-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NMKYiuXqDiY0uMuwpn6yeZe1ira7HrtfjXxrHih2SQS162F9NOlFtPrq/6CgyK3L ZtZMSCiSzmVvdywuTIG7kQ== 0001047469-09-004654.txt : 20090428 0001047469-09-004654.hdr.sgml : 20090428 20090428162533 ACCESSION NUMBER: 0001047469-09-004654 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 20090428 DATE AS OF CHANGE: 20090428 EFFECTIVENESS DATE: 20090501 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COMMONWEALTH SEL ACCT OF COMMONWEALTH ANNUITY & LIFE INSURANCE CO CENTRAL INDEX KEY: 0000886134 IRS NUMBER: 046145677 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1933 Act SEC FILE NUMBER: 033-47216 FILM NUMBER: 09776021 BUSINESS ADDRESS: STREET 1: 132 TURNPIKE ROAD, SUITE 210 CITY: SOUTHBOROUGH STATE: MA ZIP: 01772 BUSINESS PHONE: (508)490-2400 MAIL ADDRESS: STREET 1: 132 TURNPIKE ROAD, SUITE 210 CITY: SOUTHBOROUGH STATE: MA ZIP: 01772 FORMER COMPANY: FORMER CONFORMED NAME: ALLMERICA FIN LIFE INS & ANN CO ALLMERICA SEL ACCT DATE OF NAME CHANGE: 19960301 FORMER COMPANY: FORMER CONFORMED NAME: ALLMERICA SELECT SEPARATE ACCOUNT OF ALLMER FN LF INS & AN C DATE OF NAME CHANGE: 19951107 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COMMONWEALTH SEL ACCT OF COMMONWEALTH ANNUITY & LIFE INSURANCE CO CENTRAL INDEX KEY: 0000886134 IRS NUMBER: 046145677 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1940 Act SEC FILE NUMBER: 811-06632 FILM NUMBER: 09776022 BUSINESS ADDRESS: STREET 1: 132 TURNPIKE ROAD, SUITE 210 CITY: SOUTHBOROUGH STATE: MA ZIP: 01772 BUSINESS PHONE: (508)490-2400 MAIL ADDRESS: STREET 1: 132 TURNPIKE ROAD, SUITE 210 CITY: SOUTHBOROUGH STATE: MA ZIP: 01772 FORMER COMPANY: FORMER CONFORMED NAME: ALLMERICA FIN LIFE INS & ANN CO ALLMERICA SEL ACCT DATE OF NAME CHANGE: 19960301 FORMER COMPANY: FORMER CONFORMED NAME: ALLMERICA SELECT SEPARATE ACCOUNT OF ALLMER FN LF INS & AN C DATE OF NAME CHANGE: 19951107 0000886134 S000009761 ALLMERICA FIN LIFE INS & ANN CO ALLMERICA SEL ACCT C000026819 Allmerica Select Resource (33-47216) 485BPOS 1 a2191538z485bpos.txt 485BPOS File Nos. 33-47216 811-6632 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 Post-Effective Amendment No. 35 REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 Amendment No. 81 COMMONWEALTH SELECT SEPARATE ACCOUNT OF COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (Exact Name of Registrant) COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (Name of Depositor) 132 Turnpike Road, Suite 210 Southborough, Massachusetts 01772 Telephone: (508) 460-2400 (Address of Depositor's Principal Executive Office Scott D. Silverman, Vice President, General Counsel and Corporate Secretary Commonwealth Annuity and Life Insurance Company 132 Turnpike Road, Suite 210 Southborough, Massachusetts 01772 Telephone: (508) 460-2408 (Name and Address of Agent for Service of Process) It is proposed that this filing will become effective: |_| immediately upon filing pursuant to paragraph (b) of Rule 485 |X| on May 1, 2009 pursuant to paragraph (b) of Rule 485 |_| 60 days after filing pursuant to paragraph (a) (1) of Rule 485 |_| on (date) pursuant to paragraph (a) (1) of Rule 485 |_| this post-effective amendment designates a new effective date for a previously filed post-effective amendment VARIABLE ANNUITY CONTRACTS Pursuant to Reg. Section 270.24f-2 of the Investment Company Act of 1940 ("1940 Act"), Registrant has registered an indefinite amount of its securities under the Securities Act of 1933 ("1933 Act"). The Rule 24f-2 Notice for the issuer's fiscal year ended December 31, 2008 and was filed on or before March 30, 2009. CROSS REFERENCE SHEET SHOWING LOCATION IN PROSPECTUSES OF ITEMS CALLED FOR BY FORM N-4 FORM N-4 ITEM NO. CAPTION IN PROSPECTUSES - ----------------- ----------------------- 1 Cover Page 2 Special Terms 3 Summary of Fees and Expenses; Summary of Contract Features 4 Condensed Financial Information; Performance Information 5 Description of the Companies, the Variable Accounts, and the Underlying Investment Companies 6 Charges and Deductions 7 Description of the Contract 8 Electing the Form of Annuity and the Annuity Date; Description of Variable Annuity Payout Options; Annuity Benefit Payments 9 Death Benefit 10 Payments; Computation of Values; Distribution 11 Surrender; Withdrawals; Charge for Surrender and Withdrawal; Withdrawal Without Surrender Charge; Texas Optional Retirement Program 12 Federal Tax Considerations 13 Legal Matters 14 Statement of Additional Information - Table of Contents FORM N-4 ITEM NO. CAPTION IN STATEMENT OF ADDITIONAL INFORMATION - ----------------- ---------------------------------------------- 15 Cover Page 16 Table of Contents 17 General Information and History 18 Services 19 Underwriters 20 Performance Information 21 Annuity Benefit Payments 22 Financial Statements COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY SOUTHBOROUGH, MASSACHUSETTS This Prospectus provides important information about the Commonwealth Annuity Select Resource II variable annuity contracts issued by Commonwealth Annuity and Life Insurance Company ("Commonwealth Annuity") (in all jurisdictions except Hawaii and New York). The contract is a flexible payment tax-deferred combination variable and fixed annuity offered on both a group and individual basis. This Prospectus also includes important information about the Commonwealth Annuity Select Resource I contract. See Appendix D. As of the date of this Prospectus, the Company has ceased issuing new contracts except in connection with certain preexisting contractual plans and programs. PLEASE READ THIS PROSPECTUS CAREFULLY BEFORE INVESTING AND KEEP IT FOR FUTURE REFERENCE. ANNUITIES INVOLVE RISKS INCLUDING POSSIBLE LOSS OF PRINCIPAL. A Statement of Additional Information ("SAI") dated May 1, 2009 containing more information about this annuity is on file with the Securities and Exchange Commission and is incorporated by reference into this Prospectus. A copy may be obtained free of charge by calling Commonwealth Annuity Select Customer Service at 1-800-366-1492. The Table of Contents of the Statement of Additional Information is listed on page 4 of this Prospectus. This Prospectus and the Statement of Additional Information can also be obtained from the Securities and Exchange Commission's website (http://www.sec.gov). The Commonwealth Select Separate Account is subdivided into Sub-Accounts. Each Sub-Account offered as an investment option under this contract invests exclusively in shares of one of the following funds: GOLDMAN SACHS VARIABLE INSURANCE TRUST (SERVICE SHARES) Goldman Sachs VIT Capital Growth Fund Goldman Sachs VIT Core Fixed Income Fund Goldman Sachs VIT Equity Index Fund Goldman Sachs VIT Government Income Fund Goldman Sachs VIT Growth Opportunities Fund Goldman Sachs VIT Mid Cap Value Fund Goldman Sachs VIT Money Market Fund Goldman Sachs VIT Strategic International Equity Fund Goldman Sachs VIT Structured U.S. Equity Fund AIM VARIABLE INSURANCE FUNDS (SERIES I SHARES) AIM V.I. Capital Appreciation Fund AIM V.I. Core Equity Fund AIM V.I. Dynamics Fund AIM V.I. Global Health Care Fund AIM V.I. Large Cap Growth Fund AIM VARIABLE INSURANCE FUNDS (SERIES II SHARES) AIM V.I. Basic Value Fund AIM V.I. Capital Development Fund ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND, INC. (CLASS B) AllianceBernstein VPS Global Thematic Growth Portfolio AllianceBernstein VPS Growth and Income Portfolio AllianceBernstein VPS Large Cap Growth Portfolio AllianceBernstein VPS Small/Mid Cap Value Portfolio AllianceBernstein VPS Value Portfolio DWS INVESTMENTS VIT FUNDS DWS Small Cap Index VIP DWS VARIABLE SERIES II DWS Dreman High Return Equity VIP DWS Technology VIP EATON VANCE VARIABLE TRUST Eaton Vance VT Floating-Rate Income Fund Eaton Vance VT Worldwide Health Sciences Fund (CONTINUES ON THE NEXT PAGE) THIS ANNUITY IS NOT A BANK DEPOSIT OR OBLIGATION; IS NOT FEDERALLY INSURED; AND IS NOT ENDORSED BY ANY BANK OR GOVERNMENTAL AGENCY. ANNUITIES INVOLVE RISKS INCLUDING POSSIBLE LOSS OF PRINCIPAL. THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED THAT THE INFORMATION IN THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. DATED MAY 1, 2009 (CONT.) FIDELITY VARIABLE INSURANCE PRODUCTS FUNDS Fidelity VIP Contrafund(R) Portfolio Fidelity VIP Equity-Income Portfolio Fidelity VIP Growth Portfolio Fidelity VIP Growth & Income Portfolio Fidelity VIP High Income Portfolio Fidelity VIP Mid Cap Portfolio FIDELITY VARIABLE INSURANCE PRODUCTS FUNDS (SERVICE CLASS 2) Fidelity VIP Value Strategies Portfolio FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST (CLASS 2) FT VIP Franklin Large Cap Growth Securities Fund FT VIP Franklin Small Cap Value Securities Fund FT VIP Franklin Small-Mid Cap Growth Securities Fund FT VIP Mutual Shares Securities Fund FT VIP Templeton Foreign Securities Fund JANUS ASPEN SERIES (SERVICE SHARES) Janus Aspen Growth and Income Portfolio Janus Aspen Overseas Portfolio Janus Aspen Janus Portfolio Janus Aspen Enterprise Portfolio MFS(R) VARIABLE INSURANCE TRUST(SM) (SERVICE CLASS) MFS(R) Mid Cap Growth Series MFS(R) New Discovery Series MFS(R) Total Return Series MFS(R) Utilities Series OPPENHEIMER VARIABLE ACCOUNT FUNDS (SERVICE SHARES) Oppenheimer Balanced Fund/VA Oppenheimer Capital Appreciation Fund/VA Oppenheimer Global Securities Fund/VA Oppenheimer High Income Fund/VA Oppenheimer Main Street Fund(R)/VA PIONEER VARIABLE CONTRACTS TRUST (CLASS II) Pioneer Fund VCT Portfolio Pioneer Real Estate Shares VCT Portfolio T. ROWE PRICE INTERNATIONAL SERIES, INC. T. Rowe Price International Stock Portfolio In most jurisdictions, values may be allocated to the Fixed Account which is part of the Company's General Account. The Fixed Account is an investment option that pays an interest rate guaranteed for one year from the time a payment is received. The Guarantee Period Accounts, additional investment options available in most jurisdictions, offer fixed rates of interest for specified periods ranging from 3 to 10 years. A Market Value Adjustment is applied to payments removed from a Guarantee Period Account before the end of the specified period. The Market Value Adjustment may be positive or negative. Payments allocated to a Guarantee Period Account are held in the Company's Separate Account GPA (except in California where they are allocated to the General Account). 2 TABLE OF CONTENTS SPECIAL TERMS 5 SUMMARY OF FEES AND EXPENSES 7 SUMMARY OF CONTRACT FEATURES 11 DESCRIPTION OF THE COMPANY, THE VARIABLE ACCCOUNT AND THE UNDERLYING FUNDS 16 INVESTMENT OBJECTIVES AND POLICIES 17 PERFORMANCE INFORMATION 23 DESCRIPTION OF THE CONTRACT 25 DISRUPTIVE TRADING 25 PAYMENTS 26 RIGHT TO CANCEL INDIVIDUAL RETIREMENT ANNUITY 27 RIGHT TO CANCEL ALL OTHER CONTRACTS 27 TELEPHONE TRANSACTIONS PRIVILEGE 27 TRANSFER PRIVILEGE 28 AUTOMATIC TRANSFERS AND AUTOMATIC ACCOUNT REBALANCING OPTIONS 28 SURRENDER 29 WITHDRAWALS 30 DEATH BENEFIT 31 THE SPOUSE OF THE OWNER AS BENEFICIARY 32 OPTIONAL ENHANCED EARNINGS RIDER 33 ASSIGNMENT 35 ELECTING THE FORM OF ANNUITY AND THE ANNUITY DATE 35 DESCRIPTION OF VARIABLE ANNUITY PAYOUT OPTIONS 36 ANNUITY BENEFIT PAYMENTS 37 NORRIS DECISION 38 COMPUTATION OF VALUES 38 CHARGES AND DEDUCTIONS 40 VARIABLE ACCOUNT DEDUCTIONS 40 CONTRACT FEE 41 OPTIONAL RIDER CHARGES 41 PREMIUM TAXES 41 SURRENDER CHARGE 42 WAIVER OF SURRENDER CHARGE AND ADDITIONAL AMOUNTS CREDITED 43 TRANSFER CHARGE 45 GUARANTEE PERIOD ACCOUNTS 46 FEDERAL TAX CONSIDERATIONS 48 GENERAL 48 QUALIFIED AND NON-QUALIFIED CONTRACTS 49 TAXATION OF THE CONTRACT 49 TAX WITHHOLDING 52 OTHER TAX ISSUES 52 PROVISIONS APPLICABLE ONLY TO TAX QUALIFIED PLANS 53 STATEMENTS AND REPORTS 54 LOANS (QUALIFIED CONTRACTS ONLY) 54 ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS 56 CHANGES TO COMPLY WITH LAW AND AMENDMENTS 57 VOTING RIGHTS 57 DISTRIBUTION 57 LEGAL MATTERS 57 FURTHER INFORMATION 58
3 APPENDIX A -- MORE INFORMATION ABOUT THE FIXED ACCOUNT A-1 APPENDIX B -- SURRENDER CHARGES AND THE MARKET VALUE ADJUSTMENT B-1 APPENDIX C -- THE DEATH BENEFIT C-1 APPENDIX D -- DIFFERENCES UNDER THE COMMONWEALTH ANNUITY SELECT RESOURCE I CONTRACT D-1 APPENDIX E -- CONDENSED FINANCIAL INFORMATION E-1 STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS GENERAL INFORMATION AND HISTORY 3 TAXATION OF THE CONTRACT, THE VARIABLE ACCOUNT AND THE COMPANY 4 SERVICES 5 UNDERWRITERS 6 ANNUITY BENEFIT PAYMENTS AND ACCUMULATION UNIT CALCULATION 6 ENHANCED AUTOMATIC TRANSFER (DOLLAR COST AVERAGING) PROGRAM 8 DISCONTINUATION OF THE MINIMUM GUARANTEED ANNUITY PAYOUT (M-GAP) RIDER 8 PERFORMANCE INFORMATION 10 FINANCIAL STATEMENTS F-1
4 SPECIAL TERMS ACCUMULATED VALUE: the total value of all Accumulation Units in the Sub-Accounts plus the value of all accumulations in the Fixed Account and Guarantee Period Accounts credited to the Contract on any date before the Annuity Date. ACCUMULATION UNIT: a unit of measure used to calculate the value of a Sub-Account before annuity benefit payments begin. ANNUITANT: the person designated in the Contract upon whose life annuity benefit payments are to be made. ANNUITY DATE: the date on which annuity benefit payments begin. This date may not be later than the first day of the month before the Annuitant's 90th birthday. ANNUITY UNIT: a unit of measure used to calculate the value of the periodic annuity benefit payments under the Contract. COMPANY: unless otherwise specified, any reference to the "Company" shall refer exclusively to Commonwealth Annuity and Life Insurance Company. CUMULATIVE EARNINGS: the Accumulated Value reduced by total payments not previously withdrawn. FIXED ACCOUNT: an investment option under the Contract that guarantees principal and a fixed minimum interest rate and which is part of the Company's General Account. FIXED ANNUITY PAYOUT: an annuity payout option providing for annuity benefit payments which remain fixed in amount throughout the annuity benefit payment period selected. GENERAL ACCOUNT: all the assets of the Company other than those held in a separate account. GUARANTEE PERIOD: the number of years that a Guaranteed Interest Rate is credited. GUARANTEE PERIOD ACCOUNT: an account which corresponds to a Guaranteed Interest Rate for a specified Guarantee Period. GUARANTEED INTEREST RATE: the annual effective rate of interest, after daily compounding, credited to a Guarantee Period Account. MARKET VALUE ADJUSTMENT: a positive or negative adjustment assessed if any portion of a Guarantee Period Account is withdrawn or transferred prior to the end of its Guarantee Period. OWNER (YOU): the person, persons or entity entitled to exercise the rights and privileges under this Contract. Joint Owners are permitted if one of the two is the Annuitant. SERVICE OFFICE: Security Benefit Life Insurance Company and its affiliates (collectively, "Security Benefit") provide administrative, accounting, and other services to the Company. The principal administrative offices of Security Benefit are located at One Security Benefit Place Topeka, KS 66675, telephone 1-800-366-1492. SUB-ACCOUNT: a subdivision of the Variable Account investing exclusively in the shares of a corresponding Underlying Fund. SURRENDER VALUE: the Accumulated Value of the Contract on full surrender after application of any applicable Contract fee, surrender charge, rider charge and Market Value Adjustment. UNDERLYING FUND (OR FUNDS): certain investment portfolios of Goldman Sachs Variable Insurance Trust "Goldman Sachs VIT"), AIM Variable Insurance Funds ("AIM"), AllianceBernstein Variable Products Series Fund, Inc. ("AllianceBernstein VPS"), Eaton Vance Variable Trust ("EVVT"), Fidelity Variable Insurance Products Funds ("Fidelity VIP"), Franklin Templeton Variable Insurance Products Trust ("FT VIP"), Janus Aspen Series ("Janus Aspen"), MFS(R) Variable Insurance Trust(SM) (the "MFS(R) Trust"), Oppenheimer Variable Account Funds ("Oppenheimer"), Pioneer Variable Contracts Trust ("Pioneer VCT"), DWS Scudder Investment VIT Funds ("DWS Scudder VIT"), DWS Variable Series II ("DVS"), T. Rowe Price International Series, Inc. ("T. Rowe Price"). 5 VALUATION DATE: a day on which the net asset value of the shares of any of the Underlying Funds is determined and unit values of the Sub-Accounts are determined. Valuation Dates currently occur on each day on which the New York Stock Exchange is open for trading, and on such other days (other than a day during which no payment, withdrawal or surrender of a Contract was received) when there is a sufficient degree of trading in an Underlying Fund's portfolio securities such that the current unit value of the Sub-Accounts may be affected materially. VALUATION PERIOD: The time span between the close of trading on the New York Stock Exchange from one Valuation Date to the next. VARIABLE ACCOUNT: Commonwealth Select Separate Account, one of the Company's separate accounts, consisting of assets segregated from other assets of the Company. The investment performance of the assets of the Variable Account is determined separately from the other assets of the Company and are not chargeable with liabilities arising out of any other business which the Company may conduct. VARIABLE ANNUITY PAYOUT: an annuity payout option providing for payments varying in amount in accordance with the investment experience of certain of the Underlying Funds. 6 SUMMARY OF FEES AND EXPENSES There are certain fees and expenses that you will incur directly or indirectly under the Commonwealth Annuity Select Resource II Contract. The following tables describe the fees and expenses that you will pay when buying, owning and surrendering the contract. The purpose of the tables is to help you understand these various charges. TABLE I OWNER TRANSACTION EXPENSES TABLE I DESCRIBES THE FEES AND EXPENSES THAT YOU WILL PAY AT THE TIME THAT YOU BUY OR SURRENDER THE CONTRACT AND WHEN YOU TRANSFER VALUES AMONG THE INVESTMENT OPTIONS. (NOTE: THE COMPANY DOES NOT CHARGE A TRANSACTION CHARGE WHEN YOU PURCHASE THE CONTRACT AND DOES NOT CURRENTLY CHARGE WHEN YOU TRANSFER AMONG INVESTMENT OPTIONS.) STATE PREMIUM TAXES ARE APPLICABLE IN SOME STATES AND ARE DEDUCTED AS DESCRIBED IN "PREMIUM TAXES" UNDER CHARGES AND DEDUCTIONS. MAXIMUM CHARGE SURRENDER CHARGE(1): (as a percentage of payments withdrawn) 6.5% TRANSFER CHARGE(2): $0 on the first 12 transfers in a Contract year. Up to $25 for subsequent transfers. (1) During the accumulation phase, this charge may be assessed upon surrender, withdrawal or annuitization under any commutable period certain option or a noncommutable fixed period certain option of less than ten years. The charge is a percentage ranging from 6.5% to 1.0% of payments withdrawn (in excess of any amount that is free of surrender charge) within the indicated time period. YEARS MEASURED FROM DATE OF PAYMENT CHARGE - ----------------------------------- ------ Less than 1 6.5% Less than 2 6.0% Less than 3 5.0% Less than 4 4.0% Less than 5 3.0% Less than 6 2.0% Less than 7 1.0% Thereafter 0.0% (2) The Company currently does not charge for processing transfers and guarantees that the first 12 transfers in a Contract year will not be subject to a transfer charge. For each subsequent transfer, the Company reserves the right to assess a charge, guaranteed never to exceed $25, to reimburse the Company for the costs of processing the transfer. 7 TABLE II PERIODIC FEES AND EXPENSES OTHER THAN UNDERLYING FUND EXPENSES THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU WILL PAY PERIODICALLY DURING THE TIME THAT YOU OWN THE CONTRACT, NOT INCLUDING THE FEES AND EXPENSES OF EACH UNDERLYING FUND. ANNUAL CONTRACT FEE(1): $ 30 ANNUAL VARIABLE SUB-ACCOUNT EXPENSES: (on an annual basis as percentage of average daily net assets) Mortality and Expense Risk Charge: 1.25% Administrative Expense Charge: 0.15% ---- Total Annual Expenses: 1.40% OPTIONAL RIDER CHARGES: The charge on an annual basis as a percentage of the Accumulated Value is: Enhanced Earnings Rider 0.25% Optional Minimum Guaranteed Annuity Payout (M-GAP) Rider with a ten-year waiting period:(2) 0.25% Optional Minimum Guaranteed Annuity Payout (M-GAP) Rider with a fifteen-year waiting period:(2) 0.15%
(1) During the accumulation phase, the fee is deducted annually and upon surrender when Accumulated Value is less than $50,000. The fee is waived for Contracts issued to and maintained by the trustee of a 401(k) plan. (2) If you elected one of the following riders prior to their discontinuance on 1/31/02, 1/12th of the annual charge is deducted pro-rata on a monthly basis at the end of each month and, if applicable, at termination. For more information about the M-GAP Rider, see "DISCONTINUATION OF THE MINIMUM GUARANTEED ANNUITY PAYOUT (M-GAP) RIDER" in the SAI. 8 TABLE III TOTAL ANNUAL OPERATING EXPENSES OF THE UNDERLYING FUNDS TABLE III SHOWS THE MINIMUM AND MAXIMUM TOTAL OPERATING EXPENSES CHARGED BY THE UNDERLYING FUNDS THAT YOU MAY PAY PERIODICALLY DURING THE TIME THAT YOU OWN THE CONTRACT. MORE DETAIL CONCERNING EACH UNDERLYING FUNDS' FEES AND EXPENSES, INCLUDING INFORMATION ABOUT ANY EXPENSE CAPS OR REIMBURSEMENTS, IS CONTAINED IN THE PROSPECTUS FOR THE UNDERLYING FUNDS.
ANNUAL FUND OPERATING EXPENSES - ------------------------------------------------------------------------------------------------- TOTAL ANNUAL FUND OPERATING EXPENSES MINIMUM MAXIMUM - ------------------------------------ ---------------------------- --------------------------- Expenses that are deducted from Fund Annual charge of 0.54%(1)(2) Annual charge of 1.97%(3) assets, including management fees, of average daily net assets of average daily net assets distribution and/or service (12b-1) fees and other expenses.
(1) "Other Expenses" are based on estimated amounts for the current fiscal year. Actual expenses may be different. (2) Through September 30, 2009, the Advisor has contractually agreed to waive all or a portion of its management fee and reimburse or pay operating expenses of the fund to the extent necessary to maintain the fund's operating expenses at 0.51% for Class A shares, excluding certain expenses such as extraordinary expenses, taxes, brokerage and interest. (3) Total Annual Fund Operating expenses for the period ending December 31, 2008 were 1.97% after applying the performance fee adjustment of 0.0%. Total annual expenses are not fixed or specified under the terms of the Contract and will vary from year to year. The information is based on expenses as a percentage of average net assets for the year ended December 31, 2008 as adjusted for any material changes. The Underlying Fund information is based on information provided by the Underlying Funds and is not independently verified by the Company. EXAMPLES THE FOLLOWING EXAMPLES ARE INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN THE CONTRACT WITH THE COST OF INVESTING IN OTHER VARIABLE ANNUITY CONTRACTS. THESE COSTS INCLUDE CONTRACT OWNER TRANSACTION EXPENSES, CONTRACT FEES, SEPARATE ACCOUNT ANNUAL EXPENSES, AND UNDERLYING FUND FEES AND EXPENSES. THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. NOTE: SEE APPENDIX D FOR EXPENSE EXAMPLES FOR SELECT RESOURCE I CONTRACTS (FORM A3020-92). 9 MAXIMUM EXPENSE EXAMPLE The following example assumes that you invest $10,000 in the Contract for the time periods indicated and that your investment has a 5% return each year. The example also assumes the maximum fees and expenses of any of the Underlying Funds and assumes that these fees and expenses remain the same in each of the 1, 3, 5, and 10-year intervals. Finally, the example assumes that you have chosen the combination of optional riders with the maximum possible charges, which would be the Enhanced Earnings Rider with a charge of 0.25% annually and the Minimum Guaranteed Annuity Payout (M-GAP) Rider with a ten-year waiting period at a charge of 0.25% annually. Although your actual costs may be higher or lower, based on these assumptions your costs would be: (1) If, at the end of the applicable time period, you surrender your Contract or annuitize under any commutable period certain option or a noncommutable fixed period certain option of less than ten years:
1 YEAR 3 YEARS 5 YEARS 10 YEARS ------ ------- ------- -------- Fund with the maximum total operating expenses $985 $1,657 $2,294 $4,130
(2) If you do NOT surrender your Contract or if you annuitize at the end of the applicable time period under a life option or a noncommutable fixed period certain option of ten years or longer:
1 YEAR 3 YEARS 5 YEARS 10 YEARS ------ ------- ------- -------- Fund with the maximum total operating expenses $393 $1,192 $2,009 $4,130
MINIMUM EXPENSE EXAMPLE The following example assumes that you invest $10,000 in the Contract for the time periods indicated and that your investment has a 5% return each year. The example also assumes the minimum fees and expenses of any of the Underlying Funds and assumes that these fees and expenses remain the same in each of the 1, 3, 5, and 10-year intervals. It also assumes that you have not chosen any optional riders. Although your actual costs may be higher or lower, based on these assumptions your costs would be: (1) If, at the end of the applicable time period, you surrender your Contract or annuitize under any commutable period certain option or a noncommutable fixed period certain option of less than ten years:
1 YEAR 3 YEARS 5 YEARS 10 YEARS ------ ------- ------- -------- Fund with the minimum total operating expenses $804 $1,113 $1,368 $2,306
(2) If you do NOT surrender your Contract or if you annuitize at the end of the applicable time period under a life option or a noncommutable fixed period certain option of ten years or longer:
1 YEAR 3 YEARS 5 YEARS 10 YEARS ------ ------- ------- -------- Fund with the minimum total operating expenses $201 $621 $1,068 $2,306
10 SUMMARY OF CONTRACT FEATURES WHAT IS THE COMMONWEALTH ANNUITY SELECT RESOURCE II VARIABLE ANNUITY? The Commonwealth Annuity Select Resource II variable annuity contract or certificate ("Contract") is an insurance contract designed to help you, the Owner, accumulate assets for your retirement or other important financial goals on a tax-deferred basis. The Contract combines the concept of professional money management with the attributes of an annuity contract. Features available through the Contract include: - a customized investment portfolio; - experienced professional investment advisers; - tax deferral on earnings; - guarantees that can protect your family during the accumulation phase; and - income payments that you can receive for life. I HAVE THE COMMONWEALTH ANNUITY SELECT RESOURCE I CONTRACT -- ARE THERE ANY DIFFERENCES? Yes. If your Contract is issued on Form No. A3020-92 ("Commonwealth Annuity Select Resource I"), it is basically similar to the Contract described in this Prospectus ("Commonwealth Annuity Select Resource II") except as specifically indicated in APPENDIX D -- DIFFERENCES UNDER THE COMMONWEALTH ANNUITY RESOURCE I CONTRACT. The form number is located in the bottom left-hand corner of your Contract pages and may include some numbers or letters in addition to A3020-92 in order to identify state variations. WHAT HAPPENS IN THE ACCUMULATION PHASE? The Contract has two phases, an accumulation phase and, if you choose to annuitize, an annuity payout phase. During the accumulation phase, you may allocate payments among the combination of portfolios of securities ("Underlying Funds") (up to seventeen Sub-Accounts, in addition to the Goldman Sachs VIT Money Market Fund, may be utilized at any one time) and, in most jurisdictions, the Guarantee Period Accounts and the Fixed Account (collectively "the investment options"). You select the investment options most appropriate for your investment needs. As those needs change, you may also change your allocation without incurring any tax consequences. Your Contract's Accumulated Value is based on the investment performance of the Underlying Funds and any accumulations in the Guarantee Period and Fixed Accounts. You do not pay taxes on any earnings under the Contract until you withdraw money. In addition, during the accumulation phase, your beneficiaries receive certain protections in the event of the Annuitant's death. See discussion below WHAT HAPPENS UPON DEATH DURING THE ACCUMULATION PHASE? WHAT HAPPENS IN THE ANNUITY PAYOUT PHASE? During the annuity payout phase, the Annuitant can receive income based on several annuity payout options. You choose the annuity payout option and the date for annuity benefit payments to begin. You also decide whether you want variable annuity benefit payments based on the investment performance of certain Underlying Funds, fixed-amount annuity benefit payments with payment amounts guaranteed by the Company, or a combination of fixed-amount and variable annuity benefit payments. Among the payout options available during the annuity payout phase are: - periodic payments for the Annuitant's lifetime; - periodic payments for the Annuitant's life and the life of another person selected by you; - periodic payments for the Annuitant's lifetime with any remaining guaranteed payments continuing to your beneficiary for 10 years in the event that the Annuitant dies before the end of ten years; 11 - periodic payments over a specified number of years (1 to 30) - under the fixed version of this option you may reserve the right to convert remaining payments to a lump-sum payout by electing a commutable option. Variable period certain options are automatically commutable. WHO ARE THE KEY PERSONS UNDER THE CONTRACT? The Contract is between you, (the "Owner"), and us, Commonwealth Annuity and Life Insurance Company. Each Contract has an Owner (or an Owner and a Joint Owner, in which case one of the two must be the Annuitant), an Annuitant and one or more beneficiaries. As Owner, you make payments, choose investment allocations and select the Annuitant and beneficiary. The Annuitant is the individual who receives annuity benefit payments under the Contract. The beneficiary is the person who receives any payment on the death of the Owner or Annuitant. HOW MUCH CAN I INVEST AND HOW OFTEN? The number and frequency of your payments are flexible, subject only to a $5,000 minimum for your initial payment ($2,000 for IRA's) and a $50 minimum for any additional payments. (A lower initial payment amount may be permitted where monthly payments are being forwarded directly from a financial institution.) In addition, a minimum of $1,000 is always required to establish a Guarantee Period Account. WHAT ARE MY INVESTMENT CHOICES? Prior to the Annuity Date, you may allocate payments among one or more of the Sub-Accounts investing in the Underlying Funds (up to a total of seventeen at any one time, in addition to the Goldman Sachs VIT Money Market Fund), the Guarantee Period Accounts, and the Fixed Account. Each Underlying Fund operates pursuant to different investment objectives and this range of investment options enables you to allocate your money among the Underlying Funds to meet your particular investment needs. For a detailed description of the Underlying Funds, see INVESTMENT OBJECTIVES AND POLICIES. Assets supporting the guarantees under the Guarantee Period Accounts are held in the Company's Separate Account GPA, a non-unitized insulated separate account, except in California where assets are held in the Company's General Account. Values and benefits calculated on the basis of Guarantee Period Account allocations, however, are obligations of the Company's General Account. Amounts allocated to a Guarantee Period Account earn a Guaranteed Interest Rate declared by the Company. The level of the Guaranteed Interest Rate depends on the number of years of the Guarantee Period selected. The Company may offer up to eight Guarantee Periods ranging from three to ten years in duration. Once declared, the Guaranteed Interest Rate will not change during the duration of the Guarantee Period. If amounts allocated to a Guarantee Period Account are transferred, surrendered or applied to any annuity option at any time other than the day following the last day of the applicable Guarantee Period, a Market Value Adjustment will apply that may increase or decrease the account's value. For more information about the Guarantee Period Accounts and the Market Value Adjustment, see GUARANTEE PERIOD ACCOUNTS. THE GUARANTEE PERIOD ACCOUNTS MAY NOT BE AVAILABLE IN ALL STATES. The Fixed Account is part of the General Account which consists of all the Company's assets other than those allocated to the Variable Account and any other separate account. Allocations to the Fixed Account are guaranteed as to principal and a minimum rate of interest. Additional excess interest may be declared periodically at the Company's discretion. Furthermore, the initial rate in effect on the date an amount is allocated to the Fixed Account is guaranteed for one year from that date. For more information about the Fixed Account, see APPENDIX A -- MORE INFORMATION ABOUT THE FIXED ACCOUNT. 12 CAN I MAKE TRANSFERS AMONG THE INVESTMENT OPTIONS? Yes. Prior to the Annuity Date, you may transfer among the Sub-Accounts investing in the Underlying Funds, the Guarantee Period Accounts, and the Fixed Account. You will incur no current taxes on transfers while your money remains in the Contract. The first 12 transfers in a Contract year are guaranteed to be free of a transfer charge. For each subsequent transfer in a Contract year, the Company does not currently charge but reserves the right to assess a processing charge guaranteed never to exceed $25. Transfers may be made to and among all of the available Sub-Accounts as long as no more than seventeen Sub-Accounts, in addition to the Goldman Sachs VIT Money Market Fund, are utilized at any one time. See "TRANSFER PRIVILEGE" under DESCRIPTION OF THE CONTRACT. WHAT IF I NEED MY MONEY BEFORE THE ANNUITY PAYOUT PHASE BEGINS? Before the annuity payout phase begins, you may surrender your Contract or make withdrawals at any time. A 10% tax penalty may apply on all amounts deemed to be earnings if you are under age 59 1/2. Each calendar year, you can withdraw without a surrender charge the greatest of 100% of Cumulative Earnings, 10% of the Contract's Accumulated Value or, if you are both an Owner and the Annuitant, an amount based on your life expectancy. (Similarly, no surrender charge will apply if an amount is withdrawn based on the Annuitant's life expectancy and the Owner is a trust or other nonnatural person.) Additional amounts may be withdrawn at any time but payments that have not been invested in the Contract for more than seven years may be subject to a surrender charge. (A Market Value Adjustment may apply to any withdrawal made from a Guarantee Period Account prior to the expiration of the Guarantee Period.) In addition, you may withdraw all or a portion of your money without a surrender charge if, after the Contract is issued and before age 65, you become disabled. Also, except in New Jersey where not permitted by state law, you may withdraw money without a surrender charge if, after the contract is issued, you are admitted to a medical care facility or diagnosed with a fatal illness. For details and restrictions, see "Reduction or Elimination of Surrender Charge and Additional Amounts Credited" under "SURRENDER CHARGE" in the CHARGES AND DEDUCTION section. WHAT HAPPENS UPON DEATH DURING THE ACCUMULATION PHASE? If the Annuitant, Owner or Joint Owner should die before the Annuity Date, a death benefit will be paid to the beneficiary. Upon the death of the Annuitant (or an Owner who is also an Annuitant), the death benefit is equal to the greatest of: - The Accumulated Value on the Valuation Date that the Company receives proof of death and all necessary claim paperwork, increased by any positive Market Value Adjustment; - Gross payments, with interest compounding daily at an effective annual yield of 5% starting on the date each payment is applied, and continuing throughout your investments' entire accumulation phase, decreased proportionately to reflect withdrawals; or - The death benefit that would have been payable on the most recent Contract anniversary, increased for subsequent payments and decreased proportionately for subsequent withdrawals. This guaranteed death benefit works in the following way assuming no withdrawals are made. On the first anniversary, the death benefit will be equal to the greater of: (a) the Accumulated Value (increased by any positive Market Value Adjustment); or (b) gross payments compounded daily at an effective annual yield of 5%. The higher of (a) or (b) will then be locked in until the second anniversary, at which time the death benefit will be equal to the greatest of: (a) the Contract's then current Accumulated Value increased by any positive Market Value Adjustment; (b) gross payments compounded daily at an effective annual yield of 5%; or (c) the locked-in value of the death benefit at the first anniversary. 13 The greatest of (a), (b) or (c) will be locked in until the next Contract anniversary. This calculation will then be repeated on each anniversary while the Contract remains in force and prior to the Annuity Date. As noted above, the values of (b) and (c) will be decreased proportionately if withdrawals are taken. At the death of an Owner who is not also the Annuitant during the accumulation phase, the death benefit will equal the Contract's Accumulated Value on the Valuation Date that the Company receives proof of death and all necessary claim paperwork, increased by any positive Market Value Adjustment. If the Annuitant dies after the Annuity Date but before all guaranteed annuity benefit payments have been made, the remaining payments will be paid to the beneficiary at least as rapidly as under the annuity option in effect. See "DEATH BENEFIT" In addition, if you elected the optional Enhanced Earnings Rider at issue, additional amounts may be payable to your beneficiary if the Annuitant dies prior to the Annuity Date. For a detailed discussion of the benefits under the Enhanced Earnings Rider, see OPTIONAL ENHANCED EARNINGS RIDER" under DESCRIPTION OF THE CONTRACT. WHAT CHARGES WILL I INCUR UNDER MY CONTRACT? If the Accumulated Value on a Contract anniversary or upon surrender is less than $50,000, the Company will deduct a $30 Contract fee from your Contract. The Contract fee is currently waived for Contracts issued to and maintained by a trustee of a 401(k) plan. Should you decide to surrender your Contract, make withdrawals, or receive payments under certain annuity options, you may be subject to a surrender charge. If applicable, this charge will be between 1% and 6.5% of payments withdrawn, based on when the payments were originally made. A deduction for state and local premium taxes, if any, may be made as described under "PREMIUM TAXES." The Company will deduct on a daily basis, an annual Mortality and Expense Risk Charge and Administrative Expense Charge equal to 1.25% and 0.15%, respectively, of the average daily net assets invested in each Fund. The Funds will incur certain management fees and expenses which are described in the prospectuses of the Underlying Funds which accompany this Prospectus. These charges vary among the Underlying Funds and may change from year to year. If you elected the optional Enhanced Earnings Rider, a separate monthly charge is deducted from the Contract's Accumulated Value. For specific information regarding charges, see "OPTIONAL RIDER CHARGES" under CHARGES AND DEDUCTIONS. CAN I EXAMINE THE CONTRACT? Yes. Your Contract will be delivered to you after your purchase. If you return the Contract to the Company within ten days of receipt, the Contract will be cancelled. (There may be a longer period in certain states; see the "Right to Examine" provision on the cover of your Contract.) If you cancel the Contract, you will receive a refund of any amounts allocated to the Fixed and Guarantee Period Accounts and the Accumulated Value of any amounts allocated to the Sub-Accounts (plus any fees or charges that may have been deducted.) However, if state law requires, or if the Contract was issued as an Individual Retirement Annuity (IRA) you will generally receive a refund of your entire payment. (In certain states this refund may be the greater of (1) your entire payment or (2) the amounts allocated to the Fixed and Guarantee Period Accounts plus the Accumulated Value of amounts in the Sub-Accounts, plus any fees or charges previously deducted.) See "RIGHT TO CANCEL INDIVIDUAL RETIREMENT ANNUITY" and "RIGHT TO CANCEL ALL OTHER CONTRACTS" under DESCRIPTION OF THE CONTRACT. 14 CAN I MAKE FUTURE CHANGES UNDER MY CONTRACT? You can make several changes after receiving your Contract: - You may assign your ownership to someone else, except under certain qualified plans. - You may change the beneficiary, unless you have designated a beneficiary irrevocably. - You may change your allocation of payments. - You may make transfers of Accumulated Value among your current investments without any tax consequences. - You may cancel your Contract within ten days of delivery (or longer if required by state law). 15 DESCRIPTION OF THE COMPANY, THE VARIABLE ACCCOUNT AND THE UNDERLYING FUNDS THE COMPANY. Effective September 1, 2006, Allmerica Financial Life Insurance and Annuity Company was renamed Commonwealth Annuity and Life Insurance Company and the principal office was relocated to 132 Turnpike Road, Suite 210, Southborough, MA 01772, Telephone 508-460-2400. Unless otherwise specified, any reference to the "Company" refers to Commonwealth Annuity and Life Insurance Company ("Commonwealth Annuity"). Commonwealth Annuity is a life insurance company organized under the laws of Delaware in July 1974. Prior to December 31, 2002, Commonwealth Annuity was a direct subsidiary of First Allmerica Financial Life Insurance Company, which in turn was a direct subsidiary of The Hanover Insurance Group ("THG," formerly Allmerica Financial Corporation). Effective December 31, 2002, Commonwealth Annuity became a Massachusetts domiciled insurance company and a direct subsidiary of THG. On December 30, 2005, THG completed the closing of the sale of the Company to The Goldman Sachs Group, Inc. ("Goldman Sachs"), 85 Broad Street, New York, NY 10004. As of December 31, 2008, Commonwealth Annuity had $6 billion in assets and $12 billion of life insurance in force. Commonwealth Annuity is subject to the laws of the Commonwealth of Massachusetts governing insurance companies and to regulation by the Commissioner of Insurance of Massachusetts. In addition, it is subject to the insurance laws and regulations of other states and jurisdictions in which it is licensed to operate. Its Principal Office is located at 132 Turnpike Road, Suite 210, Southborough, MA 01772, Telephone 508-460-2400. COMMONWEALTH SELECT SEPARATE ACCOUNT. The Company maintains a separate account called the Commonwealth Select Separate Account (the "Variable Account"). The Variable Account was authorized by vote of the Board of Directors of the Company on March 5, 1992. The Variable Account is registered with the SEC as a unit investment trust under the Investment Company Act of 1940 ("the 1940 Act"). This registration does not involve the supervision or management of investment practices or policies of the Variable Account by the SEC. The Variable Account is a separate investment account of the Company. The assets used to fund the variable portions of the Contract are set aside in Sub-Accounts kept separate from the general assets of the Company. The Sub-Account is administered and accounted for as part of the general business of the Company. The income, capital gains or capital losses of the Sub-Account, however, are allocated to each Sub-Account, without regard to any other income, capital gains, or capital losses of the Company. Obligations under the Contracts are obligations of the Company. Under Massachusetts law, the assets of the Variable Account may not be charged with any liabilities arising out of any other business of the Company. The Company reserves the right, subject to compliance with applicable law, to change the names of the Separate Account and the Sub-Accounts. The Company also offers other variable annuity contracts investing in the Variable Account which are not discussed in this Prospectus. In addition, the Variable Account may invest in other underlying funds which are not available to the contracts described in this Prospectus. UNDERLYING FUNDS. Each Sub-Account invests in a corresponding investment portfolio ("Underling Fund") of an open-end management investment company. The Underlying Funds available through this Contract are NOT publicly traded. They are only available as variable investment options in variable life insurance policies or variable annuity contracts issued by life insurance companies or, in some cases, through participation in certain qualified pension or retirement plans. The investment advisers of the Underlying Funds may manage publicly traded mutual funds with similar names and objectives. However, the Underlying Funds are NOT directly related to any publicly traded mutual fund. Consequently, the investment performance of the Underlying Funds and any similarly named publicly traded mutual fund may differ substantially. A summary of investment objectives of each of the Underlying Funds is set forth below. Certain Underlying Funds have similar investment objectives and/or policies. Therefore, to choose the Sub-Accounts which best meet your needs and objectives, carefully read the Underlying Fund prospectuses along with this Prospectus. There 16 can be no assurance that the investment objectives of the Underlying Funds can be achieved. In some states, insurance regulations may restrict the availability of particular Funds. INVESTMENT OBJECTIVES AND POLICIES A summary of investment objectives of each of the Underlying Funds is set forth below. MORE DETAILED INFORMATION REGARDING THE INVESTMENT OBJECTIVES, RESTRICTIONS AND RISKS, EXPENSES PAID BY THE UNDERLYING FUNDS AND OTHER RELEVANT INFORMATION REGARDING THE FUNDS MAY BE FOUND IN THEIR RESPECTIVE PROSPECTUSES, WHICH SHOULD BE READ CAREFULLY BEFORE INVESTING. THE PROSPECTUSES AND STATEMENTS OF ADDITIONAL INFORMATION OF THE UNDERLYING FUNDS ARE AVAILABLE FROM THE SERVICE OFFICE UPON REQUEST. There can be no assurance that the investment objectives of the Underlying Funds can be achieved or that the value of the Contract will equal or exceed the aggregate amount of the purchase payments made under the Contract. Sub-Account values will fluctuate; even a Sub-Account investing in a money market fund may have negative returns, particularly if fees and charges are deducted at the Sub-Account level. GOLDMAN SACHS VARIABLE SACHS VARIABLE INSURANCE TRUST (SERVICE SHARES) ADVISER: GOLDMAN SACHS ASSET MANAGEMENT, L.P. ADVISER: GOLDMAN SACHS ASSET MANAGEMENT INTERNATIONAL - GOLDMAN SACHS VIT STRATEGIC INTERNATIONAL EQUITY FUND GOLDMAN SACHS VIT CAPITAL GROWTH FUND - seeks long-term growth of capital. GOLDMAN SACHS VIT CORE FIXED INCOME FUND - seeks a total return consisting of capital appreciation and income that exceeds the total return of the Lehman Brothers Aggregate Bond Index. GOLDMAN SACHS VIT EQUITY INDEX FUND - seeks to achieve investment results that correspond to the aggregate price and yield performance of a benchmark index that measures the investment returns of large capitalization stocks. The sub-adviser is SSgA Funds Management, Inc. GOLDMAN SACHS VIT GOVERNMENT INCOME FUND - seeks a high level of current income, consistent with safety of principal. GOLDMAN SACHS VIT GROWTH OPPORTUNITIES FUND - seeks long-term growth of capital. GOLDMAN SACHS VIT MID CAP VALUE FUND - seeks long-term capital appreciation. GOLDMAN SACHS VIT MONEY MARKET FUND - The Money Market Fund seeks to maximize current income to the extent consistent with the preservation of capital and the maintenance of liquidity by investing exclusively in high quality money market instruments. The Money Market Fund pursues its investment objective by investing in U.S. Government Securities, obligations of U.S. banks, commercial paper and other short-term obligations of U.S. companies, states, municipalities and other entities and repurchase agreements. The Fund may also invest in U.S. dollar denominated obligations of foreign banks, foreign companies and foreign governments. GOLDMAN SACHS VIT STRATEGIC INTERNATIONAL EQUITY FUND - seeks long-term capital appreciation. The Fund seeks this objective by investing in the stocks of leading companies within developed and emerging countries around the world, outside the U.S. GOLDMAN SACHS VIT STRUCTURED U.S. EQUITY FUND - The Fund seeks long-term growth of capital and dividend income. The Fund seeks this objective through a broadly diversified portfolio of large-cap and blue chip equity investments representing all major sectors of the U.S. economy. 17 AIM VARIABLE INSURANCE FUNDS (SERIES I SHARES) ADVISER: INVESCO AIM ADVISORS, INC. AIM V.I. CAPITAL APPRECIATION FUND -- The fund's investment objective is growth of capital. The fund seeks to meet its investments by primarily in common stocks of companies of all market capitalizations. The sub-advisers are Invesco Trimark Ltd., Invesco Global Asset Management (N.A.), Inc., Invesco Institutional (N.A.), Inc., Invesco Senior Secured Management, Inc., Invesco Hong Kong Limited, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Asset Management Deutschland, GmbH, and Invesco Australia Limited. AIM V.I. CORE EQUITY FUND -- The fund's investment objective is growth of capital. The Fund normally fund seeks to meet its objective by investing, normally, at least 80% of its net assets, plus the amount of any borrowings for investment purposes, in equity securities including convertible securities, of established companies that have long-term above-average growth in earnings, and growth companies that the portfolio manager believes have the potential for above-average growth in earnings. The sub-advisers are Invesco Trimark Ltd., Invesco Global Asset Management (N.A.), Inc., Invesco Institutional (N.A.), Inc., Invesco Senior Secured Management, Inc., Invesco Hong Kong Limited, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Asset Management Deutschland, GmbH, and Invesco Australia Limited. AIM V.I. DYNAMICS FUND -- The fund's investment objective is long-term capital growth. The fund seeks to meet its objective by investing, normally, at least 65% of its net assets in equity securities of mid-capitalization companies. The sub-advisers are Invesco Trimark Ltd., Invesco Global Asset Management (N.A.), Inc., Invesco Institutional (N.A.), Inc., Invesco Senior Secured Management, Inc., Invesco Hong Kong Limited, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Asset Management Deutschland, GmbH, and Invesco Australia Limited. AIM V.I. GLOBAL HEALTH CARE FUND -- The fund's investment objective is capital growth. The fund seeks to meet its objective by investing, normally, at least 80% of its net assets in securities of health care industry companies. The sub-advisers are Invesco Trimark Ltd., Invesco Global Asset Management (N.A.), Inc., Invesco Institutional (N.A.), Inc., Invesco Senior Secured Management, Inc., Invesco Hong Kong Limited, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Asset Management Deutschland, GmbH, and Invesco Australia Limited. AIM V.I. LARGE CAP GROWTH FUND -- The fund's investment objective is to provide long-term growth of capital. The fund seeks to meet its objective by investing, normally, at least 80% of its assets in securities of large-capitalization companies. The sub-advisers are Invesco Trimark Ltd., Invesco Global Asset Management (N.A.), Inc., Invesco Institutional (N.A.), Inc., Invesco Senior Secured Management, Inc., Invesco Hong Kong Limited, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Asset Management Deutschland, GmbH, and Invesco Australia Limited. AIM VARIABLE INSURANCE FUNDS (SERIES II SHARES) ADVISER: INVESCO AIM ADVISORS, INC. AIM V.I. BASIC VALUE FUND -- The fund's investment objective is long-term growth of capital. The portfolio management team seeks to construct a portfolio of companies that have the potential for capital growth. The fund's investment may include synthetic and derivative instruments.The sub-advisers are Invesco Trimark Ltd., Invesco Global Asset Management (N.A.), Inc., Invesco Institutional (N.A.), Inc., Invesco Senior Secured Management, Inc., Invesco Hong Kong Limited, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Asset Management Deutschland, GmbH, and Invesco Australia Limited. 18 AIM V.I. CAPITAL DEVELOPMENT FUND -- The fund's investment objective is long-term growth of capital. The fund seeks to meet its objective by investing primarily in equity securities of mid-capitalization companies. The principal type of equity securities purchased by the fund is common stocks. The sub-advisers are Invesco Trimark Ltd., Invesco Global Asset Management (N.A.), Inc., Invesco Institutional (N.A.), Inc., Invesco Senior Secured Management, Inc., Invesco Hong Kong Limited, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Asset Management Deutschland, GmbH, and Invesco Australia Limited. ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND, INC. (CLASS B) ADVISER: ALLIANCEBERNSTEIN L.P. ALLIANCEBERNSTEIN VPS GLOBAL THEMATIC GROWTH PORTFOLIO -- seeks long-term growth of capital. This Portfolio was formerly known as AllianceBernstein VPS Global Technology Portfolio. ALLIANCEBERNSTEIN VPS GROWTH AND INCOME PORTFOLIO -- seeks long-term growth of capital. ALLIANCEBERNSTEIN VPS LARGE CAP GROWTH PORTFOLIO -- seeks long-term growth of capital. ALLIANCEBERNSTEIN VPS SMALL/MID CAP VALUE PORTFOLIO -- seeks long-term growth of capital. ALLIANCEBERNSTEIN VPS VALUE PORTFOLIO -- seeks long-term growth of capital. DWS INVESTMENT VIT FUNDS ADVISER: DEUTSCHE INVESTMENT MANAGEMENT AMERICA INC. DWS SMALL CAP INDEX VIP -- The portfolio seeks maximum appreciation of investors' capital. Under normal circumstances, the portfolio invests at least 80% of net assets, plus the amount of any borrowings for investment purposes, in small capitalization stocks similar in size to those comprising the Russell 2000(R) Growth Index. Deutsche Investment Management Americas Inc. is the investment advisor for the portfolio. DWS VARIABLE SERIES II ADVISER: DEUTSCHE INVESTMENT MANAGEMENT AMERICAS INC. DWS DREMAN HIGH RETURN EQUITY PORTFOLIO -- The portfolio seeks to achieve a high rate of total return. Under normal circumstances, the portfolio invests at least 80% of net assets, plus the amount of any borrowings for investment purposes, in common stocks and other equity securities. The portfolio focuses on stocks of large U.S, companies that are similar in size to the companies in the Standard & Poor's 500(R) Composite Stock Price Index and that portfolio management believes are undervalued. Deutsche Investment Management Americas Inc. is the investment advisor for the portfolio. Dreman Value Management L.L.C. is the subadvisor for the portfolio. DWS TECHNOLOGY PORTFOLIO -- The portfolio seeks growth of capital. Under normal circumstances, the portfolio invests at least 80% of net assets, plus the amount of any borrowings for investment purposes, in common stocks of U.S. companies in the technology sector. The portfolio may invest in companies of any size. In addition, the portfolio may invest in initial public offerings. While the portfolio invests mainly in US stocks, it could invest up to 35% of its net assets in foreign securities. Deutsche Investment Management Americas Inc. is the investment advisor for the portfolio. EATON VANCE VARIABLE TRUST ADVISER: EATON VANCE MANAGEMENT -- EATON VANCE VT FLOATING-RATE INCOME FUND ADVISER: ORBIMED ADVISORS LLC -- EATON VANCE VT WORLDWIDE HEALTH SCIENCES FUND 19 EATON VANCE VT FLOATING-RATE INCOME FUND - seeks to provide a high level of current income. The Fund invests primarily in interests in senior floating rate loans. These loans typically are of below investment grade quality and have below investment grade credit ratings, which ratings are associated with securities having high risk, speculative characteristics. The Fund normally invests at least 80% of its net assets in income producing floating rate loans and other floating rate debt securities. EATON VANCE VT WORLDWIDE HEALTH SCIENCES FUND - seeks long-term capital growth by investing in a worldwide and diversified portfolio of health sciences companies. The Fund invests at least 80% of net assets in securities (primarily common stocks) of companies principally engaged in the discovery, development, production or distribution of products (or services) related to scientific advances in health care. Because the Fund concentrates its investments in medical research and the health care industry, it could be affected by any event that adversely affects that industry. FIDELITY VARIABLE INSURANCE PRODUCTS FUNDS ADVISER: FIDELITY MANAGEMENT & RESEARCH COMPANY FIDELITY VIP CONTRAFUND(R) PORTFOLIO -- seeks long-term capital appreciation. The sub-advisers are FMR Co., Inc., Fidelity Management & Research (U.K.) Inc., Fidelity Research & Analysis Company, Fidelity International Investment Advisors, Fidelity International Investment Advisors (U.K.) Limited, and Fidelity Investments Japan Limited. FIDELITY VIP EQUITY-INCOME PORTFOLIO -- seeks reasonable income. The Fund will also consider the potential for capital appreciation. The fund's goal is to achieve a yield which exceeds the composite yield of securities comprising the Standard & Poor's 500(SM) Index (S&P 500(R)). The sub-adviser is FMR Co., Inc., Fidelity Research & Analysis Company, Fidelity Management & Research (U.K.) Inc., Fidelity International Investment Advisors, Fidelity International Investment Advisors (U.K.) Limited, and Fidelity Investments Japan Limited. FIDELITY VIP GROWTH PORTFOLIO -- seeks to achieve capital appreciation. The sub-adviser is FMR Co., Inc., Fidelity Research & Analysis Company, Fidelity Management & Research (U.K.) Inc., Fidelity International Investment Advisors, Fidelity International Investment Advisors (U.K.) Limited, and Fidelity Investments Japan Limited. FIDELITY VIP GROWTH & INCOME PORTFOLIO -- seeks high total return through a combination of current income and capital appreciation. The sub-advisers are FMR Co., Inc., Fidelity Management & Research (U.K.) Inc., Fidelity Research & Analysis Company, Fidelity International Investment Advisors, Fidelity International Investment Advisors (U.K.) Limited and Fidelity Investments Japan Limited. FIDELITY VIP HIGH INCOME PORTFOLIO -- seeks high level of current income, while also considering growth of capital. The sub-advisers are FMR Co., Inc., Fidelity Management & Research (U.K.) Inc., Fidelity Research & Analysis Company, Fidelity International Investment Advisors, Fidelity International Investment Advisors (U.K.) Limited, and Fidelity Investments Japan Limited. FIDELITY VIP MID CAP PORTFOLIO - seeks long-term growth of capital. The sub-advisers are FMR Co., Inc., Fidelity Management & Research (U.K.) Inc., Fidelity Research & Analysis Company, Fidelity International Investment Advisors, Fidelity International Investment Advisors (U.K.) Limited,. and Fidelity Investments Japan Limited. FIDELITY VARIABLE INSURANCE PRODUCTS FUNDS (SERVICE CLASS 2) ADVISER: FIDELITY MANAGEMENT & RESEARCH COMPANY FIDELITY VIP VALUE STRATEGIES PORTFOLIO - seeks capital appreciation. The sub-advisers are FMR Co., Inc., Fidelity Management & Research (U.K.) Inc., Fidelity Research & Analysis Company, Fidelity International 20 Investment Advisors, Fidelity International Investment Advisors (U.K.) Limited, and Fidelity Investments Japan Limited. FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST (CLASS 2) ADVISER: FRANKLIN ADVISERS, INC. - FT VIP FRANKLIN LARGE CAP GROWTH SECURITIES FUND AND FT VIP FRANKLIN SMALL-MID CAP GROWTH SECURITIES FUND ADVISER: FRANKLIN ADVISORY SERVICES, LLC - FT VIP FRANKLIN SMALL CAP VALUE SECURITIES FUND ADVISER: FRANKLIN MUTUAL ADVISERS, LLC - FT VIP MUTUAL SHARES SECURITIES FUND ADVISER: TEMPLETON INVESTMENT COUNSEL, LLC - FT VIP TEMPLETON FOREIGN SECURITIES FUND FT VIP FRANKLIN LARGE CAP GROWTH SECURITIES FUND - seeks capital appreciation. The Fund normally invests at least 80% of its net assets in investments of large capitalization companies, and normally invests predominantly in equity securities. FT VIP FRANKLIN SMALL CAP VALUE SECURITIES PORTFOLIO - seeks long-term total return. The Fund normally invests at least 80% of its net assets in investments of small capitalization companies and normally invests predominantly in equity securities. FT VIP FRANKLIN SMALL-MID CAP GROWTH SECURITIES FUND - seeks long-term capital growth. The Fund normally invests at least 80% of its net assets in investments of small capitalization and mid capitalization companies and normally invests predominantly in equity securities. FT VIP MUTUAL SHARES SECURITIES FUND -- seeks capital appreciation, with income as a secondary goal. The Fund normally invests primarily in U.S. and foreign equity securities that the manager believes are undervalued. The Fund also invests, to a lesser extent in risk arbitrage securities and distressed companies. FT VIP TEMPLETON FOREIGN SECURITIES FUND -- seeks long-term capital growth. The Fund normally invests at least 80% of its net assets in investments of issuers located outside the U.S., including those in emerging markets, and normally invests predominantly in equity securities. JANUS ASPEN SERIES (SERVICE SHARES) ADVISER: JANUS CAPITAL JANUS ASPEN GROWTH AND INCOME PORTFOLIO - seeks long-term capital growth and current income. JANUS ASPEN OVERSEAS PORTFOLIO -- seeks long-term growth of capital. This Portfolio was formerly known as Janus Aspen International Growth Portfolio. JANUS ASPEN JANUS PORTFOLIO - seeks long-term growth of capital in a manner consistent with the preservation of capital. This Portfolio was formerly known as Janus Aspen Large Cap Growth Portfolio. JANUS ASPEN ENTERPRISE PORTFOLIO -- seeks long-term growth of capital. This Portfolio was formerly known as Janus Aspen Mid Cap Growth Portfolio. MFS(R) VARIABLE INSURANCE TRUST(SM) (SERVICE CLASS) ADVISER: MANAGEMENT FINANCIAL SERVICES COMPANY MFS(R) MID CAP GROWTH SERIES -- seeks capital appreciation. MFS(R) NEW DISCOVERY SERIES -- seeks capital appreciation. MFS(R) TOTAL RETURN SERIES -- seeks total return. MFS(R) UTILITIES SERIES -- seeks total return. 21 OPPENHEIMER VARIABLE ACCOUNT FUNDS (SERVICE SHARES) ADVISER: OPPENHEIMERFUNDS, INC. OPPENHEIMER BALANCED FUND/VA -- seeks a high total investment return, which includes current income and capital appreciation in the value of its shares. OPPENHEIMER CAPITAL APPRECIATION FUND/VA -- seeks capital appreciation by investing in securities of well-known, established companies. OPPENHEIMER GLOBAL SECURITIES FUND/VA -- seeks long-term capital appreciation by investing a substantial portion of its assets in securities of foreign issuers, "growth-type" companies, cyclical industries and special situations that are considered to have appreciation possibilities. OPPENHEIMER HIGH INCOME FUND/VA -- seeks a high level of current income from investment in lower-grade, high-yield debt securities. OPPENHEIMER MAIN STREET FUND(R)/VA -- seeks high total return, (which includes growth in the value of its shares as well as current income), from equity and debt securities. PIONEER VARIABLE CONTRACTS TRUST (CLASS II) ADVISER: PIONEER INVESTMENT MANAGEMENT, INC. PIONEER FUND VCT PORTFOLIO -- Reasonable income and capital growth. PIONEER REAL ESTATE SHARES VCT PORTFOLIO -- Long-term growth of capital. Current income is a secondary objective. T. ROWE PRICE INTERNATIONAL SERIES, INC. ADVISER: T. ROWE PRICE INTERNATIONAL, INC. T. ROWE PRICE INTERNATIONAL STOCK PORTFOLIO -- seeks long-term growth of capital through investments primarily in common stocks of established, non-U.S. companies. Normally at least 80% of the fund's net assets will be invested in stocks. The fund is intended for long-term investors who can accept the price volatility inherent in common stock investing, and is subject to the risks unique to international investing such as changes in currency values, and also geographic or, potentially, emerging markets risks. The sub-adviser is T. Rowe Price Associates, Inc. If there is a material change in the investment policy of a Sub-Account or the Underlying Fund in which it invests, the Owner will be notified of the change. If the Owner has Accumulated Value allocated to that Fund, he or she may have the Accumulated Value reallocated without charge to another Fund or to the Fixed Account, where available, on written request received by the Company within sixty (60) days of the later of (1) the effective date of such change in the investment policy, or (2) the receipt of the notice of the Owner's right to transfer. 22 PERFORMANCE INFORMATION The Contract was first offered to the public by Commonwealth Annuity and Life Insurance Company in 1996. The Company, however, may advertise "total return" and "average annual total return" performance information based on (1) the periods that the Sub-Accounts have been in existence and (2) the periods that the Underlying Funds have been in existence. Performance tables are included in the SAI. The total return of a Sub-Account refers to the total of the income generated by an investment in the Sub-Account and of the changes in the value of the principal (due to realized and unrealized capital gains or losses) for a specified period, reduced by Variable Account charges, and expressed as a percentage. The average annual total return represents the average annual percentage change in the value of an investment in the Sub-Account over a given period of time. It represents averaged figures as opposed to the actual performance of a Sub-Account, which will vary from year to year. The yield of the Sub-Account investing in the Goldman Sachs VIT Money Market Fund refers to the income generated by an investment in the Sub-Account over a seven-day period (which period will be specified in the advertisement). This income is then "annualized" by assuming that the income generated in the specific week is generated over a 52-week period. This annualized yield is shown as a percentage of the investment. The "effective yield" calculation is similar but, when annualized, the income earned by an investment in the Sub-Account is assumed to be reinvested. Thus the effective yield will be slightly higher than the yield because of the compounding effect of this assumed reinvestment. The yield of a Sub-Account investing in a Fund other than the Goldman Sachs VIT Money Market Fund refers to the annualized income generated by an investment in the Sub-Account over a specified 30-day or one-month period. The yield is calculated by assuming that the income generated by the investment during that 30-day or one- month period is generated each period over a 12-month period and is shown as a percentage of the investment. PERFORMANCE INFORMATION FOR ANY SUB-ACCOUNT REFLECTS THE PERFORMANCE OF A HYPOTHETICAL INVESTMENT IN THE SUB-ACCOUNT DURING THE TIME PERIOD ON WHICH THE CALCULATIONS ARE BASED AS WELL AS CONTRACT LEVEL CHARGES (IF ANY) AND WITHDRAWAL CHARGES (FOR MORE INFORMATION, SEE THE SAI). PERFORMANCE INFORMATION SHOULD BE CONSIDERED IN LIGHT OF THE INVESTMENT OBJECTIVES AND POLICIES AND RISK CHARACTERISTICS OF THE UNDERLYING FUND IN WHICH THE SUB-ACCOUNT INVESTS AND THE MARKET CONDITIONS DURING THE GIVEN TIME PERIOD, AND SHOULD NOT BE CONSIDERED AS A REPRESENTATION OF WHAT MAY BE ACHIEVED IN THE FUTURE. Performance information for a Sub-Account may be compared in reports and promotional literature to: (1) the Standard & Poor's 500 Composite Stock Price Index (S&P 500), Dow Jones Industrial Average (DJIA), Shearson Lehman Aggregate Bond Index or other unmanaged indices, so that investors may compare the Sub-Account results with those of a group of unmanaged securities widely regarded by investors as representative of the securities markets in general; or (2) 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 products by overall performance, investment objectives, and assets, or tracked by other services, companies, publications, or persons, who rank such investment products on overall performance or other criteria; or (3) the Consumer Price Index (a measure for inflation) to assess the real rate of return from an investment in the Sub-Account. Unmanaged indices may assume the reinvestment of dividends but generally do not reflect deductions for administrative and management costs and expenses. In addition, relevant broad-based indices and performance from independent sources may be used to illustrate the performance of certain Contract features. 23 At times, the Company may also advertise the ratings and other information assigned to it by independent rating organizations such as A.M. Best Company ("A.M. Best"), Moody's Investors Service ("Moody's"), Standard & Poor's Insurance Rating Services ("S&P") and Duff & Phelps. A.M. Best's and Moody's ratings reflect their current opinion of the Company's relative financial strength and operating performance in comparison to the norms of the life/health insurance industry. S&P's and Duff & Phelps' ratings measure the ability of an insurance company to meet its obligations under insurance policies it issues and do not measure the ability of such companies to meet other non-policy obligations. The ratings also do not relate to the performance of the Underlying Funds. 24 DESCRIPTION OF THE CONTRACT As of the date of this Prospectus, the Company has ceased issuing new Contracts except in connection with certain pre-existing contractual plans and programs. References to issue requirements and initial payments are included as information regarding general Company procedures. This Prospectus provides only a very brief overview of the more significant aspects of the Contract and of the Company's administrative procedures for the benefit of the Company's current Owners. DISRUPTIVE TRADING This Contract is not designed for use by individuals, professional market timing organizations, or other entities that engage in short-term trading, frequent transfers, programmed transfers or transfers that are large in relation to the total assets of an Underlying Fund (collectively, "Disruptive Trading"). These activities may require the Underlying Fund to maintain undesirable large cash positions or frequently buy or sell portfolio securities. Such transfers may dilute the value of the Underlying Fund's shares, interfere with the efficient management of the Underlying Fund's portfolio, and increase brokerage and administrative costs of the Underlying Funds. As a result, Disruptive Trading may adversely affect an Underlying Fund's ability to invest effectively in accordance with its investment objectives and policies, and may harm other Contract Owners. In order to protect our Contract Owners and the Underlying Funds from potentially harmful trading activity, we utilize certain policies and procedures that are designed to detect and prevent disruptive trading among the Underlying Funds (the "Disruptive Trading Procedures"). Our Disruptive Trading Procedures consider certain factors in order to identify Disruptive Trading activity, including the following: - the number of transfers made over a period of time; - the length of time between transfers; - whether the transfers follow a pattern that appears to be designed to take advantage of short term market fluctuations, particularly within certain Underlying Funds; - the dollar amount(s) requested for transfers; and - whether the transfers are part of a group of transfers made by a third party on behalf of several individual Contract Owners; and - the investment objectives and/or size of the Underlying Funds. We may increase our monitoring of Contract Owners who engage in what we perceive to be disruptive trading, including investigating the transfer patterns within multiple contracts owned by the same Contract Owners. We may also investigate any patterns of disruptive trading identified by the Underlying Funds that may not have been captured by our Disruptive Trading Procedures. Our Disruptive Trading Procedures may vary from sub-account to Sub-Account. The Disruptive Trading Procedures limit the number of transfers a Contract Owner may make during a given period, limit the number of times a Contract Owner may transfer into particular funds during a given period, and place restrictions as to the time and means of transfers (for example, transfer instructions are required by a certain daily time cutoff), among other things. Subject to the terms of the Contract, the Company reserves the right to impose, without prior notice, additional or alternate restrictions on allocations and transfers that it determines, in its sole discretion, will disadvantage or potentially hurt the rights or interests of other Contract Owners or other holders of the Underlying Funds. Some of the Underlying Funds have reserved the right to temporarily or permanently refuse payments or transfer requests from the Company if, in the judgment of the Underlying Fund's investment adviser, the Underlying Fund would be unable to invest effectively in accordance with its investment objective or policies, or would otherwise potentially be adversely affected. If an Underlying Fund refuses a transfer request from the Company, the Company may not be able to effect certain allocations or transfers that a Contract Owner has 25 requested. In the future, some Underlying Funds may impose redemption fees on short-term trading (i.e., redemptions of mutual fund shares within a certain number of business days after purchase). We reserve the right to administer and collect any such redemption fees on behalf of the Underlying Funds. We will apply our Disruptive Trading Procedures consistently without special arrangement, waiver, or exception. However, the Company's ability to detect and deter Disruptive Trading and to consistently apply the Disruptive Trading Procedures may be limited by operational systems and technological limitations. Contract Owners seeking to engage in such transfer activities may employ a variety of strategies to avoid detection. Because identifying Disruptive Trading involves judgments that are inherently subjective, the Company cannot provide assurances that its Disruptive Trading Procedures will detect every Contract Owner who engages in disruptive trading. In addition, the terms of some contracts previously issued by the Company, historical practices or actions, litigation, or certain regulatory restrictions may limit the Company's ability to apply transfer or other restrictions. If we are unable to detect Disruptive Trading or are unable to restrict Disruptive Trading because of contract provisions or other reasons, you may experience dilution in the value of your Underlying Fund shares. There may be increased brokerage and administrative costs within the Underlying Funds, which may result in lower long-term returns for your investments. Additionally, because other insurance companies and/or retirement plans may invest in the Underlying Funds, we cannot guarantee that the Underlying Funds will not suffer harm from disruptive trading within the variable contracts issued by other insurance companies or among investment options available to retirement plan participants. Under rules recently adopted by the Securities and Exchange Commission, effective April 16, 2007, we will be required to: (1) enter into a written agreement with each Underlying Fund or its principal underwriter that will obligate us to provide to the Underlying Fund promptly upon request certain information about the trading activity of individual Contract Owners, and (2) execute instructions from the Underlying Fund to restrict or prohibit further purchases or transfers by specific Contract Owners who violate the frequent trading policies established by the Underlying Fund. PAYMENTS The Company issues a Contract when its underwriting requirements, which include receipt of the initial payment and allocation instructions by the Company at its Service Office, are met. These requirements also may include the proper completion of an application; however, where permitted, the Company may issue a Contract without completion of an application and/or signature for certain classes of Contracts. The Company reserves the right to reject an application or request to issue a Contract. Any such rejection will not discriminate unfairly among purchasers. Payments are to be made payable to the Company. A net payment is equal to the payment received less the amount of any applicable premium tax. The initial net payment is credited to the Contract and allocated among the requested investment options as of the date that all issue requirements are properly met. If all issue requirements are not completed within five business days of the Company's receipt of the initial payment, the payment will be returned immediately unless the applicant authorizes the Company to retain it pending completion of all issue requirements. Subsequent payments will be credited as of the Valuation Date received at the Service Office, on the basis of accumulation unit value next determined after receipt. Payments may be made to the Contract at any time prior to the Annuity Date, or prior to payment of the death benefit, subject to certain minimums: - Currently, the initial payment must be at least $5,000 ($2,000 for IRA's). A lower minimum amount may be permitted if monthly automatic payments are being forwarded directly from a financial institution. - Under a monthly automatic payment plan, the minimum initial payment is $50. - Each subsequent payment must be at least $50. 26 - The minimum allocation to a Guarantee Period Account is $1,000. If less than $1,000 is allocated to a Guarantee Period Account, the Company reserves the right to apply that amount to the Goldman Sachs VIT Money Market Fund of the Trust. Generally, unless otherwise requested, all payments will be allocated among the investment options in the same proportion that the initial net payment is allocated or, if subsequently changed, according to the most recent allocation instructions. Prior to the Annuity Date, you may utilize up to seventeen variable Sub-Accounts at any one time, in addition to the Goldman Sachs VIT Money Market Fund. The Owner may change allocation instructions for new payments pursuant to a written or telephone request. RIGHT TO CANCEL INDIVIDUAL RETIREMENT ANNUITY An individual purchasing a Contract intended to qualify as an IRA may cancel the Contract at any time within ten days after receipt of the Contract and receive a refund. In order to cancel the Contract, the Owner must mail or deliver the Contract to the agent through whom the Contract was purchased, to the Service Office, Security Benefit Life Insurance Company, located at One Security Benefit Place, Topeka, KS 66675, telephone 1-800-533-7881 or to an authorized representative. Mailing or delivery must occur within ten days after receipt of the Contract for cancellation to be effective. Within seven days the Company will provide a refund equal to the gross payment(s) received. In some states, however, the refund may equal the greater of (a) gross payments or (b) any amounts allocated to the Fixed Account and the Guarantee Period Accounts plus the Accumulated Value of amounts allocated to the Variable Account plus any amounts deducted under the Contract or by the Funds for taxes, charges or fees. At the time the Contract is issued, the "Right to Examine" provision on the cover of the Contract will specifically indicate whether the refund will be equal to gross payments or equal to the greater of (a) or (b) as set forth above. The liability of the Variable Account under this provision is limited to the Owner's Accumulated Value in the Sub-Accounts on the date of cancellation. Any additional amounts refunded to the Owner will be paid by the Company. RIGHT TO CANCEL ALL OTHER CONTRACTS An Owner may cancel the Contract at any time within ten days after receipt of the Contract (or longer if required by state law) and receive a refund. In most states the Company will pay the Owner an amount equal to the sum of (1) the difference between the payment received, including fees, and any amount allocated to the Variable Account, and (2) the Accumulated Value of amounts allocated to the Variable Account as of the date the request is received. If the Contract was purchased as an IRA or issued in a state that requires a full refund of the initial payment(s), the IRA cancellation right described above will be used. At the time the Contract is issued, the "Right to Examine" provision on the cover of the Contract will specifically indicate what the refund will be and the time period allowed to exercise the right to cancel. In order to cancel the Contract, the Owner must mail or deliver it to the Company's Service Office or to one of its authorized representatives. The Company will refund an amount equal to the Surrender Value plus all fees and charges and the Contract will be void from the beginning. TELEPHONE TRANSACTIONS PRIVILEGE Subject to state law, you, or anyone you authorize, may initiate transactions over the telephone, unless you notify the Company of your election not to have this privilege. The policy of the Company and its agents and affiliates is that we will not be responsible for losses resulting from acting upon telephone requests reasonably believed to be genuine. The Company will employ reasonable procedures to confirm that instructions communicated by telephone are genuine; otherwise, the Company may be liable for any losses due to unauthorized or fraudulent instructions. Such procedures may include, among other things, requiring some form of personal identification prior to acting upon instructions received by telephone. All telephone instructions are tape-recorded. The Company reserves the right to modify or discontinue this privilege at any time without prior notice. 27 The Company cannot guarantee that you, or any other person you authorize, will always be able to reach us to complete a telephone transaction. Under these circumstances, you should submit your request in writing or other form acceptable to us. TRANSFER PRIVILEGE At any time prior to the Annuity Date and subject to the Disruptive Trading limitations described above under DESCRIPTION OF THE CONTRACT, an Owner may transfer amounts among investment options upon written or, in most jurisdictions, telephone request to the Company. Transfers may be made to or among all of the available Sub-Accounts as long as no more than seventeen Sub-Accounts, in addition to the Goldman Sachs VIT Money Market Account, are utilized at any one time. Transfer values will be based on the Accumulated Value next computed after receipt of the transfer request. Transfers to a Guarantee Period Account must be at least $1,000. If the amount to be transferred to a Guarantee Period Account is less than $1,000, the Company may transfer that amount to the Goldman Sachs VIT Money Market Fund. Transfers from a Guarantee Period Account prior to the expiration of the Guarantee Period will be subject to a Market Value Adjustment. If the Owner requests a transfer of an amount from a Sub-Account that is higher than the amount in the Sub-Account on the Valuation Date (for example, if a request is made to transfer $100 from a Sub-Account but the Accumulated Value in the Sub-Account on the Valuation Date is only $98), the Company will transfer all of the Accumulated Value in the Sub-Account. The first 12 transfers in a Contract year are guaranteed to be free of any transfer charge. The Company does not currently charge for additional transfers but reserves the right to assess a charge, guaranteed never to exceed $25, to reimburse it for the expense of processing these additional transfers. If you authorize periodic transfers under an Automatic Transfer option (Dollar Cost Averaging), an Automatic Account Rebalancing option or an Asset Allocation Model Reallocation option, the first automatic transfer or rebalancing under a request counts as one transfer for purposes of the 12 transfers guaranteed to be free of a transfer charge in each Contract year. Each subsequent transfer or rebalancing under that request in the same or a subsequent Contract year is without charge and does not reduce the remaining number of transfers which may be made free of charge. ASSET ALLOCATION MODEL REALLOCATIONS. If an Owner elects to follow an asset allocation strategy, the Owner may preauthorize transfers in accordance with the chosen strategy. The Company may provide administrative or other support services to independent third parties who provide recommendations as to such allocation strategies. However, the Company does not engage any third parties to offer investment allocation services of any type under this Contract, does not endorse or review any investment allocation recommendations made by such third parties and is not responsible for the investment allocations and transfers transacted on the Owner's behalf. The Company does not charge for providing additional asset allocation support services. Additional information concerning asset allocation programs for which the Company is currently providing support services may be obtained from a registered representative or the Company. AUTOMATIC TRANSFERS AND AUTOMATIC ACCOUNT REBALANCING OPTIONS. AUTOMATIC TRANSFERS (DOLLAR COST AVERAGING) OPTION. The Owner may elect automatic transfers of a predetermined dollar amount, not less than $100, on a periodic basis (monthly, bi-monthly, quarterly, semi-annually or annually) from either the Fixed Account, the Sub-Account investing in the Goldman Sachs VIT Money Market Fund or the Sub-Account investing in the Select Investment Grade Income Fund (the "source accounts") to one or more of the Sub-Accounts. Automatic transfers may not be made into the Fixed Account, the Guarantee Period Accounts or, if applicable, the Fund being used as the source account. If an automatic transfer would reduce the balance in the source account to less than $100, the entire balance will be transferred proportionately to the chosen Sub-Accounts. Automatic transfers will continue until the amount in the source account on a transfer date is zero or the Owner's request to terminate the option is received by the Company. If additional amounts are allocated to the source account after its balance has fallen to zero, this option will not restart automatically and the Owner must provide a new request to the Company. 28 To the extent permitted by law, the Company reserves the right, from time to time, to credit an enhanced interest rate to certain initial and/or subsequent payments made to the Fixed Account, when it is being used as the source account from which to process automatic transfers. For more information see "ENHANCED AUTOMATIC TRANSFER (DOLLAR COST AVERAGING) PROGRAM" in the SAI. AUTOMATIC ACCOUNT REBALANCING OPTION. The Owner may request automatic rebalancing of Sub-Account allocations on a monthly, quarterly, semi-annual or annual basis in accordance with percentage allocations specified by the Owner. As frequently as specified by the Owner, the Company will review the percentage allocations in the Funds and, if necessary, transfer amounts to ensure conformity with the designated percentage allocation mix. If the amount necessary to re-establish the mix on any scheduled date is less than $100, no transfer will be made. Automatic Account Rebalancing will continue until the Owner's request to terminate or change the option is received by the Company. As such, subsequent payments allocated in a manner different from the percentage allocation mix in effect on the date the payment is received will be reallocated in accordance with the existing mix on the next scheduled date unless the Owner's timely request to change the mix or terminate the option is received by the Company. LIMITATIONS. The Company reserves the right to limit the number of Sub-Accounts that may be used for automatic transfers and rebalancing, and to discontinue either option upon advance written notice. Currently, Automatic Transfers (Dollar Cost Averaging) and Automatic Account Rebalancing may not be in effect simultaneously. Either option may be elected at no additional charge when the Contract is purchased or at a later date. The Contracts are not designed for use by individuals, professional market timing organizations, or other entities that engage in short-term trading, frequent transfers, programmed transfers or transfers that are large in relation to the total assets of an Underlying Fund (collectively, "Disruptive Trading"). These and similar activities may be disruptive to the Underlying Funds, and may adversely affect an Underlying Fund's ability to invest effectively in accordance with its investment objectives and policies. If it appears that there is a pattern of transfers that coincides with a market timing strategy and/or that is disruptive to the Underlying Funds, the Company reserves the right, subject to state law, to refuse transfers or to take other action to prevent or limit the use of such activities. SURRENDER At any time prior to the Annuity Date, an Owner may surrender the Contract and receive its Surrender Value, less any tax withholding. The request for surrender must be made on Company forms. You may obtain Company forms by calling 1-800-366-1492. The Owner must return the Contract and a signed, written request for surrender on a Company surrender form to the Service Office. The Surrender Value will be calculated based on the Contract's Accumulated Value as of the Valuation Date on which the request and the Contract are received at the Service Office. Before the Annuity Date, a surrender charge may be deducted when a Contract is surrendered if payments have been credited to the Contract during the last seven full Contract years. See CHARGES AND DEDUCTIONS. The Contract fee will be deducted upon surrender of the Contract. After the Annuity Date, only Contracts annuitized under a commutable period certain option may be surrendered. The amount payable is the commuted value of any unpaid installments, computed on the basis of the assumed interest rate incorporated in such annuity benefit payments. No surrender charge is imposed after the Annuity Date. Any amount surrendered is normally payable within seven days following the Company's receipt of the surrender request. The Company reserves the right to defer surrenders and withdrawals of amounts in each Sub-Account in any period during which (1) trading on the New York Stock Exchange is restricted as determined by the SEC or such Exchange is closed for other than weekends and holidays, (2) the SEC has by order permitted such suspension, or (3) an emergency, as determined by the SEC, exists such that disposal of portfolio securities or valuation of assets of a separate account is not reasonably practicable. 29 The Company reserves the right to defer surrenders and withdrawals of amounts allocated to the Company's Fixed Account and Guarantee Period Accounts for a period not to exceed six months. The surrender rights of Owners who are participants under Section 403(b) plans or who are participants in the Texas Optional Retirement Program (Texas ORP) are restricted; see "Tax-Sheltered Annuities" and "Texas Optional Retirement Program" under FEDERAL TAX CONSIDERATIONS. Pursuant to new tax regulations, we generally are required to confirm, with your 403(b) plan sponsor or otherwise, that withdrawals, transfers or surrenders you request from a 403(b) Contract comply with applicable tax requirements before we process your request. For important tax consequences which may result from surrender, see FEDERAL TAX CONSIDERATIONS. WITHDRAWALS At any time prior to the Annuity Date, an Owner may withdraw a portion of the Accumulated Value of his or her Contract, subject to the limits stated below. The request for withdrawal must be made on Company forms. You may obtain Company forms by calling 1-800-366-1492. You may also obtain a Company withdrawal form at our Company web site, https://cwannuity.se2.com. The Owner must submit to the Service Office a signed, written request for withdrawal on a Company withdrawal form. The written request must indicate the dollar amount the Owner wishes to receive and the investment options from which such amount is to be withdrawn. The amount withdrawn equals the amount requested by the Owner plus any applicable surrender charge, as described under CHARGES AND DEDUCTIONS. In addition, amounts withdrawn from a Guarantee Period Account prior to the end of the applicable Guarantee Period will be subject to a Market Value Adjustment, as described under GUARANTEE PERIOD ACCOUNTS. Where allocations have been made to more than one investment option, a percentage of the withdrawal may be allocated to each such option. A withdrawal from a Sub-Account will result in cancellation of a number of units equivalent in value to the amount withdrawn, computed as of the Valuation Date that the request is received at the Service Office. Each withdrawal must be in a minimum amount of $100. Withdrawals will be paid in accordance with the time limitations described under "SURRENDER." For important restrictions on withdrawals which are applicable to Owners who are participants under Section 403(b) plans or under the Texas ORP, see FEDERAL TAX CONSIDERATIONS, "Tax-Sheltered Annuities" and "Texas Optional Retirement Program." For important tax consequences which may result from withdrawals, see FEDERAL TAX CONSIDERATIONS. SYSTEMATIC WITHDRAWALS. The Owner may elect an automatic schedule of withdrawals (systematic withdrawals) from amounts in the Sub-Accounts and/or the Fixed Account on a monthly, bi-monthly, quarterly, semi-annual or annual basis. Systematic withdrawals from Guarantee Period Accounts are not available. The minimum amount of each automatic withdrawal is $100, and will be subject to any applicable withdrawal charges. The Owner may elect, by written request, a specific dollar amount and the percentage of this amount to be taken from each designated Sub-Account and/or the Fixed Account, or the Owner may elect to withdraw a specific percentage of the Accumulated Value calculated as of the withdrawal dates, and may designate the percentage of this amount which should be taken from each account. The first withdrawal will take place on the date the written request is received at the Service Office or, if later, on a date specified by the Owner. If a withdrawal would cause the remaining Accumulated Value to be less than $1,000, systematic withdrawals may be discontinued. Systematic withdrawals will cease automatically on the Annuity Date. The Owner may change or terminate systematic withdrawals only by written request to the Service Office. 30 LIFE EXPECTANCY DISTRIBUTIONS. Each calendar year prior to the Annuity Date, the Owner may take without surrender charge a series of systematic withdrawals from the Contract according to the Company's life expectancy distribution ("LED") option. See "SURRENDER CHARGE," "Withdrawal Without Surrender Charge" under CHARGES AND DEDUCTIONS. The Owner must return a properly signed LED request to the Service Office. The Owner may elect monthly, bi-monthly, quarterly, semi-annual, or annual LED distributions, and may terminate the LED option at any time. If an Owner elects the Company's LED option, (which is based on applicable IRS tables), in each calendar year a fraction of the Accumulated Value is withdrawn without a surrender charge based on the Owner's then life expectancy (or the joint life expectancy of the Owner and a beneficiary.) The numerator of the fraction is 1 (one) and the denominator of the fraction is the remaining life expectancy of the Owner, as determined annually by the Company. The resulting fraction, expressed as a percentage, is applied to the Accumulated Value at the beginning of the year to determine the amount to be distributed during the year. Under the Company's LED option, the amount withdrawn from the Contract changes each year, because life expectancy changes each year that a person lives. For example, actuarial tables indicate that a person age 70 has a life expectancy of 16 years, but a person who attains age 86 has a life expectancy of another 6.5 years. Where the Owner is a trust or other nonnatural person, the Owner may elect the LED option based on the Annuitant's life expectancy. (Note: this option may not produce annual distributions that meet the definition of "substantially equal periodic payments" as defined under Code Section 72(t). As such, the withdrawals may be treated by the Internal Revenue Service (IRS) as premature distributions from the Contract and may be subject to a 10% federal tax penalty. Owners seeking distributions over their life under this definition should consult their tax advisor. For more information, see FEDERAL TAX CONSIDERATIONS, "TAXATION OF THE CONTRACT." In addition, if the amount necessary to meet the substantially equal periodic payment definition is greater than the Company's LED amount, a surrender charge may apply to the amount in excess of the LED amount.) The Company may discontinue or change the LED option at any time, but not with respect to an election of the option made prior to the date of any change in the LED option. DEATH BENEFIT In the event that the Annuitant, Owner or Joint Owner, if applicable, dies while the Contract is in force, the Company will pay the beneficiary a death benefit, except where the Contract is continued as provided below in "THE SPOUSE OF THE OWNER AS BENEFICIARY." The amount of the death benefit and the time requirements for receipt of payment may vary depending upon whether the Annuitant or an Owner dies first, and whether death occurs prior to or after the Annuity Date. Request for payment must be made within 180 days of the date of death. DEATH OF THE ANNUITANT PRIOR TO THE ANNUITY DATE. At the death of the Annuitant (including an Owner who is also the Annuitant), the death benefit is equal to the greatest of: (a) the Accumulated Value on the Valuation Date that the Company receives the death certificate and all necessary claim paperwork, increased by any positive Market Value Adjustment; (b) gross payments compounded daily at an effective annual yield of 5% starting on the date each payment is applied and continuing throughout that payment's entire accumulation phase, decreased proportionately to reflect withdrawals; or (c) the death benefit that would have been payable on the most recent contract anniversary, increased for subsequent payments and decreased proportionately for subsequent withdrawals. For each withdrawal under (b) or (c), the proportionate reduction is calculated as the death benefit under this option immediately prior to the withdrawal multiplied by the withdrawal amount and divided by the Accumulated Value immediately prior to the withdrawal. 31 This guaranteed death benefit works in the following way assuming no withdrawals are made. On the first anniversary, the death benefit will be equal to the greater of: (a) the Accumulated Value: or (b) gross payments compounded daily at an effective annual yield of 5%. The higher of (a) or (b) will then be locked in until the second anniversary, at which time the death benefit will be equal to the greatest of: (a) the Contract's then current Accumulated Value increased by any positive Market Value Adjustment; (b) gross payments compounded daily at an effective annual yield of 5%: or (c) the locked-in value of the death benefit at the first anniversary. The greatest of (a), (b) or (c) will be locked in until the next Contract anniversary. This calculation will then be repeated on each anniversary while the Contract remains in force and prior to the Annuity Date. As noted above, the values of (b) and (c) will be decreased proportionately if withdrawals are taken. See APPENDIX C -- THE DEATH BENEFIT for specific examples of death benefit calculations. DEATH OF AN OWNER WHO IS NOT ALSO THE ANNUITANT PRIOR TO THE ANNUITY DATE. If an Owner who is not also the Annuitant dies before the Annuity Date, the death benefit will be the Accumulated Value increased by any positive Market Value Adjustment. The death benefit never will be reduced by a negative Market Value Adjustment. PAYMENT OF THE DEATH BENEFIT PRIOR TO THE ANNUITY DATE. The death benefit generally will be paid to the beneficiary in one sum within seven business days of the receipt of due proof of death at the Service Office. Instead of payment in one sum, the beneficiary may, by written request, elect to: (1) defer distribution of the death benefit for a period no more than five years from the date of death; or (2) receive distributions over the life of the beneficiary or for a period certain not extending beyond the beneficiary's life expectancy, with payments beginning one year from the date of death. However, if the Owner has specified a death benefit annuity option, the death benefit will be paid out accordingly. Any death benefit annuity option specified by the Owner must comply with the requirements set forth in paragraph (2) above. If distribution of the death benefit is deferred under (1) or (2), any value in the Guarantee Period Accounts will be transferred to the Sub-Account investing in the Goldman Sachs VIT Money Market Fund. The excess, if any, of the death benefit over the Accumulated Value also will be added to the Goldman Sachs VIT Money Market Fund. The beneficiary may, by written request, effect transfers and withdrawals during the deferral period and prior to annuitization under (2), but may not make additional payments. The death benefit will reflect any earnings or losses experienced during the deferral period. If there are multiple beneficiaries, the consent of all is required. With respect to the death benefit, the Accumulated Value under the Contract will be based on the unit values next computed after due proof of the death has been received. DEATH OF THE ANNUITANT ON OR AFTER THE ANNUITY DATE. If the Annuitant's death occurs on or after the Annuity Date but before completion of all guaranteed annuity benefit payments, any unpaid amounts or installments will be paid to the beneficiary. The Company must pay out the remaining payments at least as rapidly as under the payment option in effect on the date of the Annuitant's death. THE SPOUSE OF THE OWNER AS BENEFICIARY The Owner's spouse, if named as the sole beneficiary, may by written request continue the Contract rather than directly receiving payment of the death benefit. Upon such election, the spouse will become the Owner and Annuitant subject to the following: (1) any value in the Guarantee Period Accounts will be transferred to the Goldman Sachs VIT Money Market Fund; (2) the excess, if any, of the death benefit over the Contract's 32 Accumulated Value also will be added to the Goldman Sachs VIT Money Market Fund. The resulting value will never be subject to a surrender charge when withdrawn. The new Owner may also make additional payments; however, a surrender charge will apply to these amounts if they are withdrawn before they have been invested in the Contract for at least seven years. All other rights and benefits provided in the Contract will continue, except that any subsequent spouse of such new Owner will not be entitled to continue the Contract when the new Owner's dies. OPTIONAL ENHANCED EARNINGS RIDER (EER) The Enhanced Earnings Rider (EER) may have been elected at issue in most jurisdictions as long as the Annuitant had not yet attained age 76. The Rider provides for additional amounts to be paid to the beneficiary under certain circumstances in the event that the Annuitant dies prior to the Annuity Date. For specific charges see "OPTIONAL RIDER CHARGES" under CHARGES AND DEDUCTIONS. The Company reserves the right to terminate the availability of the EER at any time; however, such a termination would not effect Riders issued prior to the termination date. CONDITIONS FOR PAYMENT OF THE EER BENEFIT For any benefit to be payable under the EER, certain conditions must be met, as follows: 1. The Annuitant's death must occur prior to the Annuity Date. 2. The difference between (a) and (b) must be greater than zero, where(a) is the Accumulated Value, and (b) is gross payments not previously withdrawn. IF (A) MINUS (B) IS ZERO OR LESS, NO BENEFIT WILL BE PAYABLE. Under the EER, Accumulated Value is determined on the Valuation Date on which due proof of death and all necessary documentation have been received at the Service Office. For purposes of the EER, withdrawals will be considered withdrawn from earnings first and then withdrawn from gross payments on a last-in, first-out basis. Therefore, the value of the EER largely depends on the amount of earnings that accumulate under the Contract. If you expect to withdraw the earnings from your Accumulated Value, electing the EER may not be appropriate. Your financial representative can help you determine if the EER is appropriate in your circumstances. AMOUNT OF EER BENEFIT ANNUITANT'S AGE AT ISSUE - 0 TO 70 - If a benefit is payable under the EER and the Contract was issued prior to the Annuitant's 71st birthday, the benefit will be equal to the LESSER of: (a) 50% of gross payments not previously withdrawn. (For purposes of this calculation only, except for the Initial Payment, gross payments shall not include payments made under the Contract during the 12-month period immediately prior to the date of death.); or (b) 50% of the difference between the Accumulated Value and gross payments not previously withdrawn. ANNUITANT'S AGE AT ISSUE - 71 TO 75 - If a benefit is payable under the EER and the Contract was issued on or after the Annuitant's 71st birthday and before his/her 76th birthday, the benefit will be equal to the LESSER of: (a) 25% of gross payments not previously withdrawn. (For purposes of this calculation only, except for the Initial Payment, gross payments shall not include payments made under the Contract during the 12-month period immediately prior to the date of death.); or (b) 25% of the difference between the Accumulated Value and gross payments not previously withdrawn. 33 The EER benefit shall be paid in the same manner that the death benefit is paid prior to the Annuity Date. EXAMPLES EXAMPLE 1. Assume that the Annuitant is 67 years old at the time the Contract is issued and the Enhanced Earnings Rider is selected. The Owner makes an initial payment of $100,000 and does not make any subsequent payments or take any withdrawals. Further assume that the Annuitant dies five years later and on the date that due proof of death and all necessary documentation are received by the Company the Accumulated Value is equal to $150,000. The EER benefit on that date is equal to the LESSER of: (a) 50% of the gross payments (not previously withdrawn) made to the Contract (excluding payments made in the 12 months prior to the date of death) = (50% x 100,000) = $50,000; or (b) 50% of the difference between the Accumulated Value and the gross payments (not previously withdrawn) made to the contract = (50% x (150,000 - 100,000)) = $25,000 The EER benefit is equal to $25,000 under (b), which is the lesser of $50,000 (50% x 100,000) and $25,000 (50% x (150,000 - 100,000)). EXAMPLE 2. Assume that the Annuitant is 67 years old at the time the Contract is issued and the Enhanced Earnings Rider is selected. The Owner makes an initial payment of $100,000 and does not make any subsequent payments or take any withdrawals. Further assume that the Annuitant dies ten years later and on the date that due proof of death and all necessary documentation are received by the Company the Accumulated Value is equal to $250,000. The EER benefit on that date is equal to the LESSER of: (a) 50% of the gross payments (not previously withdrawn) made to the Contract (excluding payments made in the 12 months prior to the date of death) = (50% x $100,000) = $50,000; or (b) 50% of the difference between the Accumulated Value and the gross payments (not previously withdrawn) made to the Contract = (50% x ($250,000 - $100,000)) = $75,000 The EER benefit is equal to $50,000 under (a), which is the lesser of $50,000 (50% x $100,000) and $75,000 (50% x ($250,000 - $100,000)). EXAMPLE 3. Assume that the Annuitant is 67 years old at the time the Contract is issued and the Enhanced Earnings Rider is selected. The Owner makes an initial payment of $100,000 and does not make any subsequent payments. Further assume that the Owner takes a $15,000 withdrawal and that the Accumulated Value was equal to $150,000 before the withdrawal was taken. Since there was $50,000 of earnings in the Contract at the time of withdrawal, for purposes of the Enhanced Earnings Rider the withdrawal is considered to be a withdrawal of $15,000 of earnings. Immediately after the withdrawal, the Accumulated Value is $135,000 and the gross payments (not previously withdrawn) is $100,000. Immediately after the withdrawal, the EER benefit is equal to the LESSER of: (a) 50% of the gross payments (not previously withdrawn) made to the Contract (excluding payments made in the 12 months prior to the date of death) = (50% x $100,000) = $50,000; or (b) 50% of the difference between the Accumulated Value and the gross payments (not previously withdrawn) made to the contract = (50% x ($135,000 - $100,000)) = $17,500 The EER benefit is equal to $17,500 under (b), which is the lesser of $50,000 (50% x 100,000) and $17,500 (50% x ($135,000 - $100,000)). EXAMPLE 4. Assume that the Annuitant is 67 years old at the time the Contract is issued and the Enhanced Earnings Rider is selected. The Owner makes an initial payment of $100,000 and does not make any subsequent payments. Further assume that the Owner takes a $65,000 withdrawal and that the Accumulated Value was equal to $150,000 before the withdrawal was taken. Since there was $50,000 of earnings in the 34 Contract at the time of the withdrawal, for purposes of the Enhanced Earnings Rider the withdrawal of $65,000 is considered to be a withdrawal of $50,000 earnings and $15,000 of gross payments. Immediately after the withdrawal, the Accumulated Value is $85,000 and the gross payments (not previously withdrawn) is $85,000. Immediately after the withdrawal, the EER benefit is equal to the LESSER of: (a) 50% of the gross payments (not previously withdrawn) made to the Contract (excluding payments made in the 12 months prior to the date of death) = (50% x $85,000) = $42,500; or (b) 50% of the difference between the Accumulated Value and the gross payments (not previously withdrawn) made to the contract = (50% x ($85,000 - $85,000)) = $0 The EER benefit is equal to $0 under (b), which is the lesser of $42,500 (50% x $85,000) and $0 (50% x ($85,000 - $85,000)). TERMINATING THE EER Once the EER is chosen, it cannot be discontinued unless the underlying Contract is surrendered, annuitized, or a death benefit is payable. The EER will terminate on the earliest of the following: 1. the Annuity Date; 2. the date the Contract is surrendered; 3. the date the Company determines a death benefit is payable; or 4. if the deceased Owner's spouse, who is the sole beneficiary, continues the contract. If the payment of the death benefit is deferred under the Contract or if the Contract is continued by the deceased Owner's spouse, the amount of the EER benefit, if any, will be applied to the Contract through an allocation to the Sub-Account investing in the Goldman Sachs VIT Money Market Fund and the Rider will terminate. ASSIGNMENT The Contract, other than one sold in connection with certain qualified plans, may be assigned by the Owner at any time prior to the Annuity Date and while the Annuitant is alive (see FEDERAL TAX CONSIDERATIONS). The Company will not be deemed to have knowledge of an assignment unless it is made in writing on a Company approved form and filed at the Service Office. The Company will not assume responsibility for determining the validity of any assignment. If an assignment of the Contract is in effect on the Annuity Date, the Company reserves the right to pay to the assignee, in one sum, that portion of the Surrender Value of the Contract to which the assignee appears to be entitled. The Company will pay the balance, if any, in one sum to the Owner in full settlement of all liability under the Contract. The interest of the Owner and of any beneficiary will be subject to any assignment. ELECTING THE FORM OF ANNUITY AND THE ANNUITY DATE The Owner selects the Annuity Date. To the extent permitted by law, the Annuity Date may be the first day of any month (1) before the Annuitant's 85th birthday, if the Annuitant's age on the issue date of the Contract is 75 or under; or (2) within ten years from the issue date of the Contract and before the Annuitant's 90th birthday, if the Annuitant's age on the issue date is between 76 and 90. The Owner may elect to change the Annuity Date by sending a request to the Service Office at least one month before the Annuity Date. The new Annuity Date must be the first day of any month occurring before the Annuitant's 90th birthday, and must be within the life expectancy of the Annuitant. The Company shall determine such life expectancy at the time a change in Annuity Date is requested. In no event will the latest possible annuitization age exceed 90. If the Annuity Date under a non-qualified Contract is deferred until the Owner reaches an age that is significantly beyond the Owner's life expectancy, it is possible that the Contract will not be considered an annuity for federal tax purposes. In addition, the Internal Revenue Code ("the Code") and the terms of qualified plans impose limitations on the age at which annuity benefit payments may commence and the type 35 of annuity option selected. The Owner should carefully review the selection of the Annuity Date with his/her tax adviser. See FEDERAL TAX CONSIDERATIONS for further information. Subject to certain restrictions described below, the Owner has the right (1) to select the annuity payout option under which annuity benefit payments are to be made, and (2) to determine whether payments are to be made on a fixed basis, a variable basis, or a combination fixed and variable basis. Certain annuity options may be commutable or noncommutable. A commutable option provides the Owner with the right to request a lump sum payment of any remaining balance after annuity payments have commenced. Under a noncommutable option, the Owner may not request a lump sum payment. Annuity benefit payments are determined according to the annuity tables in the Contract, by the annuity option selected, and by the investment performance of the account(s) selected. See "Annuity Benefit Payments" in the SAI. To the extent a fixed annuity payout is selected, Accumulated Value will be transferred to the Fixed Account of the Company, and the annuity benefit payments will be fixed in amount. See APPENDIX A -- MORE INFORMATION ABOUT THE FIXED ACCOUNT. Under a variable annuity payout option, a payment equal to the value of the fixed number of Annuity Units in the Sub-Account(s) is made monthly, quarterly, semi-annually or annually. Since the value of an Annuity Unit in a Sub-Account will reflect the investment performance of the Sub-Account, the amount of each annuity benefit payment will vary. The annuity option selected must produce an initial payment of at least $50 (a lower amount may be required in some states). The Company reserves the right to increase this minimum amount. If the annuity option(s) selected do(es) not produce an initial payment which meet this minimum, a single payment may be made. Once the Company begins making annuity benefit payments, the Annuitant cannot make withdrawals or surrender the annuity benefit, except where a commutable period certain option has been elected. Beneficiaries entitled to receive remaining payments under either a commutable or noncommutable period certain option may elect instead to receive a lump sum settlement. See "DESCRIPTION OF VARIABLE ANNUITY PAYOUT OPTIONS." If the Owner does not elect an option, a variable life annuity with periodic payments guaranteed for ten years will be purchased. Changes in either the Annuity Date or annuity option can be made up to one month prior to the Annuity Date. DESCRIPTION OF VARIABLE ANNUITY PAYOUT OPTIONS The Company provides the variable annuity payout options described below. Currently, variable annuity payout options may be funded through the Sub-Accounts investing in the Goldman Sachs VIT Equity Index Fund, the Goldman Sachs VIT Structured U.S. Equity Fund, the Goldman Sachs VIT Capital Growth Fund and the Goldman Sachs VIT Money Market Fund. The Company also provides these same options funded through the Fixed Account (fixed annuity payout option). Regardless of how payments were allocated during the accumulation period, any of the variable annuity payout options or the fixed annuity payout options may be selected, or any of the variable annuity payout options may be selected in combination with any of the fixed annuity payout options. Other annuity options may be offered by the Company. IRS regulations may not permit certain of the available annuity options when used in connection with certain qualified Contracts. VARIABLE LIFE ANNUITY WITH PAYMENTS GUARANTEED FOR TEN YEARS. This variable annuity is payable periodically during the lifetime of the Annuitant with the guarantee that if the Annuitant should die before all payments have been made, the remaining annuity benefit payments will continue to the beneficiary. VARIABLE LIFE ANNUITY PAYABLE PERIODICALLY DURING LIFETIME OF THE ANNUITANT ONLY. This variable annuity is payable during the Annuitant's life. It would be possible under this option for the Annuitant to receive only one annuity benefit payment if he/she dies prior to the due date of the second annuity benefit payment, two annuity benefit payments if he/she dies before the due date of the third annuity benefit payment, and so on. Payments will continue, however, during the Annuitant's lifetime, no matter how long he or she lives. 36 UNIT REFUND VARIABLE LIFE ANNUITY. This is an annuity payable periodically during the lifetime of the Annuitant with the guarantee that if (1) exceeds (2), then periodic variable annuity benefit payments will continue to the beneficiary until the number of such payments equals the number determined in (1). Where: (1) is the dollar amount of the Accumulated Value at annuitization divided by the dollar amount of the first payment, and (2) is the number of payments paid prior to the death of the Annuitant. JOINT AND SURVIVOR VARIABLE LIFE ANNUITY. This variable annuity is payable jointly to the Annuitant and another individual during their joint lifetime, and then continues thereafter during the lifetime of the survivor. The amount of each payment to the survivor is based on the same number of Annuity Units which applied during the joint lifetime of the two payees. One of the payees must be either the person designated as the Annuitant in the Contract or the beneficiary. There is no minimum number of payments under this option. JOINT AND TWO-THIRDS SURVIVOR VARIABLE LIFE ANNUITY. This variable annuity is payable jointly to the Annuitant and another individual during their joint lifetime, and then continues thereafter during the lifetime of the survivor. The amount of each periodic payment to the survivor, however, is based upon two-thirds of the number of Annuity Units which applied during the joint lifetime of the two payees. One of the payees must be the person designated as the Annuitant in the Contract or the beneficiary. There is no minimum number of payments under this option. PERIOD CERTAIN VARIABLE ANNUITY (PAYMENTS GUARANTEED FOR A SPECIFIED NUMBER OF YEARS). This variable annuity has periodic payments for a stipulated number of years ranging from one to thirty. If the Annuitant dies before the end of the period, remaining payments will continue to be paid. A fixed period certain annuity may be either commutable or noncommutable. A variable period certain annuity is automatically commutable. It should be noted that the period certain option does not involve a life contingency. In computing payments under this option, the Company deducts a charge for annuity rate guarantees, which includes a factor for mortality risks. Although not contractually required to do so, the Company currently follows a practice of permitting persons receiving payments under a period certain option to elect to convert to a variable annuity involving a life contingency. The Company may discontinue or change this practice at any time, but not with respect to election of the option made prior to the date of any change in this practice. ANNUITY BENEFIT PAYMENTS DETERMINATION OF THE FIRST VARIABLE ANNUITY BENEFIT PAYMENT. The amount of the first monthly payment depends upon the selected variable annuity option, the sex (however, see "NORRIS DECISION" below) and age of the Annuitant, and the value of the amount applied under the annuity option ("annuity value"). The Contract provides annuity rates that determine the dollar amount of the first periodic payment under each variable annuity option for each $1,000 of applied value. From time to time, the Company may offer its Owners both fixed and variable annuity rates more favorable than those contained in the Contract. Any such rates will be applied uniformly to all Owners of the same class. The dollar amount of the first periodic annuity benefit payment is calculated based upon the type of annuity option chosen, as follows: - For life annuity options and noncommutable fixed period certain options of ten years or more, the dollar amount is determined by multiplying (1) the Accumulated Value applied under that option (after application of any Market Value Adjustment and less premium tax, if any) divided by $1,000, by (2) the applicable amount of the first monthly payment per $1,000 of value. - For all commutable fixed period certain options, any noncommutable fixed period certain option of less than ten years and all variable period certain options the dollar amount is determined by multiplying (1) the Surrender Value less premium taxes, if any, applied under that option (after application of any Market Value Adjustment and less premium tax, if any) divided by $1,000, by (2) the applicable amount of the first monthly payment per $1,000 of value. - For a death benefit annuity, the annuity value will be the amount of the death benefit. 37 The first periodic annuity benefit payment is based upon the Accumulated Value as of a date not more than four weeks preceding the date that the first annuity benefit payment is due. The Company transmits variable annuity benefit payments for receipt by the payee by the first of a month. Variable annuity benefit payments are currently based on unit values as of the 15th day of the preceding month. THE ANNUITY UNIT. On and after the Annuity Date, the Annuity Unit is a measure of the value of the monthly annuity benefit payments under a variable annuity option. The value of an Annuity Unit in each Sub-Account initially was set at $1.00. The value of an Annuity Unit under a Sub-Account on any Valuation Date thereafter is equal to the value of such unit on the immediately preceding Valuation Date, multiplied by the net investment factor of the Sub-Account for the current Valuation Period and divided by the assumed interest rate for the current Valuation Period The assumed interest rate, discussed below, is incorporated in the variable annuity options offered in the Contract. DETERMINATION OF THE NUMBER OF ANNUITY UNITS. The dollar amount of the first variable annuity benefit payment is divided by the value of an Annuity Unit of the selected Sub-Account(s) to determine the number of Annuity Units represented by the first payment. This number of Annuity Units remains fixed under all annuity options except the joint and two-thirds survivor annuity option. DOLLAR AMOUNT OF SUBSEQUENT VARIABLE ANNUITY BENEFIT PAYMENTS. The dollar amount of each periodic variable annuity benefit payment after the first will vary with the value of the Annuity Units of the selected Sub-Account(s). The dollar amount of each subsequent variable annuity benefit payment is determined by multiplying the fixed number of Annuity Units (derived from the dollar amount of the first payment, as described above) with respect to a Sub-Account by the value of an Annuity Unit of that Sub-Account on the applicable Valuation Date. The variable annuity options offered by the Company are based on a 3.5% assumed interest rate, which affects the amounts of the variable annuity benefit payments. Variable annuity benefit payments with respect to a Sub-Account will increase over periods when the actual net investment result of the Sub-Account exceeds the equivalent of the assumed interest rate. Variable annuity benefit payments will decrease over periods when the actual net investment results are less than the equivalent of the assumed interest rate. For an illustration of a calculation of a variable annuity benefit payment using a hypothetical example, see "Annuity Benefit Payments" in the SAI. NORRIS DECISION In the case of ARIZONA GOVERNING COMMITTEE V. NORRIS, the United States Supreme Court ruled that, in connection with retirement benefit options offered under certain employer-sponsored employee benefit plans, annuity options based on sex-distinct actuarial tables are not permissible under Title VII of the Civil Rights Act of 1964. The ruling requires that benefits derived from contributions paid into a plan after August 1, 1983 be calculated without regard to the sex of the employee. Annuity benefits attributable to payments received by the Company under a Contract issued in connection with an employer-sponsored benefit plan affected by the NORRIS decision will be based on the greater of (1) the Company's unisex Non-Guaranteed Current Annuity Option Rates or (2) the guaranteed unisex rates described in such Contract, regardless of whether the Annuitant is male or female. COMPUTATION OF VALUES THE ACCUMULATION UNIT. Each net payment is allocated to the investment options selected by the Owner. Allocations to the Sub-Accounts are credited to the Contract in the form of Accumulation Units. Accumulation Units are credited separately for each Sub-Account. The number of Accumulation Units of each Sub-Account credited to the Contract is equal to the portion of the net payment allocated to the Sub-Account, divided by the dollar value of the applicable Accumulation Unit as of the Valuation Date the payment is received at the Service Office. The number of Accumulation Units resulting from each payment will remain fixed unless changed by a subsequent split of Accumulation Unit value, a transfer, a withdrawal, or surrender. The dollar value of an Accumulation Unit of each Sub-Account varies from Valuation Date to Valuation Date based on the investment experience of that Sub-Account, and will reflect the investment performance, expenses and 38 charges of its Underlying Funds. The value of an Accumulation Unit was set at $1.00 on the first Valuation Date for each Sub-Account. Allocations to the Guarantee Period Accounts and the Fixed Account are not converted into Accumulation Units, but are credited interest at a rate periodically set by the Company. See GUARANTEE PERIOD ACCOUNTS and APPENDIX A -- MORE INFORMATION ABOUT THE FIXED ACCOUNT. The Accumulated Value under the Contract is determined by (1) multiplying the number of Accumulation Units in each Sub-Account by the value of an Accumulation Unit of that Sub-Account on the Valuation Date, (2) adding the products, and (3) adding the amount of the accumulations in the Fixed Account and Guarantee Period Accounts, if any. NET INVESTMENT FACTOR. The Net Investment Factor is an index that measures the investment performance of a Sub-Account from one Valuation Period to the next. This factor is equal to 1.000000 plus the result from dividing (1) by (2) and subtracting the sum of (3) and (4) where: (1) is the investment income of a Sub-Account for the Valuation Period, including realized or unrealized capital gains and losses during the Valuation Period, adjusted for provisions made for taxes, if any; (2) is the value of that Sub-Account's assets at the beginning of the Valuation Period; (3) is a charge for mortality and expense risks equal to 1.25% on an annual basis of the daily value of the Sub-Account's assets; and (4) is an administrative charge equal to 0.15% on an annual basis of the daily value of the Sub-Account's assets. The dollar value of an Accumulation Unit as of a given Valuation Date is determined by multiplying the dollar value of the corresponding Accumulation Unit as of the immediately preceding Valuation Date by the appropriate net investment factor. For an illustration of an Accumulation Unit calculation using a hypothetical example see the SAI. 39 CHARGES AND DEDUCTIONS Deductions under the Contract and charges against the assets of the Sub-Accounts are described below. Other deductions and expenses paid out of the assets of the Underlying Funds are described in the prospectuses and SAIs of the Underlying Funds. VARIABLE ACCOUNT DEDUCTIONS MORTALITY AND EXPENSE RISK CHARGE. The Company assesses a charge against the assets of each Sub-Account to compensate for certain mortality and expense risks it has assumed. The charge is imposed during both the accumulation phase and the annuity payout phase. The mortality risk arises from the Company's guarantee that it will make annuity benefit payments in accordance with annuity rate provisions established at the time the Contract is issued for the life of the Annuitant (or in accordance with the annuity payout option selected), no matter how long the Annuitant (or other payee) lives and no matter how long all Annuitants as a class live. Therefore, the mortality charge is deducted during the annuity payout phase on all Contracts, including those that do not involve a life contingency, even though the Company does not bear direct mortality risk with respect to variable annuity settlement options that do not involve life contingencies. The expense risk arises from the Company's guarantee that the charges it makes will not exceed the limits described in the Contract and in this Prospectus. If the charge for mortality and expense risks is not sufficient to cover actual mortality experience and expenses, the Company will absorb the losses. If expenses are less than the amounts provided to the Company by the charge, the difference will be a profit to the Company. To the extent this charge results in a profit to the Company, such profit will be available for use by the Company for, among other things, the payment of distribution, sales and other expenses. The mortality and expense risk charge is assessed daily at an annual rate of 1.25% of each Sub-Account's assets. This charge may not be increased. Since mortality and expense risks involve future contingencies which are not subject to precise determination in advance, it is not feasible to identify specifically the portion of the charge which is applicable to each. The Company estimates that a reasonable allocation might be 0.80% for mortality risk and 0.45% for expense risk. ADMINISTRATIVE EXPENSE CHARGE. The Company assesses each Sub-Account with a daily charge at an annual rate of 0.15% of the average daily net assets of the Sub-Account. This charge may not be increased. The charge is imposed during both the accumulation phase and the annuity payout phase. The daily Administrative Expense Charge is assessed to help defray administrative expenses actually incurred in the administration of the Sub-Account, without profits. There is no direct relationship, however, between the amount of administrative expenses imposed on a given Contract and the amount of expenses actually attributable to that Contract. Deductions for the Contract fee (described below under "CONTRACT FEE") and for the Administrative Expense Charge are designed to reimburse the Company for the cost of administration and related expenses and are not expected to be a source of profit. The administrative functions and expense assumed by the Company in connection with the Variable Account and the Contract include, but are not limited to, clerical, accounting, actuarial and legal services, rent, postage, telephone, office equipment and supplies, expenses of preparing and printing registration statements, expense of preparing and typesetting prospectuses and the cost of printing prospectuses not allocable to sales expense, filing and other fees. OTHER CHARGES. Because the Sub-Accounts purchase shares of the Underlying Funds, the value of the net assets of the Sub-Accounts will reflect the investment advisory fee and other expenses incurred by the Underlying Funds. Management fee waivers and/or reimbursements may be in effect for certain or all of the Underlying Funds. The prospectuses and SAIs of the Underlying Funds contain additional information concerning expenses of the Underlying Funds and should be read in conjunction with this Prospectus. 40 CONTRACT FEE A $30 Contract fee is deducted on the Contract anniversary date and upon full surrender of the Contract if the Accumulated Value on any of these dates is less than $50,000. The Contract fee is currently waived for Contracts issued to and maintained by the trustee of a 401(k) plan. The Company reserves the right to impose a Contract fee up to $30 on Contracts issued to 401(k) plans but only with respect to Contracts issued after the date the waiver is no longer available. Where Accumulated Value has been allocated to more than one investment option, a percentage of the total Contract fee will be deducted from the value in each. The portion of the charge deducted from each investment option will be equal to the percentage which the value in that investment option bears to the Accumulated Value under the Contract. The deduction of the Contract fee from a Sub-Account will result in cancellation of a number of Accumulation Units equal in value to the percentage of the charge deducted from that Sub-Account. Where permitted by law, the Contract fee also may be waived for Contracts where, on the issue date, either the Owner or the Annuitant is within the following class of individuals: (1) employees and registered representatives of any broker-dealer which has entered into a sales agreement with the Company to sell the Contract; (2) employees of the Company, its affiliates and subsidiaries officers, directors, trustees and employees of any of the Funds; (3) investment managers or sub-advisers; and (4) the spouses of and immediate family members residing in the same household with such eligible persons. "Immediate family members" means children, siblings, parents and grandparents. OPTIONAL RIDER CHARGES Subject to state availability, the Company offers an optional Enhanced Earnings Rider that the Owner may elect at issue if the Annuitant has not yet attained age 76. A separate monthly charge is made for the Rider through a pro-rata reduction of the Accumulated Value of the Sub-Accounts, the Fixed Account and the Guarantee Period Accounts. The pro-rata reduction is based on the relative value that the Accumulation Units of the Sub-Accounts, the dollar amounts in the Fixed Account and the dollar amounts in the Guarantee Period Accounts bear to the total Accumulated Value. The applicable monthly charge is equal to the Accumulated Value on the last day of each month within which the Rider has been in effect multiplied by 1/12th of 0.25%. For a description of the Rider, see "OPTIONAL ENHANCED EARNINGS RIDER" under DESCRIPTION OF THE CONTRACT. If you elected one of the following riders prior to their discontinuance on 1/31/02, the applicable monthly charge is equal to the Accumulated Value on the last day of each month within which the Rider has been in effect multiplied by 1/12 of the following: Optional Minimum Guaranteed Annuity Payout (M-GAP) Rider with a ten-year waiting period: 0.25% Optional Minimum Guaranteed Annuity Payout (M-GAP) Rider with a fifteen-year waiting period: 0.15% For a description of this Rider, see "DISCONTINUATION OF THE MINIMUM GUARANTEED ANNUITY PAYOUT (M-GAP) RIDER" in the SAI. PREMIUM TAXES Some states and municipalities impose a premium tax on variable annuity contracts. State premium taxes currently range up to 3.5%. The Company makes a charge for state and municipal premium taxes, when applicable, and deducts the amount paid as a premium tax charge. The current practice of the Company is to deduct the premium tax charge in one of two ways: 1. if the premium tax was paid by the Company when payments were received, the premium tax charge may be deducted on a pro-rata basis when withdrawals are made, upon surrender of the Contract, or 41 when annuity benefit payments begin (the Company reserves the right instead to deduct the premium tax charge for a Contract at the time payments are received); or 2. the premium tax charge is deducted in total when annuity benefit payments begin. In no event will a deduction be taken before the Company has incurred a tax liability under applicable state law. If no amount for premium tax was deducted at the time the payment was received, but subsequently tax is determined to be due prior to the Annuity Date, the Company reserves the right to deduct the premium tax from the Contract's Accumulated Value at the time such determination is made. SURRENDER CHARGE No charge for sales expense is deducted from payments at the time the payments are made. However, during the accumulation phase, a surrender charge may be deducted from the Accumulated Value in the case of surrender or withdrawal within certain time limits described below. For purposes of determining the surrender charge, the Accumulated Value is divided into three categories: (1) New Payments - payments received by the Company during the seven years preceding the date of the surrender; (2) Old Payments - accumulated payments invested in the Contract for more than seven years; and (3) the amount available under the Withdrawal Without Surrender Charge provision. See "Withdrawal Without Surrender Charge" below. For purposes of determining the amount of any surrender charge, surrenders will be deemed to be taken first from amounts available as a Withdrawal Without Surrender Charge, if any; then from any Old Payments, and then from New Payments. Amounts available as a Withdrawal Without Surrender Charge, followed by Old Payments, may be withdrawn from the Contract at any time without the imposition of a surrender charge. If a withdrawal is attributable all or in part to New Payments, a surrender charge may apply. CHARGE FOR SURRENDER AND WITHDRAWAL. If a Contract is surrendered, or if New Payments are withdrawn while the Contract is in force and before the Annuity Date, a surrender charge may be imposed. The amount of the charge will depend upon the number of years that any New Payments, to which the withdrawal is attributed have remained credited under the Contract. For the purpose of calculating surrender charges for New Payments, all amounts withdrawn are assumed to be deducted first from the oldest New Payment and then from the next oldest New Payment and so on, until all New Payments have been exhausted pursuant to the first-in-first-out ("FIFO") method of accounting. (See FEDERAL TAX CONSIDERATIONS for a discussion of how withdrawals are treated for income tax purposes.) The surrender charge is as follows: COMPLETE CHARGE AS PERCENTAGE OF YEARS FROM NEW PAYMENTS DATE OF PAYMENT WITHDRAWN - --------------- ----------------------- Less than 1 6.5% Less than 2 6.0% Less than 3 5.0% Less than 4 4.0% Less than 5 3.0% Less than 6 2.0% Less than 7 1.0% Thereafter 0.0% The amount withdrawn equals the amount requested by the Owner plus the surrender charge, if any. The charge is applied as a percentage of the New Payments withdrawn, but in no event will the total surrender 42 charge exceed a maximum limit of 6.5% of total gross New Payments. Such total charge equals the aggregate of all applicable surrender charges for surrender, withdrawals, and annuitization. WAIVER OF SURRENDER CHARGE(S) AND ADDITIONAL AMOUNTS CREDITED PHYSICAL DISABILITY OR ADMISSION TO MEDICAL CARE FACILITY. Where permitted by law, the Company will waive the surrender charge in the event that the Owner (or the Annuitant, if the Owner is not an individual) becomes physically disabled after the issue date of the Contract and before attaining age 65. The Company may require proof of such disability and continuing disability, including written confirmation of receipt and approval of any claim for Social Security Disability Benefits and reserves the right to obtain an examination by a licensed physician of its choice and at its expense. In addition, except in New Jersey (where not permitted by state law), the Company will waive the surrender charge in the event that an Owner (or the Annuitant, if the Owner is not an individual) is: (1) admitted to a medical care facility after the issue date and remains confined there until the later of one year after the issue date or 90 consecutive days or (2) first diagnosed by a licensed physician as having a fatal illness after the issue date of the Contract. For purposes of the above provision, "medical care facility" means any state-licensed facility or, in a state that does not require licensing, a facility that is operating pursuant to state law, providing medically necessary inpatient care which is prescribed by a licensed "physician" in writing and based on physical limitations which prohibit daily living in a non-institutional setting; "fatal illness" means a condition diagnosed by a licensed "physician" which is expected to result in death within two years of the diagnosis; and "physician" means a person other than the Owner, Annuitant or a member of one of their families who is state licensed to give medical care or treatment and is acting within the scope of that license. Where surrender charges have been waived under any of the situations discussed above, no additional payments under this Contract will be accepted unless required by state law. OTHER REDUCTIONS OR ELIMINATIONS OF SURRENDER CHARGES. From time to time the Company may allow a reduction in or elimination of the surrender charges, the period during which the charges apply, or both, and/or credit additional amounts on Contracts, when Contracts are sold to individuals or groups of individuals in a manner that reduces sales expenses. The Company will consider factors such as the following: (1) the size and type of group or class, and the persistency expected from that group or class; (2) the total amount of payments to be received, and the manner in which payments are remitted; (3) the purpose for which the Contracts are being purchased, and whether that purpose makes it likely that costs and expenses will be reduced; (4) other transactions where sales expenses are likely to be reduced; or (5) the level of commissions paid to selling broker-dealers or certain financial institutions with respect to Contracts within the same group or class (for example, broker-dealers who offer this Contract in connection with financial planning services offered on a fee-for-service basis). The Company also may reduce or waive the surrender charge, and/or credit additional amounts on Contracts, where either the Owner or the Annuitant on the issue date is within the following class of individuals ("eligible persons"): (1) employees and registered representatives of any broker-dealer which has entered into a sales agreement with the Company to sell the Contract; (2) employees of the Company, its affiliates and subsidiaries; (3) officers, directors, trustees and employees of any of the Underlying Funds, investment managers or sub-advisers of the Underlying Funds; and (4) the spouses of and immediate family members residing in the same household with such eligible persons. "Immediate family members" means children, siblings, parents and grandparents. 43 Finally, if permitted under state law, surrender charge will be waived under 403(b) Contracts where the amount withdrawn is being contributed to a life policy issued by the Company as part of the individual's 403(b) plan. Any reduction or elimination in the amount or duration of the surrender charge will not discriminate unfairly among purchasers of this Contract. The Company will not make any changes to this charge where prohibited by law. Pursuant to Section 11 of the 1940 Act and Rule 11a-2 thereunder, the surrender charge is modified to effect certain exchanges of existing annuity contracts issued by the Company for the Contract. See "Exchange Offer" in the SAI. WITHDRAWAL WITHOUT SURRENDER CHARGE. In each calendar year, the Company will waive the surrender charge, if any, on an amount ("Withdrawal Without Surrender Charge Amount") equal to the greatest of (1), (2) or (3): Where (1) is: 100% of Cumulative Earnings (calculated as the Accumulated Value as of the Valuation Date the Company receives the withdrawal request, or the following day, reduced by total gross payments not previously withdrawn); Where (2) is: 10% of the Accumulated Value as of the Valuation Date the Company receives the withdrawal request, or the following day, reduced by the total amount of any prior withdrawals made in the same calendar year to which no surrender charge was applied; and Where (3) is: The amount calculated under the Company's life expectancy distribution option (see "Life Expectancy Distributions" above) whether or not the withdrawal was part of such distribution (applies only if Annuitant is also an Owner). For example, an 81-year-old Owner/Annuitant with an Accumulated Value of $15,000, of which $1,000 is Cumulative Earnings, would have a Withdrawal Without Surrender Charge Amount of $1,530, which is equal to the greatest of: (1) Cumulative Earnings ($1,000); (2) 10% of Accumulated Value ($1,500); or (3) LED of 10.2% of Accumulated Value ($1,530). The Withdrawal Without Surrender Charge Amount first will be deducted from Cumulative Earnings. If the Withdrawal Without Surrender Charge Amount exceeds Cumulative Earnings, the excess amount will be deemed withdrawn from payments not previously withdrawn on a LIFO (last-in/first-out) basis. This means that the last payments credited to the Contract will be withdrawn first. If more than one withdrawal is made during the year, on each subsequent withdrawal the Company will waive the surrender charge, if any, until the entire Withdrawal Without Surrender Charge Amount has been withdrawn. Amounts withdrawn from a Guarantee Period Account prior to the end of the applicable Guarantee Period will be subject to a Market Value Adjustment. SURRENDERS. In the case of a complete surrender, the amount received by the Owner is equal to the entire Accumulated Value under the Contract, net of the applicable surrender charge on New Payments, the Contract fee and any applicable tax withholding, and adjusted for any applicable Market Value Adjustment. Subject to the same rules applicable to withdrawals, the Company will not assess a surrender charge on an amount equal to the Withdrawal Without Surrender Charge Amount, described above. Where an Owner who is trustee under a pension plan surrenders, in whole or in part, a Contract on a terminating employee, the trustee will be permitted to reallocate all or a part of the Accumulated Value under the Contract to other Contracts issued by the Company and owned by the trustee, with no deduction for any otherwise applicable surrender charge. Any such reallocation will be at the unit values for the Sub-Accounts as of the Valuation Date on which a written, signed request is received at the Service Office. 44 For further information on surrender and withdrawal, including minimum limits on amount withdrawn and amount remaining under the Contract in the case of withdrawal, and important tax considerations, see "SURRENDER" and "WITHDRAWALS" under DESCRIPTION OF THE CONTRACT and see FEDERAL TAX CONSIDERATIONS. CHARGE AT THE TIME ANNUITY BENEFIT PAYMENTS BEGIN. If the Owner chooses any commutable period certain option or a noncommutable fixed period certain option for less than ten years, a surrender charge will be deducted from the Accumulated Value of the Contract if the Annuity Date occurs at any time when a surrender charge would still apply had the Contract been surrendered on the Annuity Date. No surrender charge is imposed at the time of annuitization in any Contract year under an option involving a life contingency or any noncommutable fixed period certain option for ten years or more. A Market Value Adjustment, however, may apply. See GUARANTEE PERIOD ACCOUNTS. If the Owner of a fixed annuity contract issued by the Company wishes to elect a variable annuity option, the Company may permit such Owner to exchange, at the time of annuitization, the fixed contract for a Contract offered in this Prospectus. The proceeds of the fixed contract, minus any surrender charge applicable under the fixed contract if a period certain option is chosen, will be applied towards the variable annuity option desired by the Owner. The number of Annuity Units under the option will be calculated using the Annuity Unit values as of the 15th of the month preceding the Annuity Date. TRANSFER CHARGE The Company currently makes no charge for processing transfers. The Company guarantees that the first 12 transfers in a Contract year will be free of transfer charge, but reserves the right to assess a charge, guaranteed never to exceed $25, for each subsequent transfer in a Contract year to reimburse it for the expense of processing transfers. For more information, see "TRANSFER PRIVILEGE" under DESCRIPTION OF THE CONTRACT. 45 GUARANTEE PERIOD ACCOUNTS Due to certain exemptive and exclusionary provisions in the securities laws, interests in the Guarantee Period Accounts and the Company's Fixed Account are not registered as an investment company under the provisions of the 1933 Act or the 1940 Act. Accordingly, the staff of the SEC has not reviewed the disclosures in this Prospectus relating to the Guarantee Period Accounts or the Fixed Account. Nevertheless, disclosures regarding the Guarantee Period Accounts and the Fixed Account of this Contract or any fixed benefits offered under these accounts may be subject to the provisions of the 1933 Act relating to the accuracy and completeness of statements made in the Prospectus. INVESTMENT OPTIONS. In most jurisdictions, Guarantee Periods ranging from three through ten years may be available. Each Guarantee Period established for the Owner is accounted for separately in a non-unitized segregated account except in California where it is accounted for in the Company's General Account. Each Guarantee Period Account provides for the accumulation of interest at a Guaranteed Interest Rate. The Guaranteed Interest Rate on amounts allocated or transferred to a Guarantee Period Account is determined from time to time by the Company in accordance with market conditions. Once an interest rate is in effect for a Guarantee Period Account, however, the Company may not change it during the duration of its Guarantee Period. In no event will the Guaranteed Interest Rate be less than 3%. To the extent permitted by law, the Company reserves the right at any time to offer Guarantee Periods with durations that differ from those which were available when a Contract initially was issued and to stop accepting new allocations, transfers or renewals to a particular Guarantee Period. Owners may allocate net payments or make transfers from any of the Sub-Accounts, the Fixed Account or an existing Guarantee Period Account to establish a new Guarantee Period Account at any time prior to the Annuity Date. Transfers from a Guarantee Period Account on any date other than on the day following the expiration of that Guarantee Period will be subject to a Market Value Adjustment. The Company establishes a separate investment account each time the Owner allocates or transfers amounts to a Guarantee Period except that amounts allocated to the same Guarantee Period on the same day will be treated as one Guarantee Period Account. The minimum that may be allocated to establish a Guarantee Period Account is $1,000. If less than $1,000 is allocated, the Company reserves the right to apply that amount to the Goldman Sachs VIT Money Market Fund. The Owner may allocate amounts to any of the Guarantee Periods available. At least 45 days, but not more than 75 days, prior to the end of a Guarantee Period, the Company will notify the Owner in writing of the expiration of that Guarantee Period. At the end of a Guarantee Period the Owner may transfer amounts to the Sub-Accounts, the Fixed Account or establish a new Guarantee Period Account of any duration then offered by the Company without a Market Value Adjustment. If reallocation instructions are not received at the Service Office before the end of a Guarantee Period, the account value automatically will be applied to a new Guarantee Period Account with the same duration unless (1) less than $1,000 would remain in the Guarantee Period Account on the expiration date, or (2) unless the Guarantee Period would extend beyond the Annuity Date or is no longer available. In such cases, the Guarantee Period Account value will be transferred to the Sub-Account investing in the Goldman Sachs VIT Money Market Fund. Where amounts have been renewed automatically in a new Guarantee Period, the Company currently gives the Owner an additional 30 days to transfer out of the Guarantee Period Account without application of a Market Value Adjustment. This practice may be discontinued or changed with notice at the Company's discretion. 46 MARKET VALUE ADJUSTMENT. No Market Value Adjustment will be applied to transfers, withdrawals, or a surrender from a Guarantee Period Account on the expiration of its Guarantee Period. No Market Value Adjustment will apply to amounts deducted for Contract fees or rider charges. In addition, no negative Market Value Adjustment will be applied to a death benefit although a positive Market Value Adjustment, if any, will be applied to increase the value of the death benefit when based on the Contract's Accumulated Value. See "DEATH BENEFIT." All other transfers, withdrawals, or a surrender prior to the end of a Guarantee Period will be subject to a Market Value Adjustment, which may increase or decrease the account value. Amounts applied under an annuity option are treated as withdrawals when calculating the Market Value Adjustment. The Market Value Adjustment will be determined by multiplying the amount taken from each Guarantee Period Account before deduction of any Surrender Charge by the market value factor. The market value factor for each Guarantee Period Account is equal to: [(1+i)/(1+j)](TO THE POWER OF n/365) - 1 where: i is the Guaranteed Interest Rate expressed as a decimal for example: (3% = 0.03) being credited to the current Guarantee Period; j is the new Guaranteed Interest Rate, expressed as a decimal, for a Guarantee Period with a duration equal to the number of years remaining in the current Guarantee Period, rounded to the next higher number of whole years. If that rate is not available, the Company will use a suitable rate or index allowed by the Department of Insurance; and n is the number of days remaining from the Effective Valuation Date to the end of the current Guarantee Period. Based on the application of this formula, if the then current market rates are lower than the rate being credited to the Guarantee Period Account, the value of a Guarantee Period Account will INCREASE after the Market Value Adjustment is applied. If the then current market rates are higher than the rate being credited to the Guarantee Period Account, the value of a Guarantee Period Account will DECREASE after the Market Value Adjustment is applied. The Market Value Adjustment is limited, however, so that even if the account value is decreased after application of a Market Value Adjustment, it will equal or exceed the Owner's principal plus 3% earnings per year less applicable Contract fees. Conversely, if the then current market rates are lower and the account value is increased after the Market Value Adjustment is applied, the increase in value is also affected by the minimum guaranteed rate of 3%. In this situation, the amount that will be added to the Guarantee Period Account is limited to the difference between the amount earned and the 3% minimum guaranteed earnings. For examples of how the Market Value Adjustment works, See APPENDIX B -- SURRENDER CHARGES AND THE MARKET VALUE ADJUSTMENT. WITHDRAWALS. Prior to the Annuity Date, the Owner may make withdrawals of amounts held in the Guarantee Period Accounts. Withdrawals from these accounts will be made in the same manner and be subject to the same rules as set forth under "WITHDRAWALS" and "SURRENDER." In addition, the following provisions also apply to withdrawals from a Guarantee Period Account: (1) a Market Value Adjustment will apply to all withdrawals, including Withdrawals Without Surrender Charge, unless made at the end of the Guarantee Period; and (2) the Company reserves the right to defer payments of amounts withdrawn from a Guarantee Period Account for up to six months from the date it receives the withdrawal request. If deferred for 30 days or more, the Company will pay interest on the amount deferred at a rate of at least 3%. In the event that a Market Value Adjustment applies to a withdrawal of a portion of the value of a Guarantee Period Account, it will be calculated on the amount requested and deducted or added to the amount remaining in the Guarantee Period Account. If the entire amount in a Guarantee Period Account is requested, the adjustment will be made to the amount payable. If a surrender charge applies to the withdrawal, it will be calculated as set forth under "Surrender Charge" after application of the Market Value Adjustment. 47 PROGRAM TO PROTECT PRINCIPAL AND PROVIDE GROWTH POTENTIAL. Under this feature, the Owner elects a Guarantee Period and one or more Sub-Accounts. The Company will then compute the proportion of the initial payment that must be allocated to the Guarantee Period selected, assuming no transfers or withdrawals, in order to ensure that the value in the Guarantee Period Account on the last day of the Guarantee Period will equal the amount of the initial payment, less any Contract fees or charges that are applicable to the Guarantee Period Accounts. The required amount will then be allocated to the pre-selected Guarantee Period Account and the remaining balance to the other investment options selected by the Owner, in accordance with the procedures described in "PAYMENTS" under DESCRIPTION OF THE CONTRACT. FEDERAL TAX CONSIDERATIONS The effect of federal income taxes on the value of a Contract, on withdrawals or surrenders, on annuity benefit payments, and on the economic benefit to the Owner, Annuitant, or beneficiary depends upon a variety of factors. The following discussion is based upon the Company's understanding of current federal income tax laws as they are interpreted as of the date of this Prospectus. No representation is made regarding the likelihood of continuation of current federal income tax laws or of current interpretations by the IRS. In addition, this discussion does not address state or local tax consequences that may be associated with the Contract. IT SHOULD BE RECOGNIZED THAT THE FOLLOWING DISCUSSION OF FEDERAL INCOME TAX ASPECTS OF AMOUNTS PAID INTO AND RECEIVED FROM A CONTRACT IS NOT EXHAUSTIVE, DOES NOT PURPORT TO COVER ALL SITUATIONS, AND IS NOT INTENDED AS TAX ADVICE. A QUALIFIED TAX ADVISER ALWAYS SHOULD BE CONSULTED WITH REGARD TO THE APPLICATION OF LAW TO INDIVIDUAL CIRCUMSTANCES. GENERAL THE COMPANY. The Company is taxed as a life insurance company under Subchapter L of the Code. The Company files a consolidated tax return with its affiliates. The Variable Account is considered a part of and taxed with the operations of the Company and is not taxed as a separate entity. As of the date of this Prospectus, the Variable Account and Sub-Accounts are not subject to tax, but the Company reserves the right to make a charge for any future tax liability it may incur as a result of the existence of the Contract, the Variable Account or the Sub-Accounts or for any tax imposed on the Company with respect to the income or assets of the Contract, the Variable Account or the Sub-Accounts held by the Company. Any such charge for taxes will be assessed against the Variable Account or the Sub-Accounts on a fair and equitable basis in order to preserve equity among classes of Owners and with respect to each Sub-Account account as though that Sub-Account were a separate taxable entity. DIVERSIFICATION REQUIREMENTS. Section 817(h) of Code provides that the underlying investments held under a non-qualified annuity contract must satisfy certain diversification requirements in order for the contract to be treated as an annuity contract. If these requirements are not met, the Owner will be taxed each year on the annual increase in Accumulated Valued unless a waiver of the diversification failure is obtained from the IRS. The IRS has issued regulations under Section 817(h) of the Code relating to the diversification requirements for variable annuity and variable life insurance contracts. The regulations prescribed by the Treasury Department provide that the investments of a segregated asset account underlying a variable annuity contract are adequately diversified if no more than 55% of the value of the assets of such account is represented by any one investment, no more than 70% by any two investments, no more than 80% by any three investments, and no more than 90% by any four investments. These diversification requirements must be applied separately to each Sub-Account. The Company believes that the Underlying Funds will comply with the current diversification requirements so that a non-qualified Contract that invests in one or more of those Funds will not be disqualified from annuity contract treatment by Section 817(h) of the Code. In the event that future IRS regulations and/or rulings would require Contract modifications in order to remain in compliance with the diversification standards, the Company will make reasonable efforts to comply, and it reserves the right to make such changes as it deems appropriate for that purpose. 48 OWNER CONTROL. In some circumstances, owners of variable contracts who retain excessive control over the investment of the underlying separate account assets may be treated as the owners of those assets and may be subject to tax on income produced by those assets. Although published guidance in this area does not address certain aspects of the Contracts, we believe that the Owner of a Contract should not be treated as the owner of any assets in the Separate Account. We reserve the right to modify the Contracts to bring them into conformity with applicable standards should such modification be necessary to prevent Owners of the Policies from being treated as the owners of the underlying Separate Account assets. In order for a non-qualified variable annuity contract to qualify for tax deferral, assets in the segregated accounts underlying the contract must be considered to be owned by the insurance company and not by the contract owner. In three Revenue Rulings issued before the enactment of Section 817(h) of the Code in 1984, the IRS held that where a variable contract owner had certain forms of actual or potential control over the investments held under the variable annuity contract, the contract owner, rather than the issuing insurance company, would be treated as the owner and would be taxable on the income and gains produced by those assets. QUALIFIED AND NON-QUALIFIED CONTRACTS From a federal tax viewpoint there are two broad categories of variable annuity contracts: "qualified" contracts and "non-qualified" contracts. A qualified contract is one that is purchased in connection with a tax-qualified retirement plan or program eligible for special tax treatment under the Code. A non-qualified contract is one that is not purchased in connection with a retirement plan or program eligible for special tax treatment. The tax treatment for certain withdrawals or surrenders will vary, depending on whether they are made from a qualified contract or a non-qualified contract. For more information on the tax provisions applicable to qualified contracts, see "PROVISIONS APPLICABLE ONLY TO TAX QUALIFIED PLANS" below. TAXATION OF THE CONTRACT IN GENERAL. The Company believes that the Contract described in this Prospectus, with certain exceptions (see "Nonnatural Owner" below), will be considered an annuity contract under Section 72 of the Code which governs the taxation of annuities, and, if the Contract is a qualified contract, certain other provisions of the Code that will apply to it. Please note, however, if the Owner of a non-qualified Contract chooses an Annuity Date beyond the Owner's life expectancy, it is possible that the Contract may not be considered an annuity for tax purposes because there is no reasonable basis for expecting that annuity payments will ever be made under the Contract. In that event, the Owner would be taxed on the annual increase in Accumulated Value under the Contract. The Owner should consult a qualified tax adviser for more information. The following discussion assumes that a Contract will be treated as an annuity contract subject to Section 72 and, in the case of a qualified Contract, any other applicable provisions of the Code. MANDATORY DISTRIBUTION REQUIREMENTS FOR QUALIFIED CONTRACTS. Under Section 401(a)(9) of the Code, qualified Contracts will generally be subject both to mandatory minimum distribution requirements upon attainment of age 70 1/2 by the Owner and to mandatory death benefit distribution requirements upon the death of the Owner, either before or after the commencement of benefit payments. (Note: the rules for Roth IRAs do not currently require distributions to begin during the Owner's lifetime.) To comply with Section 401(a)(9), tax-qualified plans must include a provision for the commencement of benefits when a participant attains age 70 1/2 (or under certain plans when the participant retires, if later.) The regulations under Section 401(a)(9) provide that if the minimum distribution requirements are applicable to an annuity contract for any year in which annuity payments have not yet commenced on an irrevocable basis, except for acceleration, the required minimum distribution for that year must be computed by determining the entire interest of the Owner in the Contract as of the prior December 31 and dividing that amount by the applicable distribution period as determined under the regulations. Pursuant to special legislation, required minimum distributions for the 2009 tax year generally are not required, and 2009 distributions that otherwise would be required minimum distributions may be eligible for rollover. The regulations further provide that if the minimum distribution requirements are applicable to an annuity contract for any year in which annuity payments have commenced on an irrevocable basis, payments under 49 such contract must generally be non-increasing. According to the regulations, payments will not fail to satisfy the non-increasing payment requirement merely because payments are increased in one or more of the following ways: (1) By a constant percentage, applied not less frequently than annually; (2) To provide a final payment upon the death of the employee that does not exceed the excess of the total value being annuitized over the total payments before the death of the employee; (3) As a result of dividend payments or other payments that result from actuarial gains, but only if actuarial gain is measured no less frequently than annually and the resulting dividend payments or other payments are either paid no later than the year following the year for which the actuarial experience is measured or paid in the same form as the payment of the annuity over the remaining period of the annuity, beginning no later than the year following the year for which the actuarial experience is measured; and (4) An acceleration of payments under the annuity which is defined as a shortening of the payment period with respect to an annuity or a full or partial commutation of the future annuity payments. An increase in the payment amount will be treated as an acceleration of payments in the annuity only if the total future expected payments under the annuity (including the amount of any payment made as a result of the acceleration) is decreased as a result of the change in payment period. Some forms of annuity payments permitted under the Contract may not meet the requirements under the final regulations issued pursuant to Section 401(a)(9). In the event that future IRS regulations and/or rulings would require Contract modifications in order for distributions to the Owner to remain in compliance with these distribution requirements, the Company will make reasonable efforts to comply and it reserves the right to make such changes as it deems appropriate for that purpose. To comply with Section 401(a)(9) of the Code, tax-qualified plans must also include provisions for the distribution of plan benefits after the death of the participant. If the surviving spouse of the participant is the beneficiary subject to the terms of such a plan, Section 401(a)(9) permits the surviving spouse to defer the commencement of benefits until he or she reaches age 70 1/2, at which time the minimum distribution requirements will apply as though the spouse were a plan participant. If the beneficiary of a qualified Contract is not the participant's surviving spouse, the operation of the death benefit distribution requirements of Section 401(a)(9) will depend upon whether annuity payments have commenced. If the participant dies and annuity payments have commenced, the entire remaining interest must be distributed to the beneficiary at least as rapidly as under the method of distribution being used as of the date of the participant's death. If the participant dies before annuity payments have commenced, the entire interest must be distributed to the beneficiary either (i) within five years after the participant's death and/or (ii) in distributions that commence within one year after the date of death and are made in substantially equal amounts over a period not extending beyond the life or life expectancy of the beneficiary. If a beneficiary intends to comply with the substantially equal payment requirements without electing annuity payments, the required minimum distribution for any year must be computed by determining the entire interest of the owner in the Contract as of the prior December 31 and dividing that amount by the life expectancy of the owner and beneficiary as determined under the regulations. If the beneficiary intends to comply with the requirement by electing to receive annuity payments, these payments must satisfy the "nonincreasing payment" requirement discussed above. Some forms of annuity payments offered under the Contract may not satisfy these requirements. In the event that future IRS regulations and/or rulings would require Contract modifications in order for distributions to a beneficiary to remain in compliance with these distribution requirements, the Company will make reasonable efforts to comply, and it reserves the right to make such changes as it deems appropriate for that purpose. MANDATORY DISTRIBUTION REQUIREMENTS FOR NON-QUALIFIED CONTRACTS. Under Section 72(s) of the Code, a non-qualified annuity contract must contain specified provisions with respect to the distribution of the amounts held under the contract following the death of the contract owner. If this requirement is not met, the owner 50 will be taxed each year on the annual increase in Accumulated Value. This Contract contains provisions that are designed to meet the requirements of Section 72(s). Under Section 72(s), if the deceased Owner's surviving spouse is the beneficiary, the surviving spouse may retain the contract and continue deferral during his or her lifetime. If the beneficiary of the Contract is not the deceased Owner's surviving spouse, the specific distribution requirement applicable under Section 72(s) will depend upon whether annuity payments have commenced. If any Owner dies after annuity payments have commenced, the entire remaining interest under the Contract must be distributed at least as rapidly as under the method of distribution being used as of the date of the Owner's death. If any Owner dies before annuity payments have commenced, then the entire amount held under the Contract must be distributed: (1) within five years after the death of the Owner; and/or (2) in distributions that commence within one year after the date of death and are made in substantially equal amounts over a period not extending beyond the life or life expectancy of the beneficiary. In a private letter ruling issued in 2001, the IRS held that distributions made to the designated beneficiary under a non-qualified variable annuity contract under a procedure that provided for payments over the life expectancy of the beneficiary would qualify under the "substantially equal" procedure described in (ii) above, even though the beneficiary had the right to accelerate payments under the distribution procedure so long as the payments continued automatically unless and until such an acceleration occurred. In the event that future IRS regulations and/or rulings would require Contract modification in order to remain in compliance with these distribution requirements, the Company will make reasonable efforts to comply and it reserves the right to make such changes as it deems appropriate for that purpose. WITHDRAWALS PRIOR TO ANNUITIZATION. With certain exceptions, increases in the Contract's Accumulated Value are not taxable to the Owner until withdrawn from the Contract. Under the current provisions of the Code, amounts received or deemed to have been received under an annuity contract prior to annuitization (including payments made upon the death of the annuitant or owner), generally are first allocable to any investment gains credited to the contract over the taxpayer's "investment in the contract" and, to that extent, are treated as ordinary income subject to federal income taxation. For this purpose, the "investment in the contract" is the total of all payments to the Contract that were not excluded from the Owner's income less any amounts previously withdrawn from the Contract which were excluded from income as recovery of the investment in the Contract. For purposes of computing the taxable amount of any distribution under these rules, Section 72(e)(11)(A)(ii) requires that all non-qualified deferred annuity contracts issued by the same insurance company to the same owner during a single calendar year be treated as one contract. Different rules may apply to Qualified Contracts. ANNUITY PAYOUTS AFTER ANNUITIZATION. After annuity benefit payments begin under the Contract, a portion of each such payment received may generally be excluded from income as a recovery of the investment in the Contract. Different formulas apply to the computation of the excludable portion with respect to fixed annuity payments and with respect to variable annuity payments, but the general effect of both formulas is to allocate the exclusion from income for the investment in the Contract ratably over the period during which annuity payments will be received. All annuity payments received in excess of this excludable amount are taxable as ordinary income. Once the investment in the Contract is fully recovered, because payments under the Contract have continued for longer than expected, the entire amount of all future payments will be taxable. If the annuitant dies before the entire investment in the Contract is recovered, a deduction for the remaining amount is generally allowed on the annuitant's final tax return. PENALTY ON EARLY DISTRIBUTIONS. Under Section 72(q) of the Code, a 10% penalty tax may be imposed on the withdrawal of investment gains from a non-qualified Contract if the withdrawal is made prior to age 59 1/2. A similar 10% penalty tax is imposed under Section 72(t) of the Code on withdrawals or distributions of investment gains from a qualified Contract prior to age 59 1/2. The penalty tax will not be imposed on withdrawals: - taken on or after age 59 1/2; or 51 - if the withdrawal follows the death of the Owner (or, if the Owner is not an individual, the death of the primary Annuitant, as defined in the Code); or in the case of the Owner's "total disability" (as defined in the Code); or - if withdrawals from a qualified Contract are made to an employee who has terminated employment after reaching age 55; or - irrespective of age, if the amount received is one of a series of "substantially equal" periodic payments made at least annually for the life or life expectancy of the payee or the payee and a beneficiary. In addition, the penalty tax does not apply to certain distributions used for qualified first time home purchases, higher education expenses, or qualified military reservist distributions. Special conditions must be met to qualify for these exceptions. If you wish to take a distribution for these purposes you should consult your tax adviser. Other exceptions may also be available. Some forms of annuity payments permitted under the Contracts may not meet the "substantially equal" payment requirements under Section 72(q) or Section 72(s). Because of the uncertainties regarding these issues, a qualified tax adviser should be consulted prior to any request for a withdrawal from a Contract prior to age 59 1/2. ASSIGNMENTS OR TRANSFERS. If the Owner transfers (assigns) the Contract without receiving adequate and full consideration for the transfer, Section 72 of the Code generally requires the Owner to report taxable income equal to any investment gain in value over the Owner's cost basis at the time of the transfer. This acceleration rule applies to a transfer to another individual (other than the Owner's spouse) or to a nonnnatural person, such as a trust. If the transfer is to a charity, the Owner may be allowed a deduction for some or all of the value of the Contract transferred. If the transfer is not to a charity, the Owner may also be subject to gift tax on some or all of the value of the Contract transferred without adequate and full consideration. NONNATURAL OWNERS. As a general rule, deferred annuity contracts owned by "nonnatural persons" (e.g., a corporation) are not treated as annuity contracts for federal tax purposes, and the investment income attributable to contributions made after February 28, 1986 is taxed as ordinary income that is received or accrued by the owner during the taxable year. This rule does not apply to annuity contracts purchased with a single payment when the annuity date is no later than a year from the Issue Date (an immediate annuity) or to deferred annuities owned by qualified employer plans, estates, employers with respect to a terminated pension plan, and entities other than employers, such as a trust, holding an annuity as an agent for a natural person. This exception, however, will not apply in cases of any employer who is the owner of an annuity contract under a non-qualified deferred compensation plan. TAX WITHHOLDING The Code requires withholding with respect to payments or distributions from non-qualified contracts and IRAs, unless a taxpayer elects not to have withholding. A mandatory 20% withholding requirement applies to distributions from most other qualified contracts if such distribution would have been eligible to be rolled over into another qualified plan. In addition, the Code requires reporting to the IRS of the amount of income received with respect to payment or distributions from annuities. OTHER TAX ISSUES FEDERAL ESTATE TAXES. While no attempt is being made to discuss the federal estate tax implications of the Contract, you should keep in mind that the value of an annuity contract owned by a decedent and payable to a beneficiary by virtue of surviving the decedent is included in the decedent's gross estate. Depending on the terms of the annuity contract, the value of the annuity included in the gross estate may be the value of the lump sum payment payable to the designated beneficiary or the actuarial value of the payments to be received by the beneficiary. Consult an estate planning advisor for more information. GENERATION-SKIPPING TRANSFER TAX. Under certain circumstances, the Code may impose a "generation skipping transfer tax" when all or part of an annuity contract is transferred to, or a death benefit is paid to, an individual two or more generations younger than the Owner. Regulations issued under the Code may require us to deduct the tax from your Contract, or from any applicable payment, and pay it directly to the IRS. 52 ANNUITY PURCHASES BY RESIDENTS OF PUERTO RICO. The Internal Revenue Service has ruled that income received by residents of Puerto Rico under life insurance or annuity contracts issued by a Puerto Rico branch of a United States life insurance company is U.S.-source income that is generally subject to United States federal income tax. ANNUITY PURCHASES BY NONRESIDENT ALIENS AND FOREIGN CORPORATIONS. The discussion above provides general information regarding U.S. federal income tax consequences to annuity owners that are U.S. citizens or residents. Owners that are not U.S. citizens or residents will generally be subject to U.S. federal withholding tax on taxable distributions from annuity contracts at a 30% rate, unless a lower treaty rate applies. In addition, Owners may be subject to state and/or municipal taxes and taxes that may be imposed by the Owner's country of citizenship or residence. Consult with a qualified tax adviser regarding U.S. state, and foreign taxation with respect to an annuity contract. FOREIGN TAX CREDITS. We may benefit from any foreign tax credits attributable to taxes paid by certain Funds to foreign jurisdictions to the extent permitted under federal tax law. POSSIBLE TAX LAW CHANGES. Although the likelihood of legislative changes is uncertain, there is always the possibility that the tax treatment of the Contract could change by legislation or otherwise. Consult a tax adviser with respect to legislative developments and their effect on the Contract. We have the right to modify the contract in response to legislative changes that could otherwise diminish the favorable tax treatment that annuity contract Owners currently receive. We make no guarantee regarding the tax status of any contact and do not intend the above discussion as tax advice. PROVISIONS APPLICABLE ONLY TO TAX QUALIFIED PLANS Federal income taxation of assets held inside a qualified retirement plan and of earnings on those assets is deferred until distribution of plan benefits begins. As such, it is not necessary to purchase a variable annuity contract solely to obtain its tax deferral feature. However, other features offered under this Contract and described in this Prospectus -- such as the minimum guaranteed death benefit, the guaranteed fixed annuity rates and the wide variety of investment options -- may make this Contract a suitable investment for your qualified retirement plan. The tax rules applicable to qualified retirement plans, as defined by the Code, are complex and vary according to the type of plan. Benefits under a qualified plan may be subject to that plan's terms and conditions irrespective of the terms and conditions of any annuity contract used to fund such benefits. As such, the following is simply a general description of various types of qualified plans that may use the Contract. Before purchasing any annuity contract for use in funding a qualified plan, more specific information should be obtained. Qualified Contracts may include special provisions (endorsements) changing or restricting rights and benefits otherwise available to owners of non-qualified Contracts. Individuals purchasing a qualified Contract should carefully review any such changes or limitations that may include restrictions to ownership, transferability, assignability, contributions, and distributions. CORPORATE AND SELF-EMPLOYED ("H.R. 10" AND "KEOGH") PENSION AND PROFIT SHARING PLANS. Sections 401(a), 401(k) and 403(a) of the Code permit business employers and certain associations to establish various types of tax-favored retirement plans for employees, including self-employed individuals. Employers intending to use qualified Contracts in connection with such plans should seek competent advice as to the suitability of the Contract to their specific needs and as to applicable Code limitations and tax consequences. INDIVIDUAL RETIREMENT ANNUITIES. Sections 408 and 408A of the Code permit eligible individuals to contribute to an individual retirement program known as an Individual Retirement Annuity ("IRA"). Note: This term covers all IRAs permitted under Sections 408 and 408A of the Code, including Roth IRAs. IRAs are subject to limits on the amounts that may be contributed, the persons who may be eligible, and on the time when distributions may commence. In addition, certain distributions from other types of retirement plans may be "rolled over," on a tax-deferred basis, to an IRA. Purchasers of an IRA Contract will be provided with supplementary information as may be required by the IRS or other appropriate agency, and will have the right to cancel the Contract as described in this Prospectus. See "RIGHT TO CANCEL INDIVIDUAL 53 RETIREMENT ANNUITY" under DESCRIPTION OF THE CONTRACT. The Contract, including all available riders, was filed with the IRS and its form approved as a prototype. Such an approval is an approval as to the form of the Contract and does not represent a determination of its merits. Eligible employers that meet specified criteria may establish simplified employee pension plans (SEP-IRAs) for their employees using IRAs. Employer contributions that may be made to such plans are larger than the amounts that may be contributed to regular IRAs and may be deductible to the employer. TAX-SHELTERED ANNUITIES ("TSAS"). Under the provisions of Section 403(b) of the Code, payments made to annuity Contracts purchased for employees under annuity plans adopted by public school systems and certain organizations which are tax exempt under Section 501(c)(3) of the Code are excludable from the gross income of such employees to the extent that total annual payments do not exceed the maximum contribution permitted under the Code. Purchasers of TSA contracts should seek competent advice as to eligibility, limitations on permissible payments and other tax consequences associated with the contracts. Withdrawals or other distributions attributable to salary reduction contributions (including earnings thereon) made to a TSA contract after December 31, 1988, may not begin before the employee attains age 59 1/2, separates from service, dies or becomes disabled. In the case of hardship, an Owner may withdraw amounts contributed by salary reduction, but not the earnings on such amounts. Even though a distribution may be permitted under these rules (e.g., for hardship or after separation from service), it may be subject to a 10% penalty tax as a premature distribution, in addition to income tax. For Contracts issued after December 31, 2008, amounts attributable to contributions other than salary reduction contributions generally may not be distributed before severance of employment or occurrence of an event specified in the employer's Section 403(b) plan. If your Contract was issued pursuant to a 403(b) plan, we generally are required to confirm, with your 403(b) plan sponsor or otherwise, that withdrawals, transfers or surrenders you request comply with applicable tax requirements and to decline requests that are not in compliance. We will defer such payments you request until all information required under the tax law has been received. By requesting a withdrawal, transfer or surrender, you consent to the sharing of confidential information about you, the Contract, and transactions under the Contract and any other 403(b) contracts or accounts you have under the 403(b) plan among us, your employer or plan sponsor, any plan administrator or recordkeeper, and other product providers. DEFERRED COMPENSATION PLANS OF STATE AND LOCAL GOVERNMENTS AND TAX-EXEMPT ORGANIZATIONS. Under Section 457 of the Code, deferred compensation plans established by governmental and certain other tax-exempt employers for their employees may invest in annuity contracts. Contributions and investment earnings are not taxable to employees until distributed; however, with respect to payments made after February 28, 1986, a Contract owned by a state or local government or a tax-exempt organization will not be treated as an annuity under Section 72 as well. TEXAS OPTIONAL RETIREMENT PROGRAM. Distributions under a TSA contract issued to participants in the Texas Optional Retirement Program may not be received except in the case of the participant's death, retirement or termination of employment in the Texas public institutions of higher education. These additional restrictions are imposed under the Texas Government Code and a prior opinion of the Texas Attorney General. STATEMENTS AND REPORTS An Owner is sent a report semi-annually which provides certain financial information about the Underlying Funds. At least annually, the Company will furnish a statement to the Owner containing information about his or her Contract, including Accumulation Unit Values and other information as required by applicable law, rules and regulations. The Company will also send a confirmation statement to Owners each time a transaction is made affecting the Contract's Accumulated Value. (Certain transactions made under recurring payment plans such as Dollar Cost Averaging may in the future be confirmed quarterly rather than by immediate confirmations.) The Owner should review the information in all statements carefully. All errors or corrections must be reported to the Company immediately to assure proper crediting to the Contract. The Company will assume that all transactions are accurately reported on confirmation statements and other statements unless the Owner notifies the Service Office in writing within 30 days after receipt of the statement. 54 LOANS (QUALIFIED CONTRACTS ONLY) Loans are available to Owners of TSA Contracts (i.e., contracts issued under Section 403(b) of the Code) and to Contracts issued to plans qualified under Sections 401(a) and 401(k) of the Code. Loans are subject to provisions of the Code and to applicable qualified retirement plan rules. Tax advisors and plan fiduciaries should be consulted prior to exercising loan privileges. Loaned amounts will be withdrawn first from Sub-Account and Fixed Account values on a pro-rata basis until exhausted. Thereafter, any additional amounts will be withdrawn from the Guarantee Period Accounts (pro-rata by duration and LIFO within each duration), subject to any applicable Market Value Adjustments. The maximum loan amount will be determined under the Company's maximum loan formula. The minimum loan amount is $1,000. Loans will be secured by a security interest in the Contract and the amount borrowed will be transferred to a loan asset account within the Company's General Account, where it will accrue interest at a specified rate below the then-current loan rate. Generally, loans must be repaid within five years or less, and repayments must be made quarterly and in substantially equal amounts. Repayments will be allocated pro-rata in accordance with the most recent payment allocation, except that any allocations to a Guarantee Period Account will instead be allocated to the Goldman Sachs VIT Money Market Fund. ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS The Company reserves the right, subject to applicable law, to make additions to, deletions from, or substitutions for the shares of a fund that are held in the Sub-Accounts or that the Sub-Accounts may purchase. If the shares of any Underlying Fund no longer are available for investment or if, in the Company's judgment, further investment in any Underlying Fund should become inappropriate in view of the purposes of the Variable Account or the affected Sub-Account, the Company may withdraw the shares of that Underlying Fund and substitute shares of another registered open-end management company. The Company will not substitute any shares attributable to a Contract interest in a Sub-Account without notice to the Owner and prior approval of the SEC and state insurance authorities, to the extent required by the 1940 Act or other applicable law. The Variable Account may, to the extent permitted by law, purchase other securities for other contracts or permit a conversion between contracts upon request by an Owner. The Company also reserves the right to establish additional Sub-Accounts of the Variable Account, each of which would invest in shares corresponding to a new Underlying Fund or in shares of another investment company having a specified investment objective. Subject to applicable law and any required SEC approval, the Company may, in its sole discretion, establish new Sub-Accounts or eliminate one or more Sub-Accounts if marketing needs, tax considerations or investment conditions warrant. Any new Sub-Accounts may be made available to existing Owners on a basis to be determined by the Company. Shares of the Underlying Funds also are issued to variable accounts of the Company and its affiliates which issue variable life contracts ("mixed funding"). Shares of the Underlying Funds also are issued to other unaffiliated insurance companies ("shared funding"). It is conceivable that in the future such mixed funding or shared funding may be disadvantageous for variable life owners or variable annuity owners. Although the Company and the underlying investment companies do not currently foresee any such disadvantages to either variable life insurance owners or variable annuity owners, the Company and the respective trustees intend to monitor events in order to identify any material conflicts between such owners, and to determine what action, if any, should be taken in response thereto. if any, should be taken in response thereto. If the trustees were to conclude that separate funds should be established for variable life and variable annuity separate accounts, the Company will bear the attendant expenses. The Company reserves the right, subject to compliance with applicable law, to: (1) transfer assets from the Variable Account or any of its Sub-Accounts to another of the Company's separate accounts or Sub-Accounts having assets of the same class, (2) to operate the Variable Account or any Sub-Account as a management investment company under the 1940 Act or in any other form permitted by law, 55 (3) to deregister the Variable Account under the 1940 Act in accordance with the requirements of the 1940 Act, (4) to substitute the shares of any other registered investment company for the Underlying Fund shares held by a Sub-Account, in the event that Underlying Fund shares are unavailable for investment, or if the Company determines that further investment in such Underlying Fund shares is inappropriate in view of the purpose of the Sub-Account, (5) to change the methodology for determining the net investment factor, (6) to change the names of the Variable Account or of the Sub-Accounts, and (7) to combine with other Sub-Accounts or other Separate Accounts of the Company. If any of these substitutions or changes is made, the Company may endorse the Contract to reflect the substitution or change, and will notify Owners of all such changes. In no event will the changes described above be made without notice to Owners in accordance with the 1940 Act. CHANGES TO COMPLY WITH LAW AND AMENDMENTS The Company reserves the right, without the consent of Owners, to suspend sales of the Contract as presently offered, and to make any change to provisions of the Contract to comply with, or give Owners the benefit of, any federal or state statute, rule or regulation, including but not limited to requirements for annuity contracts and retirement plans under the Code and pertinent regulations or any state statute or regulation. Any such changes will apply uniformly to all Contracts that are affected. You will be given written notice of such changes. VOTING RIGHTS The Company will vote Underlying Fund shares held by each Sub-Account in accordance with instructions received from Owners and, after the Annuity Date, from the Annuitants. Each person having a voting interest in a Sub-Account will be provided with proxy materials of the Underlying Fund, together with a form with which to give voting instructions to the Company. Shares for which no timely instructions are received will be voted in proportion to the instructions which are received. The Company also will vote shares in a Sub-Account that it owns and which are not attributable to Contracts in the same proportion. If the 1940 Act or any rules thereunder should be amended or if the present interpretation of the 1940 Act or such rules should change, and as a result the Company determines that it is permitted to vote shares in its own right, whether or not such shares are attributable to the Contract, the Company reserves the right to do so. The number of votes which an Owner or Annuitant may cast will be determined by the Company as of the record date established by the Underlying Fund. During the accumulation period, the number of Underlying Fund shares attributable to each Owner will be determined by dividing the dollar value of the Accumulation Units of the Sub-Account credited to the Contract by the net asset value of one Underlying Fund share. During the annuity period, the number of Underlying Fund shares attributable to each Annuitant will be determined by dividing the reserve held in each Sub-Account for the Annuitant's Variable Annuity by the net asset value of one Underlying Fund share. Ordinarily, the Annuitant's voting interest in the Underlying Fund will decrease as the reserve for the Variable Annuity is depleted. DISTRIBUTION Effective May 1, 2008, Epoch Securities, Inc. ("Epoch" or "Principal Underwriter"), a Delaware company located at 132 Turnpike Road, Southborough, Massachusetts 01772, became principal underwriter for the Contracts. Epoch is a wholly-owned subsidiary of The Goldman Sachs Group, Inc. The Company paid commissions not to exceed 7.0% of payments to broker-dealers that sold the Contract. The Company currently does not pay direct commissions on additional payments to the Contracts. However, alternative commission schedules may be in effect that paid lower initial commission amounts but with ongoing annual compensation of up to 1% of the Contract's Accumulated Value. To the extent permitted by 56 FINRA rules, overrides and promotional incentives or payments also may be provided to independent marketing organizations and broker-dealers based on the Contract's Accumulated Value, sales volumes, the performance of wholesaling functions, or other sales-related criteria. Additional payments may be made for other services not directly related to the sale of the Contract. The Company intends to recoup commissions and other sales expenses through a combination of anticipated surrender charges and profits from the Company's General Account, which may include amounts derived from mortality and risk charges. Commissions paid on the Contract, including additional incentives or payments, do not result in any additional charge to Owners or to the Variable Account. The Company will retain any surrender charges assessed on a Contract. LEGAL MATTERS There are no legal proceedings to which we, the Separate Account or the Principal Underwriter is a party, or to which the assets of the Separate Account are subject, that are likely to have a material adverse effect on: - - the Separate Account; or - - the ability of the principal underwriter to perform its contract with the Separate Account; or - - on our ability to meet our obligations under the variable annuity contracts funded through the Separate Account. FURTHER INFORMATION A Registration Statement under the 1933 Act relating to this offering has been filed with the SEC. Certain portions of the Registration Statement and amendments have been omitted in this Prospectus pursuant to the rules and regulations of the SEC. The omitted information may be obtained from the SEC's principal office in Washington, D.C., upon payment of the SEC's prescribed fees. 57 APPENDIX A MORE INFORMATION ABOUT THE FIXED ACCOUNT Because of exemption and exclusionary provisions in the securities laws, interests in the Fixed Account generally are not subject to regulation under the provisions of the 1933 Act or the 1940 Act. Disclosures regarding the fixed portion of the annuity Contract and the Fixed Account may be subject to the provisions of the 1933 Act concerning the accuracy and completeness of statements made in this Prospectus. The disclosures in this APPENDIX A have not been reviewed by the SEC. The Fixed Account is part of the Company's General Account which is made up of all of the general assets of the Company other thna those allocated to separate accounts. Allocations to the Fixed Account become part of the assets of the Company and are used to support insurance and annuity obligations. The General Account is not segregated or insulated from the claims of the insurance company's creditors. Any amounts allocated to the Fixed Account or amounts that we guarantee in excess of your Contract Value are subject to our financial strength and claim's paying ability, and are subject to the risk that the insurance company may not be able to cover, or may default on, its obligations under those guarantees. A portion or all of net payments may be allocated to accumulate at a fixed rate of interest in the Fixed Account. Such net amounts are guaranteed by the Company as to principal and a minimum rate of interest. Currently, the Company will credit amounts allocated to the Fixed Account with interest at an effective annual rate of at least 3%, compounded daily. Additional "Excess Interest" may or may not be credited at the sole discretion of the Company. If a Contract is surrendered, or if an excess amount is withdrawn while the Contract is in force and before the Annuity Date, a surrender charge is imposed if such event occurs before the payments attributable to the surrender or withdrawal have been credited to the Contract for seven full Contract years. STATE RESTRICTIONS. In Massachusetts, payments and transfers to the Fixed Account are subject to the following restrictions: If a Contract is issued prior to the Annuitant's 60th birthday, allocations to the Fixed Account will be permitted until the Annuitant's 61st birthday. On and after the Annuitant's 61st birthday, no additional Fixed Account allocations will be accepted. If a Contract is issued on or after the Annuitant's 60th birthday, up through and including the Annuitant's 81st birthday, Fixed Account allocations will be permitted during the first Contract year. On and after the first Contract anniversary, no additional allocations to the Fixed Account will be permitted. If a Contract is issued after the Annuitant's 81st birthday, no payments to the Fixed Account will be permitted at any time. In Oregon, no payments to the Fixed Account will be permitted if a Contract is issued after the Annuitant's 81st birthday. If an allocation designated as a Fixed Account allocation is received at the Service Office during a period when the Fixed Account is not available due to the limitations outlined above, the monies will be allocated to the Goldman Sachs VIT Money Market Fund. A-1 APPENDIX B SURRENDER CHARGES AND THE MARKET VALUE ADJUSTMENT PART 1: SURRENDER CHARGES FULL SURRENDER -- Assume a payment of $50,000 is made on the issue date and no additional payments are made. Assume there are no partial withdrawals and that the Withdrawal Without Surrender Charge Amount is equal to the greater of 10% of the Accumulated Value or the accumulated earnings in the Contract. The table below presents examples of the surrender charge resulting from a full surrender, based on Hypothetical Accumulated Values (8% rate of return). HYPOTHETICAL WITHDRAWAL SURRENDER CONTRACT ACCUMULATED WITHOUT SURRENDER CHARGE SURRENDER YEAR VALUE CHARGE AMOUNT PERCENTAGE CHARGE - -------- ------------ ----------------- ---------- --------- 1 $54,000.00 $ 5,400.00 6.5% $3,159.00 2 58,320.00 8,320.00 6.0% 3,000.00 3 62,985.60 12,985.60 5.0% 2,500.00 4 68,024.45 18,024.45 4.0% 2,000.00 5 73,466.40 23,466.40 3.0% 1,500.00 6 79,343.72 29,343.72 2.0% 1,000.00 7 85,691.21 35,691.21 1.0% 500.00 8 92,546.51 42,546.51 0.0% 0.00 WITHDRAWALS -- Assume a payment of $50,000 is made on the issue date and no additional payments are made. Assume that the Withdrawal Without Surrender Charge Amount is equal to the greater of 10% of the current Accumulated Value or the accumulated earnings in the Contract and there are withdrawals as detailed below. The table below presents examples of the surrender charge resulting from withdrawals, based on Hypothetical Accumulated Values:
HYPOTHETICAL WITHDRAWAL SURRENDER CONTRACT ACCUMULATED WITHOUT SURRENDER CHARGE SURRENDER YEAR VALUE WITHDRAWALS CHARGE AMOUNT PERCENTAGE CHARGE - -------- ------------ ----------- ----------------- ---------- --------- 1 $54,000.00 $ 0.00 $ 5,400.00 6.5% $ 0.00 2 58,320.00 0.00 8,320.00 6.0% 0.00 3 62,985.60 0.00 12,985.60 5.0% 0.00 4 68,024.45 30,000.00 18,024.45 4.0% 479.02 5 41,066.40 10,000.00 4,106.64 3.0% 176.80 6 33,551.72 5,000.00 3,355.17 2.0% 32.90 7 30,835.85 10,000.00 3,083.59 1.0% 69.16 8 22,502.72 15,000.00 2,250.27 0.0% 0.00
PART 2: MARKET VALUE ADJUSTMENT The market value factor is: [(1+i)/(1+j)](TO THE POWER OF n/365) - 1 For purposes of the examples below: i = the guaranteed interest rate being credited to the guarantee period. j = the guaranteed interest rate on the date of surrender for the guarantee period with a duration equal to the number of years remaining in the current guarantee period, rounded to the next higher number of whole years. n = the number of days from the date of surrender to the expiration date of the guarantee period. B-1 The following examples assume: 1. The payment was allocated to a ten-year Guarantee Period Account with a Guaranteed Interest Rate of 8%. 2. The date of surrender is seven years (2,555 days) from the expiration date. 3. The value of the Guarantee Period Account is equal to $62,985.60 at the end of three years. 4. No transfers or withdrawals affecting this Guarantee Period Account have been made. 5. Surrender charges, if any, are calculated in the same manner as shown in the examples in Part 1. NEGATIVE MARKET VALUE ADJUSTMENT (CAPPED) * Assume that on the date of surrender, the current rate (j) is 11.00% or 0.11 The market value factor = [(1+i)/(1+j)](TO THE POWER OF n/365) - 1 = [(1+.08)/(1+.11)](TO THE POWER OF 2555/365) - 1 = (.97297)(TO THE POWER OF 7) - 1 = -.17452 The Market Value Adjustment = Maximum of the market value factor multiplied by the withdrawal or the negative of the excess interest earned over 3% = Maximum (-.17452 X $62,985.60 or -$8,349.25) = Maximum (-$10,992.38 or -$8,349.25) = -$8,349.25
* Capped takes into account the excess interest part of the Market Value Adjustment formula when the value produced is greater than the cap. NEGATIVE MARKET VALUE ADJUSTMENT (UNCAPPED)** Assume that on the date of surrender, the current rate (j) is 10.00% or 0.10 The market value factor = [(1+i)/(1+j)](TO THE POWER OF n/365) - 1 = [(1+.08)/(1+.10)](TO THE POWER OF 2555/365) - 1 = (.98182)(TO THE POWER OF 7) - 1 = -.12054
B-2 The Market Value Adjustment = the market value factor multiplied by the withdrawal = -.12054 X $62,985.60 = -$7,592.11 ** Uncapped is a straight application of the Market Value Adjustment formula when the value produced is less than the cap. POSITIVE MARKET VALUE ADJUSTMENT (CAPPED) * Assume that on the date of surrender, the current rate (j) is 5.00% or 0.05 The market value factor = [(1+i)/(1+j)](TO THE POWER OF n/365) - 1 = [(1+.08)/(1+.05)](TO THE POWER OF 2555/365) - 1 = (1.02857)(TO THE POWER OF 7) - 1 = .21798 The Market Value Adjustment = Minimum of the market value factor multiplied by the withdrawal or the excess interest earned over 3% = Minimum of (.21798 X $62,985.60 or $8,349.25) = Minimum of ($13,729.78 or $8,349.25) = $8,349.25
* Capped takes into account the excess interest part of the Market Value Adjustment formula when the value produced is greater than the cap. POSITIVE MARKET VALUE ADJUSTMENT (UNCAPPED)** Assume that on the date of surrender, the current rate (j) is 7.00% or 0.07 The market value factor = [(1+i)/(1+j)](TO THE POWER OF n/365) - 1 = [(1+.08)/(1+.07)](TO THE POWER OF 2555/365) - 1 = (1.00935)(TO THE POWER OF 7) - 1 = .06728 The Market Value Adjustment = the market value factor multiplied by the withdrawal = .06728 X $62,985.60 = $4,237.90
** Uncapped is a straight application of the Market Value Adjustment formula when the value produced is less than the cap. B-3 APPENDIX C THE DEATH BENEFIT PART 1: DEATH OF THE ANNUITANT DEATH BENEFIT ASSUMING NO WITHDRAWALS Assume a payment of $50,000 is made on the issue date and no additional payments are made. Assume there are no withdrawals and that the Death Benefit Effective Annual Yield is equal to 5%. The table below presents examples of the Death Benefit based on the Hypothetical Accumulated Values.
HYPOTHETICAL HYPOTHETICAL CONTRACT ACCUMULATED MARKET VALUE DEATH DEATH DEATH HYPOTHETICAL YEAR VALUE ADJUSTMENT BENEFIT (a) BENEFIT (b) BENEFIT (c) DEATH BENEFIT - -------- ------------ ------------ ----------- ----------- ----------- ------------- 1 $53,000.00 $ 0.00 $53,000.00 $52,500.00 $50,000.00 $53,000.00 2 53,530.00 500.00 54,030.00 55,125.00 53,000.00 55,125.00 3 58,883.00 0.00 58,883.00 57,881.25 55,125.00 58,883.00 4 52,994.70 500.00 53,494.70 60,775.31 58,883.00 60,775.31 5 58,294.17 0.00 58,294.17 63,814.08 60,775.31 63,814.08 6 64,123.59 500.00 64,623.59 67,004.78 63,814.08 67,004.78 7 70,535.95 0.00 70,535.95 70,355.02 67,004.78 70,535.95 8 77,589.54 500.00 78,089.54 73,872.77 70,535.95 78,089.54 9 85,348.49 0.00 85,348.49 77,566.41 78,089.54 85,348.49 10 93,883.34 0.00 93,883.34 81,444.73 85,348.49 93,883.34
Death Benefit (a) is the Accumulated Value increased by any positive Market Value Adjustment. Death Benefit (b) is the gross payments accumulated daily at an effective annual yield of 5% reduced proportionately to reflect withdrawals. Death Benefit (c) is the death benefit that would have been payable on the most recent Contract anniversary, increased for subsequent payments, and decreased proportionately for subsequent withdrawals. The Hypothetical Death Benefit is equal to the greatest of Death Benefits (a), (b), or (c) DEATH BENEFIT ASSUMING WITHDRAWALS Assume a payment of $50,000 is made on the issue date and no additional payments are made. Assume there are withdrawals as detailed in the table below and that the Death Benefit Effective Annual Yield is equal to 5%. The table below presents examples of the Death Benefit based on the Hypothetical Accumulated Value.
HYPOTHETICAL HYPOTHETICAL HYPOTHETICAL CONTRACT ACCUMULATED MARKET VALUE DEATH DEATH DEATH DEATH YEAR VALUE WITHDRAWALS ADJUSTMENT BENEFIT (a) BENEFIT (b) BENEFIT (c) BENEFIT - -------- ------------ ----------- ------------ ----------- ----------- ----------- ------------ 1 $53,000.00 $ 0.00 $ 0.00 $53,000.00 $52,500.00 $50,000.00 $53,000.00 2 53,530.00 0.00 500.00 54,030.00 55,125.00 53,000.00 55,125.00 3 3,883.00 50,000.00 0.00 3,883.00 4,171.13 3,972.50 4,171.13 4 3,494.70 0.00 500.00 3,994.70 4,379.68 4,171.13 4,379.68 5 3,844.17 0.00 0.00 3,844.17 4,598.67 4,379.68 4,598.67 6 4,228.59 0.00 500.00 4,728.59 4,828.60 4,598.67 4,828.60 7 4,651.45 0.00 0.00 4,651.45 5,070.03 4,828.60 5,070.03 8 5,116.59 0.00 500.00 5,616.59 5,323.53 5,070.03 5,616.59 9 5,628.25 0.00 0.00 5,628.25 5,589.71 5,616.59 5,628.25 10 691.07 5,000.00 0.00 691.07 712.70 683.44 712.70
C-1 Death Benefit (a) is the Accumulated Value increased by any positive Market Value Adjustment. Death Benefit (b) is the gross payments accumulated daily at an effective annual yield of 5% reduced proportionately to reflect withdrawals. Death Benefit (c) is the death benefit that would have been payable on the most recent Contract anniversary, increased for subsequent payments, and decreased proportionately for subsequent withdrawals. The Hypothetical Death Benefit is equal to the greatest of Death Benefits (a), (b), or (c). PART 2: DEATH OF THE OWNER WHO IS NOT THE ANNUITANT Assume a payment of $50,000 is made on the issue date and no additional payments are made. Assume there are no partial withdrawals. The table below presents examples of the Death Benefit based on the Hypothetical Accumulated Values. HYPOTHETICAL HYPOTHETICAL CONTRACT ACCUMULATED MARKET VALUE HYPOTHETICAL YEAR VALUE ADJUSTMENT DEATH BENEFIT - -------- ------------ ------------ ------------- 1 $53,000.00 $ 0.00 $53,000.00 2 53,530.00 500.00 54,030.00 3 58,883.00 0.00 58,883.00 4 52,994.70 500.00 53,494.70 5 58,294.17 0.00 58,294.17 6 64,123.59 500.00 64,623.59 7 70,535.95 0.00 70,535.95 8 77,589.54 500.00 78,089.54 9 85,348.49 0.00 85,348.49 10 93,883.34 0.00 93,883.34 The Hypothetical Death Benefit is the Accumulated Value increased by any positive Market Value Adjustment. C-2 APPENDIX D DIFFERENCES UNDER THE COMMONWEALTH ANNUITY SELECT RESOURCE I CONTRACT (FORM A3020-92) 1. The Guarantee Period Accounts and the Enhanced Earning Rider are not available under Commonwealth Annuity Select Resource I. 2. The waiver of surrender charge offered in Commonwealth Annuity Select Resource II if you become disabled prior to age 65, are diagnosed with a terminal illness or remain confined in a nursing home for the later of one year after issue or 90 days (see Elimination or Reduction of Surrender Charges) is not available under Commonwealth Annuity Select Resource I. "NOTE: THE WAIVERS FOR TERMINAL ILLNESS AND FOR CONFINEMENT IN A NURSING HOME ARE NOT AVAILABLE IN NEW JERSEY UNDER EITHER Commonwealth Annuity SELECT RESOURCE I OR Commonwealth Annuity SELECT RESOURCE II." 3. The Withdrawal Without Surrender Charge privilege under Commonwealth Annuity Select Resource I does not provide access to cumulative earnings without charge. In addition, the 10% free amount is based on the prior December 31 Accumulated Value rather than 10% of the Accumulated Value as of the date the withdrawal request is received. 4. The death benefit under Commonwealth Annuity Select Resource I is the greatest of: 1) total payments less any withdrawals; 2) the Contract's Accumulated Value on the Valuation Date that the Company receives proof of death; or 3) the amount that would have been payable as a death benefit on the most recent fifth Contract anniversary, increased to reflect additional payments and reduced to reflect withdrawals since that date. 5. Any payment to the Fixed Account offered under Commonwealth Annuity Select Resource I must be at least $500 and is locked in for one year from the date of deposit. At the end of one year, a payment may be transferred or renewed in the Fixed Account for another full year at the guaranteed rate in effect on that date. The minimum guaranteed rate is 3 1/2%. The Fixed Account is not available to Owners who purchased Commonwealth Annuity Select Resource I in Oregon. The Fixed Account offered under Commonwealth Annuity Select Resource I in Massachusetts does not contain any age restrictions. (See APPENDIX A for discussion of Fixed Account under Commonwealth Annuity Select Resource II) 6. The $30 Contract fee under Commonwealth Annuity Select Resource I is not waived under any circumstances. 7. If you select a variable period certain annuity option, the dollar amount of the first periodic annuity benefit payment is determined by multiplying (1) the Accumulated Value applied under that option (less premium taxes, if any) divided by $1,000, by (2) the applicable amount of the first monthly payment per $1,000 of value. 8. Because of the differences between the free withdrawal provisions and the application of the Contract fee, the following examples apply to the Commonwealth Annuity Select Resource I contract rather than the examples on page 10 of this prospectus: MAXIMUM EXPENSE EXAMPLE The following example assumes that you invest $10,000 in the Contract for the time periods indicated and that your investment has a 5% return each year. The example also assumes the maximum fees and expenses of any of the Underlying Funds and assumes that these fees and expenses remain the same in each of the 1, 3, 5, and 10-year intervals. Finally, the example assumes that you have elected a Minimum Guaranteed Annuity (M-GAP) Rider with a ten year waiting period at an annual charge of 0.25% annually. Although your actual costs may be higher or lower, based on these assumptions, your costs would be: D-1 1) If, at the end of the applicable time period, you surrender your Contract or annuitize under any commutable period certain option or a noncommutable fixed period certain option of less than ten years: 1 YEAR 3 YEARS 5 YEARS 10 YEARS ------ ------- ------- -------- Fund with the maximum total operating expenses $955 $1,575 $2,170 $3,932 2) If you do NOT surrender your Contract or if you annuitize at the end of the applicable time period under a life option or a noncommutable fixed period certain option of ten years or longer: 1 YEAR 3 YEARS 5 YEARS 10 YEARS ------ ------- ------- -------- Fund with the maximum total operating expenses $370 $1,126 $1,902 $3,932 MINIMUM EXPENSE EXAMPLE The following example assumes that you invest $10,000 in the Contract for the time periods indicated and that your investment has a 5% return each year. The example also assumes the minimum fees and expenses of any of the Underlying Funds and assumes that these fees and expenses remain the same in each of the 1, 3, 5, and 10-year intervals. It also assumes that you have not chosen any optional rider. Although your actual costs may be higher or lower, based on these assumptions, your costs would be: (1) If, at the end of the applicable time period, you surrender your Contract or annuitize under any commutable period certain option or a noncommutable fixed period certain option of less than ten years: 1 YEAR 3 YEARS 5 YEARS 10 YEARS ------ ------- ------- -------- Fund with the minimum total operating expenses $788 $1,074 $1,344 $2,327 (2) If you do NOT surrender your Contract or if you annuitize at the end of the applicable time period under a life option or a noncommutable fixed period certain option of ten years or longer: 1 YEAR 3 YEARS 5 YEARS 10 YEARS ------ ------- ------- -------- Fund with the minimum total operating expenses $203 $627 $1,078 $2,327 D-2 APPENDIX E CONDENSED FINANCIAL INFORMATION COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY COMMONWEALTH SELECT SEPARATE ACCOUNT THE FOLLOWING TABLES PROVIDE CONDENSED FINANCIAL INFORMATION FOR THE SUB-ACCOUNTS OF THE COMPANY FOR THE 10-YEAR PERIOD ENDING DECEMBER 31, 2008.
SUB-ACCOUNT 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 - ----------- ------------------------------------------------------------------------------------- GOLDMAN SACHS CAPITAL GROWTH FUND (SERVICE SHARES) Unit Value: Beginning of Period 2.503 2.308 2.145 2.026 1.912 1.536 2.151 2.897 3.575 2.793 2.091 End of Period 1.433 2.503 2.308 2.145 2.026 1.912 1.536 2.151 2.897 3.575 2.793 Units Outstanding at End of Period (in thousands) 35,908 43,582 55,864 69,410 89,713 110,128 84,037 111,852 135,289 134,059 120,538 GOLDMAN SACHS CORE FIXED INCOME FUND (SERVICE SHARES) Unit Value: Beginning of Period 1.879 1.784 1.737 1.730 1.687 1.656 1.553 1.459 1.340 1.371 1.301 End of Period 1.694 1.879 1.784 1.737 1.730 1.687 1.656 1.553 1.459 1.340 1.371 Units Outstanding at End of Period (in thousands) 41,855 54,064 61,115 73,642 86,702 111,942 118,921 127,566 114,184 110,437 102,171 GOLDMAN SACHS EQUITY INDEX FUND (SERVICE SHARES) Unit Value: Beginning of Period 1.040 1.001 0.880 0.855 0.786 0.623 0.813 0.937 1.000 N/A N/A End of Period 0.643 1.040 1.001 0.880 0.855 0.786 0.623 0.813 0.937 N/A N/A Units Outstanding at End of Period (in thousands) 71,779 87,418 114,406 146,147 183,137 213,299 35,464 16,661 1,156 N/A N/A
E-1
SUB-ACCOUNT 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 - ----------- ------------------------------------------------------------------------------------- GOLDMAN SACHS GOVERNMENT INCOME FUND (SERVICE SHARES) Unit Value: Beginning of Period 1.172 1.108 1.080 1.078 1.071 1.068 1.000 N/A N/A N/A N/A End of Period 1.192 1.172 1.108 1.080 1.078 1.071 1.068 N/A N/A N/A N/A Units Outstanding at End of Period (in thousands) 21,385 16,889 15,967 18,132 21,211 38,456 57,149 N/A N/A N/A N/A GOLDMAN SACHS GROWTH OPPORTUNITIES FUND (SERVICE SHARES) Unit Value: Beginning of Period 4.118 3.499 3.356 2.968 2.537 1.842 2.383 2.444 2.321 1.878 1.672 End of Period 2.403 4.118 3.499 3.356 2.968 2.537 1.842 2.383 2.444 2.321 1.878 Units Outstanding at End of Period (in thousands) 11,852 15,062 19,737 25,913 32,585 39,218 57,017 64,079 74,845 62,949 54,789 GOLDMAN SACHS MID CAP VALUE FUND (SERVICE SHARES) Unit Value: Beginning of Period 2.152 2.115 1.859 1.759 1.495 1.095 1.327 1.195 0.929 0.989 1.000 End of Period 1.332 2.152 2.115 1.859 1.759 1.495 1.095 1.327 1.195 0.929 0.989 Units Outstanding at End of Period (in thousands) 20,130 25,869 33,311 41,697 51,760 62,506 78,287 91,948 78,804 43,839 18,240 GOLDMAN SACHS MONEY MARKET FUND (SERVICE SHARES) Unit Value: Beginning of Period 1.472 1.422 1.378 1.360 1.367 1.375 1.372 1.334 1.272 1.227 1.179 End of Period 1.484 1.472 1.422 1.378 1.360 1.367 1.375 1.372 1.334 1.272 1.227 Units Outstanding at End of Period (in thousands) 51,918 52,473 52,521 57,329 68,857 93,968 180,361 165,467 134,660 127,048 92,796
E-2
SUB-ACCOUNT 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 - ----------- ------------------------------------------------------------------------------------- GOLDMAN SACHS STRATEGIC INTERNATIONAL EQUITY FUND (SERVICE SHARES) Unit Value: Beginning of Period 2.315 2.177 1.817 1.640 1.453 1.153 1.451 1.875 2.089 1.608 1.400 End of Period 1.231 2.315 2.177 1.817 1.640 1.453 1.153 1.451 1.875 2.089 1.608 Units Outstanding at End of Period (in thousands) 24,890 29,909 37,902 48,390 62,631 79,065 87,250 107,611 123,129 109,511 103,028 GOLDMAN SACHS STRUCTURED U.S. EQUITY FUND (SERVICE SHARES) Unit Value: Beginning of Period 1.255 1.296 1.166 1.116 1.025 0.814 1.000 N/A N/A N/A N/A End of Period 0.778 1.255 1.296 1.166 1.116 1.025 0.814 N/A N/A N/A N/A Units Outstanding at End of Period (in thousands) 1,779 1,877 2,306 2,130 2,384 2,557 2,155 N/A N/A N/A N/A AIM V.I. CAPITAL APPRECIATION FUND (SERIES I SHARES) Unit Value: Beginning of Period 0.851 0.770 0.715 0.686 0.622 0.622 0.653 0.896 1.000 N/A N/A End of Period 0.482 0.851 0.770 0.715 0.686 0.622 0.622 0.653 0.896 N/A N/A Units Outstanding at End of Period (in thousands) 7,152 8,012 9,358 11,353 14,459 17,422 17,422 13,106 2,982 N/A N/A AIM V.I. CORE EQUITY FUND (SERVICE I SHARES) Unit Value: Beginning of Period 0.901 0.846 0.744 0.714 0.685 0.555 0.808 0.937 1.000 N/A N/A End of Period 0.621 0.901 0.846 0.744 0.714 0.685 0.555 0.808 0.937 N/A N/A Units Outstanding at End of Period (in thousands) 9,685 11,116 13,191 15,631 18,766 23,728 27,915 25,862 2,405 N/A N/A
E-3
SUB-ACCOUNT 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 - ----------- ------------------------------------------------------------------------------------- AIM V.I. DYNAMICS FUND (SERVICE I SHARES) Unit Value: Beginning of Period 0.803 0.726 0.634 0.580 0.519 0.382 0.569 0.838 1.000 N/A N/A End of Period 0.411 0.803 0.726 0.634 0.580 0.519 0.382 0.569 0.838 N/A N/A Units Outstanding at End of Period (in thousands) 2,733 3,999 6,848 7,974 10,597 12,607 13,272 10,159 1,664 N/A N/A AIM V.I. GLOBAL HEALTH CARE FUND (SERIES I SHARES) Unit Value: Beginning of Period 1.000 0.979 0.944 0.885 0.834 0.662 0.889 1.031 1.000 N/A N/A End of Period 0.760 1.080 0.979 0.944 0.885 0.834 0.662 0.889 1.031 N/A N/A Units Outstanding at End of Period (in thousands) 3,516 4,123 5,536 7,366 8,979 10,760 12,323 9,811 2,059 N/A N/A AIM V.I. LARGE CAP GROWTH FUND (SERIES I SHARES) Unit Value: Beginning of Period 0.802 0.704 0.661 0.648 0.628 0.509 0.699 0.915 1.000 N/A N/A End of Period 0.488 0.802 0.704 0.661 0.648 0.628 0.509 0.699 0.915 N/A N/A Units Outstanding at End of Period (in thousands) 8,605 11,326 13,537 16,926 20,414 23,608 24,811 18,589 2,625 N/A N/A AIM V.I. BASIC VALUE FUND (SERIES II SHARES) Unit Value: Beginning of Period 1.260 1.261 1.132 1.089 0.996 0.758 1.000 N/A N/A N/A N/A End of Period 0.598 1.260 1.261 1.132 1.089 0.996 0.758 N/A N/A N/A N/A Units Outstanding at End of Period (in thousands) 3,549 4,500 5,862 7,824 10,386 10,164 7,356 N/A N/A N/A N/A
E-4
SUB-ACCOUNT 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 - ----------- ------------------------------------------------------------------------------------- AIM V.I. CAPITAL DEVELOPMENT FUND (SERIES II SHARES) Unit Value: Beginning of Period 1.510 1.385 1.208 1.122 0.987 0.741 1.000 N/A N/A N/A N/A End of Period 0.787 1.510 1.385 1.208 1.122 0.987 0.741 N/A N/A N/A N/A Units Outstanding at End of Period (in thousands) 618 933 1,153 1,073 1,483 1,329 284 N/A N/A N/A N/A ALLIANCEBERNSTEIN VPS GLOBAL THEMATIC GROWTH PORTFOLIO (CLASS B) Unit Value: Beginning of Period 1.285 1.087 1.017 0.995 0.961 0.678 1.000 N/A N/A N/A N/A End of Period 0.666 1.285 1.087 1.017 0.995 0.961 0.678 N/A N/A N/A N/A Units Outstanding at End of Period (in thousands) 868 1,292 1,326 1,247 1,498 1,778 364 N/A N/A N/A N/A ALLIANCEBERNSTEIN VPS GROWTH AND INCOME PORTFOLIO (CLASS B) Unit Value: Beginning of Period 1.376 1.331 1.154 1.119 1.020 0.783 1.021 1.034 1.000 N/A N/A End of Period 0.804 1.376 1.331 1.154 1.119 1.020 0.783 1.021 1.034 N/A N/A Units Outstanding at End of Period (in thousands) 26,095 31,950 41,319 49,056 58,892 70,116 78,109 49,134 3,477 N/A N/A ALLIANCEBERNSTEIN VPS LARGE CAP GROWTH PORTFOLIO (CLASS B) Unit Value: Beginning of Period 0.977 0.872 0.890 0.786 0.736 0.605 0.887 1.000 N/A N/A N/A End of Period 0.580 0.977 0.872 0.890 0.786 0.736 0.605 0.887 N/A N/A N/A Units Outstanding at End of Period (in thousands) 3,560 4,737 5,486 6,519 8,122 10,285 11,814 7,890 N/A N/A N/A
E-5
SUB-ACCOUNT 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 - ----------- ------------------------------------------------------------------------------------- ALLIANCEBERNSTEIN VPS SMALL/MID CAP VALUE PORTFOLIO (CLASS B) Unit Value: Beginning of Period 1.597 1.596 1.417 1.348 1.148 0.826 1.000 N/A N/A N/A N/A End of Period 1.012 1.597 1.596 1.417 1.348 1.148 0.826 N/A N/A N/A N/A Units Outstanding at End of Period (in thousands) 3,139 4,416 4,905 5,923 8,152 4,501 2,761 N/A N/A N/A N/A ALLIANCEBERNSTEIN VPS VALUE PORTFOLIO (CLASS B) Unit Value: Beginning of Period 1.397 1.479 1.239 1.191 1.066 0.841 1.000 N/A N/A N/A N/A End of Period 0.813 1.397 1.479 1.239 1.191 1.066 0.841 N/A N/A N/A N/A Units Outstanding at End of Period (in thousands) 2,782 3,713 5,543 5,036 4,568 3,594 2,499 N/A N/A N/A N/A DWS SMALL CAP INDEX VIP (CLASS A) Unit Value: Beginning of Period 1.497 1.547 1.335 1.299 1.119 0.775 0.990 0.984 1.000 N/A N/A End of Period 0.972 1.497 1.547 1.336 1.299 1.119 0.775 0.990 0.984 N/A N/A Units Outstanding at End of Period (in thousands) 3,614 5,203 6,806 7,795 9,675 10,849 8,991 3,904 87 N/A N/A DWS DREMAN HIGH RETURN EQUITY VIP (CLASS A) Unit Value: Beginning of Period 1.407 1.455 1.288 1.307 1.184 0.937 1.039 1.107 1.000 N/A N/A End of Period 0.972 1.407 1.455 1.288 1.307 1.184 0.937 1.039 1.107 N/A N/A Units Outstanding at End of Period (in thousands) 3,068 3,669 4,599 5,812 6,810 7,951 8,796 5,736 679 N/A N/A
E-6
SUB-ACCOUNT 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 - ----------- ------------------------------------------------------------------------------------- DWS TECHNOLOGY VIP (CLASS A) Unit Value: Beginning of Period 0.512 0.455 0.458 0.447 0.445 0.308 0.484 0.727 1.000 N/A N/A End of Period 0.272 0.512 0.455 0.458 0.447 0.445 0.308 0.484 0.727 N/A N/A Units Outstanding at End of Period (in thousands) 4,803 6,115 7,832 9,811 17,110 20,389 16,554 12,020 4,507 N/A N/A EATON VANCE VT FLOATING RATE-INCOME FUND Unit Value: Beginning of Period 1.090 1.088 1.046 1.021 1.007 0.992 1.003 1.000 N/A N/A N/A End of Period 0.783 1.090 1.088 1.046 1.021 1.007 0.992 1.003 N/A N/A N/A Units Outstanding at End of Period (in thousands) 11,126 15,225 18,060 19,427 19,489 18,378 21,100 8,027 N/A N/A N/A EATON VANCE VT WORLDWIDE HEALTH SCIENCES FUND Unit Value: Beginning of Period 1.163 1.111 1.126 1.067 1.019 0.795 1,149 1.000 N/A N/A N/A End of Period 1.065 1.163 1.111 1.126 1.067 1.019 0.795 1.149 N/A N/A N/A Units Outstanding at End of Period (in thousands) 11,126 6,107 7,934 9,788 11,449 12,539 11,658 5,703 N/A N/A N/A FIDELITY VIP CONTRAFUND(R) PORTFOLIO Unit Value: Beginning of Period 1.586 1.368 1.242 1.077 0.946 0.747 0.836 0.966 1.000 N/A N/A End of Period 0.899 1.586 1.368 1.242 1.077 0.946 0.747 0.836 0.966 N/A N/A Units Outstanding at End of Period (in thousands) 27,351 34,328 39,323 42,028 36,499 30,644 28,591 16,731 4,509 N/A N/A
E-7
SUB-ACCOUNT 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 - ----------- ------------------------------------------------------------------------------------- FIDELITY VIP EQUITY-INCOME PORTFOLIO Unit Value: Beginning of Period 2.810 2.807 2.368 2.269 2.063 1.605 1.961 2.092 1.957 1.867 1.696 End of Period 1.589 2.810 2.807 2.368 2.269 2.063 1.605 1.961 2.092 1.957 1.867 Units Outstanding at End of Period (in thousands) 29,480 37,240 46,520 57,749 73,279 85,422 105,303 119,522 122,812 114,059 95,537 FIDELITY VIP GROWTH PORTFOLIO Unit Value: Beginning of Period 2.861 2.285 2.169 2.079 2.040 1.557 2,260 2,783 3.171 2.340 1.701 End of Period 1.490 2.861 2.285 2.169 2.079 2.040 1.557 2.260 2.783 3.171 2.340 Units Outstanding at End of Period (in thousands) 21,946 26,316 32,819 40,830 52,885 62,334 74,649 95,897 111,920 90,071 63,055 FIDELITY VIP GROWTH & INCOME PORTFOLIO Unit Value: Beginning of Period 1.203 1.088 0.975 0.919 0.881 0.722 0.878 0.976 1.000 N/A N/A End of Period 0.692 1.203 1.088 0.975 0.919 0.881 0.722 0.878 0.976 N/A N/A Units Outstanding at End of Period (in thousands) 6,091 8,773 9,280 11,245 13,053 15,016 14,260 14,337 1,485 N/A N/A FIDELITY VIP HIGH INCOME PORTFOLIO Unit Value: Beginning of Period 1.491 1.471 1.341 1.324 1.225 0.977 0.957 1.100 1.439 1.350 1.430 End of Period 1.103 1.491 1.471 1.341 1.324 1.225 0.977 1.100 1.100 1.439 1.350 Units Outstanding at End of Period (in thousands) 24,893 31,959 39,175 47,686 61,378 80,700 89,461 103,705 99,327 87,413 74,986
E-8
SUB-ACCOUNT 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 - ----------- ------------------------------------------------------------------------------------- FIDELITY VIP MID CAP PORTFOLIO Unit Value: Beginning of Period 2.208 1,936 1.743 1.494 1.213 0.887 0.998 1.046 1.000 N/A N/A End of Period 1.318 2.208 1.936 1.743 1.494 1.213 0.887 0.998 1.046 N/A N/A Units Outstanding at End of Period (in thousands) 16,357 20,407 27,207 32,957 33,168 34,214 35,732 19,368 2,914 N/A N/A FIDELITY VIP VALUE STRATEGIES PORTFOLIO Unit Value: Beginning of Period 1.566 1.506 1.317 1.304 1.162 0.749 1.000 N/A N/A N/A N/A End of Period 0.752 1.566 1.506 1.317 1.304 1.162 0.749 N/A N/A N/A N/A Units Outstanding at End of Period (in thousands) 2.396 3,082 3,383 3,587 4,838 5,165 885 N/A N/A N/A N/A FT VIP FRANKLIN LARGE CAP GROWTH SECURITIES FUND (CLASS 2) Unit Value: Beginning of Period 1.246 1.189 1.088 1.091 1.026 0.819 1.000 N/A N/A N/A N/A End of Period 0.804 1.246 1.189 1.088 1.091 1.026 0.819 N/A N/A N/A N/A Units Outstanding at End of Period (in thousands) 2,644 3,366 3,724 4,331 4,510 3,150 1,070 N/A N/A N/A N/A FT VIP FRANKLIN SMALL CAP VALUE SECURITIES FUND (CLASS 2) Unit Value: Beginning of Period 1.502 1.561 1.353 1.262 1.034 0.794 1.000 N/A N/A N/A N/A End of Period 0.992 1.502 1.561 1.353 1.262 1.034 0.794 N/A N/A N/A N/A Units Outstanding at End of Period (in thousands) 4,967 6,175 8,511 9,019 8,092 4,489 2,257 N/A N/A N/A N/A
E-9
SUB-ACCOUNT 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 - ----------- ------------------------------------------------------------------------------------- FT VIP FRANKLIN SMALL-MID CAP GROWTH SECURITIES FUND (CLASS 2) Unit Value: Beginning of Period 0.915 0.834 0.778 0.753 0.686 0.507 0.720 0.862 1.000 N/A N/A End of Period 0.519 0.915 0.834 0.778 0.753 0.686 0.507 0.720 0.862 N/A N/A Units Outstanding at End of Period (in thousands) 11,859 14,119 18,318 21,392 25,011 29,881 27,115 12,372 1,055 N/A N/A FT VIP MUTUAL SHARES SECURITIES FUND (CLASS 2) Unit Value: Beginning of Period 1.733 1.699 1.455 1.335 1.202 0.974 1.121 1.062 1.000 N/A N/A End of Period 1.075 1.733 1.699 1.455 1.335 1.202 0.974 1.121 1.062 N/A N/A Units Outstanding at End of Period (in thousands) 17,600 22,619 25,587 28,576 29,084 30,941 2,257 22,617 1,151 N/A N/A FT VIP TEMPLETON FOREIGN SECURITIES FUND (CLASS 2) Unit Value: Beginning of Period 1.770 1.555 1.299 1.195 1.023 0.785 1.000 N/A N/A N/A N/A End of Period 1.041 1.770 1.555 1.299 1.195 1.023 0.785 N/A N/A N/A N/A Units Outstanding at End of Period (in thousands) 7,681 10,111 11,965 13,604 10,905 6,831 4,058 N/A N/A N/A N/A JANUS ASPEN GROWTH AND INCOME PORTFOLIO Unit Value: Beginning of Period 1.012 0.946 0.890 0.805 0.731 0.600 0.778 0.914 1.000 N/A N/A End of Period 0.586 1.012 0.946 0.890 0.805 0.731 0.600 0.778 0.914 N/A N/A Units Outstanding at End of Period (in thousands) 7,575 10,229 13,034 14,157 15,197 18,412 19,923 14,985 2,409 N/A N/A
E-10
SUB-ACCOUNT 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 - ----------- ------------------------------------------------------------------------------------- JANUS ASPEN OVERSEAS PORTFOLIO (SERVICE SHARES) Unit Value: Beginning of Period 1.782 1.412 0.977 0.751 0.641 0.484 0.484 0.875 1.000 N/A N/A End of Period 0.839 1.782 1.412 0.977 0.751 0.641 0.484 0.641 0.875 N/A N/A Units Outstanding at End of Period (in thousands) 11,556 15,018 16.132 15,571 13,033 15,184 18,862 15,184 3,263 N/A N/A JANUS ASPEN JANUS PORTFOLIO (SERVICE SHARES) Unit Value: Beginning of Period 0.770 0.680 0.620 0.605 0.589 0.454 0.629 0.849 1.000 N/A N/A End of Period 0.456 0.770 0.680 0.620 0.605 0.589 0.454 0.629 0.849 N/A N/A Units Outstanding at End of Period (in thousands) 11,808 14,397 16,157 18,834 22,842 26,135 30,199 16,948 3,332 N/A N/A JANUS ASPEN ENTERPRISE PORTFOLIO (SERVICE SHARES) Unit Value: Beginning of Period 0.735 0.612 0.548 0.496 0.417 0.314 0.443 0.744 1.000 N/A N/A End of Period 0.407 0.735 0.612 0.548 0.496 0.417 0.314 0.443 0.744 N/A N/A Units Outstanding at End of Period (in thousands) 4,783 7,191 6,313 7,017 7,398 8,603 10,681 12,347 1,707 N/A N/A MFS(R) MID CAP GROWTH SERIES (SERVICE CLASS) Unit Value: Beginning of Period 1.191 1.103 1.094 1.079 0.956 0.710 1.000 N/A N/A N/A N/A End of Period 0.569 1.191 1.103 1.094 1.079 0.956 0.710 N/A N/A N/A N/A Units Outstanding at End of Period (in thousands) 1,845 2,737 3,258 4,311 5,677 3,896 1,076 N/A N/A N/A N/A
E-11
SUB-ACCOUNT 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 - ----------- ------------------------------------------------------------------------------------- MFS(R) NEW DISCOVERY SERIES (SERVICE CLASS) Unit Value: Beginning of Period 1.197 1.187 1.066 1.029 0.983 0.747 1.000 N/A N/A N/A N/A End of Period 0.714 1.197 1.187 1.066 1.029 0.983 0.747 N/A N/A N/A N/A Units Outstanding at End of Period (in thousands) 1,018 1,132 1,549 1,585 2,084 1,800 644 N/A N/A N/A N/A MFS(R) TOTAL RETURN SERIES (SERVICE CLASS) Unit Value: Beginning of Period 1.311 1.280 1.163 1.149 1.050 0.918 1.000 N/A N/A N/A N/A End of Period 1.004 1.311 1.280 1.163 1.149 1.050 8,179 N/A N/A N/A N/A Units Outstanding at End of Period (in thousands) 11,112 13,289 16,085 19,446 16,967 13,317 8,179 N/A N/A N/A N/A MFS(R) UTILITIES SERIES (SERVICE CLASS) Unit Value: Beginning of Period 2.674 2.126 1.646 1.432 1.119 0.837 1.000 N/A N/A N/A N/A End of Period 1.639 2.674 2.126 1.646 1.432 1.119 0.837 N/A N/A N/A N/A Units Outstanding at End of Period (in thousands) 4,103 5,242 5,822 6,230 4,031 2,152 779 N/A N/A N/A N/A OPPENHEIMER BALANCED FUND/VA (SERVICE SHARES) Unit Value: Beginning of Period 1.361 1.334 1.220 1.194 1.103 0.897 1.000 N/A N/A N/A N/A End of Period 0.757 1.361 1.334 1.220 1.194 1.103 0.897 N/A N/A N/A N/A Units Outstanding at End of Period (in thousands) 3,905 5,067 5,476 4,512 3,299 2,025 616 N/A N/A N/A N/A
E-12
SUB-ACCOUNT 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 - ----------- ------------------------------------------------------------------------------------- OPPENHEIMER CAPITAL APPRECIATION FUND/VA (SERVICE SHARES) Unit Value: Beginning of Period 1.311 1.168 1.100 1.064 1.012 0.785 1.000 N/A N/A N/A N/A End of Period 0.702 1.311 1.168 1.100 1.064 1.012 0.785 N/A N/A N/A N/A Units Outstanding at End of Period (in thousands) 3,266 4,421 7,062 8,402 6,220 4,649 2,037 N/A N/A N/A N/A OPPENHEIMER GLOBAL SECURITIES FUND/VA (SERVICE SHARES) Unit Value: Beginning of Period 1.730 1.654 1.430 1.271 1.084 0.770 1.000 N/A N/A N/A N/A End of Period 1.018 1.730 1.654 1.430 1.271 1.084 0.770 N/A N/A N/A N/A Units Outstanding at End of Period (in thousands) 7,617 11,014 13,958 15,317 11,880 7,050 3,478 N/A N/A N/A N/A OPPENHEIMER HIGH INCOME FUND/VA (SERVICE SHARES) Unit Value: Beginning of Period 1.316 1.341 1.246 1.238 1.155 0.946 1.000 N/A N/A N/A N/A End of Period 0.278 1.316 1.341 1.246 1.238 1.155 0.946 N/A N/A N/A N/A Units Outstanding at End of Period (in thousands) 5,287 6,296 7,237 8,044 10,199 10,871 6,429 N/A N/A N/A N/A OPPENHEIMER MAIN STREET FUND(R)/VA (SERVICE SHARES) Unit Value: Beginning of Period 1.308 1.274 1.126 1.080 1.003 0.805 1.000 N/A N/A N/A N/A End of Period 0.792 1.308 1.274 1.126 1.080 1.003 0.805 N/A N/A N/A N/A Units Outstanding at End of Period (in thousands) 2,299 3,024 3,801 4,771 5,221 4,518 3,011 N/A N/A N/A N/A
E-13
SUB-ACCOUNT 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 - ----------- ------------------------------------------------------------------------------------- PIONEER FUND VCT PORTFOLIO (CLASS II) Unit Value: Beginning of Period 1.180 1.142 0.995 0.953 0.871 0.716 0.899 1.000 N/A N/A N/A End of Period 0.763 1.180 1.142 0.995 0.953 0.871 0.716 0.899 N/A N/A N/A Units Outstanding at End of Period (in thousands) 5,525 5,991 7,922 9,219 9,507 8,096 8,671 3,277 N/A N/A N/A PIONEER REAL ESTATE SHARES VCT PORTFOLIO (CLASS 2) Unit Value: Beginning of Period 2.333 2.925 2.173 1.919 1.437 1.084 1.075 1.000 N/A N/A N/A End of Period 1.418 2.333 2.925 2.173 1.919 1.437 1.084 3,475 N/A N/A N/A Units Outstanding at End of Period (in thousands) 4,828 6,594 9,661 10,741 11,633 11,433 12,231 3,475 N/A N/A N/A T. ROWE PRICE INTERNATIONAL STOCK PORTFOLIO Unit Value: Beginning of Period 1.988 1.784 1.519 1.328 1.184 0.920 1.142 1.488 1.837 1.398 1.223 End of Period 1.006 1.988 1.784 1.519 1.328 1.184 0.920 1.142 1.488 1.837 1.398 Units Outstanding at End of Period (in thousands) 23,278 26,681 32,378 37,547 47,389 55,172 67,555 65,264 62,055 49,814 41,458
E-14 COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY STATEMENT OF ADDITIONAL INFORMATION OF FLEXIBLE PAYMENT DEFERRED VARIABLE AND FIXED ANNUITY CONTRACTS FUNDED THROUGH SUB-ACCOUNTS OF COMMONWEALTH SELECT SEPARATE ACCOUNT THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS. IT SHOULD BE READ IN CONJUNCTION WITH THE COMMONWEALTH ANNUITY SELECT RESOURCE I AND II PROSPECTUS OF COMMONWEALTH ANNUITY SELECT SEPARATE ACCOUNT DATED MAY 1, 2009 ("THE PROSPECTUS"). THE PROSPECTUS MAY BE OBTAINED FROM ANNUITY CLIENT SERVICES, COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY, PO BOX 758554, TOPEKA, KS 66675, TELEPHONE 1-800-366-1492. DATED MAY 1, 2009 Commonwealth Annuity Select Resource I & II TABLE OF CONTENTS GENERAL INFORMATION AND HISTORY 3 TAXATION OF THE CONTRACT, THE VARIABLE ACCOUNT AND THE COMPANY 4 SERVICES 5 UNDERWRITERS 6 ANNUITY BENEFIT PAYMENTS AND ACCUMULATION UNIT CALCULATION 6 ENHANCED AUTOMATIC TRANSFER (DOLLAR COST AVERAGING) PROGRAM 8 DISCONTINUATION OF THE MINIMUM GUARANTEED ANNUITY PAYOUT (M-GAP) RIDER 8 PERFORMANCE INFORMATION 10 FINANCIAL STATEMENTS F-1 2 GENERAL INFORMATION AND HISTORY Effective September 1, 2006, Allmerica Financial Life Insurance and Annuity Company was renamed Commonwealth Annuity and Life Insurance Company (the "Company"). The Company is a life insurance company organized under the laws of Delaware in July 1974. Prior to December 31, 2002, the Company was a wholly owned subsidiary of First Allmerica Financial Life Insurance Company ("First Allmerica)", which in turn was a direct subsidiary of Allmerica Financial Corporation ("AFC"). Effective December 31, 2002, the Company became a Massachusetts domiciled insurance company and a direct wholly-owned subsidiary of The Hanover Insurance Group ("THG," formerly Allmerica Financial Corporation). On December 30, 2005, THG completed the closing of the sale of the Company to The Goldman Sachs Group, Inc. ("Goldman Sachs"), 85 Broad Street, New York, NY 10004. The Company's principal office (the "Principal Office") was relocated to 132 Turnpike Road, Suite 210, Southborough, MA 01772, Telephone 508-460-2400. The Company is subject to the laws of the Commonwealth of Massachusetts governing insurance companies and to regulation by the Commissioner of Insurance of Massachusetts. In addition, the Company is subject to the insurance laws and regulations of other states and jurisdictions in which it is licensed to operate. As of December 31, 2008, the Company and its subsidiaries had $6 billion in assets and $12 billion of life insurance in force. In connection with its purchase of the Company in December 2005, Goldman Sachs provided certain written assurances to the Commissioner of the Massachusetts Division of Insurance (the "Commissioner"). More specifically, Goldman Sachs agreed to make capital contributions to the Company, subject to a maximum of $350 million, if necessary to ensure that the Company maintains a risk-based capital ratio of at least 100%, pursuant to Massachusetts Insurance Law. Such assurances have been provided solely to the Commissioner by Goldman Sachs. These assurances are not evidence of indebtedness or an obligation or liability of Goldman Sachs, and do not provide Contract Owners with any specific rights or recourse against Goldman Sachs. Commonwealth Select Separate Account (the "Variable Account") is a separate investment account of Commonwealth Annuity and Life Insurance Company (the "Company") authorized by vote of its Board of Directors on March 5, 1992. Several Sub-Accounts of the Variable Account are available under the Commonwealth Annuity Select Resource I and II contract (the "Contract"). Each Sub-Account invests exclusively in shares of one of the following funds: GOLDMAN SACHS VARIABLE INSURANCE TRUST (SERVICE SHARES) Goldman Sachs VIT Capital Growth Fund Goldman Sachs VIT Core Fixed Income Fund Goldman Sachs VIT Equity Index Fund Goldman Sachs VIT Government Income Fund Goldman Sachs VIT Growth Opportunities Fund Goldman Sachs VIT Mid Cap Value Fund Goldman Sachs VIT Money Market Fund Goldman Sachs VIT Strategic International Equity Fund Goldman Sachs VIT Structured U.S. Equity Fund AIM VARIABLE INSURANCE FUNDS (SERIES I SHARES) AIM V.I. Capital Appreciation Fund AIM V.I. Core Equity Fund AIM V.I. Dynamics Fund AIM V.I. Global Health Care Fund AIM V.I. Large Cap Growth Fund AIM VARIABLE INSURANCE FUNDS (SERIES II SHARES) AIM V.I. Basic Value Fund AIM V.I. Capital Development Fund ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND, INC. (CLASS B) AllianceBernstein VPS Global Thematic Growth Portfolio AllianceBernstein VPS Growth and Income Portfolio AllianceBernstein VPS Large Cap Growth Portfolio AllianceBernstein VPS Small/Mid Cap Value Portfolio AllianceBernstein VPS Value Portfolio DWS INVESTMENTS VIT FUNDS DWS Small Cap Index VIP DWS VARIABLE SERIES II DWS Dreman High Return Equity VIP DWS Technology VIP (CONTINUES ON THE NEXT PAGE) 3 EATON VANCE VARIABLE TRUST Eaton Vance VT Floating-Rate Income Fund Eaton Vance VT Worldwide Health Sciences Fund FIDELITY VARIABLE INSURANCE PRODUCTS FUNDS Fidelity VIP Contrafund(R) Portfolio Fidelity VIP Equity-Income Portfolio Fidelity VIP Growth Portfolio Fidelity VIP Growth & Income Portfolio Fidelity VIP High Income Portfolio Fidelity VIP Mid Cap Portfolio FIDELITY VARIABLE INSURANCE PRODUCTS FUNDS (SERVICE CLASS 2) Fidelity VIP Value Strategies Portfolio FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST (CLASS 2) FT VIP Franklin Large Cap Growth Securities Fund FT VIP Franklin Small Cap Value Securities Fund FT VIP Franklin Small-Mid Cap Growth Securities Fund FT VIP Mutual Shares Securities Fund FT VIP Templeton Foreign Securities Fund JANUS ASPEN SERIES (SERVICE SHARES) Janus Aspen Enterprise Portfolio Janus Aspen Growth and Income Portfolio Janus Aspen Janus Portfolio Janus Aspen Overseas Portfolio MFS(R) VARIABLE INSURANCE TRUST(SM) (SERVICE CLASS) MFS(R) Mid Cap Growth Series MFS(R) New Discovery Series MFS(R) Total Return Series MFS(R) Utilities Series OPPENHEIMER VARIABLE ACCOUNT FUNDS (SERVICE SHARES) Oppenheimer Balanced Fund/VA Oppenheimer Capital Appreciation Fund/VA Oppenheimer Global Securities Fund/VA Oppenheimer High Income Fund/VA Oppenheimer Main Street Fund(R)/VA PIONEER VARIABLE CONTRACTS TRUST (CLASS II) Pioneer Fund VCT Portfolio Pioneer Real Estate Shares VCT Portfolio T. ROWE PRICE INTERNATIONAL SERIES, INC. T. Rowe Price International Stock Portfolio TAXATION OF THE CONTRACT, THE VARIABLE ACCOUNT AND THE COMPANY The Company currently imposes no charge for taxes payable in connection with the Contract, other than for state and local premium taxes and similar assessments when applicable. The Company reserves the right to impose a charge for any other taxes that may become payable in the future in connection with the Contract or the Variable Account. The Variable Account is considered to be a part of and taxed with the operations of the Company. The Company is taxed as a life insurance company under subchapter L of the Internal Revenue Code (the "Code"), and files a consolidated tax return with its affiliated companies. The Company reserves the right to make a charge for any effect which the income, assets or existence of the Contract or the Variable Account may have upon its tax. Such charge for taxes, if any, will be assessed on a fair and equitable basis in order to preserve equity among classes of Contract Owners ("Owners"). The Variable Account presently is not subject to tax. 4 SERVICES SERVICE PROVIDERS CUSTODIAN OF SECURITIES. The Company serves as custodian of the assets of the Variable Account. Underlying Fund shares owned by the Sub-Accounts are held on an open account basis. A Sub-Account's ownership of Underlying Fund shares is reflected on the records of the Underlying Fund and is not represented by any transferable stock certificates. MAIL ROOM AND ADMINISTRATIVE SERVICES. Goldman Sachs and the Company have retained Security Benefit Life Insurance Company and its affiliates (collectively, "Security Benefit") to provide systems, administrative, accounting, mailroom and lockbox services and other services to the Company. The principal administrative offices of Security Benefit are located at One Security Benefit Place, Topeka, Kansas, 66636. EXPERTS. The financial statements of the Company as of December 31, 2008 and 2007 and for each of the three years in the period ended December 31, 2008, and the financial statements of the Commonwealth Select Separate Account of the Company as of December 31, 2008 and for the periods indicated, included in this Statement of Additional Information constituting part of this Registration Statement, have been so included in reliance on the reports of PricewaterhouseCoopers LLP, the Company's independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting. The financial statements of the Company included herein should be considered only as bearing on the ability of the Company to meet its obligations under the Contract. OTHER SERVICE ARRANGEMENTS The Company may enter into certain arrangements under which the Company (or its affiliates) are compensated by the investment advisers, distributors and/or affiliates of the underlying funds for the distribution and/or administrative services which we provide to the underlying funds. The amount of payments the Company receives from the Fund's service providers is based on a percentage of the assets of the particular Fund attributable to the Contract as well as certain other variable insurance products that the Company and/or our affiliates may issue or administer. These percentages are negotiated and vary with each Fund. (These payments may be derived, in whole or in part, from the investment advisory fee deducted from Fund assets. Contract Owners, through their indirect investment in the Funds, bear the costs of these investment advisory fees; see the Funds' prospectuses for more information.) Some service providers may pay the Company significantly more than others and the amount the Company receives may be substantial. The percentages that we receive under these arrangements currently range from 0.10% to 0.22%. Certain of the Funds may also make payments to us or to Epoch under their distribution plans (12b-1 plans). The payment rates currently range up to 0.25% based on the amount of assets invested in those Funds. Payments made out of the assets of the Funds will reduce the amount of assets that otherwise would be available for investment, and will reduce the return on your investment. The dollar amount of future asset-based fees is not predictable because these fees are a percentage of the Fund's average net assets, which can fluctuate over time. If, however, the value of the Funds goes up, then so would the dollar amount of payment to the Company or to Epoch. Conversely, if the value of the Fund goes down, payments to the Company or to Epoch would decrease. The Company (and our affiliates) may profit from these payments. As of the date of this prospectus, we were receiving payments from each Fund's service providers. The Company and/or the Epoch also may directly or indirectly receive additional amounts or different percentages of assets under management from some of the Funds' service providers with regard to other variable insurance products the Company or our affiliates may issue or administer. 5 UNDERWRITERS Effective May 1, 2008, Epoch Securities, Inc., a Delaware company located at 132 Turnpike Road, Southborough, MA 01772 ("Epoch" or "Underwriter"), became principal underwriter for the Contracts. Epoch is a corporation organized and existing under the laws of the state of Delaware, and is a wholly-owned subsidiary of The Goldman Sachs Group, Inc. Epoch is a registered broker-dealer with the SEC and a member of the Financial Industry Regulatory Authority ("FINRA"). Epoch replaced Security Distributors, Inc., located at One Security Benefit Place, Topeka, Kansas 66636, ("SDI"), which had served as principal underwriter from January 1, 2007. SDI had replaced VeraVest Investments, Inc., located at 440 Lincoln Street, Worcester, MA 01653 ("VeraVest," formerly Allmerica Investments, Inc.), which had served as principal underwriter and general distributor until December 31, 2006. The Company has effectively ceased issuing new Contracts except in connection with certain pre-existing contractual plans and programs. The Company paid commissions not to exceed 7.0% of payments to broker-dealers that sold the Contract. The Company currently does not pay direct commissions on additional payments to the Contracts. However, alternative commission schedules may be in effect that paid lower initial commission amounts but with ongoing annual compensation of up to 1.0% of the Contract's Accumulated Value. To the extent permitted by FINRA rules, overrides and promotional incentives or payments also may be provided to independent marketing organizations and broker-dealers based on the Contract's Accumulated Value, sales volumes, the performance of wholesaling functions, or other sales-related criteria. Additional payments may be made for other services not directly related to the sale of the Contract. Commissions paid by the Company do not result in any charge to Owners or to the Variable Account in addition to the charges described under CHARGES AND DEDUCTIONS in the Prospectus. The Company intends to recoup the commission and other sales expense through a combination of anticipated surrender, withdrawal and/or annuitization charges, profits from the Company's general account, including the investment earnings on amounts allocated to accumulate on a fixed basis in excess of the interest credited on fixed accumulations by the Company, and the profit, if any, from the mortality and expense risk charge. The aggregate amounts of commissions paid to VeraVest (2005 and 2006) and SDI (2007) for sales of all contracts funded by Commonwealth Select Separate Account (including contracts not described in the Prospectus) for the years 2006, 2007 and 2008 were $11,808.00, $3,633,179.19 and $2,688,525.20, respectively. No commissions were retained by SDI or VeraVest for sales of all contracts funded by Commonwealth Annuity Select Separate Account (including contracts not described in the Prospectus) for the years 2006, 2007 and 2008. No commissions or other compensation was received by Epoch, directly or indirectly, from the Commonwealth Select Separate Account during the Commonwealth Annuity Select Separate Account's last fiscal year. ANNUITY BENEFIT PAYMENTS AND ACCUMULATION UNIT CALCULATION The method by which the Accumulated Value under the Contract is determined is described in detail under "Computation of Values" in the Prospectus. ILLUSTRATION OF ACCUMULATION UNIT CALCULATION USING HYPOTHETICAL EXAMPLE. The Accumulation Unit calculation for a daily Valuation Period may be illustrated by the following hypothetical example: Assume that the assets of a Sub-Account at the beginning of a one-day Valuation Period were $5,000,000; that the value of an Accumulation Unit on the previous date was $1.135000; and that during the Valuation Period, the investment income and net realized and unrealized capital gains exceed net realized and unrealized capital losses by $1,675. The Accumulation Unit Value at the end of the current Valuation Period would be calculated as follows: 6 (1) Accumulation Unit Value -- Previous Valuation Period $ 1.135000 (2) Value of Assets -- Beginning of Valuation Period $5,000,000 (3) Excess of Investment Income and Net Gains Over Capital Losses $ 1,675 (4) Adjusted Gross Investment Rate for the Valuation Period (3) divided by (2) 0.000335 (5) Annual Charge (one-day equivalent of 1.40% per annum) 0.000039 (6) Net Investment Rate (4) - (5) 0.000296 (7) Net Investment Factor 1.000000 + (6) 1.000296 (8) Accumulation Unit Value -- Current Period (1) x (7) $ 1.135336 Conversely, if unrealized capital losses and charges for expenses and taxes exceeded investment income and net realized capital gains of $1,675, the Accumulation Unit Value at the end of the Valuation Period would have been $1.134576. The method for determining the amount of annuity benefit payments is described in detail under "Annuity Benefit Payments" in the Prospectus. ILLUSTRATION OF VARIABLE ANNUITY BENEFIT PAYMENT CALCULATION USING HYPOTHETICAL EXAMPLE. The determination of the Annuity Unit value and the variable annuity benefit payment may be illustrated by the following hypothetical example: Assume an Annuitant has 40,000 Accumulation Units in a Variable Account, and that the value of an Accumulation Unit on the Valuation Date used to determine the amount of the first variable annuity benefit payment is $1.120000. Therefore, the Accumulated Value of the Contract is $44,800 (40,000 x $1.120000). Assume also that the Owner elects an option for which the first monthly payment is $6.57 per $1,000 of Accumulated Value applied. Assuming no premium tax or surrender charge, the first monthly payment would be $44.80 ($44,800 divided by $1,000) multiplied by $6.57, or $294.34. Next, assume that the Annuity Unit Value for the assumed interest rate of 3.5% per annum for the Valuation Date as of which the first payment was calculated was $1.100000. Annuity Unit Values will not be the same as Accumulation Unit Values because the former reflect the 3.5% assumed interest rate used in the annuity rate calculations. When the Annuity Unit Value of $1.100000 is divided into the first monthly payment, the number of Annuity Units represented by that payment is determined to be 267.5818. The value of this same number of Annuity Units will be paid in each subsequent month under most options. Assume further that the net investment factor for the Valuation Period applicable to the next annuity benefit payment is 1.000190. Multiplying this factor by .999906 (the one-day adjustment factor for the assumed interest rate of 3.5% per annum) produces a factor of 1.000096. This then is multiplied by the Annuity Unit Value on the immediately preceding Valuation Date (assumed here to be $1.105000). The result is an Annuity Unit Value of $1.105106 for the current monthly payment. The current monthly payment then is determined by multiplying the number of Annuity Units by the current Annuity Unit Value, or 267.5818 times $1.105106, which produces a current monthly payment of $295.71. METHOD FOR DETERMINING COMMUTED VALUE ON VARIABLE ANNUITY PERIOD CERTAIN OPTIONS AND ILLUSTRATION USING HYPOTHETICAL EXAMPLE. The Contract offers both commutable and non-commutable fixed period certain annuity options and commutable variable period certain annuity options. A commutable option gives the Annuitant the right to exchange any remaining payments for a lump sum payment based on the commuted value. The Commuted Value is the present value of remaining payments calculated at 3.5% interest. The determination of the Commuted Value may be illustrated by the following hypothetical example. 7 Assume a commutable period certain option is elected. The number of Annuity Units on which each payment is based would be calculated using the Surrender Value less any premium tax rather than the Accumulated Value. Assume this results in 250.0000 Annuity Units. Assume the Commuted Value is requested with 60 monthly payments remaining and a current Annuity Unit Value of $1.200000. Based on these assumptions, the dollar amount of remaining payments would be $300 a month for 60 months. The present value at 3.5% of all remaining payments would be $16,560.72. ENHANCED AUTOMATIC TRANSFER (DOLLAR COST AVERAGING) PROGRAM To the extent permitted by law, the Company reserves the right to offer an Enhanced Automatic Transfer (Dollar Cost Averaging) Program from time to time. If an Owner elects automatic transfers while the enhanced program is in effect, the Company will credit an enhanced interest rate to eligible payments made to the Enhanced Automatic Transfer Program. Eligible payments: - must be new payments to the Contract, including the initial payment, - must be allocated to the Fixed Account, which will be the source account, - must be automatically transferred out of the Fixed Account to one or more Sub-Accounts over a specified time period and - will receive the enhanced rate while they remain in the Fixed Account. Any new eligible payments made to an existing Enhanced Automatic Transfer program will start a new Enhanced Automatic Transfer program. In this case, the following rules apply: - The money remaining in the Fixed Account from the original program will be combined with the new eligible payment to determine the new monthly transfer amount. - The new monthly transfer amount will be transferred out of the Fixed Account in accordance with the allocation instructions specified for the new payment. If no allocation instructions are specified with the new eligible payment, the allocation instructions for the original eligible payment will be used. The new monthly transfer amount will be transferred out of the Fixed Account on a LIFO (last-in, first-out basis) to the selected Sub-Accounts on the date designated for the new eligible payment. - A new enhanced interest rate may be applied to the new eligible payment, while the money remaining in the Fixed Account from the original program will continue to receive the enhanced rate in effect at the time the older payment was received. DISCONTINUATION OF THE MINIMUM GUARANTEED ANNUITY PAYOUT (M-GAP) RIDER Effective January 31, 2002, the Company terminated the availability of the optional Minimum Guaranteed Annuity Payout (M-GAP) Rider. This termination does not affect M-GAP Riders issued prior to January 31, 2002 except that Owners who have previously elected the M-GAP Rider will not be able to purchase a new M-GAP Rider under the repurchase feature. The M-GAP Rider provides a guaranteed minimum amount of fixed annuity lifetime income during the annuity payout phase, after a ten year or fifteen year waiting period, subject to the conditions described below. On each Contract anniversary a Minimum Guaranteed Annuity Payout Benefit Base (less any applicable premium taxes) is determined. The Minimum Guaranteed Annuity Payout Benefit Base is the value that will be annuitized should you exercise the Rider. In order to exercise the Rider, a fixed annuitization option involving a life contingency must be selected. Annuitization under this Rider will occur at the Company's 8 guaranteed annuity option rates listed under the Annuity Option Tables in the Contract. The Minimum Guaranteed Annuity Payout Benefit Base is equal to the greatest of: (a) the Accumulated Value increased by any positive Market Value Adjustment, if applicable, on the Contract Anniversary that the M-GAP Benefit Base is being determined; (b) the Accumulated Value on the effective date of the Rider compounded daily at an effective annual yield of 5% plus gross payments made thereafter compounded daily at an effective annual yield of 5%, starting on the date each payment is applied, proportionately reduced to reflect withdrawals; or (c) the highest Accumulated Value on any Contract anniversary since the Rider effective date, as determined after being increased for subsequent payments and any positive Market Value Adjustment if applicable and proportionately reduced for subsequent withdrawals. For each withdrawal described in (b) and (c) above, the proportionate reduction is calculated by multiplying the (b) or (c) value, whichever is applicable, determined immediately prior to the withdrawal by the following fraction: amount of the withdrawal ---------------------------------------------------------------- Accumulated Value determined immediately prior to the withdrawal EXERCISING THE M-GAP RIDER. - - The Owner may only exercise the M-GAP Rider within thirty days after any Contract anniversary following the expiration of a ten or fifteen-year waiting period from the effective date of the Rider. - - The Owner may only annuitize under a fixed annuity payout option involving a life contingency as provided in "DESCRIPTION OF VARIABLE ANNUITY PAYOUT OPTIONS" under DESCRIPTION OF THE CONTRACT in the Prospectus. - - The Owner may only annuitize at the Company's guaranteed fixed annuity option rates listed under the Annuity Option Tables in the Contract. TERMINATING THE M-GAP RIDER. The Owner may not terminate the M-GAP Rider prior to the seventh Contract anniversary after the effective date of the Rider. The Owner may terminate the Rider at any time after the seventh Contract anniversary following the effective date of the Rider. The Rider will terminate automatically upon surrender of the Contract or the date that a death benefit is payable if the Contract is not continued under "THE SPOUSE OF THE OWNER AS BENEFICIARY" (see THE VARIABLE ANNUITY POLICIES). From time to time the Company may illustrate minimum guaranteed income amounts under the M-GAP Rider for individuals based on a variety of assumptions, including varying rates of return on the value of the Contract during the accumulation phase, annuity payout periods, annuity payout options and M-GAP Rider waiting periods. Any assumed rates of return are for purposes of illustration only and are not intended as a representation of past or future investment rates of return. For example, the illustration below assumes an initial payment of $100,000 for an Annuitant age 60 (at issue) and exercise of an M-GAP Rider with a ten-year waiting period. The illustration assumes that no subsequent payments or withdrawals are made and that the annuity payout option is a Life Annuity With 120 Monthly Payments Guaranteed. The values below have been computed based on a 5% net rate of return and are the guaranteed minimums that would be received under the M-GAP Rider. The minimum guaranteed benefit base 9 amounts are the values that will be annuitized. Minimum guaranteed annual income values are based on a fixed annuity payout. MINIMUM CONTRACT MINIMUM GUARANTEED ANNIVERSARY GUARANTEED ANNUAL AT EXERCISE BENEFIT BASE INCOME(1) - ----------- ------------ ---------- 10 $162,889 $12,153 15 $207,892 $17,695 (1) Other fixed annuity options involving a life contingency other than Life Annuity With 120 Monthly Payments Guaranteed are available. See "DESCRIPTION OF VARIABLE ANNUITY PAYOUT OPTIONS." The M-GAP Rider does not create Accumulated Value or guarantee performance of any investment option. Because this Rider is based on guaranteed actuarial factors, the level of lifetime income that it guarantees may often be less than the level that would be provided by applying the then current annuity factors. Therefore, the Rider should be regarded as providing a guarantee of a minimum amount of annuity income. As described above, withdrawals will reduce the benefit base. PERFORMANCE INFORMATION Performance information for a Sub-Account may be compared, in reports and promotional literature, to certain indices described in the Prospectus under PERFORMANCE INFORMATION. In addition, the Company may provide advertising, sales literature, periodic publications or other material information on various topics of interest to Owners and prospective Owners. These topics may include the relationship between sectors of the economy and the economy as a whole and its effect on various securities markets, investment strategies and techniques (such as value investing, market timing, dollar cost averaging, asset allocation, constant ratio transfer and account rebalancing), the advantages and disadvantages of investing in tax-deferred and taxable investments, customer profiles and hypothetical purchase and investment scenarios, financial management and tax and retirement planning, and investment alternatives to certificates of deposit and other financial instruments, including comparisons between the Contract and the characteristics of and market for such financial instruments. Total return data and supplemental total return information may be advertised based on the period of time that an Underlying Fund and/or an underlying Sub-Account have been in existence, even if longer than the period of time that the Contract has been offered. The results for any period prior to a Contract being offered will be calculated as if the Contract had been offered during that period of time, with all charges assumed to be those applicable to the Contract. TOTAL RETURN "Total Return" refers to the total of the income generated by an investment in a Sub-Account and of the changes of value of the principal invested (due to realized and unrealized capital gains or losses) for a specified period, reduced by the Sub-Account's asset charge and any applicable surrender charge which would be assessed upon complete withdrawal of the investment. Total Return figures are calculated by standardized methods prescribed by rules of the Securities and Exchange Commission ("SEC"). The quotations are computed by finding the average annual compounded rates of return over the specified periods that would equate the initial amount invested to the ending redeemable values, according to the following formula: P(1 + T)(TO THE POWER OF (n)) = ERV Where: P = a hypothetical initial payment to the Variable Account of $1,000 10 T = average annual total return n = number of years ERV = the ending redeemable value of the $1,000 payment at the end of the specified period The calculation of Total Return includes the annual charges against the assets of the Sub-Account. This charge is 1.40% on an annual basis. The calculation of ending redeemable value assumes (1) the Contract was issued at the beginning of the period, and (2) a complete surrender of the Contract at the end of the period. The deduction of the surrender charge, if any, applicable at the end of the period is included in the calculation, according to the following schedule: CHARGE AS YEARS FROM DATE PERCENTAGE OF OF PAYMENT TO NEW PURCHASE DATE OF WITHDRAWAL PAYMENTS WITHDRAWN - ------------------ ------------------ 0 - 1 6.5% 2 6.0% 3 5.0% 4 4.0% 5 3.0% 6 2.0% 7 1.0% More than 7 0.0% * Subject to the maximum limit described in the Prospectus. No surrender charge is deducted upon expiration of the periods specified above. In each calendar year, a certain amount (withdrawal without surrender charge amount, as described in the Prospectus) is not subject to the surrender charge. The calculations of Total Return include the deduction of the $30 annual Contract fee. SUPPLEMENTAL TOTAL RETURN INFORMATION The Supplemental Total Return Information in this section refers to the total of the income generated by an investment in a Sub-Account and of the changes of value of the principal invested (due to realized and unrealized capital gains or losses) for a specified period reduced by the Sub-Account's asset charges. It is assumed, however, that the investment is NOT withdrawn at the end of each period. The quotations of Supplemental Total Return are computed by finding the average annual compounded rates of return over the specified periods that would equate the initial amount invested to the ending values, according to the following formula: P(1 + T)(TO THE POWER OF (n)) = EV Where: P = a hypothetical initial payment to the Variable Account of $1,000 T = average annual total return n = number of years EV = the ending value of the $1,000 payment at the end of the specified period The calculation of Supplemental Total Return reflects the 1.40% annual charge against the assets of the Sub- 11 Accounts. The ending value assumes that the Contract is NOT surrendered at the end of the specified period, and therefore there is no adjustment for the surrender charge that would be applicable if the Contract was surrendered at the end of the period. The calculation of supplemental total return does not include the deduction of the $30 annual Contract fee. PERFORMANCE TABLES. Quotations of average annual total return as shown in Table 1A are calculated in the manner prescribed by the SEC and show the percentage rate of return of a hypothetical initial investment of $1,000 for the most recent one, five and ten year period or for a period covering the time the Sub-Account has been in existence, if less than the prescribed periods. The calculation is adjusted to reflect the deduction of the annual Sub-Account asset charge of 1.40%, the $30 annual Contract fee, the Underlying Fund charges and the surrender charge which would be assessed if the investment were completely withdrawn at the end of the specified period. The calculation is not adjusted to reflect the deduction of any rider charge. Quotations of supplemental average total returns, as shown in Table 1B, are calculated in exactly the same manner and for the same periods of time except that they do not reflect the Contract fee and assume that the Contract is not surrendered at the end of the periods shown. The performance shown in Tables 2A and 2B is calculated in exactly the same manner as that in Tables 1A and 1B; however, the period of time is based on the Underlying Fund's lifetime, which may predate the Sub-Account's inception date. These performance calculations are based on the assumption that the Sub-Account corresponding to the applicable Underlying Fund was actually in existence throughout the stated period and that the contractual charges and expenses during that period were equal to those currently assessed under the Contract. PERFORMANCE INFORMATION FOR ANY SUB-ACCOUNT REFLECTS ONLY THE PERFORMANCE OF A HYPOTHETICAL INVESTMENT IN THE SUB-ACCOUNT DURING THE TIME PERIOD ON WHICH THE CALCULATIONS ARE BASED. PERFORMANCE INFORMATION SHOULD BE CONSIDERED IN LIGHT OF THE INVESTMENT OBJECTIVES AND POLICIES AND RISK CHARACTERISTICS OF THE UNDERLYING FUND IN WHICH THE SUB-ACCOUNT INVESTS AND THE MARKET CONDITIONS DURING THE GIVEN TIME PERIOD, AND SHOULD NOT BE CONSIDERED AS A REPRESENTATION OF WHAT MAY BE ACHIEVED IN THE FUTURE. 12 PERFORMANCE TABLES COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY TABLE 1A AVERAGE ANNUAL TOTAL RETURNS OF SUB-ACCOUNT FOR PERIODS ENDING DECEMBER 31, 2008 SINCE INCEPTION OF SUB-ACCOUNT (ASSUMING COMPLETE WITHDRAWAL OF THE INVESTMENT)
SINCE SUB-ACCOUNT FOR YEAR ENDED INCEPTION OF INCEPTION DATE 12/31/08 5 YEARS SUB-ACCOUNT -------------- -------------- ------- ------------ Goldman Sachs VIT Capital Growth Fund 01/09/06 -46.52 N/A -15.65 Goldman Sachs VIT Core Fixed Income Fund 01/09/06 -15.37 N/A -2.63 Goldman Sachs VIT Equity Index Fund 01/09/06 -41.85 N/A -12.43 Goldman Sachs VIT Government Income Fund 01/09/06 -4.25 N/A 1.71 Goldman Sachs VIT Growth Opportunities Fund 01/09/06 -45.28 N/A -13.33 Goldman Sachs VIT Mid Cap Value Fund 01/09/06 -41.86 N/A -12.88 Goldman Sachs VIT Money Market Fund 01/09/06 -5.20 N/A 0.81 Goldman Sachs VIT Strategic International Equity Fund 01/09/06 -50.26 N/A -15.32 Goldman Sachs VIT Structured U.S. Equity Fund 01/09/06 -41.64 N/A -15.02 AIM V.I. Capital Appreciation Fund 10/6/00 -46.63 -5.49 -8.49 AIM V.I. Core Equity Fund 10/6/00 -35.17 -2.49 -5.65 AIM V.I. Dynamics Fund 10/6/00 -51.81 -5.11 -10.25 AIM V.I. Global Health Care Fund 10/6/00 -33.75 -2.40 -3.29 AIM V.I. Large Cap Growth Fund 10/6/00 -42.72 -5.44 -8.35 AIM V.I. Basic Value Fund 5/1/02 -55.36 -10.22 -7.56 AIM V.I. Capital Development Fund 5/1/02 -50.92 -4.95 -3.66 AllianceBernstein VPS Global Thematic Growth Portfolio 5/1/02 -51.23 -7.58 -6.05 AllianceBernstein VPS Growth and Income Portfolio 10/6/00 -44.99 -5.19 -2.65 AllianceBernstein VPS Large Cap Growth Portfolio 2/23/01 -44.16 -5.20 -6.74 AllianceBernstein VPS Small/Mid Cap Value Portfolio 5/1/02 -40.35 -3.02 0.04 AllianceBernstein VPS Value Portfolio 5/1/02 -45.25 -5.80 -3.20 DWS Small Cap Index VIP 10/6/00 -38.85 -3.31 -0.35 DWS Dreman High Return Equity VIP 10/6/00 -49.86 -9.24 -3.45 DWS Technology VIP 10/6/00 -50.08 -9.91 -14.65 Eaton Vance VT Floating-Rate Income Fund 5/1/01 -32.38 -5.43 -3.14 Eaton Vance VT Worldwide Health Sciences Fund 5/1/01 -13.75 0.33 0.82 Fidelity VIP Contrafund(R) Portfolio 10/6/00 -46.65 -1.56 -1.29 Fidelity VIP Equity-Income Portfolio 5/1/95 -47.05 -5.88 -1.85 Fidelity VIP Growth Portfolio 5/1/1995 -51.26 -6.89 -4.72 Fidelity VIP Growth & Income Portfolio 10/6/2000 -45.89 -5.25 -4.39 Fidelity VIP High Income Portfolio 5/1/95 -30.56 -2.82 -2.22 Fidelity VIP Mid Cap Portfolio 10/6/00 -43.81 1.11 3.39 Fidelity VIP Value Strategies Portfolio 5/1/02 -54.78 -8.83 -4.31 FT VIP Franklin Large Cap Growth Securities Fund 5/1/02 -39.22 -5.27 -3.35 FT VIP Franklin Small Cap Value Securities Fund 5/1/02 -37.82 -1.37 -0.25 FT VIP Franklin Small-Mid Cap Growth Securities Fund 10/6/00 -46.63 -5.95 -7.68 FT VIP Mutual Shares Securities Fund 10/6/00 -41.65 -2.77 0.86 FT VIP Templeton Foreign Securities Fund 5/01/02 -44.66 -0.21 0.46 Janus Aspen Enterprise Portfolio 10/6/00 -47.89 -1.07 -10.36 Janus Aspen Growth and Income Portfolio 10/6/00 -45.50 -4.87 -6.30
13
SINCE SUB-ACCOUNT FOR YEAR ENDED INCEPTION OF INCEPTION DATE 12/31/08 5 YEARS SUB-ACCOUNT -------------- -------------- ------- ------------ Janus Aspen Janus Portfolio 10/6/00 -44.19 -5.50 -9.11 Janus Aspen Overseas Portfolio 10/6/00 -55.67 5.03 -2.12 MFS(R) Mid Cap Growth Series 5/1/02 -55.07 -10.37 -8.24 MFS(R) New Discovery Series 5/1/02 -43.86 -6.72 -5.06 MFS(R) Total Return Series 5/1/02 -27.89 -1.43 -0.07 MFS(R) Utilities Series 5/1/02 -42.27 7.50 7.60 Oppenheimer Balanced Fund/VA 5/1/02 -47.66 -7.76 -4.22 Oppenheimer Capital Appreciation Fund/VA 5/1/02 -49.56 -7.55 -5.29 Oppenheimer Global Securities Fund/VA 5/1/02 -44.61 -1.80 0.13 Oppenheimer High Income Fund/VA 5/1/02 -80.11 -25.20 -17.58 Oppenheimer Main Street Fund(R)/VA 5/1/02 -43.03 -5.15 -3.57 Pioneer Fund VCT Portfolio 5/1/01 -39.07 -3.14 -3.46 Pioneer Real Estate Shares VCT Portfolio 5/1/01 -42.78 -0.83 4.65 T. Rowe Price International Stock Portfolio 5/1/95 -52.56 -3.89 -3.42
14 TABLE 1B SUPPLEMENTAL AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31, 2008 SINCE INCEPTION OF SUB-ACCOUNT (ASSUMING NO WITHDRAWAL OF THE INVESTMENT AND NO CONTRACT FEES)
SINCE SUB-ACCOUNT FOR YEAR ENDED INCEPTION OF INCEPTION DATE 12/31/08 5 YEARS SUB-ACCOUNT -------------- -------------- ------- ------------ Goldman Sachs VIT Capital Growth Fund 1/9/06 -42.76 N/A -13.90 Goldman Sachs VIT Core Fixed Income Fund 1/9/06 -9.86 N/A -0.88 Goldman Sachs VIT Equity Index Fund 1/9/06 -38.14 N/A -10.97 Goldman Sachs VIT Government Income Fund 1/9/06 1.71 N/A 3.31 Goldman Sachs VIT Growth Opportunities Fund 1/9/06 -41.64 N/A -11.74 Goldman Sachs VIT Mid Cap Value Fund 1/9/06 -38.09 N/A -11.37 Goldman Sachs VIT Money Market Fund 1/9/06 0.82 N/A 2.50 Goldman Sachs VIT Strategic International Equity Fund 1/9/06 -46.85 N/A -13.69 Goldman Sachs VIT Structured U.S. Equity Fund 1/9/06 -38.01 N/A -13.69 AIM V.I. Capital Appreciation Fund 10/6/00 -43.30 -4.96 -8.47 AIM V.I. Core Equity Fund 10/6/00 -31.12 -1.94 -5.62 AIM V.I. Dynamics Fund 10/6/00 -48.81 -4.58 -10.24 AIM V.I. Global Health Care Fund 10/6/00 -29.62 -1.85 -3.28 AIM V.I. Large Cap Growth Fund 10/6/00 -39.15 -4.91 -8.34 AIM V.I. Basic Value Fund 5/1/02 -52.58 -9.72 -7.43 AIM V.I. Capital Development Fund 5/1/02 -47.87 -4.42 -3.53 AllianceBernstein VPS Global Thematic Growth Portfolio 5/1/02 -48.20 -7.07 -5.92 AllianceBernstein VPS Growth and Income Portfolio 10/6/00 -41.53 -4.64 -2.61 AllianceBernstein VPS Large Cap Growth Portfolio 2/23/01 -40.66 -4.66 -6.71 AllianceBernstein VPS Small/Mid Cap Value Portfolio 5/1/02 -36.65 -2.49 0.18 AllianceBernstein VPS Value Portfolio 5/1/02 -41.84 -5.28 -3.06 DWS Small Cap Index VIP 10/6/00 -35.05 -2.77 -0.34 DWS Dreman High Return Equity VIP 10/6/00 -46.74 -8.73 -3.44 DWS Technology VIP 10/6/00 -46.97 -9.40 -14.63 Eaton Vance VT Floating-Rate Income Fund 5/1/01 -28.17 -4.91 -3.13 Eaton Vance VT Worldwide Health Sciences Fund 5/1/01 -8.39 0.89 0.83 Fidelity VIP Contrafund(R) Portfolio 10/6/00 -43.32 -1.01 -1.28 Fidelity VIP Equity-Income Portfolio 5/1/95 -43.46 -5.09 -1.60 Fidelity VIP Growth Portfolio 5/1/1995 -47.91 -6.09 -4.41 Fidelity VIP Growth & Income Portfolio 10/6/2000 -42.52 -4.72 -4.38 Fidelity VIP High Income Portfolio 5/1/95 -26.04 -2.09 -2.00 Fidelity VIP Mid Cap Portfolio 10/6/00 -40.29 1.68 3.41 Fidelity VIP Value Strategies Portfolio 5/1/02 -51.97 -8.33 -4.18 FT VIP Franklin Large Cap Growth Securities Fund 5/1/02 -35.45 -4.75 -3.22 FT VIP Franklin Small Cap Value Securities Fund 5/1/02 -33.96 -0.82 -0.12 FT VIP Franklin Small-Mid Cap Growth Securities Fund 10/6/00 -43.30 -5.42 -7.66 FT VIP Mutual Shares Securities Fund 10/6/00 -37.99 -2.22 0.88 FT VIP Templeton Foreign Securities Fund 5/1/02 -41.21 0.34 0.60 Janus Aspen Enterprise Portfolio 10/6/00 -44.64 -0.52 -10.35 Janus Aspen Growth and Income Portfolio 10/6/00 -42.10 -4.34 -6.29 Janus Aspen Janus Portfolio 10/6/00 -40.71 -4.97 -9.09 Janus Aspen Overseas Portfolio 10/6/00 -52.90 5.53 -2.10 MFS(R) Mid Cap Growth Series 5/1/02 -52.27 -9.88 -8.12 MFS(R) New Discovery Series 5/1/02 -40.37 -6.20 -4.93
15
SINCE SUB-ACCOUNT FOR YEAR ENDED INCEPTION OF INCEPTION DATE 12/31/08 5 YEARS SUB-ACCOUNT -------------- -------------- ------- ------------ MFS(R) Total Return Series 5/1/02 -23.41 -0.88 0.07 MFS(R) Utilities Series 5/1/02 -38.68 7.94 7.69 Oppenheimer Balanced Fund/VA 5/1/02 -44.41 -7.26 -4.09 Oppenheimer Capital Appreciation Fund/VA 5/1/02 -46.42 -7.04 -5.16 Oppenheimer Global Securities Fund/VA 5/1/02 -41.17 -1.26 0.27 Oppenheimer High Income Fund/VA 5/1/02 -78.87 -24.78 -17.46 Oppenheimer Main Street Fund(R)/VA 5/1/02 -39.49 -4.63 -3.44 Pioneer Fund VCT Portfolio 5/1/01 -35.29 -2.61 -3.46 Pioneer Real Estate Shares VCT Portfolio 5/1/01 -39.21 -0.27 4.66 T. Rowe Price International Stock Portfolio 5/1/95 -49.42 -3.21 -3.24
YIELD AND EFFECTIVE YIELD - THE GOLDMAN SACHS VIT MONEY MARKET SUB-ACCOUNT Set forth below is yield and effective yield information for the Goldman Sachs VIT Money Market Sub-Account for the seven-day period ended December 31, 2008: Yield 0.03% Effective Yield 0.03% The yield and effective yield figures are calculated by standardized methods prescribed by rules of the SEC. Under those methods, the yield quotation is computed by determining the net change (exclusive of capital changes) in the value of a hypothetical pre-existing account having a balance of one accumulation unit of the Sub-Account at the beginning of the period, dividing the difference by the value of the account at the beginning of the same period to obtain the base period return, and then multiplying the return for a seven-day base period by (365/7), with the resulting yield carried to the nearest hundredth of one percent. The Goldman Sachs VIT Money Market Sub-Account computes effective yield by compounding the unannualized base period return by using the formula: Effective Yield = [(base period return + 1)(TO THE POWER OF (365/7))] - 1 The calculations of yield and effective yield reflect the $30 annual Contract fee. FINANCIAL STATEMENTS Financial Statements are included for Commonwealth Annuity and Life Insurance Company and for its Commonwealth Select Separate Account. 16 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders of Commonwealth Annuity and Life Insurance Company: In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, shareholder's equity, comprehensive income and cash flows present fairly, in all material respects, the financial position of Commonwealth Annuity and Life Insurance Company at December 31, 2008 and 2007, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2008 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. /s/ PricewaterhouseCoopers LLP Hartford, Connecticut April 17, 2009 COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (A WHOLLY-OWNED SUBSIDIARY OF THE GOLDMAN SACHS GROUP, INC.) CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2008 2007 - -------------------------------------------------------------------------------------- (In millions) ASSETS Investments: Fixed maturities at fair value (amortized cost of $959.7 and $967.2 in 2008 and 2007, respectively) $ 929.3 $ 965.7 Equity securities at fair value (cost of $93.5 and $108.1 in 2008 and 2007, respectively) 68.1 102.7 Policy loans 92.9 106.1 -------- --------- Total investments 1,090.3 1,174.5 -------- --------- Cash and cash equivalents 277.4 57.4 Accrued investment income 12.3 11.3 Reinsurance receivable on paid and unpaid losses, benefits, unearned premiums and modified coinsurance 2,572.6 2,070.0 Value of business acquired (intangible) 146.5 220.4 Deferred policy acquisition costs 118.3 153.3 Deferred federal income taxes 139.3 129.7 Derivative instruments receivable 182.9 29.1 Other assets 74.7 31.9 Separate account assets 3,659.8 6,906.7 -------- --------- Total assets $8,274.1 $10,784.3 ======== ========= LIABILITIES Policy liabilities and accruals: Future policy benefits $3,748.6 $ 3,133.2 Outstanding claims and losses 16.3 9.2 Contractholder deposit funds and other policy liabilities 65.6 46.3 -------- --------- Total policy liabilities and accruals 3,830.5 3,188.7 -------- --------- Derivative instruments payable 57.7 33.7 Collateral on derivative instruments 60.0 -- Accrued expenses and other liabilities 46.5 56.4 Reinsurance payable 25.5 21.4 Separate account liabilities 3,659.8 6,906.7 -------- --------- Total liabilities $7,680.0 $10,206.9 -------- --------- Commitments and contingencies (Notes 17 and 18) SHAREHOLDER'S EQUITY Common stock, $1,000 par value, 10,000 shares authorized, 2,526 shares issued and outstanding $ 2.5 $ 2.5 Additional paid-in capital 466.9 416.9 Accumulated other comprehensive loss (25.0) (3.2) Retained earnings 149.7 161.2 -------- --------- Total shareholder's equity 594.1 577.4 -------- --------- Total liabilities and shareholder's equity $8,274.1 $10,784.3 ======== =========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS. 1 COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (A WHOLLY-OWNED SUBSIDIARY OF THE GOLDMAN SACHS GROUP, INC.) CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2008 2007 2006 - ------------------------------------------------------------------------------------------- (In millions) REVENUES Universal life and investment product policy fees $ 189.6 $239.6 $233.0 Net investment income 125.6 137.5 114.5 Net realized investment (losses)/gains (49.6) 5.9 (7.3) Other income 21.6 19.9 16.7 ------------------------- Total revenues 287.2 402.9 356.9 ------------------------- BENEFITS, LOSSES AND EXPENSES Policy benefits, claims, losses and loss adjustment expenses 297.1 141.7 105.2 Policy acquisition expenses 106.9 52.7 39.0 (Gains)/losses on derivative instruments (175.6) 6.8 46.7 Other operating expenses 59.5 70.1 74.9 ------------------------- Total benefits, losses and expenses 287.9 271.3 265.8 ------------------------- (Loss)/income before federal income taxes (0.7) 131.6 91.1 ------------------------- FEDERAL INCOME TAX EXPENSE ------------------------- Deferred federal income tax expense 10.8 34.6 26.2 ------------------------- Net (loss)/income $ (11.5) $ 97.0 $ 64.9 =========================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS. 2 COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (A WHOLLY-OWNED SUBSIDIARY OF THE GOLDMAN SACHS GROUP, INC.) CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
ACCUMULATED OTHER TOTAL ADDITIONAL RETAINED COMPREHENSIVE SHAREHOLDER'S (IN MILLIONS) COMMON STOCK PAID-IN CAPITAL EARNINGS LOSS EQUITY - ------------------------------------------------------------------------------------------------------------ BALANCE AT JANUARY 1, 2006 $2.5 $329.9 $ (0.7) $ -- $331.7 Net income 64.9 64.9 Other comprehensive income: Net unrealized losses (1.2) (1.2) Capital contribution 87.0 87.0 --------------------------------------------------------------------- BALANCE AT DECEMBER 31, 2006 $2.5 $416.9 $ 64.2 $ (1.2) $482.4 ===================================================================== Net income 97.0 97.0 Other comprehensive income: Net unrealized losses (2.0) (2.0) --------------------------------------------------------------------- BALANCE AT DECEMBER 31, 2007 $2.5 $416.9 $161.2 $ (3.2) $577.4 ===================================================================== Net loss (11.5) (11.5) Other comprehensive income: Net unrealized losses (21.8) (21.8) Capital contribution 50.0 50.0 --------------------------------------------------------------------- BALANCE AT DECEMBER 31, 2008 $2.5 $466.9 $149.7 $(25.0) $594.1 =====================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS. 3 COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (A WHOLLY-OWNED SUBSIDIARY OF THE GOLDMAN SACHS GROUP, INC.) CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
FOR THE YEARS ENDED DECEMBER 31, 2008 2007 2006 - --------------------------------------------------------------------------------------- (In millions) ---------------------- Net (loss)/income $(11.5) $97.0 $64.9 ---------------------- Other comprehensive (loss)/income: Available-for-sale securities, net of policyholder amounts: Net depreciation during the period (33.5) (3.0) (2.0) Benefit for deferred federal income taxes 11.7 1.0 0.8 ---------------------- Total available-for-sales securities (21.8) (2.0) (1.2) ---------------------- Comprehensive (loss)/income $(33.3) $95.0 $63.7 ======================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS. 4 COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (A WHOLLY-OWNED SUBSIDIARY OF THE GOLDMAN SACHS GROUP, INC.) CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2008 2007 2006 - ----------------------------------------------------------------------------------------------------------------- (In millions) CASH FLOWS FROM OPERATING ACTIVITIES Net (loss)/income $ (11.5) $ 97.0 $ 64.9 Adjustments to reconcile net (loss)/income to net cash provided by (used in) operating activities: Net realized investment (gains)/losses 49.6 (5.9) 7.3 Non cash derivative activity (172.6) (7.4) 28.5 Net accretion of premiums on investments (1.1) 0.7 (0.8) Net amortization and depreciation 107.5 52.7 39.0 Deferred federal income taxes 10.8 34.6 26.2 Change in deferred policy acquisition costs 13.8 (53.0) (110.0) Change in premiums and notes receivable, net of reinsurance premiums payable 4.1 16.9 (2.6) Change in accrued investment income (1.0) 1.6 7.9 Change in policy liabilities and accruals, net 622.5 (281.5) 1,053.6 Change in reinsurance receivable and modified coinsurance (502.6) 104.8 (1,362.9) Change in expenses and taxes payable (9.9) (4.4) (5.6) Other, net 11.5 (17.0) (5.6) --------- ------- --------- Net cash provided by/(used in) operating activities 121.1 (60.9) (260.1) --------- ------- --------- CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from disposals and maturities of fixed maturities 1,550.8 773.9 2,206.0 Proceeds from disposals of other investments 271.9 19.3 0.6 Purchase of fixed maturities (1,580.2) (662.4) (2,012.1) Purchase of equity securities -- (43.7) (64.4) Purchase of other investments (212.9) (20.3) (1.4) Capital expenditures -- -- (1.5) Net payments related to margin deposits on derivative instruments -- -- (0.1) --------- ------- --------- Net cash provided by investing activities 29.6 66.8 127.1 --------- ------- --------- CASH FLOWS FROM FINANCING ACTIVITIES Deposits in/(withdrawals from) contractholder deposit funds 19.3 (7.4) (17.6) Capital contribution 50.0 -- 86.3 --------- ------- --------- Net cash provided by/(used in) financing activities 69.3 (7.4) 68.7 --------- ------- --------- Net change in cash and cash equivalents 220.0 (1.5) (64.3) Cash and cash equivalents, beginning of period 57.4 58.9 123.2 --------- ------- --------- Cash and cash equivalents, end of period $ 277.4 $ 57.4 $ 58.9 ========= ======= =========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS 5 COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (A WHOLLY-OWNED SUBSIDIARY OF THE GOLDMAN SACHS GROUP, INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2008 1. ORGANIZATION Commonwealth Annuity and Life Insurance Company ("the Company") is a stock life insurance company organized under the laws of Massachusetts, and is a wholly-owned subsidiary of The Goldman Sachs Group, Inc ("Goldman Sachs"). The Company manages blocks of variable annuity, variable universal life insurance, whole life insurance, term life insurance, universal life insurance and minor blocks of group retirement products. In 2007, the Company began issuance of 403(b) variable annuity products. This requires the Company to have an affiliated broker dealer to act as principal underwriter and distributor. The Company signed an agreement with Epoch Securities Inc. ("Epoch"), a Delaware corporation, and a Financial Industry Regulatory Authority ("FINRA") member firm, to serve as principal underwriter for several of the Company's variable products. Epoch is a wholly-owned subsidiary of Goldman Sachs (see Note 18 - Related Party Transactions). Prior to September 1, 2006, the Company was named Allmerica Financial Life Insurance and Annuity Company ("AFLIAC"). On December 30, 2005, Goldman Sachs acquired all outstanding common shares of the Company from The Hanover Insurance Group ("THG") (the "Transaction"). Immediately preceding the Transaction, the Company distributed its ownership in certain wholly-owned subsidiaries, First Allmerica Financial Life Insurance Company ("FAFLIC"), VeraVest Investments, Inc. ("VeraVest"), and Allmerica Financial Investment Management Services, Inc ("AFIMS") directly to THG as a dividend to shareholders. The Company's remaining non-insurance subsidiaries were distributed to FAFLIC as a capital contribution prior to the Transaction. Concurrent with the Transaction, the Company entered into several servicing agreements to provide certain operational and administrative support of its business. Transitional service agreements with THG provided operational support, system and policy conversion support, accounting and other services until December 31, 2006. An operational servicing agreement was executed with Security Benefit Life Insurance Company ("Se2") on December 30, 2005, to provide customer and agent support and perform other key policy administration and operational functions. As of December 31, 2006, these operational functions were transferred to Se2. 2. BASIS OF PRESENTATION The accompanying audited financial statements have been prepared in accordance with generally accepted accounting principles ("US GAAP"). The preparation of financial statements in conformity with US GAAP requires the Company to make estimates and assumptions and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Transaction was accounted for using the purchase method under Statement of Financial Accounting Standards ("SFAS") No. 141, "Business Combinations" ("SFAS No. 141") and SFAS No. 142, "Goodwill and Other Intangible Assets" ("SFAS No. 142") and purchase accounting adjustments were "pushed down" to the Company's financial statements. Under the purchase method of accounting, assets acquired and liabilities assumed were recorded at estimated fair value at the date of purchase, and updated as of December 31, 2008 and December 31, 2007. See Note 4 - - Purchase Accounting, for a purchase accounting income statement containing the changes. 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. VALUATION OF INVESTMENTS The Company accounts for its investments in accordance with SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities" ("SFAS No. 115"). At the time of purchase, fixed maturity securities are classified based on the Company's intent as either held-to-maturity, trading or available-for-sale. Fixed maturities and equity securities are classified as available-for-sale. Available-for-sale securities are carried at fair value, with unrealized gains and losses, net of tax, reported in accumulated other comprehensive income, a separate component of shareholder's equity. The amortized cost of fixed maturities is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization is included in investment income. Policy loans are carried principally at unpaid principal balances. Interest income on such loans is recorded as earned using the contractually agreed upon interest rate. Generally, interest is capitalized on the policy's anniversary date. 6 COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (A WHOLLY-OWNED SUBSIDIARY OF THE GOLDMAN SACHS GROUP, INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2008 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) A. VALUATION OF INVESTMENTS (CONTINUED) Realized investment gains and losses, other than those related to separate accounts for which the Company does not bear the investment risk and that meet the conditions for separate account reporting under American Institute of Certified Public Accountants ("AICPA") Statement of Position 03-1, "Accounting and Reporting by Insurance Enterprises for Certain Non-Traditional Long-Duration Contract and for Separate Accounts" ("SOP 03-1"), are reported as a component of revenues based upon specific identification of the investment assets sold. When an other-than-temporary decline in value of a specific investment is deemed to have occurred, the Company reduces the cost basis of the investment to fair value. This reduction is permanent and is recognized as a realized investment loss. Realized investment gains and losses related to separate accounts that meet the conditions for separate account reporting under SOP 03-1 accrue to and are borne by the contract holder. B. FINANCIAL INSTRUMENTS Financial instruments are reflected in the balance sheet on a trade-date basis. The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (the exit price). The Company evaluates and monitors each financial instrument individually and, when appropriate, obtains collateral or other security to minimize losses. Fair value measurements are not adjusted for transaction costs. In the normal course of business, the Company enters into transactions involving various types of financial instruments, including U.S. government and agency securities, liquid mortgage products, investment-grade corporate bonds, money market securities, state, municipal and provincial obligations, swap contracts, option contracts, futures contracts and a high yield mutual fund. The high yield fund invests in high yield, fixed income securities that, at the time of purchase, are non-investment grade. This holding is classified within Equity Securities on the Company's Consolidated Balance Sheets. The Company adopted SFAS No. 157, "Fair Value Measurements" ("SFAS No. 157"), as of the beginning of 2007. SFAS No. 157 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of the fair value hierarchy under SFAS No. 157 are described below: BASIS OF FAIR VALUE MEASUREMENT Level 1 Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities; Level 2 Quoted prices in markets that are not considered to be active or financial instruments for which all significant inputs are observable, either directly or indirectly; Level 3 Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.
A financial instrument's level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. See "Note 3N - New and Adopted Accounting Pronouncements" for a discussion of the impact of adopting SFAS No. 157. During the fourth quarter of 2008, both the Financial Accounting Standards Board ("FASB") and the staff of the Securities and Exchange Commission ("SEC") re-emphasized the importance of sound fair value measurement in financial reporting. In October 2008, the FASB issued FASB Staff Position No. FAS 157-3, "Determining the Fair Value of a Financial Asset When the Market for That Asset is Not Active" ("FSP No. FAS 157-3"). This statement clarifies that determining fair value in an inactive or dislocated market depends on facts and circumstances and requires significant management judgment. This statement specifies that it is acceptable to use inputs based on management estimates or assumptions, or for management to make adjustments to observable inputs to determine fair value when markets are not active and relevant observable inputs are not available. The Company's fair value measurement policies are consistent with the guidance in FSP No. FAS 157-3. 7 COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (A WHOLLY-OWNED SUBSIDIARY OF THE GOLDMAN SACHS GROUP, INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2008 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) B. FINANCIAL INSTRUMENTS (CONTINUED) Credit risk is an essential component of fair value. Cash products (e.g., bonds and loans) and derivative instruments (particularly those with significant future projected cash flows) trade in the market at levels which reflect credit considerations. The Company calculates the fair value of derivative assets by discounting future cash flows at a rate which incorporates counterparty credit spreads and the fair value of derivative liabilities by discounting future cash flows at a rate which incorporates the Company's own credit spreads. In doing so, credit exposures are adjusted to reflect mitigants, namely collateral agreements which reduce exposures based on triggers and contractual posting requirements. The Company manages its exposure to credit risk as it does other market risks and will price, economically hedge, facilitate and intermediate trades which involve credit risk. The Company records liquidity valuation adjustments to reflect the cost of exiting concentrated risk positions, including exposure to the Company's own credit spreads. In determining fair value, the Company separates its financial instruments into two categories: cash instruments and derivative contracts. See "Note 3C - Cash Instruments" and "Note 3D - Derivatives and Hedging Activities" below. C. CASH INSTRUMENTS The Company's cash instruments are generally classified within level 1 or level 2 of the fair value hierarchy because they are valued using quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency. The types of instruments valued based on quoted market prices in active markets include most U.S. government and agency securities, many other sovereign government obligations, and most money market securities. Such instruments are generally classified within level 1 of the fair value hierarchy. In accordance with SFAS No. 157, the Company does not adjust the quoted price for such instruments, even in situations where the Company holds a large position and a sale could reasonably impact the quoted price. The types of instruments valued based on quoted prices in markets that are not active, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency include most investment-grade and high-yield corporate bonds, most mortgage products, state, and municipal obligations. Such instruments are generally classified within level 2 of the fair value hierarchy. Certain cash instruments are classified within level 3 of the fair value hierarchy because they trade infrequently and therefore have little or no price transparency. Such instruments include private equity and subordinated obligations. The transaction price is initially used as the best estimate of fair value. Accordingly, when a pricing model is used to value such an instrument, the model is adjusted so that the model value at inception equals the transaction price. This valuation is adjusted only when changes to inputs and assumptions are corroborated by evidence such as transactions in similar instruments, completed or pending third-party transactions in the underlying investment or comparable entities, subsequent rounds of financing, recapitalizations and other transactions across the capital structure, offerings in the equity or debt capital markets, and changes in financial ratios or cash flows. For positions that are not traded in active markets or are subject to transfer restrictions, valuations are adjusted to reflect illiquidity and/or non-transferability, and such adjustments are generally based on available market evidence. In the absence of such evidence, management's best estimate is used. Recent market conditions, particularly in the fourth quarter of 2008 (characterized by dislocations between asset classes, elevated levels of volatility, and reduced price transparency), have increased the level of management judgment required to value cash trading instruments classified within level 3 of the fair value hierarchy. In particular, management's judgment is required to determine the appropriate risk-adjusted discount rate for cash trading instruments with little or no price transparency as a result of decreased volumes and lower levels of trading activity. In such situations, the Company's valuation is adjusted to approximate rates which market participants would likely consider appropriate for relevant credit and liquidity risks. 8 COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (A WHOLLY-OWNED SUBSIDIARY OF THE GOLDMAN SACHS GROUP, INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2008 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) D. DERIVATIVES AND HEDGING ACTIVITIES Derivative contracts can be exchange-traded or over-the-counter ("OTC"). Exchange-traded derivatives typically fall within level 1 or level 2 of the fair value hierarchy depending on whether they are deemed to be actively traded or not. The Company generally values exchange-traded derivatives within portfolios using models which calibrate to market clearing levels and eliminate timing differences between the closing price of the exchange-traded derivatives and their underlying cash instruments. In such cases, exchange-traded derivatives are classified within level 2 of the fair value hierarchy. As of the Transaction, the Company entered into certain OTC derivatives, primarily equity put options and interest rate swaptions, to hedge certain equity market, credit and interest rate risk. None of these post-transaction instruments qualify for hedge accounting, and are carried at fair value or amounts that approximate fair value. OTC derivatives are valued using market transactions and other market evidence whenever possible, including market-based inputs to models, model calibration to market clearing transactions, broker or dealer quotations or alternative pricing sources with reasonable levels of price transparency. Where models are used, the selection of a particular model to value an OTC derivative depends upon the contractual terms of, and specific risks inherent in, the instrument as well as the availability of pricing information in the market. The Company generally uses similar models to value similar instruments. Valuation models require a variety of inputs, including contractual terms, market prices, yield curves, credit curves, measures of volatility, prepayment rates and correlations of such inputs. For OTC derivatives that trade in liquid markets, such as generic forwards, swaps and options, model inputs can generally be verified and model selection does not involve significant management judgment. Such instruments are typically classified within level 2 of the fair value hierarchy. Certain OTC derivatives trade in less liquid markets with limited pricing information, and the determination of fair value for these derivatives is inherently more difficult. Such instruments are classified within level 3 of the fair value hierarchy. Where the Company does not have corroborating market evidence to support significant model inputs and cannot verify the model to market transactions, transaction price is initially used as the best estimate of fair value. Accordingly, when a pricing model is used to value such an instrument, the model is adjusted so that the model value at inception equals the transaction price. The valuations of these less liquid OTC derivatives are typically based on level 1 and/or level 2 inputs that can be observed in the market, as well as unobservable level 3 inputs. Subsequent to initial recognition, the Company updates the level 1 and level 2 inputs to reflect observable market changes, with resulting gains and losses reflected within level 3. Level 3 inputs are only changed when corroborated by evidence such as similar market transactions, third-party pricing services and/or broker or dealer quotations, or other empirical market data. In circumstances where the Company cannot verify the model value to market transactions, it is possible that a different valuation model could produce a materially different estimate of fair value. When appropriate, valuations are adjusted for various factors such as liquidity, bid/offer spreads and credit considerations. Such adjustments are generally based on available market evidence. In the absence of such evidence, management's best estimate is used. In November 2006, per an investment management agreement with Goldman Sachs Asset Management, L.P. ("GSAM"), the Company began to trade futures contracts. Exchange-traded futures and options are effected through a regulated exchange and positions are marked to market through the Consolidated Statements of Income on a daily basis. The Company has little exposure to credit-related losses in the event of nonperformance by counterparties to such financial instruments. From time to time, futures contracts are terminated. The termination of such contracts would be recognized in income as they are marked to market on a daily basis. Terminations would not materially impact earnings as any payment due upon termination represents one day of market exposure. The clearinghouse guarantees the performance of both counterparties which mitigates credit risk. E. CASH AND CASH EQUIVALENTS Cash and cash equivalents include cash on hand, amounts due from banks and highly liquid overnight deposits held in the ordinary course of business. None of this is restricted or segregated for specific business reasons. Approximately $81.8 million is held at one financial institution at December 31, 2008. 9 COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (A WHOLLY-OWNED SUBSIDIARY OF THE GOLDMAN SACHS GROUP, INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2008 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) F. DEFERRED POLICY ACQUISITION COSTS ("DAC") AND DEFERRED SALES INDUCEMENTS ("DSI") DAC consists of commissions, ceding commissions, and other costs, which vary with, and are primarily related to, the production of revenues. The Company defers sales inducements generated by variable annuities that offer enhanced crediting rates or bonus payments. DAC is amortized over its estimated life in accordance with SFAS No. 97, "Accounting and Reporting by Insurance Enterprises for Certain Long-Duration Contracts and for Realized Gains and Losses from the Sale of Investments" ("SFAS No. 97"). As part of the recording of fair value purchase accounting due to the acquisition of the Company, all DAC and DSI acquired from THG were written down to zero as of the Transaction date. Subsequent to the Transaction, DAC and DSI balances primarily were created via the deferral of ceding commissions and bonus interest credits paid in the reinsurance of in force contracts. DAC and DSI amortization is reviewed periodically and adjusted retrospectively when the Company revises its estimate of current or future gross profits to be recognized from these products. Acquisition costs and sales inducements related to variable annuity products are amortized in proportion to total estimated gross profits from investment yields, mortality, surrender charges and expense margins over the expected life of the contracts. (See Note 14 - Deferred Policy Acquisition Costs for further discussion). G. REINSURANCE Reinsurance accounting is followed for ceded and assumed transactions when the risk transfer provisions of SFAS No. 113, "Accounting and Reporting for Reinsurance of Short-Duration and Long-Duration Contracts," have been met. To meet risk transfer requirements, a long duration reinsurance contract must transfer mortality or morbidity risks, and subject the reinsurer to a reasonable possibility of a significant loss. With respect to ceded reinsurance, the valuation of claims recoverable depends on whether the underlying claim is a reported claim, or a future policy benefit. For reported claims, the Company values reinsurance recoverables at the time the underlying claim is recognized, in accordance with contract terms. For future policy benefits, the Company estimates the amount of reinsurance recoverables based on the terms of the reinsurance contracts and historical reinsurance recovery information and applies that information to the future policy benefit estimates. The reinsurance recoverables are based on what the Company believes are reasonable estimates and the balance is disclosed separately in the financial statements. However, the ultimate amount of the reinsurance recoverable is not known until all claims are settled. Reinsurance contracts do not relieve the Company from its obligations to policyholders. Failure of reinsurers to honor their obligations could result in losses to the Company; consequently, allowances are established for amounts deemed uncollectible. See Note 13 - Reinsurance for further discussion. H. PROPERTY, EQUIPMENT AND CAPITALIZED SOFTWARE Property, equipment, leasehold improvements and capitalized software are stated at cost, less accumulated depreciation and amortization. Depreciation is provided using the straight-line method over the estimated useful lives of the related assets. Certain costs of software developed or obtained for internal use are capitalized and amortized on a straight-line basis over the useful life of the software. Amortization of leasehold improvements is provided using the straight-line method over the lesser of the term of the leases or the estimated useful life of the improvements. The Company tests for the potential impairment of long-lived assets whenever events or changes in circumstances suggest that the carrying amounts may not be fully recoverable in accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-lived Assets." The Company recognizes impairment losses only when the carrying amounts of long-lived assets exceed the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the assets. In such cases, the Company reduces the carrying value of the asset to fair value. Fair values are estimated using discounted cash flow analysis. 10 COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (A WHOLLY-OWNED SUBSIDIARY OF THE GOLDMAN SACHS GROUP, INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2008 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) I. VALUE OF BUSINESS ACQUIRED ("VOBA") VOBA is an intangible asset that reflects the estimated fair value of in-force contracts resulting from the Transaction. VOBA represents the portion of the purchase price that is allocated to the value of the right to receive future cash flows from the business in force at the acquisition date. The methodology for determining the amortization of VOBA is based on SFAS No. 97. Under SFAS No. 97, acquisition costs for variable universal life insurance and variable annuity products are generally amortized over the lives of the policies in relation to the emergence of estimated gross profits ("EGPs") from surrender charges, investment, and mortality net of reinsurance ceded and expense margins and actual realized gain (loss) on investments. Contract lives for variable universal life policies and variable annuities are estimated to be 30 years. The carrying amount of VOBA is adjusted for the effects of realized and unrealized gains and losses on debt securities classified as available-for-sale and certain derivatives. Amortization expense of VOBA reflects an assumption for an expected level of credit-related investment losses. When actual credit-related investment losses are realized, the Company recognize a true-up to our VOBA amortization within realized gain (loss) in the Consolidated Statements of Income reflecting the incremental impact of actual versus expected credit-related investment losses. These actual to expected amortization adjustments can create volatility from period to period in realized gain (loss). VOBA is reviewed periodically to ensure that the unamortized portion does not exceed the expected recoverable amounts. J. SEPARATE ACCOUNTS Separate account assets and liabilities represent segregated funds administered and invested by the Company for the benefit of variable annuity and variable life insurance contractholders. Assets consist principally of mutual funds, bonds, common stocks, and short-term obligations at market value. The investment income and gains and losses of these accounts generally accrue to the contractholders and, therefore, are not included in the Company's net income. However, the Company's net income reflects fees assessed and earned on fund values of these contracts. See Note 6 - Liabilities for Minimum Gurantees under Statement of Position 03-1, Accounting and Reporting by Insurance Enterprises for Certain Nontraditional Long-Duration contracts and for Separate Accounts. Separate account assets representing contract holder funds are measured at fair value and reported as a summary total in the Balance Sheet, with an equivalent summary total reported for related liabilities. The open-ended mutual funds in the separate accounts produce a daily net asset value that is validated with a sufficient level of observable activity to support classification of the fair value measurement as level 1, under SFAS No. 157. K. POLICY LIABILITIES AND ACCRUALS Future policy benefits are liabilities for annuity, life, and health products. Such liabilities are established in amounts adequate to meet the estimated future obligations of policies in force. Future policy benefits for individual life insurance and annuity policies are computed using interest rates ranging from 3.5 % to 11.5 % for annuities and 2.5 % to 6.0 % for life insurance. Mortality, morbidity and withdrawal assumptions for all policies are based on the Company's own experience and industry standards. Liabilities for universal life, variable universal life and variable annuities include deposits received from customers and investment earnings on their fund balances, less administrative charges. Universal life fund balances are also assessed mortality and surrender charges. Liabilities for variable annuities include a reserve for guaranteed minimum death benefits ("GMDB") in excess of contract values. Liabilities for outstanding claims and claims adjustment expenses are estimates of payments to be made on health insurance contracts for reported losses and claims adjustment expenses and estimates of losses and claims adjustment expenses incurred but not reported. These liabilities are determined using case basis evaluations and statistical analyses and represent estimates of the 11 COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (A WHOLLY-OWNED SUBSIDIARY OF THE GOLDMAN SACHS GROUP, INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2008 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) K. POLICY LIABILITIES AND ACCRUALS (CONTINUED) ultimate cost of all claims incurred but not paid. These estimates are continually reviewed and adjusted as necessary; such adjustments are reflected in current operations. Contractholder deposit funds and other policy liabilities include deposit administration funds and immediate participation guarantee funds and consist of deposits received from customers and investment earnings on their fund balances. Policy liabilities and accruals are based on the various estimates discussed above. Although the adequacy of these amounts cannot be assured, the Company believes that policy liability and accruals will be sufficient to meet future obligations of policies in force. The amount of liabilities and accruals, however, could be revised in the near-term if the estimates discussed above are revised. L. PREMIUM, FEE REVENUE AND RELATED EXPENSES Premiums for individual life insurance and individual and group annuity products, excluding universal life and investment-related products, are considered revenue when due. Benefits, losses and related expenses are matched with premiums, resulting in their recognition over the lives of the contracts. This matching is accomplished through the provision for future benefits, estimated and unpaid losses and amortization of deferred policy acquisition costs. Revenues for investment-related products consist of net investment income and contract charges assessed against the fund values. Related benefit expenses include annuity benefit claims for guaranteed minimum death benefits in excess of contract values, and net investment income credited to the fund values after deduction for investment and risk charges. Revenues for universal life products consist of net investment income, with mortality, administration and surrender charges assessed against the fund values. Related benefit expenses include universal life benefit claims in excess of fund values and net investment income credited to universal life fund values. Certain policy charges such as enhanced crediting rates or bonus payments that represent compensation for services to be provided in future periods are classified as deferred sales inducements and amortized over the period benefited using the same assumptions used to amortize deferred acquisition costs. See Note 14 - Deferred Policy Acquisition Costs, for further information regarding revaluation of DAC and deferred sales inducements. M. FEDERAL INCOME TAXES Deferred federal income taxes are generally recognized when assets and liabilities have different values for financial statement and tax reporting purposes, and for other temporary taxable and deductible differences as defined by Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS No. 109"). These differences result primarily from insurance reserves, net operating loss carryforwards, policy acquisition expenses, tax credit carryforwards and deferred sales inducements. In June 2006, the FASB issued Interpretation No. 48, "Accounting for Uncertainty in Income Taxes - an Interpretation of FASB Statement No. 109" ("FIN No. 48"), to create a single model to address accounting for uncertainty in tax positions (See Note 3N - New and Adopted Accounting Pronouncements). N. NEW AND ADOPTED ACCOUNTING PRONOUNCEMENTS In January 2009, the FASB issued FASB Staff Position ("FSP") No. EITF 99-20-1, "Amendments to the Impairment Guidance of EITF Issue No. 99-20," ("FSP EITF 99-20-1"). The FSP amends the impairment guidance of Emerging Issues Task Force ("EITF") Issue No. 99-20, "Recognition of Interest Income and Impairment of Purchased Beneficial Interest and Beneficial Interest that Continue to Be Held by a Transferor in Securitized Financial Assets," by removing the exclusive reliance upon market participant assumptions about future cash flows when evaluating impairment of securities within its scope. FSP EITF 99-20-1 requires companies to follow the impairment guidance in SFAS No. 115, which permits the use of reasonable management judgement of the probability that the holder will be unable to collect all amounts due. The FSP is effective prospectively for interim and annual reporting periods ending after December 15, 2008. The Company adopted the FSP on December 31, 2008 and the adoption did not have a material effect on the Company's financial condition, results of operations or cash flows. 12 COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (A WHOLLY-OWNED SUBSIDIARY OF THE GOLDMAN SACHS GROUP, INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2008 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) N. NEW AND ADOPTED ACCOUNTING PRONOUNCEMENTS (CONTINUED) As discussed above, in October 2008, the FASB issued FSP No. FAS 157-3, which clarifies the application of SFAS No. 157 in an inactive market, without changing its existing principles. The FSP was effective immediately upon issuance. The adoption of FSP No. FAS 157-3 did not have an effect on the Company's financial condition, results of operations or cash flows. In September 2008, the FASB issued FSP No. FAS 133-1 ("FSP No. FAS 133-1") and FIN 45-4 ("FIN 45-4"), "Disclosures about Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement No. 133 and FASB Interpretation No. 45; and Clarification of the Effective Date of FASB Statement No. 161." FSP No. FAS 133-1 and FIN 45-4 requires enhanced disclosures about credit derivatives and guarantees and amends FIN 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others" to exclude credit derivative instruments accounted for at fair value under SFAS No. 133. The FSP is effective for financial statements issued for reporting periods ending after November 15, 2008. Adoption of FSP No. FAS 133-1 and FIN 45-4 did not have an effect on the Company's financial condition, results of operations or cash flows. In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities," which gives entities the option to measure eligible financial assets, financial liabilities and firm commitments at fair value (i.e., the fair value option), on an instrument-by-instrument basis, that are otherwise not accounted for at fair value under other accounting standards. The election to use the fair value option is available at specified election dates, such as when an entity first recognizes a financial asset or financial liability or upon entering into a firm commitment. Subsequent changes in fair value must be recorded in earnings. Additionally, SFAS No. 159 allows for a one-time election for existing positions upon adoption, with the transition adjustment recorded to beginning retained earnings. The Company did not adopted SFAS No. 159 for any portion of its business. In September 2006, the FASB issued SFAS No. 157. SFAS No. 157 clarifies that fair value is an exit price, representing the amount that would be exchanged to sell an asset or transfer a liability in an orderly transaction between market participants. Under FAS No. 157, fair value measurements are not adjusted for transaction costs. SFAS No. 157 nullifies the consensus reached in EITF Issue No. 02-3, "Issues Involved in Accounting for Derivative Contracts Held for Trading Purposes and Contracts Involved in Energy Trading and Risk Management Activities," ("EITF Issue No. 02-3") that prohibited the recognition of day one gain or loss on derivative contracts (and hybrid instruments measured at fair value under SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," as modified by SFAS No. 155) where the Company could not verify all of the significant model inputs to observable market data and verify the model to market transactions. However, SFAS No. 157 requires that a fair value measurement reflect the assumptions market participants would use in pricing an asset or liability based on the best information available. Assumptions include the risks inherent in a particular valuation technique (such as a pricing model) and/or the risks inherent in the inputs to the model. The Company adopted SFAS 157 as of January 1, 2007; adoption did not have a material effect on the Company's financial condition, results of operations or cash flows. In June 2006, the FASB issued FIN No. 48. FIN No. 48 requires that the Company determine whether a tax position is more likely than not to be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. Once it is determined that a position meets this recognition threshold, the position is measured to determine the amount of benefit to be recognized in the financial statements. The Company adopted the provisions of FIN No. 48 as of January 1, 2007; adoption did not have any impact on the Company's financial condition, results of operations or cash flows and did not result in any adjustments to retained earnings. In February 2006, the FASB issued SFAS No. 155, "Accounting for Certain Hybrid Financial Instruments - an amendment of FASB Statements No. 133 and 140" ("SFAS No. 155"). SFAS No. 155 permits an entity to measure at fair value any financial instrument that contains an embedded derivative that otherwise would require bifurcation. As permitted, the Company early adopted SFAS No. 155 in the first quarter of 2006. Adoption did not have a material effect on the Company's financial condition, results of operations or cash flows. In September 2005, the AICPA issued Statement of Position 05-1, "Accounting by Insurance Enterprises for Deferred Acquisition Costs in Connection with Modifications or Exchanges of Insurance Contracts" ("SOP 05-1"). SOP 05-1 provides guidance on 13 COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (A WHOLLY-OWNED SUBSIDIARY OF THE GOLDMAN SACHS GROUP, INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2008 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) N. NEW AND ADOPTED ACCOUNTING PRONOUNCEMENTS (CONTINUED) accounting by insurance companies for deferred acquisition costs on internal replacements of insurance and investment contracts other than those described in SFAS No. 97, "Accounting and Reporting by Insurance Enterprises for Certain Long-Duration Contracts and for Realized Gains and Losses from the Sale of Investments." This statement is effective for internal replacements occurring in fiscal years beginning after December 15, 2006. The Company adopted SOP 05-1 as of January 1, 2007; adoption did not have a material effect on the Company's financial condition, results of operations or cash flows. O. ACCOUNTING STANDARDS NOT YET ADOPTED In April 2009, the FASB issued FSP FAS 157-4, "Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly," ("FSP FAS No. 157-4"). FSP FAS No. 157-4 provides guidance in estimating fair value in accordance with SFAS 157 when the volume and level of activity for an asset or liability have significantly decreased when compared to normal activity. FSP FAS no. 157-4 also provides guidance in identifying circumstances that indicate a transaction is not orderly, which may indicate that further analysis of transactions or quoted market prices is needed and a significant adjustment to these transactions or prices may be necessary to estimate fair value in accordance with SFAS 157. FSP FAS No. 157-4 shall be effective for interim and annual reporting periods ending after June 15, 2009, and shall be applied prospectively. Early adoption is permitted for periods ending after March 15, 2009. Earlier adoption for periods ending before March 15, 2009, is not permitted. The Company will adopt FSP FAS No. 157-4 in 2009; the Company is currently reviewing the impact of adoption of FSP FAS No. 157-4 on the Company's financial condition, results of operations and cash flows. In April 2009, the FASB issued FSP FAS 115-2 and FAS 124-2, "Recognition and Presentation of Other-Than-Temporary Impairments," ("FSP FAS No. 115-2 and FAS 124-2"), which amends the other-than-temporary impairment guidance for debt securities and changes the presentation and disclosure requirements for other-than-temporary impairments on both debt and equity securities. Under FSP FAS No. 115-2 and FAS 124-2, only that portion of an other-than-temporary impairment loss on a debt security related to credit is charged through the income statement, unless the entity intends to or it is more likely than not that the entity will be required to sell the impaired debt security prior to recovery. FSP FAS No. 115-2 and FAS 124-2 shall be effective for interim and annual reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. Earlier adoption for periods ending before March 15, 2009, is not permitted. The Company will adopt FSP FAS No. 115-2 and FAS 124-2 in 2009; the Company is currently reviewing the impact of adoption of FSP FAS No. 115-2 and FAS 124-2 on the Company's financial condition, results of operations and cash flows. In May 2008, the FASB issued SFAS No. 163, "Accounting for Financial Guarantee Insurance Contracts - an interpretation of FASB Statement No. 60." The scope of SFAS No. 163 is limited to financial guarantee insurance (and reinsurance) contracts issued by enterprises that are included within the scope of SFAS No. 60, "Accounting and Reporting by Insurance Enterprises," and that are not accounted for as derivative instruments. SFAS No. 163 excludes from its scope insurance contracts that are similar to financial guarantee insurance, such as mortgage guaranty insurance and credit insurance on trade receivables. SFAS No. 163 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and all interim periods within those fiscal years, except for certain disclosures about the insurance enterprise's risk management activities. Except for certain disclosures, earlier application is not permitted. The Company does not have any contracts with guarantees within the scope of this standard. The Company's adoption of SFAS No. 163 on January 1, 2009 will have no impact on its consolidated financial statements. In March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative Instruments and Hedging Activities" ("SFAS No. 161"). SFAS No. 161 requires enhanced disclosures about an entity's derivative and hedging activities, and is effective for financial statements issued for reporting periods beginning after November 15, 2008, with early application encouraged. Since SFAS No. 161 requires only additional disclosures concerning derivatives and hedging activities, adoption of SFAS No. 161 will not affect the Company's financial condition, results of operations or cash flows. In December 2007, the FASB issued a revision to SFAS No. 141, "Business Combinations." SFAS No. 141(R) requires changes to the accounting for transaction costs, certain contingent assets and liabilities, and other balances in a business combination. In addition, in partial acquisitions, when control is obtained, the acquiring company must measure and record all of the target's assets 14 COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (A WHOLLY-OWNED SUBSIDIARY OF THE GOLDMAN SACHS GROUP, INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2008 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) O. ACCOUNTING STANDARDS NOT YET ADOPTED (CONTINUED) and liabilities, including goodwill, at fair value as if the entire target company had been acquired. The Company will apply the provisions of SFAS No. 141(R) to business combinations occurring after December 31, 2008. Adoption of SFAS No. 141(R) will not affect the Company's financial condition, results of operations or cash flows. In June 2007, the AICPA issued Statement of Position 07-1, "Clarification of the Scope of the Audit and Accounting Guide 'Audits of Investment Companies' and Accounting by Parent Companies and Equity Method Investors for Investments in Investment Companies" ("SOP 07-1") SOP 07-1 clarifies when an entity may apply the provisions of the Audit and Accounting Guide for Investment Companies (the Guide). In February 2008, the FASB issued FSP Statement of Position 07-1-a, "The Effective Date of AICPA Statement of Position 07-1," which indefinitely defers the effective date for SOP 07-01. P. RECLASSIFICATIONS Certain reclassifications have been made to previously reported amounts to conform to the current presentation. 4. PURCHASE ACCOUNTING Goldman Sachs' acquisition of the Company is accounted for by applying SFAS No. 141 through "push down" accounting. Included in the following table is VOBA, which represents the present value of future profits embedded in the acquired contracts. See Note 12 - Value of Business Acquired, for further explanation of VOBA. The assessment of fair value in accordance with SFAS No. 141 included the establishment of intangible assets for VOBA and various state licenses. No specific goodwill was recognized as a result of this assessment. In accordance with SFAS No. 141 the purchase allocation period to identify and record fair value for all assets acquired and liabilities assumed should usually not exceed one year from the transaction date, with the exception of tax adjustments. At the conclusion of 2007 and 2006, additional balance sheet adjustments related to tax items were identified. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed as of December 30, 2005 and purchase accounting adjustments made for the years ended December 31, 2008, December 31, 2007 and December 31, 2006.
EFFECT OF EFFECT OF EFFECT OF PROFORMA DECEMBER 30, ADJUSTMENTS IN ADJUSTMENTS IN ADJUSTMENTS IN DECEMBER 31, FAIR VALUE 2005 2006(1) 2007(2) 2008(2) 2005 - ------------------------------------------------------------------------------------------------------------------ (In millions) Assets: Total investments at market value $ 1,391.8 $ -- $ -- $ -- $ 1,391.8 Cash and cash equivalents 123.2 -- -- 123.2 VOBA 318.5 (12.4) (5.8) (8.6) 291.7 Other assets at fair value 1,007.5 18.4 5.6 8.6 1,040.1 Separate account assets 8,578.3 -- -- -- 8,578.3 --------------------------------------------------------------------------- Total assets acquired 11,419.3 6.0 (0.2) -- 11,425.1 Liabilities: Policyholder account balances 2,436.3 5.3 -- -- 2,441.6 Other liabilities at fair value 72.3 -- (0.4) -- 71.9 Separate account liabilities 8,578.3 -- -- -- 8,578.3 --------------------------------------------------------------------------- Total liabilities assumed 11,086.9 5.3 (0.4) -- 11,091.8 Total purchase price $ 332.4 $ 0.7 $ 0.2 $ -- $ 333.3 ===========================================================================
(1) Adjustment to Other assets reflects the combined effect of adjustment to the deferred tax asset (see Note 10), receivables from reinsurers and other accounts receivable. (2) Adjustment to Other assets reflects the effect of adjustment to the deferred tax asset. 15 COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (A WHOLLY-OWNED SUBSIDIARY OF THE GOLDMAN SACHS GROUP, INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2008 4. PURCHASE ACCOUNTING (CONTINUED)
PURCHASE PRICE: - ---------------------------------------------- (In millions) Initial payment of purchase price $262.0 FAFLIC ceding commission 8.6 Direct transaction expenses 6.9 Additional deferred purchase price 54.9 Purchase accounting final adjustments 0.9 ------ Total purchase price $333.3 ======
5. SIGNIFICANT TRANSACTIONS On January 1, 2008, the Company reinsured under an assumption agreement a book of business from Fidelity Mutual Life Insurance Company ("FML") comprising primarily whole, term and universal life insurance policies. FML was in rehabilitation under the governance of the State of Pennsylvania, and the Company has no responsibility for the dissolution or future state of FML and any of its remaining legal entity obligations or liabilities. As part of this transaction, the Company paid a ceding commission of $4.3 million and assumed general account reserves of $0.7 billion. During the first quarter of 2008, the Company effectively ceded the entire FML block of business to its affiliate, Columbia Capital Life Reinsurance Company ("Columbia"). In consideration of Columbia's assumption of the business, the Company received a ceding commission of $4.1 million. On May 25, 2007 the Company signed an agreement, effective retroactive to January 1, 2007, with Pacific Life Insurance Company ("Pacific Life") to assume 8% of its variable annuity products sold in 2007. The base annuities were assumed on a modified coinsurance and the benefits provided via riders were assumed on a coinsurance basis. As separate account liabilities were assumed under modified coinsurance terms, ownership of the underlying separate account assets was not transferred and these assets are not reflected in the Consolidated Balance Sheets. The Company assumed general account reserves of $58.2 million and, for the retroactive period prior to signing, recorded a payable to Pacific Life of $12.4 million for the period through May 2007. In February 2008, the Pacific Life contract was recaptured retroactive to January 1, 2008. Concurrent with the recapture, certain derivative options hedging the rider benefits of this treaty were disposed. The recapture of the Pacific Life block resulted in a recapture of $25.5 million in reserves and resulted in a $41.3 million reduction in DAC and reinsurance receivable on paid and unpaid losses, benefits, unearned premiums and modified coinsurance. See Note 13 - Reinsurance for further discussion. On July, 1, 2006, the Company entered into a modified coinsurance agreement with Chase Insurance Life and Annuity Company ("CILAC") to assume 100% of its variable annuity business on a modified coinsurance basis. The Company assumed general account reserves of $1.3 billion and paid a ceding allowance of $85.0 million to CILAC. As separate account liabilities were assumed under modified coinsurance terms, ownership of the underlying separate account assets was not transferred and these assets are not reflected in the Consolidated Balance Sheets. On April 1, 2007, CILAC was merged into Protective Life Insurance Company ("Protective"). 6. LIABILITIES FOR MINIMUM GUARANTEES UNDER STATEMENT OF POSITION 03-1, ACCOUNTING AND REPORTING BY INSURANCE ENTERPRISES FOR CERTAIN NONTRADTIONAL LONG-DURATION CONTRACTS AND FOR SEPARATE ACCOUNTS GUARANTEED MINIMUM DEATH BENEFITS The Company has issued variable annuity contracts with a GMDB feature. The GMDB feature provides annuity contractholders with a guarantee that the benefit received at death will be no less than a prescribed minimum amount. This amount is based on either the net deposits paid into the contract, the net deposits accumulated at a specified rate, the highest historical account value on a 16 COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (A WHOLLY-OWNED SUBSIDIARY OF THE GOLDMAN SACHS GROUP, INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2008 6. LIABILITIES FOR MINIMUM GUARANTEES UNDER STATEMENT OF POSITION 03-1, ACCOUNTING AND REPORTING BY INSURANCE ENTERPRISES FOR CERTAIN NONTRADTIONAL LONG-DURATION CONTRACTS AND FOR SEPARATE ACCOUNTS (CONTINUED) contract anniversary, or more typically, the greatest of these values. If the GMDB is higher than the current account value at the time of death, the Company incurs a cost equal to the difference. The following summarizes the liability for GMDB contracts reflected in the general account. The GMDB exposure includes reinsurance assumed, however modified coinsurance is excluded as it provides negligible GMDB reserves and significant account values:
FOR THE YEARS ENDED DECEMBER 31, 2008 2007 - -------------------------------------------------- (In millions) Beginning balance $212.4 $237.0 Provision for GMDB: GMDB expense incurred 25.2 6.4 Volatility (1) 149.5 13.8 --------------- 174.7 20.2 Claims, net of reinsurance: Claims from policyholders (76.7) (44.6) Claims ceded to reinsurers 76.1 41.1 --------------- (0.6) (3.5) GMDB reinsurance premium (71.5) (41.3) --------------- Ending balance $315.0 $212.4 ===============
(1) Volatility reflects the difference between actual and expected investment performance, persistency, age distribution, mortality and other factors that are assumptions within the GMDB reserving model. The reserve represents estimates, over a range of stochastic scenarios, of the present value of future GMDB net benefits expected to be paid less the present value of future GMDB net fees charged to the policyholders. The following information relates to the reserving methodology and assumptions for GMDB at December 31, 2008 and 2007. - The projection model used 500 stochastically generated return scenarios with mean performance ranging from 5% to 10% depending on the underlying fund type. - Implied volatilities by duration were based on a combination of over the counter quotes (when available) and historical volatilities. For 2008, volatility assumptions range from 30% to 45%, varying by equity fund type; 10% for bond funds; and 1% for money market funds. For 2007, volatility assumptions ranged from 20% to 34%, varying by equity fund type; 7% for bond funds; and 1% for money market funds. - The mortality assumptions are factors of the 1994 GMDB table based on age and gender. The overall average factor is 79% of the 1994 GMDB table. Mortality improvement of 1% per year for 10 years is assumed. - The full surrender rate assumption varies from 1% to 50% depending on distribution channel, contract type, policy duration, and attained age. The aggregate projected full surrender rates for 2009 and 2010 are approximately 15% and 16%, respectively (full surrender rates include annuitizations, but they do not reflect partial withdrawals or deaths). - The partial withdrawal rate assumption varies by distribution channel, tax qualified status, and attained age. Total projected partial withdrawals are from 5% - 7% for all years. The following table presents the account value, net amount at risk and average attained age of underlying contractholders for guarantees in the event of death as of December 31, 2008 and 2007. The net amount at risk is the death benefit coverage in force or the amount that the Company would have to pay if all contractholders had died as of the specified date, and represents the excess of the guaranteed benefit over the account value. 17 COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (A WHOLLY-OWNED SUBSIDIARY OF THE GOLDMAN SACHS GROUP, INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2008 6. LIABILITIES FOR MINIMUM GUARANTEES UNDER STATEMENT OF POSITION 03-1, ACCOUNTING AND REPORTING BY INSURANCE ENTERPRISES FOR CERTAIN NONTRADTIONAL LONG-DURATION CONTRACTS AND FOR SEPARATE ACCOUNTS (CONTINUED)
DECEMBER 31, (IN MILLIONS, EXCEPT FOR CONTRACTHOLDER INFORMATION) 2008 2007 - ---------------------------------------------------------------------------- Net deposits paid Account value $ 2,623 $ 4,239 Net amount at risk $ 169 $ 26 Average attained age of contractholders 62 61 Ratchet (highest historical account value at specified anniversary dates) Account value $ 777 $ 1,549 Net amount at risk $ 328 $ 60 Average attained age of contractholders 67 66 Roll-up (net deposits accumulated at a specified rate) Account value $ 50 $ 80 Net amount at risk $ 39 $ 17 Average attained age of contractholders 79 78 Higher of ratchet or roll-up Account value $ 2,712 $ 4,849 Net amount at risk $ 2,295 $ 958 Average attained age of contractholders 74 73 Total of guaranteed benefits categorized above Account value $ 6,162 $ 10,717 Net amount at risk $ 2,831 $ 1,061 Average attained age of contractholders (weighted by account value) 68 67 Number of contractholders 181,847 213,958
The above table includes business coinsured from FAFLIC and Protective for both years. 2007 includes reinsurance assumed from Pacific Life. GUARANTEED MINIMUM INCOME BENEFIT Additionally, the Company previously issued variable annuity contracts with a guaranteed minimum income benefit ("GMIB") feature. The GMIB liability as of December 31, 2008 was $34.7 million with a benefit paid of approximately $50.0 thousand. The GMIB liability at December 31, 2007 was $14.2 million with no benefits paid out. Similar to the approach employed to value the GMDB reserve, the fair value reserve for the GMIB feature was computed using a risk neutral approach. The reserve was determined by estimating the present value of future GMIB benefits expected to be paid less the present value of future GMIB fees charged to the policyholders, over a range of stochastic scenarios. SALES INDUCEMENTS The Company's variable annuity product offerings included contracts that offered enhanced crediting rates or bonus payments. These enhanced rates are considered sales inducements under SOP 03-1. As such, the balance of sales inducement assets were required to be reclassified from DAC to other assets upon adoption of SOP 03-1, and amortization of these sales inducements over the life of the contract is required to be reflected as a policy benefit. Amortization of these contracts is required to be computed using the same methodology and assumptions used in amortizing DAC. Deferrred sales inducements at December 31, 2008 reflect bonus interest payments on direct and assumed blocks and are included in "Other assets" in the accompanying Consolidated Balance Sheets. 18 COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (A WHOLLY-OWNED SUBSIDIARY OF THE GOLDMAN SACHS GROUP, INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2008 6. LIABILITIES FOR MINIMUM GUARANTEES UNDER STATEMENT OF POSITION 03-1, ACCOUNTING AND REPORTING BY INSURANCE ENTERPRISES FOR CERTAIN NONTRADTIONAL LONG-DURATION CONTRACTS AND FOR SEPARATE ACCOUNTS (CONTINUED) The following reflects the changes to the deferred sales inducement asset:
FOR THE YEARS ENDED DECEMBER 31, 2008 2007 - ----------------------------------------------------- (In millions) Balance at beginning of year $ 8.9 $ -- Block acquisition -- 3.9 Reinsurance treaty recapture (8.9) -- Acquisition expenses deferred 0.5 5.3 Amortized to expense during the year -- (0.3) -------------- Balance at end of year $ 0.5 $ 8.9 ==============
SEPARATE ACCOUNTS WITH CREDITED INTEREST GUARANTEES The Company issued variable annuity and life contracts through its separate accounts for which net investment income and investment gains and losses accrue directly to, and investment risk is borne by, the contractholder. The Company also issued variable annuity and life contracts through separate accounts where the Company contractually guarantees to the contractholder the total deposits made to the contract less any partial withdrawals plus a minimum return. The market value adjusted ("MVA") product attributable to assumed modified coinsurance basis. See further explanation within Note 13 - Reinsurance. The Company had the following variable annuities with guaranteed minimum returns:
DECEMBER 31, 2008 2007 - ----------------------------------------------------------- (In millions) Account value $ 36.7 $ 47.2 Range of guaranteed minimum return rates 2.8-6.5% 2.8-6.5%
Account balances of these contracts with guaranteed minimum returns were invested as follows:
DECEMBER 31, 2008 2007 - ---------------------------------------------------- (In millions) Asset Type: Fixed maturities $28.7 $40.8 Cash and cash equivalents 16.5 11.5 ------------- Total $45.2 $52.3 =============
7. INVESTMENTS A. FIXED MATURITIES AND EQUITY SECURITIES The Company accounts for its investments in fixed maturities and equity securities, all of which are classified as available-for-sale, in accordance with the provisions of SFAS No. 115. 19 COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (A WHOLLY-OWNED SUBSIDIARY OF THE GOLDMAN SACHS GROUP, INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2008 7. INVESTMENTS (CONTINUED) A. FIXED MATURITIES AND EQUITY SECURITIES (CONTINUED) The amortized cost and fair value of available-for-sale fixed maturities and equity securities were as follows:
DECEMBER 31, 2008 - ------------------------------------------------------------------------------------------- GROSS GROSS AMORTIZED UNREALIZED UNREALIZED FAIR COST GAINS LOSSES VALUE - ------------------------------------------------------------------------------------------- (In millions) U.S. Treasury securities and U.S. government and agency securities $205.7 $22.3 $ (0.8) $227.2 States and political subdivisions 23.0 2.2 (0.1) 25.1 Corporate fixed maturities 400.7 8.4 (32.4) 376.7 Mortgage-backed securities 330.3 3.1 (33.1) 300.3 ------------------------------------------ Total fixed maturities $959.7 $36.0 $(66.4) $929.3 ========================================== Equity securities $ 93.5 $ -- $(25.4) $ 68.1 ==========================================
DECEMBER 31, 2007 - ------------------------------------------------------------------------------------------- GROSS GROSS AMORTIZED UNREALIZED UNREALIZED FAIR COST GAINS LOSSES VALUE - ------------------------------------------------------------------------------------------- (In millions) U.S. Treasury securities and U.S. government and agency securities $204.1 $ 5.2 $ -- $209.3 States and political subdivisions 16.1 0.2 -- 16.3 Corporate fixed maturities 428.2 2.0 (10.6) 419.6 Mortgage-backed securities 318.8 3.3 (1.6) 320.5 ------------------------------------------ Total fixed maturities $967.2 $10.7 $(12.2) $965.7 ========================================== Equity securities $108.1 $ -- $ (5.4) $102.7 ==========================================
In connection with AFLIAC's voluntary withdrawal of its license in New York, AFLIAC agreed with the New York Department of Insurance in 1994 to maintain, through a custodial account in New York, a security deposit, the market value of which will equal 102% of all outstanding liabilities of AFLIAC for New York policyholders, claimants and creditors. At December 31, 2008, the amortized cost and fair value of the assets on deposit were $79.4 million and $86.8 million, respectively. At December 31, 2007, the amortized cost and fair value of assets on deposit in New York were $42.4 million and $43.6 million, respectively. In addition, fixed maturities, excluding those securities on deposit in New York, with an amortized cost of $5.3 million and $5.2 million were on deposit with various state and governmental authorities at December 31, 2008 and 2007, respectively. Fair values related to these securities were $6.6 million and $6.0 million at December 31, 2008 and 2007, respectively. The Company entered into various derivative and other arrangements that required assets, such as cash and fixed maturities, to be pledged as collateral. At December 31, 2008, the Company held $60.0 million in cash as collateral, compared to $43.4 million held as fixed maturities at December 31, 2007. The amortized cost and fair value by maturity periods for fixed maturities are shown below. Actual maturities may differ from contractual maturities, because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties, or the Company may have the right to put or sell the obligations back to the issuers. Mortgage backed securities are included in the category representing their ultimate maturity. 20 COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (A WHOLLY-OWNED SUBSIDIARY OF THE GOLDMAN SACHS GROUP, INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2008 7. INVESTMENTS (CONTINUED) A. FIXED MATURITIES AND EQUITY SECURITIES (CONTINUED)
DECEMBER 31, DECEMBER 31, 2008 2008 AMORTIZED COST FAIR VALUE - ---------------------------------------------------------------------- (In millions) Due in one year or less $ 65.8 $ 64.2 Due after one year through five years 261.6 264.0 Due after five years through ten years 106.0 112.3 Due after ten years 526.3 488.8 ---------------------- Total $959.7 $929.3 ======================
B. DERIVATIVE INSTRUMENTS Simultaneous to the Transaction, the Company implemented a hedging strategy consisting of long duration equity derivative put options. The hedge is primarily static consisting of quarterly put options. The purpose of the hedge is to protect against increases in GMDB liability in the event that the market grows at a rate below LIBOR. In addition, the Company invests in exchange traded futures and options as part of its overall diversification and total return objectives. On December 12, 2007, the Company implemented an enhancement to its existing hedging strategy by selling short-duration S&P futures to reduce our long delta position. This strategy would help reduce expected volatility from changes in the market and protects the Company from adverse market movements. On May 25, 2007, the Company entered into a reinsurance contract with Pacific Life, accounted for on a coinsurance/modified-coinsurance ("co-modco") basis with respect to the annuity riders and base contracts. Insurance contracts in their entirety do not meet the definition of a derivative instrument, but may contain embedded derivatives. This reinsurance agreement stated that the Company would pay its proportionate share of the present value of the guaranteed future income stream in excess of account value. The riders were accounted for as an embedded derivative under Derivatives Implementation Group issue B25, "Embedded Derivatives: Deferred Variable Annuity Contracts with Payment Alternatives at the end of the Accumulation Period," ("DIG B25"). On February 2008, the contract was recaptured retroactive to January 1, 2008. Concurrent with this recapture, certain derivative options hedging the rider benefits of this treaty were disposed. On July 1, 2006, the Company entered into a reinsurance contract which is accounted for on a modified coinsurance basis. Under a traditional modified coinsurance arrangement, the ceding company owns the assets backing the liabilities and transfers their book investment returns to the reinsurer, including credited related gains or losses. The reinsurance contract represents a hybrid instrument that should be bifurcated into its host contract and embedded derivative components. An embedded derivative exists because the Company is exposed to third-party credit risk. This is accounted for as an embedded derivative under Derivatives Implementation Group issue B36, "Modified Coinsurance Arrangements and Debt Instruments that Incorporate Credit Risk Exposures That Are Unrelated or Only Partially Related to the Creditworthiness of the Obligor Under Those Instruments," ("DIG B36"). The Company does not employ hedge accounting. C. TRADING ACTIVITIES For 2008, the Company recognized a net gain of $175.6 million on its derivatives. For 2007, the Company recognized a net loss of $6.8 million on its derivatives. The derivatives in this program included exchange-traded futures contracts and interest rate swap contracts. The hedges did not qualify for hedge accounting under SFAS No. 133. The core risk the Company seeks to address with its hedging strategy is GMDB exposure. The objective is to protect against increases in GMDB liability in the event that the market grows at a rate below LIBOR, while maintaining some upside potential in rising markets. 21 COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (A WHOLLY-OWNED SUBSIDIARY OF THE GOLDMAN SACHS GROUP, INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2008 7. INVESTMENTS (CONTINUED) C. TRADING ACTIVITIES (CONTINUED) On May 25, 2007, the Company entered into a reinsurance contract which is accounted for on a co-modco basis with respect to the annuity riders and base contracts. Insurance contracts in their entirety do not meet the definition of a derivative instrument, and may contain embedded derivatives. This reinsurance agreement states that the Company will pay its proportionate share of the present value of the guaranteed future income stream in excess of account value. The riders are accounted for as an embedded derivative as defined by DIG B25. In February 2008, the contract was recaptured retroactive to January 1, 2008. D. UNREALIZED GAINS AND LOSSES Unrealized gains and losses on available-for-sale, other securities, and derivative instruments are summarized as follows:
EQUITY FIXED SECURITIES AND DECEMBER 31, MATURITIES OTHER TOTAL - ----------------------------------------------------------------------------------------------- (In millions) 2008 Net appreciation/(depreciation), beginning of year $ 0.4 $ (3.6) $ (3.2) ---------------------------------- Net (depreciation) on available-for-sale Securities (28.8) (20.1) (48.9) Net depreciation from the effect on value of business acquired and on policy liabilities 15.4 -- 15.4 Benefit for deferred federal income taxes 4.7 7.0 11.7 ---------------------------------- (8.7) (13.1) (21.8) ---------------------------------- Net depreciation, end of year $ (8.3) $(16.7) $(25.0) ================================== 2007 Net (depreciation)/appreciation, beginning of year $ (2.0) $ 0.8 $ (1.2) ---------------------------------- Net appreciation/(depreciation) on available-for-sale securities 2.8 (6.7) (3.9) Net depreciation from the effect on value of business acquired and on policy liabilities 0.9 -- 0.9 (Provision)/benefit for deferred federal income taxes (1.3) 2.3 1.0 ---------------------------------- 2.4 (4.4) (2.0) ---------------------------------- Net (depreciation)/appreciation, end of year $ 0.4 $ (3.6) $ (3.2) ================================== 2006 Net appreciation, beginning of year $ -- $ -- $ -- ---------------------------------- Net (depreciation)/appreciation on available-for-sale securities (4.3) 1.3 (3.0) Net depreciation from the effect on value of business acquired and on policy liabilities 1.0 -- 1.0 Benefit/(provision) for deferred federal income taxes 1.3 (0.5) 0.8 ---------------------------------- (2.0) 0.8 (1.2) ---------------------------------- Net (depreciation) appreciation, end of year $ (2.0) $ 0.8 $ (1.2) ==================================
22 COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (A WHOLLY-OWNED SUBSIDIARY OF THE GOLDMAN SACHS GROUP, INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2008 7. INVESTMENTS (CONTINUED) E. SECURITIES IN A CONTINUOUS UNREALIZED LOSS POSITION The following table provides information about the Company's fixed maturities and equity securities that have been continuously in an unrealized loss position.
DECEMBER 31, 2008 - -------------------------------------------------------------------------------------- GROSS NUMBER OF UNREALIZED FAIR SECURITIES WITH GROSS (IN MILLIONS) LOSSES VALUE UNREALIZED LOSSES - -------------------------------------------------------------------------------------- Investment grade fixed maturities (1): 0-6 months $(13.6) $ 52.9 22 7-12 months (22.4) 87.1 22 Greater than 12 months (18.6) 39.4 12 -------------------------------- Total investment grade fixed maturities $(54.6) $179.4 56 -------------------------------- Below investment grade fixed maturities: $ (2.1) $ 11.3 3 -------------------------------- Total fixed maturities $(56.7) $190.7 59 ================================ Equity securities: 0-6 months $(25.4) $ 68.1 1 -------------------------------- Total equity securities $(25.4) $ 68.1 1 ================================
(1) Includes gross unrealized losses for investment grade fixed maturity obligations of the U.S. Treasury, U.S. government and agency securities, states, and political subdivisions of $0.0 million at December 31, 2008.
DECEMBER 31, 2007 - -------------------------------------------------------------------------------------- GROSS NUMBER OF UNREALIZED FAIR SECURITIES WITH GROSS (IN MILLIONS) LOSSES VALUE UNREALIZED LOSSES - -------------------------------------------------------------------------------------- Investment grade fixed maturities (1): 0-6 months $ (1.7) $ 66.7 28 7-12 months (9.5) 190.9 43 Greater than 12 months (1.0) 19.7 7 -------------------------------- Total investment grade fixed maturities $(12.2) $277.3 78 -------------------------------- Below investment grade fixed maturities: $ -- $ -- -- -------------------------------- Total fixed maturities $(12.2) $277.3 78 ================================ Equity securities: 0-6 months $ (5.4) $102.7 1 -------------------------------- Total equity securities $ (5.4) $102.7 1 ================================
(1) Includes gross unrealized losses for investment grade fixed maturity obligations of the U.S. Treasury, U.S. government and agency securities, states, and political subdivisions of $0.1 million at December 31, 2007. The Company employs a systematic methodology to evaluate declines in fair values below amortized cost for all investments. The methodology utilizes a quantitative and qualitative process ensuring that available evidence concerning the declines in fair value below amortized cost is evaluated in a disciplined manner. In determining whether a decline in fair value below amortized cost is other-than-temporary, the Company evaluates the ability and intent to hold the investment to recovery; the issuer's overall financial condition; the issuer's credit and financial strength ratings; the issuer's financial performance, including earnings trends, dividend 23 COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (A WHOLLY-OWNED SUBSIDIARY OF THE GOLDMAN SACHS GROUP, INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2008 7. INVESTMENTS (CONTINUED) E. SECURITIES IN A CONTINUOUS UNREALIZED LOSS POSITION (CONTINUED) payments, and asset quality; a weakening of the general market conditions in the industry or geographic region in which the issuer operates; the length of time in which the fair value of an issuer's securities remains below cost; and with respect to fixed maturity investments, any factors that might raise doubt about the issuer's ability to pay all amounts due according to the contractual terms. The Company applies these factors to all securities as necessary. F. OTHER The Company had the following concentration of investments at fair value that exceeded 10% of shareholder's equity:
DECEMBER 31, 2008 2007 - ----------------------------------- (In millions) Issuer Name: U.S. Treasury $62.5 $ -- GS High Yield Fund $68.1 $102.7
8. INVESTMENT INCOME AND GAINS AND LOSSES A. NET INVESTMENT INCOME The components of net investment income were as follows:
FOR THE YEARS ENDED DECEMBER 31, 2008 2007 2006 - -------------------------------------------------------------------------- (In millions) Fixed maturities $ 53.4 $ 53.3 $ 59.9 Equity securities 8.0 7.7 4.4 Policy loans 5.2 7.5 9.2 Short-term investments and miscellaneous income 62.2 71.9 43.9 ------------------------ Gross investment income 128.8 140.4 117.4 Less investment expenses (3.2) (2.9) (2.9) ------------------------ Net investment income $125.6 $137.5 $114.5 ========================
The Company had no fixed maturities on non-accrual status at December 31, 2008, 2007 or 2006. The Company did not have any mortgage loan investments at December 31, 2008 or 2007. The Company had no fixed maturities which were non-income producing at December 31, 2008, 2007 or 2006. 24 COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (A WHOLLY-OWNED SUBSIDIARY OF THE GOLDMAN SACHS GROUP, INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2008 8. INVESTMENT INCOME AND GAINS AND LOSSES (CONTINUED) B. NET REALIZED INVESTMENT GAINS AND LOSSES Realized (losses) and gains on investments were as follows:
FOR THE YEARS ENDED DECEMBER 31, 2008 2007 2006 - -------------------------------------------------------------- (In millions) Fixed maturities $(38.0) $4.1 $(7.3) Equity securities (14.5) -- -- Other investments 2.9 1.8 -- --------------------- Net realized investment (losses)/gains $(49.6) $5.9 $(7.3) =====================
The proceeds from voluntary sales of available-for-sale securities and the gross realized gains and gross realized losses on those sales were as follows:
PROCEEDS FROM VOLUNTARY GROSS GROSS FOR THE YEARS ENDED DECEMBER 31, SALES GAINS LOSSES - ------------------------------------------------------------------- (In millions) 2008 Fixed maturities $1,550.8 $12.6 $(50.6) 2007 Fixed maturities $ 773.9 $ 5.7 $ 1.6 2006 Fixed maturities $2,213.8 $ 3.3 $ 10.6
The Company recognized other-than-temporary impairments on fixed maturities of $27.5 million and equity securities of $14.5 million in 2008. There were no other-than-temporary impairments in 2007 and 2006 respectively. C. OTHER COMPREHENSIVE INCOME RECONCILIATION The following table provides a reconciliation of gross unrealized gains/(losses) to the net balance shown in the Consolidated Statements of Comprehensive Income:
FOR THE YEARS ENDED DECEMBER 31, 2008 2007 2006 - ---------------------------------------------------------------------------------------------------- (In millions) Unrealized (depreciation)/appreciation on available-for-sale securities: Unrealized holding losses arising during period (net of income tax benefit of $30.2, $0.7 and $3.3 million in 2008, 2007 and 2006, respectively) $(56.1) $(1.4) $(5.9) Less: reclassification adjustment for gains/(losses) included in net income (net of income tax (benefit)/expense of $(18.5), $0.3 and $(2.5) million in 2008, 2007 and 2006, respectively) (34.3) 0.6 (4.7) ---------------------- Total available-for-sale securities (21.8) (2.0) (1.2) ---------------------- Net unrealized (depreciation)/appreciation on available-for-sale securities $(21.8) $(2.0) $(1.2) ======================
25 COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (A WHOLLY-OWNED SUBSIDIARY OF THE GOLDMAN SACHS GROUP, INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2008 9. FAIR VALUE DISCLOSURE OF FINANCIAL INSTRUMENTS SFAS No. 107, DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS, as amended by SFAS No. 157, requires disclosure of fair value information about certain financial instruments (insurance contracts, real estate, goodwill and taxes are excluded) for which it is practicable to estimate such values, whether or not these instruments are included in the balance sheet. The fair values presented for certain financial instruments are estimates which, in many cases, may differ significantly from the amounts which could be realized in an orderly transaction. The following methods and assumptions were used to estimate the fair value of each class of financial instruments: CASH AND CASH EQUIVALENTS For these short-term investments, the carrying amount approximates fair value. FIXED MATURITIES Fair values are based on quoted market prices, if available. If a quoted market price is not available, fair values are estimated using independent pricing sources or internally developed pricing models using discounted cash flow analyses which utilize current interest rates for similar financial instruments which have comparable terms and credit. EQUITY SECURITIES Fair values are based on quoted market prices, if available. If a quoted market price is not available, fair values are estimated using independent pricing sources or internally developed pricing models. POLICY LOANS The carrying amount reported in the Consolidated Balance Sheets approximates fair value since policy loans have no defined maturity dates and are inseparable from the insurance contracts. DERIVATIVE INSTRUMENTS Fair values of the Company's derivatives are generally determined using model inputs to observable market data. Derivative instruments include embedded derivatives related to insurance contracts. INVESTMENT CONTRACTS (WITHOUT MORTALITY FEATURES) Liabilities under supplemental contracts without life contingencies are estimated based on current fund balances and other individual contract funds represent the present value of future policy benefits. SEPARATE ACCOUNT ASSETS The estimated fair value of assets held in separate accounts is based on quoted market prices. 26 COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (A WHOLLY-OWNED SUBSIDIARY OF THE GOLDMAN SACHS GROUP, INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2008 9. FAIR VALUE DISCLOSURE OF FINANCIAL INSTRUMENTS (CONTINUED) The estimated fair values of the financial instruments were as follows:
2008 2007 ----------------------------------------- CARRYING FAIR CARRYING FAIR DECEMBER 31, VALUE VALUE VALUE VALUE - ------------------------------------------------------------------------------------------------ (In millions) Financial Assets Cash and cash equivalents $ 277.4 $ 277.4 $ 57.4 $ 57.4 Fixed maturities 929.3 929.3 965.7 965.7 Equity securities 68.1 68.1 102.7 102.7 Policy loans 92.9 92.9 106.1 106.1 Derivative instruments receivable 182.9 182.9 29.1 29.1 Separate account assets 3,659.8 3,659.8 6,906.7 6,906.7 ----------------------------------------- $5,210.4 $5,210.4 $8,167.7 $8,167.7 ========================================= Financial Liabilities Derivative instruments payable $ 57.7 $ 57.7 $ 33.7 $ 33.7 Supplemental contracts without life contingencies 31.3 31.3 27.4 27.4 Other individual contract deposit funds 22.5 22.5 20.7 20.7 ----------------------------------------- $ 111.5 $ 111.5 $ 81.8 $ 81.8 =========================================
The following tables set forth by level within the fair value hierarchy financial assets and liabilities accounted for at fair value under SFAS No. 157 as of December 2008. As required by SFAS No. 157, assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.
DECEMBER 31, 2008 LEVEL 1 LEVEL 2 LEVEL 3 TOTAL - ---------------------------------------------------------------------------------------------- (In millions) Financial Assets Fixed maturities $ 172.2 $755.4 $ 1.7 $ 929.3 Equity securities -- 68.1 -- 68.1 Derivative instruments receivable -- 182.9 -- 182.9 Separate account assets 3,659.8 -- -- 3,659.8 --------------------------------------- Total assets at fair value $3,832.0 $1,006.4 $1.7 $4,840.1 ======================================= Financial Liabilities Derivative instruments payable $ -- $ 1.4 $56.3 $ 57.7 --------------------------------------- Total liabilities at fair value $ -- $ 1.4 $56.3 $ 57.7 =======================================
27 COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (A WHOLLY-OWNED SUBSIDIARY OF THE GOLDMAN SACHS GROUP, INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2008 9. FAIR VALUE DISCLOSURE OF FINANCIAL INSTRUMENTS (CONTINUED)
DECEMBER 31, 2007 LEVEL 1 LEVEL 2 LEVEL 3 TOTAL - ------------------------------------------------------------------------------ (In millions) Financial Assets Fixed maturities $ 107.7 $854.3 $ 3.7 $ 965.7 Equity securities -- 102.7 -- 102.7 Derivative instruments receivable -- 18.0 11.1 29.1 Separate account assets 6,906.7 -- -- 6,906.7 --------------------------------------- Total assets at fair value $7,014.4 $975.0 $14.8 $8,004.2 ======================================= Financial Liabilities Derivative instruments payable $ -- $ 2.6 $31.1 $ 33.7 --------------------------------------- Total liabilities at fair value $ -- $ 2.6 $31.1 $ 33.7 =======================================
LEVEL 3 GAINS AND LOSSES The table below sets forth a summary of changes in the fair value of the Company's level 3 financial assets and liabilities for the year ended December 2008. The table reflects gains and losses for the full year for all financial assets and liabilities categorized as level 3 as at December 31, 2008. As reflected in the table below, the net unrealized loss on level 3 financial assets and liabilities was $28.5 million for the year ended December 2008. CASH INSTRUMENTS The Company's cash instruments are generally classified within level 1 or level 2 of the fair value hierarchy because they are valued using quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency. Certain cash instruments are classified within level 3 of the fair value hierarchy because they trade infrequently and therefore have little or no price transparency. Total cash instruments at fair value classified within level 3 were $1.7 million and $3.7 million as of December 31, 2008 and 2007, respectively. This includes a tax credit investment and a surplus note. DERIVATIVE CONTRACTS - - A derivative contract with level 1 and/or level 2 inputs is classified as a level 3 financial instrument in its entirety if it has at least one significant level 3 input. - - If there is one significant level 3 input, the entire gain or loss from adjusting only observable inputs (i.e. level 1 and level 2) is still classified as level 3. 28 COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (A WHOLLY-OWNED SUBSIDIARY OF THE GOLDMAN SACHS GROUP, INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2008 9. FAIR VALUE DISCLOSURE OF FINANCIAL INSTRUMENTS (CONTINUED)
LEVEL 3 FINANCIAL ASSETS AND LIABILITIES ----------------------------------------- CASH INSTRUMENTS - DERIVATIVE DECEMBER 31, 2008 ASSETS CONTRACTS TOTAL LOSSES - ---------------------------------------------------------------------------------------------- (In millions) Balance, beginning of year $ 3.7 $(20.0) N/A Realized (losses)/gains (0.1) 11.1 11.0 Unrealized (losses) relating to instruments still held at the reporting date (3.3) (25.2) (28.5) Purchases, issuances and settlements 1.4 (11.1) N/A -------------------- Balance, end of year $ 1.7 $(45.2) ====================
CASH INSTRUMENTS - DERIVATIVE DECEMBER 31, 2007 ASSETS CONTRACTS TOTAL LOSSES - ---------------------------------------------------------------------------------------------- (In millions) Balance, beginning of year $ 3.7 $ 0.5 N/A Realized (losses) (0.1) -- (0.1) Unrealized gains/(losses) relating to instruments still held at the reporting date 0.1 (31.6) (31.5) Purchases, issuances and settlements -- 11.1 N/A -------------------- Balance, end of year $ 3.7 $(20.0) ====================
29 COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (A WHOLLY-OWNED SUBSIDIARY OF THE GOLDMAN SACHS GROUP, INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2008 10. FEDERAL INCOME TAXES Provisions for federal income taxes have been calculated in accordance with the provisions of Statement No. 109. The federal income tax provision/(benefit) in the Consolidated Statements of Income is shown below:
FOR THE YEARS ENDED DECEMBER 31, 2008 2007 2006 - -------------------------------------------------------- (In millions) Federal income tax expense Deferred $10.8 $34.6 $26.2 --------------------- Total $10.8 $34.6 $26.2 =====================
The federal income tax benefit attributable to the consolidated results of operations is different from the amount determined by multiplying income before federal income taxes by the statutory federal income tax rate at 35%. The sources of the difference and the tax effects of each were as follows:
FOR THE YEARS ENDED DECEMBER 31, 2008 2007 2006 - --------------------------------------------------------------------- (In millions) Expected federal income tax (benefit)/expense $(0.2) $46.1 $31.9 Prior years' federal income tax adjustment (0.6) (1.1) -- Dividend received deduction (5.2) (8.2) (8.2) Tax credits (0.7) (0.5) (1.1) Valuation allowance 17.2 (1.7) 3.6 Other, net 0.3 -- -- --------------------- Federal income tax expense $10.8 $34.6 $26.2 =====================
30 COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (A WHOLLY-OWNED SUBSIDIARY OF THE GOLDMAN SACHS GROUP, INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2008 10. FEDERAL INCOME TAXES (CONTINUED) Following are the components of the Company's deferred tax assets and liabilities.
DECEMBER 31, 2008 2007 - -------------------------------------------------- (In millions) Deferred tax asset Insurance reserves $ 63.5 $ 141.4 Deferred acquisition costs 17.7 22.4 Tax credit carryforwards 9.7 7.8 Loss carryforwards 104.2 63.0 Investments, net 44.9 9.3 Ceding commission 19.5 23.8 Deferred compensation 0.9 0.8 Other, net 6.7 9.0 ----------------- Subtotal deferred tax asset 267.1 277.5 Valuation allowance (34.8) (17.6) ----------------- Total deferred tax asset, net 232.3 $ 259.9 ----------------- Deferred tax liability VOBA $(93.0) $(130.2) ----------------- Total deferred tax liability (93.0) $(130.2) ----------------- Total deferred tax asset, net $139.3 $ 129.7 =================
Deferred income taxes reflect the net tax effects of temporary differences between the financial reporting and tax bases of assets and liabilities. These temporary differences result in taxable or deductible amounts in future years and are measured using the tax rates and laws that will be in effect when such differences are expected to reverse. Gross deferred income tax assets totaled approximately $267.1 million and $277.5 million at December 31, 2008 and 2007, respectively. Gross deferred income tax liabilities totaled approximately $93.0 million and $130.2 million at December 31, 2008 and 2007, respectively. The Company has recorded a valuation allowance against tax benefits from capital losses and tax credit carryforwards. A portion of the valuation allowance against the December 31, 2008 deferred tax asset is due to limitations under Section 382 of the Internal Revenue Code against certain tax benefits. Under SFAS No. 141(R), any future adjustments to deferred tax assets and liabilities established at the inception of the Transaction would be recognized through the Company's Consolidated Statements of Income (including the realization of tax benefits currently offset by valuation allowance). During 2008, an additional valuation allowance of $17.2 million was posted to reduce the tax benefit from realized capital losses incurred in 2008. During 2007, a reduction of $14.0 million was made to the valuation allowance. Of this amount, $1.7 million relates to foreign tax credits generated in 2006 and thus reduces income tax expense. In management's judgment, the remaining gross deferred tax asset will more likely than not be realized through reductions of future taxes, except as otherwise noted. This conclusion is based primarily on a review of expected taxable income and considers all available evidence, both positive and negative. At December 31, 2008, there are available foreign tax credit carryforwards of $9.7 million which will expire beginning in 2013. At December 31, 2008, the Company has net operating loss carryforwards of $247.0 million and capital loss carryforwards of $50.7 million, which begin to expire in 2016 and 2010, respectively. All tax credits, net operating loss carryforwards, and capital loss carryforwards generated prior to 2006 are subject to annual limitations on utilization. This includes $6.1 million of foreign tax credits and $143.9 million of net operating and capital loss carryforwards. The Company's federal income tax returns are routinely audited by the IRS, and when appropriate, provisions are made in the financial statements in anticipation of the results of these audits. THG has agreed to indemnify the Company and Goldman Sachs with respect to tax liabilities for periods before the acquisition as provided in the Transaction. However, the tax attributes carried over from THG are not guaranteed under the Transaction, and accordingly, such attributes may be 31 COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (A WHOLLY-OWNED SUBSIDIARY OF THE GOLDMAN SACHS GROUP, INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2008 10. FEDERAL INCOME TAXES (CONTINUED) adjusted in the future. During 2008, the Company increased acquired pre-acquisition operating loss by approximately $5.6 million. In 2007, the pre-acquisition operating loss was decreased by $7.5 million. The 2008 and 2007 adjustments are the result of IRS audit adjustments to THG. As a result of the 2008 and 2007 adjustments, the Company has reduced the gross net operating loss carryforward by $5.4 million. No post-acquisition periods are currently under audit. In June 2006, the FASB issued FIN No. 48 (See Note 3N - New Accounting and Adopted Pronouncements for further discussion around FIN No. 48). The Company adopted the provisions of FIN No. 48 as of January 1, 2007. The Company believes it does not have any tax positions that fail to meet the more likely than not standard and does not expect any material adverse effects from audit examination, including interest and penalties. The Company believes that its income tax filing positions and deductions will be sustained on audit and does not anticipate any adjustments that will result in a material adverse effect on the Company's financial condition, results of operations, or cash flow. Therefore, no reserves for uncertain income tax positions have been recorded pursuant to FIN 48. The dividends received deduction claimed by the Company is generated by the separate accounts of variable annuity contracts. In Revenue Ruling 2007-61, the IRS issued notice that it intends to publish regulations dealing with the computation of separate account dividends received deductions. The impact and timing of such regulations is unknown at this time, but it is possible that the regulations could reduce the amount of dividends received deduction tax benefit that the Company claims. It is anticipated that any regulations would have a public comment period and would be effective prospectively. The Company will file a stand-alone tax return for the period January 1, 2008 through December 31, 2008. The Company's tax return is ineligible for consolidation into Goldman Sachs until fiscal year end 2012. Any net operating loss carryforwards, capital loss carryforwards or foreign tax credits from prior to the acquisition date of December 30, 2005 can only be used against the income of the Company. 11. DIVIDEND RESTRICTIONS Massachusetts has enacted laws governing the payment of dividends to shareholders by insurers. Massachusetts laws affect the dividend paying ability of the Company. Massachusetts' statute limits the dividends a life insurer may pay in any twelve month period, without the prior permission of the Massachusetts Commissioner of Insurance (the "Commissioner"), to the greater of (i) 10% of its statutory policyholder surplus as of the preceding December 31 or (ii) the individual company's statutory net gain from operations for the preceding calendar year. In addition, under Massachusetts law, no domestic insurer may pay a dividend or make any distribution to its shareholders from other than unassigned funds unless the Commissioner has approved such dividend or distribution. The Company must meet minimum capital and surplus requirements under a risk-based capital ("RBC") formula. RBC is the standard measurement of an insurance company's required capital on a statutory basis. It is based on a formula calculated by applying factors to various assets, premium and statutory reserve items. The formula takes into account the risk characteristics of the insurer, including asset risk, insurance risk, interest rate risk and business risk. Regulatory action is tied to the amount of a company's surplus deficit under the RBC formula. Goldman Sachs has agreed with the Commissioner to continue the previous THG commitment to maintain total adjusted capital levels at a minimum of 200% of the Company's Company Action Level ("CAL") as determined under the risk-based capital formula, which was $82.7 million at December 31, 2008. Total adjusted capital for life insurance companies is defined as statutory capital and surplus, plus asset valuation reserve, plus 50% of dividends apportioned for payment and was $394.0 million at December 31, 2008 for the Company. There were no dividends declared by the Company to Goldman Sachs in 2008 and 2007. 12. VALUE OF BUSINESS ACQUIRED VOBA represents the present value of future profits embedded in the acquired contracts related to the Transaction. VOBA is determined by estimating the net present value of future cash flows expected to result from contracts in force at the date of the 32 COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (A WHOLLY-OWNED SUBSIDIARY OF THE GOLDMAN SACHS GROUP, INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2008 12. VALUE OF BUSINESS ACQUIRED (CONTINUED) Transaction. Future positive cash flows include fees and other charges assessed to the contracts for as long as they remain in force as well as fees collected upon surrender, while future negative cash flows include costs to administer the contracts, and benefit payments including payments under the GMDB provisions of the contracts. VOBA will be amortized over the expected life of the contracts in proportion to estimated gross profits arising principally from investment results, mortality and expense margins, and surrender charges based upon historical and estimated future experience, which is updated periodically. The changes in VOBA for the years ended December 31 were as follows:
(IN MILLIONS) 2008 2007 --------------- Balance at January 1 $220.4 $274.4 Amount capitalized due to purchase accounting (1) (8.6) (5.8) Amortized to expense during the year (80.7) (49.1) Adjustment for unrealized investment losses during the year 15.4 0.9 --------------- Balance at December 31 $146.5 $220.4 ===============
(1) Refer to Footnote 4 - Purchase Accounting for further discussion on purchase accounting On November 1, 2006, VOBA of $1.9 million attributable to the future profits of the deferred fixed annuity business was written off following reinsurance of the block to Columbia (see Note 13 - Reinsurance). Estimated future amortization of VOBA as of December 31, 2008 is as follows: (In millions) 2009 $ 23.4 2010 18.7 2011 15.0 2012 12.0 2013 10.1 ------ 2014 and thereafter 67.3 ------ Total $146.5 ======
13. REINSURANCE The Company seeks to diversify risk and limit its overall financial exposure by reinsuring certain levels of risk in various areas of exposure through acquisition and cessions with other insurance companies or reinsurers. In addition, consistent with the overall business strategy, the Company assumes certain policy risks written by other insurance companies on a coinsurance and modified coinsurance basis. Under a coinsurance arrangement, depending upon the terms of the contract, the reinsurer may share in the risk of loss due to mortality or morbidity, lapses, and the investment risk, if any, inherent in the underlying policy. Modified coinsurance differs from coinsurance in that the assets supporting the reserves are retained by the ceding company while the risk is transferred to the reinsurer. On January 1, 2008, the Company assumption reinsured the book of business from FML comprising primarily whole, term and universal life insurance policies. FML was in rehabilitation under the governance of the State of Pennsylvania, and the Company has no responsibility for the dissolution or future state of FML and any of its remaining legal entity obligations or liabilities. As part of this transaction, the Company paid a ceding commission of $4.3 million and assumed general account reserves of $0.7 billion. During the first quarter of 2008, the Company effectively ceded the entire FML block of business to Columbia. In consideration of Columbia's assumption of the business, the Company received a ceding commission of approximately $4.1 million. 33 COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (A WHOLLY-OWNED SUBSIDIARY OF THE GOLDMAN SACHS GROUP, INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2008 13. REINSURANCE (CONTINUED) On May 25, 2007 the Company entered into an agreement, retroactive to January 1, 2007, to assume 8% of the variable annuity products sold by Pacific Life in 2007. The base annuities were assumed on a modified coinsurance basis and the benefits provided via riders were assumed on a coinsurance basis. General account reserves of $58.2 million were assumed. In February 2008, the contract was recaptured retroactive to January 1, 2008. Certain derivative options hedging the rider benefits of this treaty were disposed. The recapture of the Pacific Life block resulted in a reinsurance recapture fee of $25.5 million with a subsequent reduction in policyholder liabilities and DAC. Due to the accounting treatment for acquiring this block of business, the recapture fee was bifurcated between the May 2007 and post May 2007 components, with the latter portion recognized through the Consolidated Statements of Income. As of November 1, 2006, the Company entered into a coinsurance agreement to cede 100% of its deferred fixed annuity insurance business to Columbia. The Company ceded reserves of $53.9 million. In consideration of Columbia's assumption of $53.9 million in reserves, the Company received a $1.9 million ceding commission. As of December 31, 2008 the Company ceded reserves of $40.2 million. On July, 1, 2006, the Company assumed, on a modified coinsurance basis 100% of the variable annuity business of CILAC. As of April 1, 2007 CILAC was merged into Protective. General account reserves of $1.3 billion were assumed. In consideration, the Company paid an $85.0 million ceding commission. The Company has evaluated the applicability of DIG B36 to its modified coinsurance agreement with Protective. An embedded derivative requiring bifurcation has been identified and liabilities of $56.3 million and $22.8 million as of December, 31 2008 and December, 31 2007, respectively, are reflected on the balance sheet. As of December 31, 2008, the assumed reserves under this contract were $1.2 billion. On December 30, 2005 subsequent to the Transaction, the Company assumed on a coinsurance basis 100% of the General Account liabilities related to FAFLIC's Variable Annuity and Variable Life policies. In consideration of the Company's assumption of these liabilities, FAFLIC transferred to the Company the statutory assets related to this block of business and received from the Company an $8.6 million ceding commission. The assumed reserves were approximately $99.3 million and $83.7 million as of December 31, 2008 and December 31, 2007 respectively. The Company also assumed on a modified coinsurance basis, essentially all of the Separate Account liabilities of FAFLIC. In addition, the MVA product was assumed on a modified coinsurance basis. In accordance with SOP 03-1, MVA liabilities are included as general account liabilities. Reserve liabilities of $1.3 million as of December 31, 2008 have been included in policy liabilities and a reinsurance recoverable of $1.3 million recognized. Reserve liabilities of $2.2 million as of December 31, 2007 have been included in policy liabilities and a reinsurance recoverable of $2.2 million recognized. The December 30, 2005 value of the FAFLIC MVA was recognized in the 2006 adjustments to purchase accounting included within other assets and future policy benefits (See Note 4 - Purchase Accounting). The Company has evaluated the applicability of DIG B36 to its modified coinsurance arrangement to reinsure FAFLIC MVA and has determined that an embedded derivative requiring bifurcation does exist but is not considered to be material. Prior to the Transaction, the Company entered into other reinsurance treaties including the cession of non core traditional life and health business the largest being a universal life insurance treaty representing reinsurance recoverables of $451.6 million and $475.5 million at December 31, 2008 and 2007, respectively. The Company determines the appropriate amount of reinsurance based on evaluation of the risks accepted and on market conditions (including the availability and pricing of reinsurance). The Company evaluates the financial condition of its reinsurers and monitors concentrations of credit risk. Based on its review of its reinsurers' financial statements and reputations in the reinsurance marketplace, the Company believes that its counterparties are financially sound. As of December 31, 2008, the Company's only concentrations of credit risk greater than 10% of the Company's stockholder's equity related to the FML block of business of approximately $0.7 billion reinsured with Columbia. 34 COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (A WHOLLY-OWNED SUBSIDIARY OF THE GOLDMAN SACHS GROUP, INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2008 13. REINSURANCE (CONTINUED) The effects of reinsurance were as follows:
FOR THE YEARS ENDED DECEMBER 31, 2008 2007 2006 - ----------------------------------------------------------------------------- (IN MILLIONS) Life and accident and health insurance premiums: Direct $ 16.9 $ 18.3 $ 19.4 Assumed -- -- -- Ceded (16.9) (18.3) (19.4) ------------------------- Net premiums $ -- $ -- $ -- ========================= Life and accident and health insurance and other individual policy benefits, claims, losses and loss adjustment expenses: Direct $ 581.4 $100.8 $109.2 Assumed 44.1 60.6 34.4 Ceded (328.4) (19.7) (38.4) ------------------------- Net policy benefits, claims, losses and loss adjustment expenses $ 297.1 $141.7 $105.2 =========================
14. DEFERRED POLICY ACQUISITION COSTS The following reflects the changes to the deferred policy acquisition asset:
FOR THE YEARS ENDED DECEMBER 31, 2008 2007 2006 - ----------------------------------------------------------------------------- (In millions) Balance at beginning of year $153.3 $103.6 $ -- Block acquisition -- 24.2 106.7 Reinsurance treaty recapture (41.3) -- -- Acquisition expenses deferred 4.4 28.8 3.3 Amortized to expense during the year 1.9 (3.3) (6.4) ------------------------ Balance at end of year $118.3 $153.3 $103.6 ========================
In February, 2008 the Pacific Life block was recaptured retroactive to January 1, 2008. The recapture of the Pacific Life block resulted in a $41.3 million reduction in the DAC asset. In January 2008, the Company acquired a block of business from FML and ceded essentially all of the business to Columbia. As a result of the cession, DAC attributed to this block was zero at December 31, 2008. In 2007, the Company acquired 8% of the 2007 variable annuity business of Pacific Life through a modified coinsurance agreement and a block of variable life insurance from Protective through a modified coinsurance agreement, resulting in initial DAC balances of $18.2 million and $6.0 million respectively. In 2006, the Company acquired through a modified coinsurance agreement the variable annuity business of CILAC, whose book of business was subsequently merged into Protective during 2007. This agreement resulted in an initial DAC asset of $106.7 million at inception of the contract. 35 COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (A WHOLLY-OWNED SUBSIDIARY OF THE GOLDMAN SACHS GROUP, INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2008 15. LIABILITIES FOR OUTSTANDING CLAIMS, LOSSES AND LOSS ADJUSTMENT EXPENSES The Company regularly updates its reserve estimates as new information becomes available and further events occur which may impact the resolution of unsettled claims. Reserve adjustments are reflected in results of operations within policy benefits, claims, losses and loss adjustment expenses. Often these adjustments are recognized in periods subsequent to the period in which the underlying policy was written and loss event occurred. These types of subsequent adjustments are described as "prior year reserve development". Such development can be either favorable or unfavorable to the Company's financial results and may vary by line of business. The liability for future policy benefits and outstanding claims and claims adjustment expenses, excluding the effect of reinsurance, related to the Company's accident and health business was $216.0 million and $228.0 million at December 31, 2008 and 2007, respectively. This business consists of the Company's exited individual health businesses. Reinsurance recoverables related to this business were $223.0 million and $227.9 million at December 31, 2008 and 2007 respectively. 16. COMPOSITION OF OTHER ASSETS, LIABILITIES, INCOME AND EXPENSES Other assets consist of the following:
DECEMBER 31, 2008 2007 - ------------------------------------------------------------ (In millions) State licenses (intangible asset) $ 2.6 $ 2.6 Accounts receivable 3.0 5.8 Deferred sales inducements 0.5 8.9 Deferred losses on modco 57.2 -- Miscellaneous assets 11.4 14.6 ------------- Total other assets $74.7 $31.9 =============
Accrued expenses and other liabilities consist of the following:
DECEMBER 31, 2008 2007 - ------------------------------------------------------------ (In millions) Payables in process $19.3 $26.9 Policyholder liabilities 5.8 11.9 Accrued expenses 4.8 8.9 Miscellaneous liabilities 16.6 8.7 ------------- Total accrued expenses and other liabilities $46.5 $56.4 =============
Other income consists of the following:
DECEMBER 31, 2008 2007 2006 - -------------------------------------------------------------------- (In millions) Asset management fees $12.6 $17.4 $15.4 Miscellaneous income 9.0 2.5 1.3 --------------------- Total other income $21.6 $19.9 $16.7 =====================
Other operating expenses consist of the following:
DECEMBER 31, 2008 2007 2006 - -------------------------------------------------------------------- (In millions) Taxes, licenses and fees $ 0.3 $ 2.5 $ 3.2 Commission expense 12.5 21.3 19.5 Management and administrative fees 26.8 29.9 23.8 Salaries and benefits 8.7 7.9 5.1 Processing and operational services 2.1 1.8 12.9 Legal and auditing 4.8 3.5 1.3 Miscellaneous operating expenses 4.3 3.2 9.1 --------------------- Total other operating expenses $59.5 $70.1 $74.9 =====================
36 COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (A WHOLLY-OWNED SUBSIDIARY OF THE GOLDMAN SACHS GROUP, INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2008 17. COMMITMENTS On June 19, 2008, the Company signed a professional services agreement with LOGiQ(3) Solutions Corp. ("LOGiQ(3)"). LOGiQ(3) will manage certain aspects of the Company's reinsurance portfolio for a period not less than five years. The Company was allocated certain rental expenses by its parent, primarily for the building lease in Southborough, MA. Rental expenses for these operating leases amounted to $0.3 million and $0.3 million for 2008 and 2007, respectively. The Company does not have lease commitments for the Southborough, MA location. On April 19, 2007 the Company entered into a lease agreement for the Elgin, IL office. As of December 31, 2008, lease commitments relating to this lease were $35.1 thousand for 2009 to 2010 inclusive. The base rent is subject to adjustments for taxes, insurance premiums, water and utilities, heating and cooling and common area charges. Concurrent to the closing of the Transaction, the Company entered into an operational servicing agreement with Security Benefit Life Insurance Company ("Se2"), whereby Se2, as third party administrator, will provide all contract/policy administration for a period of not less than ten years. On October 31, 2007, the Company signed a third party administrator agreement with Transaction Applications Group, Inc. ("TAG") and an application service provider agreement with Professional Data Management Again, Inc ("PDMA"). Commencing January 1, 2008, TAG will act as third party administrator for the Company's whole life insurance, term life insurance and universal life insurance, utilizing a PDMA platform. As of December 31, 2008, the purchase commitments relating to agreements with Se2, TAG, PDMA and LOGiQ(3) were as follows: (in millions) 2009 $12.4 2010 11.7 2011 11.0 2012 10.4 2013 9.1 2014 and thereafter 18.1 ----- Total $72.7 =====
18. CONTINGENCIES REGULATORY AND INDUSTRY DEVELOPMENTS Unfavorable economic conditions may contribute to an increase in the number of insurance companies that are under regulatory supervision. This may result in an increase in mandatory assessments by state guaranty funds, or voluntary payments by solvent insurance companies to cover losses to policyholders of insolvent or rehabilitated companies. Mandatory assessments, which are subject to statutory limits, can be partially recovered through a reduction in future premium taxes in some states. The Company is involved from time to time in judicial, regulatory and arbitration proceedings concerning matters arising in connection with the conduct of its business. THG has agreed to indemnify the Company and Goldman Sachs with respect to certain of these matters as provided in the Stock Purchase Agreement. Management believes, based on currently available information, that the results of such proceedings, in the aggregate, will not have a material adverse effect on the Company's financial condition. Given the inherent difficulty of predicting the outcome of the Company's litigation and regulatory matters, particularly in cases or proceeding in which substantial or indeterminate damages or fines are sought, the Company cannot estimate losses or ranges of losses for cases or proceedings where there is only a reasonable possibility that a loss may be incurred. However, the Company believes that at the present time there are no pending or threatened lawsuits that are reasonably likely to have a material adverse effect on the its consolidated financial position or results of operations. In 1997, a lawsuit on behalf of a putative class was instituted against the Company alleging fraud, unfair or deceptive acts, and breach of contract, misrepresentation, and related claims in the sale of life insurance policies. In November 1998, the Company and the plaintiffs entered into a settlement and in May 1999, the Federal District Court in Worcester, Massachusetts approved the settlement and certified the class for this purpose. In 2007, the Company released $0.4 million in liabilities related to this litigation representing the remaining expenses of its obligation under the settlement. 37 COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (A WHOLLY-OWNED SUBSIDIARY OF THE GOLDMAN SACHS GROUP, INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2008 18. CONTINGENCIES (CONTINUED) LITIGATION (CONTINUED) On July 24, 2002, an action was commenced in the United States District Court for the Northern District of Illinois, Eastern Division. The Plaintiffs, who purchased two variable annuities, were subsequently identified as engaging in frequent transfers of significant sums between sub-accounts that in the Company's opinion constituted "market timing," and were subject to restrictions upon such trading that the Company imposed in December 2001. Plaintiffs allege that such restrictions constituted a breach of the terms of the annuity contracts. In December 2006, a jury returned a verdict of $1.1 million in favor of the plaintiffs; both parties have appealed. In February 2008, the Court of Appeals vacated the $1.1 million verdict. In 2006, THG reached an agreement with the SEC regarding its investigation related to "market timing," "revenue sharing," and other matters, including the marketing support and administrative services arrangements entered into by VeraVest Investments, Inc. in connection with the distribution of life insurance and annuity products issued by unaffiliated insurance companies. The total amount of the settlement is $5.0 million. The Company's share of this settlement was $2.8 million, of which $2.1 million was paid during 2006 and $0.7 million was paid during 2007 representing all outstanding liabilities under this settlement. In addition, the Company is involved, from time to time, in investigations and proceedings by governmental and self-regulatory agencies, which may currently include investigations into such matters as "market timing" in sub-accounts of variable annuity and life products, "revenue sharing" and other matters, and regulatory inquiries into compensation arrangements with brokers and agents. A number of companies have announced settlements of enforcement actions related to such matters with various regulatory agencies, including the SEC, which have included a range of monetary penalties and restitution. The Company is not currently involved in any such investigations or proceedings. 19. RELATED PARTY TRANSACTIONS On December 22, 2008, the Company received a capital contribution of $50.0 million from Goldman Sachs. The additional capital will be used to support future reinsurance transactions. On December 19, 2008, the Company entered into a related party transaction with its affiliate Goldman Sachs & Co ("GSCO") whereby the Company purchased $85.0 million in mortgage back securities utilizing GSCO as the purchasing agent. These assets are included in Fixed Maturities within the Consolidated Balance Sheets. In 2007, the Company signed a distribution and service agreement with its affiliate, Epoch, to serve as principal underwriter and common remitter for certain variable annuity products issued by the Company and its separate accounts. This resulted in expense of $0.2 million and $0.1 million for 2008 and 2007, respectively, for these services. The Company performs certain administrative services on Epoch's behalf. No income was generated for the year ended December 31, 2008 from this agreement. The Company has a management services agreement with its affiliate, GSCO. Under this service agreement, GSCO provides support to the Company in administrative, legal, compliance, technology, operations, financial reporting, human resources, risk management and other areas, and the Company is allocated costs for services received. GSCO charged the Company approximately $3.1 million, $3.0 million and $3.8 million in 2008, 2007 and 2006 respectively, for these services. These amounts are shown within Other operating expenses in the accompanying Consolidated Statements of Income. In 2005, the Company entered into several derivative transactions with its affiliate, Goldman Sachs International ("GSI"). These derivative positions resulted in income of $2.4 million and $10.2 million, and expense of $47.4 million, for 2008, 2007 and 2006, respectively, due to mark to market of the positions. During 2008, the Company entered into a derivative transaction with its affiliate, GSCO, which resulted in income of $13.2 million for 2008. In 2007, the Company entered into several derivative transactions with its affiliate, Goldman Sachs Financial Markets L.L.C ("GSFM"), which resulted in income of $2.6 million and $9.5 million for 2008 and 2007 respectively. The service agreement entered into with GSAM, an affiliate organization that provides investment management services, generated expense of $2.3 million, $2.6 million, and $2.1 million in 2008, 2007 and 2006, respectively. As part of the variable products in the separate account, the Company offers underlying Goldman Sachs Variable Investment Trust funds. Management fees are paid directly to GSAM and certain of these distribution and administration fees are passed to the Company resulting in revenue of $6.9 million, $6.9 million and $7.0 million for the years ended December 31, 2008, 2007 and 2006, respectively. 38 COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (A WHOLLY-OWNED SUBSIDIARY OF THE GOLDMAN SACHS GROUP, INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2008 19. RELATED PARTY TRANSACTIONS (CONTINUED) As of January 1, 2008, the Company reinsured under an assumption agreement the book of business from FML comprising primarily whole, term and universal life insurance policies. As part of this transaction, the Company paid a ceding commission of $4.3 million and assumed general account reserves of $0.7 billion. During the first quarter of 2008, the Company effectively ceded the entire FML block of business to Columbia. In consideration of Columbia's assumption of the business, the Company received a ceding commission of approximately $4.1 million. As of November 1, 2006, the Company entered into a coinsurance agreement to cede 100% of its deferred fixed annuity insurance business to its South Carolina domiciled affiliate, Columbia. In consideration of Columbia's assumption of the liabilities, the Company received a $1.9 million ceding commission. As of December 31, 2008 and December 31, 2007 the Company ceded reserves of $40.2 million and $46.7 million. In 2006, the employees of the Company became participants in The Goldman Sachs Amended and Restated Stock Incentive Plan (the "SIP"). Pursuant to the SIP, Goldman Sachs issued restricted stock units (RSUs) to certain employees of the Company as part of their overall compensation for 2006. Unvested RSUs require future service as a condition of delivery of the underlying shares of Goldman Sachs' common stock generally over a three year period. Delivery of the underlying shares of common stock is also conditioned on the grantee's satisfying certain other requirements as outlined in the award agreement. The Company incurred expenses of $0.3 million, $0.7 million and $1.5 million relating to RSUs for the years ended December 31, 2008, December 31, 2007 and December 31, 2006, respectively. 20. STATUTORY FINANCIAL INFORMATION The Company is required to file annual statements with state regulatory authorities prepared on an accounting basis prescribed or permitted by such authorities (statutory basis), as codified by the National Association of Insurance Commissioners. Statutory surplus differs from shareholders' equity reported in accordance with generally accepted accounting principles primarily because policy acquisition costs are expensed when incurred. Statutory accounting principles require asset valuation and interest maintenance reserves, postretirement benefit costs are based on different assumptions and reflect a different method of adoption, life insurance reserves are based on different assumptions and the recognition of deferred tax assets is based on different recoverability assumptions. Statutory net (loss) income and surplus are as follows:
(UNAUDITED) 2008 2007 2006 - -------------------------------------------------------------------------- (In millions) Statutory Net (Loss) Income - Combined Life and Health Companies $(247.1) $ 58.2 $(35.5) Statutory Shareholders' Surplus - Combined Life and Health Companies $ 390.6 $461.4 $368.9
21. SUBSEQUENT EVENTS Effective January 2, 2009, the Company acquired FAFLIC, a subsidiary of THG, comprising primarily traditional life insurance products, group retirement products and a block of Guaranteed Investment Contracts. FAFLIC will be a wholly owned subsidiary of the Company. As part of this transaction, the Company paid a purchase price of $105.8 million and assumed general account reserves of $1.3 billion. 39 COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY (A WHOLLY-OWNED SUBSIDIARY OF THE GOLDMAN SACHS GROUP, INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2008 21. SUBSEQUENT EVENTS (CONTINUED) During the second quarter, 2009, the Company will assume via coinsurance the traditional life and fixed annuity blocks of six subsidiaries of American Exchange Life Insurance Company ("American Exchange Life"). American Exchange Life is a wholly owned subsidiary of Universal American Corporation. Under this joint coinsurance agreement, the Company will assume $450.0 million of reserves and pay the collective cedants approximately $78.0 million in ceding commission. In addition, the Company's wholly owned subsidiary, FAFLIC, will assume business from a seventh subsidiary of American Exchange Life, assuming $125.0 million in reserves and incurring an additional ceding commission of approximately $7.0 million. On March 25, 2009, the Company received a capital contribution of $25.0 million from Goldman Sachs. The additional capital will be used to support future reinsurance transactions. On March 30, 2009, the Company entered into a coinsurance and modified coinsurance agreement with The Lincoln National Life Insurance Company ("Lincoln National") to reinsure an in-force block of universal life and variable universal life insurance policies. Under the coinsurance and modified coinsurance agreement, the Company will assume $1.5 billion in reserves and pay the cedant approximately $224.0 million in ceding commission. On March 31, 2009, the Company received a capital contribution of $225.0 million from Goldman Sachs. The additional capital will be used to support the reinsurance transaction with Lincoln National. 40 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors of Commonwealth Annuity and Life Insurance Company and the Contract Owners of Commonwealth Select Separate Account of Commonwealth Annuity and Life Insurance Company: In our opinion, the accompanying statements of assets and liabilities and the related statements of operations and of changes in net assets present fairly, in all material respects, the financial position of each of the sub-accounts constituting Commonwealth Select Separate Account of Commonwealth Annuity and Life Insurance Company at December 31, 2008, the results of each of their operations for the year then ended and the changes in each of their net assets for each of the two years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of Commonwealth Annuity and Life Insurance Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2008 by correspondence with the mutual funds, provide a reasonable basis for our opinion. /s/ PricewaterhouseCoopers LLP Hartford, Connecticut April 8, 2009 COMMONWEALTH SELECT SEPARATE ACCOUNT STATEMENTS OF ASSETS AND LIABILITIES DECEMBER 31, 2008
AIM V.I. AIM V.I. AIM V.I. AIM V.I. BASIC CAPITAL CAPITAL CORE AIM V.I. VALUE APPRECIATION DEVELOPMENT EQUITY DYNAMICS FUND FUND FUND FUND FUND SERIES II SERIES I SERIES II SERIES I SERIES I SHARES SHARES SHARES SHARES SHARES ---------- ------------ ----------- ---------- ---------- ASSETS: Investments in shares of the Underlying Funds, at market value $2,676,090 $4,648,884 $ 606,685 $7,775,693 $1,441,417 ---------- ---------- ---------- ---------- ---------- Total assets 2,676,090 4,648,884 606,685 7,775,693 1,441,417 LIABILITIES: -- -- -- -- -- ---------- ---------- ---------- ---------- ---------- Net assets $2,676,090 $4,648,884 $ 606,685 $7,775,693 $1,441,417 ========== ========== ========== ========== ========== Net asset distribution by category: Commonwealth Select Resource, Commonwealth Select Resource II, Commonwealth Select Charter and Commonwealth Select Reward $2,120,811 $3,449,229 $ 486,134 $6,013,531 $1,122,957 Commonwealth Select Acclaim 553,927 1,199,655 120,551 1,762,162 318,460 Commonwealth Optim-L 1,352 -- -- -- -- ---------- ---------- ---------- ---------- ---------- $2,676,090 $4,648,884 $ 606,685 $7,775,693 $1,441,417 ========== ========== ========== ========== ========== Investments in shares of the Underlying Funds, at cost $6,034,645 $5,691,146 $1,153,579 $9,476,446 $1,774,493 Underlying Fund shares held 657,516 275,245 78,383 393,706 144,286 Units outstanding and net asset value per unit: Commonwealth Select Resource, Commonwealth Resource II, Commonwealth Select Charter and Commonwealth Select Reward: Units outstanding, December 31, 2008 3,549,363 7,152,427 617,632 9,684,982 2,733,160 Net asset value per unit, December 31, 2008 $ 0.597519 $ 0.482246 $ 0.787094 $ 0.620913 $ 0.410864 Commonwealth Select Acclaim: Units outstanding, December 31, 2008 923,941 2,286,245 152,645 2,659,237 659,698 Net asset value per unit, December 31, 2008 $ 0.599526 $ 0.524727 $ 0.789744 $ 0.662657 $ 0.482736 Commonwealth Optim-L: Units outstanding, December 31, 2008 1,791 -- -- -- -- Net asset value per unit, December 31, 2008 $ 0.754665 $ -- $ -- $ -- $ --
The accompanying notes are an integral part of these financial statements. SA-1 COMMONWEALTH SELECT SEPARATE ACCOUNT STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED) DECEMBER 31, 2008
ALLIANCE- ALLIANCE- AIM V.I. BERNSTEIN BERNSTEIN ALLIANCE- GLOBAL AIM V.I. VPS VPS BERNSTEIN VPS HEALTH CARE LARGE CAP GLOBAL GROWTH AND LARGE CAP FUND GROWTH FUND TECHNOLOGY INCOME GROWTH SERIES I SERIES I PORTFOLIO PORTFOLIO PORTFOLIO SHARES SHARES CLASS B CLASS B CLASS A ----------- ----------- ---------- ----------- ------------- ASSETS: Investments in shares of the Underlying Funds, at market value $3,640,100 $5,423,099 $ 683,713 $27,910,084 $12,139,062 ---------- ---------- ---------- ----------- ----------- Total assets 3,640,100 5,423,099 683,713 27,910,084 12,139,062 LIABILITIES: -- -- -- -- -- ---------- ---------- ---------- ----------- ----------- Net assets $3,640,100 $5,423,099 $ 683,713 $27,910,084 $12,139,062 ========== ========== ========== =========== =========== Net asset distribution by category: Commonwealth Select Resource, Commonwealth Select Resource II, Commonwealth Select Charter and Commonwealth Select Reward $2,672,126 $4,200,750 $ 577,914 $20,992,085 $12,139,062 Commonwealth Select Acclaim 967,974 1,222,349 105,799 6,917,999 -- Commonwealth Optim-L -- -- -- -- -- ---------- ---------- ---------- ----------- ----------- $3,640,100 $5,423,099 $ 683,713 $27,910,084 $12,139,062 ========== ========== ========== =========== =========== Investments in shares of the Underlying Funds, at cost $4,829,459 $6,948,515 $1,120,849 $45,931,610 $20,152,120 Underlying Fund shares held 291,909 554,509 64,078 2,151,895 657,231 Units outstanding and net asset value per unit: Commonwealth Select Resource, Commonwealth Resource II, Commonwealth Select Charter and Commonwealth Select Reward: Units outstanding, December 31, 2008 3,516,307 8,604,656 868,191 26,095,179 21,980,144 Net asset value per unit, December 31, 2008 $ 0.759924 $ 0.488195 $ 0.665653 $ 0.804443 $ 0.552274 Commonwealth Select Acclaim: Units outstanding, December 31, 2008 1,208,696 2,332,416 158,424 8,410,859 -- Net asset value per unit, December 31, 2008 $ 0.800842 $ 0.524070 $ 0.667821 $ 0.822508 $ -- Commonwealth Optim-L: Units outstanding, December 31, 2008 -- -- -- -- -- Net asset value per unit, December 31, 2008 $ -- $ -- $ -- $ -- $ --
The accompanying notes are an integral part of these financial statements. SA-2 COMMONWEALTH SELECT SEPARATE ACCOUNT STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED) DECEMBER 31, 2008
ALLIANCE- BERNSTEIN ALLIANCE- VPS BERNSTEIN VPS ALLIANCE- DWS LARGE CAP SMALL/MID BERNSTEIN VPS DREMAN DWS GROWTH CAP VALUE VALUE HIGH RETURN SMALL CAP PORTFOLIO PORTFOLIO PORTFOLIO EQUITY VIP INDEX VIP CLASS B CLASS B CLASS B CLASS A CLASS A ---------- ------------- ------------- ----------- ---------- ASSETS: Investments in shares of the Underlying Funds, at market value $5,002,887 $3,949,991 $3,121,145 $2,811,138 $4,566,167 ---------- ---------- ---------- ---------- ---------- Total assets 5,002,887 3,949,991 3,121,145 2,811,138 4,566,167 LIABILITIES: -- -- -- -- -- ---------- ---------- ---------- ---------- ---------- Net assets $5,002,887 $3,949,991 $3,121,145 $2,811,138 $4,566,167 ========== ========== ========== ========== ========== Net asset distribution by category: Commonwealth Select Resource, Commonwealth Select Resource II, Commonwealth Select Charter and Commonwealth Select Reward $2,064,151 $3,177,180 $2,260,633 $2,299,745 $3,513,229 Commonwealth Select Acclaim 2,938,231 772,811 860,512 511,393 1,052,938 Commonwealth Optim-L 505 -- -- -- -- ---------- ---------- ---------- ---------- ---------- $5,002,887 $3,949,991 $3,121,145 $2,811,138 $4,566,167 ========== ========== ========== ========== ========== Investments in shares of the Underlying Funds, at cost $6,478,753 $6,451,946 $5,493,363 $6,168,262 $7,029,325 Underlying Fund shares held 277,476 400,202 411,218 452,679 529,104 Units outstanding and net asset value per unit: Commonwealth Select Resource, Commonwealth Resource II, Commonwealth Select Charter and Commonwealth Select Reward: Units outstanding, December 31, 2008 3,560,490 3,139,413 2,781,869 3,067,780 3,613,845 Net asset value per unit, December 31, 2008 $ 0.579738 $ 1.012030 $ 0.812631 $ 0.749645 $ 0.972158 Commonwealth Select Acclaim: Units outstanding, December 31, 2008 5,659,619 761,069 1,055,321 668,482 1,032,051 Net asset value per unit, December 31, 2008 $ 0.519157 $ 1.015428 $ 0.815403 $ 0.765006 $ 1.020238 Commonwealth Optim-L: Units outstanding, December 31, 2008 558 -- -- -- -- Net asset value per unit, December 31, 2008 $ 0.905852 $ -- $ -- $ -- $ --
The accompanying notes are an integral part of these financial statements. SA-3 COMMONWEALTH SELECT SEPARATE ACCOUNT STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED) DECEMBER 31, 2008
EATON EATON VANCE VT VANCE VT FIDELITY VIP DWS FLOATING- WORLDWIDE CONTRAFUND(R) TECHNOLOGY RATE HEALTH FIDELITY VIP PORTFOLIO VIP INCOME SCIENCES CONTRAFUND(R) SERVICE CLASS A FUND FUND PORTFOLIO CLASS 2 ---------- ----------- ---------- ------------- ------------- ASSETS: Investments in shares of the Underlying Funds, at market value $1,843,287 $10,628,348 $6,740,964 $24,592,127 $5,566,140 ---------- ----------- ---------- ----------- ---------- Total assets 1,843,287 10,628,348 6,740,964 24,592,127 5,566,140 LIABILITIES: -- -- -- -- -- ---------- ----------- ---------- ----------- ---------- Net assets $1,843,287 $10,628,348 $6,740,964 $24,592,127 $5,566,140 ========== =========== ========== =========== ========== Net asset distribution by category: Commonwealth Select Resource, Commonwealth Select Resource II, Commonwealth Select Charter and Commonwealth Select Reward $1,304,911 $ 8,715,742 $5,416,774 $24,592,127 $ -- Commonwealth Select Acclaim 538,376 1,912,606 1,324,190 -- 5,564,203 Commonwealth Optim-L -- -- -- -- 1,937 ---------- ----------- ---------- ----------- ---------- $1,843,287 $10,628,348 $6,740,964 $24,592,127 $5,566,140 ========== =========== ========== =========== ========== Investments in shares of the Underlying Funds, at cost $2,748,505 $15,810,825 $6,700,168 $40,340,080 $9,260,056 Underlying Fund shares held 320,015 1,615,250 654,463 1,597,929 367,645 Units outstanding and net asset value per unit: Commonwealth Select Resource, Commonwealth Resource II, Commonwealth Select Charter and Commonwealth Select Reward: Units outstanding, December 31, 2008 4,803,012 11,126,029 5,085,681 27,351,024 -- Net asset value per unit, December 31, 2008 $ 0.271686 $ 0.783365 $ 1.065103 $ 0.899130 $ -- Commonwealth Select Acclaim: Units outstanding, December 31, 2008 1,649,968 2,431,708 1,238,373 -- 5,989,100 Net asset value per unit, December 31, 2008 $ 0.326295 $ 0.786528 $ 1.069298 $ -- $ 0.929055 Commonwealth Optim-L: Units outstanding, December 31, 2008 -- -- -- -- 1,686 Net asset value per unit, December 31, 2008 $ -- $ -- $ -- $ -- $ 1.148549
The accompanying notes are an integral part of these financial statements. SA-4 COMMONWEALTH SELECT SEPARATE ACCOUNT STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED) DECEMBER 31, 2008
FIDELITY VIP FIDELITY FIDELITY EQUITY- VIP VIP INCOME GROWTH FIDELITY VIP EQUITY- PORTFOLIO FIDELITY VIP PORTFOLIO GROWTH INCOME SERVICE GROWTH SERVICE & INCOME PORTFOLIO CLASS 2 PORTFOLIO CLASS 2 PORTFOLIO ----------- ----------- ------------ ---------- ------------ ASSETS: Investments in shares of the Underlying Funds, at market value $46,833,713 $ 6,356,353 $32,703,747 $2,310,688 $4,211,951 ----------- ----------- ----------- ---------- ---------- Total assets 46,833,713 6,356,353 32,703,747 2,310,688 4,211,951 LIABILITIES: -- -- -- -- -- ----------- ----------- ----------- ---------- ---------- Net assets $46,833,713 $ 6,356,353 $32,703,747 $2,310,688 $4,211,951 =========== =========== =========== ========== ========== Net asset distribution by category: Commonwealth Select Resource, Commonwealth Select Resource II, Commonwealth Select Charter and Commonwealth Select Reward $46,833,713 $ -- $32,703,747 $ -- $4,211,951 Commonwealth Select Acclaim -- 6,355,552 -- 2,309,832 -- Commonwealth Optim-L -- 801 -- 856 -- ----------- ----------- ----------- ---------- ---------- $46,833,713 $ 6,356,353 $32,703,747 $2,310,688 $4,211,951 =========== =========== =========== ========== ========== Investments in shares of the Underlying Funds, at cost $81,606,453 $10,941,715 $56,109,024 $3,339,793 $6,612,587 Underlying Fund shares held 3,553,392 488,950 1,389,874 99,129 479,175 Units outstanding and net asset value per unit: Commonwealth Select Resource, Commonwealth Resource II, Commonwealth Select Charter and Commonwealth Select Reward: Units outstanding, December 31, 2008 29,479,621 -- 21,945,922 -- 6,091,018 Net asset value per unit, December 31, 2008 $ 1.588681 $ -- $ 1.490197 $ -- $ 0.691502 Commonwealth Select Acclaim: Units outstanding, December 31, 2008 -- 8,153,013 -- 4,543,182 -- Net asset value per unit, December 31, 2008 $ -- $ 0.779534 $ -- $ 0.508417 $ -- Commonwealth Optim-L: Units outstanding, December 31, 2008 -- 839 -- 938 -- Net asset value per unit, December 31, 2008 $ -- $ 0.954826 $ -- $ 0.912899 $ --
The accompanying notes are an integral part of these financial statements. SA-5 COMMONWEALTH SELECT SEPARATE ACCOUNT STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED) DECEMBER 31, 2008
FIDELITY VIP GROWTH & FIDELITY VIP FIDELITY VIP INCOME FIDELITY HIGH INCOME MID CAP PORTFOLIO VIP PORTFOLIO FIDELITY VIP PORTFOLIO SERVICE HIGH INCOME SERVICE MID CAP SERVICE CLASS 2 PORTFOLIO CLASS 2 PORTFOLIO CLASS 2 ---------- ----------- ------------ ------------ ------------ ASSETS: Investments in shares of the Underlying Funds, at market value $ 963,468 $27,444,554 $4,704,015 $21,560,169 $4,638,248 ---------- ----------- ---------- ----------- ---------- Total assets 963,468 27,444,554 4,704,015 21,560,169 4,638,248 LIABILITIES: -- -- -- -- -- ---------- ----------- ---------- ----------- ---------- Net assets $ 963,468 $27,444,554 $4,704,015 $21,560,169 $4,638,248 ========== =========== ========== =========== ========== Net asset distribution by category: Commonwealth Select Resource, Commonwealth Select Resource II, Commonwealth Select Charter and Commonwealth Select Reward $ -- $27,444,554 $ -- $21,560,169 $ -- Commonwealth Select Acclaim 963,468 -- 4,704,015 -- 4,636,990 Commonwealth Optim-L -- -- -- -- 1,258 ---------- ----------- ---------- ----------- ---------- $ 963,468 $27,444,554 $4,704,015 $21,560,169 $4,638,248 ========== =========== ========== =========== ========== Investments in shares of the Underlying Funds, at cost $1,406,703 $42,923,660 $6,386,270 $30,612,551 $6,786,524 Underlying Fund shares held 111,384 6,930,443 1,209,258 1,169,841 255,974 Units outstanding and net asset value per unit: Commonwealth Select Resource, Commonwealth Resource II, Commonwealth Select Charter and Commonwealth Select Reward: Units outstanding, December 31, 2008 -- 24,892,906 -- 16,357,055 -- Net asset value per unit, December 31, 2008 $ -- $ 1.102505 $ -- $ 1.318096 $ -- Commonwealth Select Acclaim: Units outstanding, December 31, 2008 1,390,222 -- 4,951,762 -- 3,489,920 Net asset value per unit, December 31, 2008 $ 0.693032 $ -- $ 0.949968 $ -- $ 1.328681 Commonwealth Optim-L: Units outstanding, December 31, 2008 -- -- -- -- 894 Net asset value per unit, December 31, 2008 $ -- $ -- $ -- $ -- $ 1.407220
The accompanying notes are an integral part of these financial statements. SA-6 COMMONWEALTH SELECT SEPARATE ACCOUNT STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED) DECEMBER 31, 2008
FT VIP FT VIP FT VIP FIDELITY VIP FRANKLIN FRANKLIN FRANKLIN FT VIP VALUE LARGE CAP SMALL CAP SMALL-MID MUTUAL STRATEGIES GROWTH VALUE CAP GROWTH SHARES PORTFOLIO SECURITIES SECURITIES SECURITIES SECURITIES SERVICE FUND FUND FUND FUND CLASS 2 CLASS 2 CLASS 2 CLASS 2 CLASS 2 ------------ ---------- ---------- ----------- ----------- ASSETS: Investments in shares of the Underlying Funds, at market value $2,228,809 $2,398,524 $6,174,715 $ 7,658,287 $23,225,495 ---------- ---------- ---------- ----------- ----------- Total assets 2,228,809 2,398,524 6,174,715 7,658,287 23,225,495 LIABILITIES: -- -- -- -- -- ---------- ---------- ---------- ----------- ----------- Net assets $2,228,809 $2,398,524 $6,174,715 $ 7,658,287 $23,225,495 ========== ========== ========== =========== =========== Net asset distribution by category: Commonwealth Select Resource, Commonwealth Select Resource II, Commonwealth Select Charter and Commonwealth Select Reward $1,801,773 $2,125,886 $4,928,962 $ 6,153,040 $18,917,796 Commonwealth Select Acclaim 427,036 272,638 1,245,317 1,505,247 4,307,340 Commonwealth Optim-L -- -- 436 -- 359 ---------- ---------- ---------- ----------- ----------- $2,228,809 $2,398,524 $6,174,715 $ 7,658,287 $23,225,495 ========== ========== ========== =========== =========== Investments in shares of the Underlying Funds, at cost $5,063,559 $3,217,941 $8,947,345 $11,260,716 $31,638,313 Underlying Fund shares held 449,357 228,431 585,281 651,769 1,971,604 Units outstanding and net asset value per unit: Commonwealth Select Resource, Commonwealth Resource II, Commonwealth Select Charter and Commonwealth Select Reward: Units outstanding, December 31, 2008 2,395,732 2,643,907 4,967,239 11,858,951 17,600,160 Net asset value per unit, December 31, 2008 $ 0.752076 $ 0.804070 $ 0.992294 $ 0.518852 $ 1.074865 Commonwealth Select Acclaim: Units outstanding, December 31, 2008 565,929 337,934 1,250,757 2,562,004 4,007,730 Net asset value per unit, December 31, 2008 $ 0.754575 $ 0.806779 $ 0.995651 $ 0.587527 $ 1.074758 Commonwealth Optim-L: Units outstanding, December 31, 2008 -- -- 352 -- 339 Net asset value per unit, December 31, 2008 $ -- $ -- $ 1.238446 $ -- $ 1.059565
The accompanying notes are an integral part of these financial statements. SA-7 COMMONWEALTH SELECT SEPARATE ACCOUNT STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED) DECEMBER 31, 2008
FT VIP GOLDMAN GOLDMAN GOLDMAN GOLDMAN TEMPLETON SACHS VIT SACHS VIT SACHS VIT SACHS VIT FOREIGN CAPITAL CORE FIXED EQUITY GOVERNMENT SECURITIES GROWTH FUND INCOME FUND INDEX FUND INCOME FUND FUND SERVICE SERVICE SERVICE SERVICE CLASS 2 SHARES SHARES SHARES SHARES ----------- ----------- ------------ ----------- ----------- ASSETS: Investments in shares of the Underlying Funds, at market value $ 9,854,394 $54,059,041 $ 85,977,868 $50,895,654 $32,698,713 ----------- ----------- ------------ ----------- ----------- Total assets 9,854,394 54,059,041 85,977,868 50,895,654 32,698,713 LIABILITIES: -- -- -- -- -- ----------- ----------- ------------ ----------- ----------- Net assets $ 9,854,394 $54,059,041 $ 85,977,868 $50,895,654 $32,698,713 =========== =========== ============ =========== =========== Net asset distribution by category: Commonwealth Select Resource, Commonwealth Select Resource II, Commonwealth Select Charter and Commonwealth Select Reward $ 7,993,575 $51,447,133 $ 70,905,168 $46,177,266 $25,498,419 Commonwealth Select Acclaim 1,859,131 2,611,064 15,070,620 4,711,146 7,200,294 Commonwealth Optim-L 1,688 844 2,080 7,242 -- ----------- ----------- ------------ ----------- ----------- $ 9,854,394 $54,059,041 $ 85,977,868 $50,895,654 $32,698,713 =========== =========== ============ =========== =========== Investments in shares of the Underlying Funds, at cost $13,914,472 $76,653,934 $100,739,328 $59,627,347 $32,963,463 Underlying Fund shares held 915,836 7,315,161 9,759,122 7,688,165 3,224,725 Units outstanding and net asset value per unit: Commonwealth Select Resource, Commonwealth Resource II, Commonwealth Select Charter and Commonwealth Select Reward: Units outstanding, December 31, 2008 7,681,188 35,908,213 41,855,096 71,779,064 21,385,246 Net asset value per unit, December 31, 2008 $ 1.040669 $ 1.432740 $ 1.694063 $ 0.643325 $ 1.192337 Commonwealth Select Acclaim: Units outstanding, December 31, 2008 1,780,458 5,421,408 12,595,481 6,947,824 6,018,496 Net asset value per unit, December 31, 2008 $ 1.044187 $ 0.481621 $ 1.196510 $ 0.678075 $ 1.196361 Commonwealth Optim-L: Units outstanding, December 31, 2008 1,379 945 2,046 7,144 -- Net asset value per unit, December 31, 2008 $ 1.224510 $ 0.893270 $ 1.016410 $ 1.013696 $ --
The accompanying notes are an integral part of these financial statements. SA-8 COMMONWEALTH SELECT SEPARATE ACCOUNT STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED) DECEMBER 31, 2008
GOLDMAN GOLDMAN GOLDMAN SACHS VIT SACHS VIT GOLDMAN GOLDMAN SACHS VIT STRUCTURED GROWTH SACHS VIT SACHS VIT STRATEGIC U.S. OPPORTUNITIES MID CAP MONEY INTERNATIONAL EQUITY FUND VALUE FUND MARKET FUND EQUITY FUND FUND SERVICE SERVICE SERVICE SERVICE SERVICE SHARES SHARES SHARES SHARES SHARES ------------- ----------- ----------- ------------- ---------- ASSETS: Investments in shares of the Underlying Funds, at market value $29,868,117 $28,988,094 $91,851,810 $33,852,172 $1,576,381 ----------- ----------- ----------- ----------- ---------- Total assets 29,868,117 28,988,094 91,851,810 33,852,172 1,576,381 LIABILITIES: -- -- -- -- -- ----------- ----------- ----------- ----------- ---------- Net assets $29,868,117 $28,988,094 $91,851,810 $33,852,172 $1,576,381 =========== =========== =========== =========== ========== Net asset distribution by category: Commonwealth Select Resource, Commonwealth Select Resource II, Commonwealth Select Charter and Commonwealth Select Reward $28,483,787 $26,812,263 $77,052,362 $30,633,233 $1,384,203 Commonwealth Select Acclaim 1,384,330 2,173,939 14,793,380 3,217,927 190,991 Commonwealth Optim-L -- 1,892 6,068 1,012 1,187 ----------- ----------- ----------- ----------- ---------- $29,868,117 $28,988,094 $91,851,810 $33,852,172 $1,576,381 =========== =========== =========== =========== ========== Investments in shares of the Underlying Funds, at cost $62,928,788 $54,078,607 $91,851,810 $49,223,847 $2,362,667 Underlying Fund shares held 8,413,554 3,339,642 91,851,810 5,272,924 197,048 Units outstanding and net asset value per unit: Commonwealth Select Resource, Commonwealth Resource II, Commonwealth Select Charter and Commonwealth Select Reward: Units outstanding, December 31, 2008 11,851,751 20,129,901 51,918,439 24,889,567 1,778,660 Net asset value per unit, December 31, 2008 $ 2.403340 $ 1.331962 $ 1.484104 $ 1.230766 $ 0.778228 Commonwealth Select Acclaim: Units outstanding, December 31, 2008 1,356,631 1,788,654 13,173,301 4,713,365 244,613 Net asset value per unit, December 31, 2008 $ 1.020418 $ 1.215405 $ 1.122982 $ 0.682724 $ 0.780787 Commonwealth Optim-L: Units outstanding, December 31, 2008 -- 1,583 5,753 1,000 1,266 Net asset value per unit, December 31, 2008 $ -- $ 1.194996 $ 1.054834 $ 1.012043 $ 0.937525
The accompanying notes are an integral part of these financial statements. SA-9 COMMONWEALTH SELECT SEPARATE ACCOUNT STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED) DECEMBER 31, 2008
JANUS ASPEN JANUS ASPEN JANUS ASPEN JANUS ASPEN MFS(R) GROWTH AND INTERNATIONAL LARGE CAP MID CAP MID CAP INCOME GROWTH GROWTH GROWTH GROWTH PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO SERIES SERVICE SERVICE SERVICE SERVICE SERVICE SHARES SHARES SHARES SHARES CLASS ----------- ------------- ----------- ----------- ---------- ASSETS: Investments in shares of the Underlying Funds, at market value $ 5,220,781 $12,736,450 $ 8,033,118 $ 2,646,933 $1,313,651 ----------- ----------- ----------- ----------- ---------- Total assets 5,220,781 12,736,450 8,033,118 2,646,933 1,313,651 LIABILITIES: -- -- -- -- -- ----------- ----------- ----------- ----------- ---------- Net assets $ 5,220,781 $12,736,450 $ 8,033,118 $ 2,646,933 $1,313,651 =========== =========== =========== =========== ========== Net asset distribution by category: Commonwealth Select Resource, Commonwealth Select Resource II, Commonwealth Select Charter and Commonwealth Select Reward $ 4,436,644 $ 9,700,433 $ 5,387,280 $ 1,944,872 $1,049,173 Commonwealth Select Acclaim 784,137 3,036,017 2,645,838 702,061 264,478 Commonwealth Optim-L -- -- -- -- -- ----------- ----------- ----------- ----------- ---------- $ 5,220,781 $12,736,450 $ 8,033,118 $ 2,646,933 $1,313,651 =========== =========== =========== =========== ========== Investments in shares of the Underlying Funds, at cost $ 6,994,413 $18,788,221 $10,300,860 $ 3,980,193 $2,571,810 Underlying Fund shares held 448,521 489,675 515,605 127,871 410,516 Units outstanding and net asset value per unit: Commonwealth Select Resource, Commonwealth Resource II, Commonwealth Select Charter and Commonwealth Select Reward: Units outstanding, December 31, 2008 7,575,228 11,556,224 11,807,841 4,782,961 1,845,278 Net asset value per unit, December 31, 2008 $ 0.585678 $ 0.839412 $ 0.456246 $ 0.406625 $ 0.568572 Commonwealth Select Acclaim: Units outstanding, December 31, 2008 1,237,722 3,270,840 5,225,036 1,369,125 463,607 Net asset value per unit, December 31, 2008 $ 0.633532 $ 0.928207 $ 0.506377 $ 0.512781 $ 0.570479 Commonwealth Optim-L: Units outstanding, December 31, 2008 -- -- -- -- -- Net asset value per unit, December 31, 2008 $ -- $ -- $ -- $ -- $ --
The accompanying notes are an integral part of these financial statements. SA-10 COMMONWEALTH SELECT SEPARATE ACCOUNT STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED) DECEMBER 31, 2008
MFS(R) MFS(R) OPPENHEIMER NEW TOTAL MFS(R) OPPENHEIMER CAPITAL DISCOVERY RETURN UTILITIES BALANCED APPRECIATION SERIES SERIES SERIES FUND/VA FUND/VA SERVICE SERVICE SERVICE SERVICE SERVICE CLASS CLASS CLASS SHARES SHARES ---------- ----------- ---------- ----------- ------------ ASSETS: Investments in shares of the Underlying Funds, at market value $ 839,295 $13,220,142 $6,874,406 $2,996,168 $2,810,937 ---------- ----------- ---------- ---------- ---------- Total assets 839,295 13,220,142 6,874,406 2,996,168 2,810,937 LIABILITIES: -- -- -- -- -- ---------- ----------- ---------- ---------- ---------- Net assets $ 839,295 $13,220,142 $6,874,406 $2,996,168 $2,810,937 ========== =========== ========== ========== ========== Net asset distribution by category: Commonwealth Select Resource, Commonwealth Select Resource II, Commonwealth Select Charter and Commonwealth Select Reward $ 726,667 $11,161,299 $6,727,252 $2,954,879 $2,293,691 Commonwealth Select Acclaim 112,628 2,054,537 147,154 41,289 514,374 Commonwealth Optim-L -- 4,306 -- -- 2,872 ---------- ----------- ---------- ---------- ---------- $ 839,295 $13,220,142 $6,874,406 $2,996,168 $2,810,937 ========== =========== ========== ========== ========== Investments in shares of the Underlying Funds, at cost $1,422,638 $16,457,395 $9,553,619 $5,596,124 $3,909,597 Underlying Fund shares held 104,781 867,463 381,699 357,538 110,580 Units outstanding and net asset value per unit: Commonwealth Select Resource, Commonwealth Resource II, Commonwealth Select Charter and Commonwealth Select Reward: Units outstanding, December 31, 2008 1,018,159 11,111,883 4,103,489 3,904,733 3,266,073 Net asset value per unit, December 31, 2008 $ 0.713707 $ 1.004447 $ 1.639398 $ 0.756743 $ 0.702278 Commonwealth Select Acclaim: Units outstanding, December 31, 2008 157,274 2,038,529 89,452 54,380 729,963 Net asset value per unit, December 31, 2008 $ 0.716124 $ 1.007853 $ 1.645058 $ 0.759260 $ 0.704658 Commonwealth Optim-L: Units outstanding, December 31, 2008 -- 3,970 -- -- 3,238 Net asset value per unit, December 31, 2008 $ -- $ 1.084737 $ -- $ -- $ 0.886900
The accompanying notes are an integral part of these financial statements. SA-11 COMMONWEALTH SELECT SEPARATE ACCOUNT STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED) DECEMBER 31, 2008
OPPENHEIMER OPPENHEIMER GLOBAL HIGH OPPENHEIMER SECURITIES INCOME MAIN STREET FUND/VA FUND/VA FUND(R)/VA SERVICE SERVICE SERVICE SHARES SHARES SHARES ----------- ----------- ----------- ASSETS: Investments in shares of the Underlying Funds, at market value $9,635,931 $ 1,670,132 $2,029,994 ----------- ----------- ---------- Total assets 9,635,931 1,670,132 2,029,994 LIABILITIES: -- -- -- ----------- ----------- ---------- Net assets $9,635,931 $ 1,670,132 $2,029,994 =========== =========== ========== Net asset distribution by category: Commonwealth Select Resource, Commonwealth Select Resource II, Commonwealth Select Charter and Commonwealth Select Reward $7,754,217 $ 1,470,290 $1,819,874 Commonwealth Select Acclaim 1,877,876 199,773 210,120 Commonwealth Optim-L 3,838 69 -- ----------- ----------- ---------- $9,635,931 $ 1,670,132 $2,029,994 =========== =========== ========== Investments in shares of the Underlying Funds, at cost $13,695,317 $ 7,185,124 $2,647,930 Underlying Fund shares held 481,315 1,057,045 140,776 Units outstanding and net asset value per unit: Commonwealth Select Resource, Commonwealth Resource II, Commonwealth Select Charter and Commonwealth Select Reward: Units outstanding, December 31, 2008 7,617,312 5,286,622 2,298,637 Net asset value per unit, December 31, 2008 $ 1.017973 $ 0.278115 $ 0.791719 Commonwealth Select Acclaim: Units outstanding, December 31, 2008 1,838,573 715,890 264,496 Net asset value per unit, December 31, 2008 $ 1.021377 $ 0.279056 $ 0.794416 Commonwealth Optim-L: Units outstanding, December 31, 2008 3,075 234 -- Net asset value per unit, December 31, 2008 $ 1.247996 $ 0.295916 $ -- PIONEER T. ROWE PIONEER REAL ESTATE PRICE FUND VCT SHARES VCT INTERNATIONAL PORTFOLIO PORTFOLIO STOCK CLASS II CLASS II PORTFOLIO ---------- ----------- ----------- ASSETS: Investments in shares of the Underlying Funds, at market value $5,778,767 $ 8,358,302 $29,112,452 ---------- ----------- ----------- Total assets 5,778,767 8,358,302 29,112,452 LIABILITIES: -- -- -- ---------- ----------- ----------- Net assets $5,778,767 $ 8,358,302 $29,112,452 ========== =========== =========== Net asset distribution by category: Commonwealth Select Resource, Commonwealth Select Resource II, Commonwealth Select Charter and Commonwealth Select Reward $4,217,082 $ 6,847,044 $23,406,123 Commonwealth Select Acclaim 1,561,685 1,511,258 5,706,329 Commonwealth Optim-L -- -- -- ---------- ----------- ----------- $5,778,767 $ 8,358,302 $29,112,452 ========== =========== =========== Investments in shares of the Underlying Funds, at cost $7,019,999 $16,564,979 $42,730,875 Underlying Fund shares held 362,760 805,231 3,533,065 Units outstanding and net asset value per unit: Commonwealth Select Resource, Commonwealth Resource II, Commonwealth Select Charter and Commonwealth Select Reward: Units outstanding, December 31, 2008 5,524,637 4,828,282 23,277,677 Net asset value per unit, December 31, 2008 $ 0.763323 $ 1.418112 $ 1.005518 Commonwealth Select Acclaim: Units outstanding, December 31, 2008 2,038,014 1,061,525 8,310,256 Net asset value per unit, December 31, 2008 $ 0.766278 $ 1.423667 $ 0.686661 Commonwealth Optim-L: Units outstanding, December 31, 2008 -- -- -- Net asset value per unit, December 31, 2008 $ -- $ -- $ --
The accompanying notes are an integral part of these financial statements. SA-12 COMMONWEALTH SELECT SEPARATE ACCOUNT STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2008
AIM V.I. AIM V.I. AIM V.I. AIM V.I. BASIC CAPITAL CAPITAL CORE AIM V.I. VALUE APPRECIATION DEVELOPMENT EQUITY DYNAMICS FUND FUND FUND FUND FUND SERIES II SERIES I SERIES II SERIES I SERIES I SHARES SHARES SHARES SHARES SHARES ------------- ------------- ------------- ------------- ------------- INVESTMENT INCOME: Dividends $ 22,477 $ -- $ -- $ 223,621 $ -- EXPENSES: Commonwealth Select Resource, Commonwealth Resource II, Commonwealth Select Charter and Commonwealth Select Reward Mortality and expense risk fees 49,169 64,279 12,257 101,918 26,223 Administrative expense fees 5,900 7,714 1,471 12,230 3,147 ----------- ----------- --------- ----------- ----------- Total expenses 55,069 71,993 13,728 114,148 29,370 ----------- ----------- --------- ----------- ----------- Commonwealth Select Acclaim: Mortality and expense risk fees 12,041 21,767 3,250 30,188 6,115 Administrative expense fees 1,505 2,721 406 3,773 764 ----------- ----------- --------- ----------- ----------- Total expenses 13,546 24,488 3,656 33,961 6,879 ----------- ----------- --------- ----------- ----------- Commonwealth Optim-L: Mortality and expense risk fees 37 -- -- -- -- Administrative expense fees 4 -- -- -- -- ----------- ----------- --------- ----------- ----------- Total expenses 41 -- -- -- -- ----------- ----------- --------- ----------- ----------- Total expenses 68,656 96,481 17,384 148,109 36,249 ----------- ----------- --------- ----------- ----------- Net investment income (loss) (46,179) (96,481) (17,384) 75,512 (36,249) ----------- ----------- --------- ----------- ----------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Realized gain distributions from portfolio sponsor 874,261 -- 123,629 -- -- Net realized gain (loss) from sales of investments (322,507) 160,837 (110,264) 177,393 193,577 ----------- ----------- --------- ----------- ----------- Net realized gain (loss) 551,754 160,837 13,365 177,393 193,577 Change in unrealized gain (loss) (3,771,622) (3,822,350) (728,257) (3,999,029) (1,759,986) ----------- ----------- --------- ----------- ----------- Net realized and unrealized gain (loss) (3,219,868) (3,661,513) (714,892) (3,821,636) (1,566,409) ----------- ----------- --------- ----------- ----------- Net increase (decrease) in net assets from operations $(3,266,047) $(3,757,994) $(732,276) $(3,746,124) $(1,602,658) =========== =========== ========= =========== ===========
The accompanying notes are an integral part of these financial statements. SA-13 COMMONWEALTH SELECT SEPARATE ACCOUNT STATEMENTS OF OPERATIONS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2008
AIM V.I. ALLIANCE- ALLIANCE- ALLIANCE- GLOBAL AIM V.I. BERNSTEIN VPS BERNSTEIN VPS BERNSTEIN VPS HEALTH CARE LARGE CAP GLOBAL GROWTH AND LARGE CAP FUND GROWTH FUND TECHNOLOGY INCOME GROWTH SERIES I SERIES I PORTFOLIO PORTFOLIO PORTFOLIO SHARES SHARES CLASS B CLASS B CLASS A ------------- ------------- ------------- ------------- ------------- INVESTMENT INCOME: Dividends $ -- $ 903 $ -- $ 760,403 $ -- EXPENSES: Commonwealth Select Resource, Commonwealth Resource II, Commonwealth Select Charter and Commonwealth Select Reward Mortality and expense risk fees 46,892 83,149 14,346 400,996 238,543 Administrative expense fees 5,627 9,978 1,722 48,120 28,626 ----------- ----------- --------- ------------ ----------- Total expenses 52,519 93,127 16,068 449,116 267,169 ----------- ----------- --------- ------------ ----------- Commonwealth Select Acclaim: Mortality and expense risk fees 16,403 22,795 1,982 124,878 -- Administrative expense fees 2,050 2,849 248 15,609 -- ----------- ----------- --------- ------------ ----------- Total expenses 18,453 25,644 2,230 140,487 -- ----------- ----------- --------- ------------ ----------- Commonwealth Optim-L: Mortality and expense risk fees -- -- -- -- -- Administrative expense fees -- -- -- -- -- ----------- ----------- --------- ------------ ----------- Total expenses -- -- -- -- -- ----------- ----------- --------- ------------ ----------- Total expenses 70,972 118,771 18,298 589,603 267,169 ----------- ----------- --------- ------------ ----------- Net investment income (loss) (70,972) (117,868) (18,298) 170,800 (267,169) ----------- ----------- --------- ------------ ----------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Realized gain distributions from portfolio sponsor 973,169 -- -- 7,845,784 -- Net realized gain (loss) from sales of investments 167,415 94,506 (81,396) (1,666,771) (1,094,435) ----------- ----------- --------- ------------ ----------- Net realized gain (loss) 1,140,584 94,506 (81,396) 6,179,013 (1,094,435) Change in unrealized gain (loss) (2,785,036) (4,019,391) (707,174) (28,356,526) (7,927,772) ----------- ----------- --------- ------------ ----------- Net realized and unrealized gain (loss) (1,644,452) (3,924,885) (788,570) (22,177,513) (9,022,207) ----------- ----------- --------- ------------ ----------- Net increase (decrease) in net assets from operations $(1,715,424) $(4,042,753) $(806,868) $(22,006,713) $(9,289,376) =========== =========== ========= ============ ===========
The accompanying notes are an integral part of these financial statements. SA-14 COMMONWEALTH SELECT SEPARATE ACCOUNT STATEMENTS OF OPERATIONS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2008
ALLIANCE- ALLIANCE- BERNSTEIN VPS BERNSTEIN VPS ALLIANCE- DWS LARGE CAP SMALL/MID BERNSTEIN VPS DREMAN DWS GROWTH CAP VALUE VALUE HIGH RETURN SMALL CAP PORTFOLIO PORTFOLIO PORTFOLIO EQUITY VIP INDEX VIP CLASS B CLASS B CLASS B CLASS A CLASS A ------------- ------------- ------------- ------------- ------------- INVESTMENT INCOME: Dividends $ -- $ 28,823 $ 105,711 $ 147,040 $ 109,081 EXPENSES: Commonwealth Select Resource, Commonwealth Resource II, Commonwealth Select Charter and Commonwealth Select Reward Mortality and expense risk fees 39,652 64,901 45,338 47,387 68,616 Administrative expense fees 4,759 7,788 5,440 5,686 8,234 ----------- ----------- ----------- ----------- ----------- Total expenses 44,411 72,689 50,778 53,073 76,850 ----------- ----------- ----------- ----------- ----------- Commonwealth Select Acclaim: Mortality and expense risk fees 53,784 14,961 15,107 10,317 19,499 Administrative expense fees 6,723 1,870 1,889 1,290 2,437 ----------- ----------- ----------- ----------- ----------- Total expenses 60,507 16,831 16,996 11,607 21,936 ----------- ----------- ----------- ----------- ----------- Commonwealth Optim-L: Mortality and expense risk fees 12 -- -- -- -- Administrative expense fees 1 -- -- -- -- ----------- ----------- ----------- ----------- ----------- Total expenses 13 -- -- -- -- ----------- ----------- ----------- ----------- ----------- Total expenses 104,931 89,520 67,774 64,680 98,786 ----------- ----------- ----------- ----------- ----------- Net investment income (loss) (104,931) (60,697) 37,937 82,360 10,295 ----------- ----------- ----------- ----------- ----------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Realized gain distributions from portfolio sponsor -- 678,846 269,519 928,353 693,615 Net realized gain (loss) from sales of investments 140,345 (580,930) (605,920) (604,759) (936,287) ----------- ----------- ----------- ----------- ----------- Net realized gain (loss) 140,345 97,916 (336,401) 323,594 (242,672) Change in unrealized gain (loss) (3,810,791) (2,731,839) (2,226,086) (3,095,355) (2,715,786) ----------- ----------- ----------- ----------- ----------- Net realized and unrealized gain (loss) (3,670,446) (2,633,923) (2,562,487) (2,771,761) (2,958,458) ----------- ----------- ----------- ----------- ----------- Net increase (decrease) in net assets from operations $(3,775,377) $(2,694,620) $(2,524,550) $(2,689,401) $(2,948,163) =========== =========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements. SA-15 COMMONWEALTH SELECT SEPARATE ACCOUNT STATEMENTS OF OPERATIONS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2008
EATON EATON VANCE VT FIDELITY VIP DWS VANCE VT WORLDWIDE CONTRAFUND(R) TECHNOLOGY FLOATING-RATE HEALTH FIDELITY VIP PORTFOLIO VIP INCOME SCIENCES CONTRAFUND(R) SERVICE CLASS A FUND FUND PORTFOLIO CLASS 2 ------------- ------------- ------------- ------------- ------------- INVESTMENT INCOME: Dividends $ -- $ 906,257 $ -- $ 354,766 $ 61,537 EXPENSES: Commonwealth Select Resource, Commonwealth Resource II, Commonwealth Select Charter and Commonwealth Select Reward Mortality and expense risk fees 27,655 165,047 77,358 494,011 -- Administrative expense fees 3,319 19,806 9,283 59,282 -- ----------- ----------- ----------- ------------ ----------- Total expenses 30,974 184,853 86,641 553,293 -- ----------- ----------- ----------- ------------ ----------- Commonwealth Select Acclaim: Mortality and expense risk fees 10,203 33,661 17,986 -- 104,254 Administrative expense fees 1,276 4,207 2,248 -- 13,032 ----------- ----------- ----------- ------------ ----------- Total expenses 11,479 37,868 20,234 -- 117,286 ----------- ----------- ----------- ------------ ----------- Commonwealth Optim-L: Mortality and expense risk fees -- -- -- -- 45 Administrative expense fees -- -- -- -- 4 ----------- ----------- ----------- ------------ ----------- Total expenses -- -- -- -- 49 ----------- ----------- ----------- ------------ ----------- Total expenses 42,453 222,721 106,875 553,293 117,335 ----------- ----------- ----------- ------------ ----------- Net investment income (loss) (42,453) 683,536 (106,875) (198,527) (55,798) ----------- ----------- ----------- ------------ ----------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Realized gain distributions from portfolio sponsor -- -- 938,693 1,246,707 283,172 Net realized gain (loss) from sales of investments (27,208) (1,023,981) 65,170 (1,919,693) (721,072) ----------- ----------- ----------- ------------ ----------- Net realized gain (loss) (27,208) (1,023,981) 1,003,863 (672,986) (437,900) Change in unrealized gain (loss) (1,754,512) (4,251,282) (1,642,458) (20,046,128) (4,082,305) ----------- ----------- ----------- ------------ ----------- Net realized and unrealized gain (loss) (1,781,720) (5,275,263) (638,595) (20,719,114) (4,520,205) ----------- ----------- ----------- ------------ ----------- Net increase (decrease) in net assets from operations $(1,824,173) $(4,591,727) $ (745,470) $(20,917,641) $(4,576,003) =========== =========== =========== ============ ===========
The accompanying notes are an integral part of these financial statements. SA-16 COMMONWEALTH SELECT SEPARATE ACCOUNT STATEMENTS OF OPERATIONS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2008
FIDELITY VIP EQUITY- FIDELITY VIP FIDELITY VIP INCOME GROWTH FIDELITY VIP EQUITY- PORTFOLIO FIDELITY VIP PORTFOLIO GROWTH INCOME SERVICE GROWTH SERVICE & INCOME PORTFOLIO CLASS 2 PORTFOLIO CLASS 2 PORTFOLIO ------------- ------------- ------------- ------------- ------------- INVESTMENT INCOME: Dividends $ 1,735,257 $ 214,648 $ 419,017 $ 21,181 $ 75,579 EXPENSES: Commonwealth Select Resource, Commonwealth Resource II, Commonwealth Select Charter and Commonwealth Select Reward Mortality and expense risk fees 955,826 -- 692,573 -- 93,218 Administrative expense fees 114,700 -- 83,109 -- 11,186 ------------ ----------- ------------ ----------- ----------- Total expenses 1,070,526 -- 775,682 -- 104,404 ------------ ----------- ------------ ----------- ----------- Commonwealth Select Acclaim: Mortality and expense risk fees -- 120,439 -- 46,989 -- Administrative expense fees -- 15,055 -- 5,874 -- ------------ ----------- ------------ ----------- ----------- Total expenses -- 135,494 -- 52,863 -- ------------ ----------- ------------ ----------- ----------- Commonwealth Optim-L: Mortality and expense risk fees -- 19 -- 23 -- Administrative expense fees -- 2 -- 2 -- ------------ ----------- ------------ ----------- ----------- Total expenses -- 21 -- 25 -- ------------ ----------- ------------ ----------- ----------- Total expenses 1,070,526 135,515 775,682 52,888 104,404 ------------ ----------- ------------ ----------- ----------- Net investment income (loss) 664,731 79,133 (356,665) (31,707) (28,825) ------------ ----------- ------------ ----------- ----------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Realized gain distributions from portfolio sponsor 85,031 11,391 -- -- 894,582 Net realized gain (loss) from sales of investments (3,957,324) (432,017) (1,694,681) 133,977 (418,040) ------------ ----------- ------------ ----------- ----------- Net realized gain (loss) (3,872,293) (420,626) (1,694,681) 133,977 476,542 Change in unrealized gain (loss) (36,710,396) (4,896,354) (30,562,881) (2,385,279) (4,271,864) ------------ ----------- ------------ ----------- ----------- Net realized and unrealized gain (loss) (40,582,689) (5,316,980) (32,257,562) (2,251,302) (3,795,322) ------------ ----------- ------------ ----------- ----------- Net increase (decrease) in net assets from operations $(39,917,958) $(5,237,847) $(32,614,227) $(2,283,009) $(3,824,147) ============ =========== ============ =========== ===========
The accompanying notes are an integral part of these financial statements. SA-17 COMMONWEALTH SELECT SEPARATE ACCOUNT STATEMENTS OF OPERATIONS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2008
FIDELITY VIP GROWTH & FIDELITY VIP FIDELITY VIP INCOME HIGH INCOME MID CAP PORTFOLIO FIDELITY VIP PORTFOLIO FIDELITY VIP PORTFOLIO SERVICE HIGH INCOME SERVICE MID CAP SERVICE CLASS 2 PORTFOLIO CLASS 2 PORTFOLIO CLASS 2 ------------- ------------- ------------- ------------- ------------- INVESTMENT INCOME: Dividends $ 13,761 $ 3,042,946 $ 384,168 $ 148,036 $ 17,362 EXPENSES: Commonwealth Select Resource, Commonwealth Resource II, Commonwealth Select Charter and Commonwealth Select Reward Mortality and expense risk fees -- 496,946 -- 425,726 -- Administrative expense fees -- 59,633 -- 51,087 -- --------- ------------ ----------- ------------ ----------- Total expenses -- 556,579 -- 476,813 -- --------- ------------ ----------- ------------ ----------- Commonwealth Select Acclaim: Mortality and expense risk fees 17,631 -- 60,813 -- 86,619 Administrative expense fees 2,204 -- 7,601 -- 10,827 --------- ------------ ----------- ------------ ----------- Total expenses 19,835 -- 68,414 -- 97,446 --------- ------------ ----------- ------------ ----------- Commonwealth Optim-L: Mortality and expense risk fees -- -- -- -- 29 Administrative expense fees -- -- -- -- 2 --------- ------------ ----------- ------------ ----------- Total expenses -- -- -- -- 31 --------- ------------ ----------- ------------ ----------- Total expenses 19,835 556,579 68,414 476,813 97,477 --------- ------------ ----------- ------------ ----------- Net investment income (loss) (6,074) 2,486,367 315,754 (328,777) (80,115) --------- ------------ ----------- ------------ ----------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Realized gain distributions from portfolio sponsor 161,855 -- -- 5,888,487 1,296,890 Net realized gain (loss) from sales of investments (16,635) (2,281,567) (307,338) 65,523 277 --------- ------------ ----------- ------------ ----------- Net realized gain (loss) 145,220 (2,281,567) (307,338) 5,954,010 1,297,167 Change in unrealized gain (loss) (856,658) (10,591,448) (1,276,807) (21,723,824) (4,495,018) --------- ------------ ----------- ------------ ----------- Net realized and unrealized gain (loss) (711,438) (12,873,015) (1,584,145) (15,769,814) (3,197,851) --------- ------------ ----------- ------------ ----------- Net increase (decrease) in net assets from operations $(717,512) $(10,386,648) $(1,268,391) $(16,098,591) $(3,277,966) ========= ============ =========== ============ ===========
The accompanying notes are an integral part of these financial statements. SA-18 COMMONWEALTH SELECT SEPARATE ACCOUNT STATEMENTS OF OPERATIONS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2008
FT VIP FT VIP FT VIP FIDELITY VIP FRANKLIN FRANKLIN FRANKLIN FT VIP VALUE LARGE CAP SMALL CAP SMALL-MID MUTUAL STRATEGIES GROWTH VALUE CAP GROWTH SHARES PORTFOLIO SECURITIES SECURITIES SECURITIES SECURITIES SERVICE FUND FUND FUND FUND CLASS 2 CLASS 2 CLASS 2 CLASS 2 CLASS 2 ------------- ------------- ------------- ------------- ------------- INVESTMENT INCOME: Dividends $ 19,648 $ 44,595 $ 103,060 $ -- $ 1,029,980 EXPENSES: Commonwealth Select Resource, Commonwealth Resource II, Commonwealth Select Charter and Commonwealth Select Reward Mortality and expense risk fees 42,384 38,918 90,851 122,214 370,266 Administrative expense fees 5,086 4,671 10,902 14,666 44,432 ----------- ----------- ----------- ----------- ------------ Total expenses 47,470 43,589 101,753 136,880 414,698 ----------- ----------- ----------- ----------- ------------ Commonwealth Select Acclaim: Mortality and expense risk fees 9,212 4,999 19,727 29,250 83,058 Administrative expense fees 1,151 625 2,465 3,656 10,382 ----------- ----------- ----------- ----------- ------------ Total expenses 10,363 5,624 22,192 32,906 93,440 ----------- ----------- ----------- ----------- ------------ Commonwealth Optim-L: Mortality and expense risk fees -- -- 9 -- 8 Administrative expense fees -- -- 1 -- 1 ----------- ----------- ----------- ----------- ------------ Total expenses -- -- 10 -- 9 ----------- ----------- ----------- ----------- ------------ Total expenses 57,833 49,213 123,955 169,786 508,147 ----------- ----------- ----------- ----------- ------------ Net investment income (loss) (38,185) (4,618) (20,895) (169,786) 521,833 ----------- ----------- ----------- ----------- ------------ REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Realized gain distributions from portfolio sponsor 910,355 229,315 713,776 1,521,984 1,464,977 Net realized gain (loss) from sales of investments (759,152) 15,231 (278,788) 45,105 42,344 ----------- ----------- ----------- ----------- ------------ Net realized gain (loss) 151,203 244,546 434,988 1,567,089 1,507,321 Change in unrealized gain (loss) (2,791,689) (1,647,771) (3,775,286) (7,727,800) (18,409,617) ----------- ----------- ----------- ----------- ------------ Net realized and unrealized gain (loss) (2,640,486) (1,403,225) (3,340,298) (6,160,711) (16,902,296) ----------- ----------- ----------- ----------- ------------ Net increase (decrease) in net assets from operations $(2,678,671) $(1,407,843) $(3,361,193) $(6,330,497) $(16,380,463) =========== =========== =========== =========== ============
The accompanying notes are an integral part of these financial statements. SA-19 COMMONWEALTH SELECT SEPARATE ACCOUNT STATEMENTS OF OPERATIONS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2008
FT VIP GOLDMAN GOLDMAN GOLDMAN GOLDMAN TEMPLETON SACHS VIT SACHS VIT SACHS VIT SACHS VIT FOREIGN CAPITAL CORE FIXED EQUITY GOVERNMENT SECURITIES GROWTH FUND INCOME FUND INDEX FUND INCOME FUND FUND SERVICE SERVICE SERVICE SERVICE CLASS 2 SHARES SHARES SHARES SHARES ------------- ------------- ------------- ------------- ------------- INVESTMENT INCOME: Dividends $ 403,909 $ -- $ 5,332,969 $ 1,264,560 $1,302,963 EXPENSES: Commonwealth Select Resource, Commonwealth Resource II, Commonwealth Select Charter and Commonwealth Select Reward Mortality and expense risk fees 166,712 1,042,284 1,108,115 863,443 286,972 Administrative expense fees 20,005 125,074 132,974 103,614 34,437 ----------- ------------ ------------ ------------ ---------- Total expenses 186,717 1,167,358 1,241,089 967,057 321,409 ----------- ------------ ------------ ------------ ---------- Commonwealth Select Acclaim: Mortality and expense risk fees 37,179 49,931 224,680 74,922 77,112 Administrative expense fees 4,648 6,242 28,085 9,365 9,639 ----------- ------------ ------------ ------------ ---------- Total expenses 41,827 56,173 252,765 84,287 86,751 ----------- ------------ ------------ ------------ ---------- Commonwealth Optim-L: Mortality and expense risk fees 38 21 36 158 -- Administrative expense fees 4 2 3 15 -- ----------- ------------ ------------ ------------ ---------- Total expenses 42 23 39 173 -- ----------- ------------ ------------ ------------ ---------- Total expenses 228,586 1,223,554 1,493,893 1,051,517 408,160 ----------- ------------ ------------ ------------ ---------- Net investment income (loss) 175,323 (1,223,554) 3,839,076 213,043 894,803 ----------- ------------ ------------ ------------ ---------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Realized gain distributions from portfolio sponsor 1,653,090 -- -- 2,439,202 -- Net realized gain (loss) from sales of investments (41,015) 673,990 (3,442,684) 3,119,362 (169,796) ----------- ------------ ------------ ------------ ---------- Net realized gain (loss) 1,612,075 673,990 (3,442,684) 5,558,564 (169,796) Change in unrealized gain (loss) (9,877,362) (42,850,773) (11,641,200) (39,442,137) (199,098) ----------- ------------ ------------ ------------ ---------- Net realized and unrealized gain (loss) (8,265,287) (42,176,783) (15,083,884) (33,883,573) (368,894) ----------- ------------ ------------ ------------ ---------- Net increase (decrease) in net assets from operations $(8,089,964) $(43,400,337) $(11,244,808) $(33,670,530) $ 525,909 =========== ============ ============ ============ ==========
The accompanying notes are an integral part of these financial statements. SA-20 COMMONWEALTH SELECT SEPARATE ACCOUNT STATEMENTS OF OPERATIONS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2008
GOLDMAN GOLDMAN SACHS VIT GOLDMAN GOLDMAN SACHS VIT GOLDMAN GROWTH SACHS VIT SACHS VIT STRATEGIC SACHS VIT OPPORTUNITIES MID CAP MONEY INTERNATIONAL STRUCTURED U.S. FUND VALUE FUND MARKET FUND EQUITY FUND EQUITY FUND SERVICE SERVICE SERVICE SERVICE SERVICE SHARES SHARES SHARES SHARES SHARES ------------- ------------- ------------- ------------- --------------- INVESTMENT INCOME: Dividends $ -- $ 324,581 $2,153,757 $ 1,396,901 $ 30,037 EXPENSES: Commonwealth Select Resource, Commonwealth Resource II, Commonwealth Select Charter and Commonwealth Select Reward Mortality and expense risk fees 585,109 531,717 1,013,497 620,363 21,391 Administrative expense fees 70,213 63,806 121,620 74,444 2,567 ------------ ------------ ---------- ------------ --------- Total expenses 655,322 595,523 1,135,117 694,807 23,958 ------------ ------------ ---------- ------------ --------- Commonwealth Select Acclaim: Mortality and expense risk fees 29,023 42,166 196,901 62,587 3,961 Administrative expense fees 3,628 5,270 24,613 7,823 495 ------------ ------------ ---------- ------------ --------- Total expenses 32,651 47,436 221,514 70,410 4,456 ------------ ------------ ---------- ------------ --------- Commonwealth Optim-L: Mortality and expense risk fees -- 44 287 26 27 Administrative expense fees -- 5 27 2 3 ------------ ------------ ---------- ------------ --------- Total expenses -- 49 314 28 30 ------------ ------------ ---------- ------------ --------- Total expenses 687,973 643,008 1,356,945 765,245 28,444 ------------ ------------ ---------- ------------ --------- Net investment income (loss) (687,973) (318,427) 796,812 631,656 1,593 ------------ ------------ ---------- ------------ --------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Realized gain distributions from portfolio sponsor 917,783 78,404 -- 2,961,944 19,569 Net realized gain (loss) from sales of investments (6,063,851) (4,690,051) -- 1,176,025 (97,449) ------------ ------------ ---------- ------------ --------- Net realized gain (loss) (5,146,068) (4,611,647) -- 4,137,969 (77,880) Change in unrealized gain (loss) (17,362,697) (14,626,960) -- (37,165,378) (866,218) ------------ ------------ ---------- ------------ --------- Net realized and unrealized gain (loss) (22,508,765) (19,238,607) -- (33,027,409) (944,098) ------------ ------------ ---------- ------------ --------- Net increase (decrease) in net assets from operations $(23,196,738) $(19,557,034) $ 796,812 $(32,395,753) $(942,505) ============ ============ ========== ============ =========
The accompanying notes are an integral part of these financial statements. SA-21 COMMONWEALTH SELECT SEPARATE ACCOUNT STATEMENTS OF OPERATIONS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2008
JANUS ASPEN JANUS ASPEN JANUS ASPEN JANUS ASPEN MFS(R) GROWTH AND INTERNATIONAL LARGE CAP MID CAP MID CAP INCOME GROWTH GROWTH GROWTH GROWTH PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO SERIES SERVICE SERVICE SERVICE SERVICE SERVICE SHARES SHARES SHARES SHARES CLASS ------------- ------------- ------------- ------------- ------------- INVESTMENT INCOME: Dividends $ 65,295 $ 267,268 $ 70,695 $ 2,641 $ -- EXPENSES: Commonwealth Select Resource, Commonwealth Resource II, Commonwealth Select Charter and Commonwealth Select Reward Mortality and expense risk fees 91,892 240,309 104,465 47,684 26,644 Administrative expense fees 11,027 28,837 12,536 5,722 3,197 ----------- ------------ ----------- ----------- ----------- Total expenses 102,919 269,146 117,001 53,406 29,841 ----------- ------------ ----------- ----------- ----------- Commonwealth Select Acclaim: Mortality and expense risk fees 15,653 62,006 48,661 20,750 6,543 Administrative expense fees 1,956 7,751 6,082 2,594 818 ----------- ------------ ----------- ----------- ----------- Total expenses 17,609 69,757 54,743 23,344 7,361 ----------- ------------ ----------- ----------- ----------- Commonwealth Optim-L: Mortality and expense risk fees -- -- -- -- -- Administrative expense fees -- -- -- -- -- ----------- ------------ ----------- ----------- ----------- Total expenses -- -- -- -- -- ----------- ------------ ----------- ----------- ----------- Total expenses 120,528 338,903 171,744 76,750 37,202 ----------- ------------ ----------- ----------- ----------- Net investment income (loss) (55,233) (71,635) (101,049) (74,109) (37,202) ----------- ------------ ----------- ----------- ----------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Realized gain distributions from portfolio sponsor -- 3,860,542 -- 295,324 374,813 Net realized gain (loss) from sales of investments 178,806 1,358,568 315,724 143,775 (101,021) ----------- ------------ ----------- ----------- ----------- Net realized gain (loss) 178,806 5,219,110 315,724 439,099 273,792 Change in unrealized gain (loss) (4,424,728) (21,019,567) (6,204,458) (3,254,790) (1,885,482) ----------- ------------ ----------- ----------- ----------- Net realized and unrealized gain (loss) (4,245,922) (15,800,457) (5,888,734) (2,815,691) (1,611,690) ----------- ------------ ----------- ----------- ----------- Net increase (decrease) in net assets from operations $(4,301,155) $(15,872,092) $(5,989,783) $(2,889,800) $(1,648,892) =========== ============ =========== =========== ===========
The accompanying notes are an integral part of these financial statements. SA-22 COMMONWEALTH SELECT SEPARATE ACCOUNT STATEMENTS OF OPERATIONS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2008
MFS(R) MFS(R) OPPENHEIMER NEW TOTAL MFS(R) OPPENHEIMER CAPITAL DISCOVERY RETURN UTILITIES BALANCED APPRECIATION SERIES SERIES SERIES FUND/VA FUND/VA SERVICE SERVICE SERVICE SERVICE SERVICE CLASS CLASS CLASS SHARES SHARES ------------- ------------- ------------- ------------- ------------- INVESTMENT INCOME: Dividends $ -- $ 521,304 $ 151,135 $ 157,153 $ -- EXPENSES: Commonwealth Select Resource, Commonwealth Resource II, Commonwealth Select Charter and Commonwealth Select Reward Mortality and expense risk fees 13,111 183,542 137,680 66,662 51,683 Administrative expense fees 1,574 22,025 16,521 7,999 6,202 --------- ----------- ----------- ----------- ----------- Total expenses 14,685 205,567 154,201 74,661 57,885 --------- ----------- ----------- ----------- ----------- Commonwealth Select Acclaim: Mortality and expense risk fees 2,071 31,869 3,965 878 12,377 Administrative expense fees 259 3,983 495 110 1,547 --------- ----------- ----------- ----------- ----------- Total expenses 2,330 35,852 4,460 988 13,924 --------- ----------- ----------- ----------- ----------- Commonwealth Optim-L: Mortality and expense risk fees -- 82 -- -- 71 Administrative expense fees -- 7 -- -- 6 --------- ----------- ----------- ----------- ----------- Total expenses -- 89 -- -- 77 --------- ----------- ----------- ----------- ----------- Total expenses 17,015 241,508 158,661 75,649 71,886 --------- ----------- ----------- ----------- ----------- Net investment income (loss) (17,015) 279,796 (7,526) 81,504 (71,886) --------- ----------- ----------- ----------- ----------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Realized gain distributions from portfolio sponsor 254,904 1,136,745 1,839,851 422,524 -- Net realized gain (loss) from sales of investments (76,964) (694,961) (42,153) (637,617) 221,854 --------- ----------- ----------- ----------- ----------- Net realized gain (loss) 177,940 441,784 1,797,698 (215,093) 221,854 Change in unrealized gain (loss) (732,428) (5,169,599) (6,927,883) (2,577,839) (2,954,009) --------- ----------- ----------- ----------- ----------- Net realized and unrealized gain (loss) (554,488) (4,727,815) (5,130,185) (2,792,932) (2,732,155) --------- ----------- ----------- ----------- ----------- Net increase (decrease) in net assets from operations $(571,503) $(4,448,019) $(5,137,711) $(2,711,428) $(2,804,041) ========= =========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements. SA-23 COMMONWEALTH SELECT SEPARATE ACCOUNT STATEMENTS OF OPERATIONS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2008
OPPENHEIMER OPPENHEIMER GLOBAL HIGH OPPENHEIMER SECURITIES INCOME MAIN STREET FUND/VA FUND/VA FUND(R)/VA SERVICE SERVICE SERVICE SHARES SHARES SHARES ------------- ------------- ------------- INVESTMENT INCOME: Dividends $ 225,864 $ 508,915 $ 41,386 EXPENSES: Commonwealth Select Resource, Commonwealth Resource II, Commonwealth Select Charter and Commonwealth Select Reward Mortality and expense risk fees 161,343 73,192 35,383 Administrative expense fees 19,361 8,783 4,246 ----------- ----------- ----------- Total expenses 180,704 81,975 39,629 ----------- ----------- ----------- Commonwealth Select Acclaim: Mortality and expense risk fees 36,633 9,700 3,761 Administrative expense fees 4,579 1,212 470 ----------- ----------- ----------- Total expenses 41,212 10,912 4,231 ----------- ----------- ----------- Commonwealth Optim-L: Mortality and expense risk fees 86 5 -- Administrative expense fees 8 -- -- ----------- ----------- ----------- Total expenses 94 5 -- ----------- ----------- ----------- Total expenses 222,010 92,892 43,860 ----------- ----------- ----------- Net investment income (loss) 3,854 416,023 (2,474) ----------- ----------- ----------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Realized gain distributions from portfolio sponsor 1,211,145 -- 217,534 Net realized gain (loss) from sales of investments 29,154 (763,313) 74,148 ----------- ----------- ----------- Net realized gain (loss) 1,240,299 (763,313) 291,682 Change in unrealized gain (loss) (9,072,751) (5,243,307) (1,763,712) ----------- ----------- ----------- Net realized and unrealized gain (loss) (7,832,452) (6,006,620) (1,472,030) ----------- ----------- ----------- Net increase (decrease) in net assets from operations $(7,828,598) $(5,590,597) $(1,474,504) =========== =========== =========== PIONEER T. ROWE PIONEER REAL ESTATE PRICE FUND VCT SHARES VCT INTERNATIONAL PORTFOLIO PORTFOLIO STOCK CLASS II CLASS II PORTFOLIO ------------- ------------- ------------- INVESTMENT INCOME: Dividends $ 116,319 $ 562,926 $ 931,346 EXPENSES: Commonwealth Select Resource, Commonwealth Resource II, Commonwealth Select Charter and Commonwealth Select Reward Mortality and expense risk fees 70,867 153,045 494,458 Administrative expense fees 8,504 18,366 59,335 ----------- ----------- ------------ Total expenses 79,371 171,411 553,793 ----------- ----------- ------------ Commonwealth Select Acclaim: Mortality and expense risk fees 23,477 30,901 117,036 Administrative expense fees 2,934 3,863 14,629 ----------- ----------- ------------ Total expenses 26,411 34,764 131,665 ----------- ----------- ------------ Commonwealth Optim-L: Mortality and expense risk fees -- -- -- Administrative expense fees -- -- -- ----------- ----------- ------------ Total expenses -- -- -- ----------- ----------- ------------ Total expenses 105,782 206,175 685,458 ----------- ----------- ------------ Net investment income (loss) 10,537 356,751 245,888 ----------- ----------- ------------ REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Realized gain distributions from portfolio sponsor 315,078 4,041,025 1,798,462 Net realized gain (loss) from sales of investments 181,678 (789,799) 1,387,720 ----------- ----------- ------------ Net realized gain (loss) 496,756 3,251,226 3,186,182 Change in unrealized gain (loss) (3,425,833) (9,392,511) (33,235,321) ----------- ----------- ------------ Net realized and unrealized gain (loss) (2,929,077) (6,141,285) (30,049,139) ----------- ----------- ------------ Net increase (decrease) in net assets from operations $(2,918,540) $(5,784,534) $(29,803,251) =========== =========== ============
The accompanying notes are an integral part of these financial statements. SA-24 COMMONWEALTH SELECT SEPARATE ACCOUNT STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEARS ENDED DECEMBER 31,
AIM V.I. AIM V.I. CAPITAL AIM V.I. BASIC VALUE APPRECIATION CAPITAL DEVELOPMENT FUND FUND FUND SERIES II SHARES SERIES I SHARES SERIES II SHARES ------------------------ ------------------------ ------------------------ 2008 2007 2008 2007 2008 2007 ----------- ----------- ----------- ----------- ----------- ----------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ (46,179) $ (93,932) $ (96,481) $ (134,081) $ (17,384) $ (28,114) Net realized gain (loss) 551,754 1,589,859 160,837 608,489 13,365 399,304 Change in unrealized gain (loss) (3,771,622) (1,400,853) (3,822,350) 484,790 (728,257) (193,688) ----------- ----------- ----------- ----------- ----------- ----------- Net increase (decrease) in net assets from operations (3,266,047) 95,074 (3,757,994) 959,198 (732,276) 177,502 ----------- ----------- ----------- ----------- ----------- ----------- FROM CONTRACT TRANSACTIONS: Net purchase payments 10,178 13,578 7,155 14,330 366 126 Withdrawals (600,762) (1,234,299) (700,631) (1,181,034) (113,799) (245,909) Contract benefits (87,668) (114,653) (110,764) (97,042) (61,642) (65,757) Contract charges (11,608) (18,728) (16,547) (21,885) (2,902) (4,321) Transfers between sub-accounts (including Separate Account GPA), net (523,793) (970,720) 49,060 (262,830) (295,542) (112,015) Other transfers from (to) the General Account 26,779 9,953 (9,839) 9,111 4,529 6,667 ----------- ----------- ----------- ----------- ----------- ----------- Net increase (decrease) in net assets from contract transactions (1,186,874) (2,314,869) (781,566) (1,539,350) (468,990) (421,209) ----------- ----------- ----------- ----------- ----------- ----------- Net increase (decrease) in net assets (4,452,921) (2,219,795) (4,539,560) (580,152) (1,201,266) (243,707) NET ASSETS: Beginning of year 7,129,011 9,348,806 9,188,444 9,768,596 1,807,951 2,051,658 ----------- ----------- ----------- ----------- ----------- ----------- End of year $ 2,676,090 $ 7,129,011 $ 4,648,884 $ 9,188,444 $ 606,685 $ 1,807,951 =========== =========== =========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements. SA-25 COMMONWEALTH SELECT SEPARATE ACCOUNT STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31,
AIM V.I. AIM V.I. AIM V.I. CORE EQUITY DYNAMICS GLOBAL HEALTH CARE FUND FUND FUND SERIES I SHARES SERIES I SHARES SERIES I SHARES ------------------------ ------------------------ ------------------------ 2008 2007 2008 2007 2008 2007 ----------- ----------- ----------- ----------- ----------- ----------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ 75,512 $ (49,179) $ (36,249) $ (65,970) $ (70,972) $ (91,227) Net realized gain (loss) 177,393 481,247 193,577 1,058,382 1,140,584 478,052 Change in unrealized gain (loss) (3,999,029) 502,850 (1,759,986) (469,705) (2,785,036) 258,160 ----------- ----------- ----------- ----------- ----------- ----------- Net increase (decrease) in net assets from operations (3,746,124) 934,918 (1,602,658) 522,707 (1,715,424) 644,985 ----------- ----------- ----------- ----------- ----------- ----------- FROM CONTRACT TRANSACTIONS: Net purchase payments 6,930 13,093 1,896 10,393 9,512 13,357 Withdrawals (1,394,693) (1,552,158) (501,719) (600,070) (764,368) (825,927) Contract benefits (322,859) (320,190) (36,883) (1,428,077) (102,018) (144,381) Contract charges (25,286) (30,869) (5,826) (10,439) (11,968) (14,208) Transfers between sub-accounts (including Separate Account GPA), net 126,092 (449,918) (304,367) (431,029) 153,624 (776,025) Other transfers from (to) the General Account 44,383 51,114 (201) 24,366 12,030 12,029 ----------- ----------- ----------- ----------- ----------- ----------- Net increase (decrease) in net assets from contract transactions (1,565,433) (2,288,928) (847,100) (2,434,856) (703,188) (1,735,155) ----------- ----------- ----------- ----------- ----------- ----------- Net increase (decrease) in net assets (5,311,557) (1,354,010) (2,449,758) (1,912,149) (2,418,612) (1,090,170) NET ASSETS: Beginning of year 13,087,250 14,441,260 3,891,175 5,803,324 6,058,712 7,148,882 ----------- ----------- ----------- ----------- ----------- ----------- End of year $ 7,775,693 $13,087,250 $ 1,441,417 $ 3,891,175 $ 3,640,100 $ 6,058,712 =========== =========== =========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements. SA-26 COMMONWEALTH SELECT SEPARATE ACCOUNT STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31,
AIM V.I. ALLIANCE- ALLIANCE- LARGE CAP BERNSTEIN VPS BERNSTEIN VPS GROWTH FUND GLOBAL TECHNOLOGY GROWTH AND INCOME SERIES I SHARES PORTFOLIO CLASS B PORTFOLIO CLASS B ------------------------ ------------------------ -------------------------- 2008 2007 2008 2007 2008 2007 ----------- ----------- ----------- ----------- ------------ ------------ INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ (117,868) $ (160,559) $ (18,298) $ (20,499) $ 170,800 $ (132,746) Net realized gain (loss) 94,506 468,508 (81,396) 198,099 6,179,013 6,830,419 Change in unrealized gain (loss) (4,019,391) 1,225,970 (707,174) 12,705 (28,356,526) (4,362,004) ----------- ----------- ----------- ----------- ------------ ------------ Net increase (decrease) in net assets from operations (4,042,753) 1,533,919 (806,868) 190,305 (22,006,713) 2,335,669 ----------- ----------- ----------- ----------- ------------ ------------ FROM CONTRACT TRANSACTIONS: Net purchase payments 8,933 17,592 822 10,018 29,339 436,243 Withdrawals (1,161,062) (1,556,171) (111,923) (198,674) (4,608,988) (8,253,082) Contract benefits (242,517) (213,095) (21,749) (10,212) (853,784) (3,100,799) Contract charges (18,714) (23,122) (2,906) (3,354) (93,770) (138,503) Transfers between sub-accounts (including Separate Account GPA), net (773,843) (403,519) (311,681) 319,981 (2,721,771) (4,806,168) Other transfers from (to) the General Account (7,602) 60,513 7,176 (1,261) 92,146 175,189 ----------- ----------- ----------- ----------- ------------ ------------ Net increase (decrease) in net assets from contract transactions (2,194,805) (2,117,802) (440,261) 116,498 (8,156,828) (15,687,120) ----------- ----------- ----------- ----------- ------------ ------------ Net increase (decrease) in net assets (6,237,558) (583,883) (1,247,129) 306,803 (30,163,541) (13,351,451) NET ASSETS: Beginning of year 11,660,657 12,244,540 1,930,842 1,624,039 58,073,625 71,425,076 ----------- ----------- ----------- ----------- ------------ ------------ End of year $ 5,423,099 $11,660,657 $ 683,713 $ 1,930,842 $ 27,910,084 $ 58,073,625 =========== =========== =========== =========== ============ ============
The accompanying notes are an integral part of these financial statements. SA-27 COMMONWEALTH SELECT SEPARATE ACCOUNT STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31,
ALLIANCE- ALLIANCE- ALLIANCE- BERNSTEIN VPS BERNSTEIN VPS BERNSTEIN VPS LARGE CAP GROWTH LARGE CAP GROWTH SMALL/MID CAP VALUE PORTFOLIO CLASS A PORTFOLIO CLASS B PORTFOLIO CLASS B ------------------------- ------------------------ ------------------------ 2008 2007 2008 2007 2008 2007 ------------ ----------- ----------- ----------- ----------- ----------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ (267,169) $ (386,609) $ (104,931) $ (148,472) $ (60,697) $ (62,968) Net realized gain (loss) (1,094,435) (477,231) 140,345 401,779 97,916 1,038,041 Change in unrealized gain (loss) (7,927,772) 4,048,870 (3,810,791) 961,586 (2,731,839) (1,015,180) ------------ ----------- ----------- ----------- ----------- ----------- Net increase (decrease) in net assets from operations (9,289,376) 3,185,030 (3,775,377) 1,214,893 (2,694,620) (40,107) ------------ ----------- ----------- ----------- ----------- ----------- FROM CONTRACT TRANSACTIONS: Net purchase payments 313 44,971 17,894 16,108 5,722 15,859 Withdrawals (103,155) (3,046,983) (3,536,896) (1,411,140) (670,171) (991,013) Contract benefits (25,982) (1,184,471) (858,518) (395,704) (339,049) (198,287) Contract charges (3,955) (68,672) (63,761) (76,993) (13,022) (18,762) Transfers between sub-accounts (including Separate Account GPA), net (4,935,189) (1,428,357) 2,474,823 141,792 (1,037,338) 535,453 Other transfers from (to) the General Account 16 179,885 89,843 32,994 129,243 1,478 ------------ ----------- ----------- ----------- ----------- ----------- Net increase (decrease) in net assets from contract transactions (5,067,952) (5,503,627) (1,876,615) (1,692,943) (1,924,615) (655,272) ------------ ----------- ----------- ----------- ----------- ----------- Net increase (decrease) in net assets (14,357,328) (2,318,597) (5,651,992) (478,050) (4,619,235) (695,379) NET ASSETS: Beginning of year 26,496,390 28,814,987 10,654,879 11,132,929 8,569,226 9,264,605 ------------ ----------- ----------- ----------- ----------- ----------- End of year $ 12,139,062 $26,496,390 $ 5,002,887 $10,654,879 $ 3,949,991 $ 8,569,226 ============ =========== =========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements. SA-28 COMMONWEALTH SELECT SEPARATE ACCOUNT STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31,
DWS ALLIANCE- DREMAN DWS BERNSTEIN VPS HIGH RETURN SMALL CAP VALUE EQUITY VIP INDEX VIP PORTFOLIO CLASS B CLASS A CLASS A ------------------------ ------------------------ ------------------------ 2008 2007 2008 2007 2008 2007 ----------- ----------- ----------- ----------- ----------- ----------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ 37,937 $ (5,119) $ 82,360 $ 7,129 $ 10,295 $ (60,264) Net realized gain (loss) (336,401) 1,211,001 323,594 54,892 (242,672) 1,430,606 Change in unrealized gain (loss) (2,226,086) (1,616,022) (3,095,355) (259,423) (2,715,786) (1,700,831) ----------- ----------- ----------- ----------- ----------- ----------- Net increase (decrease) in net assets from operations (2,524,550) (410,140) (2,689,401) (197,402) (2,948,163) (330,489) ----------- ----------- ----------- ----------- ----------- ----------- FROM CONTRACT TRANSACTIONS: Net purchase payments 2,316 12,789 1,208 60,307 969 202,909 Withdrawals (455,893) (1,477,882) (535,094) (873,386) (50,466) (3,487,112) Contract benefits (129,732) (244,011) (81,776) (420,493) (208) (1,670,986) Contract charges (8,390) (15,565) (10,183) (14,650) (969) (76,523) Transfers between sub-accounts (including Separate Account GPA), net (699,916) (1,749,047) (279,118) (404,410) (2,492,295) 1,286,763 Other transfers from (to) the General Account 2,626 96,121 1,412 31,679 387 280,986 ----------- ----------- ----------- ----------- ----------- ----------- Net increase (decrease) in net assets from contract transactions (1,288,989) (3,377,595) (903,551) (1,620,953) (2,542,582) (3,463,963) ----------- ----------- ----------- ----------- ----------- ----------- Net increase (decrease) in net assets (3,813,539) (3,787,735) (3,592,952) (1,818,355) (5,490,745) (3,794,452) NET ASSETS: Beginning of year 6,934,684 10,722,419 6,404,090 8,222,445 10,056,912 13,851,364 ----------- ----------- ----------- ----------- ----------- ----------- End of year $ 3,121,145 $ 6,934,684 $ 2,811,138 $ 6,404,090 $ 4,566,167 $10,056,912 =========== =========== =========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements. SA-29 COMMONWEALTH SELECT SEPARATE ACCOUNT STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31,
DWS EATON EATON TECHNOLOGY VANCE VT VANCE VT VIP FLOATING-RATE WORLDWIDE HEALTH CLASS A INCOME FUND SCIENCES FUND ------------------------- ------------------------ ------------------------ 2008 2007 2008 2007 2008 2007 ----------- ------------ ----------- ----------- ----------- ----------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ (42,453) $ (63,509) $ 683,536 $ 1,115,424 $ (106,875) $ (52,988) Net realized gain (loss) (27,208) 228,803 (1,023,981) (146,914) 1,003,863 555,121 Change in unrealized gain (loss) (1,754,512) 375,000 (4,251,282) (910,994) (1,642,458) (14,758) ----------- ------------ ----------- ----------- ----------- ----------- Net increase (decrease) in net assets from operations (1,824,173) 540,294 (4,591,727) 57,516 (745,470) 487,375 ----------- ------------ ----------- ----------- ----------- ----------- FROM CONTRACT TRANSACTIONS: Net purchase payments 146,700 109,823 10,500 15,721 13,962 18,263 Withdrawals (9,472,261) (13,120,192) (1,968,540) (3,315,238) (717,690) (1,081,461) Contract benefits (3,341,616) (4,134,701) (631,590) (406,127) (312,215) (169,452) Contract charges (102,541) (44,444) (29,021) (40,366) (18,805) (23,195) Transfers between sub-accounts (including Separate Account GPA), net 11,841,402 15,699,735 (2,123,924) (523,713) (188,812) (1,273,907) Other transfers from (to) the General Account 292,100 495,085 (19,486) 93,381 6,963 609 ----------- ------------ ----------- ----------- ----------- ----------- Net increase (decrease) in net assets from contract transactions (636,216) (994,694) (4,762,061) (4,176,342) (1,216,597) (2,529,143) ----------- ------------ ----------- ----------- ----------- ----------- Net increase (decrease) in net assets (2,460,389) (454,400) (9,353,788) (4,118,826) (1,962,067) (2,041,768) NET ASSETS: Beginning of year 4,303,676 4,758,076 19,982,136 24,100,962 8,703,031 10,744,799 ----------- ------------ ----------- ----------- ----------- ----------- End of year $ 1,843,287 $ 4,303,676 $10,628,348 $19,982,136 $ 6,740,964 $ 8,703,031 =========== ============ =========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements. SA-30 COMMONWEALTH SELECT SEPARATE ACCOUNT STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31,
FIDELITY VIP FIDELITY VIP CONTRAFUND(R) FIDELITY VIP CONTRAFUND(R) PORTFOLIO EQUITY-INCOME PORTFOLIO SERVICE CLASS 2 PORTFOLIO ------------------------- ------------------------ -------------------------- 2008 2007 2008 2007 2008 2007 ------------ ----------- ----------- ----------- ------------ ------------ INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ (198,527) $ (262,293) $ (55,798) $ (68,834) $ 664,731 $ 307,194 Net realized gain (loss) (672,986) 17,240,433 (437,900) 3,719,706 (3,872,293) 13,370,373 Change in unrealized gain (loss) (20,046,128) (9,122,510) (4,082,305) (1,960,977) (36,710,396) (12,516,465) ------------ ----------- ----------- ----------- ------------ ------------ Net increase (decrease) in net assets from operations (20,917,641) 7,855,630 (4,576,003) 1,689,895 (39,917,958) 1,161,102 ------------ ----------- ----------- ----------- ------------ ------------ FROM CONTRACT TRANSACTIONS: Net purchase payments 43,293 539,928 78 2,698 108,619 343,324 Withdrawals (5,918,071) (6,192,824) (31,426) (1,172,867) (10,328,381) (19,242,910) Contract benefits (1,094,832) (3,097,381) (3,433) (186,183) (3,043,315) (5,176,675) Contract charges (93,411) (86,167) (1,467) (31,209) (106,287) (149,552) Transfers between sub-accounts (including Separate Account GPA), net (2,071,996) 1,430,328 (2,395,932) 922,320 (4,867,756) (3,305,963) Other transfers from (to) the General Account 189,605 205,306 2,470 25,396 353,084 437,122 ------------ ----------- ----------- ----------- ------------ ------------ Net increase (decrease) in net assets from contract transactions (8,945,412) (7,200,810) (2,429,710) (439,845) (17,884,036) (27,094,654) ------------ ----------- ----------- ----------- ------------ ------------ Net increase (decrease) in net assets (29,863,053) 654,820 (7,005,713) 1,250,050 (57,801,994) (25,933,552) NET ASSETS: Beginning of year 54,455,180 53,800,360 12,571,853 11,321,803 104,635,707 130,569,259 ------------ ----------- ----------- ----------- ------------ ------------ End of year $ 24,592,127 $54,455,180 $ 5,566,140 $12,571,853 $ 46,833,713 $104,635,707 ============ =========== =========== =========== ============ ============
The accompanying notes are an integral part of these financial statements. SA-31 COMMONWEALTH SELECT SEPARATE ACCOUNT STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31,
FIDELITY VIP FIDELITY VIP EQUITY-INCOME FIDELITY VIP GROWTH PORTFOLIO GROWTH PORTFOLIO SERVICE CLASS 2 PORTFOLIO SERVICE CLASS 2 ------------------------ -------------------------- ----------------------- 2008 2007 2008 2007 2008 2007 ----------- ----------- ------------ ------------ ----------- ---------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ 79,133 $ 28,462 $ (356,665) $ (417,908) $ (31,707) $ (47,938) Net realized gain (loss) (420,626) 1,772,570 (1,694,681) (362,242) 133,977 479,844 Change in unrealized gain (loss) (4,896,354) (1,747,018) (30,562,881) 17,498,752 (2,385,279) 662,761 ----------- ----------- ------------ ------------ ----------- ---------- Net increase (decrease) in net assets from operations (5,237,847) 54,014 (32,614,227) 16,718,602 (2,283,009) 1,094,667 ----------- ----------- ------------ ------------ ----------- ---------- FROM CONTRACT TRANSACTIONS: Net purchase payments 3,476 27,458 110,915 554,556 3,526 5,356 Withdrawals (1,106,947) (2,019,157) (7,222,189) (10,158,379) (391,706) (620,193) Contract benefits (218,259) (317,884) (2,447,181) (4,172,887) (122,613) (84,045) Contract charges (30,125) (43,155) (76,222) (94,609) (11,669) (14,881) Transfers between sub-accounts (including Separate Account GPA), net (810,996) 277,632 (714,875) (2,990,515) (221,071) (93,018) Other transfers from (to) the General Account 14,778 285 385,640 429,014 2,509 1,121 ----------- ----------- ------------ ------------ ----------- ---------- Net increase (decrease) in net assets from contract transactions (2,148,073) (2,074,821) (9,963,912) (16,432,820) (741,024) (805,660) ----------- ----------- ------------ ------------ ----------- ---------- Net increase (decrease) in net assets (7,385,920) (2,020,807) (42,578,139) 285,782 (3,024,033) 289,007 NET ASSETS: Beginning of year 13,742,273 15,763,080 75,281,886 74,996,104 5,334,721 5,045,714 ----------- ----------- ------------ ------------ ----------- ---------- End of year $ 6,356,353 $13,742,273 $ 32,703,747 $ 75,281,886 $ 2,310,688 $5,334,721 =========== =========== ============ ============ =========== ==========
The accompanying notes are an integral part of these financial statements. SA-32 COMMONWEALTH SELECT SEPARATE ACCOUNT STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31,
FIDELITY VIP FIDELITY VIP GROWTH & INCOME FIDELITY VIP GROWTH & INCOME PORTFOLIO HIGH INCOME PORTFOLIO SERVICE CLASS 2 PORTFOLIO ------------------------ ---------------------- -------------------------- 2008 2007 2008 2007 2008 2007 ----------- ----------- ---------- ---------- ------------ ------------ INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ (28,825) $ 54,027 $ (6,074) $ 1,275 $ 2,486,367 $ 3,268,400 Net realized gain (loss) 476,542 1,107,864 145,220 255,397 (2,281,567) (427,659) Change in unrealized gain (loss) (4,271,864) (162,863) (856,658) (43,682) (10,591,448) (2,050,252) ----------- ----------- ---------- ---------- ------------ ------------ Net increase (decrease) in net assets from operations (3,824,147) 999,028 (717,512) 212,990 (10,386,648) 790,489 ----------- ----------- ---------- ---------- ------------ ------------ FROM CONTRACT TRANSACTIONS: Net purchase payments 3,664 14,849 250 250 108,710 228,966 Withdrawals (1,055,106) (1,522,365) (191,401) (487,723) (5,323,609) (8,292,974) Contract benefits (121,886) (233,896) (121,211) (7,270) (1,798,578) (1,801,245) Contract charges (14,648) (19,597) (3,779) (5,513) (57,360) (72,336) Transfers between sub-accounts (including Separate Account GPA), net (1,336,773) 1,195,978 57,272 (18,462) (2,886,882) (1,026,446) Other transfers from (to) the General Account 7,073 21,346 (433) 58 150,431 195,016 ----------- ----------- ---------- ---------- ------------ ------------ Net increase (decrease) in net assets from contract transactions (2,517,676) (543,685) (259,302) (518,660) (9,807,288) (10,769,019) ----------- ----------- ---------- ---------- ------------ ------------ Net increase (decrease) in net assets (6,341,823) 455,343 (976,814) (305,670) (20,193,936) (9,978,530) NET ASSETS: Beginning of year 10,553,774 10,098,431 1,940,282 2,245,952 47,638,490 57,617,020 ----------- ----------- ---------- ---------- ------------ ------------ End of year $ 4,211,951 $10,553,774 $ 963,468 $1,940,282 $ 27,444,554 $ 47,638,490 =========== =========== ========== ========== ============ ============
The accompanying notes are an integral part of these financial statements. SA-33 COMMONWEALTH SELECT SEPARATE ACCOUNT STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31,
FIDELITY VIP FIDELITY VIP HIGH INCOME FIDELITY VIP MID CAP PORTFOLIO MID CAP PORTFOLIO SERVICE CLASS 2 PORTFOLIO SERVICE CLASS 2 ------------------------ -------------------------- ------------------------ 2008 2007 2008 2007 2008 2007 ----------- ----------- ------------ ------------ ----------- ----------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ 315,754 $ 366,135 $ (328,777) $ (223,129) $ (80,115) $ (86,736) Net realized gain (loss) (307,338) 61,826 5,954,010 9,157,302 1,297,167 1,601,209 Change in unrealized gain (loss) (1,276,807) (304,822) (21,723,824) (2,719,767) (4,495,018) (206,694) ----------- ----------- ------------ ------------ ----------- ----------- Net increase (decrease) in net assets from operations (1,268,391) 123,139 (16,098,591) 6,214,406 (3,277,966) 1,307,779 ----------- ----------- ------------ ------------ ----------- ----------- FROM CONTRACT TRANSACTIONS: Net purchase payments 1,090 1,462 42,948 299,696 2,770 2,888 Withdrawals (677,422) (826,144) (3,470,078) (4,963,985) (918,188) (1,047,564) Contract benefits (97,815) (192,646) (895,649) (4,770,881) (244,657) (113,802) Contract charges (13,719) (18,484) (58,853) (81,534) (19,235) (27,089) Transfers between sub-accounts (including Separate Account GPA), net 1,146,619 (1,360,157) (3,243,501) (4,485,506) (930,833) (624,417) Other transfers from (to) the General Account 11,887 138 233,345 156,682 4,145 (111) ----------- ----------- ------------ ------------ ----------- ----------- Net increase (decrease) in net assets from contract transactions 370,640 (2,395,831) (7,391,788) (13,845,528) (2,105,998) (1,810,095) ----------- ----------- ------------ ------------ ----------- ----------- Net increase (decrease) in net assets (897,751) (2,272,692) (23,490,379) (7,631,122) (5,383,964) (502,316) NET ASSETS: Beginning of year 5,601,766 7,874,458 45,050,548 52,681,670 10,022,212 10,524,528 ----------- ----------- ------------ ------------ ----------- ----------- End of year $ 4,704,015 $ 5,601,766 $ 21,560,169 $ 45,050,548 $ 4,638,248 $10,022,212 =========== =========== ============ ============ =========== ===========
The accompanying notes are an integral part of these financial statements. SA-34 COMMONWEALTH SELECT SEPARATE ACCOUNT STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31,
FT VIP FT VIP FIDELITY VIP FRANKLIN FRANKLIN VALUE STRATEGIES LARGE CAP SMALL CAP VALUE PORTFOLIO GROWTH SECURITIES SECURITIES SERVICE CLASS 2 FUND CLASS 2 FUND CLASS 2 ------------------------ ----------------------- ------------------------ 2008 2007 2008 2007 2008 2007 ----------- ----------- ----------- ---------- ----------- ----------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ (38,185) $ (50,874) $ (4,618) $ (33,096) $ (20,895) $ (104,262) Net realized gain (loss) 151,203 838,053 244,546 283,061 434,988 2,113,089 Change in unrealized gain (loss) (2,791,689) (602,776) (1,647,771) (11,289) (3,775,286) (2,323,020) ----------- ----------- ----------- ---------- ----------- ----------- Net increase (decrease) in net assets from operations (2,678,671) 184,403 (1,407,843) 238,676 (3,361,193) (314,193) ----------- ----------- ----------- ---------- ----------- ----------- FROM CONTRACT TRANSACTIONS: Net purchase payments 7,155 20,153 1,050 3,109 5,865 56,111 Withdrawals (500,799) (1,110,983) (670,613) (644,771) (1,396,433) (1,550,491) Contract benefits (38,180) (107,502) (27,371) (207,378) (222,688) (1,561,064) Contract charges (6,989) (11,158) (5,595) (7,550) (18,454) (27,498) Transfers between sub-accounts (including Separate Account GPA), net (375,837) 1,068,411 (220,617) 297,597 (30,057) (1,305,334) Other transfers from (to) the General Account 3,113 66,278 11,529 28,178 25,837 59,275 ----------- ----------- ----------- ---------- ----------- ----------- Net increase (decrease) in net assets from contract transactions (911,537) (74,801) (911,617) (530,815) (1,635,930) (4,329,001) ----------- ----------- ----------- ---------- ----------- ----------- Net increase (decrease) in net assets (3,590,208) 109,602 (2,319,460) (292,139) (4,997,123) (4,643,194) NET ASSETS: Beginning of year 5,819,017 5,709,415 4,717,984 5,010,123 11,171,838 15,815,032 ----------- ----------- ----------- ---------- ----------- ----------- End of year $ 2,228,809 $ 5,819,017 $ 2,398,524 $4,717,984 $ 6,174,715 $11,171,838 =========== =========== =========== ========== =========== ===========
The accompanying notes are an integral part of these financial statements. SA-35 COMMONWEALTH SELECT SEPARATE ACCOUNT STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31,
FT VIP FRANKLIN SMALL-MID FT VIP FT VIP CAP GROWTH MUTUAL SHARES TEMPLETON SECURITIES SECURITIES FOREIGN SECURITIES FUND CLASS 2 FUND CLASS 2 FUND CLASS 2 ------------------------ ------------------------- ------------------------- 2008 2007 2008 2007 2008 2007 ----------- ----------- ------------ ----------- ------------ ----------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ (169,786) $ (249,874) $ 521,833 $ 25,351 $ 175,323 $ 112,064 Net realized gain (loss) 1,567,089 2,944,682 1,507,321 5,307,065 1,612,075 3,626,633 Change in unrealized gain (loss) (7,727,800) (927,703) (18,409,617) (4,167,394) (9,877,362) (908,037) ----------- ----------- ------------ ----------- ------------ ----------- Net increase (decrease) in net assets from operations (6,330,497) 1,767,105 (16,380,463) 1,165,022 (8,089,964) 2,830,660 ----------- ----------- ------------ ----------- ------------ ----------- FROM CONTRACT TRANSACTIONS: Net purchase payments 10,113 134,097 42,448 103,087 9,861 20,386 Withdrawals (1,313,843) (2,014,638) (4,857,098) (4,475,690) (1,972,107) (2,885,375) Contract benefits (186,426) (568,801) (1,398,916) (1,202,750) (537,427) (2,317,977) Contract charges (26,033) (35,574) (79,856) (39,387) (30,455) (39,063) Transfers between sub-accounts (including Separate Account GPA), net (711,967) (1,959,933) (2,420,124) (1,593,580) (1,892,334) 1,194,174 Other transfers from (to) the General Account 2,407 79,964 254,061 200,830 275,950 95,021 ----------- ----------- ------------ ----------- ------------ ----------- Net increase (decrease) in net assets from contract transactions (2,225,749) (4,364,885) (8,459,485) (7,007,490) (4,146,512) (3,932,834) ----------- ----------- ------------ ----------- ------------ ----------- Net increase (decrease) in net assets (8,556,246) (2,597,780) (24,839,948) (5,842,468) (12,236,476) (1,102,174) NET ASSETS: Beginning of year 16,214,533 18,812,313 48,065,443 53,907,911 22,090,870 23,193,044 ----------- ----------- ------------ ----------- ------------ ----------- End of year $ 7,658,287 $16,214,533 $ 23,225,495 $48,065,443 $ 9,854,394 $22,090,870 =========== =========== ============ =========== ============ ===========
The accompanying notes are an integral part of these financial statements. SA-36 COMMONWEALTH SELECT SEPARATE ACCOUNT STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31,
GOLDMAN SACHS VIT GOLDMAN SACHS VIT GOLDMAN SACHS VIT CAPITAL CORE FIXED EQUITY GROWTH FUND INCOME FUND INDEX FUND SERVICE SHARES SERVICE SHARES SERVICE SHARES -------------------------- -------------------------- -------------------------- 2008 2007 2008 2007 2008 2007 ------------ ------------ ------------ ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ (1,223,554) $ (1,690,245) $ 3,839,076 $ 3,929,155 $ 213,043 $ 226,326 Net realized gain (loss) 673,990 4,899,558 (3,442,684) (968,316) 5,558,564 10,991,809 Change in unrealized gain (loss) (42,850,773) 7,304,030 (11,641,200) 3,479,549 (39,442,137) (6,529,728) ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in net assets from operations (43,400,337) 10,513,343 (11,244,808) 6,440,388 (33,670,530) 4,688,407 ------------ ------------ ------------ ------------ ------------ ------------ FROM CONTRACT TRANSACTIONS: Net purchase payments 194,773 346,079 131,009 249,756 20,447 109,843 Withdrawals (11,845,157) (20,176,260) (14,949,349) (16,212,068) (661,786) (5,028,470) Contract benefits (3,603,023) (6,552,555) (4,138,938) (5,041,107) (258,516) (2,454,852) Contract charges (108,302) (138,556) (182,287) (200,484) (8,938) (107,469) Transfers between sub-accounts (including Separate Account GPA), net (2,200,384) (4,651,632) (6,788,385) 6,367,450 (13,529,477) (22,094,443) Other transfers from (to) the General Account 475,048 429,847 362,788 533,687 45,879 181,419 ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in net assets from contract transactions (17,087,045) (30,743,077) (25,565,162) (14,302,766) (14,392,391) (29,393,972) ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in net assets (60,487,382) (20,229,734) (36,809,970) (7,862,378) (48,062,921) (24,705,565) NET ASSETS: Beginning of year 114,546,423 134,776,157 122,787,838 130,650,216 98,958,575 123,664,140 ------------ ------------ ------------ ------------ ------------ ------------ End of year $ 54,059,041 $114,546,423 $ 85,977,868 $122,787,838 $ 50,895,654 $ 98,958,575 ============ ============ ============ ============ ============ ============
The accompanying notes are an integral part of these financial statements. SA-37 COMMONWEALTH SELECT SEPARATE ACCOUNT STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31,
GOLDMAN SACHS VIT GOLDMAN SACHS VIT GOLDMAN SACHS VIT GOVERNMENT GROWTH MID CAP INCOME FUND OPPORTUNITIES FUND VALUE FUND SERVICE SHARES SERVICE SHARES SERVICE SHARES ------------------------ -------------------------- -------------------------- 2008 2007 2008 2007 2008 2007 ----------- ----------- ------------ ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ 894,803 $ 587,252 $ (687,973) $ (998,164) $ (318,427) $ (575,255) Net realized gain (loss) (169,796) (159,580) (5,146,068) 6,169,299 (4,611,647) 9,134,591 Change in unrealized gain (loss) (199,098) 850,614 (17,362,697) 6,592,972 (14,626,960) (6,571,045) ----------- ----------- ------------ ------------ ------------ ------------ Net increase (decrease) in net assets from operations 525,909 1,278,286 (23,196,738) 11,764,107 (19,557,034) 1,988,291 ----------- ----------- ------------ ------------ ------------ ------------ FROM CONTRACT TRANSACTIONS: Net purchase payments 17,334 28,638 87,156 220,719 177,546 214,749 Withdrawals (3,632,813) (2,675,843) (8,002,801) (12,056,886) (6,938,698) (11,415,056) Contract benefits (897,259) (623,803) (1,742,802) (2,776,822) (1,591,855) (2,641,730) Contract charges (58,501) (40,909) (66,235) (83,649) (71,121) (99,855) Transfers between sub-accounts (including Separate Account GPA), net 12,427,716 5,077,366 (2,593,980) (4,216,456) (3,475,480) (4,665,432) Other transfers from (to) the General Account 10,887 167,627 120,234 178,269 320,113 337,770 ----------- ----------- ------------ ------------ ------------ ------------ Net increase (decrease) in net assets from contract transactions 7,867,364 1,933,076 (12,198,428) (18,734,825) (11,579,495) (18,269,554) ----------- ----------- ------------ ------------ ------------ ------------ Net increase (decrease) in net assets 8,393,273 3,211,362 (35,395,166) (6,970,718) (31,136,529) (16,281,263) NET ASSETS: Beginning of year 24,305,440 21,094,078 65,263,283 72,234,001 60,124,623 76,405,886 ----------- ----------- ------------ ------------ ------------ ------------ End of year $32,698,713 $24,305,440 $ 29,868,117 $ 65,263,283 $ 28,988,094 $ 60,124,623 =========== =========== ============ ============ ============ ============
The accompanying notes are an integral part of these financial statements. SA-38 COMMONWEALTH SELECT SEPARATE ACCOUNT STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31,
GOLDMAN SACHS VIT GOLDMAN SACHS VIT STRATEGIC GOLDMAN SACHS VIT MONEY INTERNATIONAL STRUCTURED U.S. MARKET FUND EQUITY FUND EQUITY FUND SERVICE SHARES SERVICE SHARES SERVICE SHARES -------------------------- -------------------------- ----------------------- 2008 2007 2008 2007 2008 2007 ------------ ------------ ------------ ------------ ----------- ---------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ 796,812 $ 3,308,725 $ 631,656 $ (167,944) $ 1,593 $ (16,400) Net realized gain (loss) -- -- 4,137,969 16,450,167 (77,880) 463,599 Change in unrealized gain (loss) -- -- (37,165,378) (10,948,333) (866,218) (517,029) ------------ ------------ ------------ ------------ ----------- ---------- Net increase (decrease) in net assets from operations 796,812 3,308,725 (32,395,753) 5,333,890 (942,505) (69,830) ------------ ------------ ------------ ------------ ----------- ---------- FROM CONTRACT TRANSACTIONS: Net purchase payments 177,252 1,015,419 129,473 287,500 7,895 6,111 Withdrawals (29,412,520) (29,134,372) (7,868,146) (13,778,877) (257,603) (318,096) Contract benefits (3,613,962) (12,773,359) (1,558,079) (2,641,757) (109,163) (69,062) Contract charges (166,636) (163,536) (85,790) (116,970) (4,493) (7,156) Transfers between sub-accounts (including Separate Account GPA), net 26,582,302 38,853,851 (978,934) (3,272,669) 63,402 (318,201) Other transfers from (to) the General Account 4,685,120 2,191,406 197,208 252,911 101 26,533 ------------ ------------ ------------ ------------ ----------- ---------- Net increase (decrease) in net assets from contract transactions (1,748,444) (10,591) (10,164,268) (19,269,862) (299,861) (679,871) ------------ ------------ ------------ ------------ ----------- ---------- Net increase (decrease) in net assets (951,632) 3,298,134 (42,560,021) (13,935,972) (1,242,366) (749,701) NET ASSETS: Beginning of year 92,803,442 89,505,308 76,412,193 90,348,165 2,818,747 3,568,448 ------------ ------------ ------------ ------------ ----------- ---------- End of year $ 91,851,810 $ 92,803,442 $ 33,852,172 $ 76,412,193 $ 1,576,381 $2,818,747 ============ ============ ============ ============ =========== ==========
The accompanying notes are an integral part of these financial statements. SA-39 COMMONWEALTH SELECT SEPARATE ACCOUNT STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31,
JANUS ASPEN JANUS ASPEN JANUS ASPEN INTERNATIONAL LARGE CAP GROWTH AND INCOME GROWTH GROWTH PORTFOLIO PORTFOLIO PORTFOLIO SERVICE SHARES SERVICE SHARES SERVICE SHARES ------------------------ ------------------------- ------------------------ 2008 2007 2008 2007 2008 2007 ----------- ----------- ------------ ----------- ----------- ----------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ (55,233) $ 46,766 $ (71,635) $ (301,042) $ (101,049) $ (135,834) Net realized gain (loss) 178,806 1,075,691 5,219,110 4,514,442 315,724 684,771 Change in unrealized gain (loss) (4,424,728) (228,221) (21,019,567) 2,827,902 (6,204,458) 1,468,659 ----------- ----------- ------------ ----------- ----------- ----------- Net increase (decrease) in net assets from operations (4,301,155) 894,236 (15,872,092) 7,041,302 (5,989,783) 2,017,596 ----------- ----------- ------------ ----------- ----------- ----------- FROM CONTRACT TRANSACTIONS: Net purchase payments 9,169 14,348 28,941 48,349 9,360 26,590 Withdrawals (1,158,676) (1,596,506) (2,352,523) (3,674,629) (1,387,596) (1,893,240) Contract benefits (217,828) (481,174) (482,096) (3,307,420) (230,879) (207,665) Contract charges (15,688) (21,522) (47,040) (61,098) (29,078) (38,676) Transfers between sub-accounts (including Separate Account GPA), net (1,226,822) (1,026,236) (2,135,530) 4,575,996 (975,518) 532,681 Other transfers from (to) the General Account 222 31,430 151,140 158,560 (8,314) 18,642 ----------- ----------- ------------ ----------- ----------- ----------- Net increase (decrease) in net assets from contract transactions (2,609,623) (3,079,660) (4,837,108) (2,260,242) (2,622,025) (1,561,668) ----------- ----------- ------------ ----------- ----------- ----------- Net increase (decrease) in net assets (6,910,778) (2,185,424) (20,709,200) 4,781,060 (8,611,808) 455,928 NET ASSETS: Beginning of year 12,131,559 14,316,983 33,445,650 28,664,590 16,644,926 16,188,998 ----------- ----------- ------------ ----------- ----------- ----------- End of year $ 5,220,781 $12,131,559 $ 12,736,450 $33,445,650 $ 8,033,118 $16,644,926 =========== =========== ============ =========== =========== ===========
The accompanying notes are an integral part of these financial statements. SA-40 COMMONWEALTH SELECT SEPARATE ACCOUNT STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31,
JANUS ASPEN MID CAP GROWTH MFS(R) MID CAP MFS(R) NEW PORTFOLIO GROWTH SERIES DISCOVERY SERIES SERVICE SHARES SERVICE CLASS SERVICE CLASS ----------------------- ----------------------- ---------------------- 2008 2007 2008 2007 2008 2007 ----------- ---------- ----------- ---------- ---------- ---------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ (74,109) $ (87,688) $ (37,202) $ (60,366) $ (17,015) $ (27,145) Net realized gain (loss) 439,099 752,667 273,792 382,515 177,940 263,736 Change in unrealized gain (loss) (3,254,790) 485,995 (1,885,482) 31,977 (732,428) (187,002) ----------- ---------- ----------- ---------- ---------- ---------- Net increase (decrease) in net assets from operations (2,889,800) 1,150,974 (1,648,892) 354,126 (571,503) 49,589 ----------- ---------- ----------- ---------- ---------- ---------- FROM CONTRACT TRANSACTIONS: Net purchase payments 3,319 14,211 19,095 4,452 1,136 815 Withdrawals (810,919) (952,362) (525,941) (756,387) (146,524) (201,762) Contract benefits (48,182) (157,626) (66,283) (121,606) (68,566) - Contract charges (12,247) (13,953) (6,310) (9,092) (2,485) (3,923) Transfers between sub-accounts (including Separate Account GPA), net (1,249,255) 1,986,743 (477,996) 158,608 42,405 (380,522) Other transfers from (to) the General Account 25,652 28,377 2,553 14,795 6,554 7,851 ----------- ---------- ----------- ---------- ---------- ---------- Net increase (decrease) in net assets from contract transactions (2,091,632) 905,390 (1,054,882) (709,230) (167,480) (577,541) ----------- ---------- ----------- ---------- ---------- ---------- Net increase (decrease) in net assets (4,981,432) 2,056,364 (2,703,774) (355,104) (738,983) (527,952) NET ASSETS: Beginning of year 7,628,365 5,572,001 4,017,425 4,372,529 1,578,278 2,106,230 ----------- ---------- ----------- ---------- ---------- ---------- End of year $ 2,646,933 $7,628,365 $ 1,313,651 $4,017,425 $ 839,295 $1,578,278 =========== ========== =========== ========== ========== ==========
The accompanying notes are an integral part of these financial statements. SA-41 COMMONWEALTH SELECT SEPARATE ACCOUNT STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31,
OPPENHEIMER MFS(R) TOTAL MFS(R) BALANCED RETURN SERIES UTILITIES SERIES FUND/VA SERVICE CLASS SERVICE CLASS SERVICE SHARES ------------------------ ------------------------ ----------------------- 2008 2007 2008 2007 2008 2007 ----------- ----------- ----------- ----------- ----------- ---------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ 279,796 $ 211,261 $ (7,526) $ (88,612) $ 81,504 $ 39,713 Net realized gain (loss) 441,784 1,415,404 1,797,698 2,735,577 (215,093) 637,913 Change in unrealized gain (loss) (5,169,599) (1,032,055) (6,927,883) 672,411 (2,577,839) (630,964) ----------- ----------- ----------- ----------- ----------- ---------- Net increase (decrease) in net assets from operations (4,448,019) 594,610 (5,137,711) 3,319,376 (2,711,428) 46,662 ----------- ----------- ----------- ----------- ----------- ---------- FROM CONTRACT TRANSACTIONS: Net purchase payments 16,116 19,336 17,937 115,793 2,501 1,499 Withdrawals (2,096,992) (2,976,635) (1,527,045) (2,237,711) (537,321) (886,693) Contract benefits (866,703) (655,601) (227,634) (638,566) (156,543) (80,179) Contract charges (32,242) (39,097) (23,583) (30,469) (8,446) (10,863) Transfers between sub-accounts (including Separate Account GPA), net (326,454) (795,995) (911,042) 773,087 (605,574) 498,407 Other transfers from (to) the General Account 209,439 322,379 71,865 158,185 5,220 992 ----------- ----------- ----------- ----------- ----------- ---------- Net increase (decrease) in net assets from contract transactions (3,096,836) (4,125,613) (2,599,502) (1,859,681) (1,300,163) (476,837) ----------- ----------- ----------- ----------- ----------- ---------- Net increase (decrease) in net assets (7,544,855) (3,531,003) (7,737,213) 1,459,695 (4,011,591) (430,175) NET ASSETS: Beginning of year 20,764,997 24,296,000 14,611,619 13,151,924 7,007,759 7,437,934 ----------- ----------- ----------- ----------- ----------- ---------- End of year $13,220,142 $20,764,997 $ 6,874,406 $14,611,619 $ 2,996,168 $7,007,759 =========== =========== =========== =========== =========== ==========
The accompanying notes are an integral part of these financial statements. SA-42 COMMONWEALTH SELECT SEPARATE ACCOUNT STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31,
OPPENHEIMER OPPENHEIMER OPPENHEIMER CAPITAL APPRECIATION GLOBAL SECURITIES HIGH INCOME FUND/VA FUND/VA FUND/VA SERVICE SHARES SERVICE SHARES SERVICE SHARES ------------------------ ------------------------- ------------------------ 2008 2007 2008 2007 2008 2007 ----------- ----------- ------------ ----------- ----------- ----------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ (71,886) $ (111,468) $ 3,854 $ (37,239) $ 416,023 $ 594,581 Net realized gain (loss) 221,854 914,690 1,240,299 3,611,034 (763,313) 27,782 Change in unrealized gain (loss) (2,954,009) 154,770 (9,072,751) (2,173,437) (5,243,307) (789,934) ----------- ----------- ------------ ----------- ----------- ----------- Net increase (decrease) in net assets from operations (2,804,041) 957,992 (7,828,598) 1,400,358 (5,590,597) (167,571) ----------- ----------- ------------ ----------- ----------- ----------- FROM CONTRACT TRANSACTIONS: Net purchase payments 1,256 7,372 21,347 30,374 1,561 28,453 Withdrawals (877,877) (1,081,370) (2,179,584) (4,244,425) (1,641,872) (1,078,523) Contract benefits (182,709) (235,677) (520,850) (658,568) (92,064) (283,659) Contract charges (10,181) (13,661) (27,133) (40,979) (11,315) (18,081) Transfers between sub-accounts (including Separate Account GPA), net (518,211) (2,165,339) (3,336,562) (1,769,838) (425,344) (429,571) Other transfers from (to) the General Account 417 (1,854) 119,522 37,495 29,051 20,102 ----------- ----------- ------------ ----------- ----------- ----------- Net increase (decrease) in net assets from contract transactions (1,587,305) (3,490,529) (5,923,260) (6,645,941) (2,139,983) (1,761,279) ----------- ----------- ------------ ----------- ----------- ----------- Net increase (decrease) in net assets (4,391,346) (2,532,537) (13,751,858) (5,245,583) (7,730,580) (1,928,850) NET ASSETS: Beginning of year 7,202,283 9,734,820 23,387,789 28,633,372 9,400,712 11,329,562 ----------- ----------- ------------ ----------- ----------- ----------- End of year $ 2,810,937 $ 7,202,283 $ 9,635,931 $23,387,789 $ 1,670,132 $ 9,400,712 =========== =========== ============ =========== =========== ===========
The accompanying notes are an integral part of these financial statements. SA-43 COMMONWEALTH SELECT SEPARATE ACCOUNT STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31,
OPPENHEIMER PIONEER MAIN STREET PIONEER REAL ESTATE FUND(R)/VA FUND VCT SHARES VCT SERVICE SHARES PORTFOLIO CLASS II PORTFOLIO CLASS II ------------------------ ------------------------ -------------------------- 2008 2007 2008 2007 2008 2007 ----------- ----------- ----------- ----------- ------------ ------------ INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ (2,474) $ (26,095) $ 10,537 $ (44,540) $ 356,751 $ 294,856 Net realized gain (loss) 291,682 448,716 496,756 970,440 3,251,226 6,014,261 Change in unrealized gain (loss) (1,763,712) (246,885) (3,425,833) (518,822) (9,392,511) (11,696,698) ----------- ----------- ----------- ----------- ------------ ------------ Net increase (decrease) in net assets from operations (1,474,504) 175,736 (2,918,540) 407,078 (5,784,534) (5,387,581) ----------- ----------- ----------- ----------- ------------ ------------ FROM CONTRACT TRANSACTIONS: Net purchase payments 1,756 3,810 2,712 19,506 25,600 39,057 Withdrawals (463,390) (727,621) (1,110,721) (1,457,063) (1,988,168) (4,997,254) Contract benefits (91,524) (314,545) (154,952) (414,377) (359,384) (550,810) Contract charges (6,595) (9,387) (14,939) (19,976) (29,631) (52,067) Transfers between sub-accounts (including Separate Account GPA), net (317,159) (193,349) 254,688 (578,793) (2,116,434) (4,661,090) Other transfers from (to) the General Account 2,129 24,748 2,930 19,160 14,384 75,417 ----------- ----------- ----------- ----------- ------------ ------------ Net increase (decrease) in net assets from contract transactions (874,783) (1,216,344) (1,020,282) (2,431,543) (4,453,633) (10,146,747) ----------- ----------- ----------- ----------- ------------ ------------ Net increase (decrease) in net assets (2,349,287) (1,040,608) (3,938,822) (2,024,465) (10,238,167) (15,534,328) NET ASSETS: Beginning of year 4,379,281 5,419,889 9,717,589 11,742,054 18,596,469 34,130,797 ----------- ----------- ----------- ----------- ------------ ------------ End of year $ 2,029,994 $ 4,379,281 $ 5,778,767 $ 9,717,589 $ 8,358,302 $ 18,596,469 =========== =========== =========== =========== ============ ============
The accompanying notes are an integral part of these financial statements. SA-44 COMMONWEALTH SELECT SEPARATE ACCOUNT STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31,
T. ROWE PRICE INTERNATIONAL STOCK PORTFOLIO -------------------------- 2008 2007 ------------ ------------ INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ 245,888 $ (52,799) Net realized gain (loss) 3,186,182 13,849,142 Change in unrealized gain (loss) (33,235,321) (6,174,685) ------------ ------------ Net increase (decrease) in net assets from operations (29,803,251) 7,621,658 ------------ ------------ FROM CONTRACT TRANSACTIONS: Net purchase payments 108,542 194,109 Withdrawals (5,807,371) (9,032,188) Contract benefits (1,052,344) (2,381,904) Contract charges (91,211) (122,936) Transfers between sub-accounts (including Separate Account GPA), net (429,173) (2,186,725) Other transfers from (to) the General Account 22,767 159,233 ------------ ------------ Net increase (decrease) in net assets from contract transactions (7,248,790) (13,370,411) ------------ ------------ Net increase (decrease) in net assets (37,052,041) (5,748,753) NET ASSETS: Beginning of year 66,164,493 71,913,246 ------------ ------------ End of year $ 29,112,452 $ 66,164,493 ============ ============
The accompanying notes are an integral part of these financial statements. SA-45 COMMONWEALTH SELECT SEPARATE ACCOUNT NOTES TO FINANCIAL STATEMENTS NOTE 1 - ORGANIZATION The Commonwealth Select Separate Account (the "Separate Account"), which funds the Commonwealth Select Acclaim, Commonwealth Select Charter, Commonwealth Select Resource, Commonwealth Select Resource II, Commonwealth Select Reward and the Commonwealth Optim-L annuity contracts, is a separate investment account of Commonwealth Annuity and Life Insurance Company ("Commonwealth Annuity"), established on March 5, 1992 for the purpose of separating from the general assets of Commonwealth Annuity those assets used to fund the variable portion of certain variable annuity contracts (the "Contracts") issued by Commonwealth Annuity. Prior to September 1, 2006, Commonwealth Annuity was Allmerica Financial Life Insurance and Annuity Company. Prior to December 30, 2005 ("the Closing Date") Commonwealth Annuity was a wholly-owned subsidiary of The Hanover Insurance Group, Inc. ("THG"). Prior to December 1, 2005 THG was named Allmerica Financial Corporation. On the Closing Date THG sold Commonwealth Annuity and its closed block of variable annuity and variable life business to The Goldman Sachs Group, Inc. ("Goldman Sachs"). On January 9, 2006, the Allmerica Investment Trust ("AIT") funds were reorganized into corresponding funds of the Goldman Sachs Variable Insurance Trust ("Goldman Sachs VIT"). Goldman Sachs Asset Management, L.P. ("GSAM"), a subsidiary of Goldman Sachs, is investment advisor to the Goldman Sachs VIT funds. On January 11, 2006, Goldman Sachs purchased Allmerica Financial Investment Management Services, Inc. ("AFIMS"), which had served as the investment manager of the nine investment funds of AIT. AFIMS had no relationship with the Goldman Sachs VIT funds. As of December 31, 2008, Epoch Securities, Inc. ("Epoch") is the principal underwriter for the Separate Account. Epoch, an affiliate of Commonwealth Annuity, is a wholly-owned subsidiary of Goldman Sachs. Under applicable insurance law, the assets and liabilities of the Separate Account are clearly identified and distinguished from the other assets and liabilities of Commonwealth Annuity. The Separate Account cannot be charged with liabilities arising out of any other business of Commonwealth Annuity. Commonwealth Annuity's General Account is subject to the claims of creditors. The Separate Account is registered as a unit investment trust under the Investment Company Act of 1940, as amended (the "1940 Act"). Sixty-one Sub-Accounts are currently offered by the Separate Account, all of which had activity during the year. Each Sub-Account invests exclusively in one of the Funds ("Underlying Funds") that are part of the following fund groups: AIM Variable Insurance Funds AllianceBernstein Variable Products Series Fund, Inc. DWS Investments VIT Funds DWS Variable Series II Eaton Vance Variable Trust Fidelity Variable Insurance Products Funds Franklin Templeton Variable Insurance Products Trust Goldman Sachs Variable Insurance Trust Janus Aspen Series MFS(R) Variable Insurance Trust(SM) Oppenheimer Variable Account Funds Pioneer Variable Contracts Trust T. Rowe Price International Series, Inc. The fund groups listed above are open-end, diversified management investment companies registered under the 1940 Act. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates at the date of the financial statements. Actual results could differ from those estimates. The following is a summary of significant accounting policies followed by the Separate Account in the preparation of its financial statements. SA-46 COMMONWEALTH SELECT SEPARATE ACCOUNT NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) INVESTMENTS - Security transactions are recorded as of the trade date. Investments held by the Sub-Accounts are stated at the net asset value per share of the Underlying Funds. Realized investment gains and losses are determined using the average cost method. Dividend income and capital gain distributions are recorded on the ex-distribution date and are reinvested in additional shares of the Underlying Funds at net asset value. Investment income receivable represents dividends receivable by, but not yet reinvested in, the Underlying Funds. FINANCIAL INSTRUMENTS - Commonwealth Annuity adopted Statement of Financial Accounting Standards No. 157, "Fair Value Measurements," ("SFAS No. 157") as of the beginning of 2007. SFAS No. 157 clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Under SFAS No. 157, fair value measurements are not adjusted for transaction costs. SFAS No. 157 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The effect of adopting SFAS No. 157 was not material to Commonwealth Annuity's financial position or results of operations. The three levels of the fair value hierarchy under SFAS No. 157 are described below: Basis of Fair Value Measurement Level 1 Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities; Level 2 Quoted prices in markets that are not active or financial instruments for which all significant inputs are observable, either directly or indirectly; Level 3 Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable. A financial instrument's level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The open-ended mutual funds in the Separate Account produce a daily NAV that is validated with a sufficient level of observable activity to support classification of the fair value measurement as level 1. STATEMENTS OF CHANGES IN NET ASSETS - Contract Owners may allocate their Contract Values to variable investment options in the Separate Account, the Fixed Account and the Guaranteed Period Account. The Fixed Account is a part of Commonwealth Annuity's General Account that guarantees principal and a fixed minimum interest rate. The Guaranteed Period Account is included in Separate Account GPA, a non-registered separate account offered by Commonwealth Annuity, which offers fixed rates of interest for specified periods. Net Purchase Payments represent payments under the Contracts ( excluding amounts allocated to the Fixed and Guaranteed Period Accounts ) reduced by applicable deductions, charges, and state premium taxes. Contract Charges are deductions from Contract Values for optional rider benefits and annual contract fees. Contract benefits are payments made to Contract Owners and beneficiaries under the terms of the Contracts. Transfers between Sub-Accounts (including Separate Account GPA), net, are amounts that Contract Owners have directed to be moved among variable Sub-Accounts and the Guaranteed Period Account. Other transfers from (to) the General Account include certain transfers from and to contracts in the annuitization phase, reserve adjustments, and withdrawal charges. FEDERAL INCOME TAXES - The operations of the Separate Account are included in the federal income tax return of Commonwealth Annuity, which is taxed as a life insurance company under Subchapter L of the Internal Revenue Code ("IRC"). Under the current provisions of the IRC, Commonwealth Annuity does not expect to incur federal income taxes on the earnings or realized capital gains attributable to the Separate Account. Based on this, no Federal income tax provision is required. Commonwealth Annuity will review periodically the status of this policy in the event of changes in the tax law. A charge may be made in future years for any federal income taxes that would be attributable to the Contracts. SA-47 COMMONWEALTH SELECT SEPARATE ACCOUNT NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Under the provisions of Section 817(h) of the IRC, a variable annuity contract will not be treated as an annuity contract for federal income tax purposes for any period for which the investments of the segregated asset account on which the contract is based are not adequately diversified. The IRC provides that the "adequately diversified" requirement may be met if the underlying investments satisfy either a statutory safe harbor test or diversification requirements set forth in regulations issued by the Secretary of the Treasury. The Internal Revenue Service has issued regulations under Section 817(h) of the IRC. Commonwealth Annuity believes that the Separate Account satisfies the current requirements of the regulations, and it intends that it will continue to meet such requirements. NOTE 3 - EXPENSES AND RELATED PARTY TRANSACTIONS Commonwealth Annuity makes a daily charge against the net assets of each Sub-Account to compensate for certain mortality and expense risks it has assumed. If the charge for mortality and expense risks isn't sufficient to cover actual mortality experience and expenses, Commonwealth Annuity will absorb the losses. If costs are less than the amounts charged, the difference will be a profit to Commonwealth Annuity. Commonwealth Annuity also makes a daily administrative charge against the net assets of each Sub-Account. Both of these charges are imposed during the accumulation and annuity payout phase. A Contract fee may be deducted from the contract value annually during the accumulation phase and upon full surrender of the Contract, if the accumulated value is below certain levels. This fee is currently waived for certain types of contracts, and, where permitted by law, for contracts whose owner or annuitant has certain affiliations with Commonwealth Annuity, or has certain family members with such an affiliation. When contract value has been allocated to more than one investment option, contract deductions are made from each on a pro-rata basis. Subject to state availability, Commonwealth Annuity offers a number of optional riders. A separate monthly charge is made for each rider. The annual rates of Mortality and Expense Risk Fees, Administrative Expense Fees, Optional Rider Fees, and the maximum dollar amount of the Contract fee for the year ended are displayed in the table below.
COMMONWEALTH SELECT RESOURCE & COMMONWEALTH COMMONWEALTH COMMONWEALTH COMMONWEALTH COMMONWEALTH SELECT ACCLAIM SELECT CHARTER SELECT RESOURCE II SELECT REWARD OPTIM-L Mortality and Expense Risk (Annual Rate) 1.20% 1.25% 1.25% 1.25% 1.60% Administrative Expense 0.15% 0.15% 0.15% 0.15% 0.15% (Annual Rate) Optional Rider Fees (Annual Rate) 0.15-0.50% 0.15-0.25% 0.15-0.25% 0.20-0.50% 0.25-0.50% Annual Contract Fees $35 $35 $30 $35 $35 (Annual Rate)
A surrender charge may be deducted from the accumulated value of the Contract in the case of surrender or partial redemption of the Contract, or at the time annuity payments begin. The amount charged is determined by the product, the length of time the Contract has been in force, the category of accumulated value surrendered or redeemed, the time elapsed since the amount surrendered or redeemed was credited to the Contract, and whether the Contract Owner or annuitant are included in certain classes exempt from these charges. The maximum charge will not exceed 8% of the amount surrendered or redeemed. Some states and municipalities impose premium taxes, which currently range up to 3.5%, on variable annuity contracts. SA-48 COMMONWEALTH SELECT SEPARATE ACCOUNT NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 3 - EXPENSES AND RELATED PARTY TRANSACTIONS (CONTINUED) The disclosures above include charges currently assessed to the Contract Owner. There are certain other charges that may be assessed in future periods, at the discretion of Commonwealth Annuity, in accordance with Contract terms. Detailed descriptions of all fees and charges are available in the product prospectuses. During the year ended December 31, 2008 management fees of the Underlying Goldman Sachs VIT Funds were paid directly by the funds to GSAM in its capacity as investment manager and administrator of Goldman Sachs VIT funds. The Goldman Sachs VIT Funds' advisory agreement provided for fees ranging from 0.27% to 1.02% based on individual portfolios and average daily net assets. According to a Plan of Distribution and Service pursuant to Rule 12b-1 under the 1940 Act, each Goldman Sachs VIT fund paid a fee equal to an annual rate of 0.16% to 0.25% of the Fund's average daily net assets. SA-49 COMMONWEALTH SELECT SEPARATE ACCOUNT NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 4 - CONTRACT OWNER AND SPONSOR TRANSACTIONS Transactions from Contract Owners and Sponsor were as follows:
COMMONWEALTH SELECT RESOURCE, COMMONWEALTH SELECT RESOURCE II, COMMONWEALTH SELECT CHARTER AND COMMONWEALTH SELECT REWARD YEAR ENDED DECEMBER 31, 2008 2007 ----------------------- ------------------------- UNITS AMOUNT UNITS AMOUNT ---------- ----------- ----------- ------------ AIM V.I. Basic Value Fund Series II Shares Issuance of Units 670,104 $ 523,418 3,706,060 $ 4,855,965 Redemption of Units (1,620,994) (1,467,263) (5,068,268) (6,656,200) ---------- ----------- ----------- ------------ Net increase (decrease) (950,890) $ (943,845) (1,362,208) $ (1,800,235) ========== =========== =========== ============ AIM V.I. Capital Appreciation Fund Series I Shares Issuance of Units 784,600 $ 530,702 2,104,102 $ 1,776,605 Redemption of Units (1,644,660) (1,107,780) (3,449,707) (2,886,228) ---------- ----------- ----------- ------------ Net increase (decrease) (860,060) $ (577,078) (1,345,605) $ (1,109,623) ========== =========== =========== ============ AIM V.I. Capital Development Fund Series II Shares Issuance of Units 66,661 $ 72,786 1,526,618 $ 2,341,026 Redemption of Units (382,247) (424,853) (1,746,750) (2,666,886) ---------- ----------- ----------- ------------ Net increase (decrease) (315,586) $ (352,067) (220,132) $ (325,860) ========== =========== =========== ============ AIM V.I. Core Equity Fund Series I Shares Issuance of Units 1,210,811 $ 965,431 1,643,803 $ 1,477,942 Redemption of Units (2,641,889) (2,093,020) (3,718,249) (3,327,888) ---------- ----------- ----------- ------------ Net increase (decrease) (1,431,078) $(1,127,589) (2,074,446) $ (1,849,946) ========== =========== =========== ============ AIM V.I. Dynamics Fund Series I Shares Issuance of Units 252,756 $ 143,960 1,423,682 $ 1,158,116 Redemption of Units (1,518,551) (945,900) (4,272,615) (3,349,173) ---------- ----------- ----------- ------------ Net increase (decrease) (1,265,795) $ (801,940) (2,848,933) $ (2,191,057) ========== =========== =========== ============ AIM V.I. Global Health Care Fund Series I Shares Issuance of Units 842,398 $ 816,837 941,099 $ 976,903 Redemption of Units (1,449,585) (1,327,866) (2,353,422) (2,426,218) ---------- ----------- ----------- ------------ Net increase (decrease) (607,187) $ (511,029) (1,412,323) $ (1,449,315) ========== =========== =========== ============ AIM V.I. Large Cap Growth Fund Series I Shares Issuance of Units 948,067 $ 663,986 2,179,439 $ 1,662,324 Redemption of Units (3,669,853) (2,386,618) (4,390,486) (3,302,758) ---------- ----------- ----------- ------------ Net increase (decrease) (2,721,786) $(1,722,632) (2,211,047) $ (1,640,434) ========== =========== =========== ============ AllianceBernstein VPS Global Technology Portfolio Class B Issuance of Units 360,865 $ 400,548 1,252,202 $ 1,606,259 Redemption of Units (784,468) (784,403) (1,286,136) (1,547,737) ---------- ----------- ----------- ------------ Net increase (decrease) (423,603) $ (383,855) (33,934) $ 58,522 ========== =========== =========== ============ AllianceBernstein VPS Growth and Income Portfolio Class B Issuance of Units 2,042,094 $ 2,095,528 4,928,200 $ 6,763,569 Redemption of Units (7,897,383) (8,404,272) (14,296,458) (19,566,030) ---------- ----------- ----------- ------------ Net increase (decrease) (5,855,289) $(6,308,744) (9,368,258) $(12,802,461) ========== =========== =========== ============
SA-50 COMMONWEALTH SELECT SEPARATE ACCOUNT NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 4 - CONTRACT OWNER AND SPONSOR TRANSACTIONS (CONTINUED)
COMMONWEALTH SELECT RESOURCE, COMMONWEALTH SELECT RESOURCE II, COMMONWEALTH SELECT CHARTER AND COMMONWEALTH SELECT REWARD (CONTINUED) YEAR ENDED DECEMBER 31, 2008 2007 ----------------------- ------------------------- UNITS AMOUNT UNITS AMOUNT ---------- ----------- ----------- ------------ AllianceBernstein VPS Large Cap Growth Portfolio Class A Issuance of Units 1,223,823 $ 849,070 4,598,772 $ 4,090,287 Redemption of Units (7,786,565) (5,917,022) (10,922,116) (9,593,914) ---------- ----------- ----------- ------------ Net increase (decrease) (6,562,742) $(5,067,952) (6,323,344) $ (5,503,627) ========== =========== =========== ============ AllianceBernstein VPS Large Cap Growth Portfolio Class B Issuance of Units 177,139 $ 138,437 704,877 $ 674,263 Redemption of Units (1,353,447) (1,110,039) (1,454,029) (1,353,963) ---------- ----------- ----------- ------------ Net increase (decrease) (1,176,308) $ (971,602) (749,152) $ (679,700) ========== =========== =========== ============ AllianceBernstein VPS Small/Mid Cap Value Portfolio Class B Issuance of Units 645,868 $ 864,402 2,610,396 $ 4,455,047 Redemption of Units (1,922,955) (2,550,722) (3,098,595) (5,224,259) ---------- ----------- ----------- ------------ Net increase (decrease) (1,277,087) $(1,686,320) (488,199) $ (769,212) ========== =========== =========== ============ AllianceBernstein VPS Value Portfolio Class B Issuance of Units 596,470 $ 633,374 6,079,760 $ 9,209,696 Redemption of Units (1,527,776) (1,692,099) (7,909,381) (11,888,047) ---------- ----------- ----------- ------------ Net increase (decrease) (931,306) $(1,058,725) (1,829,621) $ (2,678,351) ========== =========== =========== ============ DWS Dreman High Return Equity VIP Class A Issuance of Units 433,453 $ 440,279 853,900 $ 1,239,209 Redemption of Units (1,034,433) (1,114,331) (1,784,592) (2,603,621) ---------- ----------- ----------- ------------ Net increase (decrease) (600,980) $ (674,052) (930,692) $ (1,364,412) ========== =========== =========== ============ DWS Small Cap Index VIP Class A Issuance of Units 1,610,539 $ 2,043,354 2,967,177 $ 4,661,627 Redemption of Units (3,199,740) (4,050,901) (4,569,743) (7,132,723) ---------- ----------- ----------- ------------ Net increase (decrease) (1,589,201) $(2,007,547) (1,602,566) $ (2,471,096) ========== =========== =========== ============ DWS Technology VIP Class A Issuance of Units 347,789 $ 128,326 2,378,471 $ 1,207,921 Redemption of Units (1,659,325) (637,660) (4,095,562) (2,028,744) ---------- ----------- ----------- ------------ Net increase (decrease) (1,311,536) $ (509,334) (1,717,091) $ (820,823) ========== =========== =========== ============ Eaton Vance VT Floating-Rate Income Fund Issuance of Units 2,534,508 $ 2,464,824 7,811,765 $ 8,579,383 Redemption of Units (6,633,514) (6,569,043) (10,646,296) (11,679,290) ---------- ----------- ----------- ------------ Net increase (decrease) (4,099,006) $(4,104,219) (2,834,531) $ (3,099,907) ========== =========== =========== ============ Eaton Vance VT Worldwide Health Sciences Fund Issuance of Units 1,031,539 $ 1,150,135 1,355,044 $ 1,535,553 Redemption of Units (2,053,320) (2,233,816) (3,181,793) (3,642,025) ---------- ----------- ----------- ------------ Net increase (decrease) (1,021,781) $(1,083,681) (1,826,749) $ (2,106,472) ========== =========== =========== ============
SA-51 COMMONWEALTH SELECT SEPARATE ACCOUNT NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 4 - CONTRACT OWNER AND SPONSOR TRANSACTIONS (CONTINUED)
COMMONWEALTH SELECT RESOURCE, COMMONWEALTH SELECT RESOURCE II, COMMONWEALTH SELECT CHARTER AND COMMONWEALTH SELECT REWARD (CONTINUED) YEAR ENDED DECEMBER 31, 2008 2007 ------------------------- ------------------------- UNITS AMOUNT UNITS AMOUNT ----------- ------------ ----------- ------------ Fidelity VIP Contrafund(R) Portfolio Issuance of Units 5,127,515 $ 6,367,399 10,879,465 $ 16,534,844 Redemption of Units (12,104,570) (15,312,811) (15,874,737) (23,735,654) ----------- ------------ ----------- ------------ Net increase (decrease) (6,977,055) $ (8,945,412) (4,995,272) $ (7,200,810) =========== ============ =========== ============ Fidelity VIP Equity-Income Portfolio Issuance of Units 3,034,462 $ 6,440,229 8,779,739 $ 25,622,908 Redemption of Units (10,794,902) (24,324,265) (18,060,007) (52,717,562) ----------- ------------ ----------- ------------ Net increase (decrease) (7,760,440) $(17,884,036) (9,280,268) $(27,094,654) =========== ============ =========== ============ Fidelity VIP Growth Portfolio Issuance of Units 2,909,935 $ 6,435,211 6,645,122 $ 17,843,683 Redemption of Units (7,279,689) (16,399,123) (13,148,516) (34,276,503) ----------- ------------ ----------- ------------ Net increase (decrease) (4,369,754) $ (9,963,912) (6,503,394) $(16,432,820) =========== ============ =========== ============ Fidelity VIP Growth & Income Portfolio Issuance of Units 773,611 $ 759,945 3,258,523 $ 3,783,080 Redemption of Units (3,455,391) (3,277,621) (3,766,126) (4,326,765) ----------- ------------ ----------- ------------ Net increase (decrease) (2,681,780) $ (2,517,676) (507,603) $ (543,685) =========== ============ =========== ============ Fidelity VIP High Income Portfolio Issuance of Units 3,819,884 $ 5,154,285 10,452,601 $ 15,618,234 Redemption of Units (10,886,249) (14,961,573) (17,667,848) (26,387,253) ----------- ------------ ----------- ------------ Net increase (decrease) (7,066,365) $ (9,807,288) (7,215,247) $(10,769,019) =========== ============ =========== ============ Fidelity VIP Mid Cap Portfolio Issuance of Units 1,723,065 $ 3,125,762 4,950,088 $ 10,798,508 Redemption of Units (5,773,479) (10,517,550) (11,750,025) (24,644,036) ----------- ------------ ----------- ------------ Net increase (decrease) (4,050,414) $ (7,391,788) (6,799,937) $(13,845,528) =========== ============ =========== ============ Fidelity VIP Value Strategies Portfolio Service Class 2 Issuance of Units 799,025 $ 1,022,134 2,704,519 $ 4,463,192 Redemption of Units (1,484,875) (1,878,673) (3,005,720) (4,935,139) ----------- ------------ ----------- ------------ Net increase (decrease) (685,850) $ (856,539) (301,201) $ (471,947) =========== ============ =========== ============ FT VIP Franklin Large Cap Growth Securities Fund Class 2 Issuance of Units 448,569 $ 415,795 960,895 $ 1,204,181 Redemption of Units (1,170,233) (1,239,746) (1,319,013) (1,648,479) ----------- ------------ ----------- ------------ Net increase (decrease) (721,664) $ (823,951) (358,118) $ (444,298) =========== ============ =========== ============ FT VIP Franklin Small Cap Value Securities Fund Class 2 Issuance of Units 2,067,496 $ 2,652,671 2,126,678 $ 3,428,131 Redemption of Units (3,275,704) (4,276,567) (4,461,969) (7,188,379) ----------- ------------ ----------- ------------ Net increase (decrease) (1,208,208) $ (1,623,896) (2,335,291) $ (3,760,248) =========== ============ =========== ============
SA-52 COMMONWEALTH SELECT SEPARATE ACCOUNT NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 4 - CONTRACT OWNER AND SPONSOR TRANSACTIONS (CONTINUED)
COMMONWEALTH SELECT RESOURCE, COMMONWEALTH SELECT RESOURCE II, COMMONWEALTH SELECT CHARTER AND COMMONWEALTH SELECT REWARD (CONTINUED) YEAR ENDED DECEMBER 31, 2008 2007 ------------------------- ------------------------- UNITS AMOUNT UNITS AMOUNT ----------- ------------ ----------- ------------ FT VIP Franklin Small-Mid Cap Growth Securities Fund Class 2 Issuance of Units 1,260,361 $ 862,546 3,824,553 $ 3,580,662 Redemption of Units (3,520,517) (2,534,263) (8,023,695) (7,376,577) ----------- ------------ ----------- ------------ Net increase (decrease) (2,260,156) $ (1,671,717) (4,199,142) $ (3,795,915) =========== ============ =========== ============ FT VIP Mutual Shares Securities Fund Class 2 Issuance of Units 3,404,289 $ 4,935,453 6,908,649 $ 12,187,557 Redemption of Units (8,423,457) (11,949,950) (9,875,979) (17,378,446) ----------- ------------ ----------- ------------ Net increase (decrease) (5,019,168) $ (7,014,497) (2,967,330) $ (5,190,889) =========== ============ =========== ============ FT VIP Templeton Foreign Securities Fund Class 2 Issuance of Units 1,821,060 $ 2,672,080 5,573,048 $ 9,245,500 Redemption of Units (4,251,158) (5,977,885) (7,426,952) (12,202,507) ----------- ------------ ----------- ------------ Net increase (decrease) (2,430,098) $(3,305,805) (1,853,904) $ (2,957,007) =========== ============ =========== ============ Goldman Sachs VIT Capital Growth Fund Service Shares Issuance of Units 2,544,599 $ 4,751,180 7,572,435 $ 18,892,146 Redemption of Units (10,218,612) (21,044,230) (19,854,032) (48,764,303) ----------- ------------ ----------- ------------ Net increase (decrease) (7,674,013) $(16,293,050) (12,281,597) $(29,872,157) =========== ============ =========== ============ Goldman Sachs VIT Core Fixed Income Fund Service Shares Issuance of Units 6,886,317 $ 12,401,275 15,719,488 $ 28,596,218 Redemption of Units (19,095,418) (33,806,759) (22,770,614) (41,390,958) ----------- ------------ ----------- ------------ Net increase (decrease) (12,209,101) $(21,405,484) (7,051,126) $(12,794,740) =========== ============ =========== ============ Goldman Sachs VIT Equity Index Fund Service Shares Issuance of Units 9,589,583 $ 7,074,471 16,458,876 $ 17,339,760 Redemption of Units (25,228,721) (20,887,715) (43,446,690) (45,343,133) ----------- ------------ ----------- ------------ Net increase (decrease) (15,639,138) $(13,813,244) (26,987,814) $(28,003,373) =========== ============ =========== ============ Goldman Sachs VIT Government Income Fund Service Shares Issuance of Units 13,934,282 $ 16,265,962 8,455,623 $ 9,569,355 Redemption of Units (9,438,227) (10,984,488) (7,533,832) (8,505,728) ----------- ------------ ----------- ------------ Net increase (decrease) 4,496,055 $ 5,281,474 921,791 $ 1,063,627 =========== ============ =========== ============ Goldman Sachs VIT Growth Opportunities Fund Service Shares Issuance of Units 765,826 $ 2,341,156 3,932,584 $ 15,944,430 Redemption of Units (3,976,187) (13,863,359) (8,597,057) (34,163,103) ----------- ------------ ----------- ------------ Net increase (decrease) (3,210,361) $(11,522,203) (4,664,473) $(18,218,673) =========== ============ =========== ============ Goldman Sachs VIT Mid Cap Value Fund Service Shares Issuance of Units 1,816,573 $ 3,237,852 6,571,900 $ 14,396,923 Redemption of Units (7,556,023) (13,986,949) (14,013,181) (30,993,875) ----------- ------------ ----------- ------------ Net increase (decrease) (5,739,450) $(10,749,097) (7,441,281) $(16,596,952) =========== ============ =========== ============
SA-53 COMMONWEALTH SELECT SEPARATE ACCOUNT NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 4 - CONTRACT OWNER AND SPONSOR TRANSACTIONS (CONTINUED)
COMMONWEALTH SELECT RESOURCE, COMMONWEALTH SELECT RESOURCE II, COMMONWEALTH SELECT CHARTER AND COMMONWEALTH SELECT REWARD (CONTINUED) YEAR ENDED DECEMBER 31, 2008 2007 ------------------------- -------------------------- UNITS AMOUNT UNITS AMOUNT ----------- ------------ ----------- ------------- Goldman Sachs VIT Money Market Fund Service Shares Issuance of Units 39,368,647 $ 58,301,305 75,984,353 $ 110,008,514 Redemption of Units (39,923,320) (59,151,209) (76,031,982) (110,171,558) ----------- ------------ ----------- ------------- Net increase (decrease) (554,673) $ (849,904) (47,629) $ (163,044) =========== ============ =========== ============= Goldman Sachs VIT Strategic International Equity Fund Service Shares Issuance of Units 2,297,601 $ 3,713,471 6,098,688 $ 14,037,705 Redemption of Units (7,317,356) (13,004,030) (14,091,390) (32,185,849) ----------- ------------ ----------- ------------- Net increase (decrease) (5,019,755) $ (9,290,559) (7,992,702) $ (18,148,144) =========== ============ =========== ============= Goldman Sachs VIT Structured U.S. Equity Fund Service Shares Issuance of Units 689,628 $ 637,853 646,251 $ 841,653 Redemption of Units (788,243) (817,761) (1,075,062) (1,418,151) ----------- ------------ ----------- ------------- Net increase (decrease) (98,615) $ (179,908) (428,811) $ (576,498) =========== ============ =========== ============= Janus Aspen Growth and Income Portfolio Service Shares Issuance of Units 600,938 $ 456,138 4,039,643 $ 3,973,545 Redemption of Units (3,255,049) (2,716,929) (6,843,814) (6,727,878) ----------- ------------ ----------- ------------- Net increase (decrease) (2,654,111) $ (2,260,791) (2,804,171) $ (2,754,333) =========== ============ =========== ============= Janus Aspen International Growth Portfolio Service Shares Issuance of Units 2,609,211 $ 3,763,367 9,720,617 $ 15,493,231 Redemption of Units (6,071,209) (8,443,280) (10,834,312) (17,083,412) ----------- ------------ ----------- ------------- Net increase (decrease) (3,461,998) $ (4,679,913) (1,113,695) $ (1,590,181) =========== ============ =========== ============= Janus Aspen Large Cap Growth Portfolio Service Shares Issuance of Units 833,216 $ 508,830 4,805,987 $ 3,601,502 Redemption of Units (3,422,557) (2,150,304) (6,565,691) (4,852,582) ----------- ------------ ----------- ------------- Net increase (decrease) (2,589,341) $ (1,641,474) (1,759,704) $ (1,251,080) =========== ============ =========== ============= Janus Aspen Mid Cap Growth Portfolio Service Shares Issuance of Units 4,113,844 $ 2,608,523 10,189,155 $ 7,218,614 Redemption of Units (6,521,652) (3,938,899) (9,311,540) (6,581,315) ----------- ------------ ----------- ------------- Net increase (decrease) (2,407,808) $ (1,330,376) 877,615 $ 637,299 =========== ============ =========== ============= MFS(R) Mid Cap Growth Series Service Shares Issuance of Units 201,203 $ 136,534 604,512 $ 711,927 Redemption of Units (1,092,676) (1,017,735) (1,125,599) (1,335,785) ----------- ------------ ----------- ------------- Net increase (decrease) (891,473) $ (881,201) (521,087) $ (623,858) =========== ============ =========== ============= MFS(R) New Discovery Series Service Shares Issuance of Units 253,709 $ 209,372 592,754 $ 749,466 Redemption of Units (367,089) (343,096) (1,010,538) (1,277,694) ----------- ------------ ----------- ------------- Net increase (decrease) (113,380) $ (133,724) (417,784) $ (528,228) =========== ============ =========== =============
SA-54 COMMONWEALTH SELECT SEPARATE ACCOUNT NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 4 - CONTRACT OWNER AND SPONSOR TRANSACTIONS (CONTINUED)
COMMONWEALTH SELECT RESOURCE, COMMONWEALTH SELECT RESOURCE II, COMMONWEALTH SELECT CHARTER AND COMMONWEALTH SELECT REWARD (CONTINUED) YEAR ENDED DECEMBER 31, 2008 2007 ----------------------- ------------------------ UNITS AMOUNT UNITS AMOUNT ---------- ----------- ---------- ------------ MFS(R) Total Return Series Service Shares Issuance of Units 5,970,353 $ 6,588,552 3,410,061 $ 4,522,161 Redemption of Units (8,147,305) (9,083,061) (6,206,486) (8,180,508) ---------- ----------- ---------- ------------ Net increase (decrease) (2,176,952) $(2,494,509) (2,796,425) $ (3,658,347) ========== =========== ========== ============ MFS(R) Utilities Series Service Shares Issuance of Units 1,588,666 $ 3,577,677 3,684,090 $ 9,118,522 Redemption of Units (2,727,481) (5,885,362) (4,263,958) (10,639,049) ---------- ----------- ---------- ------------ Net increase (decrease) (1,138,815) $(2,307,685) (579,868) $ (1,520,527) ========== =========== ========== ============ Oppenheimer Balanced Fund/VA Service Shares Issuance of Units 1,603,900 $ 1,833,482 3,684,504 $ 5,111,764 Redemption of Units (2,766,657) (3,102,042) (4,092,844) (5,562,497) ---------- ----------- ---------- ------------ Net increase (decrease) (1,162,757) $(1,268,560) (408,340) $ (450,733) ========== =========== ========== ============ Oppenheimer Capital Appreciation Fund/VA Service Shares Issuance of Units 812,947 $ 865,707 1,177,886 $ 1,544,110 Redemption of Units (1,968,367) (2,091,441) (3,818,872) (4,779,657) ---------- ----------- ---------- ------------ Net increase (decrease) (1,155,420) $(1,225,734) (2,640,986) $ (3,235,547) ========== =========== ========== ============ Oppenheimer Global Securities Fund/VA Service Shares Issuance of Units 1,061,637 $ 1,389,481 3,485,792 $ 6,069,914 Redemption of Units (4,457,987) (6,354,876) (6,430,422) (11,220,342) ---------- ----------- ---------- ------------ Net increase (decrease) (3,396,350) $(4,965,395) (2,944,630) $ (5,150,428) ========== =========== ========== ============ Oppenheimer High Income Fund/VA Service Shares Issuance of Units 2,664,525 $ 1,395,612 2,135,723 $ 2,898,002 Redemption of Units (3,674,026) (3,372,859) (3,076,311) (4,165,755) ---------- ----------- ---------- ------------ Net increase (decrease) (1,009,501) $(1,977,247) (940,588) $ (1,267,753) ========== =========== ========== ============ Oppenheimer Main Street Fund(R)/VA Service Shares Issuance of Units 449,622 $ 455,064 963,941 $ 1,281,285 Redemption of Units (1,175,156) (1,261,288) (1,741,059) (2,324,094) ---------- ----------- ---------- ------------ Net increase (decrease) (725,534) $ (806,224) (777,118) $ (1,042,809) ========== =========== ========== ============ Pioneer Fund VCT Portfolio Class II Issuance of Units 1,277,611 $ 1,141,326 962,078 $ 1,150,096 Redemption of Units (1,744,260) (1,751,838) (2,892,719) (3,437,003) ---------- ----------- ---------- ------------ Net increase (decrease) (466,649) $ (610,512) (1,930,641) $ (2,286,907) ========== =========== ========== ============ Pioneer Real Estate Shares VCT Portfolio Class II Issuance of Units 689,147 $ 1,367,978 2,686,006 $ 7,449,078 Redemption of Units (2,455,278) (5,179,883) (5,752,944) (15,848,339) ---------- ----------- ---------- ------------ Net increase (decrease) (1,766,131) $(3,811,905) (3,066,938) $ (8,399,261) ========== =========== ========== ============
SA-55 COMMONWEALTH SELECT SEPARATE ACCOUNT NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 4 - CONTRACT OWNER AND SPONSOR TRANSACTIONS (CONTINUED)
COMMONWEALTH SELECT RESOURCE, COMMONWEALTH SELECT RESOURCE II, COMMONWEALTH SELECT CHARTER AND COMMONWEALTH SELECT REWARD (CONTINUED) YEAR ENDED DECEMBER 31, 2008 2007 ------------------------ ------------------------- UNITS AMOUNT UNITS AMOUNT ---------- ------------ ----------- ------------ T. Rowe Price International Stock Portfolio Issuance of Units 3,215,323 $ 4,528,880 12,746,562 $ 24,872,167 Redemption of Units (6,618,475) (10,138,779) (18,443,733) (35,728,626) ---------- ------------ ----------- ------------ Net increase (decrease) (3,403,152) $ (5,609,899) (5,697,171) $(10,856,459) ========== ============ =========== ============
COMMONWEALTH SELECT ACCLAIM YEAR ENDED DECEMBER 31, 2008 2007 ------------------------------------------ UNITS AMOUNT UNITS AMOUNT -------- --------- ---------- --------- AIM V.I. Basic Value Fund Series II Shares Issuance of Units 254,159 $ 186,056 326,914 $ 432,079 Redemption of Units (482,186) (428,977) (721,904) (946,591) -------- --------- ---------- --------- Net increase (decrease) (228,027) $(242,921) (394,990) $(514,512) ======== ========= ========== ========= AIM V.I. Capital Appreciation Fund Series I Shares Issuance of Units 258,818 $ 184,149 537,185 $ 478,945 Redemption of Units (538,735) (388,637) (1,031,863) (908,672) -------- --------- ---------- --------- Net increase (decrease) (279,917) $(204,488) (494,678) $(429,727) ======== ========= ========== ========= AIM V.I. Capital Development Fund Series II Shares Issuance of Units 81,365 $ 104,303 13,938 $ 20,862 Redemption of Units (192,172) (221,226) (61,717) (92,563) -------- --------- ---------- --------- Net increase (decrease) (110,807) $(116,923) (47,779) $ (71,701) ======== ========= ========== ========= AIM V.I. Core Equity Fund Series I Shares Issuance of Units 386,899 $ 323,517 223,811 $ 212,296 Redemption of Units (916,904) (761,361) (680,721) (651,278) -------- --------- ---------- --------- Net increase (decrease) (530,005) $(437,844) (456,910) $(438,982) ======== ========= ========== ========= AIM V.I. Dynamics Fund Series I Shares Issuance of Units 53,103 $ 34,303 43,338 $ 41,445 Redemption of Units (116,756) (79,463) (300,355) (285,244) -------- --------- ---------- --------- Net increase (decrease) (63,653) $ (45,160) (257,017) $(243,799) ======== ========= ========== ========= AIM V.I. Global Health Care Fund Series I Shares Issuance of Units 329,531 $ 318,783 132,159 $ 144,070 Redemption of Units (533,291) (510,942) (397,479) (429,910) -------- --------- ---------- --------- Net increase (decrease) (203,760) $(192,159) (265,320) $(285,840) ======== ========= ========== ========= AIM V.I. Large Cap Growth Fund Series I Shares Issuance of Units 163,534 $ 103,323 556,384 $ 438,996 Redemption of Units (820,272) (575,496) (1,170,413) (916,364) -------- --------- ---------- --------- Net increase (decrease) (656,738) $(472,173) (614,029) $(477,368) ======== ========= ========== =========
SA-56 COMMONWEALTH SELECT SEPARATE ACCOUNT NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 4 - CONTRACT OWNER AND SPONSOR TRANSACTIONS (CONTINUED)
COMMONWEALTH SELECT ACCLAIM (CONTINUED) YEAR ENDED DECEMBER 31, 2008 2007 ----------------------- ----------------------- UNITS AMOUNT UNITS AMOUNT ---------- ----------- ---------- ----------- AllianceBernstein VPS Global Technology Portfolio Class B Issuance of Units 30,359 $ 33,292 144,552 $ 187,739 Redemption of Units (82,051) (89,698) (84,441) (107,276) ---------- ----------- ---------- ----------- Net increase (decrease) (51,692) $ (56,406) 60,111 $ 80,463 ========== =========== ========== =========== AllianceBernstein VPS Growth and Income Portfolio Class B Issuance of Units 1,249,833 $ 1,301,871 1,579,558 $ 2,202,030 Redemption of Units (2,881,420) (3,149,955) (3,639,010) (5,086,689) ---------- ----------- ---------- ----------- Net increase (decrease) (1,631,587) $(1,848,084) (2,059,452) $(2,884,659) ========== =========== ========== =========== AllianceBernstein VPS Large Cap Growth Portfolio Class B Issuance of Units 891,106 $ 562,243 1,246,588 $ 1,014,695 Redemption of Units (2,122,065) (1,467,196) (2,490,806) (2,027,879) ---------- ----------- ---------- ----------- Net increase (decrease) (1,230,959) $ (904,953) (1,244,218) $(1,013,184) ========== =========== ========== =========== AllianceBernstein VPS Small/Mid Cap Value Portfolio Class B Issuance of Units 210,119 $ 280,149 547,702 $ 960,224 Redemption of Units (394,185) (518,444) (495,166) (835,950) ---------- ----------- ---------- ----------- Net increase (decrease) (184,066) $ (238,295) 52,536 $ 124,274 ========== =========== ========== =========== AllianceBernstein VPS Value Portfolio Class B Issuance of Units 213,665 $ 208,225 550,208 $ 833,563 Redemption of Units (404,590) (438,489) (1,008,357) (1,532,807) ---------- ----------- ---------- ----------- Net increase (decrease) (190,925) $ (230,264) (458,149) $ (699,244) ========== =========== ========== =========== DWS Dreman High Return Equity VIP Class A Issuance of Units 35,929 $ 37,769 140,822 $ 208,973 Redemption of Units (231,593) (267,268) (310,113) (465,514) ---------- ----------- ---------- ----------- Net increase (decrease) (195,664) $ (229,499) (169,291) $ (256,541) ========== =========== ========== =========== DWS Small Cap Index VIP Class A Issuance of Units 1,107,916 $ 1,455,811 549,548 $ 901,738 Redemption of Units (1,521,454) (1,990,846) (1,151,013) (1,894,605) ---------- ----------- ---------- ----------- Net increase (decrease) (413,538) $ (535,035) (601,465) $ (992,867) ========== =========== ========== =========== DWS Technology VIP Class A Issuance of Units 28,402 $ 13,998 149,442 $ 91,038 Redemption of Units (282,052) (140,880) (441,441) (264,909) ---------- ----------- ---------- ----------- Net increase (decrease) (253,650) $ (126,882) (291,999) $ (173,871) ========== =========== ========== =========== Eaton Vance VT Floating-Rate Income Fund Issuance of Units 384,766 $ 395,888 701,117 $ 769,094 Redemption of Units (1,043,347) (1,053,730) (1,686,966) (1,845,529) ---------- ----------- ---------- ----------- Net increase (decrease) (658,581) $ (657,842) (985,849) $(1,076,435) ========== =========== ========== =========== Eaton Vance VT Worldwide Health Sciences Fund Issuance of Units 497,478 $ 532,243 158,182 $ 182,367 Redemption of Units (632,773) (665,159) (520,323) (605,038) ---------- ----------- ---------- ----------- Net increase (decrease) (135,295) $ (132,916) (362,141) $ (422,671) ========== =========== ========== ===========
SA-57 COMMONWEALTH SELECT SEPARATE ACCOUNT NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 4 - CONTRACT OWNER AND SPONSOR TRANSACTIONS (CONTINUED)
COMMONWEALTH SELECT ACCLAIM (CONTINUED) YEAR ENDED DECEMBER 31, 2008 2007 ----------------------- ----------------------- UNITS AMOUNT UNITS AMOUNT ---------- ----------- ---------- ----------- Fidelity VIP Contrafund(R) Portfolio Service Class 2 Issuance of Units 1,593,344 $ 1,913,023 2,405,846 $ 3,711,159 Redemption of Units (3,252,315) (4,342,722) (2,728,093) (4,150,991) ---------- ----------- ---------- ----------- Net increase (decrease) (1,658,971) $(2,429,699) (322,247) $ (439,832) ========== =========== ========== =========== Fidelity VIP Equity-Income Portfolio Service Class 2 Issuance of Units 1,234,077 $ 1,296,705 2,587,087 $ 3,701,679 Redemption of Units (3,025,311) (3,444,728) (4,038,670) (5,776,443) ---------- ----------- ---------- ----------- Net increase (decrease) (1,791,234) $(2,148,023) (1,451,583) $(2,074,764) ========== =========== ========== =========== Fidelity VIP Growth Portfolio Service Class 2 Issuance of Units 1,451,725 $ 1,135,375 1,940,785 $ 1,752,883 Redemption of Units (2,360,770) (1,876,286) (2,932,257) (2,558,429) ---------- ----------- ---------- ----------- Net increase (decrease) (909,045) $ (740,911) (991,472) $ (805,546) ========== =========== ========== =========== Fidelity VIP Growth & Income Portfolio Service Class 2 Issuance of Units 610,803 $ 561,063 372,585 $ 431,538 Redemption of Units (825,256) (820,365) (817,611) (950,198) ---------- ----------- ---------- ----------- Net increase (decrease) (214,453) $ (259,302) (445,026) $ (518,660) ========== =========== ========== =========== Fidelity VIP High Income Portfolio Service Class 2 Issuance of Units 3,512,535 $ 3,900,082 2,880,173 $ 3,699,567 Redemption of Units (2,915,394) (3,529,442) (4,717,819) (6,095,398) ---------- ----------- ---------- ----------- Net increase (decrease) 597,141 $ 370,640 (1,837,646) $(2,395,831) ========== =========== ========== =========== Fidelity VIP Mid Cap Portfolio Service Class 2 Issuance of Units 634,454 $ 1,040,770 767,646 $ 1,682,317 Redemption of Units (1,637,443) (3,146,761) (1,643,209) (3,492,404) ---------- ----------- ---------- ----------- Net increase (decrease) (1,002,989) $(2,105,991) (875,563) $(1,810,087) ========== =========== ========== =========== Fidelity VIP Value Strategies Portfolio Service Class 2 Issuance of Units 118,530 $ 152,682 465,225 $ 785,773 Redemption of Units (185,548) (207,680) (239,455) (388,627) ---------- ----------- ---------- ----------- Net increase (decrease) (67,018) $ (54,998) 225,770 $ 397,146 ========== =========== ========== =========== FT VIP Franklin Large Cap Growth Securities Fund Class 2 Issuance of Units 20,755 $ 16,292 37,282 $ 46,544 Redemption of Units (103,852) (103,958) (104,550) (133,061) ---------- ----------- ---------- ----------- Net increase (decrease) (83,097) $ (87,666) (67,268) $ (86,517) ========== =========== ========== =========== FT VIP Franklin Small Cap Value Securities Fund Class 2 Issuance of Units 1,045,828 $ 1,369,391 337,802 $ 556,547 Redemption of Units (1,051,284) (1,381,424) (691,346) (1,114,978) ---------- ----------- ---------- ----------- Net increase (decrease) (5,456) $ (12,033) (353,544) $ (558,431) ========== =========== ========== =========== FT VIP Franklin Small-Mid Cap Growth Securities Fund Class 2 Issuance of Units 412,916 $ 339,303 398,644 $ 415,893 Redemption of Units (1,031,328) (893,335) (957,713) (984,863) ---------- ----------- ---------- ----------- Net increase (decrease) (618,412) $ (554,032) (559,069) $ (568,970) ========== =========== ========== ===========
SA-58 COMMONWEALTH SELECT SEPARATE ACCOUNT NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 4 - CONTRACT OWNER AND SPONSOR TRANSACTIONS (CONTINUED)
COMMONWEALTH SELECT ACCLAIM (CONTINUED) YEAR ENDED DECEMBER 31, 2008 2007 ------------------------- ------------------------- UNITS AMOUNT UNITS AMOUNT ----------- ------------ ----------- ----------- FT VIP Mutual Shares Securities Fund Class 2 Issuance of Units 2,086,086 $ 3,050,783 2,038,793 $ 3,595,798 Redemption of Units (3,191,163) (4,495,768) (3,077,202) (5,412,396) ----------- ------------ ----------- ------------ Net increase (decrease) (1,105,077) $ (1,444,985) (1,038,409) $ (1,816,598) =========== ============ =========== ============ FT VIP Templeton Foreign Securities Fund Class 2 Issuance of Units 468,790 $ 648,297 919,761 $ 1,499,979 Redemption of Units (1,047,442) (1,488,947) (1,501,664) (2,475,749) ----------- ------------ ----------- ------------ Net increase (decrease) (578,652) $ (840,650) (581,903) $ (975,770) =========== ============ =========== ============ Goldman Sachs VIT Capital Growth Fund Service Shares Issuance of Units 564,146 $ 336,545 1,123,411 $ 917,715 Redemption of Units (1,624,440) (1,130,428) (2,202,124) (1,788,528) ----------- ------------ ----------- ------------ Net increase (decrease) (1,060,294) $ (793,883) (1,078,713) $ (870,813) =========== ============ =========== ============ Goldman Sachs VIT Core Fixed Income Fund Service Shares Issuance of Units 3,017,178 $ 3,799,513 3,827,960 $ 4,896,443 Redemption of Units (6,382,987) (7,959,189) (5,012,304) (6,404,165) ----------- ------------ ----------- ------------ Net increase (decrease) (3,365,809) $ (4,159,676) (1,184,344) $ (1,507,722) =========== ============ =========== ============ Goldman Sachs VIT Equity Index Fund Service Shares Issuance of Units 1,792,989 $ 1,341,539 1,100,031 $ 1,210,699 Redemption of Units (2,173,495) (1,920,673) (2,348,920) (2,569,460) ----------- ------------ ----------- ------------ Net increase (decrease) (380,506) $ (579,134) (1,248,889) $ (1,358,761) =========== ============ =========== ============ Goldman Sachs VIT Government Income Fund Service Shares Issuance of Units 4,859,100 $ 5,714,518 1,833,172 $ 2,085,032 Redemption of Units (2,673,621) (3,128,628) (1,048,223) (1,190,542) ----------- ------------ ----------- ------------ Net increase (decrease) 2,185,479 $ 2,585,890 784,949 $ 894,490 =========== ============ =========== ============ Goldman Sachs VIT Growth Opportunities Fund Service Shares Issuance of Units 361,605 $ 531,815 97,771 $ 168,167 Redemption of Units (858,636) (1,208,040) (413,890) (684,319) ----------- ------------ ----------- ------------ Net increase (decrease) (497,031) $ (676,225) (316,119) $ (516,152) =========== ============ =========== ============ Goldman Sachs VIT Mid Cap Value Fund Service Shares Issuance of Units 627,629 $ 1,021,763 793,618 $ 1,570,539 Redemption of Units (1,113,212) (1,852,007) (1,600,707) (3,242,993) ----------- ------------ ----------- ------------ Net increase (decrease) (485,583) $ (830,244) (807,089) $ (1,672,454) =========== ============ =========== ============ Goldman Sachs VIT Money Market Fund Service Shares Issuance of Units 14,100,410 $ 15,795,740 23,804,331 $ 26,023,559 Redemption of Units (14,724,014) (16,498,739) (23,784,672) (26,064,873) ----------- ------------ ----------- ------------ Net increase (decrease) (623,604) $ (702,999) 19,659 $ (41,314) =========== ============ =========== ============ Goldman Sachs VIT Strategic International Equity Fund Service Shares Issuance of Units 846,491 $ 735,902 1,372,339 $ 1,700,460 Redemption of Units (1,706,818) (1,609,488) (2,281,709) (2,822,043) ----------- ------------ ----------- ------------ Net increase (decrease) (860,327) $ (873,586) (909,370) $ (1,121,583) =========== ============ =========== ============
SA-59 COMMONWEALTH SELECT SEPARATE ACCOUNT NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 4 - CONTRACT OWNER AND SPONSOR TRANSACTIONS (CONTINUED)
COMMONWEALTH SELECT ACCLAIM (CONTINUED) YEAR ENDED DECEMBER 31, 2008 2007 ----------------------- ----------------------- UNITS AMOUNT UNITS AMOUNT ---------- ----------- ---------- ----------- Goldman Sachs VIT Structured U.S. Equity Fund Service Shares Issuance of Units 88,396 $ 81,894 217,750 $ 284,248 Redemption of Units (209,049) (201,706) (298,060) (387,476) ---------- ----------- ---------- ----------- Net increase (decrease) (120,653) $ (119,812) (80,310) $ (103,228) ========== =========== ========== =========== Janus Aspen Growth and Income Portfolio Service Shares Issuance of Units 363,331 $ 316,365 195,328 $ 211,139 Redemption of Units (756,963) (665,197) (508,181) (536,466) ---------- ----------- ---------- ----------- Net increase (decrease) (393,632) $ (348,832) (312,853) $ (325,327) ========== =========== ========== =========== Janus Aspen International Growth Portfolio Service Shares Issuance of Units 1,168,205 $ 1,701,693 1,284,903 $ 2,246,423 Redemption of Units (1,289,146) (1,858,888) (1,668,466) (2,916,484) ---------- ----------- ---------- ----------- Net increase (decrease) (120,941) $ (157,195) (383,563) $ (670,061) ========== =========== ========== =========== Janus Aspen Large Cap Growth Portfolio Service Shares Issuance of Units 879,584 $ 604,858 1,708,393 $ 1,381,486 Redemption of Units (2,174,838) (1,585,409) (2,093,040) (1,692,074) ---------- ----------- ---------- ----------- Net increase (decrease) (1,295,254) $ (980,551) (384,647) $ (310,588) ========== =========== ========== =========== Janus Aspen Mid Cap Growth Portfolio Service Shares Issuance of Units 1,739,632 $ 1,372,371 2,054,479 $ 1,775,971 Redemption of Units (2,904,567) (2,133,627) (1,736,823) (1,507,880) ---------- ----------- ---------- ----------- Net increase (decrease) (1,164,935) $ (761,256) 317,656 $ 268,091 ========== =========== ========== =========== MFS(R) Mid Cap Growth Series Service Shares Issuance of Units 37,591 $ 30,812 55,913 $ 65,013 Redemption of Units (207,741) (204,493) (125,813) (150,385) ---------- ----------- ---------- ----------- Net increase (decrease) (170,150) $ (173,681) (69,900) $ (85,372) ========== =========== ========== =========== MFS(R) New Discovery Series Service Shares Issuance of Units 34,261 $ 27,898 261 $ 329 Redemption of Units (63,616) (61,654) (38,014) (49,642) ---------- ----------- ---------- ----------- Net increase (decrease) (29,355) $ (33,756) (37,753) $ (49,313) ========== =========== ========== =========== MFS(R) Total Return Series Service Shares Issuance of Units 808,535 $ 847,645 465,251 $ 617,955 Redemption of Units (1,303,315) (1,449,966) (798,955) (1,056,246) ---------- ----------- ---------- ----------- Net increase (decrease) (494,780) $ (602,321) (333,704) $ (438,291) ========== =========== ========== =========== MFS(R) Utilities Series Service Shares Issuance of Units 33,966 $ 65,107 174,154 $ 424,710 Redemption of Units (166,816) (356,924) (315,858) (763,864) ---------- ----------- ---------- ----------- Net increase (decrease) (132,850) $ (291,817) (141,704) $ (339,154) ========== =========== ========== =========== Oppenheimer Balanced Fund/VA Service Shares Issuance of Units 3,990 $ 5,109 223 $ 306 Redemption of Units (30,155) (36,712) (12,237) (17,049) ---------- ----------- ---------- ----------- Net increase (decrease) (26,165) $ (31,603) (12,014) $ (16,743) ========== =========== ========== ===========
SA-60 COMMONWEALTH SELECT SEPARATE ACCOUNT NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 4 - CONTRACT OWNER AND SPONSOR TRANSACTIONS (CONTINUED)
COMMONWEALTH SELECT ACCLAIM (CONTINUED) YEAR ENDED DECEMBER 31, 2008 2007 ----------------------- ----------------------- UNITS AMOUNT UNITS AMOUNT ---------- ----------- ---------- ----------- Oppenheimer Capital Appreciation Fund/VA Service Shares Issuance of Units 237,914 $ 235,168 146,429 $ 181,588 Redemption of Units (573,866) (596,734) (347,850) (435,883) ---------- ----------- ---------- ----------- Net increase (decrease) (335,952) $ (361,566) (201,421) $ (254,295) ========== =========== ========== =========== Oppenheimer Global Securities Fund/VA Service Shares Issuance of Units 297,769 $ 372,640 519,670 $ 897,366 Redemption of Units (951,409) (1,330,498) (1,365,947) (2,392,071) ---------- ----------- ---------- ----------- Net increase (decrease) (653,640) $ (957,858) (846,277) $(1,494,705) ========== =========== ========== =========== Oppenheimer High Income Fund/VA Service Shares Issuance of Units 296,344 $ 164,594 134,367 $ 181,503 Redemption of Units (422,500) (327,305) (478,702) (649,285) ---------- ----------- ---------- ----------- Net increase (decrease) (126,156) $ (162,711) (344,335) $ (467,782) ========== =========== ========== =========== Oppenheimer Main Street Fund(R)/VA Service Shares Issuance of Units 28,559 $ 22,651 21,338 $ 27,264 Redemption of Units (86,233) (91,210) (143,316) (190,773) ---------- ----------- ---------- ----------- Net increase (decrease) (57,674) $ (68,559) (121,978) $ (163,509) ========== =========== ========== =========== Pioneer Fund VCT Portfolio Class II Issuance of Units 829,752 $ 659,191 616,596 $ 737,147 Redemption of Units (1,031,530) (1,068,961) (733,446) (881,783) ---------- ----------- ---------- ----------- Net increase (decrease) (201,778) $ (409,770) (116,850) $ (144,636) ========== =========== ========== =========== Pioneer Real Estate Shares VCT Portfolio Class II Issuance of Units 144,500 $ 275,913 452,435 $ 1,236,700 Redemption of Units (455,009) (917,641) (1,083,229) (2,984,186) ---------- ----------- ---------- ----------- Net increase (decrease) (310,509) $ (641,728) (630,794) $(1,747,486) ========== =========== ========== =========== T. Rowe Price International Stock Portfolio Issuance of Units 1,382,409 $ 1,227,979 2,933,700 $ 3,746,844 Redemption of Units (2,742,205) (2,866,870) (4,897,170) (6,260,796) ---------- ----------- ---------- ----------- Net increase (decrease) (1,359,796) $(1,638,891) (1,963,470) $(2,513,952) ========== =========== ========== ===========
COMMONWEALTH OPTIM-L YEAR ENDED DECEMBER 31, 2008 2007 -------------------------------- UNITS AMOUNT UNITS AMOUNT ----- ------ ------- -------- AIM V.I. Basic Value Fund Series II Shares Issuance of Units 141 $ 100 -- $ -- Redemption of Units (234) (208) (74) (122) ---- ----- ------- -------- Net increase (decrease) (93) $(108) (74) $ (122) ==== ===== ======= ======== AIM V.I. Capital Development Fund Series II Shares Issuance of Units -- $ -- 1 $ 1 Redemption of Units -- -- (12,184) (23,649) ---- ----- ------- -------- Net increase (decrease) -- $ -- (12,183) $(23,648) ==== ===== ======= ========
SA-61 COMMONWEALTH SELECT SEPARATE ACCOUNT NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 4 - CONTRACT OWNER AND SPONSOR TRANSACTIONS (CONTINUED)
COMMONWEALTH OPTIM-L (CONTINUED) YEAR ENDED DECEMBER 31, 2008 2007 ------------- ----------------- UNITS AMOUNT UNITS AMOUNT ----- ------ ------- -------- AllianceBernstein VPS Global Technology Portfolio Class B Issuance of Units -- $ -- 2 $ 3 Redemption of Units -- -- (12,293) (22,490) ---- ----- ------- -------- Net increase (decrease) -- $ -- (12,291) $(22,487) ==== ===== ======= ======== AllianceBernstein VPS Large Cap Growth Portfolio Class B Issuance of Units 66 $ 58 -- $ -- Redemption of Units (116) (118) (40) (59) ---- ----- ------- -------- Net increase (decrease) (50) $ (60) (40) $ (59) ==== ===== ======= ======== AllianceBernstein VPS Small/Mid Cap Value Portfolio Class B Issuance of Units -- $ -- -- $ -- Redemption of Units -- -- (5,350) (10,334) ---- ----- ------- -------- Net increase (decrease) -- $ -- (5,350) $(10,334) ==== ===== ======= ======== Fidelity VIP Contrafund(R) Portfolio Service Class 2 Issuance of Units -- $ -- -- $ -- Redemption of Units (9) (11) (6) (13) ---- ----- ------- -------- Net increase (decrease) (9) $ (11) (6) $ (13) ==== ===== ======= ======== Fidelity VIP Equity-Income Portfolio Service Class 2 Issuance of Units 53 $ 49 -- $ -- Redemption of Units (92) (99) (32) (57) ---- ----- ------- -------- Net increase (decrease) (39) $ (50) (32) $ (57) ==== ===== ======= ======== Fidelity VIP Growth Portfolio Service Class 2 Issuance of Units 121 $ 110 -- $ -- Redemption of Units (204) (223) (67) (114) ---- ----- ------- -------- Net increase (decrease) (83) $(113) (67) $ (114) ==== ===== ======= ======== Fidelity VIP Mid Cap Portfolio Service Class 2 Issuance of Units -- $ -- -- $ -- Redemption of Units (5) (7) (3) (8) ---- ----- ------- -------- Net increase (decrease) (5) $ (7) (3) $ (8) ==== ===== ======= ======== FT VIP Franklin Small Cap Value Securities Fund Class 2 Issuance of Units 2 $ 2 -- $ -- Redemption of Units (3) (3) (5,525) (10,322) ---- ----- ------- -------- Net increase (decrease) (1) $ (1) (5,525) $(10,322) ==== ===== ======= ======== FT VIP Mutual Shares Securities Fund Class 2 Issuance of Units -- $ -- -- $ -- Redemption of Units (3) (3) (2) (3) ---- ----- ------- -------- Net increase (decrease) (3) $ (3) (2) $ (3) ==== ===== ======= ======== FT VIP Templeton Foreign Securities Fund Class 2 Issuance of Units 42 $ 48 -- $ -- Redemption of Units (78) (105) (28) (57) ---- ----- ------- -------- Net increase (decrease) (36) $ (57) (28) $ (57) ==== ===== ======= ========
SA-62 COMMONWEALTH SELECT SEPARATE ACCOUNT NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 4 - CONTRACT OWNER AND SPONSOR TRANSACTIONS (CONTINUED)
COMMONWEALTH OPTIM-L (CONTINUED) YEAR ENDED DECEMBER 31, 2008 2006 ------------------- ----------------- UNITS AMOUNT UNITS AMOUNT -------- --------- ------- -------- Goldman Sachs VIT Capital Growth Fund Service Shares Issuance of Units 123 $ 108 -- $ -- Redemption of Units (208) (220) (68) (107) -------- --------- ------- -------- Net increase (decrease) (85) $ (112) (68) $ (107) ======== ========= ======= ======== Goldman Sachs VIT Core Fixed Income Fund Service Shares Issuance of Units -- $ -- -- $ -- Redemption of Units (2) (2) (280) (304) -------- --------- ------- -------- Net increase (decrease) (2) $ (2) (280) $ (304) ======== ========= ======= ======== Goldman Sachs VIT Equity Index Fund Service Shares Issuance of Units -- $ -- -- $ -- Redemption of Units (11) (13) (19,485) (31,838) -------- --------- ------- -------- Net increase (decrease) (11) $ (13) (19,485) $(31,838) ======== ========= ======= ======== Goldman Sachs VIT Government Income Fund Service Shares Issuance of Units -- $ -- -- $ -- Redemption of Units -- -- (23,108) (25,041) -------- --------- ------- -------- Net increase (decrease) -- $ -- (23,108) $(25,041) ======== ========= ======= ======== Goldman Sachs VIT Mid Cap Value Fund Service Shares Issuance of Units 127 $ 143 -- $ -- Redemption of Units (220) (297) (74) (148) -------- --------- ------- -------- Net increase (decrease) (93) $ (154) (74) $ (148) ======== ========= ======= ======== Goldman Sachs VIT Money Market Fund Service Shares Issuance of Units -- $ -- 186,017 $194,657 Redemption of Units (185,946) (195,541) (865) (890) -------- --------- ------- -------- Net increase (decrease) (185,946) $(195,541) 185,152 $193,767 ======== ========= ======= ======== Goldman Sachs VIT Strategic International Equity Fund Service Shares Issuance of Units 126 $ 118 -- $ -- Redemption of Units (216) (241) (72) (135) -------- --------- ------- -------- Net increase (decrease) (90) $ (123) (72) $ (135) ======== ========= ======= ======== Goldman Sachs VIT Structured U.S. Equity Fund Service Shares Issuance of Units 150 $ 135 -- $ -- Redemption of Units (265) (276) (91) (145) -------- --------- ------- -------- Net increase (decrease) (115) $ (141) (91) $ (145) ======== ========= ======= ======== MFS(R) Total Return Series Service Shares Issuance of Units -- $ -- -- $ -- Redemption of Units (5) (6) (20,376) (28,975) -------- --------- ------- -------- Net increase (decrease) (5) $ (6) (20,376) $(28,975) ======== ========= ======= ======== Oppenheimer Balanced Fund/VA Service Shares Issuance of Units -- $ -- 1 $ 2 Redemption of Units -- -- (6,253) (9,363) -------- --------- ------- -------- Net increase (decrease) -- $ -- (6,252) $ (9,361) ======== ========= ======= ========
SA-63 COMMONWEALTH SELECT SEPARATE ACCOUNT NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 4 - CONTRACT OWNER AND SPONSOR TRANSACTIONS (CONTINUED)
COMMONWEALTH OPTIM-L (CONTINUED) YEAR ENDED DECEMBER 31, 2008 2007 ------------- ----------------- UNITS AMOUNT UNITS AMOUNT ----- ------ ------- -------- Oppenheimer Capital Appreciation Fund/VA Service Shares Issuance of Units -- $ -- -- $ -- Redemption of Units (4) (5) (443) (687) --- ---- ------- -------- Net increase (decrease) (4) $ (5) (443) $ (687) === ==== ======= ======== Oppenheimer Global Securities Fund/VA Service Shares Issuance of Units -- $ -- -- $ -- Redemption of Units (4) (7) (383) (808) --- ---- ------- -------- Net increase (decrease) (4) $ (7) (383) $ (808) === ==== ======= ======== Oppenheimer High Income Fund/VA Service Shares Issuance of Units 46 $ 23 -- $ -- Redemption of Units (68) (48) (18,272) (25,744) --- ---- ------- -------- Net increase (decrease) (22) $(25) (18,272) $(25,744) === ==== ======= ======== Oppenheimer Main Street Fund(R)/VA Service Shares Issuance of Units -- $ -- -- $ -- Redemption of Units -- -- (6,513) (10,026) --- ---- ------- -------- Net increase (decrease) -- $ -- (6,513) $(10,026) === ==== ======= ========
SA-64 COMMONWEALTH SELECT SEPARATE ACCOUNT NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 5 - PURCHASES AND SALES OF INVESTMENTS The cost of purchases and proceeds from sales of shares of the Underlying Funds of the Separate Account during the year ended December 31, 2008 were as follows:
INVESTMENT PORTFOLIO PURCHASES SALES - -------------------------------------------------------------------- ----------- ----------- AIM V.I. Basic Value Fund Series II Shares $ 1,119,093 $ 1,477,885 AIM V.I. Capital Appreciation Fund Series I Shares 427,993 1,306,039 AIM V.I. Capital Development Fund Series II Shares 276,647 639,392 AIM V.I. Core Equity Fund Series I Shares 1,190,107 2,680,026 AIM V.I. Dynamics Fund Series I Shares 114,423 997,773 AIM V.I. Global Health Care Fund Series I Shares 1,943,999 1,744,990 AIM V.I. Large Cap Growth Fund Series I Shares 546,909 2,859,581 AllianceBernstein VPS Global Technology Portfolio Class B 380,004 838,564 AllianceBernstein VPS Growth and Income Portfolio Class B 9,355,940 9,496,185 AllianceBernstein VPS Large Cap Growth Portfolio Class A 88,913 5,424,034 AllianceBernstein VPS Large Cap Growth Portfolio Class B 259,660 2,241,206 AllianceBernstein VPS Small/Mid Cap Value Portfolio Class B 1,452,140 2,758,605 AllianceBernstein VPS Value Portfolio Class B 975,493 1,957,028 DWS Dreman High Return Equity VIP Class A 1,343,771 1,236,609 DWS Small Cap Index VIP Class A 3,167,514 5,006,185 DWS Technology VIP Class A 58,078 736,748 Eaton Vance VT Floating-Rate Income Fund 2,304,417 6,382,942 Eaton Vance VT Worldwide Health Sciences Fund 2,156,292 2,541,070 Fidelity VIP Contrafund(R) Portfolio 3,891,812 11,789,045 Fidelity VIP Contrafund(R) Portfolio Service Class 2 1,689,270 3,891,608 Fidelity VIP Equity-Income Portfolio 2,680,388 19,814,661 Fidelity VIP Equity-Income Portfolio Service Class 2 861,160 2,918,709 Fidelity VIP Growth Portfolio 2,860,595 13,181,172 Fidelity VIP Growth Portfolio Service Class 2 884,018 1,656,751 Fidelity VIP Growth & Income Portfolio 1,504,820 3,156,737 Fidelity VIP Growth & Income Portfolio Service Class 2 678,645 782,165 Fidelity VIP High Income Portfolio 5,138,706 12,459,626 Fidelity VIP High Income Portfolio Service Class 2 3,528,818 2,842,424 Fidelity VIP Mid Cap Portfolio 7,132,129 8,964,208 Fidelity VIP Mid Cap Portfolio Service Class 2 2,070,313 2,959,535 Fidelity VIP Value Strategies Portfolio Service Class 2 1,930,121 1,969,488 FT VIP Franklin Large Cap Growth Securities Fund Class 2 509,509 1,196,429 FT VIP Franklin Small Cap Value Securities Fund Class 2 3,286,216 4,229,264 FT VIP Franklin Small-Mid Cap Growth Securities Fund Class 2 2,004,351 2,877,902 FT VIP Mutual Shares Securities Fund Class 2 7,003,371 13,476,046 FT VIP Templeton Foreign Securities Fund Class 2 3,691,877 6,009,974 Goldman Sachs VIT Capital Growth Fund Service Shares 697,271 19,007,869 Goldman Sachs VIT Core Fixed Income Fund Service Shares 10,192,384 31,918,469 Goldman Sachs VIT Equity Index Fund Service Shares 6,255,590 17,995,737 Goldman Sachs VIT Government Income Fund Service Shares 17,295,279 8,533,113 Goldman Sachs VIT Growth Opportunities Fund Service Shares 1,899,857 13,868,475 Goldman Sachs VIT Mid Cap Value Fund Service Shares 2,053,540 13,873,057 Goldman Sachs VIT Money Market Fund Service Shares 41,448,685 42,400,315 Goldman Sachs VIT Strategic International Equity Fund Service Shares 5,029,331 11,600,000
SA-65 COMMONWEALTH SELECT SEPARATE ACCOUNT NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 5 - PURCHASES AND SALES OF INVESTMENTS (CONTINUED)
INVESTMENT PORTFOLIO PURCHASES SALES - -------------------------------------------------------------------- ----------- ----------- Goldman Sachs VIT Structured U.S. Equity Fund Service Shares $ 526,690 $ 805,388 Janus Aspen Growth and Income Portfolio Service Shares 426,775 3,091,630 Janus Aspen International Growth Portfolio Service Shares 6,911,938 7,960,139 Janus Aspen Large Cap Growth Portfolio Service Shares 641,098 3,364,172 Janus Aspen Mid Cap Growth Portfolio Service Shares 2,729,372 4,599,789 MFS(R) Mid Cap Growth Series Service Shares 444,509 1,161,780 MFS(R) New Discovery Series Service Shares 416,726 346,317 MFS(R) Total Return Series Service Shares 5,908,021 7,588,317 MFS(R) Utilities Series Service Shares 4,262,152 5,029,328 Oppenheimer Balanced Fund/VA Service Shares 1,892,525 2,688,659 Oppenheimer Capital Appreciation Fund/VA Service Shares 659,863 2,319,054 Oppenheimer Global Securities Fund/VA Service Shares 2,014,253 6,722,513 Oppenheimer High Income Fund/VA Service Shares 1,277,021 3,000,982 Oppenheimer Main Street Fund(R)/VA Service Shares 540,333 1,200,057 Pioneer Fund VCT Portfolio Class II 1,929,236 2,623,903 Pioneer Real Estate Shares VCT Portfolio Class II 5,143,512 5,199,369 T. Rowe Price International Stock Portfolio 4,695,343 9,899,782
SA-66 COMMONWEALTH SELECT SEPARATE ACCOUNT NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 6 - FINANCIAL HIGHLIGHTS A summary of unit values, units outstanding, income and expense ratios and total return for each Sub-Account for the year ended December 31, 2008 is as follows:
AT DECEMBER 31 FOR THE YEAR ENDED DECEMBER 31 --------------------------------------- -------------------------------------------------------- UNIT UNIT INVESTMENT EXPENSE EXPENSE TOTAL TOTAL VALUE VALUE NET INCOME RATIO RATIO RETURN RETURN UNITS LOWEST HIGHEST ASSETS RATIO LOWEST HIGHEST LOWEST HIGHEST (000s) ($) (4) ($) (4) ($000s) (%) (1) (%) (2) (%) (2) (%) (3)(4) (%) (3)(4) ------- -------- -------- ------- ---------- ------- ------- ---------- ---------- AIM V.I. BASIC VALUE FUND SERIES II SHARES 2008 4,475 0.754665 0.599526 2,676 0.46 1.35 1.75 -52.75 -52.55 2007 5,654 1.597063 1.263598 7,129 0.29 1.35 1.75 -0.41 -0.01 2006 7,411 1.603639 1.263655 9,349 0.11 1.35 1.75 10.96 11.42 2005 9,713 1.445178 1.134178 11,002 N/A 1.35 1.75 3.58 4.01 2004 12,749 1.395181 1.090496 13,890 N/A 1.35 1.75 8.90 9.34 AIM V.I. CAPITAL APPRECIATION FUND SERIES I SHARES 2008 9,439 0.482246 0.524727 4,649 N/A 1.35 1.40 -43.30 -43.27 2007 10,579 0.850524 0.924973 9,188 N/A 1.35 1.40 10.45 10.50 2006 12,419 0.770081 0.837060 9,769 0.05 1.35 1.40 7.74 7.80 2005 14,949 0.714750 0.776521 10,907 N/A 1.35 1.40 4.26 4.32 2004 18,834 0.685519 0.744391 13,169 N/A 1.35 1.40 10.24 10.30 AIM V.I. CAPITAL DEVELOPMENT FUND SERIES II SHARES 2008 770 0.787094 0.789744 607 N/A 1.35 1.40 -47.87 -47.84 2007 1,197 1.509868 1.514181 1,808 N/A 1.35 1.40 9.00 9.05 2006 1,477 1.797378 1.388457 2,052 N/A 1.35 1.75 14.22 14.69 2005 1,395 1.573595 1.210659 1,691 N/A 1.35 1.75 7.35 7.79 2004 1,939 1.465790 1.123138 2,180 N/A 1.35 1.75 13.25 13.71 AIM V.I. CORE EQUITY FUND SERIES I SHARES 2008 12,344 0.620913 0.662657 7,776 2.12 1.35 1.40 -31.12 -31.09 2007 14,305 0.901450 0.961569 13,087 1.05 1.35 1.40 6.60 6.66 2006 16,837 0.845611 0.901559 14,441 1.61 1.35 1.40 13.63 13.69 2005 19,950 0.744177 0.793018 15,057 0.79 1.35 1.40 4.18 4.23 2004 23,816 0.714350 0.760845 17,248 0.43 1.35 1.40 4.29 4.34 AIM V.I. DYNAMICS FUND SERIES I SHARES 2008 3,393 0.410864 0.482736 1,441 N/A 1.35 1.40 -48.81 -48.78 2007 4,722 0.802569 0.942472 3,891 N/A 1.35 1.40 10.62 10.67 2006 7,828 0.725545 0.851591 5,803 N/A 1.35 1.40 14.49 14.55 2005 9,123 0.633731 0.743443 5,908 N/A 1.35 1.40 9.17 9.22 2004 12,573 0.580497 0.680657 7,496 N/A 1.35 1.40 11.75 11.81
SA-67 COMMONWEALTH SELECT SEPARATE ACCOUNT NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 6 - FINANCIAL HIGHLIGHTS (CONTINUED)
AT DECEMBER 31 FOR THE YEAR ENDED DECEMBER 31 --------------------------------------- -------------------------------------------------------- UNIT UNIT INVESTMENT EXPENSE EXPENSE TOTAL TOTAL VALUE VALUE NET INCOME RATIO RATIO RETURN RETURN UNITS LOWEST HIGHEST ASSETS RATIO LOWEST HIGHEST LOWEST HIGHEST (000s) ($) (4) ($) (4) ($000s) (%) (1) (%) (2) (%) (2) (%) (3)(4) (%) (3)(4) ------- -------- -------- ------- ---------- ------- ------- ---------- ---------- AIM V.I. GLOBAL HEALTH CARE FUND SERIES I SHARES 2008 4,725 0.759924 0.800842 3,640 N/A 1.35 1.40 -29.62 -29.58 2007 5,536 1.079745 1.137302 6,059 N/A 1.35 1.40 10.29 10.34 2006 7,214 0.979012 1.030680 7,149 N/A 1.35 1.40 3.76 3.81 2005 9,382 0.943540 0.992820 8,952 N/A 1.35 1.40 6.63 6.69 2004 11,325 0.884839 0.930584 10,128 N/A 1.35 1.40 6.06 6.12 AIM V.I. LARGE CAP GROWTH FUND SERIES I SHARES 2008 10,937 0.488195 0.524070 5,423 0.01 1.35 1.40 -39.15 -39.12 2007 14,316 0.802323 0.860843 11,661 0.03 1.35 1.40 14.02 14.08 2006 17,141 0.703647 0.754590 12,245 0.41 1.35 1.40 6.40 6.45 2005 21,557 0.661316 0.708835 14,476 0.55 1.35 1.40 2.05 2.10 2004 25,631 0.648025 0.694254 16,851 0.10 1.35 1.40 3.21 3.26 ALLIANCEBERNSTEIN VPS GLOBAL TECHNOLOGY PORTFOLIO CLASS B 2008 1,027 0.665653 0.667821 684 N/A 1.35 1.40 -48.20 -48.18 2007 1,502 1.285099 1.288623 1,931 N/A 1.35 1.40 18.22 18.28 2006 1,488 1.582099 1.089511 1,624 N/A 1.35 1.75 6.48 6.92 2005 1,468 1.485758 1.019007 1,499 N/A 1.35 1.75 1.83 2.25 2004 1,772 1.459001 0.996585 1,770 N/A 1.35 1.75 3.25 3.67 ALLIANCEBERNSTEIN VPS GROWTH AND INCOME PORTFOLIO CLASS B 2008 34,506 0.804443 0.822508 27,910 1.81 1.35 1.40 -41.53 -41.50 2007 41,993 1.375721 1.405902 58,074 1.19 1.35 1.40 3.39 3.44 2006 53,421 1.330573 1.359084 71,425 1.16 1.35 1.40 15.35 15.40 2005 63,938 1.153550 1.177668 74,114 1.30 1.35 1.40 3.13 3.19 2004 78,193 1.118519 1.141316 87,901 0.74 1.35 1.40 9.67 9.72 ALLIANCEBERNSTEIN VPS LARGE CAP GROWTH PORTFOLIO CLASS A 2008 21,980 0.552274 0.552274 12,139 N/A 1.40 1.40 -40.51 -40.51 2007 28,543 0.928301 0.928301 26,496 N/A 1.40 1.40 12.32 12.32 2006 34,866 0.826444 0.826444 28,815 N/A 1.40 1.40 -1.84 -1.84 2005 38,719 0.841925 0.841925 32,599 N/A 1.40 1.40 13.53 13.53 2004 45,864 0.741560 0.741560 34,011 N/A 1.40 1.40 7.10 7.10 ALLIANCEBERNSTEIN VPS LARGE CAP GROWTH PORTFOLIO CLASS B 2008 9,221 0.905852 0.519157 5,003 N/A 1.35 1.75 -40.88 -40.63 2007 11,628 1.532113 0.874516 10,655 N/A 1.35 1.75 11.63 12.08 2006 13,621 1.372551 0.780267 11,133 N/A 1.35 1.75 -2.38 -1.98 2005 16,508 1.406010 0.796046 13,756 N/A 1.35 1.75 12.83 13.29 2004 20,083 1.246088 0.702645 14,793 N/A 1.35 1.75 6.45 6.88
SA-68 COMMONWEALTH SELECT SEPARATE ACCOUNT NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 6 - FINANCIAL HIGHLIGHTS (CONTINUED)
AT DECEMBER 31 FOR THE YEAR ENDED DECEMBER 31 --------------------------------------- -------------------------------------------------------- UNIT UNIT INVESTMENT EXPENSE EXPENSE TOTAL TOTAL VALUE VALUE NET INCOME RATIO RATIO RETURN RETURN UNITS LOWEST HIGHEST ASSETS RATIO LOWEST HIGHEST LOWEST HIGHEST (000s) ($) (4) ($) (4) ($000s) (%) (1) (%) (2) (%) (2) (%) (3)(4) (%) (3)(4) ------- -------- -------- ------- ---------- ------- ------- ---------- ---------- ALLIANCEBERNSTEIN VPS SMALL/MID CAP VALUE PORTFOLIO CLASS B 2008 3,900 1.012030 1.015428 3,950 0.45 1.35 1.40 -36.65 -36.61 2007 5,362 1.597446 1.601999 8,569 0.76 1.35 1.40 0.11 0.16 2006 5,803 1.925900 1.599472 9,265 0.23 1.35 1.75 12.20 12.66 2005 7,005 1.716456 1.419746 9,932 0.56 1.35 1.75 4.77 5.19 2004 9,178 1.638376 1.349667 12,374 0.06 1.35 1.75 16.99 17.47 ALLIANCEBERNSTEIN VPS VALUE PORTFOLIO CLASS B 2008 3,837 0.812631 0.815403 3,121 2.19 1.35 1.40 -41.84 -41.81 2007 4,959 1.397267 1.401319 6,935 1.34 1.35 1.40 -5.51 -5.46 2006 7,247 1.478696 1.482233 10,722 0.89 1.35 1.40 19.34 19.40 2005 6,009 1.239108 1.241435 7,448 1.23 1.35 1.40 4.00 4.06 2004 5,498 1.191397 1.193019 6,551 0.84 1.35 1.40 11.79 11.84 DWS DREMAN HIGH RETURN EQUITY VIP CLASS A 2008 3,736 0.749645 0.765006 2,811 3.20 1.35 1.40 -46.74 -46.71 2007 4,533 1.407443 1.435545 6,404 1.50 1.35 1.40 -3.24 -3.19 2006 5,633 1.454531 1.482819 8,222 3.89 1.35 1.40 12.91 12.97 2005 7,148 1.288251 1.312632 9,240 1.97 1.35 1.40 -1.47 -1.42 2004 8,487 1.307461 1.331529 11,137 1.59 1.35 1.40 10.44 10.49 DWS SMALL CAP INDEX VIP CLASS A 2008 4,646 0.972158 1.020238 4,566 1.55 1.35 1.40 -35.05 -35.01 2007 6,649 1.496703 1.569946 10,057 0.88 1.35 1.40 -3.27 -3.22 2006 8,853 1.547336 1.622230 13,851 0.63 1.35 1.40 15.85 15.91 2005 10,293 1.335684 1.399618 13,909 0.67 1.35 1.40 2.80 2.85 2004 12,526 1.299298 1.360804 16,450 0.52 1.35 1.40 16.11 16.17 DWS TECHNOLOGY VIP CLASS A 2008 6,453 0.271686 0.326295 1,843 N/A 1.35 1.40 -46.97 -46.95 2007 8,018 0.512366 0.615034 4,304 N/A 1.35 1.40 12.70 12.76 2006 10,027 0.454627 0.545451 4,758 N/A 1.35 1.40 -0.66 -0.61 2005 12,465 0.457639 0.548786 5,946 0.51 1.35 1.40 2.29 2.34 2004 20,575 0.447395 0.536238 9,513 N/A 1.35 1.40 0.50 0.54 EATON VANCE VT FLOATING-RATE INCOME FUND 2008 13,558 0.783365 0.786528 10,628 5.71 1.35 1.40 -28.16 -28.12 2007 18,315 1.090357 1.094206 19,982 6.28 1.35 1.40 0.20 0.25 2006 22,136 1.088178 1.091461 24,101 5.75 1.35 1.40 4.02 4.08 2005 24,301 1.046090 1.048715 25,434 3.99 1.35 1.40 2.41 2.46 2004 24,518 1.021494 1.023532 25,055 2.50 1.35 1.40 1.39 1.44
SA-69 COMMONWEALTH SELECT SEPARATE ACCOUNT NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 6 - FINANCIAL HIGHLIGHTS (CONTINUED)
AT DECEMBER 31 FOR THE YEAR ENDED DECEMBER 31 --------------------------------------- -------------------------------------------------------- UNIT UNIT INVESTMENT EXPENSE EXPENSE TOTAL TOTAL VALUE VALUE NET INCOME RATIO RATIO RETURN RETURN UNITS LOWEST HIGHEST ASSETS RATIO LOWEST HIGHEST LOWEST HIGHEST (000s) ($) (4) ($) (4) ($000s) (%) (1) (%) (2) (%) (2) (%) (3)(4) (%) (3)(4) ------- -------- -------- ------- ---------- ------- ------- ---------- ---------- EATON VANCE VT WORLDWIDE HEALTH SCIENCES FUND 2008 6,324 1.065103 1.069298 6,741 N/A 1.35 1.40 -8.39 -8.34 2007 7,481 1.162600 1.166581 8,703 0.86 1.35 1.40 4.69 4.74 2006 9,670 1.110563 1.113808 10,745 N/A 1.35 1.40 -1.40 -1.35 2005 12,729 1.126344 1.129066 14,345 N/A 1.35 1.40 5.53 5.58 2004 14,515 1.067328 1.069369 15,499 N/A 1.35 1.40 4.75 4.81 FIDELITY VIP CONTRAFUND(R) PORTFOLIO 2008 27,351 0.899130 0.899130 24,592 0.91 1.40 1.40 -43.32 -43.32 2007 34,328 1.586316 1.586316 54,455 0.92 1.40 1.40 15.95 15.95 2006 39,323 1.368153 1.368153 53,800 1.29 1.40 1.40 10.15 10.15 2005 42,028 1.242067 1.242067 52,202 0.27 1.40 1.40 15.30 15.30 2004 36,499 1.077231 1.077231 39,318 0.31 1.40 1.40 13.86 13.86 FIDELITY VIP CONTRAFUND(R) PORTFOLIO SERVICE CLASS 2 2008 5,991 1.148549 0.929055 5,566 0.72 1.35 1.75 -43.70 -43.47 2007 7,650 2.039876 1.643342 12,572 0.77 1.35 1.75 15.25 15.72 2006 7,972 1.769951 1.420118 11,322 0.95 1.35 1.75 9.48 9.93 2005 10,547 1.616658 1.291880 13,627 0.13 1.35 1.75 14.61 15.07 2004 9,481 1.410620 1.122660 10,644 0.20 1.35 1.75 13.14 13.60 FIDELITY VIP EQUITY-INCOME PORTFOLIO 2008 29,480 1.588681 1.588681 46,834 2.29 1.40 1.40 -43.46 -43.46 2007 37,240 2.809762 2.809762 104,636 1.67 1.40 1.40 0.11 0.11 2006 46,520 2.806714 2.806714 130,569 3.33 1.40 1.40 18.51 18.51 2005 57,749 2.368290 2.368290 136,768 1.74 1.40 1.40 4.38 4.38 2004 73,279 2.268841 2.268841 166,259 1.63 1.40 1.40 9.97 9.97 FIDELITY VIP EQUITY-INCOME PORTFOLIO SERVICE CLASS 2 2008 8,154 0.954826 0.779534 6,356 2.16 1.35 1.75 -43.82 -43.58 2007 9,945 1.699445 1.381782 13,742 1.55 1.35 1.75 -0.50 -0.10 2006 11,397 1.707978 1.383096 15,763 2.96 1.35 1.75 17.83 18.31 2005 12,318 1.449520 1.169044 14,401 1.53 1.35 1.75 3.72 4.14 2004 15,509 1.397481 1.122517 17,411 1.53 1.35 1.75 9.29 9.73 FIDELITY VIP GROWTH PORTFOLIO 2008 21,946 1.490197 1.490197 32,704 0.76 1.40 1.40 -47.91 -47.91 2007 26,316 2.860724 2.860724 75,282 0.85 1.40 1.40 25.19 25.19 2006 32,819 2.285138 2.285138 74,996 0.42 1.40 1.40 5.35 5.35 2005 40,830 2.169021 2.169021 88,561 0.54 1.40 1.40 4.32 4.32 2004 52,885 2.079242 2.079242 109,960 0.28 1.40 1.40 1.93 1.93
SA-70 COMMONWEALTH SELECT SEPARATE ACCOUNT NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 6 - FINANCIAL HIGHLIGHTS (CONTINUED)
AT DECEMBER 31 FOR THE YEAR ENDED DECEMBER 31 --------------------------------------- -------------------------------------------------------- UNIT UNIT INVESTMENT EXPENSE EXPENSE TOTAL TOTAL VALUE VALUE NET INCOME RATIO RATIO RETURN RETURN UNITS LOWEST HIGHEST ASSETS RATIO LOWEST HIGHEST LOWEST HIGHEST (000s) ($) (4) ($) (4) ($000s) (%) (1) (%) (2) (%) (2) (%) (3)(4) (%) (3)(4) ------- -------- -------- ------- ---------- ------- ------- ---------- ---------- FIDELITY VIP GROWTH PORTFOLIO SERVICE CLASS 2 2008 4,544 0.912899 0.508417 2,311 0.55 1.35 1.75 -48.23 -48.02 2007 5,453 1.763446 0.978118 5,335 0.41 1.35 1.75 24.44 24.95 2006 6,445 1.417060 0.782807 5,046 0.18 1.35 1.75 4.71 5.13 2005 7,812 1.353359 0.744586 5,817 0.32 1.35 1.75 3.66 4.08 2004 11,008 1.305615 0.715402 7,876 0.13 1.35 1.75 1.32 1.73 FIDELITY VIP GROWTH & INCOME PORTFOLIO 2008 6,091 0.691502 0.691502 4,212 1.03 1.40 1.40 -42.52 -42.52 2007 8,773 1.203011 1.203011 10,554 1.94 1.40 1.40 10.56 10.56 2006 9,280 1.088146 1.088146 10,098 0.92 1.40 1.40 11.59 11.59 2005 11,245 0.975114 0.975114 10,965 1.58 1.40 1.40 6.13 6.13 2004 13,053 0.918805 0.918805 11,993 0.89 1.40 1.40 4.32 4.32 FIDELITY VIP GROWTH & INCOME PORTFOLIO SERVICE CLASS 2 2008 1,390 0.693032 0.693032 963 0.95 1.35 1.35 -42.68 -42.68 2007 1,605 1.209143 1.209143 1,940 1.42 1.35 1.35 10.35 10.35 2006 2,050 1.095746 1.095746 2,246 0.73 1.35 1.35 11.33 11.33 2005 2,373 0.984221 0.984221 2,336 1.44 1.35 1.35 5.95 5.95 2004 3,305 0.928956 0.928956 3,070 0.78 1.35 1.35 4.10 4.10 FIDELITY VIP HIGH INCOME PORTFOLIO 2008 24,893 1.102505 1.102505 27,445 7.73 1.40 1.40 -26.04 -26.04 2007 31,959 1.490600 1.490600 47,638 7.51 1.40 1.40 1.35 1.35 2006 39,175 1.470778 1.470778 57,617 7.19 1.40 1.40 9.68 9.68 2005 47,686 1.340968 1.340968 63,946 14.99 1.40 1.40 1.26 1.26 2004 61,378 1.324235 1.324235 81,279 9.22 1.40 1.40 8.06 8.06 FIDELITY VIP HIGH INCOME PORTFOLIO SERVICE CLASS 2 2008 4,952 0.949968 0.949968 4,704 7.64 1.35 1.35 -26.15 -26.15 2007 4,355 1.286396 1.286396 5,602 6.54 1.35 1.35 1.16 1.16 2006 6,192 1.271660 1.271660 7,874 7.43 1.35 1.35 9.53 9.53 2005 7,098 1.161050 1.161050 8,241 15.45 1.35 1.35 0.93 0.93 2004 8,826 1.150340 1.150340 10,153 9.49 1.35 1.35 7.91 7.91 FIDELITY VIP MID CAP PORTFOLIO 2008 16,357 1.318096 1.318096 21,560 0.44 1.40 1.40 -40.29 -40.29 2007 20,407 2.207552 2.207552 45,051 0.94 1.40 1.40 14.01 14.01 2006 27,207 1.936299 1.936299 52,682 0.37 1.40 1.40 11.12 11.12 2005 32,957 1.742500 1.742500 57,427 N/A 1.40 1.40 16.65 16.65 2004 33,168 1.493794 1.493794 49,546 N/A 1.40 1.40 23.17 23.17
SA-71 COMMONWEALTH SELECT SEPARATE ACCOUNT NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 6 - FINANCIAL HIGHLIGHTS (CONTINUED)
AT DECEMBER 31 FOR THE YEAR ENDED DECEMBER 31 --------------------------------------- -------------------------------------------------------- UNIT UNIT INVESTMENT EXPENSE EXPENSE TOTAL TOTAL VALUE VALUE NET INCOME RATIO RATIO RETURN RETURN UNITS LOWEST HIGHEST ASSETS RATIO LOWEST HIGHEST LOWEST HIGHEST (000s) ($) (4) ($) (4) ($000s) (%) (1) (%) (2) (%) (2) (%) (3)(4) (%) (3)(4) ------- -------- -------- ------- ---------- ------- ------- ---------- ---------- FIDELITY VIP MID CAP PORTFOLIO SERVICE CLASS 2 2008 3,491 1.407220 1.328681 4,638 0.24 1.35 1.75 -40.67 -40.42 2007 4,494 2.371650 2.230199 10,022 0.51 1.35 1.75 13.32 13.78 2006 5,369 2.092891 1.960081 10,525 0.20 1.35 1.75 10.44 10.89 2005 7,155 1.895105 1.767651 12,647 N/A 1.35 1.75 15.95 16.42 2004 7,090 1.634377 1.518283 10,765 N/A 1.35 1.75 22.48 22.98 FIDELITY VIP VALUE STRATEGIES PORTFOLIO SERVICE CLASS 2 2008 2,962 0.752076 0.754575 2,229 0.48 1.35 1.40 -51.97 -51.94 2007 3,715 1.565803 1.570221 5,819 0.60 1.35 1.40 3.97 4.02 2006 3,790 1.506082 1.509578 5,709 0.34 1.35 1.40 14.38 14.44 2005 3,989 1.316693 1.319087 5,253 N/A 1.35 1.40 0.99 1.04 2004 5,402 1.303743 1.305452 7,044 N/A 1.35 1.40 12.25 12.30 FT VIP FRANKLIN LARGE CAP GROWTH SECURITIES FUND CLASS 2 2008 2,982 0.804070 0.806779 2,399 1.28 1.35 1.40 -35.45 -35.41 2007 3,787 1.245569 1.249156 4,718 0.73 1.35 1.40 4.74 4.80 2006 4,212 1.189163 1.191995 5,010 0.77 1.35 1.40 9.34 9.40 2005 4,913 1.087551 1.089589 5,344 0.57 1.35 1.40 -0.36 -0.31 2004 5,299 1.091442 1.092941 5,785 0.46 1.35 1.40 6.42 6.48 FT VIP FRANKLIN SMALL CAP VALUE SECURITIES FUND CLASS 2 2008 6,218 1.238446 0.995651 6,175 1.17 1.35 1.75 -34.19 -33.92 2007 7,432 1.881872 1.506770 11,172 0.66 1.35 1.75 -4.09 -3.70 2006 10,126 1.962088 1.564633 15,815 0.63 1.35 1.75 14.93 15.40 2005 11,571 1.707152 1.355822 15,668 0.76 1.35 1.75 6.86 7.30 2004 9,929 1.597516 1.263601 12,534 0.15 1.35 1.75 21.58 22.08 FT VIP FRANKLIN SMALL-MID CAP GROWTH SECURITIES FUND CLASS 2 2008 14,421 0.518852 0.587527 7,658 N/A 1.35 1.40 -43.30 -43.27 2007 17,300 0.915109 1.035717 16,215 N/A 1.35 1.40 9.69 9.74 2006 22,058 0.834306 0.943790 18,812 N/A 1.35 1.40 7.17 7.23 2005 25,707 0.778485 0.880181 20,451 N/A 1.35 1.40 3.32 3.37 2004 31,115 0.753469 0.851460 24,042 N/A 1.35 1.40 9.91 9.97 FT VIP MUTUAL SHARES SECURITIES FUND CLASS 2 2008 21,608 1.059565 1.074758 23,225 2.85 1.35 1.75 -38.21 -37.96 2007 27,732 1.714838 1.732332 48,065 1.45 1.35 1.75 1.67 2.08 2006 31,738 1.686710 1.696997 53,908 1.30 1.35 1.75 16.31 16.78 2005 34,595 1.450197 1.453138 50,338 0.89 1.35 1.75 8.62 9.06 2004 35,579 1.335110 1.332405 47,488 0.78 1.35 1.75 10.66 11.11
SA-72 COMMONWEALTH SELECT SEPARATE ACCOUNT NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 6 - FINANCIAL HIGHLIGHTS (CONTINUED)
AT DECEMBER 31 FOR THE YEAR ENDED DECEMBER 31 --------------------------------------- -------------------------------------------------------- UNIT UNIT INVESTMENT EXPENSE EXPENSE TOTAL TOTAL VALUE VALUE NET INCOME RATIO RATIO RETURN RETURN UNITS LOWEST HIGHEST ASSETS RATIO LOWEST HIGHEST LOWEST HIGHEST (000s) ($) (4) ($) (4) ($000s) (%) (1) (%) (2) (%) (2) (%) (3)(4) (%) (3)(4) ------- -------- -------- ------- ---------- ------- ------- ---------- ---------- FT VIP TEMPLETON FOREIGN SECURITIES FUND CLASS 2 2008 9,463 1.224510 1.044187 9,854 2.48 1.35 1.75 -41.42 -41.18 2007 12,472 2.090428 1.775341 22,091 1.91 1.35 1.75 13.44 13.90 2006 14,908 1.842808 1.558695 23,193 1.23 1.35 1.75 19.32 19.81 2005 15,953 1.544410 1.301013 20,722 1.21 1.35 1.75 8.24 8.68 2004 12,466 1.426828 1.197091 14,906 0.94 1.35 1.75 16.46 16.93 GOLDMAN SACHS VIT CAPITAL GROWTH FUND SERVICE SHARES 2008 41,331 0.893270 0.481621 54,059 N/A 1.35 1.75 -42.97 -42.73 2007 50,065 1.566229 0.841030 114,546 0.07 1.35 1.75 8.09 8.53 2006 63,425 1.449057 0.774953 134,776 0.02 1.35 1.75 7.22 7.65 2005 78,579 1.351503 0.719851 155,464 0.24 1.35 1.75 5.50 5.93 2004 99,988 1.281000 0.679535 188,707 N/A 1.35 1.75 5.56 5.99 GOLDMAN SACHS VIT CORE FIXED INCOME FUND SERVICE SHARES 2008 54,453 1.016410 1.196510 85,978 5.01 1.35 1.75 -10.18 -9.82 2007 70,028 1.131632 1.326752 122,788 4.54 1.35 1.75 4.95 5.37 2006 78,263 1.078294 1.259101 130,650 4.44 1.35 1.75 2.38 2.80 2005 92,635 1.053198 1.224822 151,161 4.69 1.35 1.75 0.06 0.47 2004 109,395 1.052554 1.219109 177,618 5.22 1.35 1.75 2.16 2.57 GOLDMAN SACHS VIT EQUITY INDEX FUND SERVICE SHARES 2008 78,734 1.013696 0.678075 50,896 1.70 1.35 1.75 -38.36 -38.11 2007 94,754 1.644646 1.095658 98,959 1.61 1.35 1.75 3.48 3.90 2006 123,010 1.589354 1.054535 123,664 1.53 1.35 1.75 13.46 13.92 2005 156,603 1.400824 0.925677 138,238 1.37 1.35 1.75 2.56 2.97 2004 195,495 1.365923 0.898954 167,629 1.57 1.35 1.75 8.39 8.83 GOLDMAN SACHS VIT GOVERNMENT INCOME FUND SERVICE SHARES 2008 27,404 1.192337 1.196361 32,699 4.46 1.35 1.40 1.71 1.76 2007 20,722 1.172295 1.175661 24,305 4.06 1.35 1.40 5.84 5.89 2006 19,039 1.037176 1.110263 21,094 4.12 1.35 1.75 2.23 2.65 2005 21,199 1.014534 1.081615 22,891 3.52 1.35 1.75 -0.23 0.18 2004 24,580 1.016833 1.079672 26,505 3.63 1.35 1.75 0.33 0.74 GOLDMAN SACHS VIT GROWTH OPPORTUNITIES FUND SERVICE SHARES 2008 13,208 2.403340 1.020418 29,868 N/A 1.35 1.40 -41.64 -41.61 2007 16,916 4.117882 1.747505 65,263 N/A 1.35 1.40 17.70 17.76 2006 21,896 3.498538 1.483924 72,234 N/A 1.35 1.40 4.25 4.30 2005 28,881 3.355960 1.422720 91,186 N/A 1.35 1.40 13.08 13.13 2004 36,156 2.967862 1.257557 101,199 N/A 1.35 1.40 16.96 17.02
SA-73 COMMONWEALTH SELECT SEPARATE ACCOUNT NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 6 - FINANCIAL HIGHLIGHTS (CONTINUED)
AT DECEMBER 31 FOR THE YEAR ENDED DECEMBER 31 --------------------------------------- -------------------------------------------------------- UNIT UNIT INVESTMENT EXPENSE EXPENSE TOTAL TOTAL VALUE VALUE NET INCOME RATIO RATIO RETURN RETURN UNITS LOWEST HIGHEST ASSETS RATIO LOWEST HIGHEST LOWEST HIGHEST (000s) ($) (4) ($) (4) ($000s) (%) (1) (%) (2) (%) (2) (%) (3)(4) (%) (3)(4) ------- -------- -------- ------- ---------- ------- ------- ---------- ---------- GOLDMAN SACHS VIT MID CAP VALUE FUND SERVICE SHARES 2008 21,920 1.194996 1.215405 28,988 0.71 1.35 1.75 -38.31 -38.06 2007 28,145 1.937171 1.962256 60,125 0.59 1.35 1.75 1.35 1.77 2006 36,394 1.911310 1.928214 76,406 1.23 1.35 1.75 13.39 13.85 2005 44,763 1.685671 1.693688 82,705 N/A 1.35 1.75 5.31 5.74 2004 55,550 1.600723 1.601805 97,115 0.06 1.35 1.75 17.26 17.74 GOLDMAN SACHS VIT MONEY MARKET FUND SERVICE SHARES 2008 65,097 1.054834 1.122982 91,852 2.22 1.35 1.75 0.46 0.87 2007 66,462 1.049993 1.113286 92,803 4.86 1.35 1.75 3.15 3.57 2006 66,305 1.017970 1.074961 89,505 4.57 1.35 1.75 2.84 3.26 2005 74,861 0.989877 1.041048 97,246 2.64 1.35 1.75 0.94 1.35 2004 88,223 0.980656 1.027169 113,550 0.89 1.35 1.75 -0.85 -0.45 GOLDMAN SACHS VIT STRATEGIC INTERNATIONAL EQUITY FUND SERVICE SHARES 2008 29,604 1.012043 0.682724 33,852 2.57 1.35 1.75 -47.04 -46.82 2007 35,484 1.910793 1.283782 76,412 1.20 1.35 1.75 5.97 6.40 2006 44,386 1.803159 1.206557 90,348 2.45 1.35 1.75 19.37 19.86 2005 55,941 1.510543 1.006654 95,550 1.42 1.35 1.75 10.44 10.89 2004 72,080 1.367710 0.907772 111,285 1.25 1.35 1.75 12.47 12.92 GOLDMAN SACHS VIT STRUCTURED U.S. EQUITY FUND SERVICE SHARES 2008 2,025 0.937525 0.780787 1,576 1.48 1.35 1.75 -38.23 -37.98 2007 2,244 1.517821 1.258930 2,819 0.89 1.35 1.75 -3.44 -3.04 2006 2,753 1.571847 1.298453 3,568 1.35 1.35 1.75 10.68 11.13 2005 2,467 1.420149 1.168380 2,879 0.77 1.35 1.75 4.17 4.60 2004 2,858 1.363266 1.117042 3,191 1.06 1.35 1.75 8.48 8.92 JANUS ASPEN GROWTH AND INCOME PORTFOLIO SERVICE SHARES 2008 8,813 0.585678 0.633532 5,221 0.76 1.35 1.40 -42.10 -42.07 2007 11,861 1.011545 1.093644 12,132 1.76 1.35 1.40 6.93 6.98 2006 14,978 0.945987 1.022243 14,317 1.30 1.35 1.40 6.27 6.32 2005 16,560 0.890200 0.961469 14,913 0.37 1.35 1.40 10.54 10.60 2004 17,869 0.805292 0.869324 14,561 0.38 1.35 1.40 10.12 10.17 JANUS ASPEN INTERNATIONAL GROWTH PORTFOLIO SERVICE SHARES 2008 14,827 0.839412 0.928207 12,736 1.11 1.35 1.40 -52.90 -52.88 2007 18,410 1.782162 1.969686 33,446 0.43 1.35 1.40 26.23 26.29 2006 19,907 1.411882 1.559653 28,665 1.88 1.35 1.40 44.58 44.65 2005 19,134 0.976556 1.078230 19,048 1.09 1.35 1.40 30.09 30.16 2004 17,180 0.750650 0.828385 13,219 0.85 1.35 1.40 17.03 17.09
SA-74 COMMONWEALTH SELECT SEPARATE ACCOUNT NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 6 - FINANCIAL HIGHLIGHTS (CONTINUED)
AT DECEMBER 31 FOR THE YEAR ENDED DECEMBER 31 --------------------------------------- -------------------------------------------------------- UNIT UNIT INVESTMENT EXPENSE EXPENSE TOTAL TOTAL VALUE VALUE NET INCOME RATIO RATIO RETURN RETURN UNITS LOWEST HIGHEST ASSETS RATIO LOWEST HIGHEST LOWEST HIGHEST (000s) ($) (4) ($) (4) ($000s) (%) (1) (%) (2) (%) (2) (%) (3)(4) (%) (3)(4) ------- -------- -------- ------- ---------- ------- ------- ---------- ---------- JANUS ASPEN LARGE CAP GROWTH PORTFOLIO SERVICE SHARES 2008 17,033 0.456246 0.506377 8,033 0.57 1.35 1.40 -40.71 -40.68 2007 20,917 0.769519 0.853646 16,645 0.57 1.35 1.40 13.19 13.25 2006 23,062 0.679843 0.753787 16,189 0.27 1.35 1.40 9.58 9.63 2005 27,326 0.620422 0.687555 17,523 0.13 1.35 1.40 2.56 2.61 2004 32,210 0.604952 0.670078 20,096 N/A 1.35 1.40 2.74 2.80 JANUS ASPEN MID CAP GROWTH PORTFOLIO SERVICE SHARES 2008 6,152 0.406625 0.512781 2,647 0.05 1.35 1.40 -44.64 -44.62 2007 9,725 0.734572 0.925877 7,628 0.07 1.35 1.40 20.04 20.10 2006 8,530 0.611946 0.770930 5,572 N/A 1.35 1.40 11.72 11.78 2005 9,705 0.547757 0.689705 5,698 N/A 1.35 1.40 10.46 10.51 2004 10,449 0.495894 0.624083 5,573 N/A 1.35 1.40 18.79 18.85 MFS(R) MID CAP GROWTH SERIES SERVICE SHARES 2008 2,309 0.568572 0.570479 1,314 N/A 1.35 1.40 -52.27 -52.25 2007 3,371 1.191298 1.194682 4,017 N/A 1.35 1.40 7.98 8.03 2006 3,961 1.103299 1.105877 4,373 N/A 1.35 1.40 0.86 0.91 2005 5,241 1.093856 1.095850 5,735 N/A 1.35 1.40 1.42 1.47 2004 6,785 1.078574 1.079989 7,320 N/A 1.35 1.40 12.78 12.83 MFS(R) NEW DISCOVERY SERIES SERVICE SHARES 2008 1,175 0.713707 0.716124 839 N/A 1.35 1.40 -40.37 -40.34 2007 1,318 1.196838 1.200291 1,578 N/A 1.35 1.40 0.82 0.87 2006 1,774 1.187119 1.189936 2,106 N/A 1.35 1.40 11.35 11.40 2005 1,980 1.066118 1.068119 2,111 N/A 1.35 1.40 3.56 3.61 2004 2,599 1.029464 1.030872 2,676 N/A 1.35 1.40 4.72 4.78 MFS(R) TOTAL RETURN SERIES SERVICE SHARES 2008 13,154 1.084737 1.007853 13,220 3.03 1.35 1.75 -23.68 -23.37 2007 15,826 1.421321 1.315222 20,765 2.33 1.35 1.75 2.12 2.53 2006 18,977 1.391867 1.282742 24,296 2.20 1.35 1.75 9.67 10.12 2005 22,245 1.269135 1.164901 25,873 1.87 1.35 1.75 0.80 1.21 2004 19,554 1.259052 1.150953 22,481 1.50 1.35 1.75 9.09 9.53 MFS(R) UTILITIES SERIES SERVICE SHARES 2008 4,193 1.639398 1.645058 6,874 1.35 1.35 1.40 -38.68 -38.65 2007 5,465 2.673544 2.681427 14,612 0.82 1.35 1.40 25.77 25.84 2006 6,186 2.125712 2.130898 13,152 1.89 1.35 1.40 29.13 29.19 2005 6,582 1.646204 1.649386 10,836 0.41 1.35 1.40 14.94 15.00 2004 4,523 1.432226 1.434262 6,478 1.10 1.35 1.40 28.03 28.09
SA-75 COMMONWEALTH SELECT SEPARATE ACCOUNT NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 6 - FINANCIAL HIGHLIGHTS (CONTINUED)
AT DECEMBER 31 FOR THE YEAR ENDED DECEMBER 31 --------------------------------------- -------------------------------------------------------- UNIT UNIT INVESTMENT EXPENSE EXPENSE TOTAL TOTAL VALUE VALUE NET INCOME RATIO RATIO RETURN RETURN UNITS LOWEST HIGHEST ASSETS RATIO LOWEST HIGHEST LOWEST HIGHEST (000s) ($) (4) ($) (4) ($000s) (%) (1) (%) (2) (%) (2) (%) (3)(4) (%) (3)(4) ------- -------- -------- ------- ---------- ------- ------- ---------- ---------- OPPENHEIMER BALANCED FUND/VA SERVICE SHARES 2008 3,959 0.756743 0.759260 2,996 2.94 1.35 1.40 -44.41 -44.38 2007 5,148 1.361189 1.365045 7,008 1.97 1.35 1.40 2.04 2.09 2006 5,575 1.489395 1.337112 7,438 1.89 1.35 1.75 8.92 9.36 2005 4,650 1.367462 1.222664 5,677 1.54 1.35 1.75 1.86 2.27 2004 3,666 1.342513 1.195492 4,379 0.86 1.35 1.75 7.87 8.31 OPPENHEIMER CAPITAL APPRECIATION FUND/VA SERVICE SHARES 2008 3,999 0.886900 0.704658 2,811 N/A 1.35 1.75 -46.61 -46.40 2007 5,491 1.661316 1.314572 7,202 0.01 1.35 1.75 11.87 12.32 2006 8,334 1.485087 1.170365 9,735 0.20 1.35 1.75 5.80 6.23 2005 9,841 1.403709 1.101745 10,827 0.64 1.35 1.75 3.03 3.45 2004 7,458 1.063591 1.065031 7,934 0.23 1.35 1.40 5.12 5.18 OPPENHEIMER GLOBAL SECURITIES FUND/VA SERVICE SHARES 2008 9,459 1.247996 1.021377 9,636 1.43 1.35 1.75 -41.38 -41.14 2007 13,509 2.128835 1.735201 23,388 1.26 1.35 1.75 4.22 4.65 2006 17,300 2.042551 1.658127 28,633 0.87 1.35 1.75 15.31 15.78 2005 18,172 1.771332 1.432125 25,985 0.76 1.35 1.75 12.06 12.52 2004 13,922 1.580631 1.272770 17,700 1.12 1.35 1.75 16.80 17.27 OPPENHEIMER HIGH INCOME FUND/VA SERVICE SHARES 2008 6,003 0.295916 0.279056 1,670 7.73 1.35 1.75 -78.95 -78.86 2007 7,138 1.405619 1.320231 9,401 7.04 1.35 1.75 -2.21 -1.81 2006 8,442 1.437419 1.344612 11,330 7.50 1.35 1.75 7.31 7.75 2005 9,419 1.339445 1.247883 11,737 6.67 1.35 1.75 0.22 0.63 2004 11,789 1.336499 1.240090 14,604 6.40 1.35 1.75 6.83 7.26 OPPENHEIMER MAIN STREET FUND(R)/VA SERVICE SHARES 2008 2,563 0.791719 0.794416 2,030 1.33 1.35 1.40 -39.49 -39.46 2007 3,346 1.308312 1.312113 4,379 0.90 1.35 1.40 2.69 2.74 2006 4,252 1.512804 1.277058 5,420 1.04 1.35 1.75 12.75 13.21 2005 5,380 1.341730 1.128050 6,060 1.20 1.35 1.75 3.89 4.31 2004 6,006 1.291492 1.081402 6,488 0.71 1.35 1.75 7.24 7.67 PIONEER FUND VCT PORTFOLIO CLASS II 2008 7,563 0.763323 0.766278 5,779 1.54 1.35 1.40 -35.29 -35.25 2007 8,231 1.179521 1.183477 9,718 0.97 1.35 1.40 3.32 3.37 2006 10,279 1.141639 1.144882 11,742 1.09 1.35 1.40 14.73 14.78 2005 12,638 0.995097 0.997425 12,584 1.10 1.35 1.40 4.45 4.51 2004 13,599 0.952682 0.954425 12,963 0.94 1.35 1.40 9.37 9.43
SA-76 COMMONWEALTH SELECT SEPARATE ACCOUNT NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 6 - FINANCIAL HIGHLIGHTS (CONTINUED)
AT DECEMBER 31 FOR THE YEAR ENDED DECEMBER 31 --------------------------------------- -------------------------------------------------------- UNIT UNIT INVESTMENT EXPENSE EXPENSE TOTAL TOTAL VALUE VALUE NET INCOME RATIO RATIO RETURN RETURN UNITS LOWEST HIGHEST ASSETS RATIO LOWEST HIGHEST LOWEST HIGHEST (000s) ($) (4) ($) (4) ($000s) (%) (1) (%) (2) (%) (2) (%) (3)(4) (%) (3)(4) ------- -------- -------- ------- ---------- ------- ------- ---------- ---------- PIONEER REAL ESTATE SHARES VCT PORTFOLIO CLASS II 2008 5,890 1.418112 1.423667 8,358 3.84 1.35 1.40 -39.21 -39.18 2007 7,966 2.332982 2.340921 18,596 2.46 1.35 1.40 -20.23 -20.19 2006 11,664 2.924668 2.933129 34,131 2.33 1.35 1.40 34.57 34.64 2005 13,328 2.173274 2.178453 28,979 3.07 1.35 1.40 13.25 13.31 2004 14,329 1.919024 1.922613 27,507 3.60 1.35 1.40 33.50 33.56 T. ROWE PRICE INTERNATIONAL STOCK PORTFOLIO 2008 31,588 1.005518 0.686661 29,112 1.91 1.35 1.40 -49.42 -49.40 2007 36,351 1.988050 1.356939 66,164 1.33 1.35 1.40 11.45 11.51 2006 44,012 1.783808 1.216924 71,913 1.14 1.35 1.40 17.43 17.49 2005 50,318 1.519095 1.035812 70,265 1.51 1.35 1.40 14.41 14.47 2004 63,572 1.327750 0.904880 77,565 1.07 1.35 1.40 12.18 12.24
(1) These amounts represent the dividends, excluding distributions of capital gains, received by the Sub-Account from the Underlying Fund, net of management fees assessed by the fund manager, divided by the average net assets. These ratios exclude those expenses, such as mortality and expense charges, that result in direct reductions in the unit values. The recognition of investment income by the Sub-Account is affected by the timing of the declaration of dividends by the Underlying Fund in which the Sub-Accounts invest. (2) These ratios represent the annualized contract expenses of the Separate Account, consisting primarily of mortality and expense charges, for each period indicated. The ratios include only those expenses that result in a direct reduction to unit values. Charges made directly to contract owner accounts through the redemption of units and expenses of the Underlying Fund are excluded. (3) These amounts represent the total return for the periods indicated, including changes in the value of the Underlying Fund, and reflect deductions for all items included in the expense ratio. The total return does not include any expenses assessed through the redemption of units; inclusion of these expenses in the calculation would result in a reduction in the total return presented. Investment options with a date notation indicate the effective date of that investment option in the variable account. The total return is calculated for the period indicated or from the effective date through the end of the reporting period. (4) Beginning in 2003, the highest unit value and total return correspond with the product with the lowest expense ratio. The lowest unit value and total return correspond with the product with the highest expense ratio. SA-77 PART C. OTHER INFORMATION ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS (a) FINANCIAL STATEMENTS Financial Statements Included in Part A None Financial Statements Included in Part B Financial Statements for Commonwealth Annuity and Life Insurance Company (the "Company" and "Depositor") and Financial Statements for Commonwealth Select Separate Account of Commonwealth Annuity and Life Insurance Company Financial Statements Included in Part C None (b) EXHIBITS EXHIBIT 1 Vote of Board of Directors Authorizing Establishment of Registrant dated March 5, 1992 was previously filed on April 24, 1998 in Post-Effective Amendment No. 16 (File Nos. 33-47216, 811-6632), and is incorporated by reference herein. EXHIBIT 2 Not Applicable. Pursuant to Rule 26a-2, the Company may hold the assets of the Registrant NOT pursuant to a trust indenture or other such instrument. (a) Form of Service Agreement by and between the Epoch Securities, Inc., Commonwealth Annuity and Life Insurance Company, First Allmerica Financial Life Insurance Company and the "Broker-Dealer" was previously filed on April 25, 2008 in Registrant's Post-Effective Amendment No. 29 (Registration Statement No. 33-39702/811-6293), and is incorporated by reference herein. (b) Underwriting and Administrative Service Agreement dated May 1, 2008 between and among Commonwealth Annuity and Life Insurance Company and Epoch Securities, Inc. is filed herewith. (c) Shared Services Agreement dated January 22, 2008 between Commonwealth Annuity and Life Insurance Company and Epoch Securities, Inc. was previously filed on April 25, 2008 in Registrant's Post-Effective Amendment No. 29 (Registration Statement No. 33-39702/811-6293), and is incorporated by reference herein. EXHIBIT 4 Minimum Guaranteed Annuity Payout Rider was previously filed on December 29, 1998 in Post-Effective Amendment No. 17 (File Nos. 33-47216, 811-6632), and is incorporated by reference herein. Specimen Policy Form A and Certificate and Generic Policy Form were previously filed on April 24, 1998 in Post-Effective Amendment No. 16 (File Nos. 33-47216, 811-6632), and are incorporated by reference herein. Policy Form B was previously filed on May 8, 1996 in Post-Effective Amendment No. 9 (File Nos. 33-47216, 811-6632), and is incorporated by reference herein. TSA-Endorsement 4012-07 (Rev. 12-08) will be filed in April of 2009 in Registrant's Post-Effective Amendment No. 30 (Registration Statement No. 33-39702/811-6293), and is incorporated by reference herein. EXHIBIT 5 Specimen Generic Application Form A was previously filed on April 24, 1998 in Post-Effective Amendment No. 16 (File Nos. 33-47216, 811-6632), and is incorporated by reference herein. Specimen Application Form B was previously filed on May 8, 1996 in Post-Effective Amendment No. 9 (File Nos. 33-47216, 811-6632), and is incorporated by reference herein. EER Rider (Form 3240-01) and EDB Rider (Form 3241-01) were previously filed on August 3, 2001 in Post-Effective Amendment No. 6 of Registrant's Registration Statement (File Nos. 333-78245, 811-6632), and are incorporated by reference herein. EXHIBIT 6 Articles of Organization and Bylaws, as amended of the Company, effective as of September 1, 2006 were previously filed on February 28, 2007 in Post-Effective Amendment No. 32 (File Nos. 33-47216, 811-6632) and are incorporated by reference herein. Bylaws, as amended of the Company, effective as of December 30, 2005 was previously filed on April 28, 2006 in Registrant's Post-Effective Amendment No. 27 (Registration Statement No. 33-39702/811-6293), and is incorporated by reference herein. EXHIBIT 7 (a) Variable Annuity GMDB Reinsurance Agreement between Allmerica Financial Life Insurance and Annuity Company and Ace Tempest Life Reinsurance LTD dated December 1, 2002 was previously filed on February 12, 2003 in Post-Effective Amendment No. 10 (File Nos. 333-78245, 811-6632) and is incorporated by reference herein. (b) Variable Annuity GMDB Reinsurance Agreement between Allmerica Financial Life Insurance and Annuity Company and Ace Tempest Life Reinsurance LTD dated December 1, 2002 was previously filed on February 12, 2003 in Post-Effective Amendment No. 10 (File Nos. 333-78245, 811-6632) and is incorporated by reference herein. (c) Variable Annuity GMDB Reinsurance Agreement between Allmerica Financial Life Insurance and Annuity Company and RGA Reinsurance Company dated December 1, 2002 was previously filed on February 12, 2003 in Post-Effective Amendment No. 10 (File Nos. 333-78245, 811-6632) and is incorporated by reference herein. (d) Variable Annuity GMDB Reinsurance Agreement between Allmerica Financial Life Insurance and Annuity Company and RGA Reinsurance Company dated December 1, 2002 was previously filed on February 12, 2003 in Post-Effective Amendment No. 10 (File Nos. 333-78245, 811-6632) and is incorporated by reference herein. EXHIBIT 8 (a) Directors' Powers of Attorney are filed herewith. (b) Third Party Agreement (TPA) between Security Benefit Life Insurance Co, Security Distributors, Inc and The Goldman Sachs Group, Inc. was previously filed on February 10, 2006 in Registrant's Post-Effective Amendment No. 26 (Registration Statement No. 33-39702/811-6293), and is incorporated by reference herein. (c) Administrative Services Agreement dated January 2, 2006 between the Company and Goldman Sachs Asset Management L.P. was previously filed on April 27, 2007 in Post-Effective Amendment No. 28 (File Nos. 33-39702, 811-6293) and is incorporated by reference herein. Form of Administrative Services Agreement dated January 2, 2006 between the Company and Goldman Sachs Variable Insurance Trust was previously filed on February 10, 2006 in Registrant's Post-Effective Amendment No. 26 (Registration Statement No. 33-39702/811-6293), and is incorporated by reference herein. (d) Work Assignment between Security Benefit Life Insurance Co, Security Distributors, Inc and the Company was previously filed on February 10, 2006 in Registrant's Post-Effective Amendment No. 27 (Registration Statement No. 33-39702/811-6293), and is incorporated by reference herein. (e) Transition Services Agreement dated December 30, 2005 between The Hanover Insurance Group, Inc., First Allmerica Financial Life Insurance Company, and Allmerica Financial Life Insurance and Annuity Company, and The Goldman Sachs Group, Inc. was previously filed on April 27, 2007 in Post-Effective Amendment No. 28 (File Nos. 33-39702, 811-6293) and is incorporated by reference herein. Form of Transition Services Agreement dated December 30, 2005 between The Hanover Insurance Group, Inc., First Allmerica Financial Life Insurance Company, and Allmerica Financial Life Insurance and Annuity Company, and The Goldman Sachs Group, Inc. was previously filed on February 10, 2006 in Registrant's Post-Effective Amendment No. 26 (Registration Statement No. 33-39702/811-6293), and is incorporated by reference herein. (f) Restructuring Agreement dated as of December 30, 2005 between The Hanover Insurance Group, Inc., Allmerica Financial Life Insurance and Annuity Company and First Allmerica Financial Life Insurance Company was previously filed on April 27, 2007 in Post-Effective Amendment No. 28 (File Nos. 33-39702, 811-6293) and is incorporated by reference herein. Form of Restructuring Agreement between First Allmerica Financial Life Insurance Company and Allmerica Financial Life Insurance and Annuity Company was previously filed on February 10, 2006 in Registrant's Post-Effective Amendment No. 26 (Registration Statement No. 33-39702/811-6293), and is incorporated by reference herein. (g) Goldman Sachs Variable Insurance Trust (the "Trust") Service Agreement was previously filed on April 27, 2007 in Post-Effective Amendment No. 28 (File Nos. 33-39702, 811-6293) and is incorporated by reference herein. Form of Goldman Sachs Variable Insurance Trust (the "Trust") Service Agreement was previously filed on February 10, 2006 in Registrant's Post-Effective Amendment No. 26 (Registration Statement No. 33-39702/811-6293), and is incorporated by reference herein. EXHIBIT 9 Opinion of Counsel was previously filed on April 25, 2008 in Registrant's Post-Effective Amendment No. 34 (File Nos. 33-47216/811-6632), and is incorporated by reference herein. EXHIBIT 10 Consent of Independent Registered Public Accounting Firm is filed herewith. EXHIBIT 11 None. EXHIBIT 12 None. EXHIBIT 13 (a) Form of Amendment dated May 1, 2003 to the Allmerica Investment Trust Participation Agreement was previously filed on April 28, 2003 in Post-Effective Amendment No. 23 of Registration Statement No. 33-39702/811-6293, and is incorporated by reference herein. Form of Amendment dated May 1, 2002 to the Allmerica Investment Trust Participation Agreement was previously filed in April 19, 2002 in Post-Effective Amendment No. 22 of Registration Statement No. 33-39702/811-6293, and is incorporated by reference herein. Amendment dated March 15, 2001 was previously filed in April 19, 2001 in Post-Effective Amendment No. 19 of Registration Statement No. 33-39702/811-6293, and is incorporated by reference herein. Participation Agreement between the Company and Allmerica Investment Trust dated March 22, 2000 was previously filed in April 2000 in Post-Effective Amendment No. 17 of Registration Statement No. 33-39702/811-6293, and is incorporated by reference herein. (b) Amendment dated May 1, 2001 to the Variable Insurance Products Fund Participation Agreement was previously filed on April 28, 2003 in Post-Effective Amendment No. 23 of Registration Statement No. 33-39702/811-6293, and is incorporated by reference herein. Amendment dated October 1, 2000 to the Variable Insurance Products Fund Participation Agreement was previously filed on April 19, 2001 in Post-Effective Amendment No. 19 of Registration Statement No. 33-39702/811-6293, and is incorporated by reference herein. Amendment dated March 29, 2000 and Amendment dated November 13, 1998 were previously filed in April 2000 in Post-Effective Amendment No. 17 of Registration Statement No. 33-39702/811-6293, and are incorporated by reference herein. Participation Agreement between the Company and Fidelity VIP, as amended, was previously filed on April 24, 1998 in Post-Effective Amendment No. 16 (File Nos. 33-47216, 811-6632) and is incorporated by reference herein. (c) Amendment to Schedule A dated October 1, 2000 of the Participation Agreement with T. Rowe Price International Series, Inc. was previously filed on April 19, 2001 in Post-Effective Amendment No. 19 of Registration Statement No. 33-39702/811-6293, and is incorporated by reference herein. Participation Agreement between the Company and T. Rowe Price International Series, Inc. was previously filed on April 24, 1998 in Post-Effective Amendment No. 16 (File Nos. 33-47216, 811-6632) and is incorporated by reference herein. (d) Amended and Restated Participation Agreement among Commonwealth Annuity and Life Insurance Company, AllianceBernstein L.P. and AllianceBernstein Investments, Inc. dated as of August 1, 2007 was previously filed on April 25, 2008 in Registrant's Post-Effective Amendment No. 29 (Registration Statement No. 33-39702/811-6293), and is incorporated by reference herein. Amendment dated May 1, 2002 to the Amended and Restated Participation Agreement with Alliance was previously filed on April 28, 2003 in Post-Effective Amendment No. 23 of Registration Statement No. 33-39702/811-6293, and is incorporated by reference herein. Form of Amendment dated May 1, 2002 to the Amended and Restated Participation Agreement with Alliance was previously filed on April 19, 2002 in Post-Effective Amendment No. 22 of Registration Statement No. 33-39702/811-6293, and is incorporated by reference herein. Form of Amendment dated May 1, 2001 to the Amended and Restated Participation Agreement, Merger and Consolidated Agreement, and the Amended and Restated Participation Agreement with Alliance were previously filed on April 19, 2001 in Post-Effective Amendment No. 19 of Registration Statement No. 33-39702/811-6293, and is incorporated by reference herein. Participation Agreement between the Company, and Alliance Capital Management L.P. was previously filed on October 8, 1999 in Pre-Effective Amendment No. 2 (File Nos. 333-78245, 811-6632) and is incorporated by reference herein. (e) Amended and Restated Participation Agreement by and among AIM Variable Insurance Funds, Inc., A I M Distributors, Inc. And Commonwealth Annuity And Life Insurance Company dated July 31, 2007 was previously filed on April 25, 2008 in Registrant's Post-Effective Amendment No. 29 (Registration Statement No. 33-39702/811-6293), and is incorporated by reference herein. Amendment dated January 1, 2003 to the AIM Participation Agreement was previously filed on April 28, 2003 in Post-Effective Amendment No. 23 of Registration Statement No. 33-39702/811-6293, and is incorporated by reference herein. Form of Amendment #7 dated May 1, 2002 to the AIM Participation Agreement was previously filed on April 19, 2002 in Post-Effective Amendment No. 22 of Registration Statement No. 33-39702/811-6293, and is incorporated by reference herein. Form of Amendment #6 to the AIM Participation Agreement was previously filed on April 19, 2001 in Post-Effective Amendment No. 19 of Registration Statement No. 33-39702/811-6293, and is incorporated by reference herein Form of Participation Agreement with Alliance was previously filed on April 21, 2000 in Post-Effective Amendment No. 1 of Registration Statement No. 333-87099/811-6293 and is incorporated by reference herein. Participation Agreement with AIM Variable Insurance Funds, Inc. was previously filed on August 27, 1998 in Post-Effective Amendment No. 3 in Registration Statement No. 333-11377/811-7799, and is incorporated by reference herein. (f) Amendment dated May 1, 2001 to the Participation Agreement with Deutsche Asset Management VIT Funds (formerly Bankers Trust) was previously filed on April 28, 2003 in Post-Effective Amendment No. 28 of Registration Statement No. 33-47216/811-06632, and is incorporated by reference herein. Participation Agreement with Deutsche Asset Management VIT Funds (formerly Bankers Trust) was previously filed on April 21, 2000 in Post-Effective Amendment No. 1 of Registration Statement No. 333-87099/811-6293 and is incorporated by reference herein. (g) Amendment dated October 1, 2001 to the Variable Insurance Products Fund II was previously filed on April 28, 2003 in Post-Effective Amendment No. 23 of Registration Statement No. 33-39702/811-6293, and is incorporated by reference herein. Form of Amendment dated October 1, 2001 to the Variable Insurance Products Fund II Participation Agreement was previously filed on April 19, 2002 in Post-Effective Amendment No. 22 of Registration Statement No. 33-39702/811-6293, and is incorporated by reference herein. Form of Amendment dated May 1, 2001 to the Variable Insurance Products Fund II Participation Agreement was previously filed on April 19, 2001 in Post-Effective Amendment No. 19 of Registration Statement No. 33-39702/811-6293, and is incorporated by reference herein. Amendment to Variable Insurance Products Fund II Participation Agreement dated March 29, 2000 and Amendment dated November 13, 1998 were previously filed in April 2000 in Post-Effective Amendment No. 17 of Registration Statement No. 33-39702/811-6293, and are incorporated by reference herein. Participation Agreement, as amended, with Variable Insurance Products Fund II was previously filed on April 24, 1998 in Registration Statement No. 33-39702/811-6293, Post-Effective Amendment No. 14, and is incorporated by reference herein. (h) Amendment dated October 1, 2001 with Variable Insurance Products Fund III was previously filed in April 2003 in Post-Effective Amendment No. 23 of Registration Statement No. 33-39702/811-6293, and is incorporated by reference herein. Form of Amendment to the Participation Agreement with Variable Insurance Products III was previously filed on April 19, 2001 in Post-Effective Amendment No. 19 of Registration Statement No. 33-39702/811-6293, and is incorporated by reference herein. Participation Agreement with Variable Insurance Products Fund III was previously filed on April 21, 2000 in Post-Effective Amendment No. 1 of Registration Statement No. 333-87099/811-6293 and is incorporated by reference herein. (i) Amendment No. 1 dated June 5, 2007 to Amended and Restated Participation Agreement between Franklin Templeton Variable Insurance Products Trust, Franklin/Templeton Distributors, Inc., and Commonwealth Annuity and Life Insurance Company was previously filed on April 25, 2008 in Registrant's Post-Effective Amendment No. 29 (Registration Statement No. 33-39702/811-6293), and is incorporated by reference herein. Form of Amended and Restated Participation Agreement dated September 25, 2006 with Franklin Templeton Variable Insurance Products Trust, Franklin/Templeton Distributors, Inc., and Commonwealth Annuity and Life Insurance Company was previously filed on April 27, 2007 in Post-Effective Amendment No. 28 (File Nos. 33-39702, 811-6293) and is incorporated by reference herein. Amendment dated May 1, 2002 to the Franklin Templeton Participation Agreement was previously filed on April 28, 2003 in Post-Effective Amendment No. 23 of Registration Statement No. 33-39702/811-6293, and is incorporated by reference herein. Form of Amendment dated May 1, 2002 to the Franklin Templeton Participation Agreement was previously filed on April 19, 2002 in Post-Effective Amendment No. 22 of Registration Statement No. 33-39702/811-6293, and is incorporated by reference herein. Form of Amendment dated May 1, 2001 and the Franklin Templeton Participation Agreement was previously filed on April 19, 2001 in Post-Effective Amendment No. 19 of Registration Statement No. 33-39702/811-6293, and is incorporated by reference herein. Form of Amendment dated May 1, 2001 and the Franklin Templeton Participation Agreement dated March 1, 2000 was previously filed on April 2001 in Post-Effective Amendment No. 19 of Registration Statement No. 33-39702/811-6293, and is incorporated by reference herein. Form of Participation Agreement with Franklin Templeton was previously filed in April 2000 in Post-Effective Amendment No. 19 of Registration Statement No. 33-44830/811-6293 and is incorporated by reference herein. (j) Amendment dated October 31, 2001 to the Participation Agreement with INVESCO was previously filed on April 19, 2002 in Post-Effective Amendment No. 22 of Registration Statement No. 33-39702/811-6293, and is incorporated by reference herein. Amendment dated May 1, 2001 to the Participation Agreement with INVESCO was previously filed on November 9, 2001 in Post-Effective Amendment No. 20 of Registration Statement No. 33-39702/811-6293, and is incorporated by reference herein. Form of Amendment dated May 1, 2001 to the Participation Agreement with INVESCO was previously filed on April 19, 2001 in Post-Effective Amendment No. 19 of Registration Statement No. 33-39702/811-6293, and is incorporated by reference herein. Participation Agreement with INVESCO was previously filed on April 21, 2000 in Post-Effective Amendment No. 1 of Registration Statement No. 333-87099/811-6293 and is incorporated by reference herein. (k) Amendment dated February 25, 2000 to the Participation Agreement with Janus was previously filed on April 19, 2002 in Post-Effective Amendment No. 22 of Registration Statement No. 33-39702/811-6293, and is incorporated by reference herein. Participation Agreement with Janus was previously filed on April 21, 2000 in Post-Effective Amendment No. 1 of Registration Statement No. 333-87099/811-6293 and is incorporated by reference herein. (l) Amendment dated May 1, 2002 to the Participation Agreement with Scudder Investments Inc. and Scudder Distributors was previously filed on April 28, 2003 in Post-Effective Amendment No. 23 of Registration Statement No. 33-39702/811-6293, and is incorporated by reference herein. Form of Amendment dated May 1, 2002 to the Participation Agreement with Scudder Investments Inc. and Scudder Distributors was previously filed on April 19, 2002 in Post-Effective Amendment No. 22 of Registration Statement No. 33-39702/811-6293, and is incorporated by reference herein. Amendment to the Participation Agreement dated October 1, 2000 with Scudder Investments Inc. and Scudder Distributors was previously filed on April 19, 2001 in Post-Effective Amendment No. 19 of Registration Statement No. 33-39702/811-6293, and is incorporated by reference herein. Amendment to Kemper Participation Agreement was previously filed in April 2000 in Post-Effective Amendment No. 7 of Registration Statement No. 333-09965/811-7767 and is incorporated by reference herein. Participation Agreement with Kemper was previously filed on November 6, 1996 in Pre-Effective Amendment No. 1 in Registration Statement No. 333-00965/811-7767, and is incorporated by reference herein. (m) Eaton Vance Participation Agreement was previously filed on April 19, 2002 in Post-Effective Amendment No. 22 of Registration Statement No. 33-39702/811-6293, and is incorporated by reference herein. Form of Participation Agreement with Eaton Vance was previously filed on February 28, 2001 in Post-Effective Amendment No. 24 (File Nos. 33-47216/811-6632), and is incorporated by reference herein. (n) Amendment dated May 1, 2002 to the Participation Agreement with MFS Variable Insurance Trust was previously filed in April 2003 in Post-Effective Amendment No. 23 of Registration Statement No. 33-39702/811-6293, and is incorporated by reference herein. Form of Amendment dated May 1, 2002 to the Participation Agreement with MFS Variable Insurance Trust was previously filed on April 19, 2002 in Post-Effective Amendment No. 22 of Registration Statement No. 33-39702/811-6293, and is incorporated by reference herein. Participation Agreement with MFS Variable Insurance Trust was previously filed on August 27, 1998 in Post-Effective Amendment No. 3, and is incorporated by reference herein. (o) Amendment dated August 28, 2007 to the Amended and Restated Participation Agreement dated as of May 1, 2000, by and among Oppenheimer Variable Account Funds, Oppenheimerfunds, Inc. and Commonwealth Annuity and Life Insurance Company as amended May 1, 2002 was previously filed in April of 2009 in Registrant's Post-Effective Amendment No. 30 (Registration Statement No. 33-39702/811-6293), and is incorporated by reference herein. Form of Amendment dated August 28, 2007 to the Amended and Restated Participation Agreement dated as of May 1, 2000, by and among Oppenheimer Variable Account Funds, Oppenheimerfunds, Inc. and Commonwealth Annuity and Life Insurance Company as amended May 1, 2002 was previously filed on April 25, 2008 in Registrant's Post-Effective Amendment No. 29 (Registration Statement No. 33-39702/811-6293), and is incorporated by reference herein. Amendment dated May 1, 2002 to the Participation Agreement with Oppenheimer Variable Account Funds was previously filed on April 28, 2003 in Post-Effective Amendment No. 23 of Registration Statement No. 33-39702/811-6293, and is incorporated by reference herein. Form of Amendment dated May 1, 2002 to the Participation Agreement with Oppenheimer Variable Account Funds was previously filed on April 19, 2002 in Post-Effective Amendment No. 22 of Registration Statement No. 33-39702/811-6293, and is incorporated by reference herein. Participation Agreement with Oppenheimer Variable Account Funds was previously filed on August 27, 1998 in Post-Effective Amendment No. 3, and is incorporated by reference herein. (p) Amendment dated May 1, 2001 to the Pioneer Participation Agreement was previously filed on April 19, 2002 in Post-Effective Amendment No. 22 of Registration Statement No. 33-39702/811-6293, and is incorporated by reference herein. Amendment dated October 24, 2000 to the Pioneer Participation Agreement was previously filed in April 2001 in Post-Effective Amendment No. 19 of Registration Statement No. 33-39702/811-6293, and is incorporated by reference herein. Form of Amendment to Pioneer Participation Agreement was previously filed in April 2000 in Post-Effective Amendment No. 14 of Registration Statement No. 33-85916/811-8848, and is incorporated by reference herein. Participation Agreement with Pioneer was previously filed on April 24, 1998 in Post-Effective Amendment No. 9 of Registration Statement No. 33-85916/811-8848, and is incorporated by reference herein. (q) Amended and Restated Participation Agreement dated August 1, 2007 by and between Goldman Sachs Variable Insurance Trust, Goldman, Sachs & Co., and Commonwealth Annuity And Life Insurance Company was previously filed on April 25, 2008 in Registrant's Post-Effective Amendment No. 29 (Registration Statement No. 33-39702/811-6293), and is incorporated by reference herein. Participation Agreement dated January 2, 2006 between Goldman Sachs Variable Insurance Trust, Goldman, Sachs & Co, and Allmerica Financial Life Insurance and Annuity Company was previously filed on April 28, 2006 in Registrant's Post-Effective Amendment No. 27 (Registration Statement No. 33-39702/811-6293), and is incorporated by reference herein. ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR The principal business address of most the following Directors and Officers* is: 85 Broad Street New York, NY 10004 The principal business address of the other following Directors and Officers is: 132 Turnpike Road, Suite 210 Southborough, MA 01772. The principal business address of the following Director** is: 1 New York Plaza New York, NY 10004 The principal business address of the following Officer*** is: 101 Constitution Avenue, NW, Suite 1000 East Washington, DC 20001 DIRECTORS AND PRINCIPAL OFFICERS OF THE COMPANY
NAME POSITION WITH COMPANY - ----- --------------------- Allan S. Levine* Chairman of the Board Manda J. D'Agata* Director, Vice President and Treasurer Nicholas Helmuth von Moltke* Director and Senior Vice President J. William McMahon* Director Donald Mullen** Director Michael A. Reardon Director, President, and Chief Executive Officer Michael S. Rotter* Director Laura Bryant Vice President and Chief Operating Officer John Fowler* Vice President Jane S. Grosso Vice President and Controller Jonathan Hecht* Vice President and Actuary Justin MacNeil Vice President Eleanor L. Kitzman*** Senior Vice President and Director of Regulatory Affairs Timothy D. Rogers Vice President and Chief Financial Officer Samuel Ramos* Vice President and Assistant Corporate Secretary Scott D. Silverman Vice President, General Counsel and Corporate Secretary Alan Akihiro Yamamura* Vice President and Chief Risk Officer Margot K. Wallin Vice President and Chief Compliance Officer
ITEM 26. PERSONS UNDER COMMON CONTROL WITH REGISTRANT
NUMBER OF PARENT PARENT ENTITY DESCRIPTION PURPOSE DOMICILE OWNERS NAME OWNERSHIP - -------------------------- --------------------------------- ------------ ------ ------------------------------- --------- GOLDMAN, SACHS & CO. Broker/dealer engaging in New York 2 THE GOLDMAN, SACHS & CO. L.L.C. 0.2000% proprietary & agency transactions in fixed income, equity and currency THE GOLDMAN SACHS GROUP, INC. 99.8000% markets; principal provider --------- of the Firm's investment 100.0000% banking services; primary dealer effective 12/74; member NYSE since 1/1/27. THE GOLDMAN, SACHS & CO. General partner of Goldman, Delaware 1 THE GOLDMAN SACHS GROUP, INC. 100.0000% L.L.C. Sachs & Co. THE J. ARON CORPORATION General partner of J. Aron Delaware 1 THE GOLDMAN SACHS GROUP, INC. 100.0000% & Company and J. Aron Holdings L.P. J. ARON HOLDINGS, L.P. General partner of J. Aron Delaware 2 THE J. ARON CORPORATION 0.2000% & Company. THE GOLDMAN SACHS GROUP, INC. 99.8000% --------- 100.0000% THE GOLDMAN SACHS GROUP, Firm's ultimate parent Delaware 0 0.0000% INC. company; leading global investment banking and securities firm that provides a wide range of services worldwide to a substantial and diversified client base. EPOCH SECURITIES, INC. An investment bank that Delaware 1 THE GOLDMAN SACHS GROUP, INC. 100.0000% uses sophisticated technology to connect to individual investors in the United States. SCADBURY UK LIMITED Holding Company England 1 GOLDMAN SACHS GROUP 100.0000% HOLDINGS (U.K.) GS FUNDING EUROPE LIMITED Established as part of an United 1 GS FINANCIAL SERVICES II, LLC 100.0000% SSG Structured Investing Kingdom Group transaction. AMAGANSETT II ASSETS Established as part of an Cayman 1 GS FUNDING EUROPE LIMITED 100.0000% LIMITED SSG Structured Investing Islands Group transaction. SCADBURY FUNDING LIMITED This entity was set up as Cayman 1 SCADBURY UK LIMITED 100.0000% part of an AMSSG Structured Islands Investing Group transaction AMAGANSETT FUNDING LIMITED Established as part of an Cayman 1 GS FUNDING EUROPE LIMITED 100.0000% SSG Structured Investing Islands Group transaction. AMAGANSETT ASSETS This entity was set up as England 2 GS FUNDING EUROPE LIMITED 99.0000% part of an AMSSG Structured Investing Group transaction AMAGANSETT FUNDING LIMITED 1.0000% --------- 100.0000% SCADBURY II ASSETS LIMITED This entity was set up as Cayman 1 SCADBURY UK LIMITED 100.0000% part of an AMSSG Structured Islands Investing Group transaction GSFS PRINCIPAL STRATEGIES part of the Killingholme Cayman 1 GS FINANCIAL SERVICES L.P. 100.0000% restructure in the AmSSG Islands (DEL) business GSTM LLC capital management Delaware 1 THE GOLDMAN SACHS GROUP, INC. 100.0000% GS SERVICIOS FINANCIEROS Trade certain products (OTC Mexico 2 GOLDMAN SACHS GROUP Y 0.0020% DE MEXICO derivatives and Lending COMPANIA, S. DE R.L. DE C.V. respectively) with local Mexican clients that are prohibited from trading GS FINANCIAL SERVICES L.P. 99.9980% with foreign (DEL) counterparties. (E.g. local --------- govt bodies etc). 100.0000% INDEPENDENCE POWER Retail marketer licensed to Delaware 1 J. ARON & COMPANY 100.0000% MARKETING, LLC sell power in the state of Maine. GSTP LLC Aircraft ownership and Delaware 1 THE GOLDMAN SACHS GROUP, INC. 100.0000% leasing GOLDMAN SACHS FINANCIAL OTC derivatives dealer Delaware 1 THE GOLDMAN SACHS GROUP, INC. 100.0000% MARKETS L.L.C. (also commonly known as BD Lite). It currently engages in OTC options on the S&P 500 Index. GSJC 50 HUDSON URBAN Lessee and construction New Jersey 1 THE GOLDMAN SACHS GROUP, INC. 100.0000% RENEWAL L.L.C. agent for construction project in Jersey City. GSJC LAND L.L.C. Land owner for construction Delaware 1 THE GOLDMAN SACHS GROUP, INC. 100.0000% project in Jersey City. GSJC 30 HUDSON URBAN Lessee and construction New Jersey 1 THE GOLDMAN SACHS GROUP, INC. 100.0000% RENEWAL L.L.C. agent for construction project in Jersey City. GSJC MASTER LESSEE L.L.C. Jersey City Property Delaware 1 THE GOLDMAN SACHS GROUP, INC. 100.0000% MLK DRIVE URBAN RENEWAL Lessee and construction New Jersey 1 THE GOLDMAN SACHS GROUP, INC. 100.0000% L.L.C. agent for construction project in Jersey City. PH PIER MANAGEMENT LLC Purchasing, investing in, Delaware 1 GSJC LAND L.L.C. 100.0000% financing, selling, leasing and otherwise dealing with direct and indirect interests in real estate assets (including mortgage loans) and in companies or entities owning, leasing and otherwise operating and maintaining such asset REP ELD GEN-PAR, L.L.C. To serve as General Partner Delaware 1 THE GOLDMAN SACHS GROUP, INC. 100.0000% of REP ELD Real Estate, L.P. CALAIS LNG PROJECT To hold physical Delaware 1 GS POWER HOLDINGS LLC 100.0000% COMPANY, LLC commodities development project. ARCHON GROUP, L.P. Real estate property/asset Delaware 2 THE GOLDMAN SACHS GROUP, INC. 99.0000% manager ARCHON GEN-PAR, INC. 1.0000% --------- 100.0000% ARCHON GEN-PAR, INC. 1% general partner of Delaware 1 THE GOLDMAN SACHS GROUP, INC. 100.0000% Archon Group, L.P. ARCHON GROUP ITALIA, Provides consulting Italy 1 ARCHON INTERNATIONAL, INC. 100.0000% S.R.L. services relating to assignment, acquisition, evaluation and management of immovable assets and/or assignment & management of credits. ARCHON INTERNATIONAL, INC. Holding company for Archon Delaware 1 THE GOLDMAN SACHS GROUP, INC. 100.0000% Italy and Archon Germany ARCHON GROUP DEUTSCHLAND Consultancy on economic and Germany 1 ARCHON INTERNATIONAL, INC. 100.0000% GmbH technical aspects of investment in real estate. Set up to support Archon's activities in Germany.
GOLDMAN SACHS COMMERCIAL To invest / orignate Delaware 2 GOLDMAN SACHS COMMERCIAL 1.0000% MORTGAGE CAPITAL, L.P. commercial mortgagesTo MORTGAGE CAPITAL, LLC invest / orignate commercial mortgages GOLDMAN SACHS BANK USA 99.0000% --------- 100.0000% GOLDMAN SACHS COMMERCIAL general partner of Goldman Delaware 1 GOLDMAN SACHS BANK USA 100.0000% MORTGAGE CAPITAL, LLC Sachs Commerical Mortgage Capital, L.P. SPF ONE IL, LLC Serve as intermediate Delaware 1 MTGLQ INVESTORS, L.P. 100.0000% (intercompany) lender to GS&Co as part of non-recourse financing transaction. Strategic capital planning entity. GS&CO ZURICH REPR. OFFICE Provides sales & mkting for New York 1 GOLDMAN, SACHS & CO. 100.0000% the equity mkt SAVOY ASSOCIATES, LLC Entity is a condominium Delaware 1 REP SVY REALTY HOLDINGS, L.L.C. 100.0000% developer that is engaged in the business of selling its developed properties. GOLDMAN SACHS (FRANCE) 1% owner of Goldman Sachs Delaware 1 THE GOLDMAN SACHS GROUP, INC. 100.0000% FINANCE, L.L.C. Overseas Finance, L.P.; formerly owned 2 Hong Kong companies which have since been liquidated. Non-regulated holding company. AVELO MORTGAGE, L.L.C. Mortgage Lending and Delaware 1 ARCHON GROUP, L.P. 100.0000% Servicing Company (single-family) GOLDMAN SACHS (ASIA) Broker/dealer with dealing Delaware 1 GOLDMAN SACHS HOLDINGS 100.0000% L.L.C. and underwriting business. (HONG KONG) LIMITED Registered in HK with HK Coy Registry. Date of registration in HK 22nd July 1994.Licensed under the HK Securities and Futures Ordinance for the following regulated activities: Type 1 dealing in secur GS KOREAN BRANCH Investment bank New York 1 GOLDMAN SACHS (ASIA) L.L.C. 100.0000% GOLDMAN SACHS (ASIA) Principally engaged in Hong Kong 1 GOLDMAN SACHS HOLDINGS 100.0000% SECURITIES LIMITED dealing in securities adn (HONG KONG) LIMITED listed options on behalf of affiliated companies on The Stock Exchange of Hong Kong Limited. GOLDMAN SACHS Holding company for PT Delaware 2 GOLDMAN SACHS GLOBAL 1.0000% (ASIA PACIFIC) L.L.C. Goldman Sachs Indonesia. HOLDINGS L.L.C. Entity in joint operating agreement with Indonesian GOLDMAN SACHS (CAYMAN) HOLDING 99.0000% firm. Generates investment COMPANY --------- banking fee income. 100.0000% SENNA INVESTMENTS To invest in KAMCO I loans Ireland 1 GS FINANCIAL SERVICES L.P. 100.0000% (IRELAND) LIMITED purchased from Restamove (DEL) Ireland Limited. (Loans classified as non accrual but is continuing to pay interest.); to ring-fence litigious ASSG KAMCO loan positions from other firm assets within a tax-efficient legal entity Goldman Sachs Licensed bank in the U.K. England 1 GOLDMAN SACHS 100.0000% International Ba performs foreign currency INTERNATIONAL BANK option and swap trading and is a deposit-taking institution PEARL TECH L.L.C. To hold partnership Delaware 2 THE GOLDMAN SACHS GROUP, INC. 1.0000% interests in a vehicle which owns a Washington DC office building. GOLDMAN SACHS CREDIT PARTNERS 99.0000% L.P. --------- 100.0000% GOLDMAN SACHS Fund Administration Nova Scotia 1 GOLDMAN SACHS 100.0000% ADMINISTRATION SERVICES ADMINISTRATION SERVICES (CANADA) CO. (CANADA) HOLDINGS LP GOLDMAN SACHS holding company for Goldman Delaware 3 GOLDMAN SACHS 1.0000% ADMINISTRATION SERVICES Sachs Administration ADMINISTRATION SERVICES (CANADA) HOLDINGS LP Services (Canada) Co. (CANADA) HOLDINGS LLC GOLDMAN SACHS GLOBAL HOLDINGS 25.0000% L.L.C. GS FINANCIAL SERVICES L.P. 74.0000% (DEL) --------- 100.0000% GOLDMAN SACHS general partner for Goldman Delaware 1 GS FINANCIAL SERVICES L.P. 100.0000% ADMINISTRATION SERVICES Sachs Administration (DEL) (CANADA) HOLDINGS LLC Services (Canada) Holdings LP GOLDMAN SACHS (CHINA) Formed to set up Delaware 2 THE GOLDMAN SACHS GROUP, INC. 99.0000% L.L.C. Representative Offices in Beijing and Shanghai engaging in liaison GOLDMAN SACHS GLOBAL HOLDINGS 1.0000% activities. L.L.C. --------- 100.0000% ARCHON CAPITAL BANK German Bank holding a Germany 1 ARCHON INTERNATIONAL, INC. 100.0000% DEUTSCHLAND GMBH portfolio of german non-performing loans and a restricted banking licence GOLDMAN SACHS ASSET Asset management1) Korea 1 GOLDMAN SACHS ASSET 100.0000% MANAGEMENT KOREA CO., LTD. Managing, and/or giving MANAGEMENT, L.P. management instructions in respect of the investment trusts under the Indirect Investment Asset Management Business Act (the ???AMBA???);2) Managing investment companies under the AMBA; 3) Distributing indire GS INVESTMENT STRATEGIES Investment Advisory for Canada 1 THE GOLDMAN SACHS GROUP, INC. 100.0000% CANADA INC. Liberty Harbour funds GOLDMAN SACHS CANADA INC. International investment Ontario 1 THE GOLDMAN SACHS GROUP, INC. 100.0000% bank and Canadian broker/dealer specializing in fixed income products; regulated Broker/Dealer; all officers of the company must be registered as such with the regulator. CMLQ INVESTORS COMPANY Hold mortgages. To invest Nova Scotia 2 MLQ, L.L.C. 1.0000% in and hold performing Canadian loans. MTGLQ INVESTORS, L.P. 99.0000% --------- 100.0000% A/C GP (NON-POOLING), Act solely as the general Delaware 2 THE GOLDMAN SACHS GROUP, INC. 10.0000% L.L.C. partner of Archon Capital (Non-Pooling), L.P. GOLDMAN SACHS MORTGAGE COMPANY 50.0000% --------- 60.0000%
GOLDMAN SACHS CANADA Formerly a 1% general Alberta 1 THE GOLDMAN SACHS GROUP, INC. 100.0000% FINANCE INC. partner of Goldman Sachs Canada Finance, L.P. Now a 1% shareholder of Goldman Sachs Canada Finance Co. entity will be dissolved in the near future. GOLDMAN SACHS CANADA Issues commercial paper in Nova Scotia 2 THE GOLDMAN SACHS GROUP, INC. 99.0000% FINANCE CO. Canada and lends the proceeds to regulated and GOLDMAN SACHS CANADA FINANCE 1.0000% unregulated GS affiliates INC. --------- in Canada. 100.0000% GS MEZZCO GP, L.L.C. To act as general partner Delaware 1 GOLDMAN SACHS MORTGAGE 100.0000% of Archon Capital, L.P. COMPANY Provides mezzazine financing. GOLDMAN SACHS CANADA Entity formed during 1996 Nova Scotia 2 THE GOLDMAN, SACHS & CO. L.L.C. 1.0000% CREDIT PARTNERS CO. to participate in the Canadian Senior bank debt THE GOLDMAN SACHS GROUP, INC. 99.0000% business; holds inventory of and trades senior bank debt. --------- 100.0000% GOLDMAN SACHS (ASIA) Primarily engaged in Mauritius 1 GOLDMAN SACHS HOLDINGS 100.0000% FINANCE trading of currencies, (HONG KONG) LIMITED securities and other financial products. GS MEZZCO GP, L.L.C. II Holding company for Archon Delaware 1 GOLDMAN SACHS MORTGAGE 100.0000% Capital Holding, LP.II. COMPANY EXPRESS INVESTMENTS III SPV for ASSG. Direct Malaysia 1 GOLDMAN SACHS HOLDINGS 100.0000% PRIVATE LTD. investement in Philipppine (MAURITIUS) LIMITED based assets (Non-interest accuring). NJLQ (IRELAND) LIMITED ASSG entity to hold the Ireland 1 GS FINANCIAL SERVICES L.P. 100.0000% Jinro loan.Established to (DEL) hold ASSG positions in Korean assets. JADE DRAGON (MAURITIUS) 1) SPV for holding both Mauritius 1 TIGER STRATEGIC 100.0000% LIMITED India and PRC investments. INVESTMENTS LTD 2) Holding company for venture capital companies in India and PRC. GOLDMAN SACHS (ASIA) Holding company. Also bears Delaware 2 GOLDMAN, SACHS & CO. 99.0000% FINANCE HOLDINGS L.L.C. EBC costs for employees transferring to/from Gao GOLDMAN SACHS GLOBAL HOLDINGS 1.0000% Hua entities. L.L.C. --------- 100.0000% MUNI TIC TOC SERIES TRUST Aggregation of multiple United 1 GOLDMAN, SACHS & CO. 100.0000% CONS trusts used in connection States with the municipal tender option bond program (TIC TOC). SINGEL COOL ONE B.V. Holding Company. Maison Netherlands 1 GS FINANCIAL SERVICES L.P. 100.0000% (Management structure (DEL) GAH). Limited partner of Gestion d'Actifs Haussmann, SCA. SINGEL COOL TWO B.V. Holding and Finance. Netherlands 1 GS FINANCIAL SERVICES L.P. 100.0000% Maison (Management (DEL) structure GAH). To act as general partner of Gestion d'Actifs Haussmann SCA. Archon Group France SAS Provides real estate loan France 2 SINGEL COOL ONE B.V. 99.9800% and property asset management as well as SINGEL COOL TWO B.V. 0.0200% underwriting services. --------- 100.0000% ARCHON GROUP FRANCE S.A.S Provides real estate loan France 2 SINGEL COOL ONE B.V. 99.9800% and property asset management as well as SINGEL COOL TWO B.V. 0.0200% underwriting services. --------- 100.0000% TORIIZAKA KAIHATSU TK Holding Hotel assets in Japan 3 THE GOLDMAN SACHS GROUP, INC. 18.5870% Japan. GS STRATEGIC INVESTMENTS JAPAN 23.5000% LLC GK TORIIZAKA KAIHATSU 5.0000% --------- 47.0870% GOLDMAN SACHS GLOBAL Oil and Gas commodity Nova Scotia 1 GOLDMAN SACHS GLOBAL 100.0000% COMMODITIES (CANADA) operating entity COMMODITIES (CANADA) CORPORATION HOLDINGS, LP GOLDMAN SACHS GLOBAL Ownership of a newly formed Delaware 3 GOLDMAN SACHS GLOBAL 1.0000% COMMODITIES (CANADA) Canadian entity which will COMMODITIES (CANADA) HOLDINGS, LP conduct the firms Canadian HOLDINGS LLC commodities business. GOLDMAN SACHS GLOBAL HOLDINGS 25.0000% L.L.C. GS FINANCIAL SERVICES L.P. 74.0000% (DEL) --------- 100.0000% GOLDMAN SACHS GLOBAL Ownership of a newly formed Delaware 1 GS FINANCIAL SERVICES L.P. 100.0000% COMMODITIES (CANADA) Canadian entity which will (DEL) HOLDINGS LLC conduct the firms Canadian commodities business. REP CHW REALTY, L.L.C. To invest in land and land Delaware 1 THE GOLDMAN SACHS GROUP, INC. 100.0000% development. REP ELD REAL ESTATE To invest in land and land Delaware 2 THE GOLDMAN SACHS GROUP, INC. 99.8000% LIMITED PARTNERSHIP development REP ELD GEN-PAR, L.L.C. 0.2000% --------- 100.0000% ELBE FUNDING LIMITED Established as part of an Cayman 1 GOLDMAN SACHS (CAYMAN) 100.0000% SSG Structured Investing Islands HOLDING COMPANY Group transaction. RHYS TRUST Established as part of an Jersey 2 GS FINANCIAL SERVICES L.P. 95.0000% SSG Structured Investing (DEL) Group transaction. GS GLOBAL MARKETS, INC. 5.0000% --------- 100.0000% SAPIEN LIMITED Established as part of an Isle of 1 RHYS TRUST 100.0000% SSG Structured Investing Jersey Group transaction. SARGASSO LIMITED Established as part of an Jersey 1 SAPIEN LIMITED 100.0000% SSG Structured Investing Group transaction. GS CAPITAL PARTNERS 2000 Consolidating employee fund. Delaware 1 THE GOLDMAN SACHS GROUP, INC. 100.0000% EMPLOYEE FUND, L.P. GS ASIAN VENTURE holding company Delaware 3 GOLDMAN SACHS (ASIA) 25.0000% (DELAWARE) L.L.C. FINANCE HOLDINGS L.L.C. GOLDMAN SACHS GLOBAL HOLDINGS 73.0000% L.L.C. GS FINANCIAL SERVICES L.P. 2.0000% (DEL) --------- 100.0000% TIGER STRATEGIC Holding company for ASSG Mauritius 1 GS ASIAN VENTURE 100.0000% INVESTMENTS LTD entities (DELAWARE) L.L.C. PANDA INVESTMENTS LTD Holding company for ASSG Mauritius 1 TIGER STRATEGIC 100.0000% entities INVESTMENTS LTD MLT INVESTMENTS LTD. Holding company for ASSG Mauritius 1 TIGER STRATEGIC 100.0000% entities INVESTMENTS LTD EUSTON ENTERPRISES LIMITED To hold ASSG investments in Hong Kong 1 MLT INVESTMENTS LTD. 100.0000% Tung Fung Development Co. FAIRWAY ENTERPRISES To hold ASSG investments in Hong Kong 1 MLT INVESTMENTS LTD. 100.0000% LIMITED Tung Fung Development Co. GOLDMAN SACHS Principally engaged in Hong Kong 1 GOLDMAN SACHS (CAYMAN) 100.0000% ADMINISTRATION SERVICES providing fund TRUST, LIMITED (ASIA) LIMITED administration services to clients of affiliated companies.
GOLDMAN SACHS Broker/dealer which engages England 2 GOLDMAN SACHS HOLDINGS (U.K.) 99.0000% INTERNATIONAL in proprietary and agency transactions in the fixed GOLDMAN SACHS GROUP HOLDINGS 1.0000% income, equity and currency (U.K.) --------- market, provides investment 100.0000% banking services in Europe GOLDMAN SACHS Provides IBD,Asset, & PWM United 1 GOLDMAN SACHS INTERNATIONAL 100.0000% INTERNATIONAL,DI services out of Dubai Kingdom GOLDMAN SACHS INTL Stockholm branch is an IBD United 1 GOLDMAN SACHS INTERNATIONAL 100.0000% SWEDEN BRAN office Kingdom GSI, SUCURSAL EN ESPANA branch of London, does IBD Spain 1 GOLDMAN SACHS INTERNATIONAL 100.0000% business in Spain GOLDMAN SACHS INTL IBD office locacted in United 1 GOLDMAN SACHS INTERNATIONAL 100.0000% JOHANNESBUR Johannesburg Kingdom FIRST ALLMERICA FINANCIAL Stock insurance corporation Massachusetts 1 COMMONWEALTH ANNUITY AND 100.0000% LIFE INSURANCE COMPANY transacting in the life LIFE INSURANCE COMPANY insurance and annuity businesses. GS EQUITY MARKETS, L.P. Established to segregate Bermuda 2 GSEM (DEL) LLC 99.0000% trading of UK structured equity products; GSEM BERMUDA HOLDINGS, L.P. 1.0000% non-regulated Bermuda based --------- subsidiary which trades 100.0000% structured equity products;Holds hedges to derivative transactions executed by Goldman outside of the US. GSEM trades only with other GOLDMAN SACHS HOLDINGS Non-regulated tax efficient England 1 GOLDMAN SACHS GROUP 100.0000% (U.K.) holding company for U.K. HOLDINGS (U.K.) pass-through entities GS DIRECT PHARMA LIMITED investment in Mauritius 1 GS DIRECT, L.L.C. 100.0000% pharmaceutical company in China REP LKS REALTY, L.L.C. Ownership and investment in Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% office property known as INC. Lakeside Atrium, located in Santa Clara, CA GOLDMAN SACHS (MONACO) In accordance with law no. Monaco 1 GOLDMAN SACHS GROUP 100.0000% S.A.M. 1.194 of 9 July 1997 and HOLDINGS (U.K.) Sovereign Ordinance no. 13.184 of 16 September 1997, as modified, the Minister of State has authorised the company to carry out the following activities: transfer of orders on the financial markets of s GOLDMAN SACHS EUROPE This is the entity used for Isle of 1 GOLDMAN SACHS INTERNATIONAL 100.0000% LIMITED contracting with the firm's Jersey EMEA International Country Advisers. GOLDMAN SACHS MANAGEMENT Set up to oversee a number Ireland 2 THE GOLDMAN SACHS GROUP, INC. 99.0000% (IRELAND) LIMITED of GSAM managed Trusts GOLDMAN SACHS GLOBAL HOLDINGS 1.0000% L.L.C. --------- 100.0000% GOLDMAN SACHS ASSET London-based provider of England 2 GOLDMAN SACHS HOLDINGS (U.K.) 99.0000% MANAGEMENT INTERNATIONAL asset management and investment advisory GOLDMAN SACHS GROUP HOLDINGS 1.0000% services, covering European (U.K.) and other international --------- asset classes. 100.0000% GSPS INVESTMENTS LIMITED GSPS London investment England 1 GSPS STRATEGIES CORP. 100.0000% company THE GOLDMAN SACHS TRUST Established as a limited Delaware 1 THE GOLDMAN SACHS TRUST 100.0000% COMPANY OF DELAWARE purpose trust company. COMPANY, N.A. THE GOLDMAN SACHS TRUST To carry on the business of Federal 1 THE GOLDMAN SACHS GROUP, 100.0000% COMPANY, N.A. banking limited to the INC. exercise of full fiduciary powers and the support of activities incidental to the exercise of these powers. A creature of banking law --it's a national association GOLDMAN SACHS INSURANCE To sell life insurance New York 1 THE GOLDMAN SACHS GROUP, 100.0000% AGENCY, INC. products and receive INC. commissions; broker in the life insurance business PEARL STREET INSURANCE Insures specific hazards Vermont 1 THE GOLDMAN SACHS GROUP, 100.0000% COMPANY, INC. and operational risks of INC. the firm. GOLDMAN SACHS BANK USA OLD UTAH BANK Utah 1 GOLDMAN SACHS BANK USA 100.0000% GSPS STRATEGIES CORP. Setup to trade private Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% equity investments. INC. MONEY PARTNERS FINANCIAL Principal business of NEWCO United 1 GOLDMAN SACHS GROUP 100.0000% COMPANY LIMITED is to act as subparticipant Kingdom HOLDINGS (U.K.) for loans originated by GSIB Milan Branch and the secondary trading of such loans. GOLDMAN SACHS GLOBAL Holds minority interests in Delaware 2 THE GOLDMAN, SACHS & CO. L.L.C. 1.0000% HOLDINGS L.L.C. various subsidiaries THE GOLDMAN SACHS GROUP, INC. 99.0000% --------- 100.0000% GS COMMODITY ASSET holding company of non-us Cayman 1 GS ASIAN VENTURE 100.0000% HOLDINGS (CAYMAN) LTD. investments Islands (DELAWARE) L.L.C. FORRES INVESTMENTS LIMITED Set up as part of rthe Cayman 1 FORRES LLC 100.0000% structured investing trade Islands that will enter into swaps and purchase treasuries. LITTON MORTGAGE SERVICING, 100 % Subsidiary of GS Bank Utah 1 GOLDMAN SACHS BANK USA 100.0000% LLC USA (0247) and 99.99% owner of Litton Loan Servicing LP. LITTON CONSUMER AND 100 % Subsidiary of GS Bank Utah 1 GOLDMAN SACHS BANK USA 100.0000% CORPORATE SERVICING, LLC USA (0247) and .01% owner of Litton Loan Servicing LP. LITTON LOAN SERVICING LP Litton Loan Servicing LP, a Delaware 2 LITTON MORTGAGE SERVICING, LLC 99.9900% Delaware limited partnership, is approved to LITTON CONSUMER AND CORPORATE 0.0100% service mortgage loans. SERVICING, LLC The entity is licensed to conduct business in variuous states and subject to regulation and examination by various agencies and certain states. --------- 100.0000%
GOLDMAN SACHS ISRAEL LLC Single Member Office in Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% Israel. For Regulatory INC. matters contact Robert Charnley or Matthias Bock in London. Israeli investment research entity. GOLDMAN SACHS SERVICES Non-regulated entity; British 1 GOLDMAN, SACHS & CO. 100.0000% LIMITED employer of certain London Virgin I office personnel GS GLOBAL FUNDING (UK) Holds a Far East structured England 1 GOLDMAN SACHS INTERNATIONAL 100.0000% finance deal. GS NEW MARKETS FUND, LLC UIG Delaware 2 THE GOLDMAN SACHS GROUP, INC. 98.0000% GS NEW MARKETS FUND PNR, INC. 2.0000% --------- 100.0000% GS NEW MARKETS FUND PNR, UIG Delaware 1 THE GOLDMAN SACHS GROUP, INC. 100.0000% INC. GOLDMAN SACHS DIRECT Consolidated employee fund Delaware 1 THE GOLDMAN SACHS GROUP, INC. 100.0000% INVESTMENT FUND 2000, L.P. GOLDMAN SACHS (JAPAN) LTD. Holding shares in Goldman British 1 THE GOLDMAN SACHS GROUP, 100.0000% Sachs Japan Co., Ltd. Virgin I INC. GOLDMAN SACHS JAPAN CO., Securities Broker Dealar, Japan 1 GOLDMAN SACHS (JAPAN) LTD. 100.0000% LTD. Investment bank, Money Lender, Real Estate Broker, Financial Ins Financial Instruments business registration according to the enforcement of the Financial Instruments and Exchange Law (FIEL), the amended Securities and Exchange GOLDMAN SACHS REALTY JAPAN Real Estates Business Japan 1 MLQ INVESTORS, L.P. 100.0000% LTD. GOLDMAN SACHS ASSET Registered investment Delaware 2 THE GOLDMAN SACHS GROUP, INC. 99.0000% MANAGEMENT, L.P. adviser. holding company for Goldman Sachs Asset GOLDMAN SACHS GLOBAL HOLDINGS 1.0000% amanagement Japan Limited. L.L.C. --------- 100.0000% STONE STREET PEP To facilitate the Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% TECHNOLOGY FUND 2000, L.P. consolidation of the GSAM INC. employee funds. GOLDMAN SACHS ASSET Investment management of Japan 2 THE GOLDMAN SACHS GROUP, INC. 1.0000% MANAGEMENT CO., LTD. securities investment trusts; discretionary and GOLDMAN SACHS ASSET MANAGEMENT, 99.0000% non-discretionary L.P. investment advisory --------- business since 4/1/02. 100.0000% Established in connection with obtaining a mutual fund license in Japan.Limited license to engage in offering of offshor GOLDMAN SACHS The Company to act as Ireland 1 GOLDMAN SACHS IRELAND 100.0000% ADMINISTRATION SERVICES manager of Goldman Sachs HOLDINGS LIMITED COMPANY LIMITED Global Currency Fund - Dollar Plus, Goldman Sachs Global Currency Fund - Euro Plus, Goldman Sachs Money Market Funds, Goldman Sachs Global Funds, Goldman Sachs Global Multi Manager Funds, Goldman Sachs Select GOLDMAN SACHS INVESTMENTS To hold investments on Bermuda 1 THE GOLDMAN SACHS GROUP, 100.0000% LTD. behalf of yet-to-be formed INC. funds. GS PENSION MANAGEMENT GSAM-related vehicle formed Cayman 2 THE GOLDMAN SACHS GROUP, INC. 99.0000% COMPANY to serve as the general Islands partner of Progressive GOLDMAN SACHS (CAYMAN) HOLDING 1.0000% Pension Management LP; also COMPANY general partner of --------- Progressive Pension 100.0000% Management II, LP; Nenpuku is the indirect limited partner of both entities Goldman Sachs Fund Administration and Luxembourg 2 GOLDMAN SACHS HOLDINGS (U.K.) 1.0000% Management S.A. management of one or several mutual investment GOLDMAN SACHS (UK) L.L.C. 99.0000% funds or investment --------- companies organised under 100.0000% the laws of Luxembourg. Management company for German Bond Fund. GOLDMAN SACHS JAPAN Following services in Japan 1 GOLDMAN SACHS (JAPAN) LTD. 100.0000% HOLDINGS, LTD. response to requests by The Goldman Sachs Group, Inc.???s subsidiaries in Japan and across Asia. 1. Leasing and sub leasing of real estate2. General Administration services including facility management, real estate and other lea PALMWOOD CO., LTD. Holding loans transferred Japan 1 GOLDMAN SACHS REALTY JAPAN 100.0000% from PIAJ, and assets LTD. purchased from Hyogin Factor. GOLDMAN SACHS CREDIT Purchasing Loans. Japan 1 GOLDMAN SACHS REALTY JAPAN 100.0000% PARTNERS (JAPAN), LTD. LTD. GS STRATEGIC INVESTMENTS Invest in TK arrangements Delaware 1 GS FINANCIAL SERVICES L.P. 100.0000% JAPAN LLC in Japan (DEL) JUPITER INVESTMENT CO., ASSG Equity Position. Holds Japan 2 AR HOLDINGS GK 0.0006% LTD. equities for investment. MLQ INVESTORS, L.P. 99.9994% --------- 100.0000% CITRINE INVESTMENT TK Holds a hotel in Osaka, Japan 3 THE GOLDMAN SACHS GROUP, INC. 18.9780% Japan. GS STRATEGIC INVESTMENTS JAPAN 24.1000% LLC CITRINE INVESTMENT CO., LTD. 5.0000% --------- 48.0780% MERCER INVESTMENTS IV SPV for REPIA and ASSG. Malaysia 2 THE GOLDMAN SACHS GROUP, INC. 14.7805% PRIVATE LTD. Equity Investment in PRC Investment SPC. GOLDMAN SACHS HOLDINGS 85.2195% (MAURITIUS) LIMITED --------- 100.0000% EXPRESS SECURITIZATION Invest in Cho Hung bank Korea 1 BEST INVESTMENTS 100.0000% SPECIALTY L.L.C. deal. (DELAWARE) L.L.C. R and G CO., LTD. Invests in non-performing Japan 2 GOLDMAN SACHS REALTY JAPAN LTD. 98.3333% loans. JLQ LLC 1.6667% --------- 100.0000% MERCER INVESTMENTS V SPV for ASSG. Equity Malaysia 1 GOLDMAN SACHS HOLDINGS 100.0000% PRIVATE LTD. investments in Beijing (MAURITIUS) LIMITED Goldman Sachs Consulting Co., Ltd (formerly Shang Er Kang) (PRC On-shore Consulting/Servicing Company).
EXPRESS II SECURITIZATION Invest in Cho Hung bank Korea 1 BEST INVESTMENTS 100.0000% SPECIALTY L.L.C. deal. (DELAWARE) L.L.C. GAC PERSONAL CO., LTD. Purchasing loans from RCC Japan 1 GOLDMAN SACHS REALTY JAPAN 100.0000% (Hyogin loan). Owns loans LTD. and equity in subsidiary (Owns Hyogo Wide Service, Midori Data and Wakaba Hoken Daiko). PHOENIX OXNARD LLC Created for transaction in Delaware 1 MLQ INVESTORS, L.P. 100.0000% Japan GOLDMAN SACHS JBWERE Regulated by the Australian Australia 2 THE GOLDMAN SACHS GROUP, INC. 100.0000% FINANCIAL MARKETS PTY LTD Securities and Investments Commission and transacts J. ARON & COMPANY 0.0000% FICC business in Australia --------- and New Zealand. 100.0000% Essentially, the company transacts with Australian and New Zealand clients and enters into back to back trades with J Aron NY or a ARCHON HOSPITALITY K.K. Management of Hotels Japan 1 GOLDMAN SACHS REALTY JAPAN 100.0000% LTD. LEAF GREEN CO., LTD. Purchasing loans (RCC-MTB) Japan 2 GOLDMAN SACHS (ASIA) FINANCE 0.0000% GOLDMAN SACHS REALTY JAPAN LTD. 100.0000% --------- 100.0000% LINDEN WOOD, LTD. Purchasing unsecured loans Cayman 1 MLQ INVESTORS, L.P. 100.0000% jointly with Nochu Islands SOLAR WIND LTD. Purchasing loans from SMBC Cayman 1 MLQ INVESTORS, L.P. 100.0000% Islands GOLDMAN SACHS MITSUI AAA rated company Delaware 2 GSMMDPGP, INC. 1.0000% MARINE DERIVATIVE established to provide PRODUCTS, L.P. credit rating enhancement GOLDMAN SACHS HOLDINGS 49.0000% to derivative product (NETHERLANDS) B.V. trading. All trades to --------- third parties are back to 50.0000% back with affiliates. AZABU CAPITAL HOLDING CO., Holding Teibow. Japan 1 JUPITER INVESTMENT CO., LTD. 100.0000% LTD. NIHON HOTEL INVESTMENT TK To hold hotels in Japan. Japan 3 THE GOLDMAN SACHS GROUP, INC. 39.4734% GS STRATEGIC INVESTMENTS JAPAN 50.1269% LLC NIHON HOTEL INVESTMENT CO., 10.3998% LTD. --------- 100.0000% NEPHRITE EQUITY CO., LTD. Flagged for SMAP2 dealTK Japan 1 GOLDMAN SACHS REALTY JAPAN LTD. 100.0000% investor of Amethyst Realty Co., Ltd. AMETHYST REALTY TK To hold real estate in Japan Japan 2 NEPHRITE EQUITY CO., LTD. 85.0000% AMETHYST REALTY CO., LTD. 5.0000% --------- 90.0000% OMACHI ONSEN KAIHATSU CO., Flagged for Onsen deal. Japan 1 GOLDMAN SACHS REALTY JAPAN 100.0000% LTD. LTD. TG FUND TK To hold real estate in Japan 2 AMETHYST REALTY TK 99.0000% Japan. TG FUND CO., LTD. 1.0000% --------- 100.0000% GK SAKURAZAKA CAPITAL Flagged for Principal Japan 2 AR HOLDINGS GK 1.0000% Finance Deals MLQ INVESTORS, L.P. 99.0000% --------- 100.0000% YOSHINO HOSPITALITY CO., Created for Ometosando deal Japan 1 GOLDMAN SACHS REALTY JAPAN 100.0000% LTD. LTD. REAL ESTATE CREATION FUND2 Created for Ometosando deal Japan 1 GOLDMAN SACHS REALTY JAPAN 100.0000% CO., LTD. LTD. NAGASAKA KAIHATSU CO., Created for Ometosando deal Japan 1 GOLDMAN SACHS REALTY JAPAN 100.0000% LTD. LTD. YOSHINO KAIHATSU CO., LTD. Created for Ometosando deal Japan 1 GOLDMAN SACHS REALTY JAPAN 100.0000% LTD. STAR GATE REALTY CO., LTD. Created for Ometosando deal Japan 1 GOLDMAN SACHS REALTY JAPAN 100.0000% LTD. REC INVESTMENTS2 CO., LTD. Created for Ometosando deal Japan 1 GOLDMAN SACHS REALTY JAPAN 100.0000% LTD. PIA HOLDINGS CAYMAN Holding Shares. Cayman 1 MLQ INVESTORS, L.P. 100.0000% Islands GS PIA HOLDINGS GK Flagged for PIA deals Japan 2 PIA HOLDINGS CAYMAN 0.4526% MLQ INVESTORS, L.P. 99.5475% --------- 100.0000% GS FINANCIAL SERVICES II, Entity set up as part of an Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% LLC AMSSG structured INC. transaction. To act as a parent company to AFCO 4 and the Amagansett chain of companies. GSMMDPGP, INC. General partner of Goldman Delaware 1 GOLDMAN SACHS BANK USA 100.0000% Sachs Mitsui Marine Derivative Products, L.P. GOLDMAN SACHS GESTION To manage Spanish SICAVs, Spain 1 GOLDMAN SACHS 100.0000% S.G.I.I.C. S.A. discretionary portfolios, (NETHERLANDS) B.V. provide advisory services and distribute funds. WILLIAM STREET LLC William Street LLC will Utah 1 GOLDMAN SACHS BANK USA 100.0000% offer credit commitments and extensions of credit to investment-grade corporate clients. These facilities are predominantly commercial paper facilities, term loans or revolving credit facilities that are intended to provide back-u GSPS ASIA LIMITED SPV for GSPS business in Mauritius 1 GS ASIAN VENTURE 100.0000% Asia (DELAWARE) L.L.C. GSPS DAI VIET LTD. SPV to hold 1 GSPS's Mauritius 1 GSPS ASIA LIMITED 100.0000% investment in Vietnam. GSPS LOTUS LIMITED Not commenced business Mauritius 1 GSPS ASIA LIMITED 100.0000% BLUE LOTUS LIMITED Korea Principal Finance Ireland 1 GS ASIAN VENTURE 100.0000% business for the Asia GSPS (DELAWARE) L.L.C. desk GOLDMAN SACHS HOLDINGS To own the GS limited Netherlands 1 GOLDMAN SACHS BANK USA 100.0000% (NETHERLANDS) B.V. partnership interest in GSMMDP GOLDMAN SACHS (INDIA) Formed to hold Delaware 2 THE GOLDMAN SACHS GROUP, INC. 99.0000% L.L.C. Representative Office in India GOLDMAN SACHS GLOBAL HOLDINGS 1.0000% L.L.C. --------- 100.0000% GS INDIA HOLDINGS Holding company for Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% (DELAWARE) L.L.C. investments into India. INC. GS INDIA HOLDINGS L.P. Holding company for Delaware 3 THE GOLDMAN SACHS GROUP, INC. 74.9900% investments into India. GOLDMAN SACHS GLOBAL HOLDINGS 25.0000% L.L.C. GS INDIA HOLDINGS (DELAWARE) 0.0100% L.L.C. --------- 100.0000% NAM VIET LTD. Holding company for Vietnam Mauritius 1 GSPS ASIA LIMITED 100.0000% investment. GREEN LOTUS LIMITED Investment holding company Mauritius 1 GSPS ASIA LIMITED 100.0000% for a PRC investment for GSPS.Investment holding company for a PRC investment for GSPS. VANTAGE MARKETPLACE to establish a holding Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% HOLDINGS, LLC company for Vantage INC. Marketplace LLC EMBARGO, LLC To purchase portfolios of Delaware 1 MTGLQ INVESTORS, L.P. 80.0000% credit cards receivables.
REC INVESTMENTS TK An ASSG related entity that Japan 2 GS STRATEGIC INVESTMENTS 69.0000% invests in loans. JAPAN LLC REC INVESTMENTS CO., LTD. 5.0000% --------- 74.0000% REAL ESTATE CREATION Acquiring non performing Japan 2 REC INVESTMENTS TK 85.0000% FUND TK loans and realizing them.( Resona Deal ) REAL ESTATE CREATION FUND CO., 5.0000% LTD. --------- 90.0000% MUSASHI CAYMAN CO., LTD. Holding GK Musashi Cayman 1 MLQ INVESTORS, L.P. 100.0000% Islands SHIRE II ASSETS LIMITED Established as part of an Cayman 1 SHIRE UK LIMITED 100.0000% SSG Structured Investing Islands Group transaction. SHIRE FUNDING LIMITED Established as part of an Cayman 1 SHIRE UK LIMITED 100.0000% SSG Structured Investing Islands Group transaction. SHIRE UK LIMITED Holding Company England 1 GOLDMAN SACHS GROUP 100.0000% HOLDINGS (U.K.) BAY WIND TK Real Estate business Japan 3 THE GOLDMAN SACHS GROUP, INC. 6.5200% BAY WIND REALTY FINANCE 5.0000% (CAYMAN) COMPANY SHIGA (DELAWARE) LLC 35.0000% --------- 46.5200% PRIME EQUITY CO., LTD. Dissolved as of 14/10/2008 Japan 1 GOLDMAN SACHS REALTY JAPAN LTD. 100.0000% with Hung Ke Lee as liquidator, liquidation completed as of 19/02/2009. MG PARTNERS TK Invests in real estate. Japan 2 MG PARTNERS CO., LTD. 5.0000% KIRI (DELAWARE) L.L.C. 75.0000% --------- 80.0000% AMAGANSETT FINANCING Established as part of an Cayman 1 GOLDMAN SACHS GROUP 100.0000% LIMITED SSG Structured Investing Islands HOLDINGS (U.K.) Group transaction. GS LONGPORT INVESTMENT Part of structured Delaware 1 GS FINANCIAL SERVICES L.P. 100.0000% CORPORATION transaction with BNP (DEL) Paribas. GS OCEANSIDE INVESTMENTS Part of structured Delaware 1 GS LONGPORT INVESTMENT 100.0000% LLC transaction with BNP CORPORATION Paribas. NORMANDY FUNDING CORP. To capitalize an entity Delaware 1 THE GOLDMAN SACHS GROUP, INC. 100.0000% used to raise 750 million of financing. SOCIETA' ACQUISIZIONE E Purchases non-performing Italy 2 ARCHON GROUP ITALIA, S.R.L. 2.0000% RIFINANZIAMENTO CREDITI Italian mortgage and SRL consumer loan portfolios MTGLQ INVESTORS, L.P. 98.0000% and then securitizes them. --------- 100.0000% GS HULL HOLDING, INC. Holding company for Hull Delaware 1 THE GOLDMAN SACHS GROUP, INC. 100.0000% THE HULL GROUP, L.L.C. To engage directly or Illinois 2 THE GOLDMAN SACHS GROUP, INC. 12.3300% indirectly through trading partnerships or other trading arrangements with GS HULL HOLDING, INC. 87.6700% others in trading & --------- investment activities. 100.0000% Managing member for Hullm Trading Company, L.L.C.To tranfer any and all lawful businesses for which limited li SLK-HULL DERIVATIVES LLC History: 1985 Hull Trading Delaware 1 THE HULL GROUP, L.L.C. 100.0000% Company, an ILL general partnership is formed; 1995 Hull Trading Company is converted to an ILL LLC; 1998 A decision is made to create a holding company structure; Broker/Dealer;SEC File No. 8-51552. The SHD BDW was filed on HULL TRADING UK To carry on business as a England 1 THE HULL GROUP, L.L.C. 100.0000% general commercial company. Proprietary trading firm. Re-registered as unlimited on 16 August 2004 HULL TRADING ASIA LIMITED Holding company. Hong Kong 1 THE GOLDMAN SACHS GROUP, INC. 100.0000% FRANKFURTER MOBILIEN was constituted to acquire Isle of 1 GS FINANCIAL SERVICES L.P. 100.0000% LIMITED and own German share Jersey (DEL) purchases, leases and loans. AKTEAS Srl ESSG Italian Real Estate Italy 1 ELQ INVESTORS, LTD 100.0000% trading entity and controlled and managed by Archon Italy NEG (TPL) LIMITED The principal activity of United 1 ELQ INVESTORS, LTD 100.0000% the Company is to hold an Kingdom investment in Teesside Power Limited, a company established to build and operate a power station on Teesside. SOUTH WALES TPL ESSG related entity United 1 ELQ INVESTORS, LTD 100.0000% INVESTMENTS LIMITED established to hold an Kingdom investment in a power company. WESTERN POWER INVESTMENTS Holding company for England 1 ELQ INVESTORS, LTD 100.0000% LIMITED Teesside Power Limited YELLOW ACQUISITIONS LTD Opportunities Fund SPV to England 1 GS EUROPEAN OPPORTUNITIES 100.0000% hold Yellow NPL Portfolio INVESTMENT FUND B.V. GS CAPITAL FUNDING The entity is setup as part Cayman 1 GS CAPITAL FUNDING (UK) II 100.0000% (CAYMAN) LIMITED of an upcoming Structured Islands LIMITED Investment Group (SSG) transaction. GS CAPITAL FUNDING, INC. The entity is setup as part Delaware 1 GS FINANCIAL SERVICES L.P. 100.0000% of an upcoming Structured (DEL) Investment Group (SSG) transaction. GS CAPITAL FUNDING The entity is setup as part Cayman 1 GOLDMAN SACHS GROUP 100.0000% (CAYMAN) II LIMITED of an upcoming Structured Islands HOLDINGS (U.K.) Investment Group (SSG) transaction. GSFS (CAYMAN) 2002 Set up as part of a Cayman 1 GS FINANCIAL SERVICES L.P. 100.0000% A LIMITED Structured Investing Group Islands (DEL) transaction. The entity will be capitalised by GS Financial Services LP. It's purpose will purely be to sell a third party a put option over the third parties' minority interest in a GS controlled Unit Trus
CONRAD P4 LTD. SPV to purchase the CP4 England 1 ELQ INVESTORS, LTD 100.0000% Porfolio of NPLs from HVB (via HANSEN & SCHUCHT DEBITORENMANAGEMENT GMBH) GS CAPITAL FUNDING (UK) Investment Company England 1 GS CAPITAL FUNDING, INC. 100.0000% II LIMITED SUNE SOLAR FUND I LLC Company founded to support Delaware 1 GS SOLAR POWER I, LLC 100.0000% the installation of solar electric systems. RUBY REALTY TK Holds commercial buildings Japan 3 THE GOLDMAN SACHS GROUP, INC. 39.4734% in Tokyo, Japan. GS STRATEGIC INVESTMENTS JAPAN 50.4388% LLC RUBY REALTY CO., LTD. 10.0878% --------- 100.0000% GK ARAKAWA HOLDING Flagged for Yodoyabashi Japan 1 MLQ INVESTORS, L.P. 100.0000% Deal (REO). Owns real estate beneficiary right. ARAKAWA HOLDING TK To acquire real estate Japan 3 THE GOLDMAN SACHS GROUP, INC. 24.5000% under a deal called Yodoyabashi. GS STRATEGIC INVESTMENTS JAPAN 25.0000% LLC GK ARAKAWA HOLDING 5.0000% --------- 54.5000% GK KAZAHANA Flagged for Joy Park Deal. Japan 1 GOLDMAN SACHS REALTY JAPAN LTD. 100.0000% Owns beneficiary rights of Joy Park Kakogawa. ARCHON JAPAN BRANCH To set up Archon Japan Japan 1 GOLDMAN SACHS REALTY JAPAN LTD. 100.0000% (division of GSRJL) with ots own enity code. Initially set up as Shell Entity 8. GK FUNABIKI Flagged for Onsen Deal. Japan 1 AR HOLDINGS GK 100.0000% Owns Ryokans (Japanese inns) and their employees. GK GEKKO Flagged for Project Taurus. Japan 1 JUPITER INVESTMENT CO., LTD. 100.0000% GK SAYAMA Flagged for Shinjjuku Japan 1 MLQ INVESTORS, L.P. 100.0000% retail REO deal. GK ARISUGAWA FINANCE Flagged for PFS Deal Japan 2 GOLDMAN SACHS REALTY JAPAN LTD. 99.0000% (Project SJ). Owns Loans and Warrants. AR HOLDINGS GK 1.0000% --------- 100.0000% ARISUGAWA FINANCE TK To Invest in Loan and Japan 1 GK ARISUGAWA FINANCE 54.5455% Preferred Shares of AP8, a SPC created by Advantage Partners, a well known MBO fund in Japan GK ASUKA Flagged for Hunet Deal. Japan 1 AR HOLDINGS GK 100.0000% SHINING PARTNERS TK2 Consolidation of Japan Japan 2 GS STRATEGIC INVESTMENTS 95.0000% Entity (to hold SPL JAPAN LLC portfolio) SHINING PARTNERS LTD. 5.0000% --------- 100.0000% SHINING PARTNERS LTD. Tokyo Brach / Nishi-Azabu Cayman 1 MLQ INVESTORS, L.P. 100.0000% Annex, 20-16, Nishi-Azabu Islands 3-chome, Minato-ku, Tokyo. SLK GLOBAL MARKETS Introduces foreign customer England 2 SLK INDEX SPECIALISTS, LLC 0.0000% trades to Spear, Leeds & Kellogg, LP on a GOLDMAN SACHS EXECUTION & 100.0000% fully-disclosed basis. CLEARING, L.P. --------- 100.0000% SLK INDEX SPECIALISTS, LLC Acts as the AMEX specialist New York 1 GOLDMAN SACHS EXECUTION & 100.0000% in index-based derivative CLEARING, L.P. products. Broker Dealer; SEC File No. 8-44563 SPEAR, LEEDS & KELLOGG To act as a specialist on New York 1 GOLDMAN SACHS EXECUTION & 100.0000% SPECIALISTS LLC the New York Stock CLEARING, L.P. Exchange; Broker Dealer; SEC File No. 8-49673 SLK LLC The surviving entity of the New York 1 GSTM LLC 100.0000% 10/30/2000 merger between SLK Acquisition LLC (Goldman merger vehicle) and SLK LLC. The Goldman Sachs Group, Inc. is the Managing Member. SLK Acquisition Holdings, Inc. is the other member. The surviving entity of the 10/30 GOLDMAN SACHS EXECUTION & Broker Dealer; SEC File No. New York 1 SLK LLC 100.0000% CLEARING, L.P. 8-00526; proprietary trading, customer business clearing firm KANSAI REALTY TK ASSG entity engaged in real Japan 2 MG PARTNERS TK 99.0000% estate activities in Japan. KANSAI REALTY CO., LTD. 1.0000% --------- 100.0000% HYOGO WIDE SERVICE CO., Gurantee loan purchased Japan 1 GAC PERSONAL TK 100.0000% LTD. from RCC MIDORI DATA CO., LTD. Gurantee loan purchased Japan 1 GAC PERSONAL TK 100.0000% from RCC WAKABA HOKEN DAIKO CO., Gurantee loan purchased Japan 1 GAC PERSONAL TK 100.0000% LTD. from RCC MINAMI AOYAMA KAIHATSU Holding Real Estate. Japan 1 GOLDMAN SACHS REALTY JAPAN LTD. 100.0000% CO., LTD. GS AYCO HOLDING LLC Parent company to The Ayco Delaware 1 THE GOLDMAN SACHS GROUP, INC. 100.0000% Company, LP, Saratoga Springs, LLC, also is a General Partner for the Ayco Services Agency LP. THE AYCO COMPANY, L.P. Provides financial Delaware 2 GS AYCO HOLDING LLC 99.0000% counseling to individuals employed by corporations. SARATOGA SPRINGS LLC 1.0000% --------- 100.0000% SARATOGA SPRINGS LLC General partners for the Delaware 1 GS AYCO HOLDING LLC 100.0000% Ayco Company LP. THE AYCO SERVICES AGENCY Insurance Agency Delaware 2 GS AYCO HOLDING LLC 1.0000% L.P. THE AYCO COMPANY, L.P. 99.0000% --------- 100.0000% MERCAY CORPORATION Holding Company for two Delaware 1 THE AYCO SERVICES AGENCY L.P. 100.0000% entitis that was established to provide insurance services in particular states. MERCER ALLIED COMPANY L.P. Broker/Dealer. Part of Delaware 2 GS AYCO HOLDING LLC 1.0000% Ayco acquisition. THE AYCO COMPANY, L.P. 99.0000% --------- 100.0000% JUST OPTIONS LLC Just Options is a joint Delaware 1 GOLDMAN SACHS EXECUTION & 100.0000% venture between Peak 6 and CLEARING, L.P. GSEC where we are currently taking a majority share in the company's net losses. Accounting Policy is mandating that we treat this as a consolidating VIE until the situation changes. GK MIYUKI Shelf. Purchasing Loans, Japan 1 GOLDMAN SACHS REALTY JAPAN LTD. 100.0000% Holding Real estates and Securities.& #12539;Flagged for Greens deal.
DOTONBORI KAIHATSU TK To purchase Toei Dotonbori Japan 2 NEPHRITE EQUITY CO., LTD. 94.7368% (Land and movie theatre buidling) in Osaka, Japan GK DOTONBORI KAIHATSU 5.2632% --------- 100.0000% GK UNIVERSAL HOTEL Purchasing loan; Flagged Japan 1 AR HOLDINGS GK 100.0000% MANAGEMENT for Hotel Universal Port Deal. TK UNIVERSAL HOTEL Management company related Japan 3 THE GOLDMAN SACHS GROUP, INC. 18.9780% MANAGEMENT to Citrine deal GS STRATEGIC INVESTMENTS JAPAN LLC 24.1000% GK UNIVERSAL HOTEL MANAGEMENT 5.0000% --------- 48.0780% GSEM (DEL) INC. General partner for GS Delaware 1 THE GOLDMAN SACHS GROUP, INC. 100.0000% Equity Market, L.P. (Bermuda). GSEM (DEL) LLC Holding company for GS Delaware 1 GSEM BERMUDA HOLDINGS, L.P. 100.0000% Equity Market, L.P. (Bermuda). GS PRIME HOLDINGS LLC Acquired as part of the Delaware 1 THE GOLDMAN SACHS GROUP, INC. 100.0000% Linden Venture. FEDERAL BOULEVARD, L.L.C. Established to purchase a Delaware 1 THE GOLDMAN SACHS GROUP, INC. 100.0000% data center. GS POWER HOLDINGS LLC Holding Company Delaware 1 THE GOLDMAN SACHS GROUP, INC. 100.0000% AMERICAN GAS ROYALTY TRUST Part of the VPP Dominion United 1 GOLDMAN, SACHS & CO. 100.0000% Transaction. States SITE 26 HOLDINGS INC. Partial Owner of GS Delaware 1 THE GOLDMAN SACHS GROUP, INC. 100.0000% Headquarter LLC GOLDMAN SACHS HEADQUARTERS Operating entity for Site 26 Delaware 2 THE GOLDMAN SACHS GROUP, INC. 99.8000% LLC SITE 26 HOLDINGS INC. 0.2000% --------- 100.0000% GOLDMAN SACHS MIDDLE EAST Established to hold private England 1 GS MIDDLE EAST (CAYMAN) LTD 100.0000% INVESTMENTS LIMITED equity investments in the Middle East. GOLDMAN SACHS Holding Company Delaware 2 GOLDMAN SACHS GLOBAL HOLDINGS 25.0000% INTERNATIONAL HOLDINGS LLC L.L.C. GSEM (DEL) INC. 75.0000% --------- 100.0000% GS BPC PARKING GARAGE, LLC To hold lease to parking Delaware 1 THE GOLDMAN SACHS GROUP, INC. 100.0000% garage adjacent to GS World Headquarters and enter into an agreement for the management of the garage GSEM (DEL) HOLDINGS, L.P. As part of the GSEM L.P. Delaware 2 GOLDMAN SACHS GLOBAL HOLDINGS 25.0000% restructuring, entity is L.L.C. being formed as part of the holding company structure GSEM (DEL) INC. 75.0000% for GSEM L.P. --------- 100.0000% GSEM BERMUDA HOLDINGS, As part of the GSEM L.P. Bermuda 2 GOLDMAN SACHS GLOBAL HOLDINGS 1.0000% L.P. restructuring, entity is L.L.C. being formed as part of the holding company structure GSEM (DEL) HOLDINGS, L.P. 99.0000% for GSEM L.P. --------- 100.0000% MEP GS INVESTOR LP Limited Partner in an United 2 GOLDMAN SACHS GLOBAL HOLDINGS 1.0000% Investment Fund Kingdom L.L.C. MEP GS INVESTOR (CAYCO) LIMITED 99.0000% --------- 100.0000% GSFS INVESTMENTS III, LLC to hold five opearting Delaware 1 GSFS INVESTMENTS I CORP. 100.0000% leases for the SBD Principal Investing desk PINNACLE PARTNERS GP LLC To consolidate GS Pinnacle Delaware 1 GOLDMAN SACHS INVESTMENTS LTD. 100.0000% Partners, LP BRENTA REAL ESTATE S.R.L. Italian Co., to purchase , Italy 1 ELQ INVESTORS, LTD 100.0000% sell exchange , build and manage properties SOUTH WIND TK An ASSG related entity that Japan 4 THE GOLDMAN SACHS GROUP, INC. 8.1500% holds golf courses and related assets in Japan. GS STRATEGIC INVESTMENTS JAPAN LLC 10.0000% SOUTH WIND REALTY FINANCE (CAYMAN) COMPANY 5.0000% SHIGA (DELAWARE) LLC 35.0000% --------- 58.1500% GS CAPITAL OPPORTUNITIES Established as part of an Delaware 1 THE GOLDMAN SACHS GROUP, INC. 100.0000% LLC SSG Structured Investing Group transaction. GS FINANCING OPPORTUNITIES Established as part of an Delaware 1 GS CAPITAL OPPORTUNITIES LLC 100.0000% LLC SSG Structured Investing Group transaction. GS FUNDING INVESTMENTS Wholly owned direct Cayman 1 SHIRE UK LIMITED 100.0000% LIMITED subsidiary of The Goldman Islands Sachs Group, Inc. May enter into certain financing agreements with GS Group and/or its affiliates from time to time and/or may invest in certain Euro government securities in connection with the issuance of ce TG FUND CO., LTD. Flagged for SMAP2 (JV, Japan 1 AMETHYST REALTY TK 100.0000% Tokyu Livable) AMETHYST REALTY CO., LTD. Flagged for SMAP2, Owns TK Japan 1 MLQ INVESTORS, L.P. 100.0000% Investment and equity in subsidiaries (Owns TG Fund and TG Fund II) EXCELLENT EQUITY CO., LTD. Flagged for REO Deal. Japan 1 GOLDMAN SACHS REALTY JAPAN LTD. 100.0000% (can't be unflagged/liquidated until Feb.22, 2009) BLUE DAISY CO., LTD. Total return SWAP w/Nochu Japan 1 GOLDMAN SACHS REALTY JAPAN LTD. 100.0000% re.Recruit shares. DANDELION INVESTMENTS CO., Mizuho JV (TK contributor Japan 1 GOLDMAN SACHS REALTY JAPAN LTD. 100.0000% LTD. to Green Mountain One) GREEN MOUNTAIN ONE CO., Flagged for Mizuho JW Deal Japan 1 GOLDMAN SACHS REALTY JAPAN LTD. 100.0000% LTD. (Investment vehicle). GK TORIIZAKA KAIHATSU Holding Hotel Assets in Japan 2 GOLDMAN SACHS REALTY JAPAN LTD. 0.8333% Japan. MLQ INVESTORS, L.P. 99.1667% --------- 100.0000% FUKUOKA TOSHI KAIHATSU Flagged for Daiwa House Japan 1 GOLDMAN SACHS REALTY JAPAN LTD. 100.0000% CO., LTD. Deal. Owns real estate (hard assets). GK TAIYO KAIHATSU Flagged for Shibuya Udagawa Japan 1 MLQ INVESTORS, L.P. 100.0000% REO Deal CITRINE INVESTMENT CO., Flagged for Universal Hotel Japan 1 MLQ INVESTORS, L.P. 100.0000% LTD. Deal. TK Investment for Universal Resort TK. GK KASHIWABARA TOSHI Flagged for Kobe Japan 1 GOLDMAN SACHS REALTY JAPAN LTD. 100.0000% KAIHATSU developmemt deal.Owns beneficiary right of Kobe Sannomiya real estate GARDEN PLAZA CAPITAL SRL An investment holding entity Barbados 2 THE GOLDMAN SACHS GROUP, INC. 19.9710% BAEKDU INVESTMENTS LIMITED 30.0000% --------- 49.9710% ZAHEER HOLDINGS To purchase preferred Mauritius 1 JADE DRAGON (MAURITIUS) LIMITED 98.0000% (MAURITIUS) equity for office development carried out by Vatika group in Gurgaon, India
GSI Fundo Investimento GOLDMAN SACHS INTERNATIONAL United 1 GOLDMAN SACHS INTERNATIONAL 100.0000% will own 100% of IFIF Kingdom PROP - GS FUNDO DE JANY fund in Brazil used to BRAZIL 1 J. ARON & COMPANY 100.0000% INVESTIMENTO MULTIMERCADO trade exotic products and CREDITO PRIVADO - in the near future INVESTIMENTO NO EXTERIOR commodities. JEREZ FUNDO DE GSCO fund in Brazil used to BRAZIL 1 GOLDMAN, SACHS & CO. 100.0000% INVESTIMENTO EM DIREITOS trade Mortgages CREDITORIOS NAO- PADRONIZADOS MULTICARTEIRA GARDA FUNDO DE GSBR fund used to trade BRAZIL 1 GOLDMAN SACHS do BRASIL 100.0000% INVESTIMENTO EM DIREITOS Mortgages BANCO MULTIPLO S/A CREDITORIOS NAO- PADRONIZADOS MULTICARTEIRA GOLDMAN SACHS ASSET The company's purpose is to BRAZIL 2 GOLDMAN SACHS GLOBAL HOLDINGS 0.0100% MANAGEMENT BRASIL LTDA. render asset management L.L.C. services, acting as a manager of investment funds GOLDMAN SACHS ASSET MANAGEMENT, and securities portfolios. L.P. 99.9900% --------- 100.0000% NIHON HOTEL INVESTMENT Flagged for multiple hotel Japan 1 MLQ INVESTORS, L.P. 100.0000% CO., LTD. acquisition deal MG PARTNERS CO., LTD. Astoria dealReal estate Japan 1 SOLAR WIND TK 100.0000% business RUBY REALTY CO., LTD. The TK Operator for entity Japan 1 MLQ INVESTORS, L.P. 100.0000% 0462. KANSAI REALTY CO., LTD. Astoria deal; Holding Real Japan 1 MG PARTNERS TK 100.0000% Estate. KAKEGAWA HOLDINGS CO., Flagged for Kakegawa Hotel Japan 1 LINDEN WOOD, LTD. 100.0000% LTD. deal. (Owns beneficiary right of Kakegawa Grand Hotel). SAKURAZAKA KAIHATSU CO., Total return swap with Japan 1 GOLDMAN SACHS REALTY JAPAN LTD. 100.0000% LTD. Aozora re. Recruit Shares KINMIRAI CREATE CO., LTD. Flagged for Jusco deal Japan 1 MLQ INVESTORS, L.P. 100.0000% (acquisition of JUSCO in Shimotsuma, Ibaraki). Owns hard RE asset (Jusco Shimotsuma). BAY WIND II LTD. Investing in Golf Portfolio. Cayman 1 MLQ INVESTORS, L.P. 100.0000% Islands MINATOMARU HOTEL HOLDINGS Flagged for JAL Hotel Japan 1 GOLDMAN SACHS REALTY JAPAN LTD. 100.0000% CO., LTD. SOUTH WIND REALTY FINANCE Purchasing loans secured by Cayman 1 MLQ INVESTORS, L.P. 100.0000% (CAYMAN) COMPANY Nitto Kogyo 30 golf courses Islands (JV w/Nochu) ITO ONSEN MANAGEMENT CO., Flagged for New Onsen deal Japan 1 GOLDMAN SACHS REALTY JAPAN LTD. 100.0000% LTD. (Ebina);Management of Ryokan (Japanese Hotel). TAMATSUKURI ONSEN HOTEL ASSG/REPIA Onsen Japan 1 GOLDMAN SACHS REALTY JAPAN LTD. 100.0000% MANAGEMENT CO., LTD. deal.Managiment of Onsen ryokan( Japanese style Hotel.) ENDEAVOR PRIVATE FUND CO., Flagged for Private Equity Japan 1 MLQ INVESTORS, L.P. 100.0000% LTD. Fund Deal. Holding RE Trust beneficicary Interest. ENDEAVOR PRIVATE FUND TK Investing in real estate. Japan 3 THE GOLDMAN SACHS GROUP, INC. 12.1380% Change from EQPU to Consolidated due to GS STRATEGIC INVESTMENTS JAPAN purchase TK interest from LLC 25.0000% 3rd party ENDEAVOR PRIVATE FUND CO., LTD. 5.0000% --------- 42.1380% HORTENSIA CAYMAN Flagged for Universal Hotel Cayman 2 THE GOLDMAN SACHS GROUP, INC. 19.9770% Deal. Islands GS STRATEGIC INVESTMENTS JAPAN LLC 25.3684% --------- 45.3454% GOLDMAN SACHS do BRASIL Brazilian bank. BRAZIL 2 THE GOLDMAN SACHS GROUP, INC. 99.9000% BANCO MULTIPLO S/A GOLDMAN SACHS GLOBAL HOLDINGS L.L.C. 0.1000% --------- 100.0000% GOLDMAN SACHS Representative office in BRAZIL 2 GOLDMAN, SACHS & CO. 1.0000% REPRESENTACOES LTDA. Sao Paulo, Brazil THE GOLDMAN SACHS GROUP, INC. 99.0000% --------- 100.0000% GK FUJIMIZAKA Flagged for Yamato Life Japan 1 AR HOLDINGS GK 100.0000% Deal. AR HOLDINGS GK Holding equity interest. Japan 2 AR HOLDINGS (DELAWARE) L.L.C. 100.0000% MLQ INVESTORS, L.P. 0.0000% --------- 100.0000% GK GOLDMAN SACHS SSG I Flagged for Project Coin. Japan 1 AR HOLDINGS GK 100.0000% Owns equity for investment. GOLDMAN SACHS PSI JAPAN Flagged for Project Coin. Japan 1 MLQ INVESTORS, L.P. 100.0000% CO., LTD. GK JUPITER INVESTMENT III Flagged as ASSG Equity Japan 1 AR HOLDINGS GK 100.0000% Entity. GK KIRISHIMA PFS Project Neo. Holds Japan 1 AR HOLDINGS GK 100.0000% equity for investment. AR HOLDINGS (DELAWARE) To hold the equity in AR Delaware 1 MLQ INVESTORS, L.P. 100.0000% L.L.C. Holdings GK which will be the parent for some of our future Japanese entities used for ASSG/REPIA acquisitions. GK YAMAMOTO KAIUN HOLDINGS Flagged for Project Japan 2 AR HOLDINGS (DELAWARE) L.L.C. 1.0000% Tugboat.Holding Securities. MLQ INVESTORS, L.P. 84.0000% --------- 85.0000% ASIAN SEA WAYS S.A. Flagged for Project Panama 1 GK YAMAMOTO KAIUN HOLDINGS 100.0000% Tugboat. Owns and operates ships. YAMAMOTO REAL ESTATE CO., Project Tugboat. Japan 1 GK YAMAMOTO KAIUN HOLDINGS 100.0000% LTD. YAMAMOTO KAIUN CO., LTD. Flagged for Project Tugboat. Japan 1 GK YAMAMOTO KAIUN HOLDINGS 100.0000% EMERALD MARINE S.A. Vessel Holding Company Panama 1 GK YAMAMOTO KAIUN HOLDINGS 100.0000% MAY FLOWER MARITIME S.A. Vessel Holding Company Panama 1 GK YAMAMOTO KAIUN HOLDINGS 100.0000% OCEAN BLUELINE S.A. Vessel Holding Company Panama 1 GK YAMAMOTO KAIUN HOLDINGS 100.0000% GOLDMAN SACHS GROUP Y Provide assets and services Mexico 2 THE GOLDMAN SACHS GROUP, 99.0000% COMPANIA, S. DE R.L. DE to Goldman Sachs Mexico INC. C.V. Casa de Bolsa, S.A. de C.V. in Mexico City, or GOLDMAN SACHS GLOBAL HOLDINGS others as deemed L.L.C. 1.0000% appropriate. --------- 100.0000%
GOLDMAN SACHS MEXICO CASA Mexican Broker-Dealer; Mexico 2 THE GOLDMAN SACHS GROUP, INC. 99.9900% DE BOLSA, S.A. DE C.V. Group Inc. owns 43,995,599 shares; Global Holdings GOLDMAN SACHS GLOBAL HOLDINGS owns 4,400 shares; as of L.L.C. 0.0100% 10/30/01 no longer Approved --------- Person and will not 100.0000% actively engage in the securities or advisory business RUBIN LINE LIMITED Vessel Holding Company Liberia 1 GK YAMAMOTO KAIUN HOLDINGS 100.0000% YAMAMOTO MARITIME, S.A. Vessel Holding Company Panama 1 GK YAMAMOTO KAIUN HOLDINGS 100.0000% GOLDMAN SACHS ARGENTINA Representitive Office in Delaware 2 THE GOLDMAN SACHS GROUP, INC. 99.0000% L.L.C. Buenos Aires GOLDMAN SACHS GLOBAL HOLDINGS L.L.C. 1.0000% --------- 100.0000% GS ARGENTINA LLC-BUENOS Rep office that handles Argentina 1 GOLDMAN SACHS ARGENTINA L.L.C. 100.0000% AIRES investment banking activities GOLDMAN SACHS HEDGE FUND An investment adviser. Delaware 2 THE GOLDMAN SACHS GROUP, INC. 99.0000% STRATEGIES LLC GOLDMAN SACHS ASSET MANAGEMENT, L.P. 1.0000% --------- 100.0000% GOLDMAN SACHS LIQUID To facilitate the Delaware 1 THE GOLDMAN SACHS GROUP, INC. 100.0000% TRADING OPPORTUNITIES consolidation of teh GSAM FUND, LLC fund Seed Investments GSAM INDIA HOLDINGS Holding company for an Mauritius 1 GOLDMAN SACHS ASSET 100.0000% LIMITED asset management company MANAGEMENT, L.P. and trustee company in India GOLDMAN SACHS Investment banking Netherlands 1 THE GOLDMAN SACHS GROUP, 100.0000% (NETHERLANDS) B.V. activities; fixed income INC. trader. Executes, clears and carries all types of futures transactions on the MATIF for affiliated entities. GS A320 LLC Established as part of a Delaware 1 GSFS INVESTMENTS I CORP. 100.0000% Private Finance Group Leasing Transaction. GS RJX LEASING LLC Established as part of a Delaware 1 GSFS INVESTMENTS I CORP. 100.0000% Private Finance Group Leasing Transaction. GOLDMAN SACHS (UK) L.L.C. Non-regulated holding Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% company for Goldman Sachs INC. Overseas Limited; established to achieve tax efficiencies within UK group. FLEET TRADE & TRANSPORT Oil shipping and England 1 GOLDMAN SACHS GROUP 100.0000% LIMITED transporting; non-regulated HOLDINGS (U.K.) London based petroleum shipping entity; FLEET TRADE & TRANSPORT Non-regulated petroleum Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% (U.S.A.) LTD. shipping entity. INC. GOLDMAN SACHS GROUP Holding company. England 1 GOLDMAN SACHS (UK) L.L.C. 100.0000% HOLDINGS (U.K.) GOLDMAN SACHS BANK USA To exercise the powers New York 1 THE GOLDMAN SACHS GROUP, 100.0000% conferred by Section 100 of INC. the New York Banking Law. GOLDMAN SACHS (CAYMAN) Trust company; acts as Cayman 2 GOLDMAN SACHS GLOBAL 1.0000% TRUST, LIMITED offshore trust administrator Islands HOLDINGS L.L.C. GOLDMAN SACHS (CAYMAN) HOLDING COMPANY 99.0000% --------- 100.0000% ROTHESAY LIFE LIMITED FSA-regulated Insurance England 1 ROTHESAY LIFE (CAYMAN) 100.0000% Company LIMITED ROTHESAY PENSIONS Employer Sponsor Company United 1 THE GOLDMAN SACHS GROUP, 100.0000% MANAGEMENT LIMITED for Defined Benefit Pension Kingdom INC. Plan GOLDMAN SACHS Licensed bank in the U.K. England 1 GOLDMAN SACHS GROUP 100.0000% INTERNATIONAL BANK performs foreign currency HOLDINGS (U.K.) option and swap trading and is a deposit-taking institution GSLM HOLDINGS, LLC To act as parent of Delaware 1 GOLDMAN SACHS 100.0000% Unlimited Liability UK INTERNATIONAL HOLDINGS LLC entity GSLM HOLDINGS II, LLC To act as parent of Delaware 1 GOLDMAN SACHS 100.0000% Unlimited Liability UK INTERNATIONAL HOLDINGS LLC entity GOLDMAN SACHS PROPERTY Non-regulated UK based England 1 THE GOLDMAN SACHS GROUP, 100.0000% MANAGEMENT entity which holds the INC. leasehold improvements for Peterborough Court and incurs all expenses for operating the building. GS MUNICIPAL PRODUCTS Holds sponsor certificates Delaware 2 GOLDMAN, SACHS & CO. 1.0000% L.L.C. issued in tender option programs. THE GOLDMAN SACHS GROUP, INC. 99.0000% --------- 100.0000% CER HOLDINGS LP holding entity for CER Cayman 2 GSEM (DEL) HOLDINGS, L.P. 99.0000% Investments 1 and all Islands further special purpose vehicles which are incorporated for the business purpose of holding CER HOLDINGS GP 1.0000% CERs --------- 100.0000% CER INVESTMENTS 1 special purpose vehicle to Cayman 1 CER HOLDINGS LP 100.0000% hold carbon emission Islands reduction units (CERs) GSPS (DEL) L.P. holding entity for GSPS Delaware 2 GSPS STRATEGIES CORP. 75.0000% Bermuda Corporation GOLDMAN SACHS GLOBAL HOLDINGS L.L.C. 25.0000% --------- 100.0000% CER HOLDINGS GP general partner to CER Cayman 1 GOLDMAN SACHS GLOBAL 100.0000% Holdings LP Islands HOLDINGS L.L.C. ROTHESAY LIFE (CAYMAN) Insurance holding company Cayman 1 ROTHESAY LIFE, L.L.C. 100.0000% LIMITED for UK insurance business Islands ROTHESAY LIFE, L.L.C. to hold stock in cayman Delaware 2 THE GOLDMAN SACHS GROUP, 75.0000% company INC. GOLDMAN SACHS GLOBAL HOLDINGS L.L.C. 25.0000% --------- 100.0000% MONEY PARTNERS HOLDINGS UK residential mortgage United 1 GOLDMAN SACHS GROUP 100.0000% LIMITED loan originator. Kingdom HOLDINGS (U.K.) GOLDMAN SACHS OVERSEAS Non-regulated Paris based Delaware 2 THE GOLDMAN SACHS GROUP, 99.0000% FINANCE, L.P. entity formed to issue a INC. $1.5 billion French France Note; finance Company; GOLDMAN SACHS (FRANCE) FINANCE, L.L.C. 1.0000% --------- 100.0000% EXCELLENT EQUITY TK Kamata kosan Japan 3 THE GOLDMAN SACHS GROUP, 19.5650% (Residential); Excellent to INC. purchase 2 retail store buildings , 1 hotel plus GS STRATEGIC INVESTMENTS JAPAN parking area ( land), 1 LLC 25.0000% residential and 5 lands. EXCELLENT EQUITY CO., LTD. 5.0000% --------- 49.5650% ELQ INVESTORS, LTD "Holding" company for England 1 MTGLQ INVESTORS, L.P. 100.0000% distressed debt investments PERCIER FINANCE SAS Investment company. France 1 ELQ INVESTORS, LTD 90.0000%
Fleet Properties, Compra e Property company Portugal 2 ELQ INVESTORS, LTD 99.0000% Venda de Im??veis, Lda incorporated in Portugual for the purpose of MTGLQ INVESTORS, L.P. 1.0000% participating in the public --------- auctions of properties held 100.0000% as collateral for the NPL portfolios held by PMF-2, Ltd MONT BLANC ACQUISITIONS Total Return Swap England 1 ELQ INVESTORS, LTD 100.0000% LTD counterparty for the Mont Blanc NPL Portfolio MATTERHORN ACQUISITIONS SPV incorporated for the England 1 GS EUROPEAN OPPORTUNITIES 100.0000% LTD. acquisition of a portfolio INVESTMENT FUND B.V. of NPLs from Delmora Bank in Germany MB ACQUISITIONS B.V. Joint venture company for Netherlands 1 ELQ INVESTORS, LTD 50.0000% the Mont Blanc non-performing loan portfolio GOLDMAN SACHS CREDIT Established to hold a England 1 ELQ INVESTORS, LTD 100.0000% PARTNERS (EUROPE) LTD portfolio of investments. GOLDMAN SACHS POWER L.L.C. DULLES HOLDING CORP. was Delaware 2 J. ARON HOLDINGS, L.P. 99.0000% former name. Established to serve as the exclusive J. ARON & COMPANY 1.0000% advisor to Constellation --------- Power Source Inc. for power 100.0000% trading and risk management. ALKAS REALTY PRIVATE The entity is a SPC which Singapore 2 THE GOLDMAN SACHS GROUP, 19.5650% LIMITED will purchase DBS tower as INC. a rental property in Singapore. BAEKDU INVESTMENTS LIMITED 30.0000% --------- 49.5650% EXCHANGE REALTY SRL Investment holding company Barbados 2 THE GOLDMAN SACHS GROUP, 19.5650% formed for the purpose of INC. investing in real estate in China BAEKDU INVESTMENTS LIMITED 30.0000% --------- 49.5650% CASE G, LLC Purchase retail installment Delaware 1 MTGLQ INVESTORS, L.P. 100.0000% contracts (RICs) and Auto Loans from Banks, Thrifts, Credit Unions, Independent Finance Companies and other Specialty Finance Dealer Related Company. Purchase loans and get leverage or securitize after a couple of years (couldP GSFS INVESTMENTS IV, LLC To hold two operating Delaware 1 GSFS INVESTMENTS I CORP. 100.0000% leases on mining equipment. GOLDMAN SACHS FUTURES Principally engaged in Hong Kong 1 GOLDMAN SACHS HOLDINGS 100.0000% (ASIA) LIMITED dealing in futures (HONG KONG) LIMITED contracts on behalf of affiliated companies on the Hong Kong Futures Exchange Limited ("HKFE"). TRIUMPH INVESTMENTS Primarily established to Ireland 1 BEST II INVESTMENTS 100.0000% (IRELAND) LIMITED hold ASSG positions in (DELAWARE) L.L.C. Korean assets. GS 767 LEASING LLC Established as part of an Delaware 1 GSFS INVESTMENTS I CORP. 100.0000% SSG Structured Investing Group transaction. BLOSSOM HOLDING III BV GS European Opportunities Netherlands 1 GS EUROPEAN OPPORTUNITIES 100.0000% Fund BV subsidary for Ihr INVESTMENT FUND B.V. Platz Investment REP FSB REAL ESTATE, REPIA entity. Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% L.L.C. INC. GS LPII PHASE I REALTY, REPIA entity. Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% LLC INC. MARS EQUITY CO., LTD. Purchasing Loans, Holding Japan 1 GOLDMAN SACHS REALTY JAPAN 100.0000% Real estates and LTD. Securities. OOO GOLDMAN SACHS This entity was set up as Russia 1 GS RBD HOLDINGS, L.P. 100.0000% part of an AMSSG Structured Investing Group transaction GCN CE HOLDINGS The entity will own several Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% CORPORATION micro-ticket machine leases INC. throughout the US and Canada. OOO GOLDMAN SACHS BANK Trade FX and interest rate Russia 1 THE GOLDMAN SACHS GROUP, 100.0000% products. INC. J. ARON & COMPANY Dealer in petroleum, metals New York 2 THE J. ARON CORPORATION 0.2000% (precious and base), grain and coffee/cocoa in the J. ARON HOLDINGS, L.P. 99.8000% spot and forward markets --------- and foreign currency 100.0000% options and maintains seats on various exchanges; Commodities dealer J. ARON & COMPANY The principal activity of Singapore 1 GOLDMAN SACHS FOREIGN 100.0000% (SINGAPORE) PTE. the Company is to trade in EXCHANGE (SINGAPORE) PTE. physical oil and oil related derivative contracts including forwards, swaps, options and futures. GOLDMAN SACHS (SINGAPORE) Holder of a Capital Markets Singapore 1 GOLDMAN SACHS FOREIGN 100.0000% PTE. Services Licence to advise EXCHANGE (SINGAPORE) PTE. on corporate finance, deal in securities, leveraged foreign exchange trading and fund management. GOLDMAN SACHS FOREIGN Non-regulated entity which Singapore 1 GOLDMAN SACHS HOLDINGS 100.0000% EXCHANGE (SINGAPORE) PTE. is a holding company and (HONG KONG) LIMITED deals in foreign exchange and derivative contracts GOLDMAN SACHS FUTURES PTE Clearing of futures and Singapore 1 GOLDMAN SACHS FOREIGN 100.0000% LTD options contracts EXCHANGE (SINGAPORE) PTE. RAINBOW PLAZA CAPITAL SRL Holds a residential Barbados 2 THE GOLDMAN SACHS GROUP, 19.5650% building in Shanghai, China. INC. BAEKDU INVESTMENTS LIMITED 30.0000% --------- 49.5650% GOLDMAN SACHS LONGEVITY UK Proprietary trading England 2 GSLM HOLDINGS, LLC 99.0000% MARKETS (U.K.) entity for the Longevity Markets Group GSLM HOLDINGS II, LLC 1.0000% --------- 100.0000% J. ARON (CHINA) Trading of base metals and People's 1 J. ARON (CHINA) HOLDINGS 100.0000% COMMODITIES TRADING other commodities in China Republic of L.L.C. COMPANY LIMITED China
GS INVESTMENT STRATEGIES Sub-advisor to Liberty Singapore 1 GOLDMAN SACHS FOREIGN 100.0000% (SINGAPORE) PTE Harbor EXCHANGE (SINGAPORE) PTE. EXCHANGE (BEIJING) CO. To hold Exchange Tower in People's 1 EXCHANGE REALTY SRL 100.0000% LIMITED Beijing. Republic of China GARDEN PLAZA CAPITAL CO. To hold Garden Plaza in People's 1 GARDEN PLAZA CAPITAL SRL 100.0000% LTD China. Republic of China SHANGHAI FUJITA TIANSHAN To hold Rainbow Plaza in People's 1 RAINBOW PLAZA CAPITAL SRL 100.0000% HOUSING DEVELOPMENT CO., China. Republic of LTD. China GOLDMAN SACHS (MAURITIUS) Vehicle for investing in Mauritius 1 GS INDIA HOLDINGS L.P. 100.0000% L.L.C. India; holding company for Goldman Schs (India) Securities Private Limited and Goldman Sachs Services Private Limited. The Company was also the holding company for GS joint venture in Kotak Mahindra Capital Company and Kotak Secur GOLDMAN SACHS INVESTMENTS Primarily engaged in Mauritius 1 GS INDIA HOLDINGS L.P. 100.0000% (MAURITIUS) I LIMITED trading of financial products including equity securities in India and other Asian countries. GOLDMAN SACHS (RUSSIA) Business tranferred to J. England 1 GOLDMAN SACHS 100.0000% Aron & Company (U.K.). INTERNATIONAL HOLDINGS LLC Entity to be used to set up an IBD branch in Russia. GOLDMAN SACHS (LABUAN) The principal activities Malaysia 1 GOLDMAN SACHS HOLDINGS 100.0000% INVESTMENT BANK LIMITED include investment banking (HONG KONG) LIMITED and trading of financial products. J.ARON(CHINA)TRADING Trading of base metals and China 1 J. ARON (CHINA) 100.0000% BEIJING other commodities in China. COMMODITIES TRADING COMPANY LIMITED EURO-SPLITTER B.V. Non-regulated Dutch entity Netherlands 1 J. ARON & COMPANY 100.0000% established to invest in a Antilles condensate splitter. LIBERTY HARBOR I GP, LLC General Partner of Liberty Delaware 1 GSCS HOLDINGS II LLC 100.0000% Harbor Master Fund GSCS HOLDINGS I LLC Holding Company of GSCS Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% Holdings II, LLC which in INC. turn holds GS Capital Strategies LLC GSPS BERMUDA CORPORATION to hold equity investments Bermuda 1 GSPS (DEL) L.P. 100.0000% LIMITED for GSPSto hold equity investments for GSPS GOLDMAN SACHS SERVICES Technology and data process India 2 GOLDMAN SACHS (ASIA) 1.0520% PRIVATE LIMITED entity. FINANCE GOLDMAN SACHS (MAURITIUS) 98.9480% L.L.C. --------- 100.0000% GOLDMAN SACHS Business tranferred to England 1 GOLDMAN SACHS HOLDINGS 100.0000% INTERNATIONAL FINANCE Goldman Sachs International (U.K.) GSISPL- Bangalore Branch Foreign Merchant Banking India 1 GOLDMAN SACHS (INDIA) 100.0000% SECURITIES PRIVATE LIMITED GOLDMAN SACHS TRADING AND Sales agent for affiliated Netherlands 2 J. ARON HOLDINGS, L.P. 0.2500% CLEARING SERVICES companies. Non-regulated (NETHERLANDS) B.V. entity established to J. ARON & COMPANY 99.7500% employ traders in Rotterdam. --------- 100.0000% THE EUROPEAN POWER SOURCE Dutch Holding Co for Netherlands 1 THE GOLDMAN SACHS GROUP, 100.0000% COMPANY (B.V.) Pan-European power trading INC. business THE EUROPEAN POWER SOURCE Trading power in the England 1 THE EUROPEAN POWER SOURCE 100.0000% COMPANY (U.K.) LIMITED UK/NETA Environment. COMPANY (B.V.) PATTERSON CAPITAL MARKETS, Futures introducing broker. Illinois 1 THE GOLDMAN SACHS GROUP, 100.0000% LTD. INC. GOLDMAN SACHS (INDIA) Broker/Dealer, merchant India 1 GOLDMAN SACHS (MAURITIUS) 100.0000% SECURITIES PRIVATE LIMITED banking, provide financial L.L.C. services GS RBD HOLDINGS, L.P. Partnership will hold an Delaware 2 GS RBD HOLDINGS I CORP. 99.0000% equity interest in a new Russian broker/dealer GS RBD HOLDINGS II CORP. 1.0000% entity. --------- 100.0000% GS RBD HOLDINGS I CORP. Holding company for a US Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% partnership, which in turn INC. will hold an interest in a new Russian broker/dealer entity. GS RBD HOLDINGS II CORP. Holding company for a US Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% partnership, which in turn INC. will hold an interest in a new Russian broker/dealer entity. GOLDMAN SACHS (MAURITIUS) Holding company for NBFC Mauritius 1 GS INDIA HOLDINGS L.P. 100.0000% NBFC L.L.C. companies in India GOLDMAN SACHS PARIS INC. Investment banking France 2 GOLDMAN, SACHS & CO. 99.0000% ET CIE activities; reception-transmission of GOLDMAN SACHS GLOBAL HOLDINGS 1.0000% orders, equity and equity L.L.C. --------- derivatives; private 100.0000% banking; marketing of asset management products to institutional clients; coutnerparty to derivatives products for mexican institutions GSI Qatar FC branch IBD services out of Quatar United 1 GOLDMAN SACHS INTERNATIONAL 100.0000% financial centre Kingdom GS SITE 25 HOTEL HOLDINGS, Entity to house the holding Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% LLC company for Embassy Suite INC. Hotel Acquisition GS SITE 25 RETAIL, LLC real estate operating Delaware 1 GS SITE 25 RETAIL 100.0000% entity for the retail HOLDINGS, LLC condominium located at 102 North End Avenue, New York, NY GS SITE 25 RETAIL Entity to house holding Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% HOLDINGS, LLC company for the Embassy INC. Suite Retail Acquisition
GS SITE 25 HOTEL, LLC real estate operating Delaware 1 GS SITE 25 HOTEL HOLDINGS, 100.0000% entity for the hotel LLC condominium known as Embassy Suites located at 102 North End Avenue, New York, NY PRATHAM INVESTMENTS AND The company is an existing India 2 GOLDMAN SACHS SERVICES 0.3360% TRADING PRIVATE LIMITED company incorporated in PRIVATE LIMITED India in 1991, under the provisions of Companies GOLDMAN SACHS (MAURITIUS) 99.6640% Act, 1956. It is NBFC L.L.C. --------- registered with the Reserve 100.0000% bank of India as a non-banking financial company. The primary activity has inter-alia involved granting of l GOLDMAN SACHS (UK) L.L.C. Holding company for CIN Delaware 2 GOLDMAN SACHS (UK) L.L.C. 99.0000% III Managemenet GOLDMAN SACHS GROUP HOLDINGS 1.0000% (U.K.) --------- 100.0000% GOLDMAN SACHS ASSET Holding company for CIN England 1 GOLDMAN SACHS (UK) L.L.C. 100.0000% MANAGEMENT HOLDINGS Management which is now III inactive CIN MANAGEMENT British Coal's pension fund England 1 GOLDMAN SACHS ASSET 100.0000% manager (see Other MANAGEMENT HOLDINGS Information) PT GOLDMAN SACHS INDONESIA Dormant company Indonesia 3 GOLDMAN SACHS (ASIA 90.0000% PACIFIC) L.L.C. GOLDMAN SACHS GLOBAL HOLDINGS 0.1000% L.L.C. GOLDMAN SACHS (CAYMAN) HOLDING 9.9000% COMPANY --------- 100.0000% VANTAGE GROUND (MAURITIUS) Shareholder of India SPV Mauritius 1 GS INDIA HOLDINGS L.P. 100.0000% LIMITED which in turn hold land and develop building in Bangalore. SAFFRON PROPERTIES PRIVATE To own / invest in real India 1 VANTAGE GROUND (MAURITIUS) 100.0000% LIMITED estate in India. LIMITED GSIP HOLDCO A LLC holding company Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% INC. GSIP HOLDCO B LLC holding company Delaware 1 GSIP HOLDCO A LLC 100.0000% GOLDMAN SACHS INVESTMENT General Partner to make Cayman 1 GSEM (DEL) HOLDINGS, L.P. 100.0000% PARTNERS HOLDCO CAYMAN nominal investment in GSIP Islands LTD. entities GOLDMAN SACHS (ASIA) Partnership holding company Delaware 5 THE GOLDMAN SACHS GROUP, 14.2637% CORPORATE HOLDINGS L.P. for the AEJ Group. INC. GOLDMAN SACHS (ASIA) FINANCE 13.7827% HOLDINGS L.L.C. GS INDIA HOLDINGS (DELAWARE) 0.0000% L.L.C. GOLDMAN SACHS (DELAWARE) 11.6899% HOLDING CORPORATION --------- 100.0000% GOLDMAN SACHS CHINA The entity is setup for the Mauritius 1 JADE DRAGON (MAURITIUS) 100.0000% STRATEGIC INVESTMENTS purpose of acquiring ASSG LIMITED LIMITED investments. GOLDMAN SACHS CHINA To hold investments in Mauritius 1 GS ASIAN VENTURE 100.0000% INVESTMENTS (MAURITIUS) private and public (DELAWARE) L.L.C. LIMITED companies with operations in the Peoples Republic of China. A Limited Partner of HOPU USD Master Fund I, L.P. VANTAGE STRIDE (MAURITIUS) To hold investments in Mauritius 1 GS ASIAN VENTURE 100.0000% LIMITED financial instruments (DELAWARE) L.L.C. mainly loans and equities in Asia ex-japan. VANTAGE QUEST (MAURITIUS) To hold investments in Mauritius 1 GS ASIAN VENTURE 100.0000% LIMITED financial instruments (DELAWARE) L.L.C. mainly loans and equities in Asia ex-japan. GS GLOBAL COMMODITIES SPC Not commenced business. Cayman 1 GOLDMAN SACHS HOLDINGS 100.0000% Intended to be a segregated Islands (HONG KONG) LIMITED portfolio company GOLDMAN SACHS RE Holding company for ASSG Cayman 1 GS ASIAN VENTURE 100.0000% INVESTMENTS HOLDINGS investments. Islands (DELAWARE) L.L.C. LIMITED OXLEY INVESTMENTS BV Investment holding for ASSG Netherlands 1 GS ASIAN VENTURE 100.0000% Indonesian investments. (DELAWARE) L.L.C. WWD RUBY LIMITED To hold investments in Mauritius 1 VANTAGE STRIDE (MAURITIUS) 100.0000% financial instruments LIMITED mainly loans and equities in Asia ex-japan. EXPRESS INVESTMENTS II SPV for ASSG. Equity Malaysia 1 GOLDMAN SACHS HOLDINGS 100.0000% PRIVATE LTD. investments in Korean (MAURITIUS) LIMITED Investment SPC (50%) and ChoHung Bank joint venture restructuring SPC (49%). (All loans were classified as non-performing loans). GOLDMAN SACHS HOLDINGS Holding company for ASSG Mauritius 2 GOLDMAN SACHS (ASIA) 99.0000% (MAURITIUS) LIMITED investments. FINANCE HOLDINGS L.L.C. GOLDMAN SACHS GLOBAL HOLDINGS 1.0000% L.L.C. --------- 100.0000% LANDPRO INVESTMENTS Affiliate of Baekdu (ASSG Delaware 1 GS FINANCIAL SERVICES L.P. 100.0000% (DELAWARE) L.L.C. flagship entity for GS to (DEL) invest in REO deals in AEJ (Asia excluding Japan)). GOLDMAN SACHS SERVICES Baekdu is an ASSG flagship British 1 GOLDMAN SACHS GLOBAL 100.0000% (B.V.I.) LIMITED entity for GS to invest in Virgin SERVICES II LIMITED REO deals in AEJ (Asia Islands excluding Japan) and Landpro was setup between GS Financial Services L.P. (DEL) and Baekdu for legal/tax reasons. GOLDMAN SACHS (DELAWARE) Holding Company for GS Delaware 3 GOLDMAN, SACHS & CO. 15.6600% HOLDING CORPORATION (Asia) Corporate Holding LP GOLDMAN SACHS GLOBAL HOLDINGS 7.9200% L.L.C. J. ARON & COMPANY 76.4200% --------- 100.0000% DISTRESSED OPPORTUNITIES To hold and invest in Delaware 1 THE GOLDMAN SACHS GROUP, 90.0000% INTERNATIONAL, INC. securities and engage in INC. general commercial activities RESTAMOVE IRELAND LIMITED The Company invests in Ireland 1 GS FINANCIAL SERVICES L.P. 100.0000% financial instruments (DEL) including foreign currencies, securities and other financial products. GS LINDEN POWER HOLDINGS Entity was acquired as part Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% LLC of the Linden venture. INC.
J. ARON (CHINA) HOLDINGS Holding company for the Delaware 1 GOLDMAN SACHS GLOBAL 100.0000% L.L.C. WFOE set up for the HOLDINGS L.L.C. commodities business. SHIPCO HOLDINGS II, LTD. indirect holding company Cayman 1 GOLDMAN SACHS HOLDINGS 100.0000% for shipping assets Islands (HONG KONG) LIMITED GOLDMAN SACHS INVESTMENT General Partner to make Delaware 1 GS INVESTMENT STRATEGIES, 100.0000% PARTNERS GP, LLC nominal investment in GSIP LLC entities GOLDMAN SACHS GLOBAL Employer of certain US Cayman 1 THE GOLDMAN SACHS GROUP, 100.0000% SERVICES I LIMITED citizens/green card holders Islands INC. outside US GOLDMAN SACHS GLOBAL Employer of certain US Cayman 2 GOLDMAN SACHS GLOBAL 1.0000% SERVICES II LIMITED citizens/green card holders Islands HOLDINGS L.L.C. outside US GOLDMAN SACHS (CAYMAN) HOLDING 99.0000% COMPANY --------- 100.0000% WALL STREET ON DEMAND, WSOD Acquisition Corp. Delaware 1 THE GOLDMAN SACHS GROUP, 95.4113% INC. merged into Wall Street On INC. Demand, Inc. on 4/17/06. GOLDMAN SACHS HOUSING AND GNMA issuer/servicer and a New York 2 THE GOLDMAN SACHS GROUP, 99.0000% HEALTH CARE FUNDING non-supervised mortgagee INC. COMPANY under FHA regulationss to originate, process and GOLDMAN SACHS HOUSING AND 1.0000% service FHA insured HEALTH CARE CAPITAL CORPORATION mortgages --------- 100.0000% REP SVY REALTY HOLDINGS, Entity is the holding Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% L.L.C. company that owns Savoy. INC. GSUIG, L.L.C. investment vehicle for UIG Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% INC. GS ACA, LLC Member in Agricultural Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% Company of America Holdings INC. LLC, a joint venture with Duquesne Partners to invest in agricultural (farm) real estate GS-MPIM II, LLC Firm direct investment.GS Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% MPIM II, L.L.C. INC. GOLDMAN SACHS HOUSING AND Originates and services FHA New York 1 THE GOLDMAN SACHS GROUP, 100.0000% HEALTH CARE CAPITAL insured mortgages; General INC. CORPORATION Partner in Goldman Sachs Housing and Health Care Funding Company COMMONWEALTH ANNUITY AND CwA (formerly AFLIAC) Massachusetts 1 THE GOLDMAN SACHS GROUP, 100.0000% LIFE INSURANCE COMPANY contains the variable INC. annuity and variable universal life business acquired from Allmerica Financial Corp. CwA contains the variable annuity and variable universal life business acquired from Allmerica Financial Corp. COMM. ANN. AND LIFE INS. This is an insurance Massachussets 1 THE GOLDMAN SACHS GROUP, 100.0000% CO company organized under the INC. laws of Massachusetts. The Company manages blocks of variable annuity, variable universal life and minor blocks of group retirement products. ARROW CAPITAL REINSURANCE ow Capital Risk Services Bermuda 1 THE GOLDMAN SACHS GROUP, 100.0000% COMPANY, LIMITED Limited).will be the risk INC. taking entity for our property catastrophe reinsurance business. Arrow Capital Re will not have any employees. All reinsurance professionals supporting the business will be employees of GS Risk Adviso EASTPORT CAPITAL CORP. Engage in life settlements Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% business INC. EPF FINANCIAL, LLC Purchaser of life settled Delaware 1 EASTPORT CAPITAL CORP. 100.0000% policies. GS RE HOLDINGS, INC. SPE set up as a Holding Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% entity for Life Settlement INC. Solutions , Inc. LONGMORE CREDIT, LLC premium finance company Delaware 1 GS RE HOLDINGS, INC. 100.0000% ARROW CORPORATE MEMBER Licensed insurance entity Delaware 2 THE GOLDMAN SACHS GROUP, 75.0000% HOLDINGS LLC that facilitates the life INC. settlements agency business,including the GOLDMAN SACHS GLOBAL HOLDINGS 25.0000% premium finance business. L.L.C. --------- 100.0000% QXX INDEX CO., LLC to own and operate the QxX Delaware 1 GS RE HOLDINGS, INC. 100.0000% Longevity/Mortality Index LONGMORE CAPITAL, LLC life settlement companylife Delaware 1 GS RE HOLDINGS, INC. 100.0000% settlement company LONGMORE CREDIT SERVICES, originate and service Life Delaware 1 GS RE HOLDINGS, INC. 100.0000% LLC Finance business GS INVESTMENT STRATEGIES, Asset Management Company Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% LLC INC. ARROW CAPITAL INVESTMENT Bermuda-based investment Bermuda 2 GOLDMAN SACHS RISK 99.0000% SERVICES, LTD. provider and will be ADVISORS, L.P. providing investment management services to GS RISK ADVISORS, INC. 1.0000% Irish Unit Trusts owned by --------- GS. This business is part 100.0000% of the Longevity Markets Group of GS Reinsurance Group. GOLDMAN SACHS IUT An Irish Fund Management Ireland 1 THE GOLDMAN SACHS GROUP, 100.0000% MANAGEMENT LIMITED Company INC. GOLDMAN SACHS RISK Licensed re-Insurance Delaware 2 THE GOLDMAN SACHS GROUP, 99.0000% ADVISORS, L.P. intermediary in NY that can INC. act as re-insurance broker; licensed re-insurance GS RISK ADVISORS, INC. 1.0000% broker in CT. --------- 100.0000% GS RISK ADVISORS, INC. General Partner of GS Risk Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% Advisors, L.P. INC. ARROW CAPITAL RISK Maintains Insurance Bermuda 1 GOLDMAN SACHS RISK 100.0000% SERVICES LIMITED Broker's license in ADVISORS, L.P. Bermuda, effective 3/27/98; reinsurance intermediary that can act as reinsurance broker. GOLDMAN SACHS RISK Reinsurance broker. Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% SERVICES L.L.C. INC. GS EUROPEAN OPPORTUNITIES Subsidiary of ELQ and United 1 ELQ INVESTORS, LTD 100.0000% FUND III L.P. Holdco for Opp Fund 3 Kingdom
GS EUROPEAN INVESTMENT Subdiairy of GS European England 1 GS EUROPEAN OPPORTUNITIES 100.0000% GROUP III LTD. Opportunities Fund III LP FUND III L.P. to trade in loan and bond positions THO B.V. Holding company for Akfen Netherlands 1 ELQ INVESTORS, LTD 100.0000% REIT KYPRIS ACQUISITIONS LTD SPV purchaser for portfolio England 1 GS EUROPEAN OPPORTUNITIES 100.0000% of NPLs from HVB named FUND II L.P. Project Aphrodite POSEIDON ACQUISITIONS LTD ESSG Portfolio SPV for England 1 GS EUROPEAN OPPORTUNITIES 100.0000% Kreta II NPL portfolio in FUND II L.P. the Opportunities Fund II GS EUROPEAN OPPORTUNITIES General partner of the England 1 ELQ INVESTORS, LTD 100.0000% FUND II GP LTD HoldCo LP of the European Opportunities Fund II KAGAWA (DELAWARE) L.L.C. Parent of Leaf Green Delaware 1 GOLDMAN SACHS HOLDINGS 100.0000% TK-2312 (loan SPC) (MAURITIUS) LIMITED BAY WIND REALTY FINANCE Purchasing loans jointly Cayman 1 MLQ INVESTORS, L.P. 100.0000% (CAYMAN) COMPANY with Nochu. Owns equity in Islands subsidiary (Owns TE Capital). RAICHO CO., LTD. Flagged for Omotesando deal. Japan 1 GOLDMAN SACHS REALTY JAPAN 100.0000% LTD. WAKAKUSA KAIHATSU CO., Flagged for Oomotesando Japan 1 GOLDMAN SACHS REALTY JAPAN 100.0000% LTD. Deal. LTD. GK CRYSTAL INVESTMENT Holding SPL. Flagged for Japan 2 GOLDMAN SACHS REALTY JAPAN 1.0000% ASSG SPL Deal. LTD. MLQ INVESTORS, L.P. 99.0000% --------- 100.0000% GK KANAGAWA HOLDING Flagged for Kohnan home Japan 1 MLQ INVESTORS, L.P. 100.0000% center deal. Owns beneficiary rights. GK TAMATSUKURI ONSEN ASSG/REPIA Onsen Japan 1 AR HOLDINGS GK 100.0000% KAIHATSU deal.Managiment of Onsen ryokan( Japanese style Hotel.) GK HAKATA HOTEL HOLDING Flagged for Hotel Japan 1 GOLDMAN SACHS REALTY JAPAN 100.0000% centraza.Holding Hotel. LTD. HAKATA HOTEL HOLDING TK To hold a 197-romm city Japan 3 THE GOLDMAN SACHS GROUP, 18.9623% hotel , Hotel Centraza, in INC. Japan. GS STRATEGIC INVESTMENTS JAPAN 29.0758% LLC GK HAKATA HOTEL HOLDING 1.0000% --------- 49.0381% GK KEISEN KAIHATSU Flagged for Fujiya Deal. Japan 1 MLQ INVESTORS, L.P. 100.0000% Holding hard asset (ginni Building). KEISEN KAIHATSU TK To purchase buildings in Japan 3 THE GOLDMAN SACHS GROUP, 19.5650% Tokyo from Fujiya, a INC. confectionary Co. in Japan. GS STRATEGIC INVESTMENTS JAPAN 25.0000% LLC GK KEISEN KAIHATSU 5.0000% --------- 49.5650% UMEDA KAIHATSU TMK Holding real estate. Japan 1 MLQ INVESTORS, L.P. 100.0000% KAWASAKI HOLDINGS CO., Flagged for Kawasaki Hotel Japan 1 GOLDMAN SACHS REALTY JAPAN 100.0000% LTD. Deal/Owns hotel assets. LTD. Owns beneficiary right of Hotel Nikko Kawasaki. Also owns equity in subsidiary. GK IMPACT HOLDING Flagged for Nihon Birudo Japan 1 GOLDMAN SACHS REALTY JAPAN 100.0000% Deal. Owns hard asset. LTD. IMPACT HOLDING TK To acquire a piece of land Japan 3 THE GOLDMAN SACHS GROUP, 19.5650% with a building in Chiba INC. and rebuild a new shopping center GS STRATEGIC INVESTMENTS JAPAN 25.0000% LLC GK IMPACT HOLDING 5.0000% --------- 49.5650% SENRI CHUO GK Flagged for Osaka Senri Japan 1 GOLDMAN SACHS REALTY JAPAN 100.0000% deal. LTD. SENRI CHUO TK To purchase a building Japan 3 THE GOLDMAN SACHS GROUP, 19.5650% named Senri Life Science INC. Center in Japan. GS STRATEGIC INVESTMENTS JAPAN 25.0000% LLC SENRI CHUO GK 5.0000% --------- 49.5650% PRIME ASSET CO., LTD. Dormant Japan 1 GOLDMAN SACHS REALTY JAPAN 100.0000% LTD. PRIME ASSET TK To purchase real estate and Japan 3 THE GOLDMAN SACHS GROUP, 19.5650% the Juraku 8 building in a INC. commercial area in Japan from KK Juraku. GS STRATEGIC INVESTMENTS JAPAN 25.0000% LLC PRIME ASSET CO., LTD. 5.0000% --------- 49.5650% TG FUND II CO., LTD. Flagged for TG Fund Deal Japan 1 AMETHYST REALTY TK 100.0000% (SMAP 2) TG FUND II TK To purchase 28 assets such Japan 2 AMETHYST REALTY TK 99.0000% as an office, retail and multifamily residential TG FUND II CO., LTD. 1.0000% properties located all over --------- Japan from Yusei Fukushi a 100.0000% pension fund manager for Japan Post. RESTIR INVESTMENT CO., Real EstateFlagged for Japan 1 JUPITER INVESTMENT CO., 50.0000% LTD. Restir Deal. LTD. GOLDMAN SACHS INTL ZURICH Provides sales and mkting Switzerland 1 GOLDMAN SACHS INTERNATIONAL 100.0000% BRAN services for equity mkt GOLDMAN SACHS BANK AG Zurich based bank providing Switzerland 1 THE GOLDMAN SACHS GROUP, 100.0000% financial services to INC. wealthy individual clients, lead-manager of Swiss Franc denominated warrants and providing clearance for Swiss equity securities;Zurich based bank providing financial services to wealthy individual client GSCO BETEILIGUNGS GMBH Established to buy Germany 1 GOLDMAN, SACHS & CO. OHG 100.0000% preferred shares in NetJets, a Swiss based company. GOLDMAN, SACHS & CO. Managing general partner of Germany 1 THE GOLDMAN SACHS GROUP, 100.0000% FINANZ GMBH Goldman, Sachs & Co. oHG, a INC. German general partnership; non regulated GSI, ZWEIGNIEDERLASSUNG Branch of GSI, only FICC & United 1 GOLDMAN SACHS INTERNATIONAL 100.0000% FRANKF equity sales Kingdom GOLDMAN, SACHS & CO. OHG Frankfurt based subsidiary Germany 2 GOLDMAN, SACHS & CO. 1.0000% which provides investment FINANZ GMBH banking services; German bank; documents must be GOLDMAN SACHS (CAYMAN) HOLDING 99.0000% signed by authorized COMPANY persons in Frankfurt; --------- CONSULT WITH ANDREAS 100.0000% KOERNLEIN FOR PROPER SIGNING AUTHORITY. Approved Person.
GOLDMAN SACHS (CAYMAN) Non-regulated holding Cayman 2 THE GOLDMAN SACHS GROUP, 97.0000% HOLDING COMPANY company and General Partner Islands INC. of Goldman Sachs & Co. OHG; parent of The Goldman Sachs GOLDMAN SACHS GLOBAL HOLDINGS (Cayman) Trust Limited L.L.C. 3.0000% --------- 100.0000% Goldman, Sachs Management General Partner of GS Germany 1 GOLDMAN, SACHS & CO. OHG 100.0000% GP GmbH Capital Partners 2000 GmbH & Co. Beteiligungs KG GOLDMAN, SACHS GIVES GMBH Charity Germany 1 GSCO BETEILIGUNGS GMBH 100.0000% GOLDMAN, SACHS & CO. Nominee Company for Germany 1 GOLDMAN, SACHS & CO. OHG 100.0000% VERWALTUNGS GMBH Rhein-Donau Capital Partners Fund and GS Capital Partners II and III (Germany) C.L.P. GOLDMAN SACHS (AO) L.L.C. Rep office in Moscow and Delaware 2 THE GOLDMAN SACHS GROUP, 99.0000% has in past entered into INC. M&A advisory engagements in Russia; does not engage in GOLDMAN SACHS GLOBAL HOLDINGS securities trading or L.L.C. 1.0000% brokerage; As of 1/1/02 --------- once again operating a 100.0000% branch in Russia, taxable by Russian authorities, supplying consultancy servicest KPL HOLDINGS LIMITED Killingholme holding Cayman 1 KPL ACQUISITIONS LIMITED 100.0000% Islands KPL FUNDING LIMITED Killingholme funding Cayman 2 KPL HOLDINGS LIMITED 100.0000% Islands GS KILLINGHOLME CAYMAN INVESTMENTS II LTD 0.0000% --------- 100.0000% KILLINGHOLME POWER GROUP Holding company of the England 1 GOLDMAN SACHS GROUP 100.0000% LIMITED Killingholme group of HOLDINGS (U.K.) companies purchased by ESSG. The group formerly held the Killingholme Power Station before its restructure. KILLINGHOLME GENERATION Established as part of an England 4 KILLINGHOLME HOLDINGS 0.0006% LIMITED SSG Structured Investing LIMITED Group transaction. Scadbury II Assets 50.3165% SCADBURY UK LIMITED 13.3694% Shire Funding Limited 36.3135% --------- 100.0000% KILLINGHOLME POWER Former operating entity for England 1 ELQ INVESTORS, LTD 100.0000% the Killingholme Power station. KILLINGHOLME HOLDINGS Established as part of an England 1 KILLINGHOLME POWER GROUP 100.0000% LIMITED SSG Structured Investing LIMITED Group transaction. GS KILLINGHOLME CAYMAN Is a part of the structured Cayman 1 KILLINGHOLME GENERATION 100.0000% INVESTMENTS LTD. investing trade and will Islands LIMITED enter into Swaps. GSI BRANCH ITALY Branch of GS London, Italy 1 GOLDMAN SACHS INTERNATIONAL 100.0000% investment banking,asset mgmt GOLDMAN SACHS SGR S.P.A. Portfolio management Italy 2 GOLDMAN SACHS HOLDINGS 99.0000% company. Merged with GSI (U.K.) effective 12 November 2008. GOLDMAN SACHS GROUP HOLDINGS (U.K.) 1.0000% --------- 100.0000% V.A.P. 1 VEICOLO Special purpose vehicle for Italy 2 MLQ, L.L.C. 50.0000% ACQUISIZIONEPORTAFOGLI securitization deal. S.R.L. MTGLQ INVESTORS, L.P. 50.0000% --------- 100.0000% GOLDMAN, SACHS & CO. Non-regulated Frankfurt Germany 1 THE GOLDMAN SACHS GROUP, 100.0000% WERTPAPIER GMBH based entity which issues INC. warrants and purchases offsetting OTC options in the fixed income, eqity, commodity and currency markets. GS FINANCE CORP. This finance subsidiary Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% will issue cash settled INC. structured notes. GSSM HOLDING II LLC To act as a holding company Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% for GSSM Holding II Corp INC. GSSM HOLDING II CORP. To hold the Sumitomo Delaware 1 GSSM HOLDING II LLC 100.0000% preferred shares GS LS LEASING LLC For PFG leasing business Delaware 1 GSFS INVESTMENTS I CORP. 100.0000% GOLDMAN SACHS BANK USA HOLDINGS LLC Holding Company (Single Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% Member LL) to hold GS Group INC. Investment in GS Bank USA REP KBY REALTY, L.L.C. Real Estate investment Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% INC. BEESTON INVESTMENTS Korea futures & options Cayman 1 GOLDMAN SACHS (ASIA 100.0000% LIMITED trading. Holds a Foreign Islands PACIFIC) L.L.C. Investor status in Korea (FINI).Maples & Calder is the Cayman Islands agent. CORNWALL INVESTMENTS Futures & options trading Cayman 1 GOLDMAN SACHS (ASIA) 100.0000% LIMITED in Korea. Holds Foreign Islands FINANCE HOLDINGS L.L.C. Investor status (FINI) in Korea and in Taiwan HILLTOP INVESTMENTS Futures & options trading Cayman 1 GOLDMAN SACHS (CAYMAN) 100.0000% LIMITED in Korea. Holds Foreign Islands HOLDING COMPANY Investor status (FINI) in Korea and in Taiwan LANSDALE INVESTMENTS LIMITED Futures & options trading Cayman 1 GS FINANCIAL SERVICES L.P. 100.0000% in Korea. Holds Foreign Islands (DEL) Investor status (FINI) in Korea and in Taiwan Amagansett Assets This entity was set up as United 1 GS FINANCIAL SERVICES II, 100.0000% part of an AMSSG Structured Kingdom LLC Investing Group transaction Amagansett Funding Limited This entity was set up as Cayman 1 GS FUNDING EUROPE 100.0000% part of an AMSSG Structured Islands Investing Group transaction Amagansett II Assets This entity was set up as Cayman 2 Amagansett Funding Limited 99.0000% part of an AMSSG Structured Islands Investing Group transaction GS FUNDING EUROPE 1.0000% --------- 100.0000% GS FUNDING EUROPE This entity was set up as England 1 GS FINANCIAL SERVICES II, 100.0000% part of an AMSSG Structured LLC Investing Group transaction
SCADBURY ASSETS This entity was set up as England 2 Scadbury Funding Limited 1.0000% part of an AMSSG Structured Investing Group transaction SCADBURY UK LIMITED 99.0000% --------- 100.0000% Scadbury Funding Limited This entity was set up as United 1 SCADBURY UK LIMITED 100.0000% part of an AMSSG Structured Kingdom Investing Group transaction Scadbury II Assets This entity was set up as United 1 Scadbury Funding Limited 100.0000% part of an AMSSG Structured Kingdom Investing Group transaction SCADBURY UK LIMITED This entity was set up as United 1 GOLDMAN SACHS GROUP 100.0000% part of an AMSSG Structured Kingdom HOLDINGS (U.K.) Investing Group transaction SHIRE ASSETS Established as part of an England 2 Shire Funding Limited 1.0000% SSG Structured Investing Group transaction. SHIRE UK LIMITED 99.0000% --------- 100.0000% Shire Funding Limited Established as part of an United 1 SHIRE UK LIMITED 100.0000% SSG Structured Investing Kingdom Group transaction. Shire II Assets This entity was set up as United 1 SHIRE UK LIMITED 100.0000% part of a Structured Kingdom Investing Group transaction SHIRE UK LIMITED Established as part of an United 1 GOLDMAN SACHS GROUP 100.0000% SSG Structured Investing Kingdom HOLDINGS (U.K.) Group transaction. FAIRWAY RESOURCES PARTNERS, LP Partnership focused on oil Delaware 1 MTGLQ INVESTORS, L.P. 100.0000% and gas production and ownership of lease acreage. PRNP, LLC To provide the SSG business Delaware 1 MTGLQ INVESTORS, L.P. 100.0000% opportunity to invest on the island of Puerto RicoTo provide the SSG business opportunity to invest on the island of Puerto Rico KRETA ACQUISITIONS LTD SPV to purchase Project England 1 GS EUROPEAN OPPORTUNITIES 100.0000% Kreta NPL Portfolio FUND II L.P. ASAMA ONSEN KAIHATSU CO., LTD. Flagged for Onsen deal. Japan 1 GOLDMAN SACHS REALTY JAPAN Holds Japanese Inn; Holds LTD. 100.0000% equity in subsidiary (Owns Asama Onsen Hotel Mamangement). KAKEGAWA HOLDINGS TK A trustor and Master Lessee Japan 2 KAKEGAWA HOLDINGS CO., LTD. 5.0000% of Kakegawa Grand Hotel. GS FINANCIAL SERVICES L.P. (DEL) 75.0000% --------- 80.0000% GS HONY HOLDINGS I LTD. Investment vehicle for Hony Cayman 1 GS ASIAN VENTURE 100.0000% Capital III Investment Islands (DELAWARE) L.L.C. vehicle for Hony Capital III GS HONY HOLDINGS II LTD. Investment vehicle for the Cayman 1 GS ASIAN VENTURE 100.0000% firm's interest in Hony Islands (DELAWARE) L.L.C. Capital fund III LP GS CAPITAL PARTNERS AUTO GLASS HOLDINGS Investment vehicle for Mauritius 1 THE GOLDMAN SACHS GROUP, 100.0000% Fuyao Auto Glass. INC. GS CAPITAL PARTNERS AURUM HOLDINGS Investment vehicle for Midea Mauritius 1 THE GOLDMAN SACHS GROUP, 100.0000% INC. GS CAPITAL PARTNERS VI The CPVI Employee Fund is Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% EMPLOYEE FUND, L.P. in the process of being INC. deconsolidated as this entity no longer holds anything. GS FUNDING MANAGEMENT Set up as part of a Cayman 1 SHIRE UK LIMITED 100.0000% LIMITED structured transaction Islands containing Interest rate Swaps,Asset swaps and treasuries. GS EQUIPMENT FINANCE II To undertake leasing Cayman 1 SCADBURY UK LIMITED 100.0000% LIMITED business. Islands GS EQUIPMENT FINANCE I To undertake leasing Cayman 1 SCADBURY UK LIMITED 100.0000% LIMITED business. Islands GS LEASING LIMITED Entity is a partnerships Cayman 2 GS LEASING NO.1 LIMITED 90.0000% PARTNERSHIP set up to enter into a Islands finance lease with Tesco Plc. It will acquire assets GS LEASING NO. 3 LIMITED 10.0000% from Tesco and then lease --------- them back in the form of 100.0000% the finance lease. As such the fixed assets do not go on the GS balance sheet. Instead there is a lease receivable. GS LEASING NO.1 LIMITED Entity set up to be the Cayman 1 SCADBURY UK LIMITED 100.0000% general partner Islands (controlling interest) in GS Leasing Limited Partnership. It will invest in the partnership in return for its share of the leasing income. GS LEASING MANAGEMENT LIMITED To undertake leasing Cayman 1 GOLDMAN SACHS GROUP 100.0000% business. Islands HOLDINGS (U.K.) BIRCHFIELD ESTATES LTD To own data site in London England 1 THE GOLDMAN SACHS GROUP, 100.0000% INC. GS Israel LLC-Tel Aviv Branch Single Member Office in Tel Delaware 1 GOLDMAN SACHS ISRAEL LLC 100.0000% Aviv. Israeli investment research entity. GS LEASING NO. 3 LIMITED To hold a 10% stake in GS Cayman 1 SCADBURY UK LIMITED 100.0000% Leasing ( 1344) Islands DHONI CAYMAN HOLDINGS LTD. To invest in Urban Cayman 1 GS ASIAN VENTURE 100.0000% Infrastructure Real Estate Islands (DELAWARE) L.L.C. Fund managed by Reliance Industrieis in India. DHONI CAYMAN LIMITED PARTNERSHIP Private equity vehicle for Cayman 2 DHONI CAYMAN HOLDINGS LTD. 99.0000% GS to invest in Urban Islands Infrastructure Real Estate DHONI CAYMAN GP LTD 1.0000% Investment Fund managed by --------- Urban Infrastructure 100.0000% Capital Advisors.Private equity vehicle for GS to invest in Urban Infrastructure Real Estate Investment Fund managed by Urban Inf DHONI CAYMAN GP LTD Hold an investment Cayman 1 GS ASIAN VENTURE 100.0000% structure in emerging Asian Islands (DELAWARE) L.L.C. mkts
GS DIRECT, L.L.C. Tupe of business: Other - Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% investment fund INC. LFG HOLDINGS, LLC Investment is a market data Delaware 1 GSUIG, L.L.C. 100.0000% base and marketing consulting firm based in Miami GS FUNDING EUROPE I LTD. This entity is to be Cayman 1 GS FUNDING EUROPE 100.0000% involved in a trade Islands undertaken by the structured investment group. It will receive funds from GS European Funding Limited. GS FUNDING EUROPE II LTD. This entity is to be Cayman 2 GS FUNDING EUROPE 10.0000% involved in a trade Islands undertaken by the GS FUNDING EUROPE I LTD. 90.0000% structured investment --------- group. It will receive 100.0000% funds from GS European Funding I Limited. GS PHERECLUS HOLDINGS Firm direct investment Mauritius 1 GS DIRECT, L.L.C. 100.0000% LIMITED holding company. GS DIRECT GD LIMITED Firm direct investment Mauritius 1 GS DIRECT, L.L.C. 100.0000% holding company. GS TREASURE SARL Firm direct investment Luxembourg 1 GS DIRECT, L.L.C. 100.0000% holding company. LIQUIDITY ASSETS HOLDING Established as part of an Cayman 1 MTGLQ INVESTORS, L.P. 100.0000% LIMITED SSG Structured Investing Islands Group transaction. FIRST AVIATION HOLDING Consolidated GS Direct Delaware 1 GS DIRECT, L.L.C. 95.5736% CORP. investment GS LOAN PARTNERS HOLDINGS To invest / lend GS Loan Delaware 1 GOLDMAN SACHS CREDIT 100.0000% LLC Partners LLC and pledge PARTNERS L.P. equity to funding counterpart GS LOAN PARTNERS LLC to purchase and finance Delaware 1 GS LOAN PARTNERS HOLDINGS 100.0000% bank loan inventory LLC GK ITO ONSEN KAIHATSU Flagged for New Onsen Deal Japan 1 AR HOLDINGS GK 100.0000% (Ebina).Management of Ryokan (Japanese Hotel). GK YONAGO KAIKE ONSEN KAIHATSU ASSG/REPIA Onsen Deal Japan 1 AR HOLDINGS GK 100.0000% ARES (REAL ESTATE) B.V. to hold real estate assets Netherlands 1 GS FINANCIAL SERVICES L.P. 50.0000% from the loan workouts in (DEL) Ares Finance s.r.l. ARES FINANCE Srl A securitization vehicle Italy 1 THE GOLDMAN SACHS GROUP, 50.0000% established under Italian INC. law that holds sub-performing assets and has issued debt secured by these assets. PNW, LLC A utilities supplier of Delaware 1 GOLDMAN SACHS LENDING 100.0000% energy and energy-related PARTNERS LLC products. GOLDMAN SACHS REAL ESTATE FUNDING CORP. Acts as the General Partner New York 1 GOLDMAN SACHS BANK USA 100.0000% of Goldman Sachs Mortgage Company GOLDMAN SACHS MORTGAGE COMPANY Goldman Sachs Mortgage New York 2 GOLDMAN SACHS BANK USA 99.0000% Company ("GSMC") purchases closed, independently GOLDMAN SACHS REAL ESTATE funded, first and FUNDING CORP. 1.0000% subordinate-lien --------- residential mortgage loans 100.0000% for its own investment, securitization, or resale. In addition, GSMC provides warehouse and repurchase financing to mortg MLQ INVESTORS, L.P. Hold certain mortgage Delaware 2 THE GOLDMAN SACHS GROUP, properties for liquidation. INC. 99.0000% MLQ, L.L.C. 1.0000% --------- 100.0000% CL INVESTMENTS LIMITED Non-regulated Cayman Island Cayman 1 THE GOLDMAN SACHS GROUP, 100.0000% based entity established to Islands INC. invest in an unaffiliated entity which holds a consumer loan portfolio; contribute equity to a trust which will hold ITT receivables MLQ, L.L.C. General partner of MLQ Delaware 2 THE GOLDMAN SACHS GROUP, Investors, L.P. INC. 99.0000% GOLDMAN SACHS GLOBAL HOLDINGS L.L.C. 1.0000% --------- 100.0000% MAIN STREET MORTGAGE Florida subsidiary acquired Delaware 2 THE GOLDMAN SACHS GROUP, 99.0000% COMPANY, LIMITED to service mortgage INC. PARTNERSHIP portfolios (primarily those held by Goldman Sachs MSMC, INC. 1.0000% Mortgage Company) --------- 100.0000% GS MORTGAGE SECURITIES To act as depositor for Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% CORPORATION II commercial mortgage backed INC. securities deals MTGLQ INVESTORS, L.P. Investor in various real Delaware 2 THE GOLDMAN SACHS GROUP, 99.0000% estate transactions INC. MLQ, L.L.C. 1.0000% --------- 100.0000% STRATEGIC MORTGAGE HOLDINGS, L.P. Hold debt and equity Delaware 2 THE GOLDMAN SACHS GROUP, 99.0000% interests in a Canadian INC. mortgage broker business STRATEGIC MORTGAGE HOLDINGS, 1.0000% INC. --------- 100.0000% STRATEGIC MORTGAGE HOLDINGS, INC. General Partner of Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% Strategic Mortgage INC. Holdings, L. P. SOPAC LLC To hold assets purchased Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% from Southern Pacific INC. Funding Corporation SOUTHERN PACIFIC FUNDING CORPORATION To hold certain mortgage California 1 THE GOLDMAN SACHS GROUP, 100.0000% loans and securities INC. purchased out of bankruptcy. Purchase of S. Pacific Funding Corp. and residuals. GSSLQ, L.L.C. To hold GS ownership Delaware 1 MTGLQ INVESTORS, L.P. 100.0000% interest in SLQ S de R.L. de C.V., a Mexican limited liability company established to purchase rights in distressed assets. SCLQ, S. de R.L. de C.V. To purchase distressed Mexico 1 MTGLQ INVESTORS, L.P. 100.0000% assets in Mexico CDV-1 HOLDING COMPANY GEN-PAR, L.L.C. General partner for CDV-1 Delaware 1 MTGLQ INVESTORS, L.P. 100.0000% Holding Company, L.P. CDV-1,LTD Established to acquire a England 1 CDV-1 HOLDING COMPANY, L.P. 91.6200% portfolio of non-performing loans in the Czech Republic from Ceska konsolidacni agentura.
CDV-1 HOLDING COMPANY, Set up as a partnership to Delaware 2 MTGLQ INVESTORS, L.P. 89.8000% L.P. own CDV-1, Ltd. CDV-1 HOLDING COMPANY GEN-PAR, 0.2000% L.L.C. --------- 90.0000% CDV-2, LTD. To acquire Czech debt England 1 ELQ INVESTORS, LTD 90.0000% PRALQ, LLC To purchase a portfolio of Delaware 1 GOLDMAN SACHS LENDING 100.0000% consumer receivables, PARTNERS LLC primarily auto loans. ARLO LLC To purchase and hold Delaware 1 GOLDMAN SACHS LENDING 100.0000% non-performing loans. PARTNERS LLC GOLDMAN SACHS ASSET BACKED Acquisition and disposition Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% SECURITIES CORP. of asset-backed securities INC. REP MCR REALTY, L.L.C. To acquire and hold 2 Delaware 1 MTGLQ INVESTORS, L.P. 100.0000% non-performing real estate secured loans (McCook and Randolph Assets). DUNVEGAN INVESTMENTS, LTD. Investment company Cayman 1 GOLDMAN SACHS HOLDINGS 100.0000% (dormant). Islands (U.K.) REMARK CAPITAL GROUP, LLC An AMSSG related entity Delaware 1 MTGLQ INVESTORS, L.P. 72.0000% that manages and services portfolios of consumer auto loans. MLQ-MLL, LLC Established to originate Delaware 1 MTGLQ INVESTORS, L.P. 100.0000% and purchase Mezzanine loans on real estate investments. RIO PARANA COMPANHIA Merged survivor of Rio BRAZIL 2 MTGLQ INVESTORS, L.P. 99.9900% SECURITIZADORA DE CREDITOS Potiguar Companhia FINANCEIROS Securitizadora de Creditos GS FINANCIAL SERVICES L.P. 0.0100% Financeiros and this entity. (DEL) --------- 100.0000% AMC REO LLC To hold real estate Delaware 1 MTGLQ INVESTORS, L.P. 100.0000% obligations. GS DO BRASIL CORRETORA Brazilian broker dealer Brazil 1 GOLDMAN SACHS do BRASIL 100.0000% entity that will enable GS BANCO MULTIPLO S/A to trade cash equities and listed options directly with the Brazilian exchange (BOVESPA). JANY Fundo Creditorios To hold FIDC (credit New York 1 J. ARON & COMPANY 100.0000% receivable) instruments. GSMC SPECIALTY LLC Acquire, own and hold Delaware 1 GOLDMAN SACHS MORTGAGE 100.0000% securities backed by, COMPANY secured by or evidencing an interest in loans, notes participations or other assets or rights related to real property or preferred equity in issuers of notes secured by such interest. Enter into agreements rel ASSET MANAGEMENT COMPANY For the purpose of engaging Delaware 1 MTGLQ INVESTORS, L.P. 100.0000% OF AMERICA, L.L.C. (directly or through subsidiary or affiliated companies or both) in any business or activities that may lawfully be angaged in by a limited liability company formed under the Delaware Act. ASSET MANAGEMENT COMPANY Capital restructure. Delaware 2 MTGLQ INVESTORS, L.P. 99.0000% OF AMERICA, L.P. ASSET MANAGEMENT COMPANY OF AMERICA, L.L.C. 1.0000% --------- 100.0000% DAC HOLDINGS I, L.L.C. Holding company for 6 other Delaware 1 GOLDMAN SACHS LENDING 100.0000% special purpose PARTNERS LLC partnerships involved inleveraged lease transactions GOLDMAN SACHS LONDON To own property. To hold England 1 THE GOLDMAN SACHS GROUP, 100.0000% PROPERTY LIMITED property owned by Goldman INC. Sachs Property Management. BEIJING GAO HUA SECURITIES Chinese entity engaged in People's 3 BEIJING GAO WANG VENTURE 33.3333% COMPANY LIMITED underwriting and Republic of CAPITAL proprietary trading of China securities as well as BEIJING DE SHANG VENTURE 33.3333% providing financial CAPITAL COMPANY advisory services. BEIJING HOU FENG VENTURE 33.3333% CAPITAL COMPANY LIMITED --------- 100.0000% GOLDMAN SACHS GAO HUA Sino-foreign Joint Venture People's 2 GOLDMAN SACHS (ASIA) L.L.C. 33.0000% SECURITIES COMPANY LIMITED Company with Beijing Gao Republic of Hua Securities Company China BEIJING GAO HUA SEC CL, BJHQ 67.0000% Limited.Business Scope: --------- Underwriting of shares 100.0000% (incluidng Renminbi donominated ordinary shares and foreign investment shares) and bonds (including government bonds and corporateb BEIJING GAO WANG VENTURE CAPITAL Invests in Beijing Gao Hua People's 1 GOLDMAN SACHS (ASIA) 100.0000% Securities Company Limited. Republic of FINANCE HOLDINGS L.L.C. China BEIJING DE SHANG VENTURE Investor in Beijing Gao Hua People's 1 GOLDMAN SACHS (ASIA) 100.0000% CAPITAL COMPANY Securities Company Limited. Republic of FINANCE HOLDINGS L.L.C. China BEIJING HOU FENG VENTURE Invests in Beijing Gao Hua People's 1 GOLDMAN SACHS (ASIA) 100.0000% CAPITAL COMPANY LIMITED Securities Company Limited. Republic of FINANCE HOLDINGS L.L.C. China BEIJING GAO HUA SEC CL, trading plus exchange seat C hina 1 BEIJING GAO HUA SEC CL, 100.0000% BJTO leasing to mutual funds BJHQ BEIJING GAO HUA SEC CL, trading plus exchange seat China 1 BEIJING GAO HUA SEC CL, 100.0000% SHTO leasing to mutual funds BJHQ BEIJING GAO HUA SEC CL, Beijing headquarters, China 3 BEIJING GAO WANG VENTURE 33.3333% BJHQ proprietary trading w/ CAPITAL china exch BEIJING DE SHANG VENTURE 33.3333% CAPITAL COMPANY BEIJING HOU FENG VENTURE 33.3333% CAPITAL COMPANY LIMITED --------- 100.0000% GSIB Beijing Rep Office Rep Office China 1 GOLDMAN SACHS INTERNATIONAL BANK KEYAKIZAKA FINANCE CO., Purchasing loans.Equity Japan 1 GS FINANCIAL SERVICES L.P. 100.0000% LTD. deals of PFS team. (DEL) GOLDMAN SACHS JAPAN Purchasing Loans Japan 1 GS FINANCIAL SERVICES L.P. 100.0000% FINANCE K.K. (DEL) CMA CO., LTD. Originated loans as money Japan 1 LINDEN WOOD II-S TK 100.0000% lender. LINDEN WOOD II-S TK An ASSG related entity that Cayman 2 LINDEN WOOD IIS LTD. 5.0000% invests in distressed loans. Islands GS FINANCIAL SERVICES L.P. 75.0000% (DEL) --------- 80.0000% LINDEN WOOD IIS LTD. Purchasing unsecured loans Cayman 1 MLQ INVESTORS, L.P. 100.0000% jointly with Nochu Islands MERCHANT SUPPORT CO., LTD. Flagged for Merchant JV Japan 1 GOLDMAN SACHS REALTY JAPAN 100.0000% (Factoring service) LTD.
REAL ESTATE CREATION FUND Resona deal.Purchasing Loan Japan 1 GOLDMAN SACHS REALTY JAPAN 100.0000% CO., LTD. LTD. REC INVESTMENTS CO., LTD. Resona deal Japan 1 GOLDMAN SACHS REALTY JAPAN 100.0000% LTD. GS WIND HOLDINGS LLC To acquire the wind Delaware 1 GSFS INVESTMENTS I CORP. 100.0000% business of Zilkha Renewable Energy LLC GS MACRO INVESTMENTS LLC Vehicle for structured Delaware 2 THE GOLDMAN SACHS GROUP, 11.1110% trades. INC. MTGLQ INVESTORS, L.P. 88.8890% --------- 100.0000% KAWASAKI HOLDINGS TK Owns hotel assets in Japan. Japan 3 THE GOLDMAN SACHS GROUP, 11.5340% INC. GS STRATEGIC INVESTMENTS 23.5000% JAPAN LLC KAWASAKI HOLDINGS CO., LTD. 5.0000% --------- 40.0340% WHITE OCEAN CO., LTD. Purchasing loans from Japan 1 GOLDMAN SACHS REALTY JAPAN 100.0000% Resona (RCC/Resona LTD. Securitization Deal) MERCHANT CAPITAL CO., LTD. Flagged for Merchant JV Japan 1 GOLDMAN SACHS REALTY JAPAN 100.0000% (factoring service) LTD. GS MACRO INVESTMENTS II, In connection with the MEIV Delaware 1 GS MACRO INVESTMENTS LLC 100.0000% LLC transaction. GS MACRO INVESTMENTS I, In connection with the MEIV Delaware 1 GS MACRO INVESTMENTS LLC 100.0000% LLC transaction. FORRES LLC Established as part of an Delaware 1 GOLDMAN SACHS HOLDINGS 100.0000% SSG Structured Investing (U.K.) Group transaction. THE AYCO SERVICES Record insurance revenues New York 1 MERCAY CORPORATION 100.0000% INSURANCE AGENCY, INC. generated in the state of Mass. SAKURAZAKA KAIHATSU TK To invest in the Recruit Japan 1 SAKURAZAKA KAIHATSU CO., 50.0000% deal - Total return Swap. LTD. BLUE DAISY TK Blue Daisy is a vehicle to Japan 1 BLUE DAISY CO., LTD. 50.0000% invest in recruit through its participation in the secondary shares acquired by Nochu. GS MACRO INVESTMENTS III, In connection with the MEIV Delaware 1 GS MACRO INVESTMENTS LLC 100.0000% LLC transaction. GS MACRO INVESTMENTS IV, In connection with the MEIV Delaware 1 GS MACRO INVESTMENTS LLC 100.0000% LLC transaction. DANDELION INVESTMENTS TK Dandelion has made Japan 2 DANDELION INVESTMENTS CO., 5.0000% investments in Green LTD. mountain to acquire non-performing loans from GS FINANCIAL SERVICES L.P. 73.0000% Linden Wood an existing SPC (DEL) of the ASSG business. --------- 78.0000% GREEN MOUNTAIN ONE TK It has been set up jointly Japan 2 GREEN MOUNTAIN ONE CO., 5.0000% with Dandelion Investmenst LTD. YK ("Dandelion") and Mizuho Security , a third party, DANDELION INVESTMENTS TK 55.0000% to acquire nonperforming --------- loans from LindenWood, an 60.0000% existing SPC of the ASSG business. ASHITABA CREATION CO., Holding loan secured by Japan 1 GOLDMAN SACHS REALTY JAPAN 100.0000% LTD. Shinjuku WINDS building LTD. morgage. JAPAN HOTEL & RESORT K.K. Hotel REIT AM company Japan 1 MLQ INVESTORS, L.P. 100.0000% (Regulated) SHINING PARTNERS TK Consolidation of Japan Japan 2 GS STRATEGIC INVESTMENTS 75.0000% Entity (to hold SPL JAPAN LLC portfolio) SHINING PARTNERS LTD. 5.0000% --------- 80.0000% FUKUOKA TOSHI KAIHATSU TK Consolidation of Japan Japan 3 THE GOLDMAN SACHS GROUP, 39.4734% Entity (REO acquisition). INC. To hold Real Estate. GS STRATEGIC INVESTMENTS JAPAN 50.4388% LLC FUKUOKA TOSHI KAIHATSU CO., LTD. 10.0878% --------- 100.0000% KINMIRAI CREATE TK Set up to purchase Mizuho Japan 3 THE GOLDMAN SACHS GROUP, 19.5650% REO JV deal. INC. GS STRATEGIC INVESTMENTS JAPAN 25.0000% LLC KINMIRAI CREATE CO., LTD. 5.0000% --------- 49.5650% GS MACRO INVESTMENTS V, In connection with the MEIV Delaware 1 GS MACRO INVESTMENTS LLC 100.0000% LLC transaction. GK TAKASU Flagged for Jusco Japan 1 AR HOLDINGS GK 100.0000% Shimotsuma Deal (Bridge Finance Provider to Kinmirai) TAKASU TK To provide bridge finance Japan 3 THE GOLDMAN SACHS GROUP, 19.5650% and add-on property INC. adjacent to the existing property. GS STRATEGIC INVESTMENTS 25.0000% JAPAN LLC GK TAKASU 5.0000% --------- 49.5650% GS (CHINA) SHANGHAI REP. Liaison offices for GS Delaware 1 GOLDMAN SACHS (CHINA) 100.0000% OFFIC affiliates L.L.C. GS (CHINA) BEIJING REP. Liaison offices for GS Delaware 1 GOLDMAN SACHS (CHINA) 100.0000% OFFICE affiliates L.L.C. GS (ASIA) LLC THAILAND develops banking invest Delaware 1 GOLDMAN SACHS (ASIA) L.L.C. 100.0000% REP. OF activity & relationships in Thai GS FINANCIAL SERVICES L.P. Holding company for various Delaware 2 THE GOLDMAN, SACHS & CO. 0.1000% (DEL) entites owned wholly or L.L.C. partially by GS that may incur material amounts of THE GOLDMAN SACHS GROUP, INC. 99.9000% foreign income tax; most --------- entities previously owned 100.0000% by GS Capital Markets, L.P.; GS MORTGAGE SECURITIES To issue bonds and/or form Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% CORP. trusts to issue bonds INC. collateralized by pools of mortgage related securities. BEST INVESTMENTS Holding company for Express Delaware 1 GS FINANCIAL SERVICES L.P. 100.0000% (DELAWARE) L.L.C. Securitization Specialty (DEL) L.L.C. and Express II Securitization Specialty L.L.C. GOLDMAN SACHS INVESTMENT To act as an investment Germany 1 GOLDMAN, SACHS & CO. OHG 100.0000% MANAGEMENT GMBH advisor in Germany GOLDMAN SACHS CAPITAL General Partner of Goldman Delaware 1 GOLDMAN SACHS BANK USA 100.0000% MARKETS L.L.C. Sachs Capital Markets, L.P. GOLDMAN SACHS CAPITAL General Partner of Goldman Delaware 2 GOLDMAN SACHS BANK USA 99.0000% MARKETS, L.P. Sachs Capital Markets, L.P. GOLDMAN SACHS CAPITAL MARKETS 1.0000% L.L.C. --------- 100.0000% VANTAGE MARKETPLACE LLC As part of Goldman Sachs' Delaware 1 VANTAGE MARKETPLACE 100.0000% independent research HOLDINGS, LLC platform, Vantage Marketplace LLC's subject matter experts will consult with clients who have contracted the expert's services on specific questions/topics. ELQ HOLDINGS (DEL) LLC Holding company for new Delaware 2 THE GOLDMAN SACHS GROUP, 75.0000% ESSG investing INC. entitiesHolding company for new ESSG investing entities MLQ, L.L.C. 25.0000% --------- 100.0000%
ELQ HOLDINGS (UK) LTD ELQ Holdings (UK) Ltd holds United 1 ELQ HOLDINGS (DEL) LLC 100.0000% ELQ II and ELQ III. As part Kingdom of the firmwide project to reduce the firms effective tax rate, US tax have been reviewing the ESSG structures and have determined that ELQ (func ccy USD) to be sub optimal from a tax perspective and ELQ INVESTORS II LTD ELQ Holdings (UK) Ltd holds United 1 ELQ HOLDINGS (UK) LTD 100.0000% ELQ Investors II Ltd and Kingdom ELQ Investors III Ltd. As part of the firmwide project to reduce the firms effective tax rate, US tax have been reviewing the ESSG structures and have determined that ELQ (func ccy USD) to be sub optima ELQ INVESTORS III LTD ELQ Holdings (UK) Ltd holds United 1 ELQ HOLDINGS (UK) LTD 100.0000% ELQ Investors II Ltd and Kingdom ELQ Investors III Ltd. As part of the firmwide project to reduce the firms effective tax rate, US tax have been reviewing the ESSG structures and have determined that ELQ (func ccy USD) to be sub optima MSMC, INC. General partner of Main Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% Street Mortgage Company INC. Limited Partnership, mortgage servicing company GOLDMAN SACHS CREDIT nation and syndication of Bermuda 2 GSCP (DEL) INC. 99.9900% PARTNERS L.P. commercial loans as well the secondary trading of GSCP (DEL) LLC 0.0100% such loans.Inventory and --------- trade lesser developed 100.0000% country debt and senior bank debt; to invest in assignments and participations in certain bank debt, debt of other lenders and anyo SPECIAL SITUATIONS The primary purpose of the Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% INVESTING GROUP, INC. entity is the buying and INC. selling of bank debt. Additionally, there will be some securities trading. GS GLOBAL FUNDING (CAYMAN) Holding company for Cayman 1 GS FINANCIAL SERVICES L.P. 100.0000% LIMITED Hechshire Limited. Islands (DEL) HECHSHIRE Special purpose vehicle. England 1 SHIRE UK LIMITED 100.0000% Entity established to facilitate structured financing, specifically a loan note issuance by Goldman Sachs International. LUGE LLC Entity established to Delaware 1 MEHETIA HOLDINGS INC. 100.0000% facilitate structured financing. MADISON/SPECIAL SITUATIONS Primarily in the business Delaware 1 SPECIAL SITUATIONS 100.0000% VALUE FUND, LLC of buying bankruptcy trade INVESTING GROUP, INC. claims RTV VENTURES LLC Delaware entity established Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% to service an existing loan INC. portfolio. GS MORTGAGE I PARTNERS, Entity established to Delaware 2 GOLDMAN SACHS MORTGAGE 95.0000% L.P. facilitate structured COMPANY financing. GS MORTGAGE I HOLDINGS, LLC 5.0000% --------- 100.0000% MEHETIA HOLDINGS INC. Parent company of Luge LLC, Delaware 3 GS MEHETIA CORP. 20.0000% Mehetia Inc and Carrera2 LLC GS MEHETIA LLC 50.0000% GS MEHETIA PARTNERSHIP LP 30.0000% --------- 100.0000% GS MEHETIA CORP. Parent company of Mehetia Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% Holdings, Inc. and GS INC. Mehetia Partnership LP. GS MEHETIA LLC Parent company of Mehetia Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% Holdings Inc. INC. GS MEHETIA PARTNERSHIP LP Parent company of GS Delaware 2 GS MEHETIA CORP. 1.0000% Mehetia Holdings Inc. GS MEHETIA LLC 99.0000% --------- 100.0000% MEHETIA INC. Entity established to Delaware 1 MEHETIA HOLDINGS INC. 100.0000% facilitate structured financing. CARRERA2 LLC Entity established to Delaware 1 MEHETIA HOLDINGS INC. 100.0000% facilitate structured financing. GS GLOBAL FUNDING II, CO. Holding company for GS Delaware 2 GOLDMAN SACHS CANADA INC. 23.0800% Global Funding III, Co.Holding company for GS GS FINANCIAL SERVICES L.P. 76.9200% Global Funding III, Co. (DEL) --------- 100.0000% GS GLOBAL FUNDING III, CO. Holding company for GS Delaware 1 GS GLOBAL FUNDING II, CO. 100.0000% Global Funding IV, LLC GS GLOBAL FUNDING IV, LLC Investor in preferred Delaware 1 GS GLOBAL FUNDING III, CO. 100.0000% securities. GS GLOBAL INVESTMENTS, CO. Investor in preferred Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% securities. INC. LIQUIDITY ASSETS LIMITED Established as part of an Cayman 1 LIQUIDITY ASSETS HOLDING 100.0000% SSG Structured Investing Islands LIMITED Group transaction. GS GLOBAL INVESTMENTS III Established as part of an Delaware 1 GS GLOBAL INVESTMENTS, CO. 100.0000% TRUST SSG Structured Investing Group transaction. COUNTY ASSETS LIMITED Entity established to Cayman 1 COUNTY FUNDING 100.0000% facilitate structured Islands financing. COUNTY FUNDING Entity established to England 1 COUNTY UK LIMITED 100.0000% facilitate structured financing. COUNTY UK LIMITED Entity established to Cayman 1 GS GLOBAL INVESTMENTS UK, 100.0000% facilitate structured Islands INC. financing. GS GLOBAL INVESTMENTS UK, Entity established to Delaware 1 GS GLOBAL INVESTMENTS, CO. 100.0000% INC. facilitate structured financing. MADISON/SPECIAL SITUATIONS Joint venture partner to Delaware 1 SPECIAL SITUATIONS 100.0000% VALUE FUND II, LLC purchase small bankrupcy INVESTING GROUP, INC. trade clients. GS GLOBAL PARTNERS LLC Entity established to Delaware 1 GS FINANCIAL SERVICES L.P. 100.0000% facilitate structured (DEL) financing. GS CAPITAL FUNDING (UK) 1 Entity is part of the England 1 GS DIVERSIFIED INVESTMENTS 100.0000% LIMITED European Hedging Strategy LIMITED deal. GS WIND POWER II, LLC Part of a wind energy Delaware 1 GSFS INVESTMENTS I CORP. 100.0000% project.
RAFT RIVER I HOLDINGS, LLC Established as part of an Delaware 1 GSFS INVESTMENTS I CORP. 100.0000% SSG Structured Investing Group transaction. RAFT RIVER ENERGY I LLC Established as part of an Delaware 1 RAFT RIVER I HOLDINGS, LLC 100.0000% SSG Structured Investing Group transaction. BRIDGEWATER ODC, LLC New entity to house a new Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% US data center property INC. HORIZON FUND Fund in Brazil used to Cayman 1 PROP - GS FUNDO DE 100.0000% trade exotic products and Islands INVESTIMENTO MULTIMERCADO in the near future CREDITO PRIVADO - commodities. INVESTIMENTO NO EXTERIOR GS MORTGAGE I HOLDINGS, Entity established to Delaware 1 GOLDMAN SACHS MORTGAGE 100.0000% LLC facilitate structured COMPANY financing. SYNFUEL SOLUTIONS HOLDINGS Holding company for Synfuel Delaware 2 THE GOLDMAN SACHS GROUP, 99.9900% LLC Holdings LLC. INC. GS FINANCIAL SERVICES L.P. (DEL) 0.0100% --------- 100.0000% GS V-1 HOLDINGS, L.P. Entity established to Bermuda 2 GSCP (DEL) INC. 99.9900% facilitate structured financing. GSCP (DEL) LLC 0.0100% --------- 100.0000% GS WIND POWER I, LLC Part of a wind energy Delaware 1 GS FINANCIAL SERVICES L.P. 100.0000% project. (DEL) GS GLOBAL MARKETS, INC. Entity established to Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% facilitate structured INC. financing. GOLDMAN SACHS CAPITAL Established as part of an England 1 GS FINANCIAL SERVICES L.P. 100.0000% INVESTMENTS LIMITED SSG Structured Investing (DEL) Group transaction. GOLDMAN SACHS CAPITAL Established as part of an England 1 GOLDMAN SACHS CAPITAL 100.0000% INVESTMENTS II LIMITED SSG Structured Investing INVESTMENTS LIMITED Group transaction. CAPITAL INVESTMENTS (U.S.) Established as part of an Delaware 1 GOLDMAN SACHS CAPITAL 100.0000% III, L.L.C. SSG Structured Investing INVESTMENTS II LIMITED Group transaction. GSFS INVESTMENTS I CORP. Established as part of an Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% SSG Structured Investing INC. Group transaction. ENERGY CENTER HOLDINGS, Established as part of an Delaware 1 GSFS INVESTMENTS I CORP. 100.0000% LLC SSG Structured Investing Group transaction. K.K. MINATO SAIKEN KAISHU Servicer. Japan 1 MLQ INVESTORS, L.P. 100.0000% GS 737 CLASSICS LEASING Established as part of an Delaware 1 GSFS INVESTMENTS I CORP. 100.0000% LLC SSG Structured Investing Group transaction. GS FUNDING OPPORTUNITIES Issuing shares and Delaware 1 GS FUNDING OPPORTUNITIES 100.0000% LLC effecting transfers, making II LLC distributions, entering into and performing its obligations, and exercising and enforcing its rights under each GS Funding transaction document. GS FUNDING OPPORTUNITIES Issuing shares and Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% II LLC effecting transfers, making INC. distributions, entering into and performing its obligations, and exercising and enforcing its rights under each GS Funding II transaction document. FLURET TRUST Established to facilitate United 2 GS FINANCIAL SERVICES L.P. 95.0000% structured financing. Kingdom (DEL) GS FUNDING OPPORTUNITIES II LLC 5.0000% --------- 100.0000% FLURET LIMITED Established as part of an Isle of 1 FLURET TRUST 100.0000% SSG Structured Investing Jersey Group transaction. HWE HOLDINGS LLC Subsidiary of GS Wind Delaware 1 GS WIND HOLDINGS LLC 100.0000% Holdings LLC GAC PERSONAL TK An ASSG related entity that Japan 2 GAC PERSONAL CO., LTD. 5.0000% purchased residential loans from Chiyoda Life. GS FINANCIAL SERVICES L.P. 95.0000% (DEL) --------- 100.0000% LINDEN WOOD TK An ASSG related entity that Japan 2 LINDEN WOOD, LTD. 5.0000% invests in distressed loans. GS FINANCIAL SERVICES L.P. 75.0000% (DEL) --------- 80.0000% LEAF GREEN TK Acquiring non performing Japan 3 THE GOLDMAN SACHS GROUP, 5.1140% loans and realizing them. INC. LEAF GREEN CO., LTD. 5.0000% KAGAWA (DELAWARE) L.L.C. 45.5125% --------- 100.0000% SOLAR WIND TK An ASSG related entity that Japan 2 SOLAR WIND LTD. 5.0000% invests in distressed loans. KIRI (DELAWARE) L.L.C. 75.0000% --------- 80.0000% GS DIVERSIFIED INVESTMENTS Participate in PBL Delaware 1 GS DIVERSIFIED FUNDING LLC 100.0000% LIMITED structured financing transaction. GS DIVERSIFIED HOLDINGS Participate in PBL Cayman 1 GS DIVERSIFIED FUNDING LLC 100.0000% LIMITED structured financing Islands transaction. GS DIVERSIFIED FUNDING LLC Participate in PBL Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% structured financing INC. transaction. GS SOLAR POWER I, LLC To hold equity interest in Delaware 1 GSFS INVESTMENTS I CORP. 100.0000% solar power investment. LORRAINE FUNDING LIMITED To settle a trust used to Cayman 1 GOLDMAN SACHS (CAYMAN) 100.0000% raise [pound] 750 million Islands HOLDING COMPANY of financing. CHILTERN TRUST Established in connection United 2 GS FINANCIAL SERVICES L.P. 95.0000% with a third party funding Kingdom (DEL) transaction. GS GLOBAL MARKETS, INC. 5.0000% --------- 100.0000% GS DIVERSIFIED FINANCE In connection with Televisa Delaware 1 GS FINANCIAL SERVICES L.P. 100.0000% III, LLC transaction. (DEL) GS DIVERSIFIED FINANCE V, In connection with Televisa Delaware 1 GS FINANCIAL SERVICES L.P. 100.0000% LLC transaction. (DEL) GS DIVERSIFIED HOLDINGS II Engage in potential Delaware 2 GS FINANCIAL SERVICES L.P. 99.9900% LLC structured transaction with (DEL) Azteca. GS DIVERSIFIED FINANCE III, LLC 0.0100% --------- 100.0000% GSCP (DEL) INC. To act as a general partner Delaware 1 GOLDMAN SACHS BANK USA 100.0000% and limited partner in GSCP and to act as the member of GSCP (DEL) LLC. GSCP (DEL) INC. It does not carry on active business. GSCP (DEL) LLC To act as limited partner Delaware 1 GSCP (DEL) INC. 100.0000% for GSCP. It does not carry on active business.
SHIGA (DELAWARE) LLC This entity, a TK investor, Delaware 1 GOLDMAN SACHS (ASIA) 100.0000% was set up to provide FINANCE HOLDINGS L.L.C. equity financing to SPCs which invests in non-performing loans and real estates. KIRI (DELAWARE) L.L.C. Pass-through entity used in Delaware 1 GOLDMAN SACHS (ASIA) 100.0000% connection with TK FINANCE HOLDINGS L.L.C. investing structures. BAY WIND II TK Purchasing unsecured loans Japan 3 THE GOLDMAN SACHS GROUP, 21.8450% jointly with Nochu INC. BAY WIND II LTD. 9.7690% SHIGA (DELAWARE) LLC 68.3860% --------- 100.0000% GS LEASING (KCSR 2005-1) The entity is an equity Delaware 1 GSFS INVESTMENTS I CORP. 100.0000% LLC holder in a leverage lease transaction where the assets are locomotives. MINATOMARU HOTEL HOLDINGS Holds hotels in Narita, Japan 3 THE GOLDMAN SACHS GROUP, 18.9780% TK Naha and Chitose, Japan. INC. GS STRATEGIC INVESTMENTS JAPAN 24.1000% LLC MINATOMARU HOTEL HOLDINGS CO., 5.0000% LTD. --------- 100.0000% GK MUSASHINO KAIHATSU Flagged for Tohoku REO Japan 1 MLQ INVESTORS, L.P. 100.0000% deall.Real Estate KINBLEY REALTY PTE. LTD. Consolidation of AEJ Singapore 1 DHONI CAYMAN HOLDINGS LTD. 100.0000% Entity. To acquire 48units which consists of apartments and townhouses in residential development in Singapore. GK LUIGI Flagged for Shibuya Japan 1 MLQ INVESTORS, L.P. 100.0000% development deal GK KOGANE Flagged for Restir Deal. Japan 2 AR HOLDINGS GK 1.0000% MLQ INVESTORS, L.P. 99.0000% --------- 100.0000% MUSASHINO KAIHATSU TK To acquire three suburban Japan 3 THE GOLDMAN SACHS GROUP, 39.4734% neighborhood shopping INC. centers located in northern part of Japan, such as GS STRATEGIC INVESTMENTS JAPAN 50.4388% Koriyama, Sendai and Aomori LLC Pref. GK MUSASHINO KAIHATSU 10.0878% --------- 100.0000% LUIGI TK To purchase land and Japan 3 THE GOLDMAN SACHS GROUP, 39.4741% develop office building in INC. Shibuya, Tokyo GS STRATEGIC INVESTMENTS JAPAN 46.6119% LLC GK LUIGI 13.9140% --------- 100.0000% I PET CO., LTD An insurance company for Japan 1 JUPITER INVESTMENT CO., 100.0000% pets. Also has equity in LTD. subsidiary. TAKAHAMA KAIHATSU TK To purchase the building Japan 3 THE GOLDMAN SACHS GROUP, 40.2128% which occupied by Tiffany's INC. in Ginza where commercial area in Japan. GS STRATEGIC INVESTMENTS 49.8226% JAPAN LLC GK TAKAHAMA KAIHATSU 9.9646% --------- 100.0000% GK TAKAHAMA KAIHATSU Flagged for Tiffany Japan 2 GOLDMAN SACHS REALTY JAPAN 0.0000% deal.Holding real estate LTD. trust beneficialy intrest. MLQ INVESTORS, L.P. 100.0000% --------- 100.0000% GK DOTONBORI KAIHATSU Flagged for Dotonbori deal. Japan 1 MLQ INVESTORS, L.P. 100.0000% Holding Real estates SAVU PROPERTIES PTE. LTD. Property management. Singapore 2 THE GOLDMAN SACHS GROUP, 20.2250% INC. BAEKDU INVESTMENTS LIMITED 30.0000% --------- 50.2250% KASHIWABARA TOSHI KAIHATSU To acquire Real Estate in Japan 2 NEPHRITE EQUITY CO., LTD. 1.1111% TK Kobe, Japan GK KASHIWABARA TOSHI KAIHATSU 98.8889% --------- 100.0000% GS GUERNSEY INVESTMENTS Subsidiary of MTGLQ to hold United 1 MTGLQ INVESTORS, L.P. 100.0000% LTD 75% of Shilling/Caledonian Kingdom group via Preference shares GOLDMAN SACHS STRATEGIC General investment company England 1 GOLDMAN SACHS 100.0000% INVESTMENTS (U.K.) LIMITED INTERNATIONAL HOLDINGS LLC SHIOHAMA KAIHATSU TK To acquire 3 retail Japan 4 GOLDMAN, SACHS & CO. 0.0000% neighborhood shopping centres in Fukushima Pref. THE GOLDMAN SACHS GROUP, INC. 20.1780% GS STRATEGIC INVESTMENTS JAPAN 25.0000% LLC GK SHIOHAMA KAIHATSU 5.0000% --------- 50.1780% GK SHIOHAMA KAIHATSU Flagged for Michinoku Japan 1 MLQ INVESTORS, L.P. 100.0000% Sendai Deal (beneficiary rights) FANTASIA (CAYMAN) LTD. Pre-IPO investment in Cayman 2 THE GOLDMAN SACHS GROUP, 13.4940% China. The deal entails Islands NC. investment in Equity and debt of real estate GOLDMAN SACHS RE INVESTMENTS 53.3333% developer with most HOLDINGS LIMITED projects in Shenzhen and --------- Chengdu. 66.8273% WWDI INVESTMENTS LTD This involves purchase of Mauritius 1 WWD INVESTMENT HOLDINGS LTD 91.5000% 6.5 Acres of land to develop residential property, luxury hotel and service apartments. Development to commence in Jul 08. Seller is ETA- a Dubai based development company. WWD INVESTMENT HOLDINGS This involves purchase of Mauritius 2 THE GOLDMAN SACHS GROUP, 20.5670% LTD 6.5 Acres of land to INC. develop residential property, luxury hotel and GOLDMAN SACHS RE INVESTMENTS 29.7350% service apartments. HOLDINGS LIMITED Development to commence in --------- Jul 08. Seller is ETA- a 50.3020% Dubai based development company. C.H. WHITE FLOWER Holding GK Frangipani Japan 1 AR HOLDINGS GK 100.0000% WWD TOPAZ INVESTMENTS Investment in Vatika Group, Mauritius 1 WWD INVESTMENT HOLDINGS LTD 100.0000% LIMITED a Gurgaon (India) based real estate developer SAVU INVESTMENTS PTE. LTD. Purchase of 100% shares of Singapore 1 KINBLEY (DELAWARE) LLC III 100.0000% asset holding company Savu Investments Ltd which is holding Hitachi Towers in Singapore. FRANGIPANI TK Entity set up to refinance Japan 1 BLUE SQUARE TK 100.0000% the loan to Takara-Gumi. GK FRANGIPANI Flagged for Project Japan 1 C.H. WHITE FLOWER 100.0000% Manhattan. Owns Loans.Investment vehicle BLUE SQUARE TK Entity set up to refinance Japan 1 NEPHRITE EQUITY CO., LTD. 100.0000% the loan to Takara-Gumi. GS LIQUID TRADING PLATFORM Entity 1 for the Liquid Isle of 1 GOLDMAN SACHS GROUP 100.0000% I PCC Trading Platform Jersey HOLDINGS (U.K.) GS LIQUID TRADING PLATFORM Entity 2 for the Liquid Isle of 1 GOLDMAN SACHS GROUP 100.0000% II LIMITED Trading PlatformEntity 2 Jersey HOLDINGS (U.K.) for the Liquid Trading Platform GK BLUE SQUARE Flagged for Project Japan 1 JUPITER INVESTMENT CO., 100.0000% Manhattan. Holding loan. LTD. GK KITANOMARU Flagged for Shinjuku MOA Japan 1 MLQ INVESTORS, L.P. 100.0000% Deal (Alook). Holds hard asset.
KAIKE ONSEN HOTEL Management of Japan 1 GOLDMAN SACHS REALTY 100.0000% MANAGEMENT CO., LTD. Ryokan.(Japannese JAPAN LTD. Hotel);Flagged for Onsen deal. Housing employees. GK KAIHIN Flagged for Paco Hakodate Japan 1 MLQ INVESTORS, L.P. 100.0000% Deal/Real Estate. Holds hard RE asset. GK SPICA Purchasing Loans. Flagged Japan 1 JLQ LLC 100.0000% for SMBC SPL portfolio acquisition deal (ASSG) KPL FINANCE LIMITED Killingholme trade Cayman 1 KILLINGHOLME GENERATION 100.0000% Islands LIMITED BRM HOLDINGS LLC Business Records Management Delaware 1 GSFS INVESTMENTS I CORP. 100.0000% PMF-1 (BES III) It is not a true legal United 1 ELQ INVESTORS, LTD 100.0000% entity. PMF 1 has a non Kingdom performing porfolio for which the desk needs separate reporting and entity 2398 has been set up to facilitate this. PMF-2 (BES III), LTD It is not a true legal United 1 GS EUROPEAN OPPORTUNITIES 100.0000% entity. PMF 2 has a non Kingdom INVESTMENT FUND B.V. performing porfolio for which the desk needs separate reporting and entity 2399 has been set up to facilitate this. GS EUROPEAN OPPORTUNITIES Purchase through its Netherlands 1 ELQ INVESTORS, LTD 75.0000% INVESTMENT FUND B.V. subsidiaries fixed income securities and portfolio of investments. GS EUROPEAN OPPORTUNITIES Primary activity is to Cayman 1 MTGLQ INVESTORS, L.P. 75.0000% FUND L.P. (CAYMAN) provide subordinated debt Islands to the various Opportunities Fund entities. Note that this Cayman L.P. was formed to replace the existing Delaware L.P. of the same name which was disolved on 28/12/04. DEMAC FINANCIAL SERVICES, Incorporated to provide The Czech 1 MTGLQ INVESTORS, L.P. 91.6200% S.R.O debt servicing and Republic administrative services for CDV-1, Ltd.'s loan assets. PMF-1, LTD. Set up for the purpose of England 1 ELQ INVESTORS, LTD 100.0000% acquiring a portfolio of non-performing Portuguese mortgages PMF-2, LTD Established for the purpose England 1 GS EUROPEAN OPPORTUNITIES 100.0000% of acquiring a 95% INVESTMENT FUND B.V. participation in a portfolio of non-performing Portuguese mortgages from PMF-1, Ltd. GS EUROPEAN INVESTMENT Asset owning subsidiary for England 1 GS EUROPEAN OPPORTUNITIES 100.0000% GROUP II LTD. GS European Opportunities FUND II L.P. Fund II GS EUROPEAN OPPORTUNITIES Holding Partnership for the England 1 ELQ INVESTORS, LTD 75.0000% FUND II L.P. European Opportunities Fund II SANA Acquisitions Ltd Entity set up to hold England 1 GS EUROPEAN OPPORTUNITIES 100.0000% portfolio of non-performing FUND II L.P. German loans MEP GS INVESTOR (CAYCO) Holding Entity Cayman 1 MLQ, L.L.C. 100.0000% LIMITED Islands GS LEASING (KCSR 2007-1) Hold operating leases in Delaware 1 GSFS INVESTMENTS I CORP. 100.0000% LLC airplanes WWD MARBLE LIMITED To hold the shares of a Mauritius 1 WWD INVESTMENT HOLDINGS LTD 100.0000% Real estate entity in India. GK KUROBE Flagged for Greens Hotel Japan 1 MLQ INVESTORS, L.P. 100.0000% Deal 2 (Kitami Acquisition). Owns beneficiary right for Comfort Hotel Kitami. KAIHIN TK To acquire Hotel Paco Japan 3 THE GOLDMAN SACHS GROUP, 22.4550% Hacodate. INC. GS STRATEGIC INVESTMENTS JAPAN 25.0000% LLC GK KAIHIN 5.0000% --------- 52.4550% GSCP MEXICO, S.A. de C.V., Trade certain products (OTC Mexico 2 GOLDMAN SACHS GROUP Y 0.0020% SOFOM, E.N.R. derivatives and Lending COMPANIA, S. DE R.L. DE respectively) with local C.V. Mexican clients. GS FINANCIAL SERVICES L.P. 99.9980% (DEL) --------- 100.0000% KINBLEY (DELAWARE) LLC III An entity for Hitachi Delaware 2 THE GOLDMAN SACHS GROUP, 20.1990% Towers deal INC. GOLDMAN SACHS RE INVESTMENTS 30.0000% HOLDINGS LIMITED --------- 50.1990% GOLDMOUNT AIRCRAFT LEASING Hold operating leases in Ireland 1 GSFS INVESTMENTS I CORP. 100.0000% IRELAND AS LIMITED trains. GS/MC LEASING KDAA, LLC To hold aircraft that are Delaware 1 GSFS INVESTMENTS I CORP. 100.0000% on lease to external parties. GS/MC LEASING SWAA, LLC Hold operating leases in Delaware 1 GSFS INVESTMENTS I CORP. 100.0000% airplanes GS/MC LEASING KLMA, LLC Hold operating leases in Delaware 1 GSFS INVESTMENTS I CORP. 100.0000% airplanes GS LEASING Hold operating leases in Delaware 1 GSFS INVESTMENTS I CORP. 100.0000% (BOEING 737-3T0) LLC airplanes GK MUSASHI Holding Real Japan 1 MUSASHI CAYMAN CO., LTD. 100.0000% estates.Flagged for Uchikanda (Totate) deal. MUSASHI TK To acquire real estate. Japan 3 THE GOLDMAN SACHS GROUP, 22.4600% INC. GS STRATEGIC INVESTMENTS 25.0000% JAPAN LLC GK MUSASHI 5.0000% --------- 52.4600% GOLDMAN SACHS SAUDI ARABIA Established to offer The Kingdom 5 GOLDMAN SACHS HOLDINGS 0.2500% private wealth management, of Saudi (U.K.) securities, asset Arabia management and investment GOLDMAN SACHS GLOBAL 0.2500% banking services. HOLDINGS L.L.C. GSEM (DEL) HOLDINGS, L.P. 0.2500% GOLDMAN SACHS GROUP HOLDINGS 0.2500% (U.K.) --------- 100.0000% GSCP LATIN AMERICA LLC Formed for the purpose of Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% providing loans INC. CITY VIEW PROPERTIES To Purchase a land in India India 1 WWD PEARL LTD 73.0000% PRIVATE LIMITED and develop hotel and residential complex. GREEN BANATELIS LIMITED An entity for City View Cyprus 1 WWDI INVESTMENTS LTD 100.0000% Properties Pvt Ltd. WWD PEARL LTD An entity for City View Mauritius 1 WWDI INVESTMENTS LTD 100.0000% Properties Pvt Ltd. INSTITUTIONAL LIFE It will perform Delaware 1 GS RE HOLDINGS, INC. 52.2235% ADMINISTRATION, LLC administrative functions for life settlements purchased on the Institutional Life Services platform.
ALLMERICA GLOBAL FUNDING, It issued notes to Cayman 1 FIRST ALLMERICA FINANCIAL 100.0000% LLC third-party investors Islands LIFE INSURANCE COMPANY ARCHON UK LIMITED Managing government office England 1 ARCHON GROUP, L.P. 100.0000% buildings in London. AH ORLANDO, L.P. Property manager of Hotel Delaware 1 ARCHON HOSPITALITY, L.P. 100.0000% Royal Plaza ARCHON/PPM L.L.C. An investment Delaware 1 ARCHON GROUP, L.P. 100.0000% entity/partner in former Trillium investment. TNL NETWORK, LTD. Entity is consolidating on Texas 1 ARCHON GROUP, L.P. 100.0000% the books and records of Archon Group, L.P. (enttyt 0100) AGCH GEN-PAR, L.L.C. Real estate property/asset Delaware 1 ARCHON GROUP, L.P. 100.0000% manager (subconsolidating entities) BTS SOLUTIONS, L.L.C. "Behind-The-Scenes" Archon Delaware 1 ARCHON GROUP, L.P. 100.0000% Group servicing entity. GSSLG GEN-PAR, L.L.C. Real estate property/asset Delaware 1 ARCHON GROUP, L.P. 100.0000% manager (subconsolidating entities) TITLE NETWORK, LTD. Entity is consolidating on Texas 2 ARCHON GROUP, L.P. 1.0000% the books and records of Archon Group, L.P. TNL NETWORK, LTD. 99.0000% --------- 100.0000% RE ACQUISITION, L.L.C. Entity is consolidating on Delaware 1 ARCHON GROUP, L.P. 100.0000% the books and records of Archon Group, L.P. ARCHON THAILAND, LLC To serve as Archon Group's Delaware 1 ARCHON GROUP, L.P. 100.0000% branch in Thailand ARCHON HOSPITALITY, L.P. Part of Archon's real Delaware 2 ARCHON GROUP, L.P. 99.0000% estate hospitality platform ARCHON HOSPITALITY GEN-PAR, 1.0000% L.L.C. --------- 100.0000% ARCHON ACQUISITION, LLC Entity is consolidating on Delaware 1 ARCHON GROUP, L.P. 100.0000% the books and records of Archon Group, L.P. (entity 0100) AWH ARCHON GEN-PAR, L.L.C. To act as general partner Delaware 1 ARCHON GROUP, L.P. 100.0000% of Archon Core Plus Real Estate Fund 2005, L.P. ARCHON KOREA, L.L.C. A servicing and asset Korea 2 THE GOLDMAN SACHS GROUP, 51.0000% management company in Korea. INC. ARCHON GROUP, L.P. 49.0000% --------- 100.0000% ARCHON GROUP Real estate property/asset Delaware 2 ARCHON GROUP, L.P. 99.0000% INTERNATIONAL, L.P. manager (subconsolidating entities) ARCHON INTERNATIONAL HOLDINGS, 1.0000% L.L.C. --------- 100.0000% GRUPO ARCHON SOCIEDAD DE To serve as asset manager Delaware 2 ARCHON GROUP, L.P. 99.0000% RESPONSIBILIDAD LIMITADA and/or investor in portfolios in Mexico ARCHON INTERNATIONAL HOLDINGS, 1.0000% L.L.C. --------- 100.0000% ARCHON HOSPITALITY To act as sole general Delaware 1 ARCHON GROUP, L.P. 100.0000% GEN-PAR, L.L.C partner of Archon Hospitality, L.P. ARCHON GROUP CANADA Real estate property/asset Delaware 2 ARCHON GROUP, L.P. 99.0000% HOLDINGS, L.P. manager (subconsolidating entities) AGCH GEN-PAR, L.L.C. 1.0000% --------- 100.0000% ARCHON RESIDENTIAL A multifamily property Delaware 2 ARCHON GROUP, L.P. 99.0000% MANAGEMENT, L.P. management company. ARCHON RESIDENTIAL MANAGEMENT GEN-PAR, INC. 1.0000% --------- 100.0000% ARCHON INTERNATIONAL Entity is consolidating on Delaware 1 ARCHON GROUP, L.P. 100.0000% HOLDINGS, L.L.C. the books and records of Archon Group, L.P. (entity 0100) GS CANADA SPECIALTY Real estate property/asset Nova Scotia 1 ARCHON GROUP CANADA 100.0000% LENDING COMPANY manager (subconsolidating HOLDINGS, L.P. entities) GOLDMAN SACHS SPECIALTY Real estate property/asset Delaware 2 ARCHON GROUP, L.P. 99.0000% LENDING GROUP, L.P. manager (subconsolidating entities) GSSLG GEN-PAR, L.L.C. 1.0000% --------- 100.0000% ARCHON RESIDENTIAL General partner of Archon Delaware 1 ARCHON GROUP, L.P. 100.0000% MANAGEMENT GEN-PAR, INC. Residential Management L.P. JLQ LLC Special purpose company for Cayman 1 GS FINANCIAL SERVICES L.P. 100.0000% purchase of loans. Owns Islands (DEL) equities, convertible bond, put option, etc. NASU URBAN PROPERTIES Holding a Japanese Inn Japan 1 JLQ LLC 100.0000% CO., LTD. Ouan)& #12539; Holding Real Estate. GOLDMAN SACHS REALTY ASIA This entity is a corporate Singapore 1 GOLDMAN SACHS FOREIGN 100.0000% PACIFIC PTE. LTD. entity for Archon, and will EXCHANGE (SINGAPORE) PTE. perform real estate asset management in Singapore and non Japan Asia. It will perform the equivalent functions of GSRJL except for the AEJ region. GK JUPITER INVESTMENT II Flagged for SBIC Deal. Has Japan 1 AR HOLDINGS GK 100.0000% ownership of Japanese limited partnership. ARROW REINSURANCE COMPANY, Licensed insurance company Bermuda 1 THE GOLDMAN SACHS GROUP, 100.0000% LIMITED to act as a "transformer" INC. between traditional insurance and reinsurance markets and the capital markets. Holds casualty bond positions. GOLDMAN SACHS FINANCIAL OTC Derivatives Dealer; Delaware 2 THE GOLDMAN SACHS GROUP, 99.0000% MARKETS, L.P. broker/dealer; SEC File No. INC. 8-51753 GOLDMAN SACHS FINANCIAL MARKETS 1.0000% L.L.C. --------- 100.0000% GOLDMAN SACHS (ASIA) LLC Taiwan brokerage, agency Delaware 1 GOLDMAN SACHS (ASIA) L.L.C. 100.0000% TAIWA trading GSI GOLDMAN SACHS EUROPE UK covered warrants and England 2 GOLDMAN SACHS HOLDINGS 99.0000% agency lending (U.K.) GOLDMAN SACHS GROUP HOLDINGS 1.0000% (U.K.) --------- 100.0000% WILLIAM STREET COMMITMENT Entity set up to extend Delaware 1 GOLDMAN SACHS BANK USA 100.0000% CORPORATION unfunded loan commitments to investment-grade customers of GS Group WILLIAM STREET EQUITY LLC Entity invests in William Delaware 1 GOLDMAN SACHS BANK USA 100.0000% Street Funding Corporation in exchange for equity and mezzanine securities.Entity invests in William Street Funding Corporation in exchange for equity and mezzanine securities. WILLIAM STREET FUNDING Provides sources of Delaware 1 WILLIAM STREET EQUITY LLC 100.0000% CORPORATION liquidity for potential funding of commitments initiated in William Street Commitment Corporation.
GOLDMAN SACHS (JERSEY) To issue warrants Isle of 1 GOLDMAN SACHS INTERNATIONAL 100.0000% LIMITED Jersey WILLIAM STREET CREDIT To extend commitments to Delaware 1 GOLDMAN SACHS BANK USA 100.0000% CORPORATION borrowers during transition over to William Street Corp. GSSM HOLDING (U.K.) To hold firms investments England 1 THE GOLDMAN SACHS GROUP, 100.0000% in SMFG convertible INC. preferreds. GSSM HOLDING LLC Established to hold firm's Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% investments in SMFG INC. convertible preferreds - As of 11-25-05, the SMFG Pref's were held by GS Group, GS EUROPEAN STRATEGIC Primarily invests in non Netherlands 1 GS EUROPEAN OPPORTUNITIES 100.0000% INVESTMENT GROUP B.V. investment grade or INVESTMENT FUND B.V. distressed securities and loans of European companies. GS EUROPEAN INVESTMENT Established to purchase and Netherlands 1 ELQ INVESTORS, LTD 100.0000% GROUP B.V. originate publicly and privately issued fixed income securities. GS EUROPEAN MEZZANINE Established to purchase and Netherlands 1 ELQ INVESTORS, LTD 100.0000% INVESTMENT GROUP originate publicly and privately issued fixed income securities. GOLDMAN SACHS SPECIALTY makes debt and equity Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% LENDING HOLDINGS, INC. investments in middle INC. market companies GOLDMAN SACHS LENDING Primarily originates, Delaware 1 MTGLQ INVESTORS, L.P. 100.0000% PARTNERS LLC sydicates and trades commercial-purpose loans to institutional borrowers GOLDMAN SACHS SPECIALTY To hold loans to be Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% LENDING HOLDINGS, INC. II financed by Norinchukin Bank INC. REMARK FUNDING CO., LLC Purchase retail installment Delaware 1 MTGLQ INVESTORS, L.P. 100.0000% contracts (RICs) and Auto Loans from Banks, Thrifts, Credit Unions, Independent Finance Companies and other Specialty Finance Dealer Related Company. Purchase loans and get leverage or securitize after a couple of years (couldP GOLDMAN SACHS SPECIALTY loans to middle market Cayman 1 GOLDMAN SACHS SPECIALTY 100.0000% LENDING CLO-I, LTD. companies; makes debt and Islands LENDING HOLDINGS, INC. II equity investments in middle market companies CHARLESTON CAPITAL To pursue various District of 1 COLUMBIA CAPITAL LIFE 100.0000% REINSURANCE, LLC opportunities in the Columbia REINSURANCE COMPANY reinsurance business. COLUMBIA CAPITAL LIFE Established to pursue District of 1 THE GOLDMAN SACHS GROUP, 100.0000% REINSURANCE COMPANY various opportunities in Columbia INC. the reinsurance business. GS INVESTMENTS (CAYMAN) Equity investments Cayman 1 GSEM (DEL) HOLDINGS, L.P. 100.0000% LIMITED Islands GS MIDDLE EAST (CAYMAN) Holding Company 1 GSEM (DEL) HOLDINGS, L.P. 100.0000% LTD OPAL RESOURCES LLC To acquire, own, hold, Delaware 1 MTGLQ INVESTORS, L.P. 100.0000% maintain, renew, drill, develop and operate Oil and Gas Interests and related assets and other properties in the continental United States, and the state and federal waters offshore. GSFS IV LLC to warehouse aircrafts Delaware 1 GSFS INVESTMENTS I CORP. 100.0000% TRIUMPH II INVESTMENTS Primarily established to Ireland 1 GS ASIAN VENTURE 100.0000% (IRELAND) LIMITED hold ASSG positions in (DELAWARE) L.L.C. Korean assets. TRIUMPH III INVESTMENTS To hold an array of Dong Ah Ireland 1 BEST II INVESTMENTS 100.0000% (IRELAND) LIMITED Construction Ltd claims (DELAWARE) L.L.C. with a portion guaranteed by Korea Express Co. and certain direct claim of Korea Express Co. GOLDMAN SACHS STRUCTURED Primarily engaged in Cayman 1 GOLDMAN SACHS (ASIA) 100.0000% PRODUCTS (ASIA) LIMITED issuing derivative Islands FINANCE instruments on the Hong Kong exchange. GOLDMAN SACHS BANK Entitiy for Irish Bank Ireland 1 GOLDMAN SACHS IRELAND 100.0000% (EUROPE) PLC DINGS LIMITED GOLDMAN SACHS IRELAND Formerly Goldman Sachs Ireland 2 GOLDMAN SACHS GLOBAL 25.0000% GROUP LIMITED Private Bank Limited. HOLDINGS L.L.C. GOLDMAN SACHS PRIVATE BANK 75.0000% HOLDINGS LLC --------- 100.0000% GOLDMAN SACHS IRELAND Entity for Irish Bank- GSB6 Ireland 1 GOLDMAN SACHS IRELAND 100.0000% HOLDINGS LIMITED GROUP LIMITED GOLDMAN SACHS PRIVATE BANK holding company for Irish Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% HOLDINGS LLC bank structure INC. BEST II INVESTMENTS Primarily established to Delaware 1 GS FINANCIAL SERVICES L.P. 100.0000% (DELAWARE) L.L.C. hold investments in Triumph (DEL) Investments (Ireland) Limited and Triumph III Investments (Ireland) Limited. BAEKDU INVESTMENTS LIMITED Intermediate holding Cayman 1 LANDPRO INVESTMENTS 100.0000% company of ASSG for Islands (DELAWARE) L.L.C. investments with REPIA. GOLDMAN SACHS STRATEGIC Primarily established to Delaware 1 MLT INVESTMENTS LTD. 100.0000% INVESTMENTS (ASIA) L.L.C. hold private equity positions of ASSG
GOLDMAN SACHS (HONG KONG) Acquiring and holding for Hong Kong 2 GOLDMAN SACHS (ASIA) 95.0000% FUNDING PARTNERSHIP investment or otherwise and FINANCE selling, assigning, transferring or otherwise GOLDMAN SACHS (HONG KONG) 5.0000% dealing with bonds or any COMPANY LIMITED other securities issued by --------- any corporation or 100.0000% governmental entity. Negotiating terms, purchasing the Bond (USD Guaranteed Bond du GOLDMAN SACHS INDIA Will hold ASSG assets. Mauritius 1 JADE DRAGON (MAURITIUS) 100.0000% VENTURE CAPITAL LIMITED LIMITED GOLDMAN SACHS STRATEGIC Global Business Licence Mauritius 1 PANDA INVESTMENTS LTD 100.0000% HOLDINGS LIMITED CATEGORY 1. Holding Company for certain PRC investments for ASSG.Changed financial year end from last Friday of November to 31 December, starting from financial year 2009 onwards. GS STRATEGIC INVESTMENTS To hold ASSG positions in Mauritius 1 PANDA INVESTMENTS LTD 100.0000% LIMITED Indian private equities. GOLDMAN SACHS LLC The Company's principal Mauritius 1 HULL TRADING ASIA LIMITED 100.0000% activity is to engage in the trading of financial products. GOLDMAN SACHS STRATEGIC Potentially holding ASSG Delaware 2 EUSTON ENTERPRISES LIMITED 50.0000% INVESTMENTS (DELAWARE) positions L.L.C. FAIRWAY ENTERPRISES LIMITED 50.0000% --------- 100.0000% GRAND STEEL STRATEGIC To hold investments in Cayman 1 GOLDMAN SACHS STRATEGIC 100.0000% INVESTMENT LIMITED Jianlong, a steel Islands INVESTMENTS (ASIA) L.L.C. Manufacturer in China GLOBAL TECHNOLOGIES Investment Holding British 1 MLT INVESTMENTS LTD. 100.0000% INTERNATIONAL LIMITED Virgin Islands GOLDMAN SACHS CHINA Holding Co of Jade Dragon Mauritius 1 JADE DRAGON (MAURITIUS) 100.0000% VENTURE I (MAURITIUS) Venture Investment Limited LIMITED LIMITED GOLDMAN SACHS CHINA Holding Co of Jade Dragon Mauritius 1 JADE DRAGON (MAURITIUS) 100.0000% VENTURE II (MAURITIUS) Venture Investment Limited LIMITED LIMITED JADE DRAGON VENTURE Venture capital company for People's 2 GOLDMAN SACHS CHINA 60.0000% INVESTMENT LIMITED ASSG in the PRC Republic VENTURE I (MAURITIUS) of China LIMITED GOLDMAN SACHS CHINA VENTURE II 40.0000% (MAURITIUS) LIMITED --------- 100.0000% ELEVATECH LIMITED Holding ASSG investments Hong Kong 1 MLT INVESTMENTS LTD. 100.0000% GOLDMAN SACHS HOLDINGS Holding company for AEJ Hong Kong 1 GOLDMAN SACHS (ASIA) 100.0000% (HONG KONG) LIMITED entities CORPORATE HOLDINGS L.P. ARROW CORPORATE MEMBER Entity owns participation England 1 ARROW CORPORATE MEMBER 100.0000% LIMITED in a syndicate at Lloyds HOLDINGS LLC that writes property catastrophe insurance. Arrow Syndicate 1910 Underwrites World property United 1 ARROW CORPORATE MEMBER 100.0000% catastrophe, Lyods mkt Kingdom LIMITED AGALIA CAPITAL LTD. The entity, incorporated in British 1 GOLDMAN SACHS STRATEGIC 75.0000% BVI, is newly acquired by Virgin INVESTMENTS (ASIA) L.L.C. GSSIA (6153) in Dec 07. The Islands entity is 75% owned by GSSIA (6153) upon completion of acquisition. The entity's principal business is investment holding. GOLDMAN SACHS (HONG KONG) Investment holding Hong Kong 1 GOLDMAN SACHS HOLDINGS 100.0000% COMPANY LIMITED (HONG KONG) LIMITED GS REA HOLDINGS, L.L.C. Firm direct investment.GS Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% REA Holdings, L.L.C. INC. GS-MPIM I, LLC Firm direct investment.GS Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% MPIM I, L.L.C. INC. GS REA GOLDENBRIDGE To invest in Delaware 1 GS REA HOLDINGS, L.L.C. 100.0000% HOLDINGS L.L.C. distressed/mezz debt. G.S.Q SPV (1) LIMITED Investment company Nigeria 1 ELQ INVESTORS, LTD 100.0000% TELE SPV LIMITED Investment company Nigeria 1 ELQ INVESTORS, LTD 100.0000% YORAM LIMITED Investment company Nigeria 1 ELQ INVESTORS, LTD 100.0000% GS KILLINGHOLME CAYMAN Structured investing entity Cayman 1 GS KILLINGHOLME CAYMAN 100.0000% INVESTMENTS II LTD Islands INVESTMENTS LTD. GS KILLINGHOLME CAYMAN GSKC III is a new entity Cayman 2 GS KILLINGHOLME CAYMAN 0.0100% INVESTMENTS III that will be party to cross Islands INVESTMENTS LTD. currency basis swaps as part of a larger structured GS KILLINGHOLME CAYMAN 99.9900% deal by the Structured INVESTMENTS II LTD Investing desk in ESSG. As --------- per the derivative booking 100.0000% policy, any entity that enters into derivates must be set up in books an GS KILLINGHOLME CAYMAN GSKC III is a new entity Cayman 3 KILLINGHOLME GENERATION 0.0000% INVESTMENTS IV, L.P. that will be party to cross Islands LIMITED currency basis swaps as part of a larger structured GS KILLINGHOLME CAYMAN 0.0000% deal by the Structured INVESTMENTS LTD. Investing desk in ESSG. As per the derivative booking GS KILLINGHOLME CAYMAN 100.0000% policy, any entity that INVESTMENTS III enters into derivates must --------- be set up in books and 100.0000% records. This entity will be formed on the 5th of February. KPL ACQUISITIONS LIMITED Killingholme acquisitions Cayman 1 KILLINGHOLME GENERATION 100.0000% Islands LIMITED GS LEASING HOLDINGS Entity set up to act as United 1 GOLDMAN SACHS GROUP 100.0000% LIMITED trustee for GS Leasing Kingdom HOLDINGS (U.K.) Investments. The entity will purely have a tiny amount of capital and cash.
GS LOGISTICS HOLDINGS LTD Firm direct investment Mauritius 1 GS DIRECT, L.L.C. 100.0000% hodling company GS CHROMA HOLDINGS LIMITED Mauritius Holding Company Mauritius 1 GS DIRECT, L.L.C. 100.0000% which holds an investment related to the GS Direct (PIA) area. GOLDMAN SACHS TRUSTEE For conducting the mutual India 1 GSAM INDIA HOLDINGS LIMITED 100.0000% COMPANY (INDIA) PRIVATE fund business in India LIMITED GOLDMAN SACHS ASSET For conducting the mutual India 1 GSAM INDIA HOLDINGS LIMITED 100.0000% MANAGEMENT (INDIA) PRIVATE fund business in India LIMITED REP PEB REALTY, L.L.C. Hold real estate investment Delaware 1 GOLDMAN SACHS LENDING 100.0000% PARTNERS LLC REP ALX REALTY, L.L.C. REPIA entity. Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% INC. REP PRS II FTB, L.L.C. Ownership of Fountains at Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% Delray Beach Apartment Homes INC. REP PRS II WTE, L.L.C. Ownership of Waters Edge Delaware 1 THE GOLDMAN SACHS GROUP, 100.0000% Apartment Homes INC.
ITEM 27. NUMBER OF CONTRACT OWNERS As of February 28, 2009, there were 4,181 Contract Owners of qualified Contracts and 7,281 Contract Owners of non-qualified Contracts. ITEM 28. INDEMNIFICATION Article VI of the Company's Bylaws states: The Corporation shall indemnify to the full extent permitted by applicable law any person made or threatened to be made a party to any action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that such person's testator or intestate is or was a director, officer or employee of the Corporation or serves or served at the request of the Corporation any other enterprise as a director, officer or employee. Expenses, including attorneys' fees, incurred by any such person in defending any such action, suit or proceeding shall be paid or reimbursed by the Corporation promptly upon receipt by it of an undertaking of such person to repay such expenses if such person if finally adjudicated not to have acted in good faith in the reasonable belief that his or her action was in the best interest of the Corporation or other enterprise. The Corporation shall accept such undertaking without reference to the financial ability of such person to make repayment. Notwithstanding the foregoing, no indemnification shall be provided for any person with respect to any matter as to which such person shall have been finally adjudicated not to have acted in good faith in the reasonable belief that the action was in best interests of the Corporation or other enterprise. No matter disposed of by settlement, compromise, the entry of a consent decree or the entry of any plea in a criminal proceeding, shall of itself be deemed an adjudication of not having acted in good faith in the reasonable belief that the action was in the best interest of the Corporation. The rights provided to any person by this by-law shall be enforceable against the Corporation by such person who shall be presumed to have relied upon it in serving or continuing to serve as director, officer or employee as provided above. No amendment of this by-law shall impair the rights of any person arising at any time with respect to events occurring prior to such amendment. ITEM 29. PRINCIPAL UNDERWRITERS (a) Epoch Securities, Inc. also acts as a principal underwriter for the following: - VEL Account, VEL II Account, VEL Account III, Separate Account SPL-D, Separate Account IMO, Select Account III, Inheiritage Account, Separate Accounts VA-A, VA-B, VA-C, VA-G, VA-H, VA-K, VA-P, Commonwealth Select Separate Account II, Group VEL Account, Separate Account KG, Separate Account KGC, Fulcrum Separate Account, Fulcrum Variable Life Separate Account, Separate Account FUVUL, Separate Account IMO, Commonwealth Select Separate Account, and Commonwealth Annuity Separate Account A of Commonwealth Annuity and Life Insurance Company - Inheiritage Account, VEL II Account, Separate Account I, Separate Account VA-K, Separate Account VA-P, Allmerica Select Separate Account II, Group VEL Account, Separate Account KG, Separate Account KGC, Fulcrum Separate Account, and Allmerica Select Separate Account of First Allmerica Financial Life Insurance Company. (b) The principal business address of most the following Directors and Officers is: 85 Broad Street New York, NY 10004 The principal business address of the other following Directors and Officers* is: 132 Turnpike Road, Suite 210 Southborough, MA 01772.
NAME POSITION OR OFFICE WITH UNDERWRITER - ---- ----------------------------------- Julie Abraham Assistant Secretary Elizabeth E. Beshel Treasurer Steven M. Bunson Assistant Treasurer Richard Cohn Assistant General Counsel and Secretary John S. Daly Director Kathleen Jack Chief Compliance Officer, Securities Underwriting Activities Kenneth L. Josselyn Assistant Secretary Robert A. Mass Compliance Officer Albert P. Meo Finance and Operations Principal Beverly O'Toole Assistant Secretary Stephen R. Pierce Director and Vice President Benjamin J. Rader Assistant Secretary Michael A. Reardon* Director, President, Chief Executive Officer and Chief Operating Officer Margot Kibbe Wallin* Chief Compliance Officer, Variable Products Distribution
(c) As indicated in Part B (Statement of Additional Information) in response to Item 20(c), there were no commissions or other compensation retained by Security Distributors, Inc., the former principal underwriter of the Contracts, directly or indirectly, for sales of variable contracts funded by the Registrant in 2008. No commissions or other compensation was received by Epoch Securities, Inc., the current principal underwriter, directly or indirectly, from the Registrant during the Registrant's last fiscal year. ITEM 30. LOCATION OF ACCOUNTS AND RECORDS Each account, book or other document required to be maintained by Section 31(a) of the Investment Company Act of 1940 and Rules 31a-1 to 31a-3 thereunder are maintained for the Company by Security Benefit Life Insurance Company at One Security Benefit Place, Topeka, Kansas. ITEM 31. MANAGEMENT SERVICES The Company provides daily unit value calculations and related services for the Company's separate accounts. ITEM 32. UNDERTAKINGS (a) The Registrant hereby undertakes to file a post-effective amendment to this registration statement as frequently as is necessary to ensure that the audited financial statements in the registration statement are never more than 16 months old for so long as payments under the variable annuity contracts may be accepted. (b) The Registrant hereby undertakes to include as part of the application to purchase a Contract a space that the applicant can check to request a Statement of Additional Information. (c) The Registrant hereby undertakes to deliver a Statement of Additional Information and any financial statements promptly upon written or oral request, according to the requirements of Form N-4. (d) Insofar as indemnification for liability arising under the 1933 Act may be permitted to Directors, Officers and Controlling Persons of Registrant under any registration statement, underwriting agreement or otherwise, Registrant has been advised that, in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the 1933 Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by Registrant of expenses incurred or paid by a Director, Officer or Controlling Person of Registrant in the successful defense of any action, suit or proceeding) is asserted by such Director, Officer or Controlling Person in connection with the securities being registered, Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the 1933 Act and will be governed by the final adjudication of such issue. (e) The Company hereby represents that the aggregate fees and charges under the Contracts are reasonable in relation to the services rendered, expenses expected to be incurred, and risks assumed by the Company. ITEM 33. REPRESENTATIONS CONCERNING WITHDRAWAL RESTRICTIONS ON SECTION 403(B) PLANS AND UNDER THE TEXAS OPTIONAL RETIREMENT PROGRAM Registrant, a separate account of Commonwealth Annuity and Life Insurance Company states that it is (a) relying on Rule 6c-7 under the 1940 Act with respect to withdrawal restrictions under the Texas Optional Retirement Program ("Program") and (b) relying on the "no-action" letter (Ref. No. IP-6-88) issued on November 28, 1988 to the American Council of Life Insurance, in applying the withdrawal restrictions of Internal Revenue Code Section 403(b)(11). Registrant has taken the following steps in reliance on the letter: 1. Appropriate disclosures regarding the redemption withdrawal restrictions imposed by the Program and by Section 403(b)(11) have been included in the prospectus of each registration statement used in connection with the offer of the Company's variable contracts. 2. Appropriate disclosures regarding the redemption withdrawal restrictions imposed by the Program and by Section 403(b)(11) have been included in sales literature used in connection with the offer of the Company's variable contracts. 3. Sales Representatives who solicit participants to purchase the variable contracts have been instructed to specifically bring the redemption withdrawal restrictions imposed by the Program and by Section 403(b)(11) to the attention of potential participants. 4. A signed statement acknowledging the participant's understanding of (I) the restrictions on redemption withdrawal imposed by the Program and by Section 403(b)(11) and (ii) the investment alternatives available under the employer's arrangement will be obtained from each participant who purchases a variable annuity contract prior to or at the time of purchase. Registrant hereby represents that it will not act to deny or limit a transfer request except to the extent that a Service-Ruling or written opinion of counsel, specifically addressing the fact pattern involved and taking into account the terms of the applicable employer plan, determines that denial or limitation is necessary for the variable annuity contracts to meet the requirements of the Program or of Section 403(b). Any transfer request not so denied or limited will be effected as expeditiously as possible. SIGNATURES Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940 the Registrant certifies that it meets all of the requirements for effectiveness of this Post-Effective Amendment to the Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused this Post-Effective Amendment to the Registration Statement to be signed on its behalf by the undersigned, thereto duly authorized, in the City of Southborough, and Commonwealth of Massachusetts, on the 7th day of April, 2009. COMMONWEALTH ANNUITY SELECT SEPARATE ACCOUNT OF COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY By: /s/ Scott D. Silverman ------------------------------------ Scott D. Silverman, Vice President, General Counsel, and Secretary Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, this Post-Effective Amendment to the Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURES TITLE DATE - ---------- ----- ----- /s/ Timothy D. Rogers Vice President and Chief Financial Officer April 7, 2009 - ---------------------------------------- Timothy D. Rogers Allan S. Levine* Chairman of the Board - ---------------------------------------- Manda J. D'Agata* Director, Vice President and Treasurer - ---------------------------------------- J. William McMahon* Director - ---------------------------------------- Donald R. Mullen* Director - ---------------------------------------- Michael A. Reardon* Director, President, and Chief Executive Officer - ---------------------------------------- Michael S. Rotter* Director - ---------------------------------------- Nicholas Helmuth von Moltke* Director and Senior Vice President - ---------------------------------------- Jane S. Grosso* Vice President and Controller - ---------------------------------------- (Chief Accounting Officer)
* Scott D. Silverman, by signing his name hereto, does hereby sign this document on behalf of each of the above-named Directors and Officers of the Registrant pursuant to the Powers of Attorney dated March 19, 2009 duly executed by such persons. /s/ Scott D. Silverman - --------------------------------------- Scott D. Silverman, Attorney-in-Fact (33-47216) Select Resource EXHIBIT TABLE Exhibit 3(i) Underwriting and Administrative Service Agreement dated May 1, 2008 between and among Commonwealth Annuity and Life Insurance Company and Epoch Securities, Inc. Exhibit 8(a) Directors' Powers of Attorney Exhibit 10 Consent of Independent Registered Public Accounting Firm EX-99.B(3)(I) 2 a2191538zex-99_b3i.txt EX-99.B(3)(I) UNDERWRITING AND ADMINISTRATIVE SERVICES AGREEMENT This AGREEMENT effective this 1st day of May, 2008 between and among Commonwealth Annuity and Life Insurance Commonwealth Annuity, a Massachusetts corporation ("Commonwealth Annuity"), on its own behalf and on behalf of each of its separate investment accounts (collectively, the "Accounts") as set forth in Appendix A hereto, and Epoch Securities, Inc., a Delaware corporation ("Epoch"). WHEREAS, Commonwealth Annuity and the Accounts issue certain variable annuity contracts or variable insurance policies (the "Contracts") which may be deemed to be securities under the Securities Act of 1933 (the "1933 Act"), and the laws of some states; WHEREAS, Epoch, an affiliate of Commonwealth Annuity, is registered as a broker-dealer with the Securities and Exchange Commission ("SEC") under the Securities Exchange Act of 1934 (the "1934 Act") and is a member of the Financial Industry Regulatory Authority ("FINRA," formerly known as the National Association of Securities Dealers, Inc.). WHEREAS, the parties desire Epoch to act as principal underwriter for the Accounts set forth in Exhibit A, as may be amended from time-to-time by mutual consent of the parties, to enter into selling agreements with independent broker-dealers in connection with the sale of the contract, and to assume full responsibility for the securities activities of all "persons associated" (as that term is defined in Section 3(a)(18) of the 1934 Act) with Epoch and engaged directly or indirectly in the variable contract operations (the "associated persons"); WHEREAS, the parties desire to have Commonwealth Annuity perform certain administrative services on behalf of Epoch in connection with the sale and servicing of the contracts; NOW, THEREFORE, in consideration of the covenants and mutual promises of the parties made to each other, it is hereby covenanted and agreed as follows: 1. Commonwealth Annuity hereby appoints Epoch as the principal underwriter of the Contracts. Epoch will promote such Variable Contracts in those states in which Commonwealth Annuity has variable contract authority and in which the Contracts are qualified for sale under applicable state law, as Commonwealth Annuity shall so notify Epoch from time to time. Epoch shall suspend its efforts to effectuate sales of the Contracts in such jurisdictions as Commonwealth Annuity may request at any time. 2. Epoch shall assume responsibility for the activities of all persons engaged directly or indirectly in the promotion of the solicitation of the Contracts, including but not limited to the continued compliance by itself and its associated persons with the FINRA Rules of Practice and Federal and state securities laws, to the extent applicable in connection with the sale of the contracts. 3. Epoch may enter into sales agreements and/or services agreements with independent broker-dealers for the sale and/or servicing of the Contracts through their registered representatives; provided, however, that no such registered representative shall be allowed to participate in the solicitation of the Contracts unless such person has been appointed to solicit variable contracts by Commonwealth Annuity in any state in which such solicitations may occur. All such agreements shall provide that each independent broker-dealer will assume full responsibility for continued compliance by itself and its associated persons with applicable laws and regulations, including but not limited to the FINRA Rules of Fair Practice and Federal and state securities laws. 4. Epoch agrees that it will not use any sales literature, as defined under the rules of the FINRA or by the statutes or regulations of any state in which the Contracts may be solicited, unless such material has received prior written approval by Commonwealth Annuity. Epoch, directly or through Commonwealth Annuity as its agent, will make timely filings with the SEC, FINRA, and any other securities regulatory authorities of all reports and any sales literature relating to the Accounts, as may be required by statutes or regulations to be filed by the principal underwriter. 5. On behalf of the Accounts, Commonwealth Annuity will prepare and submit (a) all registration statements and prospectuses (including amendments) and all reports required by law to be filed by the Accounts with Federal and state securities regulatory authorities, and (b) all notices, proxies, proxy statements, and periodic reports that are to be transmitted to persons having voting rights with respect to the Accounts. 6. Commonwealth Annuity will, except as otherwise provided in this Agreement, bear the cost of all services and expenses, including legal services and expenses, filing fees, and other fees incurred in connection with (a) registering the Accounts and contracts and qualifying the contracts for sale in the various states, (b) preparing, printing, and distributing all registration statements and prospectuses (including amendments), contracts, notices, periodic reports, and proxy solicitation material and (c) preparing, printing and distributing advertising and sales literature used by Epoch or furnished by Epoch to broker-dealers in connection with offering the contracts. 7. All costs associated with the variable contract compliance function including, but not limited to, fees and expenses associated with qualifying and licensing associated persons with Federal and state regulatory authorities and the FINRA and with performing compliance-related administrative services, shall be allocated to Commonwealth Annuity. To the extent that Epoch incurs out-of-pocket expenses in connection with the variable contracts compliance function, Commonwealth Annuity shall reimburse Epoch for such expenses. 8. Sales commissions and other compensation, if any, due to broker-dealers for the sale of Contracts shall be paid by Commonwealth Annuity through Epoch. Epoch will reflect such commissions and other compensation on its books and records, or as otherwise required or permitted by applicable statutes or regulations. Commonwealth Annuity, as agent for Epoch, agrees to transmit all sales commissions and other compensation to broker-dealers having a sales agreement with Epoch. Epoch or Commonwealth Annuity, as agent for Epoch, shall pay all other remuneration due any other persons for other activities relating to the sale of the Contracts. -2- Commonwealth Annuity shall reimburse Epoch fully and completely for all amounts, if any, paid by Epoch to any person pursuant to this Section. 9. Commonwealth Annuity shall, as agent for Epoch, (a) maintain and preserve in accordance with Rules 17a-3 and 17a-4 under the 1934 Act all books and records required to be maintained by Epoch in connection with the offer and sale of the Contracts, which books and records shall remain the property of Epoch, and shall at all times be subject to inspection by the SEC in accordance with Section 17(a) of the 1934 Act and by all other regulatory bodies having jurisdiction over the Contracts, and (b) send a written confirmation for each contract transaction reflecting the facts of the transaction and showing that it is being sent by the Company on behalf of Epoch (acting in the capacity of principal underwriter for the Accounts), in conformance with the requirements of Rule 10b-10 of the 1934 Act. 10. Each party hereto shall advise the others promptly (a) of any action of the SEC or any state or federal authorities which affects the registration or qualification of the Accounts or the contracts, or the right to offer the contracts for sale, and (b) of any fact or event which makes untrue any statement in the registration statement or prospectus, or which requires the making of any change in the registration statement or prospectus, in order to make the statements therein not misleading. 11. Commonwealth Annuity agrees to be responsible to the Accounts for all sales and administrative expenses incurred in connection with the administration of the Contracts and the Accounts other than applicable taxes arising from income and capital gains of the Accounts and any other taxes arising from the existence and operation of the Accounts. 12. As compensation for services performed and expenses incurred under this Agreement, Commonwealth Annuity will receive the charges and deductions as provided in each outstanding series of Commonwealth Annuity's Contracts. Epoch will be reimbursed by Commonwealth Annuity for the costs and expenses it incurs, as set forth in Section 7 above, and may receive additional compensation, if any, as may be agreed upon by the parties from time-to-time. If Epoch receives compensation from any third party in connection with services related to the Contracts, and such services have been or will be directly or indirectly provided by Commonwealth Annuity, Epoch shall pay such compensation to Commonwealth Annuity. 13. Each party hereto shall each comply with all applicable provisions of the Investment Company Act of 1940, Securities Act of 1933 and of all Federal and state securities and insurance laws, rules and regulations governing the issuance and sale of the Contracts. Each party hereto agrees to furnish any other state insurance commissioner or regulatory authority with jurisdiction over the contracts with any information or reports in connection with services provided under this Agreement which may be requested in order to ascertain whether the variable insurance product operations of Commonwealth Annuity are being conducted in a manner consistent with applicable statutes, rules and regulations. 14. Commonwealth Annuity agrees to indemnify Epoch against any and all claims, liabilities and expenses including but not limited to reasonable attorneys fees which Epoch may incur under the Investment Company Act of 1940, Securities Act of 1933 and all Federal and -3- state securities and insurance laws, rules and regulations governing the issuance and sale of the Contracts, common law or otherwise, arising out of or based upon any alleged untrue statements of material fact contained in any registration statement or prospectus of the Account, or any alleged omission to state a material fact therein, the omission of which makes any statement contained therein misleading or of any alleged act or omission in connection with the offering, sale or distribution of the Contracts by any registered representatives or associated persons of a FINRA member broker-dealer which has an agreement with Epoch. Epoch agrees to indemnify Commonwealth Annuity and the Accounts against any and all claims, demands, liabilities and expenses, including but not limited to reasonable attorneys fees, which Commonwealth Annuity or the Accounts may incur, arising out of or based upon any act of Epoch or of any registered representative of a FINRA member investment dealer which has an agreement with Epoch and is acting in accordance with Commonwealth Annuity's instructions. Commonwealth Annuity acknowledges that Epoch may similarly attempt to hold such FINRA member broker-dealer responsible for the acts of registered representatives and associated persons; and to the extent Commonwealth Annuity is obligated to indemnify Epoch under this Agreement, Epoch agrees to assign its rights against such broker-dealers to Commonwealth Annuity. 15. This Agreement shall upon execution become effective as of the date first above written, and (a) unless otherwise terminated, this Agreement shall continue in effect from year-to-year; (b) this Agreement may be terminated by any party at any time upon giving 60 days' written notice to the other parties hereto; and (c) this Agreement shall automatically terminate in the event of its assignment. 16. The initial Accounts and Contracts covered by this Agreement are set forth in Appendix A. This Agreement, including Appendix A, may be amended at any time by mutual consent of the parties. 17. This Agreement shall be governed by and construed in accordance with the laws of Massachusetts. IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year first written above. COMMONWEALTH ANNUITY EPOCH SECURITIES, INC. AND LIFE INSURANCE COMPANY By: /s/ Michael Reardon By: /s/ Margot Wallin --------------------------------- ------------------------------------ Name: Michael Reardon Name: Margot Wallin Title: President and CEO Title: Chief Compliance Officer -4- APPENDIX A ANNUITY CONTRACTS* POLICY FORM MARKETING OR PRODUCT NAME - ----------- ------------------------- A3019-92 Delaware Medallion I A3020-92 Allmerica Select Resource I A3022-93 Delaware Medallion II A3023-95 Pioneer Vision 1 A3025-96 Allmerica Select Resources II, Delaware Medallion III, Pioneer Vision 2, Scudder Gateway Elite A3026-96 Scudder Gateway Custom A3027-98 Kemper Advisor, Pioneer C-Vision, Select Charter A3028-99 Delaware Golden Medallion, Pioneer Xtra Vision, Scudder Gateway Plus, Select Reward A3031-99 Allmerica Select Acclaim A3035-00 Kemper SBD with EDB, Scudder Gateway Incentive A3037-02 Allmerica Optim-L A3038-02 Gateway Plus II - ---------- * This list shall be deemed to include applications, specification pages, state variations, certificates, binders and administrative forms that are included and part of the Insurance Contracts. Certain forms, riders and endorsements may have different or no form numbers and may have been filed for different distribution channels and products. Therefore, the letter prefix and numeric suffix to the form numbers can vary. This list shall be deemed to include those variations. -5- ANNUITY RIDERS AND ENDORSEMENTS* (TO THE EXTENT APPLICABLE TO THE VARIABLE ANNUITY CONTRACTS ABOVE)
LIBERALIZATION OF LIVING BENEFIT SURRENDER CHARGES OR (ACCELERATED DEATH DEATH BENEFITS WITHDRAWAL RIGHTS BENEFIT) PREMIUM TAX ENDORSEMENT - ------------------------------------- -------------------- ------------------ ----------------------- 3134-79 3260-99 3290-01 3309-02 3167-82 VAB9-94 3230-92 3197-84 3263-99 3291-00 3311-02 3168-82 2001-91 3232-92 3198-84 3264-99 3292-00 3312-02 3169-82 246-92 3240-92 3231-92 3265-99 3293-00 3313-02 3170L-88 249-94 3241-92 3235-92 3266-99 3303-02 3314-02 3173L-88 3242-92 3249-96 3271-99 3304-02 3315-02 3174L-90 ANNUITIZATION 3243-92 3260-99 3272-99 3305-02 3316-02 3239-96 A3104-74 3301-00 3273-99 3306-02 3317-02 3244-96 A3259-99 IRA ENDORSEMENT 3240-01 3288-00 3307-02 3318-02 A3268-99 3199-92 3241-01 3289-01 3308-02 A3269-99 3261-98 TSA ENDORSEMENT - 3166-81 AND 3250-96
MISCELLANEOUS 3150-80 Guaranteed Interest on General Account 3181-83 Qualified Annuities - Separate Account Usage 3183-83 Qualified Annuities - Separate Account Usage 3184-83 Non-Qualified Annuities - Separate Account Usage 3201-84 General Endorsement - SEC Exemption 27(c)(i) 3214-85 Loan Privilege 3215-85 Loan Privilege 3237-93 Elective Payment Endorsement 3245-96 Waiver of Surrender Charges 3246-96 Disability Rider/Waiver of Surrender 3247-96 Disability Rider/Waiver of Surrender 3248-96 Living Benefits Rider 3252-97 HO/BIP 3262-99 15 Day Money Market Endorsement END 4002-98 NY Automatic Reallocation Endorsement 3267-99 MAF: Rider 3270-99 APR Rider 3274-99 Group/Employee Endorsement 3275-99 Group/Employee Endorsement 3276-99 Qualified Contracts Endorsements 3297-00 Group Policy Endorsement 3298-00 Kemper Value Enhancement Endorsement 3319-99 Discount Rider 8054-95 Name Change - ---------- * This list shall be deemed to include applications, specification pages, state variations, certificates, binders and administrative forms that are included and part of the Insurance Contracts. Certain forms, riders and endorsements may have different or no form numbers and may have been filed for different distribution channels and products. Therefore, the letter prefix and numeric suffix to the form numbers can vary. This list shall be deemed to include those variations. -6- VARIABLE LIFE CONTRACTS* POLICY FORM MARKETING NAME - ----------- -------------- 1026-94 Select Variable Inheiritage 1027-95 Select Life 1030-96 Select SPVUL 2nd to-die, Select SPVUL Single Life, SPL II (Select) 1033-99 CPA, Scudder VEL, Select Life Plus, VEL 2001 (Select) 1034-99 Survivorship VUL (Select) LIFE RIDERS AND ENDORSEMENTS (TO THE EXTENT APPLICABLE TO THE VARIABLE LIFE CONTRACTS LISTED ABOVE)*
LIVING BENEFIT (ACCELERATED DEATH GUARANTEED DEATH BENEFIT) WAIVER OF PREMIUM BENEFITS RIDERS OTHER INSURED RIDER EXCHANGE OPTION RIDERS - ------------------ ----------------- ---------------- ------------------- ---------------------- END 239-91 1074-86 1091-97 1067-86 1069-87 1089-95 1086-94 1099-97 1081-94 1090-95 6005-96 CL1086-99 10490 1088-95 VEOP-94 CL1089-99 TA1094-97 CL1099-99 CL1088-99 1084-94 TA1101-98 VDBR-94 TA1100-98 VOIR-94 TA1093-97 1085-94 TA1098-97 FUIT 1088-99 CHILDREN'S INSURANCE RIDERS VAB9-94 FUIT 1086-99 FUIT 1099-99 1068-84 2001-91 250-95 1068-95 246-92 TA1096-97 249-94 1082-94
TERM LIFE INSURANCE REFUND OF SALES LOAD/EXCHANGE GUARANTEED ACCIDENTAL DEATH RIDERS* TO TERM INSURANCE OPTION INSURABILITY RIDER BENEFITS 1035 EXCHANGE RIDERS - ------------------- ----------------------------- ------------------ ---------------- -------------------- 1103-99 END 268-97 1066-86 1063-83 8056-96 CL1103-99 END 270-97 1087-95 1080-94 TA1102-98 1105P-00 END 283-99P TA1097-97 CL1089-99 1078-92 UGIR-94 1092-96 1083-94
- ---------- * This list shall be deemed to include applications, specification pages, state variations, certificates, binders and administrative forms that are included and part of the Insurance Contracts. Certain forms, riders and endorsements may have different or no form numbers and may have been filed for different distribution channels and products. Therefore, the letter prefix and numeric suffix to the form numbers can vary. This list shall be deemed to include those variations. LIFE RIDERS AND ENDORSEMENTS (CONTINUED) MISCELLANEOUS 230-86 Under 18 Non-Smoker Notice 236-88 Limitation of Liability 237-90 Interest Rate 238-90 Interest Rate 241-91 War Exclusion 242-91 Increase and Earn Exchange 243-91 EL & Endorsement 244-91 Guideline Premium Sum Insured 247-93 VEL & Payor Endorsement 251-95 Minimum Sum Insured Table Endorsement 257-95 Group Variable Universal Life 259-96 Cash Value Test 269-97 Cash Value Accumulation Test 295-01 Loan Interest Endorsement (1033-99) 296-01 Loan Interest Endorsement (1034-99) 289-00 Group Private Placement Endorsement 290-00 Group Private Placement Endorsement 291-00 Policy Loan and Death Benefit Endorsement 293-01 Policy Loan and Partial Withdrawal Endorsement 1079-94 Four Year Term Rider 1076-89 Policy Split Option 1104-99 Survivor Term END 260-96 Preferred Loan Provision END 264-96 TSA Endorsement END 263-96 Paid Up Insurance Benefit 252-95 Name Change - ---------- * The list in Schedule 2 shall be deemed to include applications, specification pages, state variations, certificates, binders and administrative forms that are included and part of the Insurance Contracts. Certain forms, riders and endorsements may have different or no form numbers and may have been filed for different distribution channels and products. Therefore, the letter prefix and numeric suffix to the form numbers can vary. This list shall be deemed to include those variations. 8 EX-99.B(8)(A) 3 a2191538zex-99_b8a.txt EX-99.B(8)(A) POWER OF ATTORNEY We, the undersigned, hereby severally constitute and appoint Scott D. Silverman, Nicholas Helmuth von Moltke, Samuel Ramos and Michael A. Reardon, and each of them singly, our true and lawful attorneys, with full power to them and each of them, to sign for us, and in our names and in any and all capacities, post-effective amendments to Registration Statements, with respect to the Separate Accounts supporting variable life and variable annuity contracts issued by Commonwealth Annuity and Life Insurance Company under file numbers 33-57792 (VEL'93), 333-9965 (Gateway Elite), 333-81019 (Gateway Plus), 33-85916/811-8848 (Pioneer Vision), 33-44830 (Delaware Medallion III), 33-39702 (Exec Annuity Plus/Allmerica Advantage), 33-47216 (Commonwealth Select Resource), 333-78245 (Allmerica Select Reward), 333-141019/811-22024 (Preferred Plus), 333-141045/811-22024 (Advantage IV), 333-157121/811-20024 (Commonwealth Annuity Horizon Annuity), initial registration statements, with respect to Commonwealth Annuity Separate Account A, and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, and with any other regulatory agency or state authority that may so require, granting unto said attorneys and each of them, acting alone, full power and authority to do and perform each and every act and thing requisite or necessary to be done in the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys or any of them may lawfully do or cause to be done by virtue hereof. Witness our hands on the date set forth below. Signature Title Date - --------- ----- ---- /s/ Allan Levine Chairman of the Board 3/19/2009 - ----------------------- Allan Levine POWER OF ATTORNEY We, the undersigned, hereby severally constitute and appoint Scott D. Silverman, Nicholas Helmuth von Moltke, Samuel Ramos and Michael A. Reardon, and each of them singly, our true and lawful attorneys, with full power to them and each of them, to sign for us, and in our names and in any and all capacities, post-effective amendments to Registration Statements, with respect to the Separate Accounts supporting variable life and variable annuity contracts issued by Commonwealth Annuity and Life Insurance Company under file numbers 33-57792 (VEL'93), 333-9965 (Gateway Elite), 333-81019 (Gateway Plus), 33-85916/811-8848 (Pioneer Vision), 33-44830 (Delaware Medallion III), 33-39702 (Exec Annuity Plus/Allmerica Advantage), 33-47216 (Commonwealth Select Resource), 333-78245 (Allmerica Select Reward), 333-141019/811-22024 (Preferred Plus), 333-141045/811-22024 (Advantage IV), 333-157121/811-20024 (Commonwealth Annuity Horizon Annuity), initial registration statements, with respect to Commonwealth Annuity Separate Account A, and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, and with any other regulatory agency or state authority that may so require, granting unto said attorneys and each of them, acting alone, full power and authority to do and perform each and every act and thing requisite or necessary to be done in the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys or any of them may lawfully do or cause to be done by virtue hereof. Witness our hands on the date set forth below. /s/ Manda J. D'Agata Director, Vice President and Treasurer 3/19/2009 - ----------------------- Manda J. D'Agata POWER OF ATTORNEY We, the undersigned, hereby severally constitute and appoint Scott D. Silverman, Nicholas Helmuth von Moltke, Samuel Ramos and Michael A. Reardon, and each of them singly, our true and lawful attorneys, with full power to them and each of them, to sign for us, and in our names and in any and all capacities, post-effective amendments to Registration Statements, with respect to the Separate Accounts supporting variable life and variable annuity contracts issued by Commonwealth Annuity and Life Insurance Company under file numbers 33-57792 (VEL'93), 333-9965 (Gateway Elite), 333-81019 (Gateway Plus), 33-85916/811-8848 (Pioneer Vision), 33-44830 (Delaware Medallion III), 33-39702 (Exec Annuity Plus/Allmerica Advantage), 33-47216 (Commonwealth Select Resource), 333-78245 (Allmerica Select Reward), 333-141019/811-22024 (Preferred Plus), 333-141045/811-22024 (Advantage IV), 333-157121/811-20024 (Commonwealth Annuity Horizon Annuity), initial registration statements, with respect to Commonwealth Annuity Separate Account A, and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, and with any other regulatory agency or state authority that may so require, granting unto said attorneys and each of them, acting alone, full power and authority to do and perform each and every act and thing requisite or necessary to be done in the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys or any of them may lawfully do or cause to be done by virtue hereof. Witness our hands on the date set forth below. /s/ J. William McMahon Director 3/19/2009 - ----------------------- J. William McMahon POWER OF ATTORNEY We, the undersigned, hereby severally constitute and appoint Scott D. Silverman, Nicholas Helmuth von Moltke, Samuel Ramos and Michael A. Reardon, and each of them singly, our true and lawful attorneys, with full power to them and each of them, to sign for us, and in our names and in any and all capacities, post-effective amendments to Registration Statements, with respect to the Separate Accounts supporting variable life and variable annuity contracts issued by Commonwealth Annuity and Life Insurance Company under file numbers 33-57792 (VEL'93), 333-9965 (Gateway Elite), 333-81019 (Gateway Plus), 33-85916/811-8848 (Pioneer Vision), 33-44830 (Delaware Medallion III), 33-39702 (Exec Annuity Plus/Allmerica Advantage), 33-47216 (Commonwealth Select Resource), 333-78245 (Allmerica Select Reward), 333-141019/811-22024 (Preferred Plus), 333-141045/811-22024 (Advantage IV), 333-157121/811-20024 (Commonwealth Annuity Horizon Annuity), initial registration statements, with respect to Commonwealth Annuity Separate Account A, and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, and with any other regulatory agency or state authority that may so require, granting unto said attorneys and each of them, acting alone, full power and authority to do and perform each and every act and thing requisite or necessary to be done in the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys or any of them may lawfully do or cause to be done by virtue hereof. Witness our hands on the date set forth below. /s/ Donald R. Mullen Director 3/19/2009 - ----------------------- Donald R. Mullen POWER OF ATTORNEY We, the undersigned, hereby severally constitute and appoint Scott D. Silverman, Nicholas Helmuth von Moltke, Samuel Ramos and Michael A. Reardon, and each of them singly, our true and lawful attorneys, with full power to them and each of them, to sign for us, and in our names and in any and all capacities, post-effective amendments to Registration Statements, with respect to the Separate Accounts supporting variable life and variable annuity contracts issued by Commonwealth Annuity and Life Insurance Company under file numbers 33-57792 (VEL'93), 333-9965 (Gateway Elite), 333-81019 (Gateway Plus), 33-85916/811-8848 (Pioneer Vision), 33-44830 (Delaware Medallion III), 33-39702 (Exec Annuity Plus/Allmerica Advantage), 33-47216 (Commonwealth Select Resource), 333-78245 (Allmerica Select Reward), 333-141019/811-22024 (Preferred Plus), 333-141045/811-22024 (Advantage IV), 333-157121/811-20024 (Commonwealth Annuity Horizon Annuity), initial registration statements, with respect to Commonwealth Annuity Separate Account A, and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, and with any other regulatory agency or state authority that may so require, granting unto said attorneys and each of them, acting alone, full power and authority to do and perform each and every act and thing requisite or necessary to be done in the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys or any of them may lawfully do or cause to be done by virtue hereof. Witness our hands on the date set forth below. /s/ Michael A. Reardon Director, President and 3/19/2009 - ----------------------- Chief Executive Officer Michael A. Reardon POWER OF ATTORNEY We, the undersigned, hereby severally constitute and appoint Scott D. Silverman, Nicholas Helmuth von Moltke, Samuel Ramos and Michael A. Reardon, and each of them singly, our true and lawful attorneys, with full power to them and each of them, to sign for us, and in our names and in any and all capacities, post-effective amendments to Registration Statements, with respect to the Separate Accounts supporting variable life and variable annuity contracts issued by Commonwealth Annuity and Life Insurance Company under file numbers 33-57792 (VEL'93), 333-9965 (Gateway Elite), 333-81019 (Gateway Plus), 33-85916/811-8848 (Pioneer Vision), 33-44830 (Delaware Medallion III), 33-39702 (Exec Annuity Plus/Allmerica Advantage), 33-47216 (Commonwealth Select Resource), 333-78245 (Allmerica Select Reward), 333-141019/811-22024 (Preferred Plus), 333-141045/811-22024 (Advantage IV), 333-157121/811-20024 (Commonwealth Annuity Horizon Annuity), initial registration statements, with respect to Commonwealth Annuity Separate Account A, and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, and with any other regulatory agency or state authority that may so require, granting unto said attorneys and each of them, acting alone, full power and authority to do and perform each and every act and thing requisite or necessary to be done in the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys or any of them may lawfully do or cause to be done by virtue hereof. Witness our hands on the date set forth below. /s/ Michael Rotter Director 3/19/2009 - ----------------------- Michael Rotter POWER OF ATTORNEY We, the undersigned, hereby severally constitute and appoint Scott D. Silverman, Nicholas Helmuth von Moltke, Samuel Ramos and Michael A. Reardon, and each of them singly, our true and lawful attorneys, with full power to them and each of them, to sign for us, and in our names and in any and all capacities, post-effective amendments to Registration Statements, with respect to the Separate Accounts supporting variable life and variable annuity contracts issued by Commonwealth Annuity and Life Insurance Company under file numbers 33-57792 (VEL'93), 333-9965 (Gateway Elite), 333-81019 (Gateway Plus), 33-85916/811-8848 (Pioneer Vision), 33-44830 (Delaware Medallion III), 33-39702 (Exec Annuity Plus/Allmerica Advantage), 33-47216 (Commonwealth Select Resource), 333-78245 (Allmerica Select Reward), 333-141019/811-22024 (Preferred Plus), 333-141045/811-22024 (Advantage IV), 333-157121/811-20024 (Commonwealth Annuity Horizon Annuity), initial registration statements, with respect to Commonwealth Annuity Separate Account A, and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, and with any other regulatory agency or state authority that may so require, granting unto said attorneys and each of them, acting alone, full power and authority to do and perform each and every act and thing requisite or necessary to be done in the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys or any of them may lawfully do or cause to be done by virtue hereof. Witness our hands on the date set forth below. /s/ Nicholas Helmuth von Moltke Director and 3/19/2009 - -------------------------------- Senior Vice President Nicholas Helmuth von Moltke EX-99.B(10) 4 a2191538zex-99_b10.txt EX-99.B(10) CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We hereby consent to the use in the Statement of Additional Information constituting part of this Post-Effective Amendment No. 35 to the Registration Statement of the Commonwealth Select Separate Account of Commonwealth Annuity and Life Insurance Company on Form N-4 of our report dated April 17, 2009, relating to the financial statements of Commonwealth Annuity and Life Insurance Company, and our report dated April 8, 2009, relating to the financial statements of the Commonwealth Select Separate Account of Commonwealth Annuity and Life Insurance Company, both of which appear in such Statement of Additional Information. We also consent to the reference to us under the heading "Experts" in such Statement of Additional Information. /s/ PricewaterhouseCoopers LLP Hartford, Connecticut April 27, 2009 -----END PRIVACY-ENHANCED MESSAGE-----