extent they would exceed, due to the payment of organizational expenses and Trustees' fees, 0.75% of average daily net assets for the PIMCO High Yield Bond. Without such reductions, Total Annual Expenses for the fiscal year ended December 31, 2000 would have been 0.75% for the PIMCO High Yield Bond. Under the Expense Limitation Agreement, PIMCO may recoup these waivers and reimbursements in future periods, not exceeding three years, provided total expenses, including such recoupment, do not exceed the annual expense limit. PILGRIM VARIABLE INSURANCE TRUST ANNUAL EXPENSES (as a percentage of the average daily net assets of the portfolio)(1):
-------------------------------------------------------------------------------------------------------------------------- INVESTMENT TOTAL TOTAL NET MANAGEMENT 12b-1 OTHER PORTFOLIO WAIVER BY PORTFOLIO PORTFOLIO FEE FEE EXPENSES(1) EXPENSES ADVISER(2) EXPENSES -------------------------------------------------------------------------------------------------------------------------- Pilgrim VIT Worldwide Growth 1.00 0.25% 1.72% 2.97% 1.74% 1.23% --------------------------------------------------------------------------------------------------------------------------
(1) The table shows the estimated operating expenses for the Portfolio as a ratio of expenses to average daily net assets. These estimates are based on the Portfolio's actual operating expenses for its most recent complete fiscal year and fee waivers to which the Adviser has agreed for the Portfolio. (2) ING Pilgrim Investments,. LLC, the Portfolio's Investment Manager, has entered into a written expense limitation agreement with the Portfolio, under which it will limit expenses of the Portfolio, excluding interest, taxes, brokerage and extraordinary expenses, subject to possible reimbursement to ING Pilgrim Investments, LLC within three years. The amoun of the Portfolio's expenses waived or reimbursed during the last fiscal year by ING Pilgrim Investments, LLC is shown under the heading "Waiver by Adviser." The expense limits will continue through at least December 31, 2001. PILGRIM VARIABLE INSURANCE TRUST ANNUAL EXPENSES (as a percentage of the average daily net assets of the portfolio)(1):
------------------------------------------------------------------------------------------------------------------------- INVESTMENT TOTAL TOTAL NET MANAGEMENT 12B-1 OTHER PORTFOLIO WAIVER BY PORTFOLIO PORTFOLIO FEE FEE EXPENSES(2) EXPENSES ADVISER(3) EXPENSES ------------------------------------------------------------------------------------------------------------------------- Pilgrim VP Convertible 0.75% 0.25% 0.25% 1.25% 0.15% 1.10% Pilgrim VP Growth and Income 0.75% 0.25% 0.25% 1.25% 0.15% 1.10% Pilgrim VP LargeCap 0.75% 0.25% 0.25% 1.25% 0.15% 1.10% Pilgrim VP MagnaCap 0.75% 0.25% 7.15% 8.15% 7.05% 1.10% Pilgrim VP SmallCap Opportunities 0.75% 0.25% 0.23% 1.23% 0.13% 1.10% Pilgrim VP Growth Opportunities 0.75% 0.25% 1.44% 2.44% 1.34% 1.10% -------------------------------------------------------------------------------------------------------------------------
(1) The table shows the estimated operating expenses for Class S shares of each Portfolio as a ratio of expenses to average daily net assets. These estimates are based on each Portfolio's actual operating expenses for Class R shares for the Trust's most recently completed fiscal year and fee waivers to which ING Pilgrim Investments, LLC, the Portfolios' Adviser, has agreed for each Portfolio. (2) Because Class S shares are new for each Portfolio, the Other Expenses for each Portfolio are based on Class R expenses of the Portfolio. (3) ING Pilgrim Investments, LLC has entered into written expense limitation agreements with each Portfolio which it advises under which it will limit expenses of the Portfolio, excluding interest, taxes, brokerage and extraordinary expenses, subject to possible reimbursement to ING Pilgrim Investments, LLC within three years. The expense limit for each such Portfolio is shown as "Total Net Portfolio Expenses." For each Portfolio, the expense limits will continue through at least December 31, 2001. THE PIONEER VARIABLE CONTRACT TRUST EXPENSES (as a percentage of the average daily net assets of the portfolio):
------------------------------------------------------------------------------------------------------------------------- TOTAL TOTAL EXPENSES MANAGEMENT SERVICE OTHER FUND EXPENSE AFTER EXPENSE PORTFOLIO FEE FEE EXPENSES EXPENSES REIMBURSEMENT REIMBURSEMENT ------------------------------------------------------------------------------------------------------------------------- Pioneer Fund VCT 0.65% 0.25% 0.03% 0.93% 0.00% 0.93% Pioneer Small Company VCT 0.75% 0.25% 0.60% 1.60% 0.10% 1.50% ------------------------------------------------------------------------------------------------------------------------- THE PORTFOLIO PARTNERS, INC. Expenses (as a percentage of the average daily net assets of the portfolio):
------------------------------------------------------------------------------------------------------------------------- TOTAL TOTAL EXPENSES MANAGEMENT SERVICE OTHER FUND EXPENSE AFTER EXPENSE PORTFOLIO FEE FEE EXPENSES EXPENSES REIMBURSEMENT REIMBURSEMENT ------------------------------------------------------------------------------------------------------------------------- PPI MFS Capital Opportunities 0.65% 0.00% 0.25% 0.90% 0.00% 0.90% ------------------------------------------------------------------------------------------------------------------------- THE PRUDENTIAL SERIES FUND ANNUAL EXPENSES (as a percentage of the average daily net assets of the portfolio):
----------------------------------------------------------------------------------------------------------------------- MANAGEMENT OTHER TOTAL PORTFOLIO FEE 12B-1 FEE(1) EXPENSES(2) EXPENSES(2) ----------------------------------------------------------------------------------------------------------------------- Prudential Jennison 0.60% 0.25% 0.19% 1.04% SP Jennison International Growth 0.85% 0.25% 0.54% 1.64% -----------------------------------------------------------------------------------------------------------------------
(1) The 12b-1 fees for the Prudential Jennison Portfolio and the SP Jennison International Growth Portfolio are imposed to enable the portfolios to recover certain sales expenses, including compensation to broker-dealers, the cost of printing prospectuses for delivery to prospective investors and advertising costs for the portfolio. Over a long period of time, the total amount of 12b-1 fees paid may exceed the amount of sales charges imposed by the product. (2) Since the SP Jennison International Growth Portfolio had not commenced operations as of December 31, 1999, expenses as shown are based on estimates of the portfolio's operating expenses for the portfolio's first fiscal year. THE PUTNAM VARIABLE TRUST EXPENSES (as a percentage of the average daily net assets of the portfolio):
------------------------------------------------------------------------------------------------------------------------- TOTAL TOTAL EXPENSES MANAGEMENT SERVICE OTHER FUND EXPENSE AFTER EXPENSE PORTFOLIO FEE FEE EXPENSES EXPENSES REIMBURSEMENT REIMBURSEMENT ------------------------------------------------------------------------------------------------------------------------- Putnam VT Growth and Income 0.25% Putnam VT International Growth and Income 0.25% Putnam VT Voyager Fund II 0.25% -------------------------------------------------------------------------------------------------------------------------
THE PURPOSE OF THE FOREGOING TABLES IS TO HELP YOU UNDERSTAND THE VARIOUS COSTS AND EXPENSES THAT YOU WILL BEAR DIRECTLY AND INDIRECTLY. SEE THE PROSPECTUSES OF THE AETNA GET FUND, AETNA VARIABLE PORTFOLIOS, INC., ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC., BRINSON SERIES TRUST, FIDELITY VARIABLE INSURANCE PRODUCTS PORTFOLIOS, THE GCG TRUST, INVESCO VARIABLE INVESTMENT FUNDS, INC., JANUS ASPEN SERIES, PILGRIM VARIABLE INSURANCE TRUST, PILGRIM VARIABLE PRODUCTS TRUST, PIMCO VARIABLE INSURANCE TRUST, PIONEER VARIABLE CONTRACTS TRUST, PORTFOLIO PARTNERS, INC., THE PRUDENTIAL SERIES FUND AND PUTNAM VARIABLE TRUST GCG TRUST, THE PIMCO VARIABLE INSURANCE TRUST, THE PILGRIM VARIABLE INSURANCE TRUST, THE PRUDENTIAL SERIES FUND, THE PILGRIM VARIABLE PRODUCTS TRUST, AND THE PROFUNDS FOR ADDITIONAL INFORMATION ON MANAGEMENT OR ADVISORY FEES AND IN SOME CASES ON OTHER PORTFOLIO EXPENSES. Premium taxes (which currently range from 0% to 3.5% of premium payments) may apply, but are not reflected in the tables above or in the examples below. EXAMPLES: The following four examples are designed to show you the expenses you would pay on a $1,000 investment, plus a credit of $20, that earns 5% annually. Each example assumes election of Option Package III. The examples reflect the deduction of a mortality and expense risk charge, an asset-based administrative charge, and the annual contract administrative charge as an annual charge of 0.04% of assets (based on an average contract value of $80,000). Examples 1 and 2 also assume you elected the premium credit option with an asset-based charge of 0.60% of assets and the earnings multiplier benefit rider with a charge of 0.25% of the contract value annually. Each example also assumes that any applicable expense reimbursements of underlying portfolio expenses will continue for the periods shown. If Option Package I or II is elected instead of Option Package III used in the examples, the actual expenses will be less than those represented in the examples. Note that surrender charges may apply if you choose to annuitize your Contract within the first 3 contract years. Thus, in the event you annuitize your Contract under circumstances which require a surrender charge, you should refer to Examples 1 and 3 below which assume applicable surrender charges. Example 1: TO BE UPDATED BY AMENDMENT If you surrender your Contract at the end of the applicable time period and elected both the premium credit option and the earnings multiplier benefit rider, you would pay the following expenses for each $1,000 invested: Example 2: TO BE UPDATED BY AMENDMENT If you do not surrender your Contract at the end of the applicable time period and elected both the premium credit option and the earnings multiplier benefit rider, you would pay the following expenses for each $1,000 invested: Example 3: TO BE UPDATED BY AMENDMENT If you surrender your Contract at the end of the applicable time period and did not elect either the premium credit option or the earnings multiplier benefit rider, you would pay the following expenses for each $1,000 invested: Example 4: TO BE UPDATED BY AMENDMENT If you do not surrender your Contract at the end of the applicable time period and did not elect either the premium credit option or the earnings multiplier benefit rider, you would pay the following expenses for each $1,000 invested: THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN SUBJECT TO THE TERMS OF YOUR CONTRACT. Compensation is paid for the sale of the Contracts. For information about this compensation, see "Selling the Contract." -------------------------------------------------------------------------------- PERFORMANCE INFORMATION -------------------------------------------------------------------------------- ACCUMULATION UNIT We use accumulation units to calculate the value of a Contract. Each subaccount of Separate Account B has its own accumulation unit value. The accumulation units are valued each business day that the New York Stock Exchange is open for trading. Their values may increase or decrease from day to day according to a Net Investment Factor, which is primarily based on the investment performance of the applicable investment portfolio. Shares in the investment portfolios are valued at their net asset value. THE NET INVESTMENT FACTOR The Net Investment Factor is an index number which reflects certain charges under the Contract and the investment performance of the subaccount. The Net Investment Factor is calculated for each subaccount as follows: 1) We take the net asset value of the subaccount at the end of each business day. 2) We add to (1) the amount of any dividend or capital gains distribution declared for the subaccount and reinvested in such subaccount. We subtract from that amount a charge for our taxes, if any. 3) We divide (2) by the net asset value of the subaccount at the end of the preceding business day. 4) We then subtract the applicable daily mortality and expense risk charge and the daily asset-based administrative charge from the subaccount. Calculations for the subaccounts are made on a per share basis. CONDENSED FINANCIAL INFORMATION Because sales of the Contract had not commenced as of the date of this prospectus, no condensed financial information is included. FINANCIAL STATEMENTS The audited financial statements of Separate Account B for the year ended December 31, 2000 are included in the Statement of Additional Information. The audited consolidated financial statements of Golden American for the years ended December 31, 2000, 1999 and 1998 are included in this prospectus. PERFORMANCE INFORMATION From time to time, we may advertise or include in reports to contract owners performance information for the subaccounts of Separate Account B, including the average annual total return performance, yields and other nonstandard measures of performance. Such performance data will be computed, or accompanied by performance data computed, in accordance with standards defined by the SEC. Except for the Liquid Asset subaccount, quotations of yield for the subaccounts will be based on all investment income per unit (contract value divided by the accumulation unit) earned during a given 30-day period, less expenses accrued during such period. Information on standard total average annual return performance will include average annual rates of total return for 1, 5 and 10 year periods, or lesser periods depending on how long Separate Account B has been investing in the portfolio. We may show other total returns for periods of less than one year. Total return figures will be based on the actual historic performance of the subaccounts of Separate Account B, assuming an investment at the beginning of the SMARTDESIGN-109651 10 period when the separate account first invested in the portfolio and withdrawal of the investment at the end of the period, adjusted to reflect the deduction of all applicable portfolio and current contract charges. We may also show rates of total return on amounts invested at the beginning of the period with no withdrawal at the end of the period. Total return figures which assume no withdrawals at the end of the period will reflect all recurring charges, but will not reflect the surrender charge. In addition, we may present historic performance data for the investment portfolios since their inception reduced by some or all of the fees and charges under the Contract. Such adjusted historic performance includes data that precedes the inception dates of the subaccounts of Separate Account B. This data is designed to show the performance that would have resulted if the Contract had been in existence before the separate account began investing in the portfolios. Current yield for the Liquid Asset subaccount is based on income received by a hypothetical investment over a given 7-day period, less expenses accrued, and then "annualized" (i.e., assuming that the 7-day yield would be received for 52 weeks). We calculate "effective yield" for the Liquid Asset subaccount in a manner similar to that used to calculate yield, but when annualized, the income earned by the investment is assumed to be reinvested. The "effective yield" will thus be slightly higher than the "yield" because of the compounding effect of earnings. We calculate quotations of yield for the remaining subaccounts on all investment income per accumulation unit earned during a given 30-day period, after subtracting fees and expenses accrued during the period, assuming no surrender. We may compare performance information for a subaccount to: (i) the Standard & Poor's 500 Stock Index, Dow Jones Industrial Average, Donoghue Money Market Institutional Averages, or any other applicable market indices, (ii) other variable annuity separate accounts or other investment products tracked by Lipper Analytical Services (a widely used independent research firm which ranks mutual funds and other investment companies), or any other rating service, and (iii) the Consumer Price Index (measure for inflation) to determine the real rate of return of an investment in the Contract. Our reports and promotional literature may also contain other information including the ranking of any subaccount based on rankings of variable annuity separate accounts or other investment products tracked by Lipper Analytical Services or by similar rating services. Performance information reflects only the performance of a hypothetical contract and should be considered in light of other factors, including the investment objective of the investment portfolio and market conditions. Please keep in mind that past performance is not a guarantee of future results. -------------------------------------------------------------------------------- GOLDEN AMERICAN LIFE INSURANCE COMPANY -------------------------------------------------------------------------------- Golden American Life Insurance Company is a Delaware stock life insurance company, which was originally incorporated in Minnesota on January 2, 1973. Golden American is a wholly owned subsidiary of Equitable of Iowa Companies, Inc. ("Equitable of Iowa"). Equitable of Iowa is a wholly owned subsidiary of ING Groep N.V. ("ING"), a global financial services holding company based in The Netherlands. Golden American is authorized to sell insurance and annuities in all states, except New York, and the District of Columbia. In May 1996, Golden American established a subsidiary, First Golden American Life Insurance Company of New York, which is authorized to sell annuities in New York and Delaware. Golden American's consolidated financial statements appear in this prospectus. Equitable of Iowa is the holding company for Golden American, Directed Services, Inc., the investment manager of the GCG Trust and the distributor of the Contracts, and other interests. ING also owns Pilgrim Investments, LLC, a portfolio manager of the GCG Trust, and the investment manager of the Pilgrim Variable Insurance Trust and the Pilgrim Variable Products Trust. ING also owns Baring International Investment Limited, another portfolio manager of the GCG Trust and ING Investment Management Advisors B.V., a portfolio manager of the Pilgrim Variable Insurance Trust. Our principal office is located at 1475 Dunwoody Drive, West Chester, Pennsylvania 19380. SMARTDESIGN-109651 11 -------------------------------------------------------------------------------- THE TRUSTS -------------------------------------------------------------------------------- TO BE UPDATED BY AMENDMENT. The GCG Trust is a mutual fund whose shares are offered to separate accounts funding variable annuity and variable life insurance policies offered by Golden American and other affiliated insurance companies. The GCG Trust may also sell its shares to separate accounts of insurance companies not affiliated with Golden American. Pending SEC approval, shares of the GCG Trust may also be sold to certain qualified pension and retirement plans. The address of the GCG Trust is 1475 Dunwoody Drive, West Chester, PA 19380. The PIMCO Variable Insurance Trust is also a mutual fund whose shares are available to separate accounts of insurance companies, including Golden American, for both variable annuity contracts and variable life insurance policies and to qualified pension and retirement plans. The address of the PIMCO Variable Insurance Trust is 840 Newport Center Drive, Suite 300, Newport Beach, CA 92660. The Pilgrim Variable Insurance Trust (formerly the ING Variable Insurance Trust) is also a mutual fund whose shares are offered to separate accounts funding variable annuity contracts offered by Golden American and other insurance companies, both affiliated and unaffiliated with Golden American. The address of Pilgrim Variable Insurance Trust is 40 North Central Avenue, Suite 1200, Phoenix, AZ 85004. The Prudential Series Fund, Inc. is also a mutual fund whose shares are available to separate accounts funding variable annuity and variable life insurance polices offered by The Prudential Insurance Company of America, its affiliated insurers and other life insurance companies not affiliated with Prudential, including Golden American. The address of the Prudential Series Fund is 751 Broad Street, Newark, NJ 07102. The Pilgrim Variable Products Trust is also a mutual fund whose shares are offered to separate accounts funding variable annuity contracts offered by Golden American and other insurance companies, both affiliated and unaffiliated with Golden American. The address of Pilgrim Variable Products Trust is 40 North Central Avenue, Suite 1200, Phoenix, AZ 85004. In the event that, due to differences in tax treatment or other considerations, the interests of contract owners of various contracts participating in the Trusts conflict, we, the Boards of Trustees of the GCG Trust, the PIMCO Variable Insurance Trust, the Pilgrim Variable Insurance Trust, the Pilgrim Variable Products Trust, ProFunds, the Board of Directors of the Prudential Series Fund, and the management of Directed Services, Inc., Pacific Investment Management Company, Credit Suisse Asset Management, LLC, The Prudential Insurance Company of America, ING Pilgrim Investments, LLC, ProFunds Advisors LLC and any other insurance companies participating in the Trusts will monitor events to identify and resolve any material conflicts that may arise. YOU WILL FIND MORE DETAILED INFORMATION ABOUT THE AETNA GET FUND, AETNA VARIABLE PORTFOLIOS, INC., ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC., BRINSON SERIES TRUST, FIDELITY VARIABLE INSURANCE PRODUCTS PORTFOLIOS, THE GCG TRUST, INVESCO VARIABLE INVESTMENT FUNDS, INC., JANUS ASPEN SERIES, PILGRIM VARIABLE INSURANCE TRUST, PILGRIM VARIABLE PRODUCTS TRUST, PIMCO VARIABLE INSURANCE TRUST, PIONEER VARIABLE CONTRACTS TRUST, PORTFOLIO PARTNERS, INC., THE PRUDENTIAL SERIES FUND AND PUTNAM VARIABLE TRUST GCG TRUST, THE PIMCO VARIABLE INSURANCE TRUST, THE PILGRIM VARIABLE INSURANCE TRUST, THE PRUDENTIAL SERIES FUND, THE PILGRIM VARIABLE PRODUCTS TRUST, AND PROFUNDS IN THE ACCOMPANYING PROSPECTUS FOR EACH TRUST. YOU SHOULD READ THEM CAREFULLY BEFORE INVESTING. SMARTDESIGN-109651 12 -------------------------------------------------------------------------------- GOLDEN AMERICAN SEPARATE ACCOUNT B -------------------------------------------------------------------------------- Golden American Separate Account B ("Separate Account B") was established as a separate account of the Company on July 14, 1988. It is registered with the SEC as a unit investment trust under the Investment Company Act of 1940 as amended (the "1940 Act"). Separate Account B is a separate investment account used for our variable annuity contracts. We own all the assets in Separate Account B but such assets are kept separate from our other accounts. Separate Account B is divided into subaccounts. Each subaccount invests exclusively in shares of one investment portfolio of the GCG Trust, the PIMCO Variable Insurance Trust, the Pilgrim Variable Insurance Trust, the Prudential Series Fund, the Pilgrim Variable Products Trust or the ProFunds. Each investment portfolio has its own distinct investment objectives and policies. Income, gains and losses, realized or unrealized, of a portfolio are credited to or charged against the corresponding subaccount of Separate Account B without regard to any other income, gains or losses of the Company. Assets equal to the reserves and other contract liabilities with respect to each are not chargeable with liabilities arising out of any other business of the Company. They may, however, be subject to liabilities arising from subaccounts whose assets we attribute to other variable annuity contracts supported by Separate Account B. If the assets in Separate Account B exceed the required reserves and other liabilities, we may transfer the excess to our general account. We are obligated to pay all benefits and make all payments provided under the Contracts. NOTE: We currently offer other variable annuity contracts that invest in Separate Account B but are not discussed in this prospectus. Separate Account B may also invest in other investment portfolios which are not available under your Contract. Under certain circumstances, we may make certain changes to the subaccounts. For more information, see "The Annuity Contract -- Addition, Deletion, or Substitution of Subaccounts and Other Changes." -------------------------------------------------------------------------------- THE INVESTMENT PORTFOLIOS -------------------------------------------------------------------------------- During the accumulation phase, you may allocate your premium payments and contract value to any of the investment portfolios listed in the section below. YOU BEAR THE ENTIRE INVESTMENT RISK FOR AMOUNTS YOU ALLOCATE TO ANY INVESTMENT PORTFOLIO, AND YOU MAY LOSE YOUR PRINCIPAL. INVESTMENT OBJECTIVES The investment objective of each investment portfolio is set forth below. You should understand that there is no guarantee that any portfolio will meet its investment objectives. Meeting objectives depends on various factors, including, in certain cases, how well the portfolio managers anticipate changing economic and market conditions. Separate Account B also has other subaccounts investing in other portfolios which are not available to the Contract described in this prospectus. YOU CAN FIND MORE DETAILED INFORMATION ABOUT THE INVESTMENT PORTFOLIOS IN THE PROSPECTUSES FOR THE THE AETNA GET FUND, AETNA VARIABLE PORTFOLIOS, INC., ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC., BRINSON SERIES TRUST, FIDELITY VARIABLE INSURANCE PRODUCTS PORTFOLIOS, THE GCG TRUST, INVESCO VARIABLE INVESTMENT FUNDS, INC., JANUS ASPEN SERIES, PILGRIM VARIABLE INSURANCE TRUST, PILGRIM VARIABLE PRODUCTS TRUST, PIMCO VARIABLE INSURANCE TRUST, PIONEER VARIABLE CONTRACTS TRUST, PORTFOLIO PARTNERS, INC., THE PRUDENTIAL SERIES FUND AND THE PUTNAM VARIABLE TRUST. YOU SHOULD READ THESE PROSPECTUSES BEFORE INVESTING. TO BE UPDATED BY AMENDMENT. SMARTDESIGN-109651 13
------------------------------------------------------------------------------------------- INVESTMENT PORTFOLIO INVESTMENT OBJECTIVE ------------------------------------------------------------------------------------------- THE GCG TRUST Liquid Asset Seeks high level of current income consistent with the preservation of capital and liquidity. Invests primarily in obligations of the U.S. Government and its agencies and instrumentalities, bank obligations, commercial paper and short-term corporate debt securities. All securities will mature in less than one year. ------------------------------------------------------------ Core Bond Seeks maximum total return, consistent with preservation of capital and prudent investment management. Invests primarily in a diversified portfolio of fixed income instruments of varying maturities. The average portfolio duration of the Portfolio normally varies within a three-to six-year time frame. ------------------------------------------------------------ Total Return Seeks above-average income (compared to a portfolio entirely invested in equity securities) consistent with the prudent employment of capital. Growth of capital and income is a secondary goal. Invests primarily in a combination of equity and fixed income securities. ------------------------------------------------------------ Growth and Income Seeks long-term capital growth and current income. Normally invests up to 75% of its assets in equity securities selected primarily for their growth potential and at least 25% of its assets in securities the portfolio manager believes have income potential. ------------------------------------------------------------ SMARTDESIGN-109651 14 ------------------------------------------------------------------------------------------- INVESTMENT PORTFOLIO INVESTMENT OBJECTIVE ------------------------------------------------------------------------------------------- Value Equity Seeks capital appreciation. Dividend income is a secondary objective. Invests primarily in common stocks of domestic and foreign issuers which meet quantitative standards relating to financial soundness and high intrinsic value relative to price. ------------------------------------------------------------ Research Seeks long-term growth of capital and future income. Invests primarily in common stocks or securities convertible into common stocks of companies believed to have better than average prospects for long-term growth. ------------------------------------------------------------ Growth Seeks capital appreciation. Invests primarily in common stocks of growth companies that have favorable relationships between price/earnings ratios and growth rates in sectors offering the potential for above-average returns. ------------------------------------------------------------ THE PIMCO VARIABLE INSURANCE TRUST PIMCO High Yield Bond Seeks to maximize total return, consistent with preservation of capital and prudent investment management. Invests at least 65% of its assets in a diversified portfolio of junk bonds rated at least B by Moody's Investor Services, Inc. or Standard & Poor's or, if unrated, determined by the portfolio manager to be of comparable quality. SMARTDESIGN-109651 15 ------------------------------------------------------------------------------------------- INVESTMENT PORTFOLIO INVESTMENT OBJECTIVE ------------------------------------------------------------------------------------------- PILGRIM VARIABLE INSURANCE TRUST Pilgrim VIT Worldwide Seeks to provide investors with long-term capital Growth Fund appreciation. Invests at least 65% of its total assets in equity securities of companies that have a well recognized franchise, a global presence and derive most of their revenues from sales of consumer goods. ------------------------------------------------------------ THE PRUDENTIAL SERIES FUND Prudential Jennison Seeks long-term growth of capital. Invests primarily in companies that have shown growth in earnings and sales, high return on equity and assets or other strong financial data and are also attractively valued in the opinion of the manager. Dividend income from investments will be incidental. ------------------------------------------------------------ SP Jennison International Seeks long-term growth of capital. Growth Invests primarily in equity-related securities of issuers located in at least five different foreign countries. ------------------------------------------------------------ PILGRIM VARIABLE PRODUCTS TRUST Pilgrim VP MagnaCap Seeks growth of capital, with dividend income as a secondary consideration. Invests primarily in equity securities of companies meeting investment policy criteria of consistent and substantially increasing dividends, reinvested earnings, strong balance sheet and attractive price. Invests primarily in companies included in the largest 500 U.S. companies. ------------------------------------------------------------ Pilgrim VP SmallCap Seeks long-term capital appreciation. Opportunities Invests primarily in the common stock of smaller, lesser-known U.S. companies that the portfolio manager believes have above average prospects for growth. ------------------------------------------------------------ Pilgrim VP Growth Seeks long-term growth of capital. Opportunities Invests primarily in U.S. companies that the portfolio manager believes have above average prospects for growth. ------------------------------------------------------------
TO BE UPDATED BY AMENDMENT INVESTMENT MANAGEMENT FEES Directed Services, Inc. serves as the overall manager to each portfolio of the GCG Trust. The GCG Trust pays Directed Services a monthly fee for its investment advisory and management services. The monthly fee is based on the average daily net assets of an investment portfolio, and in some cases, the combined total assets of certain grouped portfolios. Directed Services provides or procures, at its own expense, the services necessary for the operation of the portfolio, including retaining portfolio managers to manage the assets of the various portfolios. Directed Services (and not the GCG Trust) pays each portfolio manager a monthly fee for managing the assets of a portfolio, based on the annual rates of the average daily net assets of a portfolio. For a list of the portfolio managers, see the front cover of this prospectus. Directed Services does not bear the expense of brokerage fees and other transactional expenses for securities, taxes (if any) paid by a portfolio, interest on borrowing, fees and expenses of the independent trustees, and extraordinary expenses, such as litigation or indemnification expenses. Pacific Investment Management Company ("PIMCO") serves as investment advisor to each portfolio of the PIMCO Variable Insurance Trust. PIMCO provides the overall business management and administrative services necessary for each portfolio's operation. PIMCO provides or procures, at its own expense, the services and information necessary for the proper conduct of business and ordinary operation of each portfolio. The PIMCO Variable Insurance Trust pays PIMCO a monthly advisory fee and a separate monthly administrative fee per year, each fee based on the average daily net assets of each of the investment portfolios, for managing the assets of the portfolios and for administering the PIMCO Variable Insurance Trust. PIMCO does not bear the expense of brokerage fees and other transactional expenses for securities, taxes (if any) paid by a portfolio, interest on borrowing, fees and expense of the independent trustees, and extraordinary expenses, such as litigation or indemnification expenses. ING Pilgrim Investments, LLC ("ING Pilgrim") serves as the overall manager of Pilgrim Variable Insurance Trust and Pilgrim Variable Products Trust. ING Pilgrim supervises all aspects of the Trusts' operations and provides investment advisory services to the portfolios of the Trusts, including engaging portfolio managers, as well as monitoring and evaluating the management of the assets of each portfolio by its portfolio manager. ING Pilgrim, as well as each portfolio manager it engages, is a wholly owned indirect subsidiary of ING Groep N.V. Except for agreements to reimburse certain expenses of the portfolio, ING Pilgrim does not bear any portfolio expenses. The Prudential Insurance Company of America ("Prudential") and its subsidiary, Prudential Investments Fund Management LLC ("PIFM") serve as the overall investment advisers to the Prudential Series Fund. Prudential and PIFM are responsible for the management of the Prudential Series Fund and provide investment advice and related services. For the Prudential Jennison Portfolio and SP Jennison International Growth Portfolio, Prudential and PIFM engage Jennison Associates LLC to serve as sub- SMARTDESIGN-109651 17 adviser and to provide day-to-day management. Prudential and PIFM pay the sub-adviser out of the fee they receive from the Prudential Series Fund. Each portfolio pays its own administrative costs. Each portfolio deducts portfolio management fees and charges from the amounts you have invested in the portfolios. In addition, five portfolios deduct a service fee, which is used to compensate service providers for administrative and contract holder services provided on behalf of the portfolios, and six portfolios deduct a distribution or 12b-1 fee, which is used to finance any activity that is primarily intended to result in the sale of shares of the applicable portfolio. Based on actual portfolio experience in 2000, together with estimated costs for new portfolios, total estimated portfolio fees and charges for 2001 range from ____% to ____%. See "Fees and Expenses" in this prospectus. We may receive compensation from the investment advisors, administrators and distributors or directly from the portfolios in connection with administrative, distribution or other services and cost savings attributable to our services. It is anticipated that such compensation will be based on assets of the particular portfolios attributable to the Contract. The compensation paid by advisors, administrators or distributors may vary. YOU CAN FIND MORE DETAILED INFORMATION ABOUT EACH PORTFOLIO INCLUDING ITS MANAGEMENT FEES IN THE PROSPECTUS FOR EACH TRUST. YOU SHOULD READ THESE PROSPECTUSES BEFORE INVESTING. GET FUND A GET Fund series may be available during the accumulation phase of the Contract. We make a guarantee, as described below, when you allocate money into a GET Fund series. Each GET Fund series has an offering period of three months which precedes the guarantee period. The GET Fund investment option may not be available under your Contract or in your state. Various series of the GET Fund may be offered from time to time, and additional charges will apply if you elect to invest in one of these series. The Company makes a guarantee when you direct money into a GET Fund series. We guarantee that the value of an accumulation unit of the GET Fund subaccount for that series under the Contract on the maturity date will not be less than its value as determined after the close of business on the last day of the offering period for that GET Fund series. If the value on the maturity date is lower than it was on the last day of the offering period, we will add funds to the GET Fund subaccount for that series to make up the difference. This means that if you remain invested in the GET Fund series until the maturity date, at the maturity date, you will receive no less than the value of your separate account investment directed to the GET Fund series as of the last day of the offering period, less any maintenance fees or any amounts you transfer or withdraw from the GET Fund subaccount for that series. The value of dividends and distributions made by the GET Fund series throughout the guarantee period is taken into account in determining whether, for purposes of the guarantee, the value of your GET Fund investment on the maturity date is no less than its value as of the last day of the offering period. The guarantee does not promise that you will earn the fund's minimum targeted return referred to in the investment objective. If you withdraw or transfer funds from a GET Fund series prior to the maturity date, we will process the transactions at the actual unit value next determined after we receive your request. The guarantee will not apply to these amounts or to amounts deducted as a maintenance fee, if applicable. Before the maturity date, we will send a notice to each contract owner who has allocated amounts to the GET Fund series. This notice will remind you that the maturity date is approaching and that you must choose other investment options for your GET Fund series amounts. If you do not make a choice, on the maturity date we will transfer your GET Fund series amounts to another available series of the GET Fund that is then accepting deposits. If no GET Fund series is then available, we will transfer your GET Fund series amounts to the fund or funds that we designate. Please see the GET Fund prospectus for a complete description of the GET Fund investment option, including charges and expenses. RESTRICTED FUNDS We may designate any investment option as a Restricted Fund and limit the amount you may allocate or transfer to a Restricted Fund. We may establish any such limitation, at our discretion, as a percentage of premium or contract value or as a specified dollar amount and change the limitation at any time. Currently, we have not designated any investment option as a Restricted Fund. We may, with 30 days notice to you, designate any investment portfolio as a Restricted Fund or change the limitations on existing contracts with respect to new premiums added to such investment portfolio and also with respect to new transfers to such investment portfolio. If a change is made with regard to designation as a Restricted Fund or applicable limitations, such change will apply only to transactions effected after such change. We limit your investment in the Restricted Funds on both an aggregate basis for all Restricted Funds and for each individual Restricted Fund. The aggregate limits for investment in all Restricted Funds are expressed as a percentage of contract value, percentage of premium and maximum dollar amount. Currently, your investment in two or more Restricted Funds would be subject to each of the following three limitations: no more than 30 percent of contract value, up to 100 percent of each premium and no more than $999,999,999. We may change these limits, in our discretion, for new contracts, premiums, transfers or withdrawals. We also limit your investment in each individual Restricted Fund. The limits for investment in each Restricted Fund are expressed as a percentage of contract value, percentage of premium and maximum dollar amount. Currently, the limits for investment in an individual Restricted Fund are the same as the aggregate limits set forth above. We may change these limits, in our discretion, for new contracts, premiums, transfers or withdrawals. We monitor the aggregate and individual limits on investments in Restricted Funds for each transaction (e.g. premium payments, reallocations, withdrawals, dollar cost averaging). If the contract value in the Restricted Fund has increased beyond the applicable limit due to market growth, we will not require the reallocation or withdrawal of contract value from the Restricted Fund. However, if an aggregate limit has been exceeded, withdrawals must be taken either from the Restricted Funds or taken pro rata from all investment options in which contract value is allocated, so that the percentage of contract value in the Restricted Funds following the withdrawal is less than or equal to the percentage of contract value in the Restricted Funds prior to the withdrawal. SMARTDESIGN-109651 18 We will not permit a transfer to the Restricted Funds to the extent that it would increase the contract value in the Restricted Fund or in all Restricted Funds to more than the applicable limits set forth above. We will not limit transfers from Restricted Funds. If the result of multiple reallocations is to lower the percentage of total contract value in Restricted Funds, the reallocation will be permitted even if the percentage of contract value in a Restricted Fund is greater than its limit. Please see "Withdrawals" and "Transfers Among Your Investments" in this prospectus for more information on the effect of Restricted Funds. -------------------------------------------------------------------------------- THE FIXED INTEREST ALLOCATION -------------------------------------------------------------------------------- You may allocate premium payments and transfer your contract value to the guaranteed interest periods of our Fixed Account at any time during the accumulation period. Every time you allocate money to the Fixed Account, we set up a Fixed Interest Allocation for the guaranteed interest period you select. We currently offer guaranteed interest periods of 6 months, 1, 3, 5, 7 and 10 years, although we may not offer all these periods in the future. You may select one or more guaranteed interest periods at any one time. We will credit your Fixed Interest Allocation with a guaranteed interest rate for the interest period you select, so long as you do not withdraw money from that Fixed Interest Allocation before the end of the guaranteed interest period. Each guaranteed interest period ends on its maturity date which is the last day of the month in which the interest period is scheduled to expire. If you surrender, withdraw, transfer or annuitize your investment in a Fixed Interest Allocation more than 30 days before the end of the guaranteed interest period, we will apply a Market Value Adjustment to the transaction. A Market Value Adjustment could increase or decrease the amount you surrender, withdraw, transfer or annuitize, depending on current interest rates at the time of the transaction. YOU BEAR THE RISK THAT YOU MAY RECEIVE LESS THAN YOUR PRINCIPAL IF WE APPLY A MARKET VALUE ADJUSTMENT. Assets supporting amounts allocated to the Fixed Account are available to fund the claims of all classes of our customer, contract owners and other creditors. Interests under your Contract relating to the Fixed Account are registered under the Securities Act of 1933, but the Fixed Account is not registered under the 1940 Act. SELECTING A GUARANTEED INTEREST PERIOD You may select one or more Fixed Interest Allocations with specified guaranteed interest periods. A guaranteed interest period is the period that a rate of interest is guaranteed to be credited to your Fixed Interest Allocation. We may at any time decrease or increase the number of guaranteed interest periods offered. In addition, we may offer DCA Fixed Interest Allocations, which are 6-month and 1-year Fixed Interest Allocations available exclusively in connection with our dollar cost averaging program. For more information on DCA Fixed Interest Allocations, see "Transfers Among Your Investments -- Dollar Cost Averaging." Your contract value in the Fixed Account is the sum of your Fixed Interest Allocations and the interest credited as adjusted for any withdrawals (including any Market Value Adjustment applied to such withdrawal), transfers or other charges we may impose. Your Fixed Interest Allocation will be credited with the guaranteed interest rate in effect for the guaranteed interest period you selected when we receive and accept your premium or reallocation of contract value. We will credit interest daily at a rate which yields the quoted guaranteed interest rate. GUARANTEED INTEREST RATES Each Fixed Interest Allocation will have an interest rate that is guaranteed as long as you do not take your money out until its maturity date. We do not have a specific formula for establishing the guaranteed interest rates for the different guaranteed interest periods. We determine guaranteed interest rates at our sole discretion. To find out the current guaranteed interest rate for a guaranteed interest period you are SMARTDESIGN-109651 19 interested in, please contact our Customer Service Center or your registered representative. The determination may be influenced by the interest rates on fixed income investments in which we may invest with the amounts we receive under the Contracts. We will invest these amounts primarily in investment-grade fixed income securities (i.e., rated by Standard & Poor's rating system to be suitable for prudent investors) although we are not obligated to invest according to any particular strategy, except as may be required by applicable law. You will have no direct or indirect interest in these investments. We will also consider other factors in determining the guaranteed interest rates, including regulatory and tax requirements, sales commissions and administrative expenses borne by us, general economic trends and competitive factors. We cannot predict the level of future interest rates but no Fixed Interest Allocation will ever have a guaranteed interest rate of less than 3% per year. We may from time to time at our discretion offer interest rate specials for new premiums that are higher than the current base interest rate. Renewal rates for such rate specials will be based on the base interest rate and not on the special rates initially declared. TRANSFERS FROM A FIXED INTEREST ALLOCATION You may transfer your contract value in a Fixed Interest Allocation to one or more new Fixed Interest Allocations with new guaranteed interest periods, or to any of the subaccounts of Separate Account B. We will transfer amounts from your Fixed Interest Allocations starting with the guaranteed interest period nearest its maturity date, until we have honored your transfer request. The minimum amount that you can transfer to or from any Fixed Interest Allocation is $100. If a transfer request would reduce the contract value remaining in a Fixed Interest Allocation to less than $100, we will treat such transfer request as a request to transfer the entire contract value in such Fixed Interest Allocation. Transfers from a Fixed Interest Allocation may be subject to a Market Value Adjustment. If you have a special Fixed Interest Allocation that was offered exclusively with our dollar cost averaging program, canceling dollar cost averaging will cause a transfer of the entire contract value in such Fixed Interest Allocation to the Liquid Asset subaccount, and such a transfer is subject to a Market Value Adjustment. On the maturity date of a guaranteed interest period, you may transfer amounts from the applicable Fixed Interest Allocation to the subaccounts and/or to new Fixed Interest Allocations with guaranteed interest periods of any length we are offering at that time. You may not, however, transfer amounts to any Fixed Interest Allocation with a guaranteed interest period that extends beyond the annuity start date. At least 30 calendar days before a maturity date of any of your Fixed Interest Allocations, or earlier if required by state law, we will send you a notice of the guaranteed interest periods that are available. You must notify us which subaccounts or new guaranteed interest periods you have selected before the maturity date of your Fixed Interest Allocations. If we do not receive timely instructions from you, we will transfer the contract value in the maturing Fixed Interest Allocation to a new Fixed Interest Allocation with a guaranteed interest period that is the same as the expiring guaranteed interest period. If such guaranteed interest period is not available or would go beyond the annuity start date, we will transfer your contract value in the maturing Fixed Interest Allocation to the next shortest guaranteed interest period which does not go beyond the annuity start date. If no such guaranteed interest period is available, we will transfer the contract value to a subaccount specially designated by the Company for such purpose. Currently we use the Liquid Asset subaccount for such purpose. Please be aware that the benefit we pay under certain optional benefit riders will be adjusted by any transfers you make to and from the Fixed Interest Allocations during specified periods while the rider is in effect. See "Optional Riders." WITHDRAWALS FROM A FIXED INTEREST ALLOCATION During the accumulation phase, you may withdraw a portion of your contract value in any Fixed Interest Allocation. You may make systematic withdrawals of only the interest earned during the prior month, quarter or year, depending on the frequency chosen, from a Fixed Interest Allocation under our systematic withdrawal option. Systematic withdrawals from a Fixed Interest Allocation are not permitted if such Fixed Interest Allocation is currently participating in the dollar cost averaging program. A withdrawal from a SMARTDESIGN-109651 20 Fixed Interest Allocation may be subject to a Market Value Adjustment and, in some cases, a surrender charge. Be aware that withdrawals may have federal income tax consequences, including a 10% penalty tax. If you tell us the Fixed Interest Allocation from which your withdrawal will be made, we will assess the withdrawal against that Fixed Interest Allocation. If you do not, we will assess your withdrawal against the subaccounts in which you are invested unless the withdrawal exceeds the contract value in the subaccounts. If there is no contract value in those subaccounts, we will deduct your withdrawal from your Fixed Interest Allocations starting with the guaranteed interest periods nearest their maturity dates until we have honored your request. Please be aware that the benefit we pay under any of the optional riders will be reduced by any withdrawals you make from the Fixed Interest Allocations during the period while the rider is in effect. See "Optional Riders." MARKET VALUE ADJUSTMENT A Market Value Adjustment may decrease, increase or have no effect on your contract value. We will apply a Market Value Adjustment (i) whenever you withdraw or transfer money from a Fixed Interest Allocation (unless made within 30 days before the maturity date of the applicable guaranteed interest period, or under the systematic withdrawal or dollar cost averaging program) and (ii) if on the annuity start date a guaranteed interest period for any Fixed Interest Allocation does not end on or within 30 days of the annuity start date. We determine the Market Value Adjustment by multiplying the amount you withdraw, transfer or apply to an income plan by the following factor: N/365 ((1+I)/(1+J+.0050)) -1 Where, o "I" is the Index Rate for a Fixed Interest Allocation on the first day of the guaranteed interest period. o "J" is equal to the following: (1) If calculated for a Fixed Interest Allocation of 1 year or more, then "J" is the Index Rate for a new Fixed Interest Allocation with a guaranteed interest period equal to the time remaining in the guaranteed interest period; or (2) If calculated for a Fixed Interest Allocation of 6 months, then "J" is the lesser of the Index Rate for a new Fixed Interest Allocation with (i) a 6 month guaranteed interest period, or (ii) a 1 year guaranteed interest period, at the time of calculation. o "N" is the remaining number of days in the guaranteed interest period at the time of calculation. The Index Rate is the average of the Ask Yields for U.S. Treasury Strips as quoted by a national quoting service for a period equal to the applicable guaranteed interest period. The average currently is based on the period starting from the 22nd day of the calendar month two months prior to the month of the Index Rate determination and ending the 21st day of the calendar month immediately before the month of determination. We currently calculate the Index Rate once each calendar month but have the right to calculate it more frequently. The Index Rate will always be based on a period of at least 28 days. If the Ask Yields are no longer available, we will determine the Index Rate by using a suitable and approved, if required, replacement method. A Market Value Adjustment may be positive, negative or result in no change. In general, if interest rates are rising, you bear the risk that any Market Value Adjustment will likely be negative and reduce your contract value. On the other hand, if interest rates are falling, it is more likely that you will receive a positive Market SMARTDESIGN-109651 21 Value Adjustment that increases your contract value. In the event of a full surrender, transfer or annuitization from a Fixed Interest Allocation, we will add or subtract any Market Value Adjustment from the amount surrendered, transferred or annuitized. In the event of a partial withdrawal, transfer or annuitization, we will add or subtract any Market Value Adjustment from the total amount withdrawn, transferred or annuitized in order to provide the amount requested. If a negative Market Value Adjustment exceeds your contract value in the Fixed Interest Allocation, we will consider your request to be a full surrender, transfer or annuitization of the Fixed Interest Allocation. Several examples which illustrate how the Market Value Adjustment works are included in Appendix A. -------------------------------------------------------------------------------- SPECIAL FUNDS -------------------------------------------------------------------------------- We use the term Special Funds in the discussion of the death benefit options. The Special Funds currently include the Liquid Asset subaccount and the Fixed Interest Allocations. The Company may, at any time, designate new and/or existing subaccounts as a Special Fund with 30 days notice with respect to new premiums added or transfers to such subaccounts. Such subaccounts will include those that, due to their volatility, are excluded from the death benefit guarantees that may otherwise be provided. Allocations to Special Funds will not affect the death benefit that may be available under the earnings multiplier benefit rider. Designation of a subaccount as a Special Fund may vary by benefit. For example, a subaccount may be designated a Special Fund for purposes of calculating one death benefit and not another. -------------------------------------------------------------------------------- THE ANNUITY CONTRACT -------------------------------------------------------------------------------- The Contract described in this prospectus is a deferred combination variable and fixed annuity contract. The Contract provides a means for you to invest in one or more of the available mutual fund portfolios of the Aetna GET Fund, Aetna Variable Portfolios, Inc., Alliance Variable Products Series Fund, Inc., Brinson Series Trust, Fidelity Variable Insurance Products Portfolios, The GCG Trust, Invesco Variable Investment Funds, Inc., Janus Aspen Series, Pilgrim Variable Insurance Trust, Pilgrim Variable Products Trust, PIMCO Variable Insurance Trust, Pioneer Variable Contracts Trust, Portfolio Partners, Inc., The Prudential Series Fund and Putnam Variable Trust through Separate Account B. It also provides a means for you to invest in a Fixed Interest Allocation through the Fixed Account. CONTRACT DATE AND CONTRACT YEAR The date the Contract became effective is the contract date. Each 12-month period following the contract date is a contract year. ANNUITY START DATE The annuity start date is the date you start receiving annuity payments under your Contract. The Contract, like all deferred variable annuity contracts, has two phases: the accumulation phase and the income phase. The accumulation phase is the period between the contract date and the annuity start date. The income phase begins when you start receiving regular annuity payments from your Contract on the annuity start date. CONTRACT OWNER You are the contract owner. You are also the annuitant unless another annuitant is named in the application. You have the rights and options described in the Contract. One or more persons may own the Contract. If there are multiple owners named, the age of the oldest owner will determine the applicable death benefit if such death benefit is available for multiple owners. The death benefit becomes payable when you die. In the case of a sole contract owner who dies before the income phase begins, we will pay the beneficiary the death benefit then due. The sole contract owner's estate will be the beneficiary if no beneficiary has been designated or the beneficiary has predeceased the contract SMARTDESIGN-109651 22 owner. In the case of a joint owner of the Contract dying before the income phase begins, we will designate the surviving contract owner as the beneficiary. This will override any previous beneficiary designation. If the contract owner is a trust and a beneficial owner of the trust has been designated, the beneficial owner will be treated as the contract owner for determining the death benefit. If a beneficial owner is changed or added after the contract date, this will be treated as a change of contract owner for determining the death benefit. JOINT OWNER. For non-qualified Contracts only, joint owners may be named in a written request before the Contract is in effect. Joint owners may independently exercise transfers and other transactions allowed under the Contract. All other rights of ownership must be exercised by both owners. Joint owners own equal shares of any benefits accruing or payments made to them. All rights of a joint owner end at death of that owner if the other joint owner survives. The entire interest of the deceased joint owner in the Contract will pass to the surviving joint owner and the death benefit will be payable. Joint owners may only select Option Package I. Any addition or deletion of a joint owner is treated as a change of owner which may affect the amount of the death benefit. See "Change of Contract Owner or Beneficiary" below. If you have elected Option Package II or III, and you add a joint owner, if the older joint owner is attained age 85 or under, the death benefit from the date of change will be the Option Package I death benefit. If the older joint owner's attained age is 86 or over on the date of the ownership change, the death benefit will be the cash surrender value. The mortality and expense risk charge going forward will reflect the change in death benefit. If you elected the earnings multiplier benefit rider, it will terminate if a joint owner is added. Note that returning a Contract to single owner status will not restore any death benefit or the earnings multiplier benefit. Unless otherwise specified, the term "age" when used for joint owners shall mean the age of the oldest owner. ANNUITANT The annuitant is the person designated by you to be the measuring life in determining annuity payments. The annuitant's age determines when the income phase must begin and the amount of the annuity payments to be paid. You are the annuitant unless you choose to name another person. The annuitant may not be changed after the Contract is in effect. The contract owner will receive the annuity benefits of the Contract if the annuitant is living on the annuity start date. If the annuitant dies before the annuity start date and a contingent annuitant has been named, the contingent annuitant becomes the annuitant (unless the contract owner is not an individual, in which case the death benefit becomes payable). If there is no contingent annuitant when the annuitant dies before the annuity start date, the contract owner will become the annuitant. The contract owner may designate a new annuitant within 60 days of the death of the annuitant. If there is no contingent annuitant when the annuitant dies before the annuity start date and the contract owner is not an individual, we will pay the designated beneficiary the death benefit then due. If a beneficiary has not been designated, or if there is no designated beneficiary living, the contract owner will be the beneficiary. If the annuitant was the sole contract owner and there is no beneficiary designation, the annuitant's estate will be the beneficiary. Regardless of whether a death benefit is payable, if the annuitant dies and any contract owner is not an individual, distribution rules under federal tax law will apply. You should consult your tax advisor for more information if you are not an individual. BENEFICIARY The beneficiary is named by you in a written request. The beneficiary is the person who receives any death benefit proceeds and who becomes the successor contract owner if the contract owner (or the annuitant if the contract owner is other than an individual) dies before the annuity start date. We pay death benefits to the SMARTDESIGN-109651 23 primary beneficiary (unless there are joint owners, in which case death proceeds are payable to the surviving owner(s)). If the beneficiary dies before the annuitant or the contract owner, the death benefit proceeds are paid to the contingent beneficiary, if any. If there is no surviving beneficiary, we pay the death benefit proceeds to the contract owner's estate. One or more persons may be a beneficiary or contingent beneficiary. In the case of more than one beneficiary, we will assume any death benefit proceeds are to be paid in equal shares to the surviving beneficiaries. You have the right to change beneficiaries during the annuitant's lifetime unless you have designated an irrevocable beneficiary. When an irrevocable beneficiary has been designated, you and the irrevocable beneficiary may have to act together to exercise some of the rights and options under the Contract. CHANGE OF CONTRACT OWNER OR BENEFICIARY. During the annuitant's lifetime, you may transfer ownership of a non-qualified Contract. A change in ownership may affect the amount of the death benefit, the guaranteed minimum death benefit and/or the death benefit option applied to the Contract, and the amount of the earnings multiplier benefit, if applicable. The new owner's age, as of the date of the change, will be used as the basis for determining the applicable benefits and charges. The new owner's death will determine when a death benefit is payable. If you have elected Option Package I, the death benefit will continue if the new owner is age 85 or under on the date of the ownership change. For Option Package II or III, if the new owner is age 79 or under on the date that ownership changes, the death benefit will continue. If the new owner is age 80 to 85, under Option Package II or III, the death benefit will end, and the death benefit will become the Option Package I death benefit. For all death benefit options, if the new owner's attained age is 86 or over on the date of the ownership change, the death benefit will be the cash surrender value. The mortality and expense risk charge going forward will reflect the change in death benefit. Please note that once a death benefit has been changed due to a change in owner, it will not be restored by a subsequent change to a younger owner. If you have elected the earnings multiplier benefit rider, and the new owner is under age 76, the rider will continue. The benefit and charge will be adjusted to reflect the attained age of the new owner as the issue age. The Maximum Base and percentages in effect on the original rider date will be used to calculate the benefit. If the new owner is age 76 or over, the rider will terminate. If you have not elected the earnings multiplier benefit rider, the new owner may not add the rider upon the change of ownership. You may also change the beneficiary. All requests for changes must be in writing and submitted to our Customer Service Center in good order. You may also restrict a beneficiary's right to elect an income phase payment option or receive a lump-sum payment. If so, such rights or options will not be available to the beneficiary. The change will be effective as of the day you sign the request. The change will not affect any payment made or action taken by us before recording the change. SMARTDESIGN-109651 24 PURCHASE AND AVAILABILITY OF THE CONTRACT There are three option packages available under the Contract. You select an option package at the time of application. Each option package is unique. The minimum initial payment to purchase the Contract and the maximum age at which you may purchase the Contract depend on the option package that you elect.
--------------------------- ------------------------------ ------------------------------ --------------------------- OPTION PACKAGE I OPTION PACKAGE II OPTION PACKAGE III MINIMUM INITIAL PAYMENT $15,000 (non-qualified) $5,000 (non-qualified) $5,000 (non-qualified) $ 1,500 (qualified) $ 1,500 (qualified) $ 1,500 (qualified) --------------------------- ------------------------------ ------------------------------ --------------------------- MAXIMUM AGE TO PURCHASE 85 80 80 --------------------------- ------------------------------ ------------------------------ ---------------------------
You may make additional premium payments up to age 85. The minimum additional premium payment we will accept is $50 regardless of the option package you select. Under certain circumstances, we may waive the minimum premium payment requirement. We may also change the minimum initial or additional premium requirements for certain group or sponsored arrangements. Any initial or additional premium payment that would cause the contract value of all annuities that you maintain with us to exceed $1,000,000 requires our prior approval. IRAs and other qualified plans already have the tax-deferral feature found in this Contract. For an additional cost, the Contract provides other benefits including death benefits and the ability to receive a lifetime income. See "Fees and Expenses" in this prospectus. CREDITING OF PREMIUM PAYMENTS We will process your initial premium and credits, if applicable, within 2 business days after receipt, if the application and all information necessary for processing the Contract are complete. Subsequent premium payments will be processed within 1 business day if we receive all information necessary. In certain states we also accept initial and additional premium payments by wire order. Wire transmittals must be accompanied by sufficient electronically transmitted data. We may retain your initial premium payment for up to 5 business days while attempting to complete an incomplete application. If the application cannot be completed within this period, we will inform you of the reasons for the delay. We will also return the premium payment immediately unless you direct us to hold the premium payment until the application is completed. We will allocate your initial payment according to the instructions you specified. If a subaccount is not available or requested in error, we will make inquiry about a replacement subaccount. If we are unable to reach you or your representative, we will consider the application incomplete. For initial premium payments, the payment will be credited at the accumulation unit value next determined after we receive your premium payment and the completed application. Once the completed application is received, we will allocate the payment to the subaccounts and/or Fixed Interest Allocation specified by you within 2 business days. We will make inquiry to discover any missing information related to subsequent payments. We will allocate the subsequent payment(s) pro rata according to the current variable subaccount allocation unless you specify otherwise. Any fixed allocation(s) will not be considered in the pro rata calculations. If a subaccount is no longer available or requested in error, we will allocate the subsequent payment(s) proportionally among the other subaccount(s) in your current allocation or your allocation instructions. For any subsequent premium payments, the payment and credit, if applicable, will be credited at the accumulation unit value next determined after receipt of your premium payment and instructions. Once we allocate your premium payment and credit, if applicable, to the subaccounts selected by you, we convert the premium payment into accumulation units. We divide the amount of the premium payment SMARTDESIGN-109651 25 allocated to a particular subaccount by the value of an accumulation unit for the subaccount to determine the number of accumulation units of the subaccount to be held in Separate Account B with respect to your Contract. The net investment results of each subaccount vary with its investment performance. If your premium payment was transmitted by wire order from your broker- dealer, we will follow one of the following two procedures after we receive and accept the wire order and investment instructions. The procedure we follow depends on state availability and the procedures of your broker-dealer. (1) If either your state or broker-dealer do not permit us to issue a Contract without an application, we reserve the right to rescind the Contract if we do not receive and accept a properly completed application or enrollment form within 5 days of the premium payment. If we do not receive the application or form within 5 days of the premium payment, we will refund the contract value plus any charges we deducted, and the Contract will be voided. Some states require that we return the premium paid, in which case we will comply. (2) If your state and broker-dealer allow us to issue a Contract without an application, we will issue and mail the Contract to you or your representative, together with an Application Acknowledgement Statement for your execution. Until our Customer Service Center receives the executed Application Acknowledgement Statement, neither you nor the broker-dealer may execute any financial transactions on your Contract unless they are requested in writing by you. We may require additional information before complying with your request (e.g., signature guarantee). In some states, we may require that an initial premium designated for a subaccount of Separate Account B or the Fixed Account be allocated with the added credit, if applicable, to a subaccount specially designated by the Company (currently, the Liquid Asset subaccount) during the free look period. After the free look period, we will convert your contract value (your initial premium plus any earnings less any expenses) into accumulation units of the subaccounts you previously selected. The accumulation units will be allocated based on the accumulation unit value next computed for each subaccount. Initial premiums designated for Fixed Interest Allocations will be allocated to a Fixed Interest Allocation with the guaranteed interest period you have chosen; however, in the future we may allocate the premiums to the specially designated subaccount during the free look period. ADDITIONAL CREDIT TO PREMIUM At the time of application, you may elect the premium credit option. If you so elect, a credit will be added to your Contract based on your contract value at the beginning of the first contract year ("initial contract value"). The initial contract value generally consists of your initial premium payment. However, in the case of a 1035 exchange, initial contract value includes all payments comprising such initial 1035 exchange. The credit will be allocated among each subaccount and fixed interest allocation you have selected in proportion to your initial contract value in each investment option and will be a minimum of 2% of such contract value. On the third contract anniversary and every three contract years thereafter, on a contract anniversary, a new credit will be added to your Contract which will be a minimum of 2% of your contract value on the applicable contract anniversary. Each new premium credit will be allocated among your variable investment options in proportion to your contract value in the variable investment options. If you elect to discontinue the premium credit option, we will discontinue the option prior to the date the next credit is to be added to your contract value. Once you discontinue the premium credit option, it cannot be subsequently resumed. Currently, you may only elect the premium credit option at the time of application prior to issuance of the Contract. However, we reserve the right to make the premium credit option available to inforce contract owners. We may increase, decrease or discontinue the credit at the end of any period at our discretion. We will give at least 60 days' notice of any planned change to the premium credit option. There is a separate charge for the credit which is an asset-based charge deducted daily from your contract value. Please see "Fees and Charges" for a description of this charge. The credit constitutes earnings (and not premiums paid by you) for federal tax purposes. SMARTDESIGN-109651 26 In any of the following circumstances, we deduct a credit from the amount we pay to you or your beneficiary: (1) If you return your Contract within the free look period, we will deduct the credit from the refund amount; (2) If a death benefit becomes payable, we will deduct any credits added to your Contract since or within 12 months prior to death; and (3) If you surrender your Contract, we will deduct any credit added to your contract value within 3 years prior to surrender. If we deduct a credit from any amount we pay to you, we will deduct the full dollar amount of the credit. You will retain any gains, and you will also bear any losses, that are attributable to the credit we deduct. THERE MAY BE CIRCUMSTANCES UNDER WHICH THE CONTRACT OWNER MAY BE WORSE OFF FROM HAVING RECEIVED A PREMIUM CREDIT. FOR EXAMPLE, THIS COULD OCCUR IF THE CONTRACT OWNER RETURNS THE CONTRACT DURING THE APPLICABLE FREE LOOK PERIOD. UPON A FREE LOOK, WE RECAPTURE THE PREMIUM CREDIT THAT HAD BEEN CREDITED. IF THE STATE LAW PROVIDES THAT CONTRACT VALUE IS RETURNED ON A FREE LOOK, AND IF THE PERFORMANCE OF THE APPLICABLE SUBACCOUNTS HAS BEEN NEGATIVE DURING THAT PERIOD, WE WILL RETURN THE CONTRACT VALUE LESS THE PREMIUM CREDIT. THE NEGATIVE PERFORMANCE ASSOCIATED WITH THE PREMIUM CREDIT WILL REDUCE THE CONTRACT VALUE MORE THAN IF THE PREMIUM CREDIT HAD NOT BEEN APPLIED. ADMINISTRATIVE PROCEDURES We may accept a request for Contract service in writing, by telephone, or other approved electronic means, subject to our administrative procedures, which vary depending on the type of service requested and may include proper completion of certain forms, providing appropriate identifying information, and/or other administrative requirements. We will process your request at the contract value next determined only after you have met all administrative requirements. CONTRACT VALUE We determine your contract value on a daily basis beginning on the contract date. Your contract value is the sum of (a) the contract value in the Fixed Interest Allocations, and (b) the contract value in each subaccount in which you are invested. CONTRACT VALUE IN FIXED INTEREST ALLOCATIONS. The contract value in your Fixed Interest Allocation is the sum of premium payments and credits, if applicable, allocated to the Fixed Interest Allocation under the Contract, plus contract value transferred to the Fixed Interest Allocation, plus credited interest, minus any transfers and withdrawals from the Fixed Interest Allocation (including any Market Value Adjustment applied to such withdrawal), contract fees, and premium taxes. CONTRACT VALUE IN THE SUBACCOUNTS. On the contract date, the contract value in the subaccount in which you are invested is equal to the initial premium paid and added credit, if applicable, that was designated to be allocated to the subaccount. On the contract date, we allocate your contract value to each subaccount and/or a Fixed Interest Allocation specified by you, unless the Contract is issued in a state that requires the return of premium payments during the free look period, in which case, the portion of your initial premium and added credit, if applicable, not allocated to a Fixed Interest Allocation may be allocated to a subaccount specially designated by the Company during the free look period for this purpose (currently, the Liquid Asset subaccount). On each business day after the contract date, we calculate the amount of contract value in each subaccount as follows: 1) We take the contract value in the subaccount at the end of the preceding business day. 2) We multiply (1) by the subaccount's Net Investment Factor since the preceding business day. 3) We add (1) and (2). SMARTDESIGN-109651 27 4) We add to (3) any additional premium payments and credits, if applicable, and then add or subtract any transfers to or from that subaccount. 5) We subtract from (4) any withdrawals and any related charges, and then subtract any contract fees and premium taxes. CASH SURRENDER VALUE The cash surrender value is the amount you receive when you surrender the Contract. The cash surrender value will fluctuate daily based on the investment results of the subaccounts in which you are invested and interest credited to Fixed Interest Allocations and any Market Value Adjustment. We do not guarantee any minimum cash surrender value. On any date during the accumulation phase, we calculate the cash surrender value as follows: we start with your contract value, then we adjust for any Market Value Adjustment, then we deduct any surrender charge, any charge for premium taxes, the annual contract administrative fee, and any other charges incurred but not yet deducted. SURRENDERING TO RECEIVE THE CASH SURRENDER VALUE You may surrender the Contract at any time while the annuitant is living and before the annuity start date. A surrender will be effective on the date your written request and the Contract are received at our Customer Service Center. We will determine and pay the cash surrender value at the price next determined after receipt of all paperwork required in order for us to process your surrender. Once paid, all benefits under the Contract will be terminated. For administrative purposes, we will transfer your money to a specially designated subaccount (currently the Liquid Asset subaccount) prior to processing the surrender. This transfer will have no effect on your cash surrender value. You may receive the cash surrender value in a single sum payment or apply it under one or more annuity options. We will usually pay the cash surrender value within 7 days. Consult your tax advisor regarding the tax consequences associated with surrendering your Contract. A surrender made before you reach age 59 1/2 may result in a 10% tax penalty. See "Federal Tax Considerations" for more details. THE SUBACCOUNTS Each of the subaccounts of Separate Account B offered under this prospectus invests in an investment portfolio with its own distinct investment objectives and policies. Each subaccount of Separate Account B invests in a corresponding portfolio of the GCG Trust, the PIMCO Variable Insurance Trust, the Pilgrim Variable Insurance Trust, the Prudential Series Fund, the Pilgrim Variable Products Trust or the ProFunds. ADDITION, DELETION OR SUBSTITUTION OF SUBACCOUNTS AND OTHER CHANGES We may make additional subaccounts available to you under the Contract. These subaccounts will invest in investment portfolios we find suitable for your Contract. We may amend the Contract to conform to applicable laws or governmental regulations. If we feel that investment in any of the investment portfolios has become inappropriate to the purposes of the Contract, we may, with approval of the SEC (and any other regulatory agency, if required) substitute another portfolio for existing and future investments. If you have elected the dollar cost averaging, systematic withdrawals, or automatic rebalancing programs or if you have other outstanding instructions, and we substitute or otherwise eliminate a portfolio which is subject to those instructions, we will execute your instructions using the substitute or proposed replacement portfolio unless you request otherwise. The substitute or proposed replacement portfolio may have higher fees and charges than any portfolio it replaces. We also reserve the right to: (i) deregister Separate Account B under the 1940 Act; (ii) operate Separate Account B as a management company under the 1940 Act if it is operating as a unit investment trust; (iii) operate Separate Account B as a unit investment trust under the 1940 Act if it is operating as a managed separate account; (iv) restrict or eliminate any voting rights as to Separate Account B; and (v) combine Separate Account B with other accounts. SMARTDESIGN-109651 28 We will, of course, provide you with written notice before any of these changes are effected. THE FIXED ACCOUNT The Fixed Account is a segregated asset account which contains the assets that support a contract owner's Fixed Interest Allocations. See "The Fixed Interest Allocations" for more information. OTHER CONTRACTS We offer other variable annuity contracts that also invest in the same investment portfolios of the Trusts. These contracts have different charges that could affect their performance, and may offer different benefits more suitable to your needs. To obtain more information about these other contracts, contact our Customer Service Center or your registered representative. OTHER IMPORTANT PROVISIONS See "Withdrawals," "Transfers Among Your Investments," "Death Benefit," "Charges and Fees," "The Annuity Options" and "Other Contract Provisions" in this prospectus for information on other important provisions in your Contract. -------------------------------------------------------------------------------- WITHDRAWALS -------------------------------------------------------------------------------- Any time during the accumulation phase and before the death of the contract owner, except under certain qualified contracts, you may withdraw all or part of your money. Keep in mind that if you request a withdrawal for more than 90% of the cash surrender value, we will treat it as a request to surrender the Contract. If any single withdrawal or the sum of withdrawals exceeds the Free Withdrawal Amount, you may incur a surrender charge. There is no surrender charge if, during each contract year, the amount withdrawn is 10% or less of your contract value on the date of the withdrawal, less prior withdrawals during that contract year. Under Option Package III, any unused percentage of the 10% Free Withdrawal Amount from a contract year will carry forward into successive contract years, based on the percentage remaining at the time of the last withdrawal in that contract year. In no event will the Free Withdrawal Amount at any time exceed 30% of contract value. You need to submit to us a written request specifying the Fixed Interest Allocations or subaccounts from which amounts are to be withdrawn, otherwise the withdrawal will be made on a pro rata basis from all of the subaccounts in which you are invested. If there is not enough contract value in the subaccounts, we will deduct the balance of the withdrawal from your Fixed Interest Allocations starting with the guaranteed interest periods nearest their maturity dates until we have honored your request. We will determine the contract value as of the close of business on the day we receive your withdrawal request at our Customer Service Center. The contract value may be more or less than the premium payments made. We will apply a Market Value Adjustment to any withdrawal from your Fixed Interest Allocation taken more than 30 days before its maturity date. Definitive guidance on the proper federal tax treatment of the Market Value Adjustment has not been issued. You may want to discuss the potential tax consequences of a Market Value Adjustment with your tax adviser. If the aggregate percentage cap on allocations to the Restricted Funds has been exceeded, any subsequent withdrawals must be taken so that the percentage of contract value in the Restricted Funds following the withdrawal would not be greater than the percentage of contract value in the Restricted Funds prior to the withdrawal. If a requested withdrawal would cause the percentage cap to be exceeded, the amount of the withdrawal in excess of the cap would be taken pro rata from all variable subaccounts. For administrative purposes, we will transfer your money to a specially designated subaccount (currently, the Liquid Asset subaccount) prior to processing the withdrawal. This transfer will not affect the withdrawal amount you receive. SMARTDESIGN-109651 29 We offer the following three withdrawal options: REGULAR WITHDRAWALS After the free look period, you may make regular withdrawals. Each withdrawal must be a minimum of $100. We will apply a Market Value Adjustment to any regular withdrawal from a Fixed Interest Allocation that is taken more than 30 days before its maturity date. SYSTEMATIC WITHDRAWALS You may choose to receive automatic systematic withdrawal payments (1) from the contract value in the subaccounts in which you are invested, or (2) from the interest earned in your Fixed Interest Allocations. Systematic withdrawals may be taken monthly, quarterly or annually. If you have contract value allocated to one or more Restricted Funds, and you elect to receive systematic withdrawals from the subaccounts in which you are invested, the systematic withdrawals must be taken pro rata from all subaccounts in which contract value is invested. If you do not have contract value allocated to a Restricted Fund and choose systematic withdrawals on a non pro rata basis, we will monitor the withdrawals annually. If you subsequently allocate contract value to one or more Restricted Funds, we will require you to take your systematic withdrawals on a pro rata basis from all subaccounts in which contract value is invested. You decide when you would like systematic payments to start as long as it starts at least 28 days after your contract date. You also select the date on which the systematic withdrawals will be made, but this date cannot be later than the 28th day of the month. If you have elected to receive systematic withdrawals but have not chosen a date, we will make the withdrawals on the same calendar day of each month as your contract date. If your contract date is after the 28th day of the month, your systematic withdrawal will be made on the 28th day of each month. Each systematic withdrawal amount must be a minimum of $100. The amount of your systematic withdrawal can either be (1) a fixed dollar amount, or (2) an amount based on a percentage of the contract value. Both forms of systematic withdrawals are subject to the following maximum, which is calculated on each withdrawal date: FREQUENCY MAXIMUM PERCENTAGE Monthly 0.833% Quarterly 2.50% Annually 10.00% If your systematic withdrawal is a fixed dollar amount and the amount to be withdrawn would exceed the applicable maximum percentage of your premium payments not previously withdrawn on any withdrawal date, we will automatically reduce the amount withdrawn so that it equals such percentage. Thus, your fixed dollar systematic withdrawals will never exceed the maximum percentage. If you want fixed dollar systematic withdrawals to exceed the maximum percentage and are willing to incur associated surrender charges, consider the Fixed Dollar Systematic Withdrawal Feature which you may add to your regular systematic withdrawal program. If your systematic withdrawal is based on a percentage of contract value and the amount to be withdrawn based on that percentage would be less than $100, we will automatically increase the amount to $100 as long as it does not exceed the maximum percentage. If the systematic withdrawal would exceed the maximum percentage, we will send the amount, and then automatically cancel your systematic withdrawal option. Systematic withdrawals from Fixed Interest Allocations are limited to interest earnings during the prior month, quarter, or year, depending on the frequency you chose. Systematic withdrawals are not subject to a Market Value Adjustment, unless you have added the Fixed Dollar Systematic Withdrawal Feature discussed below and the payments exceed interest earnings. Systematic withdrawals from Fixed Interest Allocations under the Fixed Dollar Systematic Withdrawal Feature are available only in connection with Section 72(q) or 72(t) distributions. A Fixed Interest Allocation may not participate in both the systematic withdrawal option and the dollar cost averaging program at the same time. SMARTDESIGN-109651 30 You may change the amount or percentage of your systematic withdrawal once each contract year or cancel this option at any time by sending satisfactory notice to our Customer Service Center at least 7 days before the next scheduled withdrawal date. If you submit a subsequent premium payment after you have applied for systematic withdrawals, we will not adjust future withdrawals under the systematic withdrawal program unless you specifically request that we do so. The systematic withdrawal option may commence in a contract year where a regular withdrawal has been taken but you may not change the amount or percentage of your withdrawals in any contract year during which you have previously taken a regular withdrawal. You may not elect the systematic withdrawal option if you are taking IRA withdrawals. FIXED DOLLAR SYSTEMATIC WITHDRAWAL FEATURE. You may add the Fixed Dollar Systematic Withdrawal Feature to your regular fixed dollar systematic withdrawal program. This feature allows you to receive a systematic withdrawal in a fixed dollar amount regardless of any surrender charges or Market Value Adjustments. Systematic withdrawals from Fixed Interest Allocations under the Fixed Dollar Systematic Withdrawal Feature are available only in connection with Section 72(q) or 72(t) distributions. You choose the amount of the fixed systematic withdrawals, which may total up to an annual maximum of 10% of your contract value as determined on the day we receive your election of this feature. The maximum limit will not be recalculated when you make additional premium payments, unless you instruct us to do so. We will assess a surrender charge on the withdrawal date if the withdrawal exceeds the maximum limit as calculated on the withdrawal date. We will assess a Market Value Adjustment on the withdrawal date if the withdrawal from a Fixed Interest Allocation exceeds your interest earnings on the withdrawal date. We will apply the surrender charge and any Market Value Adjustment directly to your contract value (rather than to the systematic withdrawal) so that the amount of each systematic withdrawal remains fixed. Flat dollar systematic withdrawals which are intended to satisfy the requirements of Section 72(q) or 72(t) of the Tax Code may exceed the maximum. Such withdrawals are subject to surrender charges and Market Value Adjustment when they exceed the applicable maximum percentage. IRA WITHDRAWALS If you have a non-Roth IRA Contract and will be at least age 70 1/2 during the current calendar year, you may elect to have distributions made to you to satisfy requirements imposed by federal tax law. IRA withdrawals provide payout of amounts required to be distributed by the Internal Revenue Service ("IRS") rules governing mandatory distributions under qualified plans. We will send you a notice before your distributions commence. You may elect to take IRA withdrawals at that time, or at a later date. You may not elect IRA withdrawals and participate in systematic withdrawals at the same time. If you do not elect to take IRA withdrawals, and distributions are required by federal tax law, distributions adequate to satisfy the requirements imposed by federal tax law may be made. Thus, if you are participating in systematic withdrawals, distributions under that option must be adequate to satisfy the mandatory distribution rules imposed by federal tax law. You may choose to receive IRA withdrawals on a monthly, quarterly or annual basis. Under this option, you may elect payments to start as early as 28 days after the contract date. You select the day of the month when the withdrawals will be made, but it cannot be later than the 28th day of the month. If no date is selected, we will make the withdrawals on the same calendar day of the month as the contract date. You may request that we calculate for you the amount that is required to be withdrawn from your Contract each year based on the information you give us and various choices you make. For information regarding the calculation and choices you have to make, see the SAI. Or, we will accept your written instructions regarding the calculated amount required to be withdrawn from your Contract each year. The minimum dollar amount you can withdraw is $100. When we determine the required IRA withdrawal amount for a taxable year based on the frequency you select, if that amount is less than $100, we will pay $100. At any time where the IRA withdrawal amount is greater than the contract value, we will cancel the Contract and send you the amount of the cash surrender value. SMARTDESIGN-109651 31 You may change the payment frequency of your IRA withdrawals once each contract year or cancel this option at any time by sending satisfactory notice to our Customer Service Center at least 7 days before the next scheduled withdrawal date. An IRA withdrawal in excess of the amount allowed under systematic withdrawals will be subject to a Market Value Adjustment. CONSULT YOUR TAX ADVISER REGARDING THE TAX CONSEQUENCES ASSOCIATED WITH TAKING WITHDRAWALS. You are responsible for determining that withdrawals comply with applicable law. A withdrawal made before the taxpayer reaches age 59 1/2 may result in a 10% penalty tax. See "Federal Tax Considerations" for more details. -------------------------------------------------------------------------------- TRANSFERS AMONG YOUR INVESTMENTS -------------------------------------------------------------------------------- You may transfer your contract value among the subaccounts in which you are invested and your Fixed Interest Allocations at the end of the free look period until the annuity start date. We currently do not charge you for transfers made during a contract year, but reserve the right to charge $25 for each transfer after the twelfth transfer in a contract year. We also reserve the right to limit the number of transfers you may make and may otherwise modify or terminate transfer privileges if required by our business judgment or in accordance with applicable law. We will apply a Market Value Adjustment to transfers from a Fixed Interest Allocation taken more than 30 days before its maturity date, unless the transfer is made under the dollar cost averaging program. Keep in mind that transfers between Special Funds and other investment portfolios may negatively impact your death benefit or rider benefits. If you allocate contract value to an investment option that has been designated as a Restricted Fund, your ability to transfer contract value to the Restricted Fund may be limited. A transfer to the Restricted Funds will not be permitted to the extent that it would increase the contract value in the Restricted Fund to more than the applicable limits following the transfer. We do not limit transfers from Restricted Funds. If the result of multiple reallocations is to lower the percentage of total contract value in the Restricted Fund, the reallocation will be permitted even if the percentage of contract value in the Restricted Fund is greater than the limit. Transfers will be based on values at the end of the business day in which the transfer request is received at our Customer Service Center. The minimum amount that you may transfer is $100 or, if less, your entire contract value held in a subaccount or a Fixed Interest Allocation. To make a transfer, you must notify our Customer Service Center and all other administrative requirements must be met. Any transfer request received after 4:00 p.m. eastern time or the close of the New York Stock Exchange will be effected on the next business day. Separate Account B and the Company will not be liable for following instructions communicated by telephone or other approved electronic means that we reasonably believe to be genuine. We may require personal identifying information to process a request for transfer made over the telephone, over the internet or other approved electronic means. TRANSFERS BY THIRD PARTIES As a convenience to you, we currently allow you to give third parties the right to effect transfers on your behalf. However, when the third party makes transfers for many contract owners, the result can be simultaneous transfers involving large amounts of contract values. Such transfers can disrupt the orderly management of the investment portfolios available to the Contract, can result in higher costs to contract owners, and may not be compatible with the long term goals of contract owners. We require third parties making multiple, simultaneous or large volume transfers to execute a third party service agreement with us prior to executing such transfers. Therefore, we may at any time exercise our business judgment and limit or discontinue accepting transfers made by a third party. We will notify any third party whose transfers are SMARTDESIGN-109651 32 limited or discontinued by telephone, facsimile or email according to our records, followed by a letter. These limits may be based on, among other criteria, the amount of the aggregate trade or the available investment options for which third parties may make trades on behalf of multiple contract owners. We may establish additional procedures or change existing procedures at any time in the exercise of our business judgment. DOLLAR COST AVERAGING You may elect to participate in our dollar cost averaging program if you have at least $1,200 of contract value in the (i) Liquid Asset subaccount, or (ii) a Fixed Interest Allocation with either a 6-month or a 1-year guaranteed interest period. These subaccounts or Fixed Interest Allocations serve as the source accounts from which we will, on a monthly basis, automatically transfer a set dollar amount of money to other subaccounts selected by you. We also may offer DCA Fixed Interest Allocations, which are 6-month and 1-year Fixed Interest Allocations available exclusively for use with the dollar cost averaging program. The DCA Fixed Interest Allocations require a minimum premium payment of $1,200 directed into a DCA Fixed Interest Allocation. The dollar cost averaging program is designed to lessen the impact of market fluctuation on your investment. Since we transfer the same dollar amount to other subaccounts each month, more units of a subaccount are purchased if the value of its unit is low and fewer units are purchased if the value of its unit is high. Therefore, a lower than average value per unit may be achieved over the long term. However, we cannot guarantee this. When you elect the dollar cost averaging program, you are continuously investing in securities regardless of fluctuating price levels. You should consider your tolerance for investing through periods of fluctuating price levels. Unless you have a DCA Fixed Interest Allocation, you elect the dollar amount you want transferred under this program. Each monthly transfer must be at least $100. If your source account is the Limited Maturity Bond subaccount, the Liquid Asset subaccount or a 1-year Fixed Interest Allocation, the maximum amount that can be transferred each month is your contract value in such source account divided by 12. If your source account is a 6-month Fixed Interest Allocation, the maximum amount that can be transferred each month is your contract value in such source account divided by 6. You may change the transfer amount once each contract year. If you have a DCA Fixed Interest Allocation, there is no minimum or maximum transfer amount; we will transfer all your money allocated to that source account into the subaccount(s) in equal payments over the selected 6-month or 1-year period. The last payment will include earnings accrued over the course of the selected period. If you make an additional premium payment into a Fixed Interest Allocation subject to dollar cost averaging, the amount of your transfers under the dollar cost averaging program remains the same, unless you instruct us to increase the transfer amount. Transfers from a Fixed Interest Allocation or a DCA Fixed Interest Allocation under the dollar cost averaging program are not subject to a Market Value Adjustment. However, if you terminate the dollar cost averaging program for a DCA Fixed Interest Allocation and there is money remaining in the DCA Fixed Interest Allocation, we will transfer the remaining money to the Liquid Asset subaccount. Such transfer will trigger a Market Value Adjustment if the transfer is made more than 30 days before the maturity date of the DCA Fixed Interest Allocation. If you do not specify the subaccounts to which the dollar amount of the source account is to be transferred, we will transfer the money to the subaccounts in which you are invested on a proportional basis. The transfer date is the same day each month as your contract date. If, on any transfer date, your contract value in a source account is equal to or less than the amount you have elected to have transferred, the entire amount will be transferred and the program will end. You may terminate the dollar cost averaging program at any time by sending satisfactory notice to our Customer Service Center at least 7 days before the next transfer date. A Fixed Interest Allocation or DCA Fixed Interest Allocation may not participate in the dollar cost averaging program and in systematic withdrawals at the same time. You are permitted to transfer contract value to a Restricted Fund, subject to the limitations described above in this section and in "The Investment Portfolios." Compliance with the individual and aggregate Restricted SMARTDESIGN-109651 33 Fund limits will be reviewed when the dollar cost averaging program is established. Transfers under the dollar cost averaging program must be within those limits. We will not review again your dollar cost averaging election for compliance with the individual and aggregate limits for investment in the Restricted Funds except in the case of the transactions described below. o Amount added to source account: If you add amounts to the source account which would increase the amount to be transferred under the dollar cost averaging program, we will review the amounts to be transferred to ensure that the individual and aggregate limits are not being exceeded. If such limits would be exceeded, we will require that the dollar cost averaging transfer amounts be changed to ensure that the transfers are within the limits based on the then current allocation of contract value to the Restricted Fund(s) and the then current value of the amount designated to be transferred to that Restricted Fund(s). o Additional premium paid: Up to the individual Restricted Fund percentage limit may be allocated to a Restricted Fund. If more than the individual limit has been requested to be allocated to a Restricted Fund, we will look at the aggregate limit, subtract the current allocation to Restricted Funds, and subtract the current value of amounts to be transferred under the dollar cost averaging program to Restricted Funds. The excess, if any, is the maximum that may be allocated pro rata to Restricted Funds. o Reallocation request is made while the dollar cost averaging program is active: If the reallocation would increase the amount allocated to Restricted Funds, the maximum that may be so allocated is the individual Restricted Fund percentage limit, less the current allocation to Restricted Funds and less the current value of any remaining amounts to be transferred under the dollar cost averaging program to the Restricted Funds. We may in the future offer additional subaccounts or withdraw any subaccount or Fixed Interest Allocation to or from the dollar cost averaging program, stop offering DCA Fixed Interest Allocations or otherwise modify, suspend or terminate this program. Of course, such change will not affect any dollar cost averaging programs in operation at the time. AUTOMATIC REBALANCING If you have at least $10,000 of contract value invested in the subaccounts of Separate Account B, you may elect to have your investments in the subaccounts automatically rebalanced. You are permitted to reallocate between Restricted and non-Restricted Funds, subject to the limitations described above in this section and in "The Investment Portfolios." If the reallocation would increase the amount allocated to the Restricted Funds, the maximum that may be so allocated is the individual Restricted Fund percentage limit, less the current allocation to all Restricted Funds. We will transfer funds under your Contract on a quarterly, semi-annual, or annual calendar basis among the subaccounts to maintain the investment blend of your selected subaccounts. The minimum size of any allocation must be in full percentage points. Rebalancing does not affect any amounts that you have allocated to the Fixed Account. The program may be used in conjunction with the systematic withdrawal option only if withdrawals are taken pro rata. Automatic rebalancing is not available if you participate in dollar cost averaging. Automatic rebalancing will not take place during the free look period. To participate in automatic rebalancing, send satisfactory notice to our Customer Service Center. We will begin the program on the last business day of the period in which we receive the notice. You may cancel the program at any time. The program will automatically terminate if you choose to reallocate your contract value among the subaccounts or if you make an additional premium payment or partial withdrawal on other than a pro rata basis. Additional premium payments and partial withdrawals effected on a pro rata basis will not cause the automatic rebalancing program to terminate. SMARTDESIGN-109651 34 -------------------------------------------------------------------------------- DEATH BENEFIT CHOICES -------------------------------------------------------------------------------- DEATH BENEFIT DURING THE ACCUMULATION PHASE During the accumulation phase, a death benefit, and earnings multiplier benefit, if elected, is payable when either the annuitant (when a contract owner is not an individual), the contract owner or the first of joint owners (under Option Package I only) dies. Assuming you are the contract owner, your beneficiary will receive a death benefit unless the beneficiary is your surviving spouse and elects to continue the Contract. The death benefit paid depends on the option package you have chosen. The death benefit value is calculated as of the claim date (the close of the business day on which we receive written notice and due proof of death, as well as any required paperwork, at our Customer Service Center). If your beneficiary elects to delay receipt of the death benefit until a date after the time of death, the amount of the benefit payable in the future may be affected. The proceeds may be received in a single sum or applied to any of the annuity options. If we do not receive a request to apply the death benefit proceeds to an annuity option, we will make a single sum distribution. We will generally pay death benefit proceeds within 7 days after our Customer Service Center has received sufficient information to make the payment. For information on required distributions under federal income tax laws, you should see "Required Distributions upon Contract Owner's Death." You may select one of the option packages described below which wil determine the death benefit payable. Option Package I is available only if the contract owner and the annuitant are not more than 85 years old at the time of purchase. Option Packages II and III are available only if the contract owner and annuitant are not more than 80 years old at the time of purchase. Option Packages II and III are not available where the Contract is held by joint owners. A change in ownership of the Contract may affect the amount of the death benefit payable. The death benefit may be subject to certain mandatory distribution rules required by federal tax law. The death benefit depends upon the option package in effect on the date the contract owner dies.
------------------------- ------------------------------ ------------------------------ ----------------------------- OPTION PACKAGE I OPTION PACKAGE II OPTION PACKAGE III ------------------------- ------------------------------ ------------------------------ ----------------------------- ------------------------- ------------------------------ ------------------------------ ----------------------------- DEATH BENEFIT ON DEATH The greater of: The greatest of: The greatest of: OF THE OWNER: 1) The Standard Death 1) The Standard Death 1) The Standard Death Benefit (as described Benefit; or Benefit; or below); or 2) The contract value*; or 2) The contract value*; or 2) The contract value*. 3) The Annual Ratchet 3) The Annual Ratchet death benefit (as death benefit (as described below). described below); or 4) The 5% Roll-Up death benefit (as described below). ------------------------- ------------------------------ ------------------------------ -----------------------------
* less credits added since or within 12 months prior to death For purposes of calculating the death benefits, certain investment portfolios, and the Fixed Account are designated as "Special Funds." In addition to the Fixed Account, the investment portfolio designated currently as a Special Fund is the Liquid Asset Portfolio. We may, with 30 days notice to you, designate any investment portfolio as a Special Fund on existing contracts with respect to new premiums added to such investment portfolio and also with respect to new transfers to such investment portfolio. Selecting a Special Fund may limit or reduce the enhanced death benefit. SMARTDESIGN-109651 35 For the period during which a portion of the contract value is allocated to a Special Fund, we may at our discretion reduce the mortality and expense risk charge attributable to that portion of the contract value. The reduced mortality and expense risk charge will be applicable only during that period. We use the Base Death Benefit to help determine the minimum death benefit payable under each of the death benefits described below. You do not elect the Base Death Benefit. The Base Death Benefit is equal to the greater of: 1) the contract value minus any credits added since or within 12 months prior to death; and 2) the cash surrender value. The STANDARD DEATH BENEFIT equals the GREATER of the Base Death Benefit and the SUM of 1) and 2), LESS 3): 1) the contract value allocated to Special Funds; and 2) the Standard Minimum Guaranteed Death Benefit for amounts allocated to Non-Special Funds; 3) any initial credit added since or within 12 months prior to death. The Standard Minimum Guaranteed Death Benefit equals: 1) the initial premium payment plus the initial credit, if applicable, allocated to Special and Non-Special Funds, respectively; 2) increased by premium payments, and adjusted for transfers, allocated to Special and Non-Special Funds, respectively, after issue; and 3) reduced by a pro rata adjustment for any withdrawal or transfer taken from the Special and Non-Special Funds, respectively. In the event of transfers from Special to Non-Special funds, the increase in the Minimum Guaranteed Death Benefit of the Non-Special Fund will equal the lesser of the reduction in the Minimum Guaranteed Death Benefit in the Special Fund and the contract value transferred. In the event of transfers from Non-Special to Special Funds, the increase in the Minimum Guaranteed Death Benefit of the Special Fund will equal the reduction in the Minimum Guaranteed Death Benefit in the Non-Special Fund. The 5% ROLL-UP DEATH BENEFIT, equals the GREATER of: 1) the Standard Death Benefit; and 2) the sum of the contract value allocated to Special Funds and the 5% Roll-Up Minimum Guaranteed Death Benefit for Non-Special Funds less any initial credit added since or within 12 months prior to death. The 5% Roll-Up Minimum Guaranteed Death Benefit for Special and Non-Special Funds equals the lesser of: 1) premiums, plus the initial credit, if applicable, adjusted for withdrawals and transfers, accumulated at 5% until the earlier of attainment of age 90 or reaching the cap (equal to 3 times all premium payments and the initial credit, if applicable, as reduced by adjustments for withdrawals) and thereafter at 0%, and 2) the cap. A pro rata adjustment to the 5% Roll-Up Minimum Guaranteed Death Benefit is made for any withdrawals. The amount of the pro rata adjustment for withdrawals from Non-Special Funds will equal (a) times (b) divided by (c): where (a) is the 5% Roll-Up Minimum Guaranteed Death Benefit for Non-Special Funds prior to the withdrawal; (b) is the contract value of the withdrawal; and (c) is the contract value allocated to Non-Special Funds before the withdrawal. The amount of the pro rata adjustment for withdrawals from Special SMARTDESIGN-109651 36 Funds will equal (a) times (b) divided by (c): where (a) is the 5% Roll-Up Minimum Guaranteed Death Benefit for Special Funds prior to the withdrawal; (b) is the contract value of the withdrawal; and (c) is the contract value allocated to Special Funds before the withdrawal. Please see Appendix C for examples of the pro rata withdrawal adjustment for withdrawals other than special withdrawals. Transfers from Special to Non-Special Funds will reduce the 5% Roll-Up Minimum Guaranteed Death Benefit and the cap for Special Funds on a pro rata basis. The resulting increase in the 5% Roll-Up Minimum Guaranteed Death Benefit in the Non-Special Funds will equal the lesser of the reduction in the 5% Roll-Up Minimum Guaranteed Death Benefit in the Special Funds and the contract value transferred. The increase in the cap for Non-Special Funds will equal the reduction in the cap for Special Funds. Transfers from Non-Special to Special Funds will reduce the 5% Roll-Up Minimum Guaranteed Death Benefit and the cap in the Non-Special Funds on a pro rata basis. The resulting increase in the 5% Roll-Up Minimum Guaranteed Death Benefit and the cap for the Special Funds will equal the reduction in the 5% Roll-Up Minimum Guaranteed Death Benefit and the cap for the Non-Special Funds, respectively. The ANNUAL RATCHET ENHANCED DEATH BENEFIT equals the GREATER of: 1) the Standard Death Benefit; and 2) the sum of the contract value allocated to Special Funds and the Annual Ratchet Minimum Guaranteed Death Benefit allocated to Non-Special Funds, less any initial credit added since or within 12 months prior to death. The Annual Ratchet Minimum Guaranteed Death Benefit equals: 1) the initial premium plus the initial credit, if applicable, allocated at issue to Special and Non-Special Funds, respectively; 2) increased dollar for dollar by any premium, allocated after issue to Special and Non-Special Funds, respectively; 3) for Non-Special Funds, adjusted on each anniversary that occurs on or prior to attainment of age 90 to the greater of the Annual Ratchet Minimum Guaranteed Death Benefit for Non-Special Funds from the prior anniversary (adjusted for new premiums, partial withdrawals allocated to Non-Special Funds, and transfers between Special and Non-Special Funds) and the current contract value allocated to Non-Special Funds; 4) for Special Funds, adjusted on each anniversary that occurs on or prior to attainment of age 90 to the greater of the Annual Ratchet Minimum Guaranteed Death Benefit for Special Funds from the prior anniversary (adjusted for new premiums, partial withdrawals allocated to Special Funds, and transfers between Special and Non-Special Funds) and the current contract value allocated to Special Funds. Withdrawals reduce the Annual Ratchet Minimum Guaranteed Death Benefit on a pro rata basis, based on the amount withdrawn from the Special and Non-Special Funds, respectively. The amount of the pro rata adjustment for withdrawals from Non-Special Funds will equal (a) times (b) divided by (c): where (a) is the Annual Ratchet Minimum Guaranteed Death Benefit for Non-Special Funds prior to the withdrawal; (b) is the contract value of the withdrawal; and (c) is the contract value allocated to Non-Special Funds before withdrawal. The amount of the pro rata adjustment for Special Funds will equal (a) times (b) divided by (c): where (a) is the Annual Ratchet Minimum Guaranteed Death Benefit for Special Funds prior to the withdrawal; (b) is the contract value of the withdrawal; and (c) is the contract value allocated to Special Funds before the withdrawal. Transfers from Special to Non-Special Funds will reduce the Annual Ratchet Minimum Guaranteed Death Benefit for Special Funds on a pro rata basis. The resulting increase in the Annual Ratchet Minimum Guaranteed Death Benefit in the Non-Special Funds will equal the lesser of the reduction in the Annual Ratchet Minimum Guaranteed Death Benefit in the Special Funds and the contract value transferred. SMARTDESIGN-109651 37 Transfers from Non-Special to Special Funds will reduce the Annual Ratchet Minimum Guaranteed Death Benefit for Non-Special Funds on a pro rata basis. The resulting increase in the Annual Ratchet Minimum Guaranteed Death Benefit for the Special Funds will equal the reduction in the Annual Ratchet Minimum Guaranteed Death Benefit for the Non-Special Funds. Note: In all cases described above, the amount of the death benefit could be reduced by premium taxes owed and withdrawals not previously deducted. The enhanced death benefits may not be available in all states. TRANSFERS BETWEEN OPTION PACKAGES. You may transfer from one option package to another on each contract anniversary. A written request for such transfer must be received at our Customer Service Center within 60 days prior to the contract anniversary. No transfers between option packages are permitted: 1) after you attain age 80; or 2) if the Contract is owned by joint owners. The following minimum contract values must be met:
--------------------------------- ---------------------------------------- -------------------------------------- TRANSFERS TO TRANSFERS TO OPTION PACKAGE I OPTION PACKAGES II OR III --------------------------------- ---------------------------------------- -------------------------------------- MINIMUM CONTRACT VALUE Non-Qualified Qualified Non-Qualified Qualified $15,000 $1,500 $5,000 $1,500 --------------------------------- -------------------- ------------------- ------------------ -------------------
f you transfer from Option I to Option II or Option III, the minimum guaranteed death benefit for Special and Non-Special Funds will equal the contract value for Special and Non-Special Funds, respectively, on the effective date of the transfer. On a transfer to Option Package III, the then current roll-up cap will be allocated to Special and Non-Special Funds in the same percentage as the allocation of contract value on the effective date of the transfer. A change of owner may cause an option package transfer on other than a contract anniversary. EARNINGS MULTIPLIER BENEFIT RIDER. The earnings multiplier benefit rider is an optional rider that provides a separate death benefit in addition to the death benefit provided under the death benefit options described above. The rider is subject to state availability and is available only for issues ages 75 or under. It may be added at issue of the Contract or on the next contract anniversary following introduction of the rider in a state, if later. The rider provides a benefit equal to a percentage of the gain under the Contract, up to a gain equal to 300% of premiums adjusted for withdrawals ("Maximum Base"). Currently, where the rider is added at issue, the earnings multiplier benefit is equal to 40% (25% for issue ages 70 and above) of the lesser of: 1) the Maximum Base; and 2) the contract value on the claim date (the close of the business day on which we receive written notice and due proof of death, as well as any required paperwork) minus premiums adjusted for withdrawals. If the rider is added to a Contract after issue, the earnings multiplier benefit is equal to 40% (25% for issue ages 70 and above) of the lesser of: 1) 300% of the contract value on the rider effective date, plus subsequent premiums adjusted for subsequent withdrawals; and 2) the contract value on the claim date minus the sum of the contract value on the rider effective date and subsequent premiums adjusted for subsequent withdrawals. The adjustment to the benefit for withdrawals is pro rata, meaning that the benefit will be reduced by the proportion that the withdrawal bears to the contract value at the time of the withdrawal. There is an extra charge for this feature and once selected, it may not be revoked. The earnings enhancement benefit rider does not provide a benefit if there is no gain under the Contract. As such, the Company would continue to assess a charge for the rider, even though no benefit would be payable at death under the rider if there are no gains under the Contract. Please see page __ for a description of the earnings multiplier benefit rider charge. SMARTDESIGN-109651 38 DEATH BENEFIT DURING THE INCOME PHASE If any contract owner or the annuitant dies after the annuity start date, we will pay the beneficiary any certain benefit remaining under the annuity in effect at the time. CONTINUATION AFTER DEATH -- SPOUSE If at the contract owner's death, the surviving spouse of the deceased contract owner is the beneficiary and such surviving spouse elects to continue the contract as his or her own the following will apply: If the guaranteed death benefit as of the date we receive due proof of death, minus the contract value also on that date, is greater than zero, we will add such difference to the contract value. Such addition will be allocated to the variable subaccounts in proportion to the contract value in the subaccounts, unless we are directed otherwise. If there is no contract value in any subaccount, the addition will be allocated to the Liquid Asset subaccount, or its successor. Such addition to contract value will not affect the guaranteed death benefit. The death benefits under each of the available options will continue based on the surviving spouse's age on the date that ownership changes. If death occurs within 12 months of a credit being applied, the credit will not be forfeited upon spousal continuation, and the premium credit option charge will continue. The credit will be subject to recapture upon surrender of the Contract, unless forfeited previously. If death occurs more than 12 months after the last credit was applied, any premium credit option charge will be waived for the remainder of the current three year period. The credit will not be subject to recapture upon surrender of the Contract. At subsequent surrender, any surrender charge applicable to premiums paid prior to the date we receive due proof of death of the contract owner will be waived. Any premiums paid later will be subject to any applicable surrender charge. Any addition to contract value, as described above, is available only to the spouse of the owner as of the date of death of the owner if such spouse under the provisions of the contract elects to continue the contract as his or her own. If you elected the earnings multiplier benefit rider, and the benefit would otherwise be payable, the benefit will be added to the contract value and allocated among the variable subaccounts in proportion to the contract value in the subaccounts, unless we are directed otherwise. If there is no contract value in any subaccount, the benefit will be allocated to the Liquid Asset subaccount, or its successor. The earnings multiplier benefit rider will continue, if the surviving spouse is eligible based on his or her attained age. If the surviving spouse is older than the maximum rider issue age, the rider will terminate. The Maximum Base and the percentage will be reset based on the adjusted contract value. The calculation of the benefit going forward will be: 1) based on the attained age of the spouse at the time of the ownership change using current values as of that date; 2) computed as if the rider was added to the Contract after issue and after the increase; and 3) based on the Maximum Base and percentages in effect on the original rider date. However, we may in the future permit the surviving spouse to elect to use the then current Maximum Base and percentages in the benefit calculation. The crediting of the earnings multiplier benefit will not be included in either the minimum guaranteed death benefit or guaranteed living benefit calculations. CONTINUATION AFTER DEATH -- NON SPOUSE If the beneficiary or surviving joint owner is not the spouse of the owner, the contract may continue in force subject to the required distribution rules of the Internal Revenue Code (the "Code"). See next section, "Required Distributions upon Contract Owner's Death." If you elected the earnings multiplier benefit rider, and the benefit would otherwise be payable, the benefit will be added to the contract value and allocated among the variable subaccounts in proportion to the contract value in the subaccounts, unless we are directed otherwise. If there is no contract value in any subaccount, the benefit will be allocated to the Liquid Asset subaccount, or its successor. The earnings multiplier benefit rider then terminates, whether or not a benefit was payable under the terms of the rider. SMARTDESIGN-109651 39 REQUIRED DISTRIBUTIONS UPON CONTRACT OWNER'S DEATH We will not allow any payment of benefits provided under a non-qualified Contract which do not satisfy the requirements of Section 72(s) of the Code. If any owner of a non-qualified contract dies before the annuity start date, the death benefit payable to the beneficiary will be distributed as follows: (a) the death benefit must be completely distributed within 5 years of the contract owner's date of death; or (b) the beneficiary may elect, within the 1-year period after the contract owner's date of death, to receive the death benefit in the form of an annuity from us, provided that (i) such annuity is distributed in substantially equal installments over the life of such beneficiary or over a period not extending beyond the life expectancy of such beneficiary; and (ii) such distributions begin not later than 1 year after the contract owner's date of death. Notwithstanding (a) and (b) above, if the sole contract owner's beneficiary is the deceased owner's surviving spouse, then such spouse may elect to continue the Contract under the same terms as before the contract owner's death. Upon receipt of such election from the spouse at our Customer Service Center: (1) all rights of the spouse as contract owner's beneficiary under the Contract in effect prior to such election will cease; (2) the spouse will become the owner of the Contract and will also be treated as the contingent annuitant, if none has been named and only if the deceased owner was the annuitant; and (3) all rights and privileges granted by the Contract or allowed by Golden American will belong to the spouse as contract owner of the Contract. This election will be deemed to have been made by the spouse if such spouse makes a premium payment to the Contract or fails to make a timely election as described in this paragraph. If the owner's beneficiary is a nonspouse, the distribution provisions described in subparagraphs (a) and (b) above, will apply even if the annuitant and/or contingent annuitant are alive at the time of the contract owner's death. If we do not receive an election from a nonspouse owner's beneficiary within the 1-year period after the contract owner's date of death, then we will pay the death benefit to the owner's beneficiary in a cash payment within five years from date of death. We will determine the death benefit as of the date we receive proof of death. We will make payment of the proceeds on or before the end of the 5-year period starting on the owner's date of death. Such cash payment will be in full settlement of all our liability under the Contract. If a contract owner dies after the annuity start date, we will continue to distribute any benefit payable at least as rapidly as under the annuity option then in effect. All of the contract owner's rights granted under the Contract or allowed by us will pass to the contract owner's beneficiary. If a Contract has joint owners we will consider the date of death of the first joint owner as the death of the contract owner and the surviving joint owner will become the contract owner of the Contract. If any contract owner is not an individual, the death of an annuitant shall be treated as the death of the owner. -------------------------------------------------------------------------------- CHARGES AND FEES -------------------------------------------------------------------------------- We deduct the Contract charges described below to cover our cost and expenses, services provided and risks assumed under the Contracts. We incur certain costs and expenses for distributing and administering the Contracts, including compensation and expenses paid in connection with sales of the Contracts, for paying the benefits payable under the Contracts and for bearing various risks associated with the Contracts. The amount of a Contract charge will not always correspond to the actual costs associated with the charge. For example, the surrender charge collected may not fully cover all of the distribution expenses incurred by us with the service or benefits provided. In the event there are any profits from fees and charges deducted under the Contract, we may use such profits to finance the distribution of Contracts. CHARGE DEDUCTION SUBACCOUNT You may elect to have all charges against your contract value deducted directly from a single subaccount designated by the Company. Currently we use the Liquid Asset subaccount for this purpose. If you do not elect this option, or if the amount of the charges is greater than the amount in the designated subaccount, SMARTDESIGN-109651 40 the charges will be deducted as discussed below. You may cancel this option at any time by sending satisfactory notice to our Customer Service Center. CHARGES DEDUCTED FROM THE CONTRACT VALUE We deduct the following charges from your contract value: SURRENDER CHARGE. We will deduct a contingent deferred sales charge (a "surrender charge") if you surrender your Contract or if you take a withdrawal in excess of the Free Withdrawal Amount during the 3-year period from the date we receive and accept a premium payment. The surrender charge is based on a percentage of each premium payment withdrawn. This charge is intended to cover sales expenses that we have incurred. We may in the future reduce or waive the surrender charge in certain situations and will never charge more than the maximum surrender charges. The percentage of premium payments deducted at the time of surrender or excess withdrawal depends on the number of complete years that have elapsed since that premium payment was made. We determine the surrender charge as a percentage of each premium payment withdrawn as follows: COMPLETE YEARS ELAPSED 0 1 2 3+ SINCE PREMIUM PAYMENT SURRENDER CHARGE 6% 5% 4% 0% NURSING HOME WAIVER. You may withdraw all or a portion of your contract value without a surrender charge if: 1) more than one contract year has elapsed since the contract date; 2) the withdrawal is requested within three years of your admission to a licensed nursing care facility; and 3) you have spent at least 45 consecutive days in such nursing care facility. We will not waive the early withdrawal charge if you were in a nursing care facility for at least one day during the two week period immediately preceding or following the contract date. It will also not apply to Contracts where prohibited by state law. FREE WITHDRAWAL AMOUNT. The Free Withdrawal Amount is 10% of contract value, based on the contract value on the date of the withdrawal. Under Option Package III, any unused percentage of the 10% Free Withdrawal Amount from a contract year will carry forward into successive contract years, based on the percentage remaining at the time of the last withdrawal in that contract year. In no event will the free withdrawal amount at any time exceed 30% of contract value. SURRENDER CHARGE FOR EXCESS WITHDRAWALS. We will deduct a surrender charge for excess withdrawals. We consider a withdrawal to be an "excess withdrawal" when the amount you withdraw in any contract year exceeds the Free Withdrawal Amount. Where you are receiving systematic withdrawals, any combination of regular withdrawals taken and any systematic withdrawals expected to be received in a contract year will be included in determining the amount of the excess withdrawal. Such a withdrawal will be considered a partial surrender of the Contract and we will impose a surrender charge and any associated premium tax. We will deduct such charges from the contract value in proportion to the contract value in each subaccount or Fixed Interest Allocation from which the excess withdrawal was taken. In instances where the excess withdrawal equals the entire contract value in such subaccounts or Fixed Interest Allocations, we will deduct charges proportionately from all other subaccounts and Fixed Interest Allocations in which you are invested. ANY WITHDRAWAL FROM A FIXED INTEREST ALLOCATION MORE THAN 30 DAYS BEFORE ITS MATURITY DATE WILL TRIGGER A MARKET VALUE ADJUSTMENT. For the purpose of calculating the surrender charge for an excess withdrawal: a) we treat premiums as being withdrawn on a first-in, first-out basis; and b) amounts withdrawn which are not considered an excess SMARTDESIGN-109651 41 withdrawal are not considered a withdrawal of any premium payments. We have included an example of how this works in Appendix B. Earnings for purposes of calculating the surrender charge for excess withdrawals may not be the same as earnings under federal tax law. PREMIUM TAXES. We may make a charge for state and local premium taxes depending on your state of residence. The tax can range from 0% to 3.5% of the premium payment. We have the right to change this amount to conform with changes in the law or if you change your state of residence. We deduct the premium tax from your contract value on the annuity start date. However, some jurisdictions impose a premium tax at the time that initial and additional premiums are paid, regardless of when the annuity payments begin. In those states we may defer collection of the premium taxes from your contract value and deduct it when you surrender the Contract, when you take an excess withdrawal, or on the annuity start date. ADMINISTRATIVE CHARGE. We deduct an annual administrative charge on each Contract anniversary, or if you surrender your Contract prior to a Contract anniversary, at the time we determine the cash surrender value payable to you. The amount deducted is $30 per Contract unless waived under conditions established by Golden American. We deduct the charge proportionately from all subaccounts in which you are invested. If there is no contract value in those subaccounts, we will deduct the charge from your Fixed Interest Allocations starting with the guaranteed interest periods nearest their maturity dates until the charge has been paid. TRANSFER CHARGE. We currently do not deduct any charges for transfers made during a contract year. We have the right, however, to assess up to $25 for each transfer after the twelfth transfer in a contract year. If such a charge is assessed, we would deduct the charge from the subaccounts and the Fixed Interest Allocations from which each such transfer is made in proportion to the amount being transferred from each such subaccount and Fixed Interest Allocation unless you have chosen to have all charges deducted from a single subaccount. The charge will not apply to any transfers due to the election of dollar cost averaging, automatic rebalancing and transfers we make to and from any subaccount specially designated by the Company for such purpose. CHARGES DEDUCTED FROM THE SUBACCOUNTS MORTALITY AND EXPENSE RISK CHARGE. The mortality and expense risk charge is deducted each business day. The amount of the mortality and expense risk charge depends on the option package you have elected. The charge is deducted on each business day based on the assets you have in each subaccount. The charge for each option package, on an annual basis, is equal to 1.45% for Option Package I, 1.65% for Option Package II, and 1.80% for Option Package III, of the assets you have in each subaccount. The charge is deducted each business day at the daily rate of .004002% (Option Package I),.004558% (Option Package II), or .004976% (Option Package III), respectively. In the event there are any profits from the mortality and expense risk charge, we may use such profits to finance the distribution of contracts. ASSET-BASED ADMINISTRATIVE CHARGE. The amount of the asset-based administrative charge, on an annual basis, is equal to 0.15% of the assets you have in each subaccount. The charge is deducted on each business day at the rate of .000411%from your assets in each subaccount. This charge is deducted daily from your assets in each subaccount. PREMIUM CREDIT OPTION CHARGE. The amount of the asset-based premium credit option charge, on an annual basis, is equal to 0.60% of the assets you have in each subaccount. The charge is deducted on each business day at the rate of .0001649% for 3 years following each credit from your assets in each subaccount. This charge will also be deducted from amounts allocated to the Fixed Account, resulting in a 0.60% reduction in the interest which would otherwise have been credited to your contract during the three contract years following each credit if you had not elected the premium credit option EARNINGS MULTIPLIER BENEFIT CHARGE. So long as the rider is in effect, we will deduct a separate quarterly charge for the rider through a pro rata reduction of the contract value of the subaccounts in which you are invested. The quarterly charge for the earnings multiplier benefit rider is 0.0625% (0.25% annually). SMARTDESIGN-109651 42 If there is insufficient contract value in the subaccounts, we will deduct the charges from your Fixed Interest Allocations, starting with the allocation nearest its maturity date. If that is insufficient, we will deduct the charge from the allocation next nearest its maturity date, and so on. We deduct the rider charge on each quarterly contract anniversary in arrears, meaning the first charge will be deducted on the first quarterly anniversary following the rider date. If you surrender or annuitize your Contract, we will deduct a pro rata portion of the charge for the current quarter based on the current contract value immediately prior to the surrender or annuitization. For a description of the rider, see "The Earnings Multiplier Benefit Rider." TRUST EXPENSES Each portfolio deducts portfolio management fees and charges from the amounts you have invested in the portfolios. In addition, five portfolios deduct a service fee, which is used to compensate service providers for administrative and contract holder services provided on behalf of the portfolios, and six portfolios deduct a distribution or 12b-1 fee, which is used to finance any activity that is primarily intended to result in the sale of shares of the applicable portfolio. Based on actual portfolio experience in 2000, together with estimated costs for new portfolios, total estimated portfolio fees and charges for 2001 range from 0.55% to 1.86%. See "Fees and Expenses" in this prospectus. Additionally, we may receive compensation from the investment advisers, administrators or distributors of the portfolios in connection with administrative, distribution, or other services and cost savings experienced by the investment advisers, administrators or distributors. It is anticipated that such compensation will be based on assets of the particular portfolios attributable to the Contract. Some advisers, administrators or distributors may pay us more than others. -------------------------------------------------------------------------------- THE ANNUITY OPTIONS -------------------------------------------------------------------------------- During the income phase, you stop contributing dollars to your contract and start receiving payments from your accumulated contract value. INITIATING PAYMENTS. At least 30 days prior to the date you want to start receiving payments, you must notify us in writing of all of the following: o Payment start date; o Income phase payment option (see the income phase payment options table in this section); o Payment frequency (i.e., monthly, quarterly, semi-annually or annually); o Choice of fixed, variable or a combination of both fixed and variable payments; and o Selection of an assumed net investment rate (only if variable payments are elected). Your Contract will continue in the accumulation phase until you properly start income phase payments. Once an income phase payment option is selected, it may not be changed. WHAT AFFECTS PAYMENT AMOUNTS? Some of the factors that may affect the amount of your income phase payments include: your age; gender; contract value; the income phase payment option selected; the number of guaranteed payments (if any) selected; whether you select fixed, variable or a combination of both fixed and variable payments; and, for variable payments, the assumed net investment rate selected. FIXED PAYMENTS. Amounts funding fixed income phase payments will be held in the Company's general account. The amount of fixed payments does not vary with investment performance over time. VARIABLE PAYMENTS. Amounts funding your variable income phase payments will be held in the subaccount(s) you select. Not all subaccounts available during the accumulation phase may be available during the income phase. Payment amounts will vary depending upon the performance of the subaccounts you select. For variable income phase payments, you must select an assumed net investment rate. SMARTDESIGN-109651 43 ASSUMED NET INVESTMENT RATE. If you select variable income phase payments, you must also select an assumed net investment rate of either 5% or 3 1/2%. If you select a 5% rate, your first income phase payment will be higher, but subsequent payments will increase only if the investment performance of the subaccounts you selected is greater than 5% annually, after deduction of fees. Payment amounts will decline if the investment performance is less than 5%, after deduction of fees. If you select a 3 1/2% rate, your first income phase payment will be lower and subsequent payments will increase more rapidly or decline more slowly depending upon changes to the net investment rate of the subaccounts you selected. For more information about selecting an assumed net investment rate, call us for a copy of the SAI. MINIMUM PAYMENT AMOUNTS. The income phase payment option you select must result in: o A first income phase payment of at least $50; and o Total yearly income phase payments of at least $250. If your contract value is too low to meet these minimum payment amounts, you will receive one lump-sum payment. Unless prohibited by law, we reserve the right to increase the minimum payment amount based on increases reflected in the Consumer Price Index-Urban (CPI-U) since July 1, 1993. RESTRICTIONS ON START DATES AND THE DURATION OF PAYMENTS. Income phase payments may not begin during the first contract year, or, unless we consent, later than the later of: a) The first day of the month following the annuitant's 85th birthday; or b) The tenth anniversary of the last premium payment made to your Contract. Income phase payments will not begin until you have selected an income phase payment option. Failure to select an income phase payment option by the later of the annuitant's 85th birthday or the tenth anniversary of your last premium payment may have adverse tax consequences. You should consult with a qualified tax adviser if you are considering delaying the selection of an income phase payment option before the later of these dates. For qualified contracts only, income phase payments may not extend beyond: a) The life of the annuitant; b) The joint lives of the annuitant and beneficiary; c) A guaranteed period greater than the annuitant's life expectancy; or d) A guaranteed period greater than the joint life expectancies of the annuitant and beneficiary. When income phase payments start, the age of the annuitant plus the number of years for which payments are guaranteed may not exceed 95. If income phase payments start when the annuitant is at an advanced age, such as over 85, it is possible that the Contract will not be considered an annuity for federal tax purposes. See "FEDERAL TAX CONSIDERATIONS" for further discussion of rules relating to income phase payments. CHARGES DEDUCTED. o If variable income phase payments are selected, we make a daily deduction for mortality and expense risks from amounts held in the subaccounts. Therefore, if you choose variable income phase payments and a nonlifetime income phase payment option, we still make this deduction from the subaccounts you select, even though we no longer assume any mortality risks. The SMARTDESIGN-109651 44 amount of this charge, on an annual basis, is equal to 1.25% of amounts invested in the subaccounts. See "Fees and Expenses." o There is currently no administrative expense charge during the income phase. We reserve the right, however, to charge an administrative expense charge of up to 0.25% during the income phase. If imposed, we deduct this charge daily from the subaccounts corresponding to the funds you select. If we are imposing this charge when you enter the income phase, the charge will apply to you during the entire income phase. See "Fees and Expenses." o If you elected the premium credit option and variable income phase payments, we may also deduct the premium credit option charge. We deduct this charge daily during the first seven contract years from the subaccounts corresponding to the funds you select. If fixed income phase payments are selected, this charge may be reflected in the income phase payment rates. See "Fees and Expenses." DEATH BENEFIT DURING THE INCOME PHASE. The death benefits that may be available to a beneficiary are outlined in the income phase payment options table below. If a lump-sum payment is due as a death benefit, we will make payment within seven calendar days after we receive proof of death acceptable to us and the request for the payment in good order at our Customer Service Center. If continuing income phase payments are elected, the beneficiary may not elect to receive a lump sum at a future date unless the income phase payment option specifically allows a withdrawal right. We will calculate the value of any death benefit at the next valuation after we receive proof of death and a request for payment. Such value will be reduced by any payments made after the date of death. BENEFICIARY RIGHTS. A beneficiary's right to elect an income phase payment option or receive a lump-sum payment may have been restricted by the contract owner. If so, such rights or options will not be available to the beneficiary. PARTIAL ENTRY INTO THE INCOME PHASE. You may elect an income phase payment option for a portion of your contract value, while leaving the remaining portion invested in the accumulation phase. Whether the Tax Code considers such payments taxable as income phase payments or as withdrawals is currently unclear; therefore, you should consult with a qualified tax adviser before electing this option. The same or different income phase payment option may be selected for the portion left invested in the accumulation phase. TAXATION. To avoid certain tax penalties, you or your beneficiary must meet the distribution rules imposed by the Tax Code. Additionally, when selecting an income phase payment option, the Tax Code requires that your expected payments will not exceed certain durations. See "FEDERAL TAX CONSIDERATIONS" [NEEDS TO BE INSERTED IN TAX SECTION?] PAYMENT OPTIONS. The following table lists the income phase payment options and accompanying death benefits available during the income phase. We may offer additional income phase payment options under the Contract from time to time. Once income phase payments begin, the income phase payment option selected may not be changed. TERMS TO UNDERSTAND: ANNUITANT(S): The person(s) on whose life expectancy(ies) the income phase payments are based. BENEFICIARY(IES): The person(s) or entity(ies) entitled to receive a death benefit under the contract. SMARTDESIGN-109651 45
----------------------------------------------------------------------------------------------------------------------- LIFETIME INCOME PHASE PAYMENT OPTIONS ------------------------ ---------------------------------------------------------------------------------------------- Life Income LENGTH OF PAYMENTS: For as long as the annuitant lives. It is possible that only one payment will be made if the annuitant dies prior to the second payment's due date. DEATH BENEFIT--NONE: All payments end upon the annuitant's death. ------------------------ ---------------------------------------------------------------------------------------------- Life Income-- LENGTH OF PAYMENTS: For as long as the annuitant lives, with payments guaranteed for your Guaranteed choice of 5 to 30 years or as otherwise specified in the contract. Payments DEATH BENEFIT--PAYMENT TO THE BENEFICIARY: If the annuitant dies before we have made all the guaranteed payments, we will continue to pay the beneficiary the remaining payments, unless the beneficiary elects to receive a lump-sum payment equal to the present value of the remaining guaranteed payments. ------------------------ ---------------------------------------------------------------------------------------------- Life Income-- LENGTH OF PAYMENTS: For as long as either annuitant lives. It is possible that only one Two Lives payment will be made if both annuitants die before the second payment's due date. CONTINUING PAYMENTS: When you select this option you choose for: a) 100%, 66 2/3% or 50% of the payment to continue to the surviving annuitant after the first death; or b) 100% of the payment to continue to the annuitant on the second annuitant's death, and 50% of the payment to continue to the second annuitant on the annuitant's death. DEATH BENEFIT--NONE: All payments end upon the death of both annuitants. ------------------------ ---------------------------------------------------------------------------------------------- Life Income-- LENGTH OF PAYMENTS: For as long as either annuitant lives, with payments guaranteed from 5 Two Lives-- to 30 years or as otherwise specified in the contract. Guaranteed Payments CONTINUING PAYMENTS: 100% of the payment to continue to the surviving annuitant after the first death. DEATH BENEFIT--PAYMENT TO THE BENEFICIARY: If both annuitants die before we have made all the guaranteed payments, we will continue to pay the beneficiary the remaining payments, unless the beneficiary elects to receive a lump-sum payment equal to the present value of the remaining guaranteed payments. ------------------------ ---------------------------------------------------------------------------------------------- Life Income--Cash LENGTH OF PAYMENTS: For as long as the annuitant lives. Refund Option (limited availability--fixed DEATH BENEFIT--PAYMENT TO THE BENEFICIARY: Following the annuitant's death, payments only) we will pay a lump sum payment equal to the amount originally applied to the income phase payment option (less any applicable premium tax) and less the total amount of income payments paid. ------------------------ ---------------------------------------------------------------------------------------------- Life Income--Two LENGTH OF PAYMENTS: For as long as either annuitant lives. Lives--Cash Refund Option (limited CONTINUING PAYMENTS: 100% of the payment to continue after the first death. availability--fixed payments only) DEATH BENEFIT--PAYMENT TO THE BENEFICIARY: When both annuitants die we will pay a lump-sum payment equal to the amount applied to the income phase payment option (less any applicable premium tax) and less the total amount of income payments paid. ------------------------ ----------------------------------------------------------------------------------------------
SMARTDESIGN-109651 46
----------------------------------------------------------------------------------------------------------------------- NONLIFETIME INCOME PHASE PAYMENT OPTION ----------------------------------------------------------------------------------------------------------------------- Nonlifetime-- LENGTH OF PAYMENTS: You may select payments for 5 to 30 years (15 to 30 years if you elected Guaranteed the premium bonus option). In certain cases a lump-sum payment may be requested at any time Payments (see below). DEATH BENEFIT--PAYMENT TO THE BENEFICIARY: If the annuitant dies before we make all the guaranteed payments, we will continue to pay the beneficiary the remaining payments, unless the beneficiary elects to receive a lump-sum payment equal to the present value of the remaining guaranteed payments. We will not impose any surrender charge. -------------------------------------------------------------------------- LUMP-SUM PAYMENT: If the "Nonlifetime--Guaranteed Payments" option is elected with variable payments, you may request at any time that all or a portion of the present value of the remaining payments be paid in one lump sum. Any such lump-sum payments will be treated as a withdrawal during the accumulation phase and we will charge any applicable surrender charge. Lump-sum payments will be sent within seven calendar days after we receive the request for payment in good order at our Customer Service Center. --------------------------------------------------------------------------
CALCULATION OF LUMP-SUM PAYMENTS: If a lump-sum payment is available under the income phase payment options above, the rate used to calculate the present value of the remaining guaranteed payments is the same rate we used to calculate the income phase payments (i.e., the actual fixed rate used for fixed payments or the 3 1/2% or 5% assumed net investment rate used for variable payments). -------------------------------------------------------------------------------- OTHER CONTRACT PROVISIONS -------------------------------------------------------------------------------- REPORTS TO CONTRACT OWNERS We will send you a quarterly report within 31 days after the end of each calendar quarter. The report will show the contract value, cash surrender value, and the death benefit as of the end of the calendar quarter. The report will also show the allocation of your contract value and reflects the amounts deducted from or added to the contract value since the last report. You have 30 days to notify our Customer Service Center of any errors or discrepancies contained in the report or in any confirmation notices. We will also send you copies of any shareholder reports of the investment portfolios in which Separate Account B invests, as well as any other reports, notices or documents we are required by law to furnish to you. SUSPENSION OF PAYMENTS The Company reserves the right to suspend or postpone the date of any payment or determination of values on any business day (1) when the New York Stock Exchange is closed; (2) when trading on the New York Stock Exchange is restricted; (3) when an emergency exists as determined by the SEC so that the sale of securities held in Separate Account B may not reasonably occur or so that the Company may not reasonably determine the value of Separate Account B's net assets; or (4) during any other period when the SEC so permits for the protection of security holders. We have the right to delay payment of amounts from a Fixed Interest Allocation for up to 6 months. IN CASE OF ERRORS IN YOUR APPLICATION If an age or gender given in the application or enrollment form is misstated, the amounts payable or benefits provided by the Contract shall be those that the premium payment would have bought at the correct age or sex. SMARTDESIGN-109651 47 ASSIGNING THE CONTRACT AS COLLATERAL You may assign a non-qualified Contract as collateral security for a loan but you should understand that your rights and any beneficiary's rights may be subject to the terms of the assignment. An assignment may have federal tax consequences. You must give us satisfactory written notice at our Customer Service Center in order to make or release an assignment. We are not responsible for the validity of any assignment. CONTRACT CHANGES -- APPLICABLE TAX LAW We have the right to make changes in the Contract to continue to qualify the Contract as an annuity under applicable federal tax law. You will be given advance notice of such changes. FREE LOOK You may cancel your Contract within your 10-day free look period. We deem the free look period to expire 15 days after we mail the Contract to you. Some states may require a longer free look period. To cancel, you need to send your Contract to our Customer Service Center or to the agent from whom you purchased it. We will refund the contract value. For purposes of the refund during the free look period, (i) we adjust your contract value for any Market Value Adjustment (if you have invested in the fixed account), (ii) then, if applicable, we exclude any credit initially applied, and (iii) then we include a refund of any charges deducted from your contract value. Because of the market risks associated with investing in the portfolios and the potential positive or negative effect of the market value adjustment, the contract value returned may be greater or less than the premium payment you paid. Some states require us to return to you the amount of the paid premium (rather than the contract value) in which case you will not be subject to investment risk during the free look period. In these states, your premiums designated for investment in the subaccounts may be allocated during the free look period to a subaccount specially designated by the Company for this purpose (currently, the Liquid Asset subaccount). We may, in our discretion, require that premiums designated for investment in the subaccounts from all other states as well as premiums designated for a Fixed Interest Allocation be allocated to the specially designated subaccount during the free look period. Your Contract is void as of the day we receive your Contract and cancellation request. We determine your contract value at the close of business on the day we receive your written request. If you keep your Contract after the free look period and the investment is allocated to a subaccount specially designated by the Company, we will put your money in the subaccount(s) chosen by you, based on the accumulation unit value next computed for each subaccount, and/or in the Fixed Interest Allocation chosen by you. GROUP OR SPONSORED ARRANGEMENTS For certain group or sponsored arrangements, we may reduce any surrender, administration, and mortality and expense risk charges. We may also change the minimum initial and additional premium requirements, or offer an alternative or reduced death benefit. SELLING THE CONTRACT Directed Services, Inc. is the principal underwriter and distributor of the Contract as well as for other contracts issued through Separate Account B and other separate accounts of Golden American. The principal address of Directed Services is 1475 Dunwoody Drive, West Chester, Pennsylvania 19380. Directed Services is a corporation organized under the laws of New York and is a wholly owned subsidiary of Equitable of Iowa. Directed Services is registered as a broker-dealer with the SEC under the Securities Exchange Act of 1934, as well as with securities commissions in the states in which it operates, and is a member of the National Association of Securities Dealers, Inc. ("NASD"). Directed Services has the authority to enter into selling agreements with other firms. Directed Services has entered into selling agreements with broker-dealers to sell the Contracts through registered representatives. Those representatives are registered with the NASD, and if applicable, also with the states in which they do business. They also are licensed as insurance agents in the states in which they do business. We pay sales commissions to Directed Services for the sale of the Contracts. Directed Services passes through the entire amount of the sales commission to the broker-dealer whose registered representative sold SMARTDESIGN-109651 48 the Contract. The maximum sales commission payable will be approximately 8.5% of the initial and any additional premium payment. This commission may be returned if the Contract is not continued through the first Contract Year.
-------------------------------------------------------------------------------------------- UNDERWRITER COMPENSATION -------------------------------------------------------------------------------------------- NAME OF PRINCIPAL UNDERWRITER AMOUNT OF COMMISSION TO BE OTHER PAID COMPENSATION Directed Services, Inc. The equivalent of a Reimbursement of any combination of a percentage covered expenses of premium payments and a incurred percentage of the contract by registered value up to maximum of 8.5%. representatives in connection with the distribution of the Contracts. ------------------------------ ------------------------------- -----------------------------
Certain sales agreements may provide for a different combination of percentage of commission at the time of sale and annual trail commission under which one of the percentages could exceed that shown above. We may make additional cash payments to broker-dealers for marketing and educational expenses and for the reimbursement of certain expenses incurred by registered representatives in connection with the distribution of the Contracts. We do not pay any additional commissions on the sale or exercise of any of the optional benefit riders offered in this prospectus. -------------------------------------------------------------------------------- OTHER INFORMATION -------------------------------------------------------------------------------- VOTING RIGHTS We will vote the shares of a Trust owned by Separate Account B according to your instructions. However, if the 1940 Act or any related regulations should change, or if interpretations of it or related regulations should change, and we decide that we are permitted to vote the shares of a Trust in our own right, we may decide to do so. We determine the number of shares that you have in a subaccount by dividing the Contract's contract value in that subaccount by the net asset value of one share of the portfolio in which a subaccount invests. We count fractional votes. We will determine the number of shares you can instruct us to vote 180 days or less before a Trust shareholder meeting. We will ask you for voting instructions by mail at least 10 days before the meeting. If we do not receive your instructions in time, we will vote the shares in the same proportion as the instructions received from all contracts in that subaccount. We will also vote shares we hold in Separate Account B which are not attributable to contract owners in the same proportion. STATE REGULATION We are regulated by the Insurance Department of the State of Delaware. We are also subject to the insurance laws and regulations of all jurisdictions where we do business. The variable Contract offered by this prospectus has been approved where required by those jurisdictions. We are required to submit annual statements of our operations, including financial statements, to the Insurance Departments of the various jurisdictions in which we do business to determine solvency and compliance with state insurance laws and regulations. SMARTDESIGN-109651 49 LEGAL PROCEEDINGS The Company, like other insurance companies, may be involved in lawsuits, including class action lawsuits. In some class action and other lawsuits involving insurers, substantial damages have been sought and/or material settlement payments have been made. We believe that currently there are no pending or threatened lawsuits that are reasonably likely to have a materially adverse impact on the Company or Separate Account B. LEGAL MATTERS The legal validity of the Contracts was passed on by Myles R. Tashman, Esquire, Executive Vice President, General Counsel and Assistant Secretary of Golden American. Sutherland Asbill & Brennan LLP of Washington, D.C. has provided advice on certain matters relating to federal securities laws. EXPERTS The audited consolidated financial statements of Golden American at December 31, 2000 and 1999 and for each of the three years in the period ended December 31, 2000, and Separate Account B at December 31, 2000 and for the year then ended, appearing in this prospectus or in the SAI and Registration Statement have been audited by Ernst & Young LLP, independent auditors, as set forth in their reports thereon appearing in this prospectus or in the SAI and in the Registration Statement, and are included or incorporated by reference in reliance upon such reports given upon the authority of such firm as experts in accounting and auditing. -------------------------------------------------------------------------------- FEDERAL TAX CONSIDERATIONS -------------------------------------------------------------------------------- The following summary provides a general description of the federal income tax considerations associated with this Contract and does not purport to be complete or to cover all tax situations. This discussion is not intended as tax advice. You should consult your counsel or other competent tax advisers for more complete information. This discussion is based upon our understanding of the present federal income tax laws. We do not make any representations as to the likelihood of continuation of the present federal income tax laws or as to how they may be interpreted by the IRS. TYPES OF CONTRACTS: NON-QUALIFIED OR QUALIFIED The Contract may be purchased on a non-tax-qualified basis or purchased on a tax-qualified basis. Qualified Contracts are designed for use by individuals whose premium payments are comprised solely of proceeds from and/or contributions under retirement plans that are intended to qualify as plans entitled to special income tax treatment under Sections 401(a), 403(b), 408, or 408A of the Code. The ultimate effect of federal income taxes on the amounts held under a Contract, or annuity payments, depends on the type of retirement plan, on the tax and employment status of the individual concerned, and on our tax status. In addition, certain requirements must be satisfied in purchasing a qualified Contract with proceeds from a tax-qualified plan and receiving distributions from a qualified Contract in order to continue receiving favorable tax treatment. Some retirement plans are subject to distribution and other requirements that are not incorporated into our Contract administration procedures. Contract owners, participants and beneficiaries are responsible for determining that contributions, distributions and other transactions with respect to the Contract comply with applicable law. Therefore, you should seek competent legal and tax advice regarding the suitability of a Contract for your particular situation. The following discussion assumes that qualified Contracts are purchased with proceeds from and/or contributions under retirement plans that qualify for the intended special federal income tax treatment. TAX STATUS OF THE CONTRACTS DIVERSIFICATION REQUIREMENTS. The Code requires that the investments of a variable account be "adequately diversified" in order for nonqualified Contracts to be treated as annuity contracts for federal income tax purposes. It is intended that Separate Account B, through the subaccounts, will satisfy these diversification requirements. SMARTDESIGN-109651 50 INVESTOR CONTROL. In certain circumstances, owners of variable annuity contracts have been considered for federal income tax purposes to be the owners of the assets of the separate account supporting their contracts due to their ability to exercise investment control over those assets. When this is the case, the contract owners have been currently taxed on income and gains attributable to the separate account assets. There is little guidance in this area, and some features of the Contracts, such as the flexibility of a contract owner to allocate premium payments and transfer contract values, have not been explicitly addressed in published rulings. While we believe that the Contracts do not give contract owners investment control over Separate Account B assets, we reserve the right to modify the Contracts as necessary to prevent a contract owner from being treated as the owner of the Separate Account B assets supporting the Contract. REQUIRED DISTRIBUTIONS. In order to be treated as an annuity contract for federal income tax purposes, the Code requires any nonqualified Contract to contain certain provisions specifying how your interest in the Contract will be distributed in the event of your death. 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. See "Death Benefit Choices" for additional information on required distributions from non-qualified contracts. Other rules may apply to Qualified Contracts. The following discussion assumes that the Contracts will qualify as annuity contracts for federal income tax purposes. TAX TREATMENT OF ANNUITIES IN GENERAL. We believe that if you are a natural person you will generally not be taxed on increases in the value of a Contract until a distribution occurs or until annuity payments begin. (For these purposes, the agreement to assign or pledge any portion of the contract value, and, in the case of a qualified Contract, any portion of an interest in the qualified plan, generally will be treated as a distribution.) TAXATION OF NON-QUALIFIED CONTRACTS NON-NATURAL PERSON. The owner of any annuity contract who is not a natural person generally must include in income any increase in the excess of the contract value over the "investment in the contract" (generally, the premiums or other consideration you paid for the contract less any nontaxable withdrawals) during the taxable year. There are some exceptions to this rule and a prospective contract owner that is not a natural person may wish to discuss these with a tax adviser. The following discussion generally applies to Contracts owned by natural persons. WITHDRAWALS. When a withdrawal from a non-qualified Contract occurs, the amount received will be treated as ordinary income subject to tax up to an amount equal to the excess (if any) of the contract value (unreduced by the amount of any surrender charge) immediately before the distribution over the contract owner's investment in the Contract at that time. Credits constitute earnings (not premiums) for federal tax purposes and are not included in the owner's investment in the Contract. The tax treatment of market value adjustments is uncertain. You should consult a tax adviser if you are considering taking a withdrawal from your Contract in circumstances where a market value adjustment would apply. In the case of a surrender under a non-qualified Contract, the amount received generally will be taxable only to the extent it exceeds the contract owner's investment in the Contract. RIDER CHARGES. The IRS could come to a determination that rider charges are taxable distributions to you. Although we do not believe that a rider charge under the Contract should be treated as a taxable withdrawal, you should consult your tax advisor prior to selecting any rider or endorsement under the Contract. SEPARATE ACCOUNT CHARGES. It is possible that the Internal Revenue Service may take a position that charges for certain optional benefits and riders are deemed to be taxable distributions to you. In particular, SMARTDESIGN-109651 51 the Internal Revenue Service may treat the quarterly charges deducted for the earnings multiplier benefit rider as taxable withdrawals, which might also be subject to a tax penalty if the withdrawal occurs before you reach age 59 1/2. Although we do not believe that the charges we deduct for the earnings multiplier benefit rider or any other optional benefit or rider provided under the Contract should be treated as taxable withdrawals, you should consult your tax advisor prior to selecting any optional benefit or rider under the Contract. PENALTY TAX ON CERTAIN WITHDRAWALS. In the case of a distribution from a non-qualified Contract, there may be imposed a federal tax penalty equal to 10% of the amount treated as income. In general, however, there is no penalty on distributions: o made on or after the taxpayer reaches age 59 1/2; o made on or after the death of a contract owner; o attributable to the taxpayer's becoming disabled; or o made as part of a series of substantially equal periodic payments for the life (or life expectancy) of the taxpayer. Other exceptions may be applicable under certain circumstances and special rules may be applicable in connection with the exceptions enumerated above. A tax adviser should be consulted with regard to exceptions from the penalty tax. ANNUITY PAYMENTS. Although tax consequences may vary depending on the payment option elected under an annuity contract, a portion of each annuity payment is generally not taxed and the remainder is taxed as ordinary income. The non-taxable portion of an annuity payment is generally determined in a manner that is designed to allow you to recover your investment in the Contract ratably on a tax-free basis over the expected stream of annuity payments, as determined when annuity payments start. Once your investment in the Contract has been fully recovered, however, the full amount of each annuity payment is subject to tax as ordinary income. TAXATION OF DEATH BENEFIT PROCEEDS. Amounts may be distributed from a Contract because of your death or the death of the annuitant. Generally, such amounts are includible in the income of recipient as follows: (i) if distributed in a lump sum, they are taxed in the same manner as a surrender of the Contract, or (ii) if distributed under a payment option, they are taxed in the same way as annuity payments. TRANSFERS, ASSIGNMENTS, EXCHANGES AND ANNUITY DATES OF A CONTRACT. A transfer or assignment of ownership of a Contract, the designation of an annuitant, or payee other than an owner, the selection of certain dates for commencement of the annuity phase, or the exchange of a Contract may result in certain tax consequences to you that are not discussed herein. A contract owner contemplating any such transfer, assignment, designation or exchange, should consult a tax advisor as to the tax consequences. WITHHOLDING. Annuity distributions are generally subject to withholding for the recipient's federal income tax liability. Recipients can generally elect, however, not to have tax withheld from distributions. MULTIPLE CONTRACTS. All non-qualified deferred annuity contracts that are issued by us (or our affiliates) to the same contract owner during any calendar year are treated as one non-qualified deferred annuity contract for purposes of determining the amount includible in such contract owner's income when a taxable distribution occurs. TAXATION OF QUALIFIED CONTRACTS The Contracts are designed for use with several types of qualified plans. The tax rules applicable to participants in these qualified plans vary according to the type of plan and the terms and conditions of the plan itself. Special favorable tax treatment may be available for certain types of contributions and distributions. Adverse tax consequences may result from: contributions in excess of specified limits; distributions before age 59 1/2 (subject to certain exceptions); distributions that do not conform to specified SMARTDESIGN-109651 52 commencement and minimum distribution rules; and in other specified circumstances. Therefore, no attempt is made to provide more than general information about the use of the Contracts with the various types of qualified retirement plans. Contract owners, annuitants, and beneficiaries are cautioned that the rights of any person to any benefits under these qualified retirement plans may be subject to the terms and conditions of the plans themselves, regardless of the terms and conditions of the Contract, but we shall not be bound by the terms and conditions of such plans to the extent such terms contradict the Contract, unless the Company consents. The IRS could come to a determination that rider charges are taxable distributions to you. Although we do not believe that a rider charge under the Contract should be treated as a taxable withdrawal, you should consult your tax advisor prior to selecting any rider or endorsement under the Contract. DISTRIBUTIONS. Annuity payments are generally taxed in the same manner as under a non-qualified Contract. When a withdrawal from a qualified Contract occurs, a pro rata portion of the amount received is taxable, generally based on the ratio of the contract owner's investment in the Contract (generally, the premiums or other consideration paid for the Contract) to the participant's total accrued benefit balance under the retirement plan. For qualified Contracts, the investment in the Contract can be zero. For Roth IRAs, distributions are generally not taxed, except as described below. For qualified plans under Section 401(a) and 403(b), the Code requires that distributions generally must commence no later than the later of April 1 of the calendar year following the calendar year in which the contract owner (or plan participant) (i) reaches age 70 1/2 or (ii) retires, and must be made in a specified form or manner. If the plan participant is a "5 percent owner" (as defined in the Code), distributions generally must begin no later than April 1 of the calendar year following the calendar year in which the contract owner (or plan participant) reaches age 70 1/2. For IRAs described in Section 408, distributions generally must commence no later than the later of April 1 of the calendar year following the calendar year in which the contract owner (or plan participant) reaches age 70 1/2. Roth IRAs under Section 408A do not require distributions at any time before the contract owner's death. WITHHOLDING. Distributions from certain qualified plans generally are subject to withholding for the contract owner's federal income tax liability. The withholding rates vary according to the type of distribution and the contract owner's tax status. The contract owner may be provided the opportunity to elect not to have tax withheld from distributions. "Eligible rollover distributions" from section 401(a) plans and section 403(b) tax-sheltered annuities are subject to a mandatory federal income tax withholding of 20%. An eligible rollover distribution is the taxable portion of any distribution from such a plan, except certain distributions that are required by the Code, distributions in a specified annuity form or hardship distributions. The 20% withholding does not apply, however, if the contract owner chooses a "direct rollover" from the plan to another tax-qualified plan or IRA. Brief descriptions of the various types of qualified retirement plans in connection with a Contract follow. We will endorse the Contract as necessary to conform it to the requirements of such plan. CORPORATE AND SELF-EMPLOYED PENSION AND PROFIT SHARING PLANS Section 401(a) of the Code permits corporate employers to establish various types of retirement plans for employees, and permits self-employed individuals to establish these plans for themselves and their employees. These retirement plans may permit the purchase of the Contracts to accumulate retirement savings under the plans. Adverse tax or other legal consequences to the plan, to the participant, or to both may result if this Contract is assigned or transferred to any individual as a means to provide benefit payments, unless the plan complies with all legal requirements applicable to such benefits before transfer of the Contract. Employers intending to use the Contract with such plans should seek competent advice. INDIVIDUAL RETIREMENT ANNUITIES Section 408 of the Code permits eligible individuals to contribute to an individual retirement program known as an "Individual Retirement Annuity" or "IRA." These IRAs are subject to limits on the amount that can be contributed, the deductible amount of the contribution, the persons who may be eligible, and the time when distributions commence. Also, distributions from certain other types of qualified retirement plans may be "rolled over" or transferred on a tax-deferred basis into an IRA. There are significant restrictions on rollover SMARTDESIGN-109651 53 or transfer contributions from Savings Incentive Match Plans for Employees (SIMPLE), under which certain employers may provide contributions to IRAs on behalf of their employees, subject to special restrictions. Employers may establish Simplified Employee Pension (SEP) Plans to provide IRA contributions on behalf of their employees. Sales of the Contract for use with IRAs may be subject to special requirements of the IRS. ROTH IRA Section 408A of the Code permits certain eligible individuals to contribute to a Roth IRA. Contributions to a Roth IRA, which are subject to limits on the amount of the contribution and the persons who may be eligible to contribute, are not deductible, and must be made in cash or as a rollover or transfer from another Roth IRA or other IRA. A rollover from or conversion of an IRA to a Roth IRA may be subject to tax, and other special rules may apply. Distributions from a Roth IRA generally are not taxed, except that, once aggregate distributions exceed contributions to the Roth IRA, income tax and a 10% penalty tax may apply to distributions made (1) before age 59 1/2 (subject to certain exceptions) or (2) during the five taxable years starting with the year in which the first contribution is made to any Roth IRA. A 10% penalty tax may apply to amounts attributable to a conversion from an IRA to a Roth IRA if the amounts are distributed during the five taxable years beginning with the year in which the conversion was made. TAX SHELTERED ANNUITIES Section 403(b) of the Code allows employees of certain Section 501(c)(3) organizations and public schools to exclude from their gross income the premium payments made, within certain limits, on a Contract that will provide an annuity for the employee's retirement. These premium payments may be subject to FICA (Social Security) tax. Distributions of (1) salary reduction contributions made in years beginning after December 31, 1988; (2) earnings on those contributions; and (3) earnings on amounts held as of the last year beginning before January 1, 1989, are not allowed prior to age 59 1/2, separation from service, death or disability. Salary reduction contributions may also be distributed upon hardship, but would generally be subject to penalties. TAX CONSEQUENCES OF DEATH BENEFIT OPTIONS THE CONTRACT INCLUDES DEATH BENEFIT OPTIONS THAT IN SOME CASES MAY EXCEED THE GREATER OF THE PREMIUM PAYMENTS OR THE CONTRACT VALUE. THE IRS HAS NOT RULED WHETHER AN ENHANCED DEATH BENEFIT COULD BE CHARACTERIZED AS AN INCIDENTAL BENEFIT, THE AMOUNT OF WHICH IS LIMITED IN ANY CODE SECTION 401(A) PENSION OR PROFIT-SHARING PLAN OR CODE SECTION 403(B) TAX-SHELTERED ANNUITY. EMPLOYERS USING THE CONTRACT MAY WANT TO CONSULT THEIR TAX ADVISER REGARDING SUCH LIMITATION. IRA's generally may not invest in life insurance contracts. We do not believe a death benefit under an annuity contract that is equal to the greater of premiums paid (less withdrawals) or contract value will be treated as life insurance. However, the enhanced death benefits and earnings multiplier benefit under this Contract may exceed the greater of premiums paid (less withdrawals) and contract value. We have previously received IRS approval of the form of the Contract, including the enhanced death benefit feature, for use as an IRA. THE CONTRACT WITH BOTH ENHANCED DEATH BENEFITS AND THE EARNINGS MULTIPLIER BENEFIT HAS BEEN FILED WITH THE IRS FOR APPROVAL FOR USE AS AN IRA. HOWEVER, THERE IS NO ASSURANCE THAT THE IRS WILL GIVE THIS APPROVAL OR THAT THE CONTRACT MEETS THE QUALIFICATION REQUIREMENTS FOR AN IRA. Although we regard the enhanced death benefit options and earnings multiplier benefit as investment protection features that should not have an adverse tax effect, it is possible that the IRS could take a contrary position regarding tax qualification, which could result in the immediate taxation of amounts held in the Contract and the imposition of penalty taxes. YOU SHOULD CONSULT YOUR TAX ADVISOR IF YOU ARE CONSIDERING ADDING AN ENHANCED DEATH BENEFIT OR EARNINGS MULTIPLIER BENEFIT TO YOUR CONTRACT IF IT IS AN IRA. OTHER TAX CONSEQUENCES As noted above, the foregoing comments about the federal tax consequences under the Contracts are not exhaustive, and special rules are provided with respect to other tax situations not discussed in this prospectus. Further, the federal income tax consequences discussed herein reflect our understanding of current law, and the law may change. Federal estate and state and local estate, inheritance and other tax consequences of ownership or receipt of distributions under a Contract depend on the individual SMARTDESIGN-109651 54 circumstances of each contract owner or recipient of the distribution. A competent tax adviser should be consulted for further information. POSSIBLE CHANGES IN TAXATION Although the likelihood of legislative change is uncertain, there is always the possibility that the tax treatment of the Contracts could change by legislation or other means. It is also possible that any change could be retroactive (that is, effective before the date of the change). You should consult a tax adviser with respect to legislative developments and their effect on the Contract. SMARTDESIGN-109651 55 This page intentionally left blank. -------------------------------------------------------------------------------- STATEMENT OF ADDITIONAL INFORMATION -------------------------------------------------------------------------------- TABLE OF CONTENTS ITEM PAGE Introduction............................................ 1 Description of Golden American Life Insurance Company... 1 Safekeeping of Assets................................... 1 The Administrator....................................... 1 Independent Auditors.................................... 1 Distribution of Contracts............................... 1 Performance Information................................. 2 IRA Partial Withdrawal Option........................... 9 Other Information....................................... 9 Financial Statements of Separate Account B.............. 10 PLEASE TEAR OFF, COMPLETE AND RETURN THE FORM BELOW TO ORDER A FREE STATEMENT OF ADDITIONAL INFORMATION FOR THE CONTRACTS OFFERED UNDER THE PROSPECTUS. ADDRESS THE FORM TO OUR CUSTOMER SERVICE CENTER; THE ADDRESS IS SHOWN ON THE PROSPECTUS COVER. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - PLEASE SEND ME A FREE COPY OF THE STATEMENT OF ADDITIONAL INFORMATION FOR SEPARATE ACCOUNT B. Please Print or Type: -------------------------------------------------- NAME -------------------------------------------------- SOCIAL SECURITY NUMBER -------------------------------------------------- STREET ADDRESS -------------------------------------------------- CITY, STATE, ZIP 109651 SmartDesign 05/01/2001 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - This page intentionally left blank. -------------------------------------------------------------------------------- APPENDIX A -------------------------------------------------------------------------------- MARKET VALUE ADJUSTMENT EXAMPLES EXAMPLE #1: FULL SURRENDER -- EXAMPLE OF A NEGATIVE MARKET VALUE ADJUSTMENT Assume $100,000 was allocated to a Fixed Interest Allocation with a guaranteed interest period of 10 years, a guaranteed interest rate of 7.5%, an initial Index Rate ("I") of 7%; that a full surrender is requested 3 years into the guaranteed interest period; that the then Index Rate for a 7 year guaranteed interest period ("J") is 8%; and that no prior transfers or withdrawals affecting this Fixed Interest Allocation have been made. CALCULATE THE MARKET VALUE ADJUSTMENT 1. The contract value of the Fixed Interest Allocation on the date of surrender is 3 $124,230 ($100,000 x 1.075 ) 2. N = 2,555 ( 365 x 7 ) 3. Market Value Adjustment = 2,555/365 $124,230 x [( 1.07/1.0850 ) -1 ] = $11,535 Therefore, the amount paid to you on full surrender ignoring any surrender charge is $112,695 ($124,230 - $11,535 ). EXAMPLE #2: FULL SURRENDER -- EXAMPLE OF A POSITIVE MARKET VALUE ADJUSTMENT Assume $100,000 was allocated to a Fixed Interest Allocation with a guaranteed interest period of 10 years, a guaranteed interest rate of 7.5%, an initial Index Rate ("I") of 7%; that a full surrender is requested 3 years into the guaranteed interest period; that the then Index Rate for a 7 year guaranteed interest period ("J") is 6%; and that no prior transfers or withdrawals affecting this Fixed Interest Allocation have been made. CALCULATE THE MARKET VALUE ADJUSTMENT 1. The contract value of the Fixed Interest Allocation on the date of surrender is 3 $124,230 ($100,000 x 1.075 ) 2. N = 2,555 ( 365 x 7 ) 3. Market Value Adjustment = 2,555/365 $124,230 x [( 1.07/1.0650 ) -1]= $4,141 Therefore, the amount paid to you on full surrender ignoring any surrender charge is $128,371 ($124,230 + $4,141 ). EXAMPLE #3: WITHDRAWAL -- EXAMPLE OF A NEGATIVE MARKET VALUE ADJUSTMENT Assume $200,000 was allocated to a Fixed Interest Allocation with a guaranteed interest period of 10 years, a guaranteed interest rate of 7.5%, an initial Index Rate ("I") of 7%; that a withdrawal of $112,695 is requested 3 years into the guaranteed interest period; that the then Index Rate ("J") for a 7 year guaranteed interest period is 8%; and that no prior transfers or withdrawals affecting this Fixed Interest Allocation have been made. 109651 A1 First calculate the amount that must be withdrawn from the Fixed Interest Allocation to provide the amount requested. 1. The contract value of the Fixed Interest Allocation on the date of withdrawal is 3 $248,459 ( $200,000 x 1.075 ) 2. N = 2,555 ( 365 x 7 ) 3. Amount that must be withdrawn = 2,555/365 [ $112,695 / (1.07/1.0850) ] = $124,230 Then calculate the Market Value Adjustment on that amount. 4. Market Value Adjustment = 2,555/365 $124,230 x [(1.07/1.0850) -1 ] = $11,535 Therefore, the amount of the withdrawal paid to you ignoring any surrender charge is $112,695, as requested. The Fixed Interest Allocation will be reduced by the amount of the withdrawal, $112,695, and also reduced by the Market Value Adjustment of $11,535, for a total reduction in the Fixed Interest Allocation of $124,230. EXAMPLE #4: WITHDRAWAL -- EXAMPLE OF A POSITIVE MARKET VALUE ADJUSTMENT Assume $200,000 was allocated to a Fixed Interest Allocation with a guaranteed interest period of 10 years, a guaranteed interest rate of 7.5%, an initial Index Rate of 7%; that a withdrawal of $128,371 requested 3 years into the guaranteed interest period; that the then Index Rate ("J") for a 7 year guaranteed interest period is 6%; and that no prior transfers or withdrawals affecting this Fixed Interest Allocation have been made. First calculate the amount that must be withdrawn from the Fixed Interest Allocation to provide the amount requested. 1. The contract value of the Fixed Interest Allocation on the date of withdrawal is 3 $248,459 ( $200,000 x 1.075 ) 2. N = 2,555 ( 365 x 7 ) 3. Amount that must be withdrawn = 2,555/365 [ $128,371 / (1.07/1.0650) ] = $124,230 Then calculate the Market Value Adjustment on that amount. 4. Market Value Adjustment = 2,555/365 $124,230 x [(1.07/1.0650) -1 ] = $$4,141 Therefore, the amount of the withdrawal paid to you ignoring any surrender charge is $128,371, as requested. The Fixed Interest Allocation will be reduced by the amount of the withdrawal, $128,371, but increased by the Market Value Adjustment of $4,141, for a total reduction in the Fixed Interest Allocation of $124,230. SMARTDESIGN-109651 A2 -------------------------------------------------------------------------------- APPENDIX B -------------------------------------------------------------------------------- SURRENDER CHARGE FOR EXCESS WITHDRAWALS EXAMPLE The following assumes you made an initial premium payment of $10,000 and additional premium payments of $10,000 in each of the second and third contract years, for total premium payments under the Contract of $30,000. It also assumes a withdrawal at the end of the third contract year of 30% of the contract value of $35,000 and that Option Package I was selected. In this example, $3,500 (10% of contract value) is the maximum free withdrawal amount that you may withdraw without a surrender charge. The total withdrawal would be $10,500 ($35,000 x .30). Therefore, $7,000 (10,500 - 3,500) is considered an excess withdrawal of a part of the initial premium payment of $10,000 and would be subject to a 4% surrender charge of $280 ($7,000x .04). This example does not take into account any Market Value Adjustment or deduction of any premium taxes. SMARTDESIGN-109651 B1 -------------------------------------------------------------------------------- APPENDIX C -------------------------------------------------------------------------------- WITHDRAWAL ADJUSTMENT FOR 5% ROLL-UP DEATH BENEFIT EXAMPLES (NEEDS TO BE REVISED) EXAMPLE #1: THE CONTRACT VALUE (AV) IS LOWER THAN THE DEATH BENEFIT Assume a premium payment of $100,000, AV at the time of withdrawal of $80,000 and a 5% Roll-Up minimum guarantee death benefit ("MGDB") at the time of withdrawal of $120,000. A total withdrawal of $20,000 is made. Calculate the Effect of the Withdrawal Pro rata Withdrawal Adjustment to MGDB = $30,000 ($120,000 * ($20,000 /$80,000)) MGDB after Pro rata Withdrawal = $90,000 ($120,000 - $30,000) AV after Pro rata Withdrawal = $60,000 ($80,000 - $20,000) EXAMPLE #2: THE CONTRACT VALUE (AV) IS GREATER THAN THE DEATH BENEFIT Assume a premium payment of $100,000, AV at the time of withdrawal of $160,000 and a 5% Roll-Up minimum guarantee death benefit ("MGDB") at the time of withdrawal of $120,000. A total withdrawal of $20,000 is made. Calculate the Effect of the Withdrawal Pro rata Withdrawal Adjustment to MGDB = $15,000 ($120,000 * ($20,000 / $160,000)) MGDB after Pro rata Withdrawal = $105,000 ($120,000 - $15,000) AV after Pro rata Withdrawal = $140,000 ($160,000 - $20,000) SMARTDESIGN-109651 C1 EXAMPLE #3: THE CONTRACT VALUE (AV) IS EQUAL TO THE DEATH BENEFIT Assume a premium payment of $100,000, AV at the time of withdrawal of $120,000 and a 5% Roll-Up minimum guarantee death benefit ("MGDB") at the time of withdrawal of $120,000. A total withdrawal of $27,000 is made. Calculate the Effect of the Withdrawal Pro rata Withdrawal Adjustment to MGDB = $20,000 ($120,000 * ($20,000 / $120,000)) MGDB after Pro rata Withdrawal = $100,000 ($120,000 - $20,000) AV after Pro rata Withdrawal = $100,000 ($120,000 - $20,000) SMARTDESIGN-109651 C2 ING VARIABLE ANNUITIES GOLDEN AMERICAN LIFE INSURANCE COMPANY Golden American Life Insurance Company is a stock company domiciled in Delaware. 109651 SmartDesign 05/01/2001 Part B Statement of Additional Information STATEMENT OF ADDITIONAL INFORMATION SMARTDESIGN ADVANTAGE VARIABLE ANNUITY DEFERRED COMBINATION VARIABLE AND FIXED ANNUITY CONTRACT ISSUED BY SEPARATE ACCOUNT B OF GOLDEN AMERICAN LIFE INSURANCE COMPANY This Statement of Additional Information is not a prospectus. The information contained herein should be read in conjunction with the Prospectus for the Golden American Life Insurance Company Deferred Variable Annuity Contract, which is referred to herein. The Prospectus sets forth information that a prospective investor ought to know before investing. For a copy of the Prospectus, send a written request to Golden American Life Insurance Company, Customer Service Center, P.O. Box 2700, West Chester, Pennsylvania 19380-1478 or telephone 1-800-366-0066. DATE OF PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION: , 2001 TABLE OF CONTENTS ITEM PAGE Introduction 1 Description of Golden American Life Insurance Company 1 Safekeeping of Assets 1 The Administrator 1 Independent Auditors 1 Distribution of Contracts 1 Performance Information 2 IRA Partial Withdrawal Option 5 Other Information 6 Financial Statements of Separate Account B 6 i INTRODUCTION This Statement of Additional Information provides background information regarding Separate Account B. DESCRIPTION OF GOLDEN AMERICAN LIFE INSURANCE COMPANY Golden American Life Insurance Company ("Golden American") is a stock life insurance company organized under the laws of the State of Delaware. On August 13, 1996, Equitable of Iowa Companies, Inc. (formerly Equitable of Iowa Companies) ("Equitable of Iowa") acquired all of the interest in Golden American and Directed Services, Inc. On October 24, 1997, Equitable of Iowa and ING Groep, N.V. ("ING") completed a merger agreement, and Equitable of Iowa became a wholly owned subsidiary of ING. ING, headquartered in The Netherlands, is a global financial services holding company with approximately $605 billion in assets as of December 31, 2000. As of December 31, 2000, Golden American had approximately $617.1 million in stockholder's equity and approximately $11.9 billion in total assets, including approximately $9.8 billion of separate account assets. Golden American is authorized to do business in all jurisdictions except New York. Golden American offers variable insurance products. Golden American formed a subsidiary, First Golden American Life Insurance Company of New York ("First Golden"), who is licensed to do variable annuity business in the states of New York and Delaware. SAFEKEEPING OF ASSETS Golden American acts as its own custodian for Separate Account B. THE ADMINISTRATOR Effective January 1, 1997, Equitable Life Insurance Company of Iowa ("Equitable Life") and Golden American became parties to a service agreement pursuant to which Equitable Life agreed to provide certain accounting, actuarial, tax, underwriting, sales, management and other services to Golden American. Expenses incurred by Equitable Life in relation to this service agreement were reimbursed by Golden American on an allocated cost basis. No charges were billed to Golden American by Equitable Life pursuant to the service agreement in 1997. Equitable Life billed Golden American $930,000 and $1,109,000 pursuant to the service agreement in 2000 and 1999, respectively. INDEPENDENT AUDITORS Ernst & Young LLP, independent auditors, performs annual audits of Golden American and Separate Account B. DISTRIBUTION OF CONTRACTS The offering of contracts under the prospectus associated with this Statement of Additional Information is continuous. Directed Services, Inc., an affiliate of Golden American, acts as the principal underwriter (as defined in the Securities Act of 1933 and the Investment Company Act of 1940, as amended) of the variable insurance products (the "variable insurance products") issued by Golden American. The variable insurance products were sold primarily through two broker/dealer institutions during the year ended December 31, 1998 and December 31, 1999. For the year ended December 31, 2000 only a single broker/dealer institution sold more than 10% of Golden American's variable insurance products. For the years ended 2000, 1999 and 1998 commissions paid by Golden American, including amounts paid by its subsidiary, First Golden American Life Insurance Company of 1 New York, to Directed Services, Inc. aggregated $208,883,000, $181,536,000 and $117,470,000, respectively. All commissions received by the distributor were passed through to the broker-dealers who sold the contracts. Directed Services, Inc. is located at 1475 Dunwoody Drive, West Chester, Pennsylvania 19380-1478. Under a management services agreement, last amended in 1995, Golden American provides to Directed Services, Inc. certain of its personnel to perform management, administrative and clerical services and the use of certain facilities. Golden American charges Directed Services, Inc. for such expenses and all other general and administrative costs, first on the basis of direct charges when identifiable, and the remainder allocated based on the estimated amount of time spent by Golden American's employees on behalf of Directed Services, Inc. In the opinion of management, this method of cost allocation is reasonable. This fee, calculated as a percentage of average assets in the variable separate accounts, was $21,296,000, $10,136,000 and $4,771,000 for the years ended 2000, 1999 and 1998, respectively. PERFORMANCE INFORMATION Performance information for the subaccounts of Separate Account B, including yields, standard annual returns and other non-standard measures of performance of all subaccounts, may appear in reports or promotional literature to current or prospective owners. Such non-standard measures of performance will be computed, or accompanied by performance data computed, in accordance with standards defined by the SEC. Negative values are denoted by minus signs ("-"). Performance information for measures other than total return do not reflect any applicable premium tax that can range from 0% to 3.5%. As described in the prospectus, four death benefit options are available. The following performance values reflect the election at issue of the 7% Solution Enhanced Death Benefit, thus providing values reflecting the highest aggregate contract charges. In addition, the performance values reflect the selection of the most costly optional benefit rider. If one of the other death benefit options had been elected, or if another optional benefit rider or no rider had been elected, the historical performance values would be higher than those represented in the examples. SEC STANDARD MONEY MARKET SUBACCOUNT YIELDS Current yield for the Liquid Asset Subaccount will be based on the change in the value of a hypothetical investment (exclusive of capital changes or income other than investment income) over a particular 7-day period, less a pro rata share of subaccount expenses which includes deductions for the mortality and expense risk charge and the administrative charge accrued over that period (the "base period"), and stated as a percentage of the investment at the start of the base period (the "base period return"). The base period return is then annualized by multiplying by 365/7, with the resulting yield figure carried to at least the nearest hundredth of one percent. Calculation of "effective yield" begins with the same "base period return" used in the calculation of yield, which is then annualized to reflect weekly compounding pursuant to the following formula: Effective Yield = [(Base Period Return) +1)^365/7] - 1 The current yield and effective yield of the Liquid Asset Subaccount for the 7-day period December 25, 2000 to December 31, 2000 were 4.07% and 4.15% respectively. SEC STANDARD 30-DAY YIELD FOR NON-MONEY MARKET SUBACCOUNTS Quotations of yield for the remaining subaccounts will be based on all investment income per subaccount earned during a particular 30-day period, less expenses accrued during the period ("net investment income"), and will be computed by dividing net investment income by the value of an accumulation unit on the last day of the period, according to the following formula: Yield = 2 x [((a - b)/(c x d) + 1)^6 - 1] 2 Where: [a] equals the net investment income earned during the period by the investment portfolio attributable to shares owned by a subaccount [b] equals the expenses accrued for the period (net of reimbursements) [c] equals the average daily number of units outstanding during the period based on the accumulation unit value [d] equals the value (maximum offering price) per accumulation unit value on the last day of the period Yield on subaccounts of Separate Account B is earned from the increase in net asset value of shares of the investmenr portfolio in which the subaccount invests and from dividends declared and paid by the investment portfolio, which are automatically reinvested in shares of the investment portfolio. SEC STANDARD AVERAGE ANNUAL TOTAL RETURN FOR ALL SUBACCOUNTS Quotations of average annual total return for any subaccount will be expressed in terms of the average annual compounded rate of return of a hypothetical investment in a contract over a period of one, five and 10 years (or, if less, up to the life of the subaccount), calculated pursuant to the formula: P(1+T)^(n)=ERV Where: (1) [P] equals a hypothetical initial premium payment of $1,000 (2) [T] equals an average annual total return (3) [n] equals the number of years (4) [ERV] equals the ending redeemable value of a hypothetical $1,000 initial premium payment made at the beginning of the period (or fractional portion thereof) All total return figures reflect the deduction of the maximum sales load, the administrative charges, the mortality and expense risk charges and maximum optional benefit rider charge. The Securities and Exchange Commission (the "SEC") requires that an assumption be made that the contract owner surrenders the entire contract at the end of the one, five and 10 year periods (or, if less, up to the life of the security) for which performance is required to be calculated. This assumption may not be consistent with the typical contract owner's intentions in purchasing a contract and may adversely affect returns. Quotations of total return may simultaneously be shown for other periods, as well as quotations of total return that do not take into account certain contractual charges such as sales load. Except for the GCG Trust International Equity, GCG Trust Internet Tollkeeper, SP Jennison International Equity, Pilgrim VP MagnaCap, Pilgrim VP SmallCap Opportunities, Pilgrim VP Growth Opportunities, Profund VP Bull, Profund VP Small-Cap subaccounts which had not commenced operations as of December 31, 2000, Average Annual Total Return for the Subaccounts presented on a standardized basis, which includes deductions for the maximum mortality and expense risk charge for Max 7 Enhanced Death Benefit of 2.10%, and administrative charges of 0.15%, a living benefit optional rider charge annualized at 0.75% for all portfolios for all portfolios except Liquid Asset and Limited Maturity Bond, which are annualized at 0.50%, the earnings multiplier benefit rider charge annualized at 0.30%, for the year ending December 31, 2000 were as follows: 3 Average Annual Total Return for Periods Ending 12/31/00 - Standardized with Rider Charges -------------------------------------------------------------------------------- [TO BE ADDED BY AMENDMENT] 4 Average Annual Total Return for Periods Ending 12/31/00 - Standardized without Rider Charges -------------------------------------------------------------------------------- [TO BE ADDED BY AMENDMENT] P(1+T)^(n)]=ERV Where: (1) [P] equals a hypothetical initial premium payment of $1,000 (2) [T] equals an average annual total return (3) [n] equals the number of years (4) [ERV] equals the ending redeemable value of a hypothetical $1,000 initial premium payment made at the beginning of the period (or fractional portion thereof) assuming certain loading and charges are zero. Except for the GCG Trust International Equity, GCG Trust Internet Tollkeeper, Pilgrim VP MagnaCap, Pilgrim VP SmallCap Opportunities, Pilgrim VP Growth Opportunities, Profund VP Bull, Profund VP Small-Cap subaccounts which had not commenced operations as of December 31, 2000, Average Annual Total Return for the subaccounts presented on a non-standardized basis, which includes deductions for the maximum mortality and expense risk charge for the Max 7 Enhanced Death Benefit of 2.10%, and administrative charges of 0.15%, a living benefit optional rider charge annualized at 0.75% for all portfolios for all portfolios except Liquid Asset and Limited Maturity Bond, which are annualized at 0.50%, and the earnings multiplier benefit rider charge annualized at 0.30%, for the year ending December 31, 2000 were as follows: 5 Average Annual Total Return for Periods Ending 12/31/00 - Non-Standardized with Rider Charges ------------------------------------------------------------------------------- [TO BE ADDED BY AMENDMENT] 6 Average Annual Total Return for Periods Ending 12/31/00 - Non-Standardized without Rider Charges -------------------------------------------------------------------------------- [TO BE ADDED BY AMENDMENT] Performance information for a subaccount may be compared, in reports and promotional literature, to: (i) the Standard & Poor's 500 Stock Index ("S&P 500"), Dow Jones Industrial Average ("DJIA"), Donoghue Money Market Institutional Averages, or other indices that measure performance of a pertinent group of securities so that investors may compare a subaccount's results with those of a group of securities widely regarded by investors as representative of the securities markets in general; (ii) other groups of variable annuity separate accounts or other investment products tracked by Lipper Analytical Services, a widely used independent research firm which ranks mutual funds and other investment companies by overall performance, investment objectives, and assets, or tracked by other services, companies, publications, or persons who rank such investment companies on overall performance or other criteria; and (iii) the Consumer Price Index (measure for inflation) to assess the real rate of return from an investment in the contract. Unmanaged indices may assume the reinvestment of dividends but generally do not reflect deductions for administrative and management costs and expenses. 7 Performance information for any subaccount reflects only the performance of a hypothetical contract under which contract value is allocated to a subaccount during a particular time period on which the calculations are based. Performance information should be considered in light of the investment objectives and policies, characteristics and quality of the investment portfolio of the Trust in which the Separate Account B subaccounts invest, and the market conditions during the given time period, and should not be considered as a representation of what may be achieved in the future. Reports and promotional literature may also contain other information including the ranking of any subaccount derived from rankings of variable annuity separate accounts or other investment products tracked by Lipper Analytical Services or by other rating services, companies, publications, or other persons who rank separate accounts or other investment products on overall performance or other criteria. PUBLISHED RATINGS From time to time, the rating of Golden American as an insurance company by A.M. Best may be referred to in advertisements or in reports to contract owners. Each year the A.M. Best Company reviews the financial status of thousands of insurers, culminating in the assignment of Best's Ratings. These ratings reflect their current opinion of the relative financial strength and operating performance of an insurance company in comparison to the norms of the life/health insurance industry. Best's ratings range from A+ + to F. An A++ and A+ ratings mean, in the opinion of A.M. Best, that the insurer has demonstrated the strongest ability to meet its respective policyholder and other contractual obligations. ACCUMULATION UNIT VALUE The calculation of the Accumulation Unit Value ("AUV") is discussed in the prospectus for the Contracts under Performance Information. Note that in your Contract, accumulation unit value is referred to as the Index of Investment Experience. The following illustrations show a calculation of a new AUV and the purchase of Units (using hypothetical examples). Note that the examples below are calculated for a Contract issued with the 7% Solution Enhanced Death Benefit Option, the death benefit option with the highest mortality and expense risk charge. The mortality and expense risk charge associated with the 7% Solution Enhanced Death Benefit, the Deferred Annual Ratchet Death Benefit, the Annual Ratchet Enhanced Death Benefit and the Standard Death Benefit are lower than that used in the examples and would result in higher AUV's or contract values. 8 ILLUSTRATION OF CALCULATION OF AUV EXAMPLE 1. 1. AUV, beginning of period 2. Value of securities, beginning of period 3. Change in value of securities 4. Gross investment return (3) divided by (2) 5. Less daily mortality and expense charge 6. Less asset based administrative charge 7. Net investment return (4) minus (5) minus (6) 8. Net investment factor (1.000000) plus (7) 9. AUV, end of period (1) multiplied by (8) ILLUSTRATION OF PURCHASE OF UNITS (ASSUMING NO STATE PREMIUM TAX) EXAMPLE 2. 1. Initial Premium Payment 2. AUV on effective date of purchase (see Example 1) 3. Number of Units purchased [(1) divided by (2)] 4. AUV for valuation date following purchase (see Example 1) 5. Accumulation Value in account for valuation date following purchase [(3) multiplied by (4)] IRA PARTIAL WITHDRAWAL OPTION If the contract owner has an IRA contract and will attain age 70 1/2 in the current calendar year, distributions will be made in accordance with the requirements of Federal tax law. This option is available to assure that the required minimum distributions from qualified plans under the Internal Revenue Code (the "Code") are made. Under the Code, distributions must begin no later than April 1st of the calendar year following the calendar year in which the contract owner attains age 70 1/2. If the required minimum distribution is not withdrawn, there may be a penalty tax in an amount equal to 50% of the difference between the amount required to be withdrawn and the amount actually withdrawn. Even if the IRA Partial Withdrawal Option is not elected, distributions must nonetheless be made in accordance with the requirements of Federal tax law. Golden American notifies the contract owner of these regulations with a letter mailed on January 1st of the calendar year in which the contract owner reaches age 70 1/2 which explains the IRA Partial Withdrawal Option and supplies an election form. If electing this option, the owner specifies whether the withdrawal amount will be based on a life expectancy calculated on a single life basis (contract owner's life only) or, if the contract owner is married, on a joint life basis (contract owner's and spouse's lives combined). The contract owner selects the payment mode on a monthly, quarterly or annual basis. If the payment mode selected on the election form is more frequent than annually, the payments in the first calendar year in which the option is in effect will be based on the amount of payment modes remaining when Golden American receives the completed election form. Golden American calculates the IRA Partial Withdrawal amount each year based on the minimum distribution rules. We do this by dividing the contract value by the life expectancy. In the first year withdrawals begin, we use the contract value as of the date of the first payment. Thereafter, we use the contract value on December 31st of each year. The life expectancy is recalculated each year. Certain minimum distribution rules govern payouts if the designated beneficiary is other than the contract owner's spouse and the beneficiary is more than ten years younger than the contract owner. 9 OTHER INFORMATION Registration statements have been filed with the SEC under the Securities Act of 1933, as amended, with respect to the Contracts discussed in this Statement of Additional Information. Not all of the information set forth in the registration statements, amendments and exhibits thereto has been included in this Statement of Additional Information. Statements contained in this Statement of Additional Information concerning the content of the Contracts and other legal instruments are intended to be summaries. For a complete statement of the terms of these documents, reference should be made to the instruments filed with the SEC. FINANCIAL STATEMENTS OF SEPARATE ACCOUNT B The audited financial statements of Separate Account B are listed below and are included in this Statement of Additional Information: Report of Independent Auditors Audited Financial Statements Statement of Net Assets as of December 31, 2000 Statements of Operations for the year ended December 31, 2000 Statements of Changes in Net Assets for the years ended December 31, 2000 and 1999 Notes to Financial Statements 10 PART C - OTHER INFORMATION Item 24. Financial Statements and Exhibits (a) Financial Statements: * (1) All financial statements are included in either the Prospectus or the Statement of Additional Information, as indicated therein (2) Schedules I, III and IV follow. All other schedules to the consolidated financial statements required by Article 7 of Regulation S-X are omitted because they are not applicable or because the information is included elsewhere in the consolidated financial statements or notes thereto. *TO BE UPDATED BY AMENDMENT EXHIBITS 1 Resolution of the Board of Directors of Depositor authorizing the establishment of the Registrant 2 Not applicable 3 (a) Distribution Agreement between the Depositor and Direct Services, Inc. (b) Form of Dealers Agreement (c) Organizational Agreement (d) Addendum to Organizational Agreement (e) Expense Reimbursement Agreement (f) Form of Assignment Agreement for Organizational Agreement 4 (a) Form of Variable Annuity Group Master Contract* (b) Form of Variable Annuity Contract* (c) Form of Variable Annuity Certificate* (d) Form of Endorsement for Premium Bonus* (e) Earnings Enhancement Death Benefit Rider* 5 Not applicable 6 (a) Resolution of the Board of Directors for Powers of Attorney, dated 04/23/99 (b) Certificate of Amendment of the Restated Articles of Incorporation of Golden American Life Insurance Company, dated 03/01/95 (c) By-laws of Golden American Life Insurance Company, dated 01/07/94 7 Not applicable 8 (a) Service Agreement between Golden American Life Insurance Company and Equitable Life Insurance Company of Iowa (b) Service Agreement between Golden American Life Insurance Company and Directed Services, Inc. (c) Asset Management Agreement between Golden American Life Insurance Company and ING Investment Management LLC (d) Reciprocal Loan Agreement between Golden American Life Insurance Company and ING America Insurance Holdings, Inc. (e) Revolving Note Payable between Golden American Life Insurance Company and SunTrust Bank (f) Surplus Note, dated 12/17/96, between Golden American Life Insurance Company and Equitable of Iowa Companies (g) Surplus Note, dated 12/30/98, between Golden American Life Insurance Company and Equitable Life Insurance Company of Iowa (h) Surplus Note, dated 09/30/99, between Golden American Life Insurance Company and ING AIH (i) Surplus Noted, dated 12/08/99, between Golden American Life Insurance Company and First Columbine Life Insurance Company (j) Surplus Note, dated 12/30/99, between Golden American Life Insurance Company and Equitable of Iowa Companies (k) Reinsurance Agreement, dated 06/30/00, between Golden American and Equitable Life Insurance Company of Iowa (l) Renewal of Revolving Note Payable between Golden American and SunTrust Bank as of July 31, 2000 and expiring July 31, 2001 (m) Reinsurance Agreement, effective 01/01/00, between Golden American and Security Life of Denver International Limited (n) Letter of Credit between Security Life of Denver International Limited and The Bank of New York (o) Form of Participation Agreement between Golden American Life Insurance Company and Aeltus Investment Management, Inc.* (p) Form of Participation Agreement between Golden American Life Insurance Company and AIM Advisors, Inc.* (q) Form of Participation Agreement between Golden American Life Insurance Company and Alliance Capital Management L.P.* (r) Form of Participation Agreement between Golden American Life Insurance Company and Brinson Advisors, Inc.* (s) Form of Participation Agreement between Golden American Life Insurance Company and Fidelity Management & Research Company* (t) Form of Participation Agreement between Golden American Life Insurance Company and Invesco* (u) Form of Participation Agreement between Golden American Life Insurance Company and Janus Capital Corporation* (v) Amended Schedule to the Participation Agreement between Golden American Life Insurance Company and ING Pilgrim Investors, LLC* (w) Form of Participation Agreement between Golden American Life Insurance Company and Pioneer* (x) Form of Participation Agreement between Golden American Life Insurance Company and Massachusetts Financial Services Company* (y) Amended Schedule to the Participation Agreement between Golden American Life Insurance Company and Prudential Series Fund, Inc.* (z) Amended Schedule to the Participation Agreement between Golden American Life Insurance Company and Pacific Investment Management, Co.* (aa)Form of Participation Agreement between Golden American Life Insurance Company and Putnam Investment Management, Inc.* 9 Opinion and Consent of Myles R. Tashman* 10(a) Consent of Sutherland Asbill & Brennan LLP* (b) Consent of Ernst & Young, LLP, Independent Auditors* (c) Consent of Myles Tashman, incorporated in Item 9 of this Part C, together with the opinion of Myles R. Tashman 11 Not applicable 12 Not applicable 13 Schedule of Performance Data* 14 Not applicable 15 Powers of Attorney 16 Subsidiaries of ING Groep N.V. * ------------------------------ *TO BE FILED BY AMENDMENT ITEM 25: DIRECTORS AND OFFICERS OF THE DEPOSITOR Principal Position(s) Name Business Address with Depositor ---- ---------------- -------------- Robert C. Salipante ReliaStar Financial Corp. Director and Chief 20 Washington Avenue South Executive Officer Minneapolis, MN 55402 Chris D. Schreier ReliaStar Financial Corp. President 20 Washington Avenue South Minneapolis, MN 55402 Barnett Chernow Golden American Life Ins. Co. President and 1475 Dunwoody Drive CEO, Investment West Chester, PA 19380 Products Group Thomas J. McInerney ING Aetna Financial Services Director 151 Farmington Avenue Hartford, CT 06156 Mark A. Tullis ING Insurance Operations Director 5780 Powers Ferry Road Atlanta, GA 30327-4390 Phillip R. Lowery ING Insurance Operations Director 5780 Powers Ferry Road Atlanta, GA 30327-4390 Wayne R. Huneke ING Insurance Operations Director and Chief 5780 Powers Ferry Road Financial Officer Atlanta, GA 30327-4390 Myles R. Tashman Golden American Life Ins. Co. Executive Vice President, 1475 Dunwoody Drive General Counsel and West Chester, PA 19380 Assistant Secretary James R. McInnis Golden American Life Ins. Co. Executive Vice President 1475 Dunwoody Drive and Chief Marketing West Chester, PA 19380 Officer Stephen J. Preston Golden American Life Ins. Co. Executive Vice President 1475 Dunwoody Drive and Chief Actuary West Chester, PA 19380 Steven G. Mandel Golden American Life Ins. Co. Senior Vice President and 1475 Dunwoody Drive Chief Information Officer West Chester, PA 19380 E. Robert Koster Golden American Life Ins. Co. Senior Vice President 1475 Dunwoody Drive West Chester, PA 19380 David L. Jacobson Golden American Life Ins. Co. Senior Vice President and 1475 Dunwoody Drive Chief Compliance Officer West Chester, PA 19380 William L. Lowe Equitable of Iowa Companies Senior Vice President, 909 Locust Street Sales & Marketing Des Moines, IA 50309 Gary F. Haynes Golden American Life Ins. Co. Senior Vice President 1475 Dunwoody Drive Operations West Chester, PA 19380 David S. Pendergrass ING Insurance Operations Vice President and 5780 Powers Ferry Road Treasurer Atlanta, GA 30327-4390 Paula Cludray-Engelke ReliaStar Financial Corp. Secretary 20 Washington Avenue South Minneapolis, MN 55402 Andrew D. Chua Golden American Life In. Co. Senior Vice President 1475 Dunwoody Drive West Chester, PA 19380 ITEM 26: PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR REGISTRANT The Depositor owns 100% of the stock of a New York company, First Golden American Life Insurance Company of New York ("First Golden"). The primary purpose for the formation of First Golden is to offer variable products in the state of New York. The following persons control or are under common control with the Depositor: DIRECTED SERVICES, INC. ("DSI") - This corporation is a general business corporation organized under the laws of the State of New York, and is wholly owned by ING Groep N.V. ("ING") The primary purpose of DSI is to act as a broker-dealer in securities. It acts as the principal underwriter and distributor of variable insurance products including variable annuities as required by the SEC. The contracts are issued by the Depositor. DSI also has the power to carry on a general financial, securities, distribution, advisory or investment advisory business; to act as a general agent or broker for insurance companies and to render advisory, managerial, research and consulting services for maintaining and improving managerial efficiency and operation. DSI is also registered with the SEC as an investment adviser. The registrant is a segregated asset account of the Company and is therefore owned and controlled by the Company. All of the Company's outstanding stock is owned and controlled by ING. Various companies and other entities controlled by ING may therefore be considered to be under common control with the registrant or the Company. Such other companies and entities, together with the identity of their controlling persons (where applicable), are set forth on the following organizational chart. The subsidiaries of ING, as of February 28, 2001, are included in this registration statement as Exhibit 16. [TO BE UPDATED BY AMENDMENT.] Item 27: Number of Contract Owners As of May 31, 2001, there are 63,574 qualified contract owners and 83,217 non-qualified contract owners in Golden American's Separate Account B. ITEM 28: INDEMNIFICATION Golden American shall indemnify (including therein the prepayment of expenses) any person who is or was a director, officer or employee, or who is or was serving at the request of Golden American as a director, officer or employee of another corporation, partnership, joint venture, trust or other enterprise for expenses (including attorney's fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him with respect to any threatened, pending or completed action, suit or proceedings against him by reason of the fact that he is or was such a director, officer or employee to the extent and in the manner permitted by law. Golden American may also, to the extent permitted by law, indemnify any other person who is or was serving Golden American in any capacity. The Board of Directors shall have the power and authority to determine who may be indemnified under this paragraph and to what extent (not to exceed the extent provided in the above paragraph) any such person may be indemnified. Golden American or its parents may purchase and maintain insurance on behalf of any such person or persons to be indemnified under the provision in the above paragraphs, against any such liability to the extent permitted by law. Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended, may be permitted to directors, officers and controlling persons of the Registrant, as provided above or otherwise, the Registrant has been advised that in the opinion of the SEC such indemnification by the Depositor is against public policy, as expressed in the Securities Act of 1933, and therefore may be unenforceable. In the event that a claim of such indemnification (except insofar as it provides for the payment by the Depositor of expenses incurred or paid by a director, officer or controlling person in the successful defense of any action, suit or proceeding) is asserted against the Depositor by such director, officer or controlling person and the SEC is still of the same opinion, the Depositor or Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by the Depositor is against public policy as expressed by the Securities Act of 1933 and will be governed by the final adjudication of such issue. ITEM 29: PRINCIPAL UNDERWRITER (a) At present, DSI, the Registrant's Distributor, also serves as principal underwriter for all contracts issued by Golden American. DSI is the principal underwriter for Separate Account A of Golden American, Separate Account B of Golden American, Alger Separate Account A of Golden American, Separate Account NY-B of First Golden, Separate Account A for Equitable Life Insurance Company of Iowa and The GCG Trust. (b) The following information is furnished with respect to the principal officers and directors of Directed Services, Inc., the Registrant's Distributor. The principal business address for each officer and director following is 1475 Dunwoody Drive, West Chester, PA 19380-1478, unless otherwise noted. Name and Principal Positions and Offices Business Address with Underwriter ------------------- --------------------- James R. McInnis President Barnett Chernow Director and Executive Vice President Myles R. Tashman Director, Executive Vice President, Secretary and General Counsel Stephen J. Preston Executive Vice President David S. Pendergrass Vice President and Treasurer ING Insurance Operations 5780 Powers Ferry Road Atlanta, GA 30327-4390 David L. Jacobson Senior Vice President and Assistant Secretary (c) 2000 Net Name of Underwriting Compensation Principal Discounts and on Brokerage Underwriter Commissions Redemption Commissions Compensation ----------- ------------ ------------- ---------- ----------- DSI $208,883,000 $0 $0 $0 ITEM 30: LOCATION OF ACCOUNTS AND RECORDS Accounts and records are maintained by Golden American Life Insurance Company at 1475 Dunwoody Drive, West Chester, Pennsylvania 19380-1478, ING Americas at 5780 Powers Ferry Road, N.W., Atlanta, GA 30327-4390 and by Equitable Life Insurance Company of Iowa, an affiliate, at 909 Locust Street, Des Moines, Iowa 50309. ITEM 31: MANAGEMENT SERVICES None. ITEM 32: UNDERTAKINGS (a) Registrant hereby undertakes to file a post-effective amendment to this registration statement as frequently as it is necessary to ensure that the audited financial statements in the registration statement are never more that 16 months old so long as payments under the variable annuity contracts may be accepted. (b) Registrant hereby undertakes to include either (1) as part of any application to purchase a contract offered by the prospectus, a space that an applicant can check to request a Statement of Additional Information, or (2) a post card or similar written communication affixed to or included in the prospectus that the applicant can remove to send for a Statement of Additional Information; and, (c) Registrant hereby undertakes to deliver any Statement of Additional Information and any financial statements required to be made available under this Form promptly upon written or oral request. REPRESENTATIONS 1. The account meets definition of a "separate account" under federal securities laws. 2. Golden American Life Insurance Company hereby represents that the fees and charges deducted under the Contract described in the Prospectus, in the aggregate, are reasonable in relation to the services rendered, the expenses to be incurred and the risks assumed by the Company. SIGNATURES As required by the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant, Separate Account B, has duly caused this Registration Statement to be signed on its behalf in the City of West Chester, Commonwealth of Pennsylvania, on the 22nd day of June, 2001. SEPARATE ACCOUNT B (Registrant) By: GOLDEN AMERICAN LIFE INSURANCE COMPANY (Depositor) By: -------------------- Robert C. Salipante* Chief Executive Officer Attest: /s/ Linda E. Senker ------------------------------- Linda E. Senker Vice President and Associate General Counsel of Depositor As required by the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities indicated on June 22, 2001. Signature Title --------- ----- Director and Chief Executive -------------------- Officer of Depositor Robert C. Salipante* Director, Senior Vice President -------------------- and Chief Financial Officer Wayne R. Huneke* DIRECTORS OF DEPOSITOR ---------------------- Robert C. Salipante* ---------------------- Thomas J. McInerney* ---------------------- Wayne R. Huneke* ---------------------- Mark A. Tullis* ---------------------- Phillip R. Lowery* Attest: /s/ Linda E. Senker ------------------------------- Linda E. Senker Vice President and Associate General Counsel of Depositor *Executed by Linda E. Senker on behalf of those indicated pursuant to Power of Attorney. EXHIBIT INDEX ITEM EXHIBIT PAGE # ---- ------- ------ 1 Resolution of the Board of Directors of Depositor authorizing the establishment of the Registrant EX-99.B1 3(a) Distribution Agreement between the Depositor and Directed Services, Inc. EX-99.B3A 3(b) Form of Dealers Agreement EX-99.B3B 3(c) Organizational Agreement EX-99.B3C 3(d) Addendum to Organizational Agreement EX-99.B3D 3(e) Expense Reimbursement Agreement EX-99.B3E 3(f) Form of Assignment Agreement for Organizational Agreement EX-99.B3F 6(a) Resolution of Board of Directors for Powers of Attorney, dated 04/23/99 EX-99.B6A 6(b) Certificate of Amendment of the Restated Articles of Incorporation of Golden American Life insurance Company, dated 03/01/95 EX-99.B6B 6(c) By-laws of Golden American Life Insurance Company, dated 01/07/94 EX-99.B6C 8(a) Service Agreement between Golden American Life Insurance Company and Equitable Life Insurance Company of Iowa EX-99.B8A 8(b) Service Agreement between Golden American Life Insurance Company and Directed Services, Inc. EX-99.B8B 8(c) Asset Management Agreement between Golden American Life Insurance Company and ING Investment Management LLC EX-99.B8C 8(d) Reciprocal Loan Agreement between Golden American Life Insurance Company and ING America Insurance Holdings, Inc. EX-99.B8D 8(e) Revolving Note Payable between Golden American Life Insurance Company and SunTrust Bank EX-99.B8E 8(f) Surplus Note, dated 12/17/96, between Golden American Life Insurance Company and Equitable of Iowa Companies EX-99.B8F 8(g) Surplus Note, dated 12/30/98, between Golden American Life Insurance Company and Equitable Life Insurance Company of Iowa EX-99.B8G 8(h) Surplus Note, dated 09/30/99, between Golden American Life Insurance Company and ING AIH EX-99.B8H 8(i) Surplus Noted, dated 12/08/99, between Golden American Life Insurance Company and First Columbine Life Insurance Company EX-99.B8I 8(j) Surplus Note, dated 12/30/99, between Golden American Life Insurance Company and Equitable of Iowa Companies EX-99.B8J 8(k) Reinsurance Agreement, dated 06/30/00, between Golden American Life Insurance Company and Equitable Life Insurance Company of Iowa EX-99.B8K 8(l) Renewal of Revolving Note Payable between Golden American Life Insurance Company and SunTrust Bank as of July 31, 2000 and expiring July 31, 2001 EX-99.B8L 8(m) Reinsurance Agreement, effective 01/01/00, between Golden American and Security Life of Denver International Limited EX-99.B8M 8(n) Letter of Credit between Security Life of Denver International Limited and The Bank of New York EX-99.B8N 15 Powers of Attorney EX-99.B15