| File Nos. 333-67660
Filed Under Rule 424(b)(3)

PROFILE AND PROSPECTUS FOR ING SMARTDESIGN MULTI-RATE INDEX ANNUITY
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| Deferred Modified Guaranteed Annuity Contract, February 13, 2002
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| ING SMARTDESIGN/TM/ MULTI-RATE INDEX ANNUITY PROSPECTUS
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| Golden American Life Insurance Company
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| ING [Lion logo appears here]

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GOLDEN AMERICAN LIFE INSURANCE COMPANY

DEFERRED MODIFIED GUARANTEED ANNUITY PROSPECTUS

SMARTDESIGN MULTI-RATE INDEX ANNUITY

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FEBRUARY 13, 2002

This prospectus describes SmartDesign Multi-Rate Index Annuity, a group
and individual deferred modified guaranteed annuity contract (the
"Contract") offered by Golden American Life Insurance Company (the
"Company," "we," or "our"). The Contract is available in connection with
certain retirement plans that qualify for special federal income tax
treatment ("qualified Contracts"), as well as those that do not qualify for
such treatment ("non-qualified Contracts").

The Contract provides a means for you to allocate your single premium
payment to one or more Accounts available under the Contract. Available
Accounts include the:

o Interest Account, which provides contract value based on the
daily crediting of interest at a rate that yields an annual
specified Guaranteed Interest Rate;

o Term Indexed Account, which provides contract value based on the
crediting at the end of the Term of an interest rate that
reflects certain changes in a market index ("Index") specified in
the Contract (currently, The Standard and Poor's 500 Composite
Stock Price Index (the "S&P 500(R)")) during the Term; and

We offer three Terms for each Account - 5, 7, and 10 years. You may
allocate your premium payment to more than one Account, but you must select
the same Term across all Accounts. Your contract value will vary to reflect
interest credited under the Interest Account (on a daily basis) and the
Annual Indexed Account (on an annual basis). Your contract value will not
vary to reflect interest under the Term Indexed Account prior to the end of
the Term. The interest earned on your money, as well as your principal, is
guaranteed as long as you hold them until the expiration of the applicable
Term. Contract values surrendered, withdrawn, or applied to an annuity
option prior to that time are subject to a Market Value Adjustment, the
operation of which may result in upward or downward adjustments in values,
and may be subject to a surrender charge. You bear the risk that you may
receive less than your principal if we take a Market Value Adjustment. You
have the right to return a Contract within 10 days after you receive it for
a refund of the adjusted contract value (which may be more or less than the
premium payment you paid) or, if required by your state, the original
amount of your premium payment. Longer periods apply in some
states and in certain situations.

This prospectus provides information that you should know before
investing and should be kept for future reference.

THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

AN INVESTMENT IN THIS CONTRACT IS NOT A BANK DEPOSIT AND IS NOT INSURED OR
GUARANTEED BY ANY BANK OR BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR
ANY OTHER GOVERNMENT AGENCY.

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MRI-121979

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TABLE OF CONTENTS
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PAGE

Index of Special Terms...................................... 1
Fees and Expenses........................................... 2
Golden American Life Insurance Company...................... 2
Financial Statements.................................. 2
The Accounts................................................ 2
Risks................................................. 3
Investments........................................... 4
The Annuity Contract........................................ 4
Purchase and Availability of the Contract............. 4
Premium Payments...................................... 4
Crediting of Premium Payment.......................... 5
Allocation of Premium Payments........................ 5
Selecting a Term...................................... 5
Transfers Among the Accounts.......................... 5
The Interest Account........................................ 6
General............................................... 6
Guaranteed Interest Rates............................. 6
Renewal Terms......................................... 6
Withdrawals........................................... 6
Interest Account Cash Surrender Value................. 7
The Term Indexed Account.................................... 7
General............................................... 7
Participation Rates................................... 7
Index Return.......................................... 7
Index Growth.......................................... 8
Minimum Guaranteed Account Value...................... 8
Renewal Terms......................................... 8
Withdrawals........................................... 8
Term Indexed Account Cash Surrender Value............. 9
The Annual Indexed Account.................................. 9
General............................................... 9
Participation Rates and Caps.......................... 9
Index Return.......................................... 9
Index Growth.......................................... 10
Minimum Guaranteed Account Value...................... 10
Renewal Terms......................................... 10
Withdrawals........................................... 11
Annual Indexed Account Cash Surrender Value........... 11
Market Value Adjustment..................................... 11
Contract Provisions......................................... 12
Contract Date and Contract Year....................... 12
Annuity Start Date.................................... 12
Contract Owner........................................ 12
Joint Owners.......................................... 12
Annuitant............................................. 12
Beneficiary........................................... 13
Change of Contract Owner or Beneficiary............... 13
Administrative Procedures............................. 13
Contract Value........................................ 14
Cash Surrender Value.................................. 14
Surrendering to Receive the Cash Surrender Value...... 14

MRI-121979 i

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TABLE OF CONTENTS (CONTINUED)
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PAGE
Other Important Provisions............................ 14
Withdrawals................................................. 14
Regular Withdrawals................................... 15
Systematic Withdrawals................................ 15
Fixed Dollar Systematic Withdrawal Feature............ 16
IRA Withdrawals....................................... 16
Death Benefit............................................... 17
Death Benefit During the Accumulation Phase........... 17
Death Benefit During the Income Phase................. 17
Required Distributions upon Contract Owner's Death.... 17
Charges and Fees............................................ 18
Charges Deducted from the Contract Value.............. 18
Surrender Charge.................................. 18
Waiver of Surrender Charge for Extended Medical
Coverage...................................... 19
Free Withdrawal Amount............................ 19
Surrender Charge for Excess Withdrawals........... 19
Premium Taxes..................................... 19
The Annuity Options......................................... 20
Annuitization of Your Contract........................ 20
Selecting the Annuity Start Date...................... 21
Frequency of Annuity Payments......................... 21
The Annuity Options................................... 21
Income for a Fixed Period......................... 21
Income for Life with a Period Certain............. 21
Joint Life Income................................. 21
Payment When Named Person Dies........................ 21
Other Contract Provisions................................... 22
Reports to Contract Owners............................ 22
Suspension of Payments................................ 22
In Case of Errors in Your Application................. 22
Assigning the Contract as Collateral.................. 22
Contract Changes-Applicable Tax Law................... 22
Free Look............................................. 22
Group or Sponsored Arrangements....................... 23
Selling the Contract.................................. 23
Other Information........................................... 24
State Regulation...................................... 24
Legal Proceedings..................................... 24
Legal Matters......................................... 24
Experts............................................... 24
Federal Tax Considerations.................................. 25
More Information About Golden American Life Insurance
Company........................................... 29
Unaudited Financial Statements of Golden American
Life Insurance Company............................ 52
Financial Statements of Golden American Life Insurance
Company........................................... 65
Appendix A - Term Indexed Account Examples.................. A1
Appendix B - Annual Indexed Account Example................. B1
Appendix C - Market Value Adjustment Examples............... C1
Appendix D - Surrender Charge for Excess Withdrawals
Examples.......................................... D1

MRI-121979 ii

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INDEX OF SPECIAL TERMS
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The following special terms are used throughout this prospectus. Refer to the
page(s) listed for an explanation of each term:

SPECIAL TERM PAGE
Annual Indexed Account 9
Annuitant 13
Annuity Start Date 21
Cash Surrender Value 14
Contract Date 12
Contract Owner 12
Contract Value 14
Contract Year 12
Free Withdrawal Amount 19
Guaranteed Interest Rates 6
Term 5
Index 2
Index Growth 10
Index Return 9
Interest Account 6
Market Value Adjustment 11
Minimum Guaranteed Account Value 8
Monthiversary 8
Participation Rates 7
Renewal Interest Rates 6
Surrender Charge 18
Term Indexed Account 7

The following terms as used in this prospectus have the same or substituted
meanings as the corresponding terms currently used in the Contract:

TERM USED IN THIS PROSPECTUS CORRESPONDING TERM USED IN THE CONTRACT
Annuity Start Date Annuity Commencement Date
Contract Owner Owner or Certificate Owner
Contract Value Accumulation Value
Free Look Period Right to Examine Period
Withdrawals Partial Withdrawals

MRI-121979 1

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FEES AND EXPENSES
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CONTRACT OWNER TRANSACTION EXPENSES*

Surrender Charge:

COMPLETE YEARS ELAPSED 0 | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8+
SINCE START OF TERM | | | | | | | |
| | | | | | | |
SURRENDER CHARGE 8% | 7% | 6% | 5% | 4% | 3% | 2% | 1% | 0%

* A Market Value Adjustment may apply to certain transactions. This may
increase or decrease your contract value and/or your surrender amount.
In addition, if you withdraw money from your Contract, die, or begin
receiving annuity payments, we may deduct a premium tax charge of 0%
to 3.5% to pay to your state.

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GOLDEN AMERICAN LIFE INSURANCE COMPANY
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Golden American Life Insurance Company ("Golden American") is a Delaware stock
life insurance company, which was originally incorporated in Minnesota on
January 2, 1973. As of December 31, 2001, Golden American is a wholly owned
subsidiary of Equitable Life Insurance Company of Iowa which is a wholly owned
subsidiary of Equitable of Iowa Companies, Inc. ("Equitable of Iowa"). Equitable
of Iowa is a wholly owned subsidiary of ING Groep N.V. ("ING"), a global
financial services holding company based in The Netherlands. Prior to December
31, 2001, Golden American was a wholly owned subsidiary of Equitable of Iowa.
Golden American is authorized to sell insurance and annuities in all states,
except New York, and the District of Columbia. In May 1996, Golden American
established a subsidiary, First Golden American Life Insurance Company of New
York, which is authorized to sell annuities in New York and Delaware. Equitable
of Iowa is the holding company for Golden American, Directed Services, Inc., the
distributor of the Contracts, and other interests.

Our principal office is located at 1475 Dunwoody Drive, West Chester,
Pennsylvania 19380.

FINANCIAL STATEMENTS

The unaudited condensed consolidated financial statements of Golden American for
the nine months ended September 30, 2001 and the audited consolidated financial
statements of Golden American for the years ended December 31, 2000, 1999 and
1998 are included in this prospectus.

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THE ACCOUNTS
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The Contract described in this prospectus is a single premium deferred annuity
contract. The Contract provides a means for you to allocate premium payments and
contract value to one or more Accounts available under the Contract. The
available Accounts include the:

o Interest Account, which provides contract value based on the daily
crediting of interest at a rate that yields an annual specified
Guaranteed Interest Rate;

o Term Indexed Account, which provides contract value based on the
crediting at the end of the Term of an interest rate that reflects
certain changes in an Index specified in the Contract (currently,
the S&P 500(R)1) during the Term; and

o Annual Indexed Account, which provides contract value based on the
annual crediting of an interest rate that reflects certain changes
in an Index (currently, the S&P 500(R)) during that contract year.
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1 The Contract is not sponsored, endorsed, sold, or promoted by
Standard & Poor's, a division of the McGraw-Hill Companies, Inc.
(S&P). S&P makes no representation or warrant, express or

MRI-121979 2

Not all Accounts may be available in all States. We may add or remove available
Interest or Indexed Accounts in the future.

RISKS

If an Account is maintained for the duration of the applicable Term, the owner's
principal allocated to that Account is guaranteed in full by the Company.
However, withdrawals and surrenders from an Account before the end of its Term
are subject to a Market Value Adjustment, which may be positive or negative, and
may be subject to a surrender charge. BECAUSE THE CONTRACT PROVIDES ONLY LIMITED
LIQUIDITY DURING A TERM THROUGH THE FREE WITHDRAWAL PROVISION, IT IS NOT
SUITABLE FOR SHORT-TERM INVESTMENT.

The investment risk and return characteristics for the Interest Account are
similar to those of a zero coupon bond or certificate of deposit; an Interest
Account, if maintained until the end of its Term, provides a fixed rate of
return over a stated period. Principal and credited interest are guaranteed by
the Company and are available without surrender charge or Market Value
Adjustment during the 30-day period prior to the end of each Term. If Interest
Account Value is withdrawn prematurely, or before the 30-day period, then the
effect of the surrender charge and Market Value Adjustment may result in a loss
of principal.

The investment risk and return characteristics for an Indexed Account are
expected to fall in between those typical of fixed annuities and those typical
of equity mutual funds or variable annuities. A fixed annuity guarantees
principal, and provides for no participation in equity or other markets. A
variable annuity does not guarantee principal, and provides for 100%
participation in equity or other markets. Long-term returns under the Indexed
Accounts may be higher than those offered by a typical fixed annuity, but growth
will be more volatile than under a fixed annuity as the Index fluctuates. The
principal guarantee under the Contract may make an Indexed Account more suitable
than direct equity investment for risk-averse Owners. However, expected
long-term returns of Indexed Accounts will be lower than those for equity mutual
funds or variable annuities. Furthermore, amounts withdrawn from an Indexed
Account will not share in any Index Returns for the current period (i.e., the
Term for the Term Indexed Account and the current contract year for the Annual
Indexed Account).

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implied, to the owners of the Contract or any member of the
public regarding the advisability of investing in securities
generally or in the Contract particularly or the ability of
the S&P 500 Index to track general stock market performance.
S&P's only relationship to the Licensee is the licensing of
certain trademarks and trade names of the S&P and of the S&P
500 Index which is determined, composed, and calculated by
S&P without regard to the Licensee or the Contract. S&P has
no obligation to take the needs of the Licensee or the
owners of the Contract into consideration in determining,
composing, or calculating the S&P 500 Index. S&P is not
responsible for and has not participated in the
determination of the prices and amount of the Contract or
the timing of the issuance or sale of the Contract or in the
determination or calculation of the equation by which the
Contract is to be converted into cash. S&P has no obligation
or liability in connection with the administration,
marketing, or trading of the Contract.

S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS
OF THE S&P INDEX OR ANY DATA INCLUDED THEREIN AND S&P SHALL
HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR
INTERRUPTIONS THEREIN. S&P MAKES NO WARRANTY, EXPRESS OR
IMPLIED, AS TO RESULTS TO BE OBTAINED BY LICENSEE, OWNERS OF
THE CONTRACT, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF
THE S&P 500 INDEX OR ANY DATA INCLUDED THEREIN. S&P MAKES NO
EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE OR USE WITH RESPECT TO THE S&P 500 INDEX OR ANY DATA
INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN
NO EVENT SHALL S&P HAVE ANY LIABILITY FOR ANY SPECIAL,
PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST
PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH
DAMAGES.

MRI-121979 3

INVESTMENTS

Amounts applied to the Accounts will be allocated to a nonunitized separate
account established under Delaware law. A nonunitized separate account is a
separate account in which the contract holder does not participate in the
performance of the assets through unit values or any other interest. Contract
holders do not receive a unit value of ownership of assets accounted for in this
separate account. Interests under the Contract are registered under the
Securities Act of 1933, but the Accounts are not registered under the Investment
Company Act of 1940.

The risk of investment gain or loss is borne entirely by the Company. All
Company obligations due to allocations to the nonunitized separate account are
contractual guarantees of the Company and are accounted for in the separate
account. All of the general assets of the Company are available to meet its
contractual guarantees. Income, gains and losses of the separate account are
credited to or charged against the separate account without regard to other
income, gains or losses of the Company.

As part of its overall investment strategy, the Company intends to maintain
assets in the separate account that reflect its obligations to Contract Owners
that have made allocations to the Interest Account and Indexed Accounts.
Accordingly, it is anticipated that assets relating to the Interest Account will
likely consist of fixed income investments, and that assets relating to the
Indexed Accounts will likely consist of fixed income investments, as well as
call options or other hedging instruments that relate to movements in the Index.

WE ARE NOT OBLIGATED TO INVEST THE ASSETS ATTRIBUTABLE TO THE CONTRACT ACCORDING
TO ANY PARTICULAR STRATEGY, EXCEPT AS REQUIRED BY DELAWARE AND OTHER STATE
INSURANCE LAWS. CONTRACT OWNERS DO NOT PARTICIPATE IN THE INVESTMENT PERFORMANCE
OF THE ASSETS OF THE SEPARATE ACCOUNT, AND THE GUARANTEED INTEREST RATES, INDEX
RETURNS, AND ANY OTHER BENEFITS PROVIDED BY THE COMPANY ARE NOT DETERMINED BY
THE PERFORMANCE OF THE NONUNITIZED SEPARATE ACCOUNT.

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THE ANNUITY CONTRACT
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PURCHASE AND AVAILABILITY OF THE CONTRACT

We will issue a Contract only if both the annuitant and the contract owner are
not older than age 85. The single premium payment must be $5,000 or more ($1,500
for qualified Contracts). Under certain circumstances, we may waive the minimum
premium payment requirement. We may also change the minimum initial premium
requirement for certain group or sponsored arrangements. Any premium payment
that would cause the contract value to exceed $1,000,000 requires our prior
approval. IRAs and other qualified plans already have the tax-deferral feature
found in this Contract. For an additional cost, the Contract provides other
benefits including death benefits and the ability to receive a lifetime income.
See "Charges and Fees" in this prospectus.

PREMIUM PAYMENTS

Although this is a single premium contract, in certain situations involving
transfers and exchanges identified on the application, we may permit additional
premium payments to be made in the first contract year. We will issue a new
Contract, however, for any subsequent premium payments received more than 60
days after the contract date that are greater than the required minimum single
premium payment.

Premium payments received in the first contract year will be treated the same as
the initial payment for purposes of the ending date of the Term and duration of
the surrender charge. The Market Value Adjustment, however, would vary based on
the date the premium payment was received. For the Indexed Accounts, the
starting Index values are based on the date the premium payment was received;
ending Index value would be the same for all premium payments. The Minimum
Guaranteed Account Value is based on the date the premium payment was received.

MRI-121979 4

CREDITING OF PREMIUM PAYMENT

We will process your premium payment within 2 business days after receipt, if
the application and all information necessary for processing the Contract are
complete. In certain states we also accept premium payments by wire order. Wire
transmittals must be accompanied by sufficient electronically transmitted data.
We may retain your premium payment for up to 5 business days while attempting to
complete an incomplete application. If the application cannot be completed
within this period, we will inform you of the reasons for the delay. We will
also return the premium payment immediately unless you direct us to hold the
premium payment until the application is completed. If your premium payment was
transmitted by wire order from your broker-dealer, we will follow one of the
following two procedures after we receive and accept the wire order and
investment instructions. The procedure we follow depends on state availability
and the procedures of your broker-dealer.

(1) If either your state or broker-dealer do not permit us to issue a
Contract without an application, we reserve the right to rescind
the Contract if we do not receive and accept a properly completed
application or enrollment form within 5 days of the premium
payment. If we do not receive the application or form within 5 days
of the premium payment, we will refund the contract value plus any
charges we deducted, and the Contract will be voided. Some states
require that we return the premium paid, in which case we will
comply.

(2) If your state and broker-dealer allow us to issue a Contract
without an application, we will issue and mail the Contract to you
or your representative, together with an Application
Acknowledgement Statement for your execution. Until our Customer
Service Center receives the executed Application Acknowledgement
Statement, neither you nor the broker-dealer may execute any
financial transactions on your Contract unless they are requested
in writing by you. We may require additional information before
complying with your request (e.g., signature guarantee).

ALLOCATION OF PREMIUM PAYMENTS

At issue, you determine the percentage of the single premium payment to be
allocated to each Account. The amount allocated to each Account becomes the
beginning Account Value for each Account.

SELECTING A TERM

For the Interest Account and the Term Indexed Account, a Term is the period of
time that a rate of interest (whether fixed or indexed) is guaranteed to be
credited to your contract value. For the Annual Indexed Account, the Term that
you select determines the Participation Rate and Cap, but within the Term, the
Participation Rate and Cap will reset each year at renewal rates. Each Term ends
on its maturity date, which is the last day of the last contract year in the
Term.

You may select the duration of your initial Term from among the durations
offered by us. We currently offer Terms of 5, 7, and 10 years, although we may
at any time decrease or increase the number of Terms offered. You must select
the same Term for all Accounts to which you allocate premium payments.

Unless you elect to surrender your Contract, a subsequent Term will
automatically begin at the end of a Term. We may not offer the same Terms for
renewal as for initial periods. If offered at the time of your renewal, each
subsequent Term will be of the same duration as the previous Term unless you
elect in writing, on any day within the 30-day period prior to the end of the
current Term, a Term of a different duration from among those offered by us at
that time. Within 45 days prior to the end of a Term, we will send you a notice
of the Terms that are available, along with certain information about your
Account Values. Because Term Indexed Account Value does not participate in Index
Returns if withdrawn or annuitized prior to the end of a Term, you may only
select the Interest Account or the Annual Indexed Account if you are less than 5
years from your annuity start date on a renewal date.

TRANSFERS AMONG THE ACCOUNTS

During a 30-day period prior to the end of each Term, you have the option of
withdrawing some or all of the contract value without surrender charge or Market
Value Adjustment. You may also elect to transfer

MRI-121979 5

contract value among the Accounts. We determine the beginning Account Value for
the renewal Terms by adding and subtracting specified transfers from the ending
Account Value from the prior Term. If you do not make any transfers of Account
Value, the beginning Account Value for the renewal Term will equal the ending
Account Value from the prior Term.

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THE INTEREST ACCOUNT
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GENERAL

In the Interest Account, your premium payment (less withdrawals) will earn
interest at the initial Guaranteed Interest Rate, which is an annual effective
rate of interest guaranteed for the duration of the Term. Your Interest Account
Value is the sum of your premium payment or contract value allocated to the
Interest Account and the interest credited as adjusted for any withdrawals
(including any Market Value Adjustment or surrender charge applied to such
withdrawal). Your Interest Account Value will be credited with the Guaranteed
Interest Rate in effect for the Term you selected when we receive and accept
your premium. We will credit interest daily at a rate that yields the quoted
Guaranteed Interest Rate. We may credit bonus interest in the first contract
year.

GUARANTEED INTEREST RATES

The Guaranteed Interest Rate to be credited to your contract value is guaranteed
as long as you do not take your money out until the 30-day period prior to the
end of the applicable Term. We do not have a specific formula for establishing
the Guaranteed Interest Rates for the different Terms. We determine Guaranteed
Interest Rates at our sole discretion. To find out the current Guaranteed
Interest Rate for a Term you are interested in, please contact our Customer
Service Center or your registered representative. The determination may be
influenced by the interest rates on fixed income investments in which we may
invest the amounts we receive under the Contracts. You will have no direct or
indirect interest in these investments. We will also consider other factors in
determining the Guaranteed Interest Rates, including regulatory and tax
requirements, sales commissions and administrative expenses borne by us, general
economic trends and competitive factors. We cannot predict the level of future
interest rates.

We will hold Guaranteed Interest Rates for 60 days from the date we receive your
application. If we receive your single premium payment within that period, we
will use the higher of the current Guaranteed Interest Rate in effect for your
selected Term at the time we receive your money or the held rate. We will accept
a faxed application for a rate hold on the day before a rate change goes into
effect, as long as we receive the original indicating that the application was
faxed for rate hold within 3 to 5 business days. Rate holds also apply to any
subsequent premiums received pursuant to an exchange or transfer within 60 days
from the date we receive your application.

We may from time to time at our discretion offer interest rate specials for new
premiums that are higher than the current base interest rate. Renewal rates for
such rate specials will be based on the base interest rate and not on the
special rates initially declared.

RENEWAL TERMS

Renewal Interest Rates will be the same as initial Guaranteed Interest Rates for
new Contracts with the same Term. The Interest Account Value at the beginning of
any renewal Term will be equal to the Interest Account Value at the end of the
Term just ending. This value, less withdrawals made after the beginning of the
subsequent Term, will earn interest compounded annually at the Renewal Interest
Rate.

WITHDRAWALS

MRI-121979 6

Term, a withdrawal may be subject to a Market Value Adjustment and, in some
cases, a surrender charge (see "Charges and Fees"). Be aware that withdrawals
may have federal income tax consequences, including a 10% penalty tax.

INTEREST ACCOUNT CASH SURRENDER VALUE
At any time, the Interest Account Cash Surrender Value equals the Interest
Account Value, plus/minus the Market Value Adjustment, less any applicable
surrender charges.

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THE TERM INDEXED ACCOUNT
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GENERAL

In the Term Indexed Account, your premium payment (less withdrawals) will earn
interest credited as a percentage of the growth, if any, in the S&P 500(R) Index
(the "Index Return"). The S&P 500(R) Index can, of course, increase or decrease
daily; however, the Term Indexed Account Value will remain constant during a
Term. Index Return (if any) is determined and credited to the Term Indexed
Account Value at the end of the Term. The Index Return equals the Index Growth
of the S&P 500(R) over the Term multiplied by a Participation Rate. If you
surrender, withdraw, or annuitize your investment before the end of the Term,
the amounts withdrawn or paid will not participate in any Index Returns. Death
benefit proceeds, however, will participate in Index Returns up to the most
recent contract anniversary. (See "Death Benefit" for additional information.)
We guarantee a Minimum Guaranteed Account Value at maturity of the Term Indexed
Account. Term Indexed Account Values are not determined by, and do not reflect,
the investment performance of the separate account, and do not correspond
directly to increases or decreases in the Index.

PARTICIPATION RATES

Participation Rates vary depending on the duration of the Term. Participation
Rates for the initial Term depend upon rates in effect as of the date the
premium was received. The Participation Rate is guaranteed for the duration of
the Term. Participation Rates for renewal Terms are the same as those in effect
for initial Terms on new Contracts as of the renewal date.

We will hold Participation Rates for 60 days from the date we receive your
application. If we receive your single premium payment within that period, we
will use the higher of the current Participation Rate in effect for your
selected Term at the time we receive your money or the held rate. We will accept
a faxed application for a rate hold on the day before a rate change goes into
effect, as long as we receive the original indicating that the application was
faxed for rate hold within 3 to 5 business days. Rate holds also apply to any
subsequent premiums received pursuant to an exchange or transfer within 60 days
from the date we receive your application

INDEX RETURN

At the end of the Term, we determine the Index Return, which is the amount we
will credit on your Account Value. The Index Return equals one plus the Index
Growth at the end of the Term multiplied by the applicable Participation Rate.
Prior to the end of each Term, the Term Indexed Account Value equals the
beginning Term Indexed Account Value less gross withdrawals. At the end of each
Term, the Term Indexed Account Value equals the greater of: (a) beginning Term
Indexed Account Value less gross withdrawals multiplied by the Index Return, or
(b) the Guaranteed Minimum Account Value. In the initial Term, Index Returns are
calculated individually for each premium payment received.

As an example, assume that the Index Growth over a 5 year Term is 75% and the
Participation Rate is 80%. The amount credited at the end of the Term would be
75% times 80%, or 60% of the beginning Term Indexed Account Value less gross
withdrawals (withdrawals plus applicable surrender charges and MVA's).

MRI-121979 7

INDEX GROWTH

Index Growth is calculated over the duration of the Term as:

( EOP-BOP )
GREATER OF: 0 OR ( ------- )
-- ( BOP )

Where:

BOP = S&P 500(R) Index value at the beginning of the Term
(based on Index value as of date premium is received
for initial Terms, or the renewal date for renewal
Terms);

EOP = S&P 500(R) Index value at the end of the Term,
calculated as an average of 12 monthly S&P 500(R)
Index values on each monthiversary in the final
contract year of the Term.

One month anniversary ("monthiversary") dates fall on the same date each month
as the contract date. If there is no corresponding date in the month, the
monthiversary date will fall on the first day of the following month. If the
monthiversary date falls on a weekend or holiday, we will use the Index value as
of the subsequent business day. In the initial Term, each premium payment will
have its own BOP Index value corresponding to the date the premium payment was
received, and a common EOP value. In renewal Terms, the BOP and EOP Index values
will be the same for all contract value allocated.

For examples that illustrate how the Term Indexed Account works, see Appendix A.

MINIMUM GUARANTEED ACCOUNT VALUE

We guarantee that the Term Indexed Account Value at the end of a Term will not
be less than the Minimum Guaranteed Account Value. For the first Term, the
Minimum Guaranteed Account Value equals 90% of the first contract year premium
payments with interest at a rate we declare (currently, 0%), less net
withdrawals. In renewal Terms, the Minimum Guaranteed Account Value equals 90%
of Account Value at the end of the prior Term with interest at a rate we declare
(currently, 0%), net of transfers, less net withdrawals.

RENEWAL TERMS

The Term Indexed Account Value at the beginning of any renewal Term will be
equal to the Term Indexed Account Value at the end of the Term just ending net
of transfers. This value, less withdrawals made after the beginning of the
subsequent Term, will earn the Index Return determined at the end of the renewal
Term. If you are fewer than 5 years from your annuity start date at renewal, you
may not select the Term Indexed Account.

WITHDRAWALS

During the accumulation phase, you may withdraw a portion of your contract
value. If you do not specify otherwise, withdrawals will be taken first from the
Interest Account, then from the Annual Indexed Account, and finally from the
Term Indexed Account. Unless made during the 30-day period prior to the end of
the Term, a withdrawal may be subject to a Market Value Adjustment and, in some
cases, a surrender charge (see "Charges and Fees"). In addition, amounts
withdrawn from the Term Indexed Account prior to the end of the Term do not
participate in any Index Returns. Be aware that withdrawals may have federal
income tax consequences, including a 10% penalty tax.

MRI-121979 8

TERM INDEXED ACCOUNT CASH SURRENDER VALUE

AT ANY TIME, THE TERM INDEXED ACCOUNT CASH SURRENDER VALUE EQUALS THE GREATER
OF:

a) Term Indexed Account Value, plus/minus the Market Value
Adjustment, less surrender charges; and

b) Minimum Guaranteed Account Value, plus/minus the Market Value
Adjustment.

- --------------------------------------------------------------------------------
THE ANNUAL INDEXED ACCOUNT
- --------------------------------------------------------------------------------

GENERAL

In the Annual Indexed Account, your premium payment (less withdrawals) will earn
annual interest credited as a percentage of the growth, if any, in the S&P
500(R) Index (the "Index Return"). The S&P 500(R) Index can, of course, increase
or decrease daily; however, the Annual Indexed Account Value will remain
constant during a contract year. Index Return (if any) is determined and
credited to the Annual Indexed Account Value at the end of each contract year of
the Term. Annual Index Returns equal the Index Growth of the S&P 500(R) at the
end of the contract year multiplied by a Participation Rate, subject to a stated
maximum return (the "Cap"). If you surrender, withdraw, or annuitize your
investment or die before the end of the contract year, the amounts withdrawn or
paid will not participate in any Index Returns for the contract year in which
the withdrawal or death occurs. We guarantee a Minimum Guaranteed Account Value
for the Annual Indexed Account at the end of the Term.

Annual Indexed Account Values are not determined by, and do not reflect, the
investment performance of the separate account, and do not correspond directly
to increases or decreases in the Index.

PARTICIPATION RATES AND CAPS

Participation Rates and Caps vary depending on the duration of the Term.
Participation Rates and Caps for the initial Term depend upon rates in effect as
of the date the premium was received. Within a Term, the Participation Rate and
Cap will reset each year at renewal rates, which may be different from rates for
initial Terms on new Contracts. Participation Rates and Caps for renewal Terms
are the same as those in effect for initial Terms on new Contracts as of the
renewal date. We guarantee that the Participation Rate will never be less than
50%, and the Cap will never be less than 8%.

We will hold Participation Rates and Caps for 60 days from the date we receive
your application. If we receive your single premium payment within that period,
we will use the higher of the current Participation Rate and Cap in effect for
your selected Term at the time we receive your money or the held rate. If both
the Participation Rate and the Cap have changed, we will determine the higher
rate for rate hold purposes as follows:

1. First, we compare Participation Rates. If they are different, we use
the higher Participation Rate and its corresponding Cap.

2. If Participation Rates are the same, we then compare Caps. If they are
different, we use the higher Cap and its corresponding Participation
Rate.

We will accept a faxed application for a rate hold on the day before a rate
change goes into effect, as long as we receive the original indicating that the
application was faxed for rate hold within 3 to 5 business days. Rate holds also
apply to any subsequent premiums received pursuant to an exchange or transfer
within 60 days from the date we receive your application

INDEX RETURN

At the end of each contract year, we determine the Index Return, which is the
amount we will credit on your Account Value. The Index Return equals one plus
the lesser of the Index Growth at the end of the contract year multiplied by the
applicable Participation Rate or the stated Cap. Prior to the end of each
contract

MRI-121979 9

year, the Annual Indexed Account Value equals the Annual Indexed Account Value
at the beginning of the contract year less gross withdrawals. At the end of each
contract year, the Annual Indexed Account Value equals the Annual Indexed
Account Value at the beginning of the contract year, less gross withdrawals,
multiplied by the Index Return. At the end of the Term, if the Guaranteed
Minimum Account Value is greater than the Annual Indexed Account Value, then
your Annual Indexed Account Value will be reset to equal the Guaranteed Minimum
Account Value. In the first contract year, Index Returns are calculated
individually for each premium payment received.

As an example, assume that the current Participation Rate for the Term is 75%,
the current year's Index Return is 15%, and the applicable Cap is 10%. The
amount credited at the end of the year would be 10% of the Annual Indexed
Account Value at the beginning of the year, which is the lesser of the Index
Return multiplied by the Participation Rate (15% * 75% = 11.25%) and the Cap of
10%.

INDEX GROWTH

Index Growth is calculated on an annual basis as:

( EOP-BOP )
GREATER OF: 0 OR ( ------- )
-- ( BOP )

Where:

BOP = S&P 500(R) Index value at the beginning of the Term
(based on Index value as of the date a premium
payment is received in the first contract year for
the initial Term, and the contract anniversary for
all other contract years and renewal Terms);

EOP = S&P 500(R) Index value at the end of each contract
year, calculated as an average of 12 monthly S&P
500(R) Index values on each monthiversary in the
contract year.

Monthiversary dates fall on the same date each month as the contract date. If
there is no corresponding date in the month, the monthiversary date will fall on
the first day of the following month. If the monthiversary date falls on a
weekend or holiday, we will use the Index value as of the subsequent business
day. In the first contract year of the initial Term, each premium will have its
own BOP Index value corresponding to the date the premium payment was received,
and a common EOP value. In subsequent years and renewal Terms, the BOP and EOP
Index values will be the same for all contract value allocated.

For examples that illustrate how the Annual Indexed Account works, see Appendix
B.

MINIMUM GUARANTEED ACCOUNT VALUE

We guarantee that the Annual Indexed Account Value at the end of a Term will not
be less than the Minimum Guaranteed Account Value. For the first Term, the
Minimum Guaranteed Account Value equals 90% of the first contract year premium
payments with interest at a rate we declare (currently, 0%), less net
withdrawals. In renewal Terms, the Minimum Guaranteed Account Value equals 90%
of Account Value at the end of the prior Term with interest at a rate we declare
(currently, 0%), net of transfers, less net withdrawals.

RENEWAL TERMS

The Annual Indexed Account Value at the beginning of any renewal Term will be
equal to the Annual Indexed Account Value at the end of the Term just ending net
of transfers. This value, less withdrawals made after the beginning of the
subsequent Term, will earn the Index Return determined at the end of the first
contract year of the renewal term.

MRI-121979 10

WITHDRAWALS

During the accumulation phase, you may withdraw a portion of your contract
value. If you do not specify otherwise, withdrawals will be taken first from the
Interest Account, then from the Annual Indexed Account, and finally from the
Term Indexed Account. Unless made during the 30-day period prior to the end of
the Term, a withdrawal may be subject to a Market Value Adjustment and, in some
cases, a surrender charge (see "Charges and Fees"). In addition, amounts
withdrawn from the Annual Indexed Account prior to the end of a contract year do
not participate in any Index Returns for that contract year. Be aware that
withdrawals may have federal income tax consequences, including a 10% penalty
tax.

ANNUAL INDEXED ACCOUNT CASH SURRENDER VALUE
At any time, the Annual Indexed Account Cash Surrender Value equals the
greater of the:

a) Annual Indexed Account Value, plus/minus the Market Value Adjustment,
less surrender charges; and

b) Minimum Guaranteed Account Value, plus/minus the Market Value
Adjustment.

- --------------------------------------------------------------------------------
MARKET VALUE ADJUSTMENT
- --------------------------------------------------------------------------------

A Market Value Adjustment may decrease, increase, or have no effect on your
contract value. We will apply a Market Value Adjustment to amounts in excess of
the free withdrawal amount:

o whenever you withdraw money (unless made within the 30-day period
prior to the end of the applicable Term) and

o on the annuity start date if a Guaranteed Period does not end on or
within 30 days of the annuity start date.

We do not apply a Market Value Adjustment on death benefit proceeds. The Market
Value Adjustment resets at the start of each Term. The Market Value Adjustment
will be applied before the deduction of any applicable surrender charges or
premium tax charges.

We determine the Market Value Adjustment by multiplying the amount you withdraw
or apply to an income plan by the following factor:

( 1+I )N/365
( ------------ ) -1*
( 1+J+.0050 )

where:

"I" is the MVA Rate (as defined below), determined at the time the
premium payment is received for the initial Term, and the beginning
of the Term for renewal Terms;

"J" is the MVA Rate, determined at the time of surrender or withdrawal
for a security with time to maturity equal to the number of years
(fractional years rounded up to the next full year) remaining in
the Term from the date of surrender or withdrawal; and

"N" is the number of days from the date of surrender or withdrawal to
the end of the current Term.

* For Contracts issued in Florida, the factor is
[(1+I)/(1+J+.0025)]N/365-1.

The MVA Rate is the average of the Ask Yields for U.S. Treasury Strips as quoted
by a national quoting service for a period equal to an applicable Term. The
average currently is based on the period starting from the 22nd day of the
calendar month two months prior to the month of the MVA Rate determination and
ending the 21st day of the calendar month immediately before the month of
determination. We currently calculate the MVA Rate once each calendar month but
have the right to calculate it more frequently. The

MRI-121979 11

MVA Rate will always be based on a period of at least 28 days. If the Ask Yields
are no longer available, we will determine the MVA Rate by using a suitable and
approved, if required, replacement method.

A Market Value Adjustment may be positive, negative, or result in no change. You
bear the risk that you may receive less than your principal if we apply a Market
Value Adjustment. In general, if interest rates are rising, you bear the risk
that any Market Value Adjustment will likely be negative and reduce your
contract value. On the other hand, if interest rates are falling, it is more
likely that you will receive a positive Market Value Adjustment that increases
your contract value. In the event of a full surrender or annuitization, we will
add or subtract any Market Value Adjustment from the amount surrendered or
annuitized. In the event of a partial withdrawal or annuitization, we will add
or subtract any Market Value Adjustment from the remaining contract value in
order to provide the amount requested. If a negative Market Value Adjustment
exceeds your contract value, we will consider your request to be a full
surrender or annuitization.

For examples that illustrate how the Market Value Adjustment works, see
Appendix C.

- --------------------------------------------------------------------------------
CONTRACT PROVISIONS
- --------------------------------------------------------------------------------

CONTRACT DATE AND CONTRACT YEAR

The date the Contract became effective is the contract date. Each 12-month
period following the contract date is a contract year.

ANNUITY START DATE

The annuity start date is the date you start receiving annuity payments under
your Contract. The Contract, like all deferred annuity contracts, has two
phases: the accumulation phase and the income phase. The accumulation phase is
the period between the contract date and the annuity start date. The income
phase begins when you start receiving regular annuity payments from your
Contract on the annuity start date.

CONTRACT OWNER

You are the contract owner. You are also the annuitant unless another annuitant
is named in the application. You have the rights and options described in the
Contract. One or more persons may own the Contract. The death benefit becomes
payable when you die. In the case of a sole contract owner who dies before the
income phase begins, we will pay the beneficiary the death benefit then due. The
sole contract owner's estate will be the beneficiary if no beneficiary has been
designated or the beneficiary has predeceased the contract owner. In the case of
a joint owner of the Contract dying before the income phase begins, we will
designate the surviving contract owner as the beneficiary. This will override
any previous beneficiary designation.

If the contract owner is a trust and a beneficial owner of the trust has been
designated, the beneficial owner will be treated as the contract owner for
determining the death benefit. If a beneficial owner is changed or added after
the contract date, this will be treated as a change of contract owner for
determining the death benefit.

JOINT OWNERS

For non-qualified Contracts only, joint owners may be named in a written request
before the Contract is in effect. Joint owners may independently exercise
transfers and other transactions allowed under the Contract. All other rights of
ownership must be exercised by both owners. Joint owners own equal shares of any
benefits accruing or payments made to them. All rights of a joint owner end at
death of that owner if the other joint owner survives. The entire interest of
the deceased joint owner in the Contract will pass to the surviving joint owner.

MRI-121979 12

ANNUITANT

The annuitant is the person designated by you to be the measuring life in
determining annuity payments. The annuitant's age determines when the income
phase must begin and the amount of the annuity payments to be paid. You are the
annuitant unless you choose to name another person. The annuitant may not be
changed after the Contract is in effect.

The contract owner will receive the annuity benefits of the Contract if the
annuitant is living on the annuity start date. If the annuitant dies before the
annuity start date, and a contingent annuitant has been named, the contingent
annuitant becomes the annuitant (unless the contract owner is not an individual,
in which case the death benefit becomes payable).

If there is no contingent annuitant when the annuitant dies before the annuity
start date, the contract owner will become the annuitant. The contract owner may
designate a new annuitant within 60 days of the death of the annuitant.

If there is no contingent annuitant when the annuitant dies before the annuity
start date and the contract owner is not an individual, we will pay the
designated beneficiary the death benefit then due. If a beneficiary has not been
designated, or if there is no designated beneficiary living, the contract owner
will be the beneficiary. If the annuitant was the sole contract owner and there
is no beneficiary designation, the annuitant's estate will be the beneficiary.

Regardless of whether a death benefit is payable, if the annuitant dies and any
contract owner is not an individual, distribution rules under federal tax law
will apply. You should consult your tax advisor for more information if you are
not an individual.

BENEFICIARY

The beneficiary is named by you in a written request. The beneficiary is the
person who receives any death benefit proceeds and who becomes the successor
contract owner if the contract owner (or the annuitant if the contract owner is
other than an individual) dies before the annuity start date. We pay death
benefits to the primary beneficiary (unless there are joint owners, in which
case death proceeds are payable to the surviving owner(s)).

If the beneficiary dies before the annuitant or the contract owner, the death
benefit proceeds are paid to the contingent beneficiary, if any. If there is no
surviving beneficiary, we pay the death benefit proceeds to the contract owner's
estate.

One or more persons may be a beneficiary or contingent beneficiary. In the case
of more than one beneficiary, we will assume any death benefit proceeds are to
be paid in equal shares to the surviving beneficiaries.

You have the right to change beneficiaries during the annuitant's lifetime
unless you have designated an irrevocable beneficiary. You may also restrict a
beneficiary's right to elect an annuity option or receive a lump sum payment. If
so, such rights or options will not be available to the beneficiary. When an
irrevocable beneficiary has been designated, you and the irrevocable beneficiary
may have to act together to exercise some of the rights and options under the
Contract.

CHANGE OF CONTRACT OWNER OR BENEFICIARY

During the annuitant's lifetime, you may transfer ownership of a non-qualified
Contract. You may also change the beneficiary. All requests for changes must be
in writing and submitted to our Customer Service Center in good order. The
change will be effective as of the day you sign the request. The change will not
affect any payment made or action taken by us before recording the change.

A change of owners may have tax consequences.

ADMINISTRATIVE PROCEDURES

We may accept a request for Contract service in writing, by telephone, or other
approved electronic means, subject to our administrative procedures, which vary
depending on the type of service requested and may

MRI-121979 13

include proper completion of certain forms, providing appropriate identifying
information, and/or other administrative requirements.

CONTRACT VALUE

We determine your contract value on a daily basis beginning on the contract
date. Your contract value is the sum of the Account Values. If you surrender
your Contract during the 30-day period prior to the end of the Term, you will
receive the contract value.

CASH SURRENDER VALUE

The cash surrender value is the amount you receive when you surrender the
Contract, other than during the 30-day period prior to the end of a Term. The
cash surrender value will fluctuate daily based on the interest credited to the
contract value and any Market Value Adjustment. The cash surrender value equals
the sum of the Interest Account Cash Surrender Value, the Term Indexed Account
Cash Surrender Value, and the Annual Indexed Account Cash Surrender Value. We do
not guarantee any minimum cash surrender value. Any charge for premium taxes
will be deducted from cash surrender value.

SURRENDERING TO RECEIVE THE CASH SURRENDER VALUE

You may surrender the Contract at any time while the annuitant is living and
before the annuity start date. A surrender will be effective on the date your
written request and the Contract are received at our Customer Service Center. We
will determine and pay the cash surrender value after receipt of all paperwork
required in order for us to process your surrender. Once paid, all benefits
under the Contract will be terminated. You may receive the cash surrender value
in a single sum payment or apply it under one or more annuity options. We will
usually pay the cash surrender value within 7 days.

Consult your tax advisor regarding the tax consequences associated with
surrendering your Contract. A surrender made before you reach age 59 1/2 may
result in a 10% tax penalty. See "Federal Tax Considerations" for more details.

OTHER IMPORTANT PROVISIONS

See "Withdrawals," "Death Benefit," "Charges and Fees," "The Annuity Options"
and "Other Contract Provisions" in this prospectus for information on other
important provisions in your Contract.

- --------------------------------------------------------------------------------
WITHDRAWALS
- --------------------------------------------------------------------------------

Any time during the accumulation phase and before the death of the owner, you
may withdraw all or part of your money. Keep in mind that the minimum withdrawal
is $100, and your contract value after the withdrawal must equal or exceed
$1,000 or we will treat the withdrawal request as a request to surrender the
Contract. We deduct a surrender charge and impose a Market Value Adjustment if
you surrender your Contract or withdraw an amount exceeding the free withdrawal
amount. No surrender charge or Market Value Adjustment applies to withdrawals
taken within the 30-day period prior to the end of a Term.

You may specify from which Account you want a withdrawal to be deducted. Because
amounts withdrawn from the Term Indexed Account prior to the end of the Term and
from the Annual Indexed Account prior to the end of a contract year do not
participate in any Index Returns for that period, you should generally take
withdrawals from the Interest Account. Accordingly, unless you instruct us
otherwise, we will take withdrawals first from the Interest Account, then from
the Annual Indexed Account, and finally from the Term Indexed Account, to the
extent possible.

In the first contract year, the free withdrawal amount is limited to systematic
interest withdrawals from the Interest Account. After the first contract year,
the free withdrawal amount equals 10% of your contract value as of the close of
business on the day we receive the withdrawal request at our Customer Service

MRI-121979 14

Center. For example, if the Account Value for each Account was $10,000 and the
total contract value was $30,000 as if the close of business on the day we
receive the withdrawal request at our Customer Service Center, then the free
withdrawal amount for the contract year would be $3,000 (10% of $30,000), all of
which would be deducted from the Interest Account unless otherwise instructed.
If required minimum distributions on qualified Contracts are greater than the
free withdrawal amount, we will waive any applicable surrender charges, but will
apply a Market Value Adjustment.

If more than the free withdrawal amount is withdrawn, a surrender charge and
Market Value Adjustment, if applicable, will be applied to the amount in excess
of the free withdrawal amount. The surrender charge varies by the length of the
Term selected, beginning with 8% during contract year 1 and reducing by 1% per
contract year to the end of the Term. No surrender charge is imposed upon a
surrender made during the 30-day period prior to the end of a Term. The
surrender charge period resets at the beginning of each Term. It is charged
against the contract value and is based on the amount of the withdrawal.

We will apply a Market Value Adjustment to any withdrawal in excess of the free
withdrawal amount taken prior to the 30-day period prior to the end of a Term.
We will determine the contract value as of the close of business on the day we
receive your withdrawal request at our Customer Service Center. The contract
value may be more or less than the premium payment made. Definitive guidance on
the proper federal tax treatment of the Market Value Adjustment has not been
issued. You may want to discuss the potential tax consequences of a Market Value
Adjustment with your tax adviser.

Upon surrender, surrender charges and a Market Value Adjustment will be applied
retroactively with respect to any free withdrawal amount previously withdrawn
within the same contract year as the surrender.

We offer the following withdrawal options:

REGULAR WITHDRAWALS

After the free look period, you may make regular withdrawals. Each withdrawal
must be a minimum of $100. We will apply a surrender charge and Market Value
Adjustment to any regular withdrawal in excess of the free withdrawal amount
that is taken prior to the 30-day period prior to the end of a Term. Unless
otherwise instructed, we will take all withdrawals from the Interest Account
until exhausted.

SYSTEMATIC WITHDRAWALS

You may choose to receive automatic systematic withdrawal payments. Systematic
withdrawals are limited to interest earnings in the Interest Account during the
prior month, quarter, or year, depending on the frequency you chose. Systematic
withdrawals are not subject to a Market Value Adjustment, unless you have added
the Fixed Dollar Systematic Withdrawal Feature discussed below and the payments
exceed the free withdrawal amount. Systematic withdrawals under the Fixed Dollar
Systematic Withdrawal Feature are available only in connection with Section
72(q) or 72(t) distributions.

Systematic withdrawals may be taken monthly, quarterly, or annually. You decide
when you would like systematic payments to start as long as they start at least
28 days after your contract date. You also select the date on which the
systematic withdrawals will be made, but this date cannot be later than the 28th
day of the month. If you have elected to receive systematic withdrawals but have
not chosen a date, we will make the withdrawals on the same calendar day of each
month as your contract date. If your contract date is after the 28th, your
systematic withdrawal will be made on the 28th day of each month.

Each systematic withdrawal amount must be a minimum of $100. The amount of your
systematic withdrawal can either be (1) a fixed dollar amount, or (2) an amount
based on a percentage of the interest earned and not previously withdrawn, but
in either case is limited to interest earnings in the Interest Account. If your
systematic withdrawal is a fixed dollar amount and the amount to be withdrawn
would exceed the applicable free withdrawal amount on any withdrawal date, we
will automatically reduce the amount withdrawn so that it equals such free
withdrawal amount. Thus, your fixed dollar systematic withdrawals will never
exceed the free withdrawal amount. If you want fixed dollar systematic
withdrawals to exceed the free withdrawal amount and are willing to incur
associated surrender charges, consider the Fixed Dollar Systematic Withdrawal
Feature which you may add to your regular systematic withdrawal program.

MRI-121979 15

You may change the amount or percentage of your systematic withdrawal once each
contract year or cancel this option at any time by sending satisfactory notice
to our Customer Service Center at least 7 days before the next scheduled
withdrawal date. The systematic withdrawal option may commence in a contract
year where a regular withdrawal has been taken but you may not change the amount
or percentage of your withdrawals in any contract year during which you have
previously taken a regular withdrawal. You may not elect the systematic
withdrawal option if you are taking IRA withdrawals.

FIXED DOLLAR SYSTEMATIC WITHDRAWAL FEATURE

You may add the Fixed Dollar Systematic Withdrawal Feature to your regular fixed
dollar systematic withdrawal program. This feature allows you to receive a
systematic withdrawal in a fixed dollar amount regardless of any surrender
charges or Market Value Adjustments. Systematic withdrawals under the Fixed
Dollar Systematic Withdrawal Feature are available only in connection with
Section 72(q) or 72(t) distributions. You choose the amount of the fixed dollar
systematic withdrawals. We will take fixed dollar systematic withdrawals first
from the Interest Account, unless otherwise instructed.

We will assess a surrender charge and Market Value Adjustment on the withdrawal
date if the withdrawal exceeds the free withdrawal amount on the withdrawal
date. We will apply the surrender charge and any Market Value Adjustment
directly to your contract value (rather than to the systematic withdrawal) so
that the amount of each systematic withdrawal remains fixed.

Flat dollar systematic withdrawals which are intended to satisfy the
requirements of Section 72(q) or 72(t) of the Tax Code may exceed the free
withdrawal amount. Such withdrawals are subject to surrender charges and Market
Value Adjustment when they exceed the applicable free withdrawal amount.

IRA WITHDRAWALS

If you have a non-Roth IRA Contract and will be at least age 70 1/2 during the
current calendar year, you may elect to have distributions made to you to
satisfy requirements imposed by Federal tax law. IRA withdrawals provide payout
of amounts required to be distributed by the Internal Revenue Service rules
governing mandatory distributions under qualified plans. We will send you a
notice before your distributions commence. You may elect to take IRA withdrawals
at that time, or at a later date. You may not elect IRA withdrawals and
participate in systematic withdrawals at the same time. If you do not elect to
take IRA withdrawals, and distributions are required by Federal tax law,
distributions adequate to satisfy the requirements imposed by Federal tax law
may be made. Thus, if you are participating in systematic withdrawals,
distributions under that option must be adequate to satisfy the mandatory
distribution rules imposed by federal tax law.

You may choose to receive IRA withdrawals on a monthly, quarterly or annual
basis. Under this option, you may elect payments to start as early as 28 days
after the contract date. You select the day of the month when the withdrawals
will be made, but it cannot be later than the 28th day of the month. If no date
is selected, we will make the withdrawals on the same calendar day of the month
as the contract date.

You may request that we calculate for you the amount that is required to be
withdrawn from your Contract each year based on the information you give us and
various choices you make. For information regarding the calculation and choices
you have to make, see the Statement of Additional Information. Or, we will
accept your written instructions regarding the calculated amount required to be
withdrawn from your Contract each year. We will make these withdrawals first
from the Interest Account, then from the Annual Indexed Account, and finally
from the Term Indexed Account unless otherwise instructed. The minimum dollar
amount you can withdraw is $100. When we determine the required IRA withdrawal
amount for a taxable year based on the frequency you select, if that amount is
less than $100, we will pay $100. At any time where the IRA withdrawal amount is
greater than the contract value, we will cancel the Contract and send you the
amount of the cash surrender value.

You may change the payment frequency of your IRA withdrawals once each contract
year or cancel this option at any time by sending us satisfactory notice to our
Customer Service Center at least 7 days before the next scheduled withdrawal
date.

MRI-121979 16

An IRA withdrawal in excess of the amount allowed under systematic withdrawals
will be subject to a Market Value Adjustment.

CONSULT YOUR TAX ADVISER REGARDING THE TAX CONSEQUENCES ASSOCIATED WITH TAKING
WITHDRAWALS. You are responsible for determining that withdrawals comply with
applicable law. A withdrawal made before the taxpayer reaches age 59 1/2 may
result in a 10% penalty tax. See "Federal Tax Considerations" for more details.

- --------------------------------------------------------------------------------
DEATH BENEFIT
- --------------------------------------------------------------------------------

DEATH BENEFIT DURING THE ACCUMULATION PHASE

During the accumulation phase, a death benefit is payable when either the
contract owner or the first of joint owners dies (or the annuitant dies when a
contract owner is not an individual). Assuming you are the contract owner, your
beneficiary will receive a death benefit unless the beneficiary is your
surviving spouse and elects to continue the Contract. The death benefit value is
calculated at the close of the business day on which we receive written notice
and due proof of death, as well as any required paperwork, at our Customer
Service Center. The death benefit is equal to the sum of the following:

o Interest Account Value on the date of death, plus

o Annual Indexed Account Value on the date of death, plus

o Greater of a) Minimum Guaranteed Account Value for the Term Indexed
Account and b) Term Indexed Account Value at the beginning of the
Term, less withdrawals, multiplied by the Index Return calculated
using S&P Index value as of the prior contract anniversary as the end
of period value (without any averaging).

PROCEEDS COULD BE REDUCED BY A CHARGE FOR PREMIUM TAXES OWED. Neither Indexed
Account participates in any Index Returns for the current period (i.e. Term for
Term Indexed Account and current contract year for Annual Indexed Account).

If your beneficiary elects to delay receipt of the death benefit until a date
after the time of death, the amount of the benefit payable in the future may be
affected. The proceeds may be received in a single sum or applied to any of the
annuity options. If we do not receive a request to apply the death benefit
proceeds to an annuity option, we will make a single sum distribution. A
beneficiary's right to elect an income phase payment may have been restricted by
the contract owner. If so, such rights or options will not be available to the
beneficiary.

We will generally pay death benefit proceeds within 7 days after our Customer
Service Center has received sufficient information to make the payment. For
information on required distributions under federal income tax laws, you should
see "Required Distributions upon Contract Owner's Death."

DEATH BENEFIT DURING THE INCOME PHASE

If any contract owner or the annuitant dies after the annuity start date, we
will pay the beneficiary any certain benefit remaining under the annuity in
effect at the time.

REQUIRED DISTRIBUTIONS UPON CONTRACT OWNER'S DEATH

We will not allow any payment of benefits provided under a non-qualified
Contract which do not satisfy the requirements of Section 72(s) of the Code.

If any owner of a non-qualified contract dies before the annuity start date, the
death benefit payable to the beneficiary will be distributed as follows: (a) the
death benefit must be completely distributed within 5 years of the contract
owner's date of death; or (b) the beneficiary may elect, within the 1-year
period after the contract owner's date of death, to receive the death benefit in
the form of an annuity from us, provided that (i) such annuity is distributed in
substantially equal installments over the life of such beneficiary or over a

MRI-121979 17

period not extending beyond the life expectancy of such beneficiary; and (ii)
such distributions begin not later than 1 year after the contract owner's date
of death.

Notwithstanding (a) and (b) above, if the sole contract owner's beneficiary is
the deceased owner's surviving spouse, then such spouse may elect to continue
the Contract under the same terms as before the contract owner's death. Upon
receipt of such election from the spouse at our Customer Service Center: (1) all
rights of the spouse as contract owner's beneficiary under the Contract in
effect prior to such election will cease; (2) the spouse will become the owner
of the Contract and will also be treated as the contingent annuitant, if none
has been named and only if the deceased owner was the annuitant; and (3) all
rights and privileges granted by the Contract or allowed by Golden American will
belong to the spouse as contract owner of the Contract. This election will be
deemed to have been made by the spouse if such spouse fails to make a timely
election as described in this paragraph. If the owner's beneficiary is a
nonspouse, the distribution provisions described in subparagraphs (a) and (b)
above, will apply even if the annuitant and/or contingent annuitant are alive at
the time of the contract owner's death.

If we do not receive an election from a nonspouse owner's beneficiary within the
1-year period after the contract owner's date of death, then we will pay the
death benefit to the owner's beneficiary in a cash payment within five years
from date of death. We will determine the death benefit as of the date we
receive proof of death and all other required documents. We will make payment of
the proceeds on or before the end of the 5-year period starting on the owner's
date of death. Such cash payment will be in full settlement of all our liability
under the Contract.

If the contract owner dies after the annuity start date, we will continue to
distribute any benefit payable at least as rapidly as under the annuity option
then in effect. All of the contract owner's rights granted under the Contract or
allowed by us will pass to the contract owner's beneficiary.

If the Contract has joint owners we will consider the date of death of the first
joint owner as the death of the contract owner and the surviving joint owner
will become the contract owner of the Contract.

- --------------------------------------------------------------------------------
CHARGES AND FEES
- --------------------------------------------------------------------------------

We deduct the Contract charges described below to cover our costs and expenses,
services provided, and risks assumed under the Contracts. We incur certain costs
and expenses for distributing and administering the Contracts, including
compensation and expenses paid in connection with sales of the Contracts, for
paying the benefits payable under the Contracts and for bearing various risks
associated with the Contracts. The amount of a Contract charge will not always
correspond to the actual costs associated with the charge. For example, the
surrender charge collected may not fully cover all of the distribution expenses
incurred by us with the service or benefits provided. In the event there are any
profits from fees and charges deducted under the Contract, we may use such
profits to finance the distribution of Contracts.

CHARGES DEDUCTED FROM THE CONTRACT VALUE We deduct the following charges from
your contract value:

SURRENDER CHARGE. No sales charge is deducted from the single premium
payment at the time that it is paid. However, we will deduct a contingent
deferred sales charge (a "surrender charge") if you surrender your Contract or
if you take a withdrawal in excess of the free withdrawal amount during a Term.
The surrender charge is charged against the contract value and is based on the
amount of the withdrawal. This charge is intended to cover sales expenses that
we have incurred. We may in the future reduce or waive the surrender charge in
certain situations and will never charge more than the maximum surrender
charges. The percentage deducted at the time of surrender or excess withdrawal
depends on the number of complete years that have elapsed since the beginning of
the Term.

MRI-121979 18

The surrender charge varies by the length of the Term selected, beginning with
8% during contract year 1 and reducing by 1% per year to the earlier of the end
of the Term or the 8th contract year. No surrender charge is imposed upon a
surrender made during the 30-day period prior to the end of a Term.

The surrender charge period resets at the beginning of each Term. Upon
withdrawal, it is charged against the remaining contract value after you have
received the amount requested for withdrawal, and is based on the amount of the
withdrawal including the amount deducted for the surrender charge. Upon
surrender, a surrender charge, as well as a Market Value Adjustment, will be
applied retroactively with respect to any free withdrawal amount previously
withdrawn within the same contract year as the surrender. The following table
shows the schedule of the surrender charge that will apply.

COMPLETE YEARS ELAPSED 0 | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8+
SINCE START OF TERM | | | | | | | |
| | | | | | | |
SURRENDER CHARGE 8% | 7% | 6% | 5% | 4% | 3% | 2% | 1% | 0%

For examples that illustrate how the surrender charge works, see Appendix D.

WAIVER OF SURRENDER CHARGE FOR EXTENDED MEDICAL CARE. We will waive the
surrender charge in most states in the following events: (i) you begin receiving
qualified extended medical care on or after the first contract anniversary for
at least 45 days during a 60-day period and your request for the surrender or
withdrawal, together with all required documentation is received at our Customer
Service Center during the term of your care or within 90 days after the last day
of your care; or (ii) you are first diagnosed by a qualifying medical
professional, on or after the first contract anniversary, as having a qualifying
terminal illness. We do not waive the Market Value Adjustment in these
circumstances. Amounts withdrawn from the Indexed Accounts will not share in
Index Returns for the current period (i.e., the Term for the Term Indexed
Account and the current contract year for the Annual Indexed Account). We have
the right to require an examination by a physician of our choice. If we require
such an examination, we will pay for it. You are required to send us
satisfactory written proof of illness. See your Contract for more information.
The waiver of surrender charge may not be available in all states.

FREE WITHDRAWAL AMOUNT. No surrender charge or Market Value Adjustment
applies to withdrawals made during the 30-day period prior to the end of a Term.
In the first contract year, the free withdrawal amount is limited to systematic
interest withdrawals from the Interest Account. After the first contract year,
the free withdrawal amount equals 10% of your contract value as of the close of
business on the day we receive the withdrawal request at our Customer Service
Center.

SURRENDER CHARGE FOR EXCESS WITHDRAWALS. We will deduct a surrender charge
for excess withdrawals. We consider a withdrawal to be an "excess withdrawal"
when the amount you withdraw in any contract year exceeds the free withdrawal
amount. Where you are receiving systematic withdrawals, any combination of
regular withdrawals taken and any systematic withdrawals expected to be received
in a contract year will be included in determining the amount of the excess
withdrawal. Such a withdrawal will be considered a partial surrender of the
Contract and we will impose a surrender charge and any associated premium tax.
ANY EXCESS WITHDRAWAL TAKEN OTHER THAN DURING THE 30-DAY PERIOD PRIOR TO THE END
OF A TERM WILL TRIGGER A MARKET VALUE ADJUSTMENT.

For examples that illustrate how the surrender charge works, see Appendix D. For
a discussion of the Market Value Adjustment, see "Market Value Adjustment."

PREMIUM TAXES. We may make a charge for state and local premium taxes
depending on your state of residence. The tax can range from 0% to 3.5% of the
contract value. We have the right to change this amount to conform with changes
in the law or if you change your state of residence.

We deduct the premium tax from your contract value on the annuity start date.
However, some jurisdictions impose a premium tax at the time that premiums are
paid, regardless of when the annuity payments begin. In those states we may
defer collection of the premium taxes from your contract value and deduct it
when you surrender the Contract, when you take an excess withdrawal, or on the
annuity start date.

MRI-121979 19

- --------------------------------------------------------------------------------
THE ANNUITY OPTIONS
- --------------------------------------------------------------------------------

ANNUITIZATION OF YOUR CONTRACT

If the annuitant and contract owner are living on the annuity start date, we
will begin making payments to the contract owner under an income plan. We will
make these payments under the annuity option chosen. You may change your annuity
option by making a written request to us at least 30 days before the annuity
start date. The amount of the payments will be determined by applying the
annuitization value on the annuity start date in accordance with the annuity
option you chose. The annuitization value equals the greater of:

a) Contract value plus/minus the Market Value Adjustment (unless the
annuity start date falls within the 30-day period prior to the end
of a Term), or

b) The Minimum Guaranteed Account Values for the Indexed Accounts plus
the contract value for the Interest Account plus/minus the Market
Value Adjustment (unless the annuity start date falls within the
30-day period prior to the end of a Term).

If you annuitize prior to the end of the current contract year, amounts
allocated to the Annual Indexed Account will not participate in any Index
Returns for that period. Because Term Indexed Account Value does not participate
in Index Returns if annuitized prior to the end of a Term, we will not allow you
to allocate contract value to the Term Indexed Account if you are less than 5
years from your annuity start date on a renewal date.

You may also elect an annuity option on surrender of the Contract for its cash
surrender value or you may choose one or more annuity options for the payment of
death benefit proceeds while it is in effect and before the annuity start date.
If, at the time of the contract owner's death or the annuitant's death (if the
contract owner is not an individual), no option has been chosen for paying death
benefit proceeds, the beneficiary may choose an annuity option within 60 days. A
beneficiary's right to elect an annuity option or lump sum payment may have been
restricted by the contract owner. If so, such rights or options will not be
available to the beneficiary. In all events, payments of death benefit proceeds
must comply with the distribution requirements of applicable federal tax law.

The minimum monthly annuity income payment that we will make is $20. We may
require that a single sum payment be made if the contract value is less than
$2,000 or if the calculated monthly annuity income payment is less than $20.

For each annuity option we will issue a separate written agreement putting the
annuity option into effect. Before we pay any annuity benefits, we require the
return of your Contract. If your Contract has been lost, we will require that
you complete and return the applicable lost Contract form. Various factors will
affect the level of annuity benefits, such as the annuity option chosen and the
applicable payment rate used.

Our current annuity options provide only for fixed payments. Fixed annuity
payments are regular payments, the amount of which is fixed and guaranteed by
us. Some fixed annuity options provide fixed payments either for a specified
period of time or for the life of the annuitant. The amount of life income
payments will depend on the form and duration of payments you chose, the age of
the annuitant or beneficiary (and gender, where appropriate under applicable
law), the total contract value applied, and the applicable payment rate.

Our approval is needed for any option where:

(1) The person named to receive payment is other than the contract owner
or beneficiary;

(2) The person named is not a natural person, such as a corporation; or

(3) Any income payment would be less than the minimum annuity income
payment allowed.

MRI-121979 20

SELECTING THE ANNUITY START DATE

You select the annuity start date, which is the date on which the annuity
payments commence. The annuity start date must be at least 1 year from the
contract date but before the month immediately following the annuitant's 90th
birthday, or 10 years from the contract date, if later. If, on the annuity start
date, a surrender charge remains, the elected annuity option must include a
period certain of at least 5 years.

If you do not select an annuity start date, it will automatically begin in the
month following the annuitant's 90th birthday, or 10 years from the contract
date, if later.

If the annuity start date occurs when the annuitant is at an advanced age, such
as at age 85, it is possible that the Contract will not be considered an annuity
for federal tax purposes. See "Federal Tax Considerations." For a Contract
purchased in connection with a qualified plan, other than a Roth IRA,
distributions must commence not later than April 1st of the calendar year
following the calendar year in which you attain age 70 1/2 or, in some case,
retire. Distributions may be made through annuitization or withdrawals. You
should consult your tax adviser for tax advice.

FREQUENCY OF ANNUITY PAYMENTS

You choose the frequency of the annuity payments. They may be monthly,
quarterly, semi-annually, or annually. If we do not receive written notice from
you, we will make the payments monthly. There may be certain restrictions on
minimum payments that we will allow.

THE ANNUITY OPTIONS

We offer the 3 annuity options shown below. Payments under Options 1, 2, and 3
are fixed. The contract value can be applied to any other annuitization plan
that we choose to offer on the annuity start date. Annuity payments under other
available options may be fixed and/or variable.

OPTION 1. INCOME FOR A FIXED PERIOD. Under this option, we make monthly
payments in equal installments for a fixed number of years based on the contract
value on the annuity start date. We guarantee that each monthly payment will be
at least the amount stated in your Contract. If you prefer, you may request that
payments be made in annual, semi-annual, or quarterly installments. We will
provide you with illustrations if you ask for them. If the cash surrender value
or contract value is applied under this option, a 10% penalty tax may apply to
the taxable portion of each income payment until the contract owner reaches age
59 1/2.

OPTION 2. INCOME FOR LIFE WITH A PERIOD CERTAIN. Payment is made for the
life of the annuitant in equal monthly installments and guaranteed for at least
a period certain such as 10 or 20 years. Other periods certain may be available
to you on request. You may choose a refund period instead. Under this
arrangement, income is guaranteed until payments equal the amount applied. If
the person named lives beyond the guaranteed period, payments continue until his
or her death. We guarantee that each payment will be at least the amount
specified in the Contract corresponding to the person's age on his or her last
birthday before the annuity start date. Amounts for ages not shown in the
Contract are available if you ask for them.

OPTION 3. JOINT LIFE INCOME. This option is available when there are 2
persons named to determine annuity payments. At least one of the persons named
must be either the contract owner or beneficiary of the Contract. We guarantee
monthly payments will be made as long as at least one of the named persons is
living. There is no minimum number of payments. Monthly payment amounts are
available if you ask for them.

The contract value can be applied to any other annuitization plan that we choose
to offer on the annuity start date. Annuity payments under other available
options may be fixed and/or variable. If variable and subject to the Investment
Company Act of 1940, it will comply with requirements of such Act.

PAYMENT WHEN NAMED PERSON DIES

When the person named to receive payment dies, we will pay any amounts still due
as provided in the annuity agreement between you and Golden American. The
amounts we will pay are determined as follows:

MRI-121979 21

(1) For Option 1, or any remaining guaranteed payments under Option 2,
we will continue payments. Under Options 1 and 2, the discounted
values of the remaining guaranteed payments may be paid in a single
sum. This means we deduct the amount of the interest each remaining
guaranteed payment would have earned had it not been paid out
early. The discount interest rate is never less than 3% for Option
1 and for Option 2 per year. We will, however, base the discount
interest rate on the interest rate used to calculate the payments
for Options 1 and 2 if such payments were not based on the tables
in the Contract.

(2) For Option 3, no amounts are payable after both named persons have
died.

For other available options, the annuity option agreement will state the
amount we will pay, if any

- --------------------------------------------------------------------------------
OTHER CONTRACT PROVISIONS
- --------------------------------------------------------------------------------

REPORTS TO CONTRACT OWNERS

We will send you an annual report within 31 days after the end of each contract
year. The report will show the contract value, cash surrender value, and the
death benefit as of the end of the contract year. The report will also show the
amounts deducted from or added to the contract value since the last report. You
have 30 days to notify our Customer Service Center of any errors or
discrepancies contained in the report or in any confirmation notices. We will
also send you any other reports, notices or documents we are required by law to
furnish to you.

SUSPENSION OF PAYMENTS

The Company reserves the right to delay payment for up to 6 months.

IN CASE OF ERRORS IN YOUR APPLICATION

If an age or sex given in the application or enrollment form is misstated, the
amounts payable or benefits provided by the Contract shall be those that the
premium payment would have bought at the correct age or sex.

ASSIGNING THE CONTRACT AS COLLATERAL

You may assign a non-qualified Contract as collateral security for a loan but
you should understand that your rights and any beneficiary's rights may be
subject to the terms of the assignment. An assignment may have federal tax
consequences. You must give us satisfactory written notice at our Customer
Service Center in order to make or release an assignment. We are not responsible
for the validity of any assignment.

CONTRACT CHANGES -- APPLICABLE TAX LAW

We have the right to make changes in the Contract to continue to qualify the
Contract as an annuity under applicable federal tax law. You will be given
advance notice of such changes.

FREE LOOK

You may cancel your Contract within your 10-day free look period. We deem the
free look period to expire 15 days after we mail the Contract to you. Some
states may require a longer free look period. To cancel, you need to send your
Contract to our Customer Service Center or to the agent from whom you purchased
it. We will refund the contract value. For purposes of the refund during the
free look period, (i) we adjust your contract value for any Market Value
Adjustment, and (ii) then we include a refund of any charges deducted from your
contract value. The Market Value Adjustment during the free look period is
determined as described on page 11, but without adding .005 in the denominator
of the formula. Because of the potential positive or negative effect of the
Market Value Adjustment, the contract value returned may be greater or less than
the premium payment you paid. Some states require us to return to you the amount
of the paid premium (rather than the adjusted contract value) in which case you
will not be subject to investment risk during the free look period. Your
Contract is void as of the day we receive your Contract and cancellation

MRI-121979 22

request. We determine your contract value at the close of business on the day we
receive your written request.

GROUP OR SPONSORED ARRANGEMENTS

For certain group or sponsored arrangements, we may reduce any surrender
charges. We may also change the minimum premium payment requirement, or offer an
alternative or reduced death benefit.

SELLING THE CONTRACT

Directed Services, Inc. ("Directed Services") is the principal underwriter and
distributor of the Contract as well as for other contracts issued by Golden
American. The principal address of Directed Services is 1475 Dunwoody Drive,
West Chester, Pennsylvania 19380. Directed Services is a corporation organized
under the laws of New York and is a wholly owned subsidiary of Equitable of
Iowa. Directed Services is registered as a broker-dealer with the SEC under the
Securities Exchange Act of 1934, as well as with securities commissions in the
states in which it operates, and is a member of the National Association of
Securities Dealers, Inc. ("NASD").

Directed Services has the authority to enter into selling agreements with other
firms. Directed Services has entered into selling agreements with broker-dealers
to sell the Contracts through registered representatives. Those representatives
are registered with the NASD, and if applicable, also with the states in which
they do business. They also are licensed as insurance agents in the states in
which they do business.

We pay sales commissions to Directed Services for the sale of the Contracts.
Directed Services passes through the entire amount of the sales commission to
the broker-dealer whose registered representative sold the Contract. The maximum
sales commission payable will be approximately 6.5% of the premium payment. This
commission may be returned if the Contract is not continued through the first
contract year.

- --------------------------------------------------------------------------------
UNDERWRITER COMPENSATION
- --------------------------------------------------------------------------------
NAME OF PRINCIPAL AMOUNT OF COMMISSION OTHER
UNDERWRITER TO BE PAID COMPENSATION
Directed Services, Inc. Reimbursement of any
Maximum of 6.5% of covered expenses
premium payment incurred
except when by registered
combined representatives
with commissions on renewal in connection
of a Term or annual with the
trail commissions. distribution
of the Contracts.
- ------------------------ ------------------------------- -----------------------

Certain sales agreements may provide for a combination of a certain percentage
of commission at the time of sale, upon the start of a new Term, or an annual
trail commission (which when combined could exceed 6.5% of total premium
payments).

We may make additional cash payments to broker-dealers for marketing and
educational expenses and for the reimbursement of certain expenses incurred by
registered representatives in connection with the distribution of the Contracts.

MRI-121979 23

- --------------------------------------------------------------------------------
OTHER INFORMATION
- --------------------------------------------------------------------------------

STATE REGULATION

We are regulated by the Insurance Department of the State of Delaware. We are
also subject to the insurance laws and regulations of all jurisdictions where we
do business. The Contract offered by this prospectus has been approved where
required by those jurisdictions. We are required to submit annual statements of
our operations, including financial statements, to the Insurance Departments of
the various jurisdictions in which we do business to determine solvency and
compliance with state insurance laws and regulations.

LEGAL PROCEEDINGS

The Company, like other insurance companies, may be involved in lawsuits,
including class action lawsuits. In some class action and other lawsuits
involving insurers, substantial damages have been sought and/or material
settlement payments have been made. We believe that currently there are no
pending or threatened lawsuits that are reasonably likely to have a materially
adverse impact on the Company.

LEGAL MATTERS

The legal validity of the Contracts was passed on by Kimberly J. Smith, Esquire,
Executive Vice President, General Counsel and Assistant Secretary of Golden
American.

EXPERTS

The audited consolidated financial statements of Golden American Life Insurance
Company as of December 31, 2000 and 1999 and for each of the three years in the
period ended December 31, 2000 appearing in this prospectus and in the
Registration Statement of which this prospectus is a part have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report thereon
appearing in this prospectus and in the Registration Statement of which this
prospectus is a part and included or incorporated herein by reference in
reliance upon such report given on the authority of such firm as experts in
accounting and auditing.

FURTHER INFORMATION

This prospectus does not contain all of the information contained in the
registration statement of which this prospectus is a part. Portions of the
registration statement have been omitted from this prospectus as allowed by the
Securities and Exchange Commission (SEC). You may obtain the omitted information
from the offices of the SEC, as described below. We are required by the
Securities Exchange Act of 1934 to file periodic reports and other information
with the SEC. You may inspect or copy information concerning the Company at the
Public Reference Room of the SEC at:

Securities and Exchange Commission
450 Fifth Street NW
Washington, DC 20549

You may also obtain copies of these materials at prescribed rates from the
Public Reference Room of the above office. You may obtain information on the
operation of the Public Reference Room by calling the SEC at either
1-800-SEC-0330 or 1-202-942-8090. You may also find more information about the
Company at www.ing.com.

MRI-121979 24

- --------------------------------------------------------------------------------
FEDERAL TAX CONSIDERATIONS
- --------------------------------------------------------------------------------

The following summary provides a general description of the federal income tax
considerations associated with this Contract and does not purport to be complete
or to cover all tax situations. This discussion is not intended as tax advice.
You should consult your counsel or other competent tax advisers for more
complete information. This discussion is based upon our understanding of the
present federal income tax laws. We do not make any representations as to the
likelihood of continuation of the present federal income tax laws or as to how
they may be interpreted by the IRS.

TYPES OF CONTRACTS: NON-QUALIFIED OR QUALIFIED

The Contract may be purchased on a non-tax-qualified basis or purchased on a
tax-qualified basis. Qualified Contracts are designed for use by individuals
whose premium payments are comprised solely of proceeds from and/or
contributions under retirement plans that are intended to qualify as plans
entitled to special income tax treatment under Sections 401(a), 403(b), 408, or
408A of the Code. The ultimate effect of federal income taxes on the amounts
held under a Contract, or annuity payments, depends on the type of retirement
plan, on the tax and employment status of the individual concerned, and on our
tax status. In addition, certain requirements must be satisfied in purchasing a
qualified Contract with proceeds from a tax-qualified plan and receiving
distributions from a qualified Contract in order to continue receiving favorable
tax treatment. Some retirement plans are subject to distribution and other
requirements that are not incorporated into our Contract administration
procedures. Contract owners, participants and beneficiaries are responsible for
determining that contributions, distributions and other transactions with
respect to the Contract comply with applicable law. Therefore, you should seek
competent legal and tax advice regarding the suitability of a Contract for your
particular situation. The following discussion assumes that qualified Contracts
are purchased with proceeds from and/or contributions under retirement plans
that qualify for the intended special federal income tax treatment.

TAX STATUS OF THE CONTRACTS

REQUIRED DISTRIBUTIONS. In order to be treated as an annuity contract for
federal income tax purposes, the Code requires any nonqualified Contract to
contain certain provisions specifying how your interest in the Contract will be
distributed in the event of your death. The non-qualified Contracts contain
provisions that are intended to comply with these Code requirements, although no
regulations interpreting these requirements have yet been issued. We intend to
review such provisions and modify them if necessary to assure that they comply
with the applicable requirements when such requirements are clarified by
regulation or otherwise.

Other rules may apply to Qualified Contracts.

The following discussion assumes that the Contracts will qualify as annuity
contracts for federal income tax purposes.

TAX TREATMENT OF ANNUITIES

IN GENERAL. We believe that if you are a natural person you will generally
not be taxed on increases in the value of a Contract until a distribution occurs
or until annuity payments begin. (For these purposes, the agreement to assign or
pledge any portion of the contract value, and, in the case of a qualified
Contract, any portion of an interest in the qualified plan, generally will be
treated as a distribution.)

TAXATION OF NON-QUALIFIED CONTRACTS

NON-NATURAL PERSON. The owner of any annuity contract who is not a natural
person generally must include in income any increase in the excess of the
contract value over the "investment in the contract" (generally, the premiums or
other consideration you paid for the contract less any nontaxable withdrawals)
during the taxable year. There are some exceptions to this rule and a
prospective contract owner that is not a natural person may wish to discuss
these with a tax adviser. The following discussion generally applies to
Contracts owned by natural persons.

MRI-121979 25

WITHDRAWALS. When a withdrawal from a non-qualified Contract occurs, the
amount received will be treated as ordinary income subject to tax up to an
amount equal to the excess (if any) of the contract value (unreduced by the
amount of any surrender charge) immediately before the distribution over the
contract owner's investment in the Contract at that time. The tax treatment of
Market Value Adjustments is uncertain. You should consult a tax adviser if you
are considering taking a withdrawal from your Contract in circumstances where a
Market Value Adjustment would apply.

In the case of a surrender under a non-qualified Contract, the amount received
generally will be taxable only to the extent it exceeds the contract owner's
investment in the Contract.

PENALTY TAX ON CERTAIN WITHDRAWALS. In the case of a distribution from a
non-qualified Contract, there may be imposed a federal tax penalty equal to 10%
of the amount treated as income. In general, however, there is no penalty on
distributions:

o made on or after the taxpayer reaches age 59 1/2;

o made on or after the death of a contract owner;

o attributable to the taxpayer's becoming disabled; or

o made as part of a series of substantially equal periodic payments for
the life (or life expectancy) of the taxpayer.

Other exceptions may be applicable under certain circumstances and special rules
may be applicable in connection with the exceptions enumerated above. A tax
adviser should be consulted with regard to exceptions from the penalty tax.

ANNUITY PAYMENTS. Although tax consequences may vary depending on the
payment option elected under an annuity contract, a portion of each annuity
payment is generally not taxed and the remainder is taxed as ordinary income.
The non-taxable portion of an annuity payment is generally determined in a
manner that is designed to allow you to recover your investment in the Contract
ratably on a tax-free basis over the expected stream of annuity payments, as
determined when annuity payments start. Once your investment in the Contract has
been fully recovered, however, the full amount of each annuity payment is
subject to tax as ordinary income.

TAXATION OF DEATH BENEFIT PROCEEDS. Amounts may be distributed from a
Contract because of your death or the death of the annuitant. Generally, such
amounts are includible in the income of recipient as follows: (i) if distributed
in a lump sum, they are taxed in the same manner as a surrender of the Contract,
or (ii) if distributed under a payment option, they are taxed in the same way as
annuity payments.

TRANSFERS, ASSIGNMENTS, EXCHANGES AND ANNUITY DATES OF A CONTRACT. A
transfer or assignment of ownership of a Contract, the designation of an
annuitant, or payee other than an owner, the selection of certain dates for
commencement of the annuity phase, or the exchange of a Contract may result in
certain tax consequences to you that are not discussed herein. A contract owner
contemplating any such transfer, assignment, designation or exchange, should
consult a tax advisor as to the tax consequences.

WITHHOLDING. Annuity distributions are generally subject to withholding for
the recipient's federal income tax liability. Recipients can generally elect,
however, not to have tax withheld from distributions.

MULTIPLE CONTRACTS. All non-qualified deferred annuity contracts that are
issued by us (or our affiliates) to the same contract owner during any calendar
year are treated as one non-qualified deferred annuity contract for purposes of
determining the amount includible in such contract owner's income when a taxable
distribution occurs.

TAXATION OF QUALIFIED CONTRACTS

The Contracts are designed for use with several types of qualified plans. The
tax rules applicable to participants in these qualified plans vary according to
the type of plan and the terms and conditions of the plan itself. Special
favorable tax treatment may be available for certain types of contributions and

MRI-121979 26

distributions. Adverse tax consequences may result from: contributions in excess
of specified limits; distributions before age 59 1/2 (subject to certain
exceptions); distributions that do not conform to specified commencement and
minimum distribution rules; and in other specified circumstances. Therefore, no
attempt is made to provide more than general information about the use of the
Contracts with the various types of qualified retirement plans. Contract owners,
annuitants, and beneficiaries are cautioned that the rights of any person to any
benefits under these qualified retirement plans may be subject to the terms and
conditions of the plans themselves, regardless of the terms and conditions of
the Contract, but we shall not be bound by the terms and conditions of such
plans to the extent such terms contradict the Contract, unless the Company
consents.

DISTRIBUTIONS. Annuity payments are generally taxed in the same manner as
under a non-qualified Contract. When a withdrawal from a qualified Contract
occurs, a pro rata portion of the amount received is taxable, generally based on
the ratio of the contract owner's investment in the Contract (generally, the
premiums or other consideration paid for the Contract) to the participant's
total accrued benefit balance under the retirement plan. For qualified
Contracts, the investment in the Contract can be zero. For Roth IRAs,
distributions are generally not taxed, except as described below. For qualified
plans under Section 401(a) and 403(b), the Code requires that distributions
generally must commence no later than the later of April 1 of the calendar year
following the calendar year in which the contract owner (or plan participant)
(i) reaches age 70 1/2 or (ii) retires, and must be made in a specified form or
manner. If the plan participant is a "5 percent owner" (as defined in the Code),
distributions generally must begin no later than April 1 of the calendar year
following the calendar year in which the contract owner (or plan participant)
reaches age 70 1/2. For IRAs described in Section 408, distributions generally
must commence no later than the later of April 1 of the calendar year following
the calendar year in which the contract owner (or plan participant) reaches age
70 1/2. Roth IRAs under Section 408A do not require distributions at any time
before the contract owner's death.

WITHHOLDING. Distributions from certain qualified plans generally are
subject to withholding for the contract owner's federal income tax liability.
The withholding rates vary according to the type of distribution and the
contract owner's tax status. The contract owner may be provided the opportunity
to elect not to have tax withheld from distributions. "Eligible rollover
distributions" from section 401(a) plans and section 403(b) tax-sheltered
annuities are subject to a mandatory federal income tax withholding of 20%. An
eligible rollover distribution is the taxable portion of any distribution from
such a plan, except certain distributions that are required by the Code or
distributions in a specified annuity form. The 20% withholding does not apply,
however, if the contract owner chooses a "direct rollover" from the plan to
another tax-qualified plan or IRA.

Brief descriptions of the various types of qualified retirement plans in
connection with a Contract follow. We will endorse the Contract as necessary to
conform it to the requirements of such plan.

CORPORATE AND SELF-EMPLOYED PENSION AND PROFIT SHARING PLANS Section 401(a) of
the Code permits corporate employers to establish various types of retirement
plans for employees, and permits self-employed individuals to establish these
plans for themselves and their employees. These retirement plans may permit the
purchase of the Contracts to accumulate retirement savings under the plans.
Adverse tax or other legal consequences to the plan, to the participant, or to
both may result if this Contract is assigned or transferred to any individual as
a means to provide benefit payments, unless the plan complies with all legal
requirements applicable to such benefits before transfer of the Contract.
Employers intending to use the Contract with such plans should seek competent
advice.

INDIVIDUAL RETIREMENT ANNUITIES

Section 408 of the Code permits eligible individuals to contribute to an
individual retirement program known as an "Individual Retirement Annuity" or
"IRA." These IRAs are subject to limits on the amount that can be contributed,
the deductible amount of the contribution, the persons who may be eligible, and
the time when distributions commence. Also, distributions from certain other
types of qualified retirement plans may be "rolled over" or transferred on a
tax-deferred basis into an IRA. There are significant restrictions on rollover
or transfer contributions from Savings Incentive Match Plans (SIMPLE), under
which certain employers may provide contributions to IRAs on behalf of their
employees, subject to special restrictions. Employers

MRI-121979 27

may establish Simplified Employee Pension (SEP) Plans to provide IRA
contributions on behalf of their employees. Sales of the Contract for use with
IRAs may be subject to special requirements of the IRS.

ROTH IRA

Section 408A of the Code permits certain eligible individuals to contribute to a
Roth IRA. Contributions to a Roth IRA, which are subject to certain limitations,
are not deductible, and must be made in cash or as a rollover or transfer from
another Roth IRA or other IRA. A rollover from or conversion of an IRA to a Roth
IRA may be subject to tax, and other special rules may apply. Distributions from
a Roth IRA generally are not taxed, except that, once aggregate distributions
exceed contributions to the Roth IRA, income tax and a 10% penalty tax may apply
to distributions made (1) before age 59 1/2 (subject to certain exceptions) or
(2) during the five taxable years starting with the year in which the first
contribution is made to any Roth IRA. A 10% penalty tax may apply to amounts
attributable to a conversion from an IRA if they are distributed during the five
taxable years beginning with the year in which the conversion was made.

TAX SHELTERED ANNUITIES

Section 403(b) of the Code allows employees of certain Section 501(c)(3)
organizations and public schools to exclude from their gross income the premium
payments made, within certain limits, on a Contract that will provide an annuity
for the employee's retirement. These premium payments may be subject to FICA
(Social Security) tax. Distributions of (1) salary reduction contributions made
in years beginning after December 31, 1988; (2) earnings on those contributions;
and (3) earnings on amounts held as of the last year beginning before January 1,
1989, are not allowed prior to age 59 1/2, separation from service, death or
disability. Salary reduction contributions may also be distributed upon
hardship, but would generally be subject to penalties.

OTHER TAX CONSEQUENCES

As noted above, the foregoing comments about the federal tax consequences under
the Contracts are not exhaustive, and special rules are provided with respect to
other tax situations not discussed in this prospectus. Further, the federal
income tax consequences discussed herein reflect our understanding of current
law, and the law may change. Federal estate and state and local estate,
inheritance and other tax consequences of ownership or receipt of distributions
under a Contract depend on the individual circumstances of each contract owner
or recipient of the distribution. A competent tax adviser should be consulted
for further information.

POSSIBLE CHANGES IN TAXATION

Although the likelihood of legislative change is uncertain, there is always the
possibility that the tax treatment of the Contracts could change by legislation
or other means. It is also possible that any change could be retroactive (that
is, effective before the date of the change). You should consult a tax adviser
with respect to legislative developments and their effect on the Contract.

MRI-121979 28

- --------------------------------------------------------------------------------
MORE INFORMATION ABOUT GOLDEN AMERICAN LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------

SELECTED FINANCIAL DATA

The following selected financial data prepared in accordance with generally
accepted accounting principles ("GAAP") for Golden American should be read in
conjunction with the financial statements and notes thereto included in this
prospectus. On October 24, 1997, PFHI Holdings, Inc. ("PFHI"), a Delaware
corporation, acquired all of the outstanding capital stock of Equitable of Iowa
Companies ("Equitable of Iowa"), according to a merger agreement among Equitable
of Iowa, PFHI and ING Groep N.V. (the "ING acquisition"). PFHI changed its
name to Eqiutable of Iowa Companies, Inc. ("EIC") on August 13, 1996,
Equitable of Iowa acquired all of the outstanding capital stock of BT Variable,
Inc., then the parent of Golden American (the "Equitable acquisition"). For
financial statement purposes, the ING acquisition was accounted for as a
purchase effective October 25, 1997 and the Equitable acquisition was accounted
for as a purchase effective August 14, 1996. As a result, the financial data
presented below for periods after October 24, 1997, are presented on the
Post-Merger new basis of accounting, for the period August 14, 1996 through
October 24, 1997, are presented on the Post-Acquisition basis of accounting, and
for August 13, 1996 and prior periods are presented on the Pre-Acquisition basis
of accounting.

On December 31, 2001, EIC contributed all of the outstanding stock of Golden
American to Equitable Life Insurance Company of Iowa, a wholly owned subsidiary
of EIC ("Equitable Life"). This change of parent has no effect on the financial
information presented below.

SELECTED GAAP BASIS FINANCIAL DATA
(IN THOUSANDS)
POST-MERGER
----------------------------------------------------------------------------------
For the Period For the Period
January 1, For the Year For the Year For the Year October 25,
2001 through Ended Ended Ended 1997 through
September 30, December 31, December 31, December 31, December 31,
2001 2000 1999 1998 1997
-------------- ------------ ------------ ------------ --------------

Annuity and Interest
Sensitive Life
Product Charges................. $ 117,308 $ 144,877 $ 82,935 $ 39,119 $ 3,834
Net Income (Loss) before
Federal Income Tax ............. $ 5,513 $ 32,862 $ 19,737 $ 10,353 $ (279)
Net Income (Loss)................... $ 3,444 $ 19,180 $ 11,214 $ 5,074 $ (425)
Total Assets........................ $ 12,031,210 $ 11,852,677 $ 9,392,857 $ 4,754,623 $ 2,446,395
Total Liabilities................... $ 11,270,516 $ 11,235,540 $ 8,915,008 $ 4,400,729 $ 2,219,082
Total Stockholder's Equity.......... $ 760,694 $ 617,137 $ 477,849 $ 353,894 $ 227,313

POST-ACQUISITION PRE-ACQUISITION
------------------------------ ---------------
For the Period For the Period For the Period
January 1,1997 August 14, January 1,
through 1996 through 1996 through
October 24, December 31, August 13,
1997 1996 1996
-------------- -------------- ---------------

Annuity and Interest
Sensitive Life Product Charges................... $ 18,288 $ 8,768 $ 12,259
Net Income (Loss) before Federal Income Tax.......... $ (608) $ 570 $ 1,736
Net Income (Loss)..................................... $ 729 $ 350 $ 3,199
Total Assets.......................................... N/A $ 1,677,899 N/A
Total Liabilities..................................... N/A $ 1,537,415 N/A
Total Stockholder's Equity............................ N/A $ 140,484 N/A

MRI-121979 29

BUSINESS ENVIRONMENT

The current business and regulatory environment presents many challenges to the
insurance industry. The variable annuity competitive environment remains intense
and is dominated by a number of large highly rated insurance companies.
Increasing competition from traditional insurance carriers as well as banks and
mutual fund companies offers consumers many choices. However, overall demand for
variable insurance products remains strong for several reasons including: low
levels of inflation, moderate interest rate levels, a growing U.S. economy; an
aging U.S. population that is increasingly concerned about retirement, estate
planning, and maintaining their standard of living in retirement; and potential
reductions in government and employer-provided benefits at retirement, as well
as lower public confidence in the adequacy of those benefits.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS

The purpose of this section is to discuss and analyze Golden American Life
Insurance Company's ("Golden American") consolidated results of operations. In
addition, some analysis and information regarding financial condition and
liquidity and capital resources is provided. This analysis should be read
jointly with the condensed consolidated financial statements, related notes, and
the Cautionary Statement Regarding Forward-Looking Statements, which appear
elsewhere in this report. Golden American reports financial results on a
consolidated basis. The consolidated financial statements include the accounts
of Golden American and its wholly owned subsidiary, First Golden American Life
Insurance Company of New York ("First Golden," and collectively with Golden
American, the "Companies").

RESULTS OF OPERATION

THE FIRST NINE MONTHS OF 2001
COMPARED TO SAME PERIOD OF 2000

PREMIUMS

PERCENTAGE DOLLAR
FOR THE NINE MONTHS ENDED SEPTEMBER 30 2001 CHANGE CHANGE 2000
-------- ---------- -------- --------
(Dollars in millions)

Variable annuity premiums:
Separate account........................ $ 303.9 (55.5)% $(378.8) $ 682.7
Fixed account........................... 1043.1 107.3 539.9 503.2
Total variable annuity premiums............. 1347.0 13.6 161.1 1,185.9
Fixed annuity premiums...................... 1.9 -- 1.9 --
Variable life premiums...................... 1.1 (26.7) (0.4) 1.5
-------- ------- ------ --------
Total premiums.............................. $1,350.0 13.7% $162.6 $1,187.4
======== ======= ====== ========

For the Companies' variable and fixed insurance contracts, premiums collected
are not reported as revenues, but as deposits to insurance liabilities. Revenues
for these products are recognized over time in the form of investment spread and
product charges.

Variable annuity premiums net of reinsurance increased 13.6% during the first
nine months of 2001 compared to the same period of 2000. This increase is
primarily due to sales of the Guarantee product, a registered fixed annuity
product introduced in the last quarter of 2000. Sales for this product totaled
$463.0 million in the first nine months of 2001. Also contributing to the
increase is a decline of $0.1 billion in ceded variable annuity separate account
premiums to $1.6 billion for the first nine months of 2000. This is mainly due
to the effects of modified coinsurance agreements. Offsetting these increases is
a reduction of $574.4 million in the sales of variable annuity separate account
products in the first nine months of 2001 as compared to the first nine months
of 2000.

MRI-121979 30

During the first nine months of 2001, First Golden began selling two fixed
annuity products, a Flex Annuity and a Multi-Year Guarantee Annuity. Premiums,
net of reinsurance, for variable products from a significant broker/dealer
having at least ten percent of total sales for the nine months ended September
30, 2001 totaled $132.8 million, or 10% of total premiums ($139.3 million, or
12% from a significant broker/dealer for the same period in 2000). Gross
premiums for variable products from a significant broker/dealer having at least
ten percent of total sales for the nine months ended September 30, 2001, totaled
$313.2 million, or 11% of total gross premiums ($659.9 million, or 22%, from two
significant broker/dealers for the same period in 2000).

REVENUES

PERCENTAGE DOLLAR
FOR THE NINE MONTHS ENDED SEPTEMBER 30 2001 CHANGE CHANGE 2000
-------- ---------- -------- --------
(Dollars in millions)

Annuity and interest sensitive life
product charges......................... $117.3 12.9% $13.4 $103.9
Management fee revenue..................... 18.7 11.0 1.9 16.8
Net investment income...................... 67.0 39.9 19.1 47.9
Realized losses on investments............. (1.5) (66.4) 3.0 (4.5)
------ ----- ----- ------
$201.5 22.8% $37.4 $164.1
====== ===== ===== ======

Total revenues increased 22.8% in the first nine months of 2001 from the same
period in 2000. Annuity and interest sensitive life product charges increased
12.9% in the first nine months of 2001 due to additional fees earned from the
higher average block of business under management in the variable separate
accounts and higher surrender charges. Golden American provides certain
managerial and supervisory services to Directed Services, Inc. ("DSI"). The fee
paid to Golden American for these services, which is calculated as a percentage
of average assets in the variable separate accounts, was $17.3 million and $15.6
million for the first nine months of 2001 and 2000, respectively. This increase
was due to the increasing average assets in the variable separate accounts.

Net investment income increased 39.9% in the first nine months of 2001 due to a
growth in invested assets during 2001 mainly related to the introduction of the
Guarantee product. The Companies had $1.5 million of realized losses on the sale
of investments in the first nine months of 2001, compared to losses of $4.5
million in the same period of 2000.

EXPENSES

Total insurance benefits and expenses increased $60.3 million, or 49.2%, to
$181.5 million in the first nine months of 2001 from the same period in 2000.
Interest credited to account balances decreased $22.6 million, or 15.4%, to
$124.1 million in the first nine months of 2001. The premium credit on the
Premium Plus product decreased $31.7 million to $73.9 million at September 30,
2001 due to a decrease in variable annuity sales of the separate account
product. This decrease was partially offset by an increase in interest credited
due to higher average account balances associated with the Companies' fixed
account options, mainly due to the introduction of the Guarantee product in the
fourth quarter of 2000. The guaranteed benefits reserve change was $19.6 million
for the nine months ended September 30, 2001 mainly due to the downturn in the
equity markets.

Commissions were nearly unchanged from September 30, 2000 at $160.8 million for
the nine months ended September 30, 2001. This is consistent with relatively
stable gross premiums for the nine months ended September 30, 2001 and 2000,
despite a change in the product sales mix. Insurance taxes, state licenses, and
fees increased $1.0 million, or 24.3%, to $5.0 million in the first nine months
of 2001. Changes in commissions and insurance taxes, state licenses, and fees
are generally related to changes in the level and mix or composition of fixed
and variable product sales. Most costs incurred as the result of sales have been
deferred, thus having very little impact on current earnings.

MRI-121979 31

General expenses increased $23.4 million, or 38.2%, to $84.6 million in the
first nine months of 2001. The Companies use a network of wholesalers to
distribute products, and the salaries and sales bonuses of these wholesalers are
included in general expenses. The portion of these salaries and related expenses
that varies directly with production levels is deferred thus having little
impact on current earnings. Contributing to this increase in general expenses
are additional cost allocations during the first nine months of 2001. The
increase in general expenses was partially offset by reimbursements received
from DSI, Equitable Life Insurance Company of Iowa ("Equitable Life"), ING
Mutual Funds Management Co., LLC, an affiliate, Security Life of Denver
Insurance Company, an affiliate, Southland Life Insurance Company, an affiliate,
and United Life & Annuity Insurance Company, an affiliate, for certain advisory,
computer, and other resources and services provided by the Companies.

During the first nine months of 2001 and 2000, the value of purchased insurance
in force ("VPIF") was adjusted to increase amortization by $1,116,000 and
$687,000, respectively, to reflect changes in the assumptions related to the
timing of estimated gross profits. Based on current conditions and assumptions
as to the impact of future events on acquired policies in force, the expected
approximate net amortization relating to VPIF as of September 30, 2001 is $0.8
million for the remainder of 2001, $2.9 million in 2002, $2.7 million in 2003,
$2.4 million in 2004, $1.9 million in 2005, and $1.4 million in 2006. Actual
amortization may vary based upon changes in assumptions and experience.

Amortization of deferred policy acquisition costs ("DPAC") decreased $9.3
million, or 18.8%, in the first nine months of 2001. The decrease in the
amortization was mainly due to an increase in the amount of deferred costs that
have been offset due to the modified coinsurance agreement entered into during
the second quarter of 2000. Deferred policy acquisition costs decreased $27.7
million, or 31.6%, for the nine months ended September 30, 2001. The decline in
the deferred policy acquisition costs was mainly due to a lower deferral of the
premium credit on the Premium Plus product.

Expenses and charges reimbursed to Golden American under modified coinsurance
agreements decreased from $220.2 million for the first nine months in 2000 to
$194.0 million during the first nine months in 2001. This reimbursement is
primarily due to a modified coinsurance agreement which was entered into during
the second quarter of 2000, with Equitable Life, an affiliate, covering a
considerable portion of Golden American's variable annuities issued after
January 1, 2000, excluding those with an interest rate guarantee. Under this
reinsurance agreement, $192.5 million and $214.7 in expenses and charges were
reimbursed during the first nine months of 2001 and 2000, respectively. This
reimbursement offset deferred policy acquisition costs and non-deferrable costs
related to policies reinsured under this agreement.

Interest expense decreased 3.6%, or $0.5 million, to $14.4 million in the first
nine months of 2001. Interest expense on a $25 million surplus note issued
December 1996 and expiring December 2026 was $1.5 million for the first nine
months of 2001 and 2000. Interest expense on a $60 million surplus note issued
in December 1998 and expiring December 2028 was $3.3 million for the first nine
months of 2001 and 2000, respectively. Interest expense on a $75 million surplus
note, issued September 1999 and expiring September 2029 was $4.4 million for the
first nine months of 2001 and 2000, respectively. Interest expense on a $50
million surplus note, issued December 1999 and expiring December 2029 was $3.1
million for the first nine months of 2001 and 2000. Interest expense on a $35
million surplus note issued December 1999 and expiring December 2029 was $2.1
million for the first nine months of 2001 and $2.3 million in 2000. Golden
American also paid $25,000 in 2001 and $0.4 million in 2000 to ING America
Insurance Holdings, Inc. ("ING AIH") for interest on a reciprocal loan
agreement. Interest expense on a revolving note payable with SunTrust Bank,
Atlanta was $117,000 and $36,000 for the first nine months of 2001 and 2000,
respectively.

INCOME

Net income was $3.4 million for the first nine months of 2001, a decrease of
$14.7 million, or 81.0% from the same period of 2000.

Comprehensive income for the first nine months of 2001 was $12.6 million, a
decrease of $9.2 million from comprehensive income of $21.8 million in the same
period of 2000.

MRI-121979 32

Net loss on a statutory basis was $206.8 million and $6.0 for the nine months
ended September 30, 2001 and 2000, respectively. This decrease is mainly due to
increased reserves related to the downturn in the equity markets.

2000 COMPARED TO 1999

PREMIUMS

PERCENTAGE DOLLAR
FOR THE YEAR ENDED DECEMBER 31 2000 CHANGE CHANGE 1999
-------- ---------- ------ ----
(Dollars in millions)

Variable annuity premiums:
Separate account.................... $1,307.3 (48.0)% $(1,204.4) $2,511.7
Fixed account....................... 793.1 2.9 22.4 770.7
Total variable annuity premiums......... 2,100.4 (36.0) (1,182.0) 3,282.4
Variable life premiums.................. 1.6 (81.8) (7.0) 8.6
-------- ------- --------- --------
Total premiums.......................... $2,102.0 (36.1)% $(1,189.0) $3,291.0
======== ======= ========= ========

For the Companies' variable insurance contracts, premiums collected are not
reported as revenues, but as deposits to insurance liabilities. Revenues for
these products are recognized over time in the form of investment spread and
product charges.

Variable annuity separate account premiums decreased 48.0% in 2000. Excluded
from the variable annuity separate account premiums above are $1,787.9 million
and $97.9 million for the years ended December 31, 2000 and 1999, respectively,
related to modified coinsurance agreements. The fixed account portion of the
Companies' variable annuity premiums increased 2.9% in 2000. Excluding the
effect of the modified coinsurance agreements, the increase in premiums resulted
from increased sales of existing annuity products and from the introduction of a
new annuity product during 2000 called GoldenSelect Guarantee Annuity.

Variable life premiums decreased 81.8% in 2000. In August 1999, Golden American
discontinued offering variable life products, but the Companies continue to
accept additional premiums from existing policyholders. Premiums, net of
reinsurance, for variable products from a significant broker/dealer having at
least ten percent of total sales for the year ended December 31, 2000, totaled
$235.3 million, or 11% of total net premiums compared to $918.4 million, or 28%,
from two significant broker/dealers for the year ended December 31, 1999. Gross
premiums for variable products from two significant broker/dealers having at
least ten percent of total sales for the year ended December 31, 2000, totaled
$831.0 million, or 21% of total gross premiums compared to $1,018.9 million, or
30%, from two significant broker/dealers for the year ended December 31, 1999.

REVENUES

PERCENTAGE DOLLAR
FOR THE YEAR ENDED DECEMBER 31 2000 CHANGE CHANGE 1999
-------- ---------- ------ ----
(Dollars in millions)

Annuity and interest sensitive life
product charges....................... $144.9 74.7% $62.0 $ 82.9
Management fee revenue.................... 23.0 106.4 11.9 11.1
Net investment income..................... 64.1 8.4 4.9 59.2
Realized losses on investments............ (6.6) (124.2) (3.7) (2.9)
-------- ------- ------ -------
$225.4 50.0% $75.1 $150.3
======== ======= ===== =======

Total revenues increased 50.0%, or $75.1 million, to $225.4 million in 2000.
Annuity and interest sensitive life product charges increased 74.7%, or $62.0
million, to $144.9 million in 2000, primarily due to additional fees earned from
the increasing block of business in the separate accounts.

MRI-121979 33

Golden American provides certain managerial and supervisory services to DSI, a
wholly owned subsidiary of EIC. The fee paid to Golden American for these
services, which is calculated as a percentage of average assets in the variable
separate accounts, was $21.3 million for 2000 and $10.1 million for 1999. This
increase is due to the increasing assets in the separate accounts and
renegotiation of the fee paid by DSI to Golden American.

Net investment income increased 8.4%, or $4.9 million, to $64.1 million in 2000
from $59.2 million in 1999, due to increasing investment yields, as well as a
larger average amount of assets backing the fixed account options within the
variable products.

During 2000, the Companies had net realized losses on investments of $6.6
million, mainly due to sales of fixed maturities, including a $142,000 write
down of an impaired fixed maturity. In 1999, the Companies had net realized
losses on investments of $2.9 million, including a $1.6 million write down of
two impaired fixed maturities.

EXPENSES

PERCENTAGE DOLLAR
FOR THE YEAR ENDED DECEMBER 31 2000 CHANGE CHANGE 1999
------- ---------- ------- ---------
(Dollars in millions)

Insurance benefits and expenses:
Annuity and interest sensitive life benefits:
Interest credited to account balances.......... $195.1 11.3% $19.8 $ 175.3
Benefit claims incurred in excess of
account balances............................. 4.9 (22.4) (1.4) 6.3
Underwriting, acquisition, and insurance
expenses:
Commissions.................................... 213.7 13.4 25.3 188.4
General expenses............................... 84.9 41.1 24.7 60.2
Insurance taxes, state licenses, and fees...... 4.5 12.5 0.5 4.0
Policy acquisition costs deferred.............. (168.4) (51.4) 178.0 (346.4)
Expenses and charges reimbursed under
modified coinsurance agreements.............. (225.8) 2,341.7 (216.6) (9.2)
Amortization:
Deferred policy acquisition costs............ 55.2 66.5 22.1 33.1
Value of purchased insurance in force........ 4.8 (23.0) (1.4) 6.2
Goodwill..................................... 3.8 -- -- 3.8
------ ------ ----- ------
$172.7 41.9% $51.0 $121.7
====== ====== ===== ======

Total insurance benefits and expenses increased 41.9%, or $51.0 million, in 2000
from $121.7 million in 1999. Interest credited to account balances increased
11.3%, or $19.8 million, in 2000 from $175.3 million in 1999. The premium credit
on the Premium Plus variable annuity product increased $8.2 million to $132.0
million at December 31, 2000. The remaining increase in interest credited
relates to higher average account balances and higher average credited rates
associated with the Companies' fixed account options within the variable
products.

Commissions increased 13.4%, or $25.3 million, in 2000 from $188.4 million in
1999 due to increased sales of the fixed and separate account options in 2000.
Insurance taxes, state licenses, and fees increased 12.5%, or $0.5 million, in
2000 from $4.0 million in 1999. Changes in commissions and insurance taxes,
state licenses, and fees are generally related to changes in the level and
composition of variable product sales. Most costs incurred as the result of
sales have been deferred, thus having very little impact on current earnings.

General expenses increased 41.1%, or $24.7 million, in 2000 from $60.2 million
in 1999. Management expects general expenses to continue to increase in 2001 as
a result of the emphasis on expanding the salaried wholesaler distribution
network and the growth in sales. The Companies use a network of wholesalers to

MRI-121979 34

distribute products, and the salaries and sales bonuses of these wholesalers are
included in general expenses. The portion of these salaries and related expenses
that varies directly with production levels is deferred thus having little
impact on current earnings. The increase in general expenses was partially
offset by reimbursements received from DSI, Equitable Life
, an affiliate, ING Mutual Funds Management Co., LLC, an
affiliate, Security Life of Denver Insurance Company, an affiliate, Southland
Life Insurance Company, an affiliate, and United Life & Annuity Insurance
Company, an affiliate, for certain advisory, computer, and other resources and
services provided by Golden American.

The Companies' previous balances of DPAC, VPIF, and unearned revenue reserve
were eliminated and a new asset of $44.3 million representing VPIF was
established for all policies in force at the merger date. During 2000, VPIF
established at the merger date of the Companies' Parent and ING, was adjusted to
reduce amortization by $1.6 million to reflect changes in the assumptions
related to the timing of estimated gross profits. During 1999, VPIF was adjusted
to increase amortization by $0.7 million to reflect changes in the assumptions
related to the timing of future gross profits. Amortization of DPAC increased
$22.1 million, or 66.5%, in 2000. This increase resulted from a growth in
deferred policy acquisition costs generated by expenses associated with the
large sales volume experienced since December 31, 1999. Deferred policy
acquisition costs decreased $178.0 million or 51.4% for the year ended December
31, 2000. This decrease was due to a modified coinsurance agreement which was
entered into during the second quarter of 2000, and which resulted in a $223.7
million decrease in deferred policy acquisition costs. Based on current
conditions and assumptions as to the impact of future events on acquired
policies in force, the expected approximate net amortization relating to VPIF as
of December 31, 2000, is $3.9 million in 2001, $3.6 million in 2002, $3.0
million in 2003, $2.4 million in 2004, and $1.9 million in 2005. Actual
amortization may vary based upon changes in assumptions and experience.

Expenses and charges reimbursed under modified coinsurance agreements increased
by $216.6 million to $225.8 million during 2000 as compared to the year ended
December 31, 1999. This was primarily due to a modified coinsurance agreement
which was entered into during the second quarter of 2000, with an affiliate,
Equitable Life, covering a part of the business issued after January 1, 2000.
This reinsurance agreement contributed $218.8 million to expenses and charges
reimbursed under modified coinsurance agreements during the year ended December
31, 2000. This was offset by a corresponding decrease in deferred policy
acquisition costs and reimbursement of non-deferrable costs related to policies
reinsured under this agreement.

Interest expense increased 123.4%, or $11.0 million, in 2000 from $8.9 million
in 1999. Interest expense on a $25 million surplus note issued December 1996 and
expiring December 2026 was $2.1 million for the year ended December 31, 2000,
unchanged from the same period of 1999. Interest expense on a $60 million
surplus note issued in December 1998 and expiring December 2028 was $4.4 million
for the year ended December 31, 2000, unchanged from the same period of 1999.
Interest expense on a $75 million surplus note, issued September 30, 1999 and
expiring September 29, 2029 was $5.8 million for the year ended December 31,
2000, and $1.5 million for the year ended December 31, 1999. Interest expense on
a $50 million surplus note, issued December 1999 and expiring December 2029 was
$4.1 million for the year ended December 31, 2000. Interest expense on a $35
million surplus note issued December 1999 and expiring December 2029 was $3.0
million for the year ended December 31, 2000. Golden American also paid $0.4
million in 2000 and $0.8 million in 1999 to ING AIH for interest on a reciprocal
loan agreement. Interest expense on a revolving note payable with SunTrust Bank,
Atlanta was $0.1 million and $0.2 million for the years ended December 31, 2000
and 1999, respectively.

INCOME. Net income for 2000 was $19.2 million, an increase of $8.0 million from
$11.2 million for 1999.

Comprehensive income for 2000 was $24.3 million, an increase of $21.3 million
from comprehensive income of $3.0 million for 1999.

MRI-121979 35

1999 COMPARED TO 1998

PREMIUMS

PERCENTAGE DOLLAR
FOR THE YEAR ENDED DECEMBER 31 1999 CHANGE CHANGE 1998
-------- ---------- ------ ----
(Dollars in millions)

Variable annuity premiums:
Separate account............... $2,511.7 71.9% $1,050.5 $1,461.2
Fixed account.................. 770.7 30.9 182.0 588.7
Total variable annuity premiums.... 3,282.4 60.1 1,232.5 2,049.9
Variable life premiums............. 8.6 (37.8) (5.2) 13.8
-------- ------ -------- --------
Total premiums..................... $3,291.0 59.5% $1,227.3 $2,063.7
======== ====== ======== ========

Variable annuity separate account premiums increased 71.9% in 1999. The fixed
account portion of the Companies' variable annuity premiums increased 30.9% in
1999. These increases resulted from increased sales of the Premium Plus variable
annuity product.

Variable life premiums decreased 37.8% in 1999. In August 1999, Golden American
discontinued offering variable life products. Premiums, net of reinsurance, for
variable products from two significant broker/dealers each having at least ten
percent of total sales for the year ended December 31, 1999 totaled $918.4
million, or 28% of premiums compared to $528.9 million, or 26%, from two
significant broker/dealers for the year ended December 31, 1998.

REVENUES

PERCENTAGE DOLLAR
FOR THE YEAR ENDED DECEMBER 31 1999 CHANGE CHANGE 1998
---- ---------- ------ ----
(Dollars in millions)

Annuity and interest sensitive life product
charges................................... $ 82.9 112.0% $43.8 $39.1
Management fee revenue........................ 11.1 131.2 6.3 4.8
Net investment income......................... 59.2 39.3 16.7 42.5
Realized gains (losses) on investments........ (2.9) 93.3 (1.4) (1.5)
------ ------ ----- -----
$150.3 77.0% $65.4 $84.9
====== ====== ===== =====

Total revenues increased 77.0%, or $65.4 million, to $150.3 million in 1999.
Annuity and interest sensitive life product charges increased 112.0%, or $43.8
million, to $82.9 million in 1999, primarily due to additional fees earned from
the increasing block of business in the separate accounts.

Golden American provides certain managerial and supervisory services to DSI. The
fee paid to Golden American for these services, which is calculated as a
percentage of average assets in the variable separate accounts, was $11.1
million for 1999 and $4.8 million for 1998.

Net investment income increased 39.3%, or $16.7 million, to $59.2 million in
1999 from $42.5 million in 1998, due to growth in invested assets from December
31, 1998, increasing interest rates, and a relative increase in below investment
grade investments.

During 1999, the Company had net realized losses on investments of $2.9 million,
which includes a $1.6 million write down of two impaired fixed maturities,
compared to net realized losses on investments of $1.5 million in 1998 which
included a $1.0 million write down of two impaired fixed maturities.

MRI-121979 36

EXPENSES

PERCENTAGE DOLLAR
FOR THE YEAR ENDED DECEMBER 31 1999 CHANGE CHANGE 1998
---- ---------- ------ ----
(Dollars in millions)

Insurance benefits and expenses:
Annuity and interest sensitive life benefits:
Interest credited to account balances.......... $ 175.3 84.7% $ 80.4 $ 94.9
Benefit claims incurred in excess of
account balances............................. 6.3 200.2 4.2 2.1
Underwriting, acquisition, and insurance
expenses:
Commissions.................................... 188.4 55.5 67.2 121.2
General expenses............................... 60.2 60.2 22.6 37.6
Insurance taxes, state licenses, and fees...... 4.0 (4.0) (0.1) 4.1
Policy acquisition costs deferred.............. (346.4) 75.1 (148.6) (197.8)
Amortization:
Deferred policy acquisition costs............ 33.1 543.3 28.0 5.1
Value of purchased insurance in force........ 6.2 32.0 1.5 4.7
Goodwill..................................... 3.8 -- -- 3.8
Expenses and charges reimbursed under
modified coinsurance agreements.............. (9.2) 64.3 (3.6) (5.6)
------- ----- ------ ------
$ 121.7 73.6% $ 51.6 $ 70.1
======= ===== ====== ======

Total insurance benefits and expenses increased 73.6%, or $51.6 million, in 1999
from $70.1 million in 1998. Interest credited to account balances increased
84.7%, or $80.4 million, in 1999 from $94.9 million in 1998. The premium credit
on the Premium Plus variable annuity product increased $69.3 million to $123.8
million at December 31, 1999. The bonus interest on the fixed account increased
$3.0 million to $10.9 million at December 31, 1999. The remaining increase in
interest credited relates to higher account balances associated with the
Companies' fixed account options within the variable products.

Commissions increased 55.5%, or $67.2 million, in 1999 from $121.2 million in
1998. Insurance taxes, state licenses, and fees decreased 4.0%, or $0.1 million,
in 1999 from $4.1 million in 1998. Changes in commissions and insurance taxes,
state licenses, and fees are generally related to changes in the level and
composition of variable product sales. Insurance taxes, state licenses, and fees
are impacted by several other factors, which include an increase in FICA taxes
primarily due to bonuses and expenses for the triennial insurance department
examination of Golden American, which were offset by a decrease in 1999 of
guaranty fund assessments paid. Most costs incurred as the result of sales have
been deferred, thus having very little impact on current earnings.

General expenses increased 60.2%, or $22.6 million, in 1999 from $37.6 million
in 1998. Management expects general expenses to continue to increase in 2000 as
a result of the emphasis on expanding the salaried wholesaler distribution
network and the growth in sales. The Companies use a network of wholesalers to
distribute products, and the salaries and sales bonuses of these wholesalers are
included in general expenses. The portion of these salaries and related expenses
that varies directly with production levels is deferred thus having little
impact on current earnings. The increase in general expenses was partially
offset by reimbursements received from DSI, Equitable Life, ING Mutual Funds
Management Co., LLC, an affiliate, Security Life of Denver Insurance Company, an
affiliate, Southland Life Insurance Company, an affiliate, and United Life &
Annuity Insurance Company, an affiliate, for certain advisory, computer, and
other resources and services provided by Golden American.

The Companies' previous balances of DPAC, VPIF, and unearned revenue reserve
were eliminated and a new asset of $44.3 million representing VPIF was
established for all policies in force at the merger date. During 1999, VPIF was
adjusted to increase amortization by $0.7 million to reflect changes in the
assumptions related to the timing of estimated gross profits. During 1998, VPIF
decreased $2.7 million to adjust the value of other receivables and increased
$0.2 million as a result of an adjustment to the merger costs. During 1998,

MRI-121979 37

VPIF was adjusted to reduce amortization by $0.2 million to reflect changes in
the assumptions related to the timing of future gross profits. Amortization of
DPAC increased $28.0 million, or 543.3%, in 1999. This increase resulted from
growth in policy acquisition costs deferred from $197.8 million at December 31,
1998 to $346.4 million at December 31, 1999, which was generated by expenses
associated with the large sales volume experienced since December 31, 1998.
Based on current conditions and assumptions as to the impact of future events on
acquired policies in force, the expected approximate net amortization relating
to VPIF as of December 31, 1999 is $4.0 million in 2000, $3.6 million in 2001,
$3.3 million in 2002, $2.8 million in 2003, and $2.3 million in 2004. Actual
amortization may vary based upon changes in assumptions and experience.

Expenses and charges reimbursed under modified coinsurance agreements increased
by $3.6 million due primarily to income received under a modified reinsurance
agreement with an unaffiliated reinsurer.

Interest expense increased 102.6%, or $4.5 million, in 1999 from $4.4 million in
1998. Interest expense on a $25 million surplus note issued December 1996 and
expiring December 2026 was $2.1 million for the year ended December 31, 1999,
unchanged from the same period of 1998. Interest expense on a $60 million
surplus note issued in December 1998 and expiring December 2028 was $4.3 million
for the year ended December 31, 1999. Interest expense on a $75 million surplus
note, issued September 30, 1999 and expiring September 29, 2029 was $1.5 million
for the year ended December 31, 1999. Golden American also paid $0.8 million in
1999 and $1.8 million in 1998 to ING AIH for interest on a reciprocal loan
agreement. Interest expense on a revolving note payable with SunTrust Bank,
Atlanta was $0.2 million and $0.3 million for the years ended December 31, 1999
and 1998, respectively. In addition, Golden American incurred interest expense
of $0.2 million in 1998 on a line of credit with Equitable Life.

INCOME. Net income for 1999 was $11.2 million, an increase of $6.1 million from
$5.1 million for 1998.

Comprehensive income for 1999 was $3.0 million, a decrease of $0.9 million from
comprehensive income of $3.9 million for 1998.

FINANCIAL CONDITION

RATINGS. Currently, the Companies' ratings are A+ by A. M. Best Company, AA+ by
Fitch IBCA, Duff & Phelps Credit Rating Company, and AA+ by Standard & Poor's
Rating Services ("Standard & Poor's").

INVESTMENTS. The financial statement carrying value and amortized cost basis of
the Companies' total investments increased 76.5% and 72.4%, respectively, during
the first nine months of 2001 after decreasing slightly in 2000. All of the
Companies' investments, other than mortgage loans on real estate, are carried at
fair value in the Companies' financial statements. The increase in the carrying
value of the Companies' investment portfolio was due mainly to net purchases, as
well as changes in unrealized appreciation and depreciation of fixed maturities.
Growth in the cost basis of the Companies' investment portfolio resulted from
the investment of premiums from the sale of the Companies' fixed account options
due mainly to the introduction of the Guarantee product. The Companies manage
the growth of insurance operations in order to maintain adequate capital ratios.
To support the fixed account options of the Companies' insurance products, cash
flow was invested primarily in fixed maturities and mortgage loans on real
estate.

At September 30, 2001 and December 31, 2000, the Companies investments had a
yield of 6.3% and 6.7%, respectively. The Companies estimate the total
investment portfolio, excluding policy loans, had a fair value approximately
equal to 102.1% and 99.3% of amortized cost value at September 30, 2001 and
December 31, 2000, respectively.

Fixed Maturities: At September 30, 2001, the Companies had fixed maturities with
an amortized cost and an estimated fair value of $1.3 billion. The Companies
classify 100% of securities as available for sale. Net unrealized appreciation
of fixed maturities of $27.6 million was comprised of gross appreciation of
$36.1 million and gross depreciation of $8.5 million. Net unrealized holding
gains on these securities, net of adjustments for VPIF, DPAC, and deferred
income taxes of $5.1 million, were included in stockholder's equity at September
30, 2001.

MRI-121979 38

At December 31, 2000, the Companies had fixed maturities with an amortized cost
of $798.8 million and an estimated fair value of $792.6 million. The Companies
classify 100% of securities as available for sale. Net unrealized depreciation
of fixed maturities of $6.2 million comprised of gross appreciation of $5.8
million and gross depreciation of $12.0 million. Depreciation of $1.5 million
was included in stockholder's equity at December 31, 2000 (net of adjustments of
$0.8 million to VPIF, $3.1 million to DPAC, and $0.8 million to deferred taxes).

The individual securities in the Companies' fixed maturities portfolio (at
amortized cost) include investment grade securities, which include securities
issued by the U.S. government, its agencies, and corporations that are rated at
least A- by Standard & Poor's Rating Services ("Standard & Poor's") ($593.0
million or 45.6% at September 30, 2001 and $519.9 million or 65.1% at December
31, 2000), that are rated BBB+ to BBB- by Standard & Poor's ($297.7 million or
22.9% at September 30, 2001 and $117.9 million or 14.7% at December 31, 2000),
and below investment grade securities, which are securities issued by
corporations that are rated BB+ and lower by Standard & Poor's ($105.0 million
or 8.0% at September 30, 2001 and $53.5 million or 6.7% at December 31, 2000).
Securities not rated by Standard & Poor's had a National Association of
Insurance Commissioners ("NAIC") rating of 1, 2, 3, 4, 5, or 6 ($306.1 million
or 23.5% at September 30, 2001 and $106.9 million or 13.4% at December 31,
2000). The Companies' fixed maturity investment portfolio had a combined yield
at amortized cost of 6.7% and 6.8% at September 30, 2001 and December 31, 2000,
respectively.

Fixed maturities rated BBB+ to BBB- may have speculative characteristics and
changes in economic conditions or other circumstances are more likely to lead to
a weakened capacity of the issuer to make principal and interest payments than
is the case with higher rated fixed maturities.

At September 30, 2001, the amortized cost value of the Companies' total
investments in below investment grade securities, excluding mortgage-backed
securities, was $98.1 million, or 5.6%, of the Companies' investment portfolio
($65.1 million, or 6.4% at December 31, 2000). The Companies do not expect the
percentage of the portfolio invested in below investment grade securities,
excluding mortgage-backed securities, to exceed 10% of the investment portfolio.
At September 30, 2001, the yield at amortized cost on the Companies' below
investment grade portfolio was 8.5% compared to 6.8% for the Companies'
investment grade corporate bond portfolio. At December 31, 2000, the yield at
amortized cost on the Companies' below investment grade portfolio was 8.2%
compared to 6.6% for the Companies' investment grade corporate bond portfolio.
The Companies estimate the fair value of the below investment grade portfolio
was $92.5 million, or 94.3% of amortized cost value, at September 30, 2001
($60.2 million, or 92.6% of amortized cost value, at December 31, 2000).

Below investment grade securities have different characteristics than investment
grade corporate debt securities. Risk of loss upon default by the borrower is
significantly greater with respect to below investment grade securities than
with other corporate debt securities. Below investment grade securities are
generally unsecured and are often subordinated to other creditors of the issuer.
Also, issuers of below investment grade securities usually have higher levels of
debt and are more sensitive to adverse economic conditions, such as a recession
or increasing interest rates, than are investment grade issuers. The Companies
attempt to reduce the overall risk in the below investment grade portfolio, as
in all investments, through careful credit analysis, strict investment policy
guidelines, and diversification by company and by industry.

The Companies analyze the investment portfolio, including below investment grade
securities, at least quarterly in order to determine if the Companies' ability
to realize the carrying value on any investment has been impaired. For debt and
equity securities, if impairment in value is determined to be other than
temporary (i.e. if it is probable the Companies will be unable to collect all
amounts due according to the contractual terms of the security), the cost basis
of the impaired security is written down to fair value, which becomes the new
cost basis. The amount of the write-down is included in earnings as a realized
loss. Future events may occur, or additional or updated information may be
received, which may necessitate future write-downs of securities in the
Companies' portfolio. Significant write-downs in the carrying value of
investments could materially adversely affect the Companies' net income in
future periods.

During the first nine months of 2001 and the year ended December 31, 2000, fixed
maturities designated as available for sale with a combined amortized cost of
$406.3 million and $211.3 million, respectively, were sold, called, or repaid by
their issuers. In total, net pre-tax gains from sales, calls, and repayments of
fixed

MRI-121979 39

maturities amounted to $1.4 million in the first nine months to September
2001. During the first nine months of 2001, Golden American determined that the
carrying value of four impaired bonds exceeded their estimated net realizable
value. As a result, at September 30, 2001, Golden American recognized a total
pre-tax loss of approximately $1,279,000 to reduce the carrying value of the
bonds to their net realizable value of $565,000. For year ended December 31,
2000, net pre-tax losses from sales, calls, and repayment of fixed maturities
amounted to $6.1 million, excluding the $142,000 pre-tax loss recognized in June
2000 to reduce the carrying value of an impaired bond to its net realizable
value of $315,000.

Equity Securities: Equity securities with a cost of $8.6 million were redeemed
during the first nine months of 2001 resulting in a realized loss of $1.6
million. At September 30, 2001, the Companies owned equity securities with a
cost of $66,000. As of December 31, 2000, equity securities at market represent
0.7% of the fair value of the Companies' investment portfolio. At December 31,
2000, the Companies owned equity securities with a cost of $8.6 million and an
estimated fair value of $6.8 million. Net unrealized depreciation of equity
securities was comprised entirely of gross depreciation of $1.8 million. Equity
securities are primarily comprised of investments in shares of the mutual funds
underlying the Companies' registered separate accounts.

Mortgage Loans on Real Estate: Mortgage loans on real estate represent 12.3% of
the Companies' investment portfolio at September 30, 2001. Mortgages outstanding
were $215.1 million at September 30, 2001 with an estimated fair value of $223.8
million. Mortgages outstanding at amortized cost were $99.9 million at December
31, 2000 with an estimated fair value of $100.5 million. The Companies' mortgage
loan portfolio includes 60 loans with an average size of $2.5 million at
September 30, 2001. The Companies' mortgage loans on real estate are typically
secured by occupied buildings in major metropolitan locations and not
speculative developments and are diversified by type of property and geographic
location. Mortgage loans on real estate have been analyzed by geographical
location with concentrations by state identified as Ohio (20% in 2001 and 4% in
2000) and California (15% in 2001 and in 2000). There are no other
concentrations of mortgage loans on real estate in any state exceeding ten
percent at September 30, 2001 and December 31, 2000. Mortgage loans on real
estate have also been analyzed by collateral type with significant
concentrations identified in office buildings (22% in 2001 and 29% in 2000),
industrial buildings (18% in 2001 and 11% in 2000), retail facilities (20% in
2001 and 18% in 2000), and multi-family apartments (36% in 2001 and 10% in
2000). At September 30, 2001 and December 31, 2000, the yield on the Companies'
mortgage loan portfolio was 7.0% and 7.3%, respectively.

Mortgage loans on real estate represent 9.9% of the Companies' investment
portfolio at December 21, 2000. Mortgages outstanding at amortized cost were
$99.9 million at December 31, 2000 with an estimated fair value of $100.5
million. The Companies' mortgage loan portfolio includes 56 loans with an
average size of $1.8 million and average seasoning of 0.6 years if weighted by
the number of loans. The Companies' mortgage loans on real estate are typically
secured by occupied buildings in major metropolitan locations and not
speculative developments and are diversified by type of property and geographic
location. Mortgage loans on real estate have been analyzed by geographical
location with concentrations by state identified as California (15% in 2000 and
12% in 1999), and Utah (9% in 2000, 10% in 1999). There are no other
concentrations of mortgage loans on real estate in any state exceeding ten
percent at December 31, 2000 and 1999. Mortgage loans on real estate have also
been analyzed by collateral type with significant concentrations identified in
office buildings (29% in 2000, 34% in 1999), industrial buildings (35% in 2000,
33% in 1999), retail facilities (18% in 2000, 19% in 1999), and multi-family
apartments (10% in 2000 and 10% in 1999). At December 31, 2000, the yield on the
Companies' mortgage loan portfolio was 7.3%.

At September 30, 2001 and December 31, 2000, no mortgage loan on real estate was
delinquent by 90 days or more. The Companies' loan investment strategy is
consistent with other life insurance subsidiaries of ING in the United States.
The Companies have experienced a historically low default rate in their mortgage
loan portfolios.

OTHER ASSETS. Reinsurance recoverables increased $48.4 million during the first
nine months of 2001 and $19.1 million during 2000, due largely to an increase of
$45.9 million during the first nine months of 2001 and $14.6 million during 2000
in reinsurance reserves from an intercompany reinsurance agreement between
Golden American and Security Life of Denver International Limited. On December
28, 2000, effective

MRI-121979 40

January 1, 2000, Golden American entered into a reinsurance agreement with
Security Life of Denver International Limited, an affiliate, covering variable
annuity minimum guaranteed death benefits and minimum guaranteed living
benefits. Negative equity market returns during 2001 led to the increase in the
reinsurance reserves under this agreement. The remainder of the increase in 2000
was mainly due to an increase in reinsurance receivable from surrenders, and was
consistent with an increase in ceded premiums from 1999 to 2000.

Amounts due from affiliates were $10,000 and $38.8 million at September 30, 2001
and December 31, 2000, respectively. At December 31, 2000, the companies had a
receivable of $35.0 million related to a capital contribution from its parent
Equitable of Iowa. Most of the remaining balance at December 31, 2000 was due to
receivable for management fee revenues. The increase was due to higher
management fees in the current year as well as the timing of the receivable
settlement.

Accrued investment income decreased $1.6 million during 2000, due to a shift
from long-term to short-term investments at December 31, 2000 as compared to
December 31, 1999.

DPAC represents certain deferred costs of acquiring new insurance business,
principally first year commissions and interest bonuses, premium credits, and
other expenses related to the production of new business after the acquisition
of Equitable of Iowa and its subsidiaries by ING Groep N.V. ("ING") on October
24, 1997 (the "acquisition date"). The Companies' previous balances of DPAC and
VPIF were eliminated as of the acquisition date, and an asset representing VPIF
was established for all policies in force at the acquisition date. VPIF is
amortized into income in proportion to the expected gross profits of in force
acquired business in a manner similar to DPAC amortization. Any expenses which
vary directly with the sales of the Companies' products are deferred and
amortized. At September 30, 2001, the Companies had DPAC and VPIF balances of
$635.7 million and $17.3 million, respectively ($635.1 million and $25.9
million, respectively, at December 31, 2000). During the first nine months of
2001 and 2000, VPIF was adjusted to increase amortization by $1,116,000 and by
$687,000, respectively, to reflect changes in the assumptions related to the
timing of estimated gross profits.

Goodwill totaling $151.1 million, representing the excess of the acquisition
cost over the fair value of net assets acquired, was established at the merger
date. Accumulated amortization of goodwill as of September 30, 2001 and December
31, 2000 was $14.8 million and $11.9 million, respectively.

Other assets increased $17.0 million during first nine months of 2001 and $29.5
million during 2000, due mainly to increases in the receivable for securities
sold.

At September 30, 2001, the Companies had $9.2 billion of separate account assets
compared to $9.8 billion at December 31, 2000. At December 31, 2000, the
Companies had $9.8 billion of separate account assets compared to $7.6 billion
at December 31, 1999. The increase in separate account assets resulted from
sales of the Companies' variable annuity products, net of redemptions and
reinsurance, and from net policyholder transfers to the separate account options
from the fixed account options within the variable products. The increase was
partially offset by negative equity market returns. At September 30, 2001, the
Companies had total assets of $12.0 billion, relatively unchanged from December
31, 2000. At December 31, 2000, the Companies had total assets of $11.9 billion,
a 26.2% increase from December 31, 1999.

LIABILITIES. During the nine months ended September 30, 2001, future policy
benefits for annuity and interest sensitive life products increased $604.9
million, or 56.9%, to $1.7 billion reflecting net sales of the Companies' fixed
account net of transfers to the separate account options.

Separate account liabilities decreased $587.2 million, or 6.0% to $9.2 billion
at September 30, 2001. Net contributions to the separate account were more than
offset by a decrease in separate account liabilities resulting from the negative
equity market returns.

During the year ended December 31, 2000, future policy benefits for annuity and
interest sensitive life products increased $29.2 million, or 2.8%, to $1.1
billion reflecting mainly an increase in reserves due to the introduction of
minimum guaranteed living benefits as new riders available to policyholders as
of February,

MRI-121979 41

2000 on certain variable products. Sales, net of redemptions and reinsurance,
and increased transfer activity to the separate account options accounted for
the $2.2 billion, or 30.0%, increase in separate account liabilities to $9.8
billion at December 31, 2000.

On December 30, 1999, Golden American issued a $50 million, 8.179% surplus note
to Equitable Life, which matures on December 29, 2029. On December 8, 1999,
Golden American issued a $35 million, 7.979% surplus note to First Columbine
Life Insurance Company, an affiliate, which matures on December 7, 2029. On
September 30, 1999, Golden American issued a $75 million, 7.75% surplus note to
ING AIH, which matures on September 29, 2029. On December 30, 1999, ING AIH
assigned the surplus note to Equitable Life. On December 30, 1998, Golden
American issued a $60 million, 7.25% surplus note to Equitable Life, which
matures on December 29, 2028. On December 17, 1996, Golden American issued a
$25 million, 8.25% surplus note to Equitable of Iowa, which matures on
December 17, 2026. As a result of the merger of Equitable of Iowa into EIC,
the surplus note is now payable to EIC.

Amounts due to affiliates decreased $10.5 million or 52.6% to $9.4 million
during the first nine months of 2001. This is mainly due to the partial cash
settlement of a liability for the modified coinsurance agreement with Equitable
Life.

During the year ended December 31, 2000, amounts due to affiliates increased by
$7.2 million from $12.7 million at December 31, 1999 to $19.9 million at
December 31, 2000. This was mainly due to the overpayment of the cash settlement
for the modified coinsurance agreement with an affiliate.

Other liabilities increased $26.0 million or 37.5% to $95.4 million during the
first nine months of 2001 due to the increase in the payable for securities
purchased. Other liabilities increased $16.2 million from $53.2 million at
December 31, 1999, due primarily to the timing of the settlement of account
transfers, an increase in outstanding checks, and an increased pension
liability, partly offset by a decrease in the payable for securities purchased.

The Companies total liabilities increased $35 million, during the first nine
months 2001 and totaled $11.3 billion at September 30, 2001. In conjunction with
the volume of variable annuity sales, the Companies' total liabilities increased
$2.3 billion, or 26.0%, during 2000 and totaled $11.2 billion at December 31,
2000.

The effects of inflation and changing prices on the Companies' financial
position are not material since insurance assets and liabilities are both
primarily monetary and remain in balance. An effect of inflation, which has been
low in recent years, is a decline in stockholder's equity when monetary assets
exceed monetary liabilities.

STOCKHOLDER'S EQUITY. Additional paid-in capital increased $131.0 million, or
22.4% from December 31, 2000 due to capital contributions from the Parent.
Additional paid-in capital increased $115.0 million, or 24.5%, from December 31,
1999 to $583.6 million at December 31, 2000, due to capital contributions from
the Parent.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity is the ability of the Companies to generate sufficient cash flows to
meet the cash requirements of operating, investing, and financing activities.
The Companies' principal sources of cash are variable annuity premiums and
product charges, investment income, maturing investments, proceeds from debt
issuance, and capital contributions made by the Parent. Primary uses of these
funds are payments of commissions and operating expenses, interest and premium
credits, investment purchases, repayment of debt, as well as withdrawals and
surrenders.

Net cash provided by operating activities was $190.4 million in the first nine
months of 2001 compared to net cash provided by operating activities of $142.9
million in the same period of 2000. Net cash provided by operating activities
was $72.7 million in 2000 compared to net cash used by operating activities of
$74.0 million in 1999. The Companies have predominantly had negative cash flows
from operating activities since Golden American started issuing variable
insurance products in 1989. These negative operating cash flows

MRI-121979 42

result primarily from commissions and other deferrable expenses related to the
continued growth in the variable annuity products. For the nine months ended
September 30, 2001 and 2000, negative operating cash flows have been offset by
the effects of a modified coinsurance agreement entered into during the second
quarter of 2000 with Equitable Life. This resulted in a net cash settlement of
$192.5 million in the first nine months of 2001. For the nine months ended
September 30, 2000, this modified coinsurance resulted in a net cash settlement
of $214.7 million. Also contributing to the increase in net cash provided by
operating activities for the first nine months of 2001 as compared to 2000 is an
increase in reserves for guaranteed benefits due to the negative equity market
returns. During 2000, these negative cash flows were offset by the effects of a
modified coinsurance agreement entered into with an affiliate which resulted in
the reimbursement of policy acquisition costs incorporated in a net cash
settlement of $218.8 million. This was partially offset also by the use of cash
from increases in reinsurance recoverable, due from affiliates and other assets.

Net cash used in investing activities was $597.3 million during the first nine
months of 2001 compared to net cash provided by investing activities of $70.5
million in the same period of 2000. This increase in the net cash used in
investing activities is primarily due to net purchases of fixed maturities and
mortgage loans on real estate during the first nine months of 2001 versus net
sales in 2000. Net purchases of fixed maturities reached $504.1 million during
the first nine months of 2001 versus net sales of $53.1 million in the same
period of 2000. Net purchases of mortgage loans on real estate reached $115.4
million in the first nine months of 2000 versus net purchases of $4.7 million
during the same period in 2000. These investment purchases were mainly due to an
increase in sales of the Companies fixed account options, primarily from the
introduction of the Guarantee product in the fourth quarter of 2000.

Net cash provided by investing activities was $28.0 million during 2000 as
compared to net cash used in investing activities of $177.5 million in 1999.
This increase is primarily due to lower purchases of fixed maturities during
2000 than in 1999. Net sales of fixed maturities totaled $51.1 million in 2000
versus net purchases of $124.0 million in 1999. This change was mainly due to
the relatively constant level policyholder account balances in the fixed account
options during 2000 as compared to an increase during 1999, combined with a
shift toward short-term investments.

Net cash provided by financing activities was $526.9 million during the first
nine months of 2001 compared to net cash used in financing activities of $162.4
million during the same period in 2000. In the first nine months of 2001, net
cash provided by financing activities was positively impacted by net fixed
account deposits of $965.3 million compared to $379.6 million in the same period
of 2000 due primarily to the introduction of the Guarantee product in the fourth
quarter of 2000. In addition, there was a decrease of $49.8 million in net
reallocations to Separate Accounts. In the first nine months of 2001, net cash
provided by financing activities was positively impacted by an increase in
capital contributions from the Parent. The Companies received $131.0 million and
$80.0 million of capital contributions from the Parent in the first nine months
of 2001 and 2000, respectively.

Net cash used by financing activities was $51.9 million during 2000 as compared
to net cash provided by financing activities of $259.2 million during the prior
year. In 2000, net cash provided by financing activities was positively impacted
by net fixed account deposits of $660.4 million compared to $627.1 million in
1999. This increase was more than offset by net reallocations to the Companies'
separate accounts, which increased to $825.9 million from $650.3 million during
the prior year. In 2000, another important source of cash provided by financing
activities was $115.0 million in capital contributions from the Parent compared
to $121.0 million in 1999. Another source of cash provided by financing
activities during 1999 was $160.0 million in proceeds from surplus notes. No
surplus notes were issued during 2000.

The Companies' liquidity position is managed by maintaining adequate levels of
liquid assets, such as cash or cash equivalents and short-term investments.
Additional sources of liquidity include borrowing facilities to meet short-term
cash requirements. Golden American maintains a $65.0 million reciprocal loan
agreement with ING AIH, which expires on December 31, 2007. In addition, the
Companies have established an $85.0 million revolving note facility with
SunTrust Bank, Atlanta. This revolving note payable was amended and restated in
April 2001 with an expiration date of May 31, 2002. Management believes these
sources of liquidity are adequate to meet the Companies' short-term cash
obligations.

MRI-121979 43

Based on current trends, the Companies expect to continue to use
net cash in operating activities before reinsurance. It is anticipated that a
continuation of capital contributions from the Parent, the issuance of
additional surplus notes, and/or the use of modified coinsurance agreements will
cover these net cash outflows. ING AIH is committed to the sustained growth of
Golden American. During 2001, ING AIH will maintain Golden American's statutory
capital and surplus at the end of each quarter at a level such that: 1) the
ratio of Total Adjusted Capital divided by Company Action Level Risk Based
Capital exceeds 300%; 2) the ratio of Total Adjusted Capital (excluding surplus
notes) divided by Company Action Level Risk Based Capital exceeds 200%; and 3)
Golden American's statutory capital and surplus exceeds the "Amounts Accrued for
Expense Allowances Recognized in Reserves" as disclosed on page 3, Line 13A of
Golden American's statutory statement.

During the first quarter of 1999, Golden American's operations were moved to a
new site in West Chester, Pennsylvania. Currently, Golden American occupies
125,000 square feet of leased space. From January 1, 2001 to September 30, 2001,
First Golden's principal office was located in New York, New York, where certain
of the companies' records were maintained. The 2,568 square feet of office space
is leased through 2001. As of October 1, 2001, First Golden's principal office
moved to Woodbury, New York.

The ability of Golden American to pay dividends to its Parent is restricted.
Prior approval of insurance regulatory authorities is required for payment of
dividends to the stockholder which exceed an annual limit. During 2001, Golden
American cannot pay dividends to its Parent without prior approval of statutory
authorities.

Under the provisions of the insurance laws of the State of New York, First
Golden cannot distribute any dividends to its stockholder, Golden American,
unless a notice of its intent to declare a dividend and the amount of the
dividend has been filed with the New York Insurance Department at least thirty
days in advance of the proposed declaration. If the Superintendent of the New
York Insurance Department finds the financial condition of First Golden does not
warrant the distribution, the Superintendent may disapprove the distribution by
giving written notice to First Golden within thirty days after the filing. The
management of First Golden does not anticipate paying dividends to Golden
American during 2001.

The NAIC's risk-based capital requirements require insurance companies to
calculate and report information under a risk-based capital formula. These
requirements are intended to allow insurance regulators to monitor the
capitalization of insurance companies based upon the type and mixture of risks
inherent in a company's operations. The formula includes components for asset
risk, liability risk, interest rate exposure, and other factors. The Companies
have complied with the NAIC's risk-based capital reporting requirements. Amounts
reported indicate that the Companies have total adjusted capital well above all
required capital levels.

Reinsurance: At June 30, 2001, Golden American had reinsurance treaties with
five unaffiliated reinsurers and three affiliated reinsurers covering a
significant portion of the mortality risks and guaranteed death and living
benefits under its variable contracts. At December 31, 2000, Golden American had
reinsurance treaties with six unaffiliated reinsurers and three affiliated
reinsurers covering a significant portion of the mortality risks and guaranteed
death and living benefits under its variable contracts. Golden American remains
liable to the extent its reinsurers do not meet their obligations under the
reinsurance agreements.

On December 28, 2000, Golden American entered into a reinsurance agreement with
Security Life of Denver International Limited, an affiliate, covering variable
annuity minimum guaranteed death benefits and minimum guaranteed living benefits
of variable annuities issued on or after January 1, 2000. An irrevocable letter
of credit was obtained through Bank of New York in the amount of $25,000,000
related to this agreement. Effective September 30, 2001, the agreement was
amended, and the letter of credit amount was revised to $60 million.

MRI-121979 44

On December 29, 2000, First Golden entered into a reinsurance treaty with London
Life Reinsurance Company of Pennsylvania, an unaffiliated reinsurer, covering
the minimum guaranteed death benefits of First Golden's variable annuities
issued on or after January 1, 2000.

MARKET RISK AND RISK MANAGEMENT

Asset/liability management is integrated into many aspects of the Companies'
operations, including investment decisions, product development, and crediting
rates determination. As part of the risk management process, different economic
scenarios are modeled, including cash flow testing required for insurance
regulatory purposes, to determine that existing assets are adequate to meet
projected liability cash flows. Key variables include contractholder behavior
and the variable separate accounts' performance.

Contractholders bear the majority of the investment risks related to the
variable insurance products. Therefore, the risks associated with the
investments supporting the variable separate accounts are assumed by
contractholders, not by the Companies (subject to, among other things, certain
minimum guarantees). The Companies' products also provide certain minimum death
and guaranteed living benefits that depend on the performance of the variable
separate accounts. Currently, the majority of death and living benefit risks are
reinsured, which protects the Companies from adverse mortality experience and
prolonged capital market decline.

A surrender, partial withdrawal, transfer, or annuitization made prior to the
end of a guarantee period from the fixed account may be subject to a market
value adjustment. As the majority of the liabilities in the fixed account are
subject to market value adjustment, the Companies do not face a material amount
of market risk volatility. The fixed account liabilities are supported by a
portfolio principally composed of fixed rate investments that can generate
predictable, steady rates of return. The portfolio management strategy for the
fixed account considers the assets available for sale. This enables the
Companies to respond to changes in market interest rates, changes in prepayment
risk, changes in relative values of asset sectors and individual securities and
loans, changes in credit quality outlook, and other relevant factors. The
objective of portfolio management is to maximize returns, taking into account
interest rate and credit risks, as well as other risks. The Companies'
asset/liability management discipline includes strategies to minimize exposure
to loss as interest rates and economic and market conditions change.

On the basis of these analyses, management believes there is no material
solvency risk to the Companies. With respect to a 10% drop in equity values from
September 30, 2001 levels, variable separate account funds, which represent 85%
of the in force, pass the risk in underlying fund performance to the
contractholder (except for certain minimum guarantees). With respect to interest
rate movements up or down 100 basis points from September 30, 2001 levels, the
remaining 15% of the in force are fixed account funds and almost all of these
have market value adjustments which provide significant protection against
changes in interest rates.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Any forward-looking statement contained herein or in any other oral or written
statement by the Companies or any of their officers, directors, or employees is
qualified by the fact that actual results of the Companies may differ materially
from such statement, among other risks and uncertainties inherent in the
Companies' business, due to the following important factors:

1. Prevailing interest rate levels and stock market performance, which
may affect the ability of the Companies to sell their products, the
market value and liquidity of the Companies' investments, fee
revenue, and the lapse rate of the Companies' policies,
notwithstanding product design features intended to enhance
persistency of the Companies' products.

2. Changes in the federal income tax laws and regulations, which
may affect the tax status of the Companies'
products.

MRI-121979 45

3. Changes in the regulation of financial services, including bank
sales and underwriting of insurance products, which may affect the
competitive environment for the Companies' products.

4. Increasing competition in the sale of the Companies' products.

5. Other factors that could affect the performance of the Companies,
including, but not limited to, market conduct claims, litigation,
insurance industry insolvencies, availability of competitive
reinsurance on new business, investment performance of the
underlying portfolios of the variable products, variable product
design, and sales volume by significant sellers of the Companies'
variable products.

OTHER INFORMATION

SEGMENT INFORMATION. During the period since the acquisition by Bankers Trust,
September 30, 1992 to date of this Prospectus, Golden American's operations
consisted of one business segment, the sale of variable insurance products.
Golden American and its affiliate DSI are party to in excess of 620 sales
agreements with broker-dealers, seven of whom, Locust Street Securities, Inc.,
Vestax Securities Corporation, Compu Life Investors Services, Inc., IFG Network
Securities, Inc., Multi-Financial Securities Corporation, Primevest Financial
Services and Washington Square Securities, Inc. are affiliates of Golden
American. As of December 31, 2000, one broker-dealer produces 10% or more of
Golden American's product sales net of reinsurance.

RESERVES. In accordance with the life insurance laws and regulations under which
Golden American operates, it is obligated to carry on its books, as liabilities,
actuarially determined reserves to meet its obligations on outstanding
Contracts. Reserves, based on valuation mortality tables in general use in the
United States, where applicable, are computed to equal amounts which, together
with interest on such reserves computed annually at certain assumed rates, make
adequate provision according to presently accepted actuarial standards of
practice, for the anticipated cash flows required by the contractual obligations
and related expenses of Golden American.

COMPETITION. Golden American is engaged in a business that is highly competitive
because of the large number of stock and mutual life insurance companies and
other entities marketing insurance products comparable to those of Golden
American. There are over 2500 stock, mutual and other types of insurers in the
life insurance business in the United States, a substantial number of which are
significantly larger than Golden American.

AGREEMENTS WITH AFFILIATES. Pursuant to a service agreement between Golden
American and Equitable Life, Equitable Life provides certain administrative,
financial and other services to Golden American. Equitable Life billed Golden
American and its subsidiary First Golden American Life Insurance Company of New
York ("First Golden") $0.2 million for the first six months of 2001, $1.3
million for 2000, and $1.3 million for 1999 under this service agreement.

Golden American provides to DSI certain of its personnel to perform management,
administrative and clerical services and the use of certain facilities. Golden
American charges DSI for such expenses and all other general and administrative
costs, first on the basis of direct charges when identifiable, and the remainder
allocated based on the estimated amount of time spent by Golden American's
employees on behalf of DSI. In the opinion of management, this method of cost
allocation is reasonable. In 1995, the service agreement between DSI and Golden
American was amended to provide for a management fee from DSI to Golden American
for managerial and supervisory services provided by Golden American. This fee,
calculated as a percentage of average assets in the variable separate accounts,
was $17.2 million, $21.3 million and $10.1 million for the first six months of
2001 and the years 2000 and 1999, respectively.

Since January 1, 1998, Golden American and First Golden have had an asset
management agreement with ING Investment Management LLC ("ING IM"), an
affiliate, in which ING IM provides asset management and accounting
services for a fee, based on assets under management and payable quarterly.
For the first nine months of 2001 and for the years ended December
31, 2000 and 1999, Golden American and First Golden incurred fees of $2.9
million, $2.5 million and $2.2 million, respectively, under this agreement.

MRI-121979 46

Since 1997, Golden American has provided certain advisory, computer and other
resources and services to Equitable Life. Revenues for these services totaled
$4.0 million for the first nine months of 2001 and $6.2 million for 2000 and
$6.1 million for 1999.

First Golden provides resources and services to DSI. Revenues for these services
totaled $0.1 million for the first nine months of 2001 and $0.2 million for 2000
and $0.4 for 1999.

Golden American provides resources and services to ING Mutual Funds Management
Co., LLC, an affiliate. Revenues for these services totaled $0.5 million for the
first nine months of 2001 and $0.5 million for 2000 and $0.2 million for 1999.

Golden American provides resources and services to United Life & Annuity
Insurance Company, an affiliate. Revenues for these services, which reduce
general expenses incurred by Golden American, totaled $0.3 million in the first
nine months of 2001 and $0.6 million for 2000 and $0.5 million for 1999.

The Companies provide resources and services to Security Life of Denver
Insurance Company, an affiliate. Revenues for these services, which reduce
general expenses incurred by the Companies totaled $0.2 million for the first
nine months of 2001 and $0.3 million for 2000 and $0.2 million for 1999.

The Companies provide resources and services to Southland Life Insurance
Company, an affiliate. Revenues for these services, which reduce general
expenses incurred by the Companies totaled $0.08 million for the first nine
months of 2001 and $0.1 million for 2000 and $0.1 million for 1999.

Golden American has a guaranty agreement with Equitable Life, an affiliate. In
consideration of an annual fee, payable June 30, Equitable Life guarantees to
Golden American that it will make funds available, if needed, to Golden American
to pay the contractual claims made under the provisions of Golden American's
life insurance and annuity contracts. The agreement is not, and nothing
contained therein or done pursuant thereto by Equitable Life shall be deemed to
constitute, a direct or indirect guaranty by Equitable Life of the payment of
any debt or other obligation, indebtedness, or liability of any kind or
character whatsoever, of Golden American. The agreement does not guarantee the
value of the underlying assets held in separate accounts in which funds of
variable life insurance and variable annuity policies have been invested. The
calculation of the annual fee is based on risk based capital. On June 30, 2001
and for 2000, Golden American incurred a fee of $12,000 and $7,000,
respectively, under this agreement. No annual fee was paid in 1999.

DISTRIBUTION AGREEMENT. Under a distribution agreement, DSI acts as the
principal underwriter (as defined in the Securities Act of 1933 and the
Investment Company Act of 1940, as amended) of the variable insurance products
issued by Golden American which as of December 31, 2000, are sold through other
broker/dealer institutions. For the first nine months of 2001 and the years 2000
and 1999, commissions paid by Golden American to DSI (including commissions paid
by First Golden) aggregated $160.0 million, $208.9 million and $181.5 million,
respectively.

EMPLOYEES. Certain officers of Golden American are also officers of DSI, and
their salaries are allocated among both companies. Certain officers of Golden
American are also officers of other Equitable of Iowa subsidiaries. See
"Directors and Executive Officers."

PROPERTIES. Golden American's principal office is located at 1475 Dunwoody
Drive, West Chester, Pennsylvania 19380, where most of Golden American's records
are maintained. This office space is leased. Other records are maintained in Des
Moines and Atlanta at the offices of Equitable Life and ING, respectively.

STATE REGULATION. Golden American is subject to the laws of the State of
Delaware governing insurance companies and to the regulations of the Delaware
Insurance Department (the "Insurance Department"). A detailed financial
statement in the prescribed form (the "Annual Statement") is filed with the
Insurance Department each year covering Golden American's operations for the
preceding year and its financial condition as of the end of that year.
Regulation by the Insurance Department includes periodic examination to
determine contract liabilities and reserves so that the Insurance Department
may certify that these items are correct. Golden American's books and accounts
are subject to review by the Insurance Department at all

MRI-121979 47

times. A full examination of Golden American's operations is conducted
periodically by the Insurance Department and under the auspices of the NAIC.

In addition, Golden American is subject to regulation under the insurance laws
of all jurisdictions in which it operates. The laws of the various jurisdictions
establish supervisory agencies with broad administrative powers with respect to
various matters, including licensing to transact business, overseeing trade
practices, licensing agents, approving contract forms, establishing reserve
requirements, fixing maximum interest rates on life insurance contract loans and
minimum rates for accumulation of surrender values, prescribing the form and
content of required financial statements and regulating the type and amounts of
investments permitted. Golden American is required to file the Annual Statement
with supervisory agencies in each of the jurisdictions in which it does
business, and its operations and accounts are subject to examination by these
agencies at regular intervals.

The NAIC has adopted several regulatory initiatives designed to improve the
surveillance and financial analysis regarding the solvency of insurance
companies in general. These initiatives include the development and
implementation of a risk-based capital formula for determining adequate levels
of capital and surplus. Insurance companies are required to calculate their
risk-based capital in accordance with this formula and to include the results in
their Annual Statement. It is anticipated that these standards will have no
significant effect upon Golden American. For additional information about the
Risk-Based Capital adequacy monitoring system and Golden American, see
"Management's Discussion and Analysis Results of Operations."

In addition, many states regulate affiliated groups of insurers, such as Golden
American, and its affiliates, under insurance holding company legislation. Under
such laws, inter-company transfers of assets and dividend payments from
insurance subsidiaries may be subject to prior notice or approval, depending on
the size of the transfers and payments in relation to the financial positions of
the companies involved.

Under insurance guaranty fund laws in most states, insurers doing business
therein can be assessed (up to prescribed limits) for contract owner losses
incurred by other insurance companies which have become insolvent. Most of these
laws provide that an assessment may be excused or deferred if it would threaten
an insurer's own financial strength. For information regarding Golden American's
estimated liability for future guaranty fund assessments, see Note 10 of Notes
to Financial Statements.

Although the federal government generally does not directly regulate the
business of insurance, federal initiatives often have an impact on the business
in a variety of ways. Certain insurance products of Golden American are subject
to various federal securities laws and regulations. In addition, current and
proposed federal measures which may significantly affect the insurance business
include regulation of insurance company solvency, employee benefit regulation,
removal of barriers preventing banks from engaging in the insurance business,
tax law changes affecting the taxation of insurance companies and the tax
treatment of insurance products and its impact on the relative desirability of
various personal investment vehicles.

DIRECTORS AND OFFICERS

NAME (AGE) POSITION(S) WITH THE COMPANY
- -------------------------- ----------------------------------------------
Robert C. Salipante (45) Chief Executive Officer and Director
Chris D. Schreier (45) President
Barnett Chernow (51) President and CEO, Investment Products Group
Kimberly J. Smith (39) Executive Vice President, General Counsel and
Assistant Secretary
Wayne R. Huneke (50) Director and Chief Financial Officer
Thomas J. McInerney (45) Director
Mark A. Tullis (46) Director
Phillip R. Lowery (48) Director
Paula Cludray-Engelke (45) Secretary
James R. McInnis (53) Executive Vice President and Chief Marketing
Officer
Stephen J. Preston (44) Executive Vice President and Chief Actuary
David S. Pendergrass (41) Vice President and Treasurer
David L. Jacobson (52) Senior Vice President and Assistant Secretary
William L. Lowe (37) Senior Vice President
Steven G. Mandel (42) Senior Vice President and Chief Information
Officer

MRI-121979 48

Each director is elected to serve for one year or until the next annual meeting
of shareholders or until his or her successor is elected. Some directors are
directors of insurance company subsidiaries of Golden American's parent,
Equitable of Iowa. Golden American's directors and senior executive officers and
their principal positions for the past five years are listed below:

Mr. Robert C. Salipante was elected Director and Chief Executive Officer of
Golden American in March, 2001. He has served as a Director of ReliaStar Life
Insurance Company from October, 1995 to the present. He served ReliaStar
Financial Corp. from February, 1996 to November, 1996 as Senior Vice President,
Individual Insurance Division and Technology and from November, 1996 to July,
1999 as Senior Vice President, Personal Financial Services. He was elected
President, Chief Operating Officer and Director of ReliaStar Financial Corp.
July, 1999 to August, 2000. He became General Manager and Chief Executive
Officer, US Retail Financial Services in September, 2000. He served as General
Manager and Chief Executive Officer, ING U.S. Retail Financial Services in 2000
to 2001. He became General Manager and President, ING U.S. Financial Services in
December 2001 to present.

Mr. Chris D. Schreier was elected President of Golden American in March, 2001.
From January, 1994 to September, 1996 he served as Assistant Vice President and
Assistant Controller for ReliaStar Financial Corp. He was elected Second Vice
President of ReliaStar Financial Corp. and ReliaStar Life Insurance Company from
September, 1996 to January, 1999. He has served as Vice President and Controller
of ReliaStar Financial Corp. since January, 1999. He became Controller, ING U.S.
Financial Services in December 2001 to present.

Mr. Barnett Chernow became President and CEO of Investment Products Group in
March 2001. From 1998 to 2001, Mr. Chernow served as President of Golden
American and First Golden. From 1996 to 1998, Mr. Chernow served as Executive
Vice President of First Golden. From 1993 to 1998, Mr. Chernow also served as
Executive Vice President of Golden American. He was elected to serve as a
director of First Golden in June, 1996 and Golden American in April, 1998. He
served as President and Chief Executive Officer of Investment Products Group
from March, 2001 to October 2001. He became Head of Retail Product/Financial
Management, ING U.S. Financial Services in December, 2001 to present.

Ms. Kimberly J. Smith joined Golden American in December, 2001 as Executive
Vice President, General Counsel and Assistant Secretary of Golden American
and First Golden, and Chief Counsel of U.S. Retail Financial Services. From
January, 1996 through December, 2001 she was a partner with the law firm
of Sutherland, Asbill & Brennan, LLP.

Mr. Wayne R. Huneke was elected Director, Senior Vice President and Chief
Financial Officer of Golden American in March, 2001. Since October, 1995 he has
served as a Director of ReliaStar Life Insurance Company. He served ReliaStar
Financial Corp. as Senior Vice President, Chief Financial Officer from August,
1994 to November, 1997, from November, 1997 to May, 1999 he served as Senior
Vice President, ReliaStar Financial Markets. He became Senior Executive Vice
President of ReliaStar Financial Corp. in May, 1999. He became Chief Financial
Officer, ING U.S. Financial Services in December, 2001 to present.

Mr. Thomas J. McInerney was elected as a Director of Golden American in March,
2001. He served Aetna U.S. Healthcare, Inc. as Vice President, National Accounts
from April, 1996 to March, 1997. From August, 1997 to the present he has served
as Director and from September, 1997 to the present he has served as President
of Aetna Life Insurance & Annuity Company. He has served as President and
Director of Aetna Insurance Company of America from September, 1997 to the
present. He became Chief Executive Officer, ING U.S. Financial Services in
December, 2001 to present.

Mr. Mark A. Tullis became a Director of Golden American and First Golden in
December 1999. He has served as Executive Vice President, Strategy and
Operations for ING Americas Region since September 1999. From June, 1994 to
August, 1999, he was with Primerica, serving as Executive Vice President at the
time of his departure. He became Chief of Staff and General Manager, ING
Americas in December, 2001 to present.

Mr. Phillip R. Lowery became a Director of Golden American in April, 1999 and
First Golden in December, 1999. He has served as Executive Vice President and
Chief Actuary for ING Americas Region since 1990. He became Chief Actuary, ING
Americas in December, 2001 to present.

MRI-121979 49

Ms. Cludray-Engelke served with ReliaStar Life Insurance Company (f/k/a
Northwestern National Life Insurance Company) in various compliance positions.
From October, 2000 to the present she has served as an Attorney with ING US
Legal Services.

Mr. James R. McInnis joined Golden American and First Golden in December, 1997
as Executive Vice President. From 1982 through November, 1997, he held several
positions with the Endeavor Group and was President upon his departure.

Mr. David S. Pendergrass was elected Treasurer and Vice President of Golden
American in December, 2000. Since October, 1995 he has served as a Vice
President and Treasurer of ING North America Insurance Corporation.

Mr. David L. Jacobson joined Golden American in November, 1993 as Vice President
and Assistant Secretary and became Senior Vice President in December, 1993. He
was elected Senior Vice President and Assistant Secretary for First Golden in
June, 1996.

Mr. Stephen J. Preston joined Golden American in December, 1993 as Senior Vice
President, Chief Actuary and Controller. He became an Executive Vice President
and Chief Actuary in June, 1998. He was elected Senior Vice President and Chief
Actuary of First Golden in June, 1996 and elected Executive Vice President in
June, 1998.

Mr. William L. Lowe joined Equitable Life as Vice President, Sales & Marketing
in January, 1994. He became a Senior Vice President, Sales & Marketing, of
Golden American in August, 1997. He was also President of Equitable of Iowa
Securities Network, Inc. until October, 1998.

Mr. Steven G. Mandel joined Golden American in October 1988 and became Senior
Vice President and Chief Information Officer in June, 1998.

COMPENSATION TABLE AND OTHER INFORMATION

The following sets forth information with respect to the Chief Executive Officer
of Golden American as well as the annual salary and bonus for the next five
highly compensated executive officers for the fiscal year ended December 31,
2000. Certain executive officers of Golden American are also officers of DSI and
First Golden. The salaries of such individuals are allocated among Golden
American, DSI and First Golden pursuant to an arrangement among these companies.

EXECUTIVE COMPENSATION TABLE

The following table sets forth information with respect to the annual salary and
bonus for Golden American's Chief Executive Officer and the four other most
highly compensated executive officers for the fiscal year ended December 31,
2000. Information for the fiscal year ended December 31, 2001 was not available
as of the date of this prospectus.

These officers serve other roles to affiliated companies and these salaries
include compensation for these services.

MRI-121979 50

LONG-TERM
ANNUAL COMPENSATION COMPENSATION
--------------------------- ---------------------------
RESTRICTED SECURITIES
NAME AND STOCK AWARDS UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS/1/ OPTIONS OPTIONS COMPENSATION/2/
- ------------------ ---- ----------- ----------- ------------ ---------- ---------------

Barnett Chernow.......... 2000 $ 409,447 $ 638,326 10,200 $ 26,887
President 1999 $ 300,009 $ 698,380 6,950 $ 20,464
1998 $ 284,171 $ 105,375 8,000

James R. McInnis......... 2000 $ 337,543 $ 1,210,898 5,200 $ 19,487
Executive Vice 1999 $ 250,007 $ 955,646 5,550 $ 15,663
President 1998 $ 250,004 $ 626,245 2,000

William L. Lowe.......... 2000 $ 205,144 $ 821,545 3,500 $ 81
Senior Vice 1999 $ 191,589 $ 737,933 $ 2,924
President 1998 $ 165,816 $ 528,299 $ 756

Stephen J. Preston....... 2000 $ 230,170 $ 426,994 5,000 $ 14,713
Executive Vice 1999 $ 198,964 $ 235,002 2,050 $ 12,564
President and 1998 $ 173,870 $ 32,152 3,500
Chief Actuary

Gary Haynes.............. 2000 $ 201,136 $ 404,773 3,000 $ 14,735
Senior Vice 1999 $ 159,030 $ 50,000 $ 9,540
President

- -------------------------
1 The amount shown relates to bonuses paid in 2000, 1999 and 1998.

2 Other compensation for 2000 and 1999 includes a business allowance for each
named executive which is required to be applied to specific business
expenses of the named executive.

OPTION GRANTS IN FISCAL YEAR ENDED DECEMBER 31, 2000

POTENTIAL
% OF TOTAL REALIZABLE VALUE AT
NUMBER OF OPTIONS ASSUMED ANNUAL
SECURITIES GRANTED TO RATES OF STOCK
UNDERLYING EMPLOYEES EXERCISE PRICE APPRECIATION
OPTIONS IN FISCAL OR BASE EXPIRATION FOR OPTION TERM/3/
NAME GRANTED/1/ YEAR PRICE/2/ DATE 5% 10%
- ---- ----------- ---------- --------- ---------- -------- --------

Barnett Chernow.......... 10,200 0.85% $54.56 04/03/2010 $348,987 $886,937
James R. McInnis......... 5,200 0.43% $54.56 04/03/2010 $178,425 $452,164
William L. Lowe.......... 3,500 0.29% $54.56 04/03/2010 $120,094 $304,341
Stephen J. Preston....... 5,000 0.42% $54.56 04/03/2010 $171,562 $434,773
Gary Haynes.............. 3,000 0.25% $54.56 04/03/2010 $102,937 $260,864

1 Stock appreciation rights granted in 2000 to the officers of Golden American
have a three-year vesting period and an expiration date as shown.

2 The base price was equal to the fair market value of ING's stock on the date
of grant.

3 Total dollar gains based on indicated rates of appreciation of share price
over the total term of the rights.

MRI-121979 51

- --------------------------------------------------------------------------------
UNAUDITED FINANCIAL STATEMENTS OF GOLDEN AMERICAN LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------

For the Nine Months Ended September 30, 2001

MRI-121979 52

GOLDEN AMERICAN LIFE INSURANCE COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(Dollars in thousands, except per share data)

September 30, 2001 December 31, 2000
------------------ -----------------

ASSETS
Investments:
Fixed maturities, available for sale, at fair value
(cost: 2001 - $1,301,768; 2000 - $798,751)........................ $ 1,329,414 $ 792,578
Equity securities, at fair value
(cost: 2001 - $66; 2000 - $8,611)................................... 52 6,791
Mortgage loans on real estate....................................... 215,059 99,916
Policy loans........................................................ 14,454 13,323
Short-term investments.............................................. -- 17,102
-------------- -------------
Total investments...................................................... 1,558,979 929,710

Cash and cash equivalents.............................................. 272,826 152,880
Reinsurance recoverable................................................ 21,891 19,331
Reinsurance recoverable from affiliate................................. 60,500 14,642
Due from affiliates.................................................... 10 38,786
Accrued investment income.............................................. 18,326 9,606
Deferred policy acquisition costs...................................... 635,737 635,147
Value of purchased insurance in force ................................. 17,286 25,942
Current income taxes recoverable....................................... 3 511
Deferred income tax asset.............................................. 4,757 9,047
Property and equipment, less allowances for depreciation of
$9,337 in 2001 and $5,638 in 2000................................... 11,248 14,404
Goodwill, less accumulated amortization of $14,798 in 2001
and $11,964 in 2000................................................. 136,329 139,163
Other assets........................................................... 48,989 32,019
Separate account assets................................................ 9,244,329 9,831,489
-------------- -------------
Total assets........................................................... $ 12,031,210 $ 11,852,677
============== =============

LIABILITIES AND STOCKHOLDER'S EQUITY
Policy liabilities and accruals:
Future policy benefits:
Annuity and interest sensitive life products...................... $ 1,667,756 $ 1,062,891
Unearned revenue reserve.......................................... 6,436 6,817
Other policy claims and benefits.................................... 810 82
-------------- -------------
1,675,002 1,069,790

Surplus notes.......................................................... 245,000 245,000
Revolving note payable................................................. 1,400 --
Due to affiliates...................................................... 9,429 19,887
Other liabilities...................................................... 95,356 69,374
Separate account liabilities........................................... 9,244,329 9,831,489
-------------- -------------
11,270,516 11,235,540
Commitments and contingencies
Stockholder's equity:
Common stock, par value $10 per share, authorized, issued,
and outstanding 250,000 shares...................................... 2,500 2,500
Additional paid-in capital.......................................... 714,640 583,640
Accumulated other comprehensive income (loss)....................... 5,067 (4,046)
Retained earnings .................................................. 38,487 35,043
-------------- -------------
Total stockholder's equity............................................. 760,694 617,137
-------------- -------------
Total liabilities and stockholder's equity............................. $ 12,031,210 $ 11,852,677
============== =============

MRI-121979 53

GOLDEN AMERICAN LIFE INSURANCE COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(Dollars in thousands)

For the Nine For the Nine
Months Ended Months Ended
September 30, 2001 September 30, 2000

------------------ ------------------
Revenues:
Annuity and interest sensitive life product charges....... $ 117,308 $ 103,923
Management fee revenue.................................... 18,675 16,827
Net investment income..................................... 67,020 47,896
Realized losses on investments............................ (1,529) (4,546)
----------- ----------
201,474 164,100

Insurance benefits and expenses:
Annuity and interest sensitive life benefits:
Interest credited to account balances..................... 124,061 146,672
Guaranteed benefits reserve change........................ 16,615 --
Benefit claims incurred in excess of account balances..... (5,557) 1,680
Underwriting, acquisition, and insurance expenses:
Commissions............................................... 160,752 160,105
General expenses.......................................... 84,551 61,194
Insurance taxes, state licenses, and fees................. 5,030 4,047
Policy acquisition costs deferred....................... (60,031) (87,753)
Amortization:
Deferred policy acquisition costs..................... 40,214 49,527
Value of purchased insurance in force................... 4,097 3,181
Goodwill................................................ 2,834 2,834
Expense and charges reimbursed under modified
coinsurance agreements (194,043) (220,249)
----------- ----------
181,523 121,238
Interest expense............................................. 14,438 14,976
----------- ----------
195,961 136,214
----------- ----------
Income before income taxes................................... 5,513 27,886

Income taxes................................................. 2,069 9,802
----------- ----------
Net income................................................... $ 3,444 $ 18,084
=========== ==========

See accompanying notes.

MRI-121979 54

GOLDEN AMERICAN LIFE INSURANCE COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Dollars in thousands)

For the Nine For the Nine
Months Ended Months Ended
September 30, 2001 September 30, 2000
------------------ ------------------

NET CASH PROVIDED BY OPERATING ACTIVITIES................... $ 190,373 $ 142,933

INVESTING ACTIVITIES
Sale, maturity, or repayment of investments:
Fixed maturities - available for sale.................... 406,428 158,731
Equity securities........................................ 6,956 5,196
Mortgage loans on real estate............................ 126,940 5,118
Policy loans - net....................................... -- 837
Short-term investments - net............................. 17,102 17,880
------------- ------------
557,426 187,762

Acquisition of investments:
Fixed maturities - available for sale.................... (910,534) (105,606)
Mortgage loans on real estate............................ (242,357) (9,786)
Policy loans - net....................................... (1,131) --
------------- ------------
(1,154,022) (115,392)
Net purchases of property and equipment..................... (745) (1,898)
Issuance of reciprocal loan agreement receivables........... -- (16,900)
Receipt of repayment of reciprocal loan agreement
receivables.............................................. -- 16,900
------------- ------------
Net cash provided by(used in) investing activities......... (597,341) 70,472

FINANCING ACTIVITIES
Proceeds from reciprocal loan agreement borrowings.......... 29,300 177,900
Repayment of reciprocal loan agreement borrowings........... (29,300) (177,900)
Proceeds from revolving note payable........................ 1,400 66,100
Repayment of revolving note payable......................... -- (67,500)
Receipts from annuity and interest sensitive life
policies credited to account balances.................... 1,074,755 506,412
Return of account balances on annuity
and interest sensitive life policies..................... (109,462) (126,803)
Net reallocations to Separate Accounts...................... (570,779) (620,568)
Contribution from parent ................................... 131,000 80,000
------------- ------------
Net cash provided by (used in) financing activities......... 526,914 (162,359)
------------- ------------

Increase in cash and cash equivalents...................... 119,946 51,046

Cash and cash equivalents at beginning of period............ 152,880 76,690
------------- ------------

Cash and cash equivalents at end of period.................. $ 272,826 $ 127,736
============= ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for
Interest................................................. $ 14,949 $ 18,068
Taxes.................................................... $ 1 $ 28

See accompanying notes.

MRI-121979 55

GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
September 30, 2001

1. BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, the financial statements do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
considered necessary for a fair presentation have been included. All adjustments
were of a normal recurring nature, unless otherwise noted in Management's
Discussion and Analysis and the Notes to Financial Statements. Operating results
for the nine months ended September 30, 2001 are not necessarily indicative of
the results that may be expected for the year ending December 31, 2001. These
financial statements should be read in conjunction with the financial statements
and related footnotes included in the Golden American Life Insurance Company's
annual report on Form 10-K for the year ended December 31, 2000.

CONSOLIDATION

The condensed consolidated financial statements include Golden American Life
Insurance Company ("Golden American") and its wholly owned subsidiary, First
Golden American Life Insurance Company of New York ("First Golden," and with
Golden American, collectively, the "Companies"). All significant intercompany
accounts and transactions have been eliminated.

ORGANIZATION

Golden American is a wholly owned subsidiary of Equitable of Iowa Companies,
Inc. ("EIC" or the "Parent"). EIC is an indirect wholly owned subsidiary of ING
Groep N.V., a global financial services holding company based in The
Netherlands.

SIGNIFICANT ACCOUNTING POLICIES

New Accounting Standards: As of January 1, 2001, the Companies adopted FAS No.
133, Accounting for Derivative Instruments and Hedging Activities, as amended
and interpreted by FAS No. 137, Accounting for Derivative Instruments and
Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133,
FAS No. 138, Accounting for Certain Derivative Instruments and Certain Hedging
Activities - an Amendment of FASB Statement No. 133, and certain FAS No. 133
implementation issues. This standard, as amended, requires companies to record
all derivatives on the balance sheet as either assets or liabilities and measure
those instruments at fair value. The manner in which companies are to record
gains or losses resulting from changes in the fair values of those derivatives
depends on the use of the derivative and whether it qualifies for hedge
accounting.

Adoption of FAS No. 133 did not have a material effect on the Companies'
financial position or results of operations given the Companies' limited
derivative and embedded derivative holdings.

The Companies chose to elect a transition date of January 1, 1999 for embedded
derivatives. Therefore, only those derivatives embedded in hybrid instruments
issued, acquired or substantively modified by the entity on or after January 1,
1999 are recognized as separate assets or liabilities. The cumulative effect of
the accounting change upon adoption was not material.

Accounting for Derivative Instruments and Hedging Activities: The Companies may
from time to time utilize various derivative instruments to manage interest rate
and price risk (collectively, market risk). The Companies have appropriate
controls in place, and financial exposures are monitored and managed by the
Companies as an integral part of their overall risk management program.
Derivatives are recognized on the balance sheet at their fair value.

The Companies occasionally purchase a financial instrument that contains a
derivative instrument that is "embedded" in the instrument. The Companies'
insurance products are also reviewed to determine whether they contain an
embedded derivative. The Companies assess whether the economic characteristics
of the

MRI-121979 56

GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
September 30, 2001

1. BASIS OF PRESENTATION (continued)
embedded derivative are clearly and closely related to the economic
characteristics of the remaining component of the financial instrument or
insurance product (i.e., the host contract) and whether a separate instrument
with the same terms as the embedded instrument would meet the definition of a
derivative instrument. When it is determined that the embedded derivative
possesses economic characteristics that are not clearly and closely related to
the economic characteristics of the host contract and that a separate instrument
with the same terms would qualify as a derivative instrument, the embedded
derivative is separated from the host contract and carried at fair value. In
cases where the host contract is measured at fair value, with changes in fair
value reported in current period earnings, or the Companies are unable to
reliably identify and measure the embedded derivative for separation from its
host contract, the entire contract is carried on the balance sheet at fair value
and is not designated as a hedging instrument.

Pending Accounting Standards: In June 2001, the Financial Accounting Standards
Board issued Statements of Financial Accounting Standards No. 141, "Business
Combinations", and No. 142, "Goodwill and Other Intangible Assets", effective
for fiscal years beginning after December 15, 2001. Under the new rules,
goodwill and intangible assets deemed to have indefinite lives will no longer be
amortized but will be subject to annual impairment tests in accordance with the
Statements. Other intangible assets will continue to be amortized over their
useful lives. The Companies are required to adopt the new rules effective
January 1, 2002. The Companies are evaluating the impact of the adoption of
these standards and have not yet determined the effect of adoption on their
financial position and results of operations.

STATUTORY

Net loss for Golden American as determined in accordance with statutory
accounting practices was $206,801,000 and $6,017,000 for the nine months ended
September 30, 2001 and 2000, respectively. Total statutory capital and surplus
was $323,288,000 at September 30, 2001 and $406,923,000 at December 31, 2000.

The National Association of Insurance Commissioners has revised the Accounting
Practices and Procedures Manual, the guidance that defines statutory accounting
principles. The revised manual was effective January 1, 2001, and has been
adopted, at least in part, by the States of Delaware and New York, which are the
states of domicile for Golden American and First Golden, respectively. The
revised manual has resulted in changes to the accounting practices that the
Companies use to prepare their statutory-basis financial statements. The impact
of these changes to the Companies' statutory-basis capital and surplus as of
January 1, 2001 was not significant.

RECLASSIFICATIONS

Certain amounts in the prior period financial statements have been reclassified
to conform to the September 30, 2001 financial statement presentation.

2. COMPREHENSIVE INCOME

Comprehensive income includes all changes in stockholder's equity during a
period except those resulting from investments by and distributions to the
stockholder. During the third quarters of 2001 and 2000, total comprehensive
income (loss) for the Companies amounted to $(4.8) million and $14.8 million,
respectively, and $12.6 million and $21.8 million for the nine months ended
September 30, 2001 and 2000, respectively. Other comprehensive income (loss)
excludes net investment gains (losses) included in net income which merely
represent transfers from unrealized to realized gains and losses. These amounts
totaled $231,000 and $(834,000) during the third quarters of 2001 and 2000,
respectively, and $45,000 and $(1.4) million for the nine months ended September
30, 2001 and 2000, respectively. Such amounts, which have been measured through
the date of sale, are net of income taxes and adjustments for the value of
purchased insurance in

MRI-121979 57

GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
September 30, 2001

2. COMPREHENSIVE INCOME (continued)
force and deferred policy acquisition costs totaling $160,000 and $(1,080,000)
for the third quarters of 2001 and 2000, respectively, and $56,000 and
$(3,121,000) for the nine months ended September 30, 2001 and 2000,
respectively.

3. INVESTMENTS

Investment Diversifications: The Companies' investment policies related to the
investment portfolio require diversification by asset type, company, and
industry and set limits on the amount which can be invested in an individual
issuer. Such policies are at least as restrictive as those set forth by
regulatory authorities. The following percentages relate to holdings at
September 30, 2001 and December 31, 2000. Fixed maturities included investments
in basic industrials (63% in 2001, 29% in 2000), conventional mortgage-backed
securities (10% in 2001, 20% in 2000), financial companies (8% in 2001, 14% in
2000), and other asset-backed securities (1% in 2001, 20% in 2000). Mortgage
loans on real estate have been analyzed by geographical location with
concentrations by state identified as Ohio (20% in 2001 and 4% in 2000) and
California (15% in 2001 and 15% in 2000). There are no other concentrations of
mortgage loans on real estate in any state exceeding ten percent at September
30, 2001. Mortgage loans on real estate have also been analyzed by collateral
type with significant concentrations identified in office buildings (22% in 2001
and 29% in 2000), industrial buildings (18% in 2001 and 11% in 2000), retail
facilities (20% in 2001 and 18% in 2000), and multi-family apartments (36% in
2001 and 10% in 2000).

Investment Valuation Analysis: The Companies analyze the investment portfolio at
least quarterly in order to determine if the carrying value of any investment
has been impaired. The carrying value of debt and equity securities is written
down to fair value by a charge to realized losses when impairment in value
appears to be other than temporary. During the first nine months of 2001, Golden
American determined that the carrying value of four bonds exceeded their
estimated net realizable value. As a result, during the nine months ended
September 30, 2001, Golden American recognized a total pre-tax loss of
$1,279,000 to reduce the carrying value of the bonds to their combined net
realizable value of $565,000.

4. DERIVATIVE INSTRUMENTS

The Companies may from time to time utilize various derivative instruments to
manage interest rate and price risk (collectively, market risk). The Companies
have appropriate controls in place, and financial exposures are monitored and
managed by the Companies as an integral part of their overall risk management
program. Derivatives are recognized on the balance sheet at their fair value. At
September 30, 2001, the Companies did not utilize any such derivatives.

The estimated fair values and carrying amounts of the Companies' embedded
derivatives at September 30, 2001 were $0, net of reinsurance. The estimated
fair values and carrying amounts of the embedded derivatives on a direct basis,
before reinsurance, were $4.9 million.

The fair value of these instruments was estimated based on quoted market prices,
dealer quotations or internal estimates.

5. RELATED PARTY TRANSACTIONS

Operating Agreements: Directed Services, Inc. ("DSI"), an affiliate, acts as the
principal underwriter (as defined in the Securities Act of 1933 and the
Investment Company Act of 1940, as amended) and distributor of the variable
insurance products issued by the Companies. DSI is authorized to enter into
agreements with broker/dealers to distribute the Companies' variable insurance
products and appoint representatives of the broker/dealers as agents. The
Companies paid commissions to DSI totaling $51,551,000 and $159,949,000 in the
third quarter and the first nine months of 2001, respectively ($47,073,000 and
$156,325,000, respectively, for the same periods of 2000).

MRI-121979 58

GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
September 30, 2001

5. RELATED PARTY TRANSACTIONS (continued)
Golden American provides certain managerial and supervisory services to DSI. The
fee paid by DSI for these services is calculated as a percentage of average
assets in the variable separate accounts. For the third quarter and nine months
ended September 30, 2001, the fee was $5,749,000 and $17,282,000, respectively
($6,521,000 and $15,579,000, respectively, for the same periods of 2000).

The Companies have an asset management agreement with ING Investment Management
LLC ("ING IM"), an affiliate, in which ING IM provides asset management and
accounting services. Under the agreement, the Companies record a fee based on
the value of the assets managed by ING IM. The fee is payable quarterly. For the
third quarter and the first nine months of 2001, the Companies incurred fees of
$1,204,000 and $2,905,000, respectively, under this agreement ($596,000 and
$1,870,000, respectively, for the same periods of 2000).

Golden American has a guaranty agreement with Equitable Life Insurance Company
of Iowa ("Equitable Life"), an affiliate. In consideration of an annual fee,
payable June 30, Equitable Life guarantees to Golden American that it will make
funds available, if needed, to Golden American to pay the contractual claims
made under the provisions of Golden American's life insurance and annuity
contracts. The agreement is not, and nothing contained therein or done pursuant
thereto by Equitable Life shall be deemed to constitute, a direct or indirect
guaranty by Equitable Life of the payment of any debt or other obligation,
indebtedness, or liability, of any kind or character whatsoever, of Golden
American. The agreement does not guarantee the value of the underlying assets
held in separate accounts in which funds of variable life insurance and variable
annuity policies have been invested. The calculation of the annual fee is based
on risk based capital. For the nine months ended September 30, 2001 and 2000,
Golden American incurred a fee of $12,000 and $7,000, respectively, under this
agreement.

Golden American provides certain advisory, computer, and other resources and
services to Equitable Life. Revenues for these services, which reduced general
expenses incurred by Golden American, totaled $1,360,000 and $4,079,000 for the
third quarter and nine months ended September 30, 2001, respectively ($1,534,000
and $4,810,000, respectively, for the same periods of 2000).

The Companies have a service agreement with Equitable Life in which Equitable
Life provides administrative and financial related services. Under this
agreement with Equitable Life, the Companies incurred expenses of $80,000 and
$232,000 for the third quarter and nine months ended September 30, 2001,
respectively ($339,000 and $1,006,000, respectively, for the same periods in
2000).

During 2001, the State of Delaware Insurance Department approved expense sharing
agreements with ING America Insurance Holdings for administrative, management,
financial, and information technology services. Under these agreements with ING
America Insurance Holdings, Golden American incurred expenses of $20.7 million
for the nine months ended September 30, 2001.

First Golden provides resources and services to DSI. Revenues for these
services, which reduced general expenses incurred by First Golden, totaled
$5,000 and $139,000 for the third quarter and nine months ended September 30,
2001, respectively ($54,000 and $162,000, respectively, for the same periods in
2000).

Golden American provides resources and services to ING Mutual Funds Management
Co., LLC, an affiliate. Revenues for these services, which reduced general
expenses incurred by Golden American, totaled $0 and $478,000 for the third
quarter and nine months ended September 30, 2001, respectively ($117,000 and
$387,000, respectively, for the same periods in 2000).

Golden American provides resources and services to United Life & Annuity
Insurance Company, an affiliate. Revenues for these services, which reduced
general expenses incurred by Golden American, totaled $93,000 and $292,000 for
the third quarter and nine months ended September 30, 2001, respectively
($145,000 and $463,000, respectively, for the same periods in 2000).

MRI-121979 59

GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
September 30, 2001

5. RELATED PARTY TRANSACTIONS (continued)
Golden American provides resources and services to Security Life of Denver
Insurance Company, an affiliate. Revenues for these services, which reduced
general expenses incurred by the Companies, totaled $112,000 and $245,000 for
the third quarter and nine months ended September 30, 2001, respectively
($65,000 and $173,000, respectively, for the same periods in 2000).

The Companies provide resources and services to Southland Life Insurance
Company, an affiliate. Revenues for these services, which reduced general
expenses incurred by the Companies, totaled $34,000 and $97,000 for the third
quarter and nine months ended September 30, 2001, respectively ($26,000 and
$78,000, respectively, for the same periods in 2000).

For the third quarter of 2001, the Companies received premiums, net of
reinsurance, for variable products sold through eight affiliates, Locust Street
Securities, Inc. ("LSSI"), Vestax Securities Corporation ("Vestax"), DSI,
Multi-Financial Securities Corporation ("Multi-Financial"), IFG Network
Securities, Inc. ("IFG"), Washington Square Securities, Inc. ("Washington
Square"), PrimeVest Financial ("PrimeVest"), and Compulife Investor Services,
Inc. ("Compulife") of $28.8 million, $8.7 million, $0.2 million, $6.6 million,
$3.1 million, $25.0 million, $9.8 million and $1.5 million, respectively ($6.0
million, $0.7 million, $0, $2.1 million, $2.7 million, $0, $0, and $0,
respectively, for the same period of 2000). For the first nine months of 2001,
the Companies received premiums, net of reinsurance for variable products sold
through eight affiliates, LSSI, Vestax, DSI, Multi-Financial, IFG, Washington
Square, PrimeVest, and Compulife of $66.7 million, $21.6 million, $0.6 million,
$15.6 million, $8.6 million, $53.9 million, $20.7 million, and $5.3 million,
respectively ($73.0 million, $29.0 million, $0.8 million, $23.2 million, $11.0
million, $0, $0, and $0, respectively, for the same period of 2000).

For the third quarter and nine months ended September 30, 2001, First Golden
received premiums for fixed annuities products sold through Washington Square of
approximately $0.3 million and $0.8 million, respectively.

Modified Coinsurance Agreement: On June 30, 2000, effective January 1, 2000,
Golden American entered into a modified coinsurance agreement with Equitable
Life, an affiliate, covering a considerable portion of Golden American's
variable annuities issued after January 1, 2000, excluding those with an
interest rate guarantee. The financial statements are presented net of the
effects of the agreement.

Under this agreement, Golden American received a net reimbursement of expenses
and charges of $31.6 million and $192.5 million for the third quarter and the
nine months ended September 30, 2001, respectively ($102.9 million and $214.7
million for the same periods in 2000). This was offset by a decrease in deferred
acquisition costs of $50.1 million and $210.9 million, respectively, for the
third quarter and the nine months ended September 30, 2001 ($103.7 million and
$213.0 million for the same periods in 2000). At September 30, 2001, Golden
American had a receivable from Equitable Life of $1.9 million due to the timing
of the cash settlement for the modified coinsurance agreement. As at December
31, 2000, Golden American had a payable of $16.3 million under the agreement.

Reinsurance Agreement Covering Minimum Guaranteed Benefits: On December 28,
2000, Golden American entered into a reinsurance agreement with Security Life of
Denver International Limited, an affiliate, covering minimum guaranteed death
benefits and minimum guaranteed living benefits of variable annuities issued
after January 1, 2000. An irrevocable letter of credit was obtained through Bank
of New York in the amount of $60.0 million related to this agreement. Under this
agreement, Golden American recorded a reinsurance recoverable of $60.5 million
and $14.6 million at September 30, 2001 and December 31, 2000, respectively.

MRI-121979 60

GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
September 30, 2001

5. RELATED PARTY TRANSACTIONS (continued)
Reciprocal Loan Agreement: Golden American maintains a reciprocal loan agreement
with ING America Insurance Holdings, Inc. ("ING AIH"), a Delaware corporation
and affiliate, to facilitate the handling of unusual and/or unanticipated
short-term cash requirements. Under this agreement, which became effective
January 1, 1998 and expires December 31, 2007, Golden American and ING AIH can
borrow up to $65,000,000 from one another. Prior to lending funds to ING AIH,
Golden American must obtain the approval of the Department of Insurance of the
State of Delaware. Interest on any Golden American borrowings is charged at the
rate of ING AIH's cost of funds for the interest period plus 0.15%. Interest on
any ING AIH borrowings is charged at a rate based on the prevailing interest
rate of U.S. commercial paper available for purchase with a similar duration.
Under this agreement, Golden American incurred interest expense of $0 and
$91,000 for the third quarters of 2001 and 2000, respectively, and $25,000 and
$427,000 for the nine months ended September 30, 2001 and 2000, respectively. At
September 30, 2001, Golden American did not have any borrowings or receivables
from ING AIH under this agreement.

Surplus Notes: On December 30, 1999, Golden American issued an 8.179% surplus
note in the amount of $50,000,000 to Equitable Life. The note matures on
December 29, 2029. Payment of the note and related accrued interest is
subordinate to payments due to policyholders, claimant and beneficiary claims,
as well as debts owed to all other classes of debtors, other than surplus note
holders, of Golden American. Any payment of principal and/or interest made is
subject to the prior approval of the Delaware Insurance Commissioner. Under this
agreement, Golden American incurred interest expense of $1,031,000 and
$1,020,000 for the third quarters of 2001 and 2000, respectively, and $3,059,000
and $3,076,000 for the nine months ended September 30, 2001 and 2000,
respectively.

On December 8, 1999, Golden American issued a 7.979% surplus note in the amount
of $35,000,000 to First Columbine Life Insurance Company ("First Columbine"), an
affiliate. The note matures on December 7, 2029. Payment of the note and related
accrued interest is subordinate to payments due to policyholders, claimant and
beneficiary claims, as well as debts owed to all other classes of debtors, other
than surplus note holders, of Golden American. Any payment of principal and/or
interest made is subject to the prior approval of the Delaware Insurance
Commissioner. Under this agreement, Golden American incurred interest expense of
$704,000 and $696,000 for the third quarters of 2001 and 2000, respectively, and
$2,089,000 and $2,271,000 for the first nine months of 2001 and 2000,
respectively.

On September 30, 1999, Golden American issued a 7.75% surplus note in the amount
of $75,000,000 to ING AIH. The note matures on September 29, 2029. Payment of
the note and related accrued interest is subordinate to payments due to
policyholders, claimant, and beneficiary claims, as well as debts owed to all
other classes of debtors, other than surplus note holders, of Golden American.
Any payment of principal and/or interest made is subject to the prior approval
of the Delaware Insurance Commissioner. Under this agreement, Golden American
incurred interest expense of $1,465,000 and $1,449,000 for the third quarters of
2001 and 2000, respectively, and $4,347,000 and $4,355,000 for the first nine
months of 2001 and 2000, respectively. On December 30, 1999, ING AIH assigned
the note to Equitable Life.

On December 30, 1998, Golden American issued a 7.25% surplus note in the amount
of $60,000,000 to Equitable Life. The note matures on December 29, 2028. Payment
of the note and related accrued interest is subordinate to payments due to
policyholders, claimant, and beneficiary claims, as well as debts owed to all
other classes of debtors, other than surplus note holders, of Golden American.
Any payment of principal and/or interest made is subject to the prior approval
of the Delaware Insurance Commissioner. Under this agreement, Golden American
incurred interest expense of $1,096,000 and $1,088,000 for the third quarters of
2001 and 2000, respectively, and $3,254,000 and $3,263,000 for the first nine
months of 2001 and 2000, respectively.

MRI-121979 61

GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
September 30, 2001

5. RELATED PARTY TRANSACTIONS (continued)
On December 17, 1996, Golden American issued an 8.25% surplus note in the amount
of $25,000,000 to Equitable of Iowa Companies. The note matures on December 17,
2026. Payment of the note and related accrued interest is subordinate to
payments due to policyholders, claimant, and beneficiary claims, as well as
debts owed to all other classes of debtors of Golden American. Any payment of
principal made is subject to the prior approval of the Delaware Insurance
Commissioner. Golden American incurred interest totaling $516,000 for the third
quarters of 2001 and 2000, respectively, and $1,547,000 for the first nine
months of 2001 and 2000, respectively.

Stockholder's Equity: During the third quarter and the first nine months of
2001, Golden American received capital contributions from its Parent of
$124,000,000 and $131,000,000, respectively ($0 and $80,000,000, respectively,
for the same periods in 2000).

6. COMMITMENTS AND CONTINGENCIES

Reinsurance: At September 30, 2001, the Companies had reinsurance treaties with
five unaffiliated reinsurers and three affiliated reinsurers covering a
significant portion of the minimum guaranteed death and living benefits under
its variable contracts as of September 30, 2001. Golden American remains liable
to the extent its reinsurers do not meet their obligations under the reinsurance
agreements.

At September 30, 2001 and December 31, 2000, the Companies had net receivables
of $82,391,000 and $33,973,000, respectively, for reinsurance claims, reserve
credits, or other receivables from these reinsurers. These net receivables were
comprised of $2,955,000 and $1,820,000, respectively, for claims recoverable
from reinsurers, $4,024,000 and $4,007,000, respectively, for a payable for
reinsurance premiums, $60,500,000 and $14,642,000, respectively, for reserve
credits, and $22,960,000 and $21,518,000, respectively, for a receivable from an
unaffiliated reinsurer. Included in the accompanying financial statements are
net considerations to reinsurers of $8,593,000 for the third quarter of 2001 and
$21,211,000 for the first nine months of 2001 compared to $6,564,000 and
$14,472,000 for the same periods in 2000. Also included in the accompanying
financial statements are net policy benefits of $13,314,000 for the third
quarter of 2001 and $25,091,000 for the first nine months of 2001 compared to
$1,122,000 and $2,957,000 for the same period in 2000.

On June 30, 2000, effective January 1, 2000, Golden American entered into a
modified coinsurance agreement with Equitable Life, an affiliate, covering a
considerable portion of Golden American's variable annuities issued after
January 1, 2000, excluding those with an interest rate guarantee. For the nine
months ended September 30, 2001, Golden American had received a total settlement
of $192.5 million under this agreement, compared to $214.7 million for the same
period in 2000. The carrying value of the separate account liabilities covered
under this agreement represent 26.3% of total separate account liabilities
outstanding at September 30, 2001, compared to 17.1% at September 30, 2000.
Golden American remains liable to the extent Equitable Life does not meet its
obligations under the agreement. The accompanying financial statements are
presented net of the effects of the agreement.

On December 28, 2000, Golden American entered into a reinsurance agreement with
Security Life of Denver International Limited, an affiliate, covering minimum
guaranteed death benefits and minimum guaranteed living benefits of variable
annuities issued after January 1, 2000. An irrevocable letter of credit was
obtained through Bank of New York in the amount of $60,000,000 related to this
agreement.

MRI-121979 62

GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
September 30, 2001

6. COMMITMENTS AND CONTINGENCIES (continued)
Investment Commitments: At September 30, 2001, outstanding commitments to fund
mortgage loans totaled $35,000,000. There were no outstanding commitments to
fund mortgage loans at December 31, 2000.

Guaranty Fund Assessments: Assessments are levied on the Companies by life and
health guaranty associations in most states in which the Companies are licensed
to cover losses of policyholders of insolvent or rehabilitated insurers. In some
states, these assessments can be partially offset through a reduction in future
premium taxes. The Companies cannot predict whether and to what extent
legislative initiatives may affect the right to offset. The associated cost for
a particular insurance company can vary significantly based upon its fixed
account premium volume by line of business and state premiums as well as its
potential for premium tax offset. The Companies have established an undiscounted
reserve to cover such assessments, review information regarding known failures,
and revise estimates of future guaranty fund assessments. The Companies charged
to expense $2,000 in guaranteed fund assessments in the first nine months of
2001 and 2000. At September 30, 2001 and December 31, 2000, the Companies have
an undiscounted reserve $2,430,000 to cover future assessments (net of related
anticipated premium tax offsets), and have established an asset totaling
$691,000 and $733,000, respectively, for assessments paid which may be
recoverable through future premium tax offsets. The Companies believe this
reserve is sufficient to cover expected future guaranty fund assessments based
upon previous premiums and known insolvencies at this time.

Litigation: The Companies, like other insurance companies, may be named or
otherwise involved in lawsuits, including class action lawsuits and
arbitrations. In some class action and other actions involving insurers,
substantial damages have been sought and/or material settlement or award
payments have been made. The Companies currently believe no pending or
threatened lawsuits or actions exist that are reasonably likely to have a
material adverse impact on the Companies.

Vulnerability from Concentrations: The Companies have various concentrations in
the investment portfolio. As of September 30, 2001, the Companies had one
investment (other than bonds issued by agencies of the United States government)
exceeding ten percent of stockholder's equity. The Companies' asset growth, net
investment income, and cash flow are primarily generated from the sale of
variable and fixed insurance products and associated future policy benefits and
separate account liabilities. Substantial changes in tax laws that would make
these products less attractive to consumers and extreme fluctuations in interest
rates or stock market returns, which may result in higher lapse experience than
assumed, could cause a severe impact on the Companies' financial condition. One
broker/dealer generated 10% of the Companies' net sales during the third quarter
of 2001 (27% by two broker/dealers in the same period of 2000). One
broker/dealer generated 10% of the Companies' net sales during the first nine
months of 2001 (12% by one broker/dealer in the same period of 2000). The
Premium Plus product generated 47% and 50% of the Companies' sales during the
third quarter of 2001 and the first nine months of 2001 (73% and 74% in the same
periods of 2000). The ES II product generated 16% of the Companies' sales during
the third and the first nine months of 2001 (12% in the same periods of 2000).
The Guarantee product, introduced in the fourth quarter of 2000, generated 11%
and 16% of the Companies' sales during the third quarter and the first nine
months of 2001.

Revolving Note Payable: To enhance short-term liquidity, the Companies
established revolving notes payable with SunTrust Bank, Atlanta (the "Bank").
These revolving notes payable were amended and restated in April 2001 with an
expiration date of May 31, 2002. The note was approved by the Boards of
Directors of Golden American and First Golden on August 5, 1998 and September
29, 1998, respectively. The total amount the Companies may have outstanding is
$85,000,000, of which Golden American and First Golden have individual credit
sublimits of $75,000,000 and $10,000,000, respectively. The notes accrue
interest at an annual rate equal to: (1) the cost of funds for the Bank for the
period applicable for the advance plus 0.225% or (2) a rate quoted by the Bank
to the Companies for the advance. The terms of the agreement require the
Companies to maintain the minimum level of Company Action Level Risk Based
Capital as established by applicable state law or regulation. During the third
quarters ended September 30, 2001 and 2000, the

MRI-121979 63

Companies incurred interest expense of $118,000 and $0, respectively. During the
nine months ended September 30, 2001 and 2000, the Companies incurred interest
expense of $117,000 and $36,000, respectively. At September 30, 2001 and
December 31, 2000, the Companies had borrowings of $1,400,000 and $0,
respectively, under these agreements.

7. MERGER OF FIRST GOLDEN WITH RELIASTAR LIFE INSURANCE COMPANY OF NEW YORK
On September 25, 2001, the Board of Directors of First Golden approved a plan of
merger to merge First Golden into ReliaStar Life Insurance Company of New York
("ReliaStar of NY"). The merger is anticipated to be effective on January 1,
2002 (the "merger date"), subject to the approval of the Insurance Department of
the State of New York, which has the discretion, as deemed necessary, to hold a
public hearing with regard to the merger. If approved, on the merger date, First
Golden will cease to exist and will be succeeded by ReliaStar of NY.

SUBSEQUENT EVENT. Subsequent to the filing with the Securities and Exchange
Commission of the Golden American Life Insurance Company Form 10-Q as of
September 30, 2001, the anticipated effective date of the proposed merger
of First Golden American Life Insurance Company of New York into ReliaStar
Life Insurance Company of New York ("RLNY") was moved to April 1, 2002, or
shortly thereafter, subject to the approval of the Insurance Departments of
the States of New York, Delaware and Minnesota.

MRI-121979 64

- -------------------------------------------------------------------------------
FINANCIAL STATEMENTS OF GOLDEN AMERICAN LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------

REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholder
Golden American Life Insurance Company

We have audited the accompanying consolidated balance sheets of Golden American
Life Insurance Company as of December 31, 2000 and 1999, and the related
consolidated statements of operations, changes in stockholder's equity, and cash
flows for each of the three years in the period ended December 31, 2000. These
financial statements are the responsibility of the Companies' management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the 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. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Golden American
Life Insurance Company at December 31, 2000 and 1999, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 2000, in conformity with accounting principles
generally accepted in the United States.

/s/ Ernst & Young LLP

Atlanta, Georgia
March 12, 2001

MRI-121979 65

GOLDEN AMERICAN LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)

December 31, December 31,
2000 1999
----------- -----------

ASSETS

Investments:

Fixed maturities, available for sale, at fair value
(cost: 2000 - $798,751; 1999 - $858,052) ............ $ 792,578 $ 835,321

Equity securities, at fair value (cost: 2000 - $8,611;
1999 - $14,952) ..................................... 6,791 17,330

Mortgage loans on real estate .......................... 99,916 100,087

Policy loans ........................................... 13,323 14,157

Short-term investments ................................. 106,775 80,191
----------- -----------
Total investments ......................................... 1,019,383 1,047,086

Cash and cash equivalents ................................. 63,207 14,380

Reinsurance recoverable ................................... 19,331 14,834

Reinsurance recoverable from affiliates ................... 14,642 --

Due from affiliates ....................................... 38,786 637

Accrued investment income ................................. 9,606 11,198

Deferred policy acquisition costs ......................... 635,147 528,957

Value of purchased insurance in force ..................... 25,942 31,727

Current income taxes recoverable .......................... 511 35

Deferred income tax asset ................................. 9,047 21,943

Property and equipment, less allowances for depreciation of
$5,638 in 2000 and $3,229 in 1999 ...................... 14,404 13,888

Goodwill, less accumulated amortization of $11,964 in 2000
and $8,186 in 1999 ..................................... 139,163 142,941

Other assets .............................................. 32,019 2,514

Separate account assets ................................... 9,831,489 7,562,717
----------- -----------
Total assets .............................................. $11,852,677 $ 9,392,857
=========== ===========

See accompanying notes.

MRI-121979 66

GOLDEN AMERICAN LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(Dollars in thousands, except per share data)

December 31, December 31,
2000 1999
------------ ------------

LIABILITIES AND STOCKHOLDER'S EQUITY

Policy liabilities and accruals:

Future policy benefits:

Annuity and interest sensitive life products .......... $ 1,062,891 $ 1,033,701

Unearned revenue reserve .............................. 6,817 6,300

Other policy claims and benefits ......................... 82 8
------------ ------------
1,069,790 1,040,009

Surplus notes ............................................... 245,000 245,000

Revolving note payable ...................................... -- 1,400

Due to affiliates ........................................... 19,887 12,650

Other liabilities ........................................... 69,374 53,232

Separate account liabilities ................................ 9,831,489 7,562,717
------------ ------------
11,235,540 8,915,008

Commitments and contingencies

Stockholder's equity:

Common stock, par value $10 per share, authorized, issued,
and outstanding 250,000 shares ........................ 2,500 2,500

Additional paid-in capital ............................... 583,640 468,640

Accumulated other comprehensive loss ..................... (4,046) (9,154)

Retained earnings ........................................ 35,043 15,863
------------ ------------
Total stockholder's equity .................................. 617,137 477,849
------------ ------------
Total liabilities and stockholder's equity .................. $ 11,852,677 $ 9,392,857
============ ============

See accompanying notes.

MRI-121979 67

GOLDEN AMERICAN LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands)

Year Ended December 31 2000 1999 1998
--------- --------- ---------
REVENUES:

Annuity and interest sensitive life product
charges .................................... $ 144,877 $ 82,935 $ 39,119
Management fee revenue ........................ 22,982 11,133 4,771
Net investment income ......................... 64,140 59,169 42,485
Realized losses on investments ................ (6,554) (2,923) (1,491)
--------- --------- ---------
225,445 150,314 84,884
Insurance benefits and expenses:
Annuity and interest sensitive life benefits:
Interest credited to account balances ...... 195,088 175,257 94,845
Benefit claims incurred in excess of account
balances ................................ 4,943 6,370 2,123
Underwriting, acquisition and insurance expenses:
Commissions ................................... 213,719 188,383 121,171
General expenses .............................. 84,936 60,205 37,612
Insurance taxes, state licenses, and fees ..... 4,528 3,976 4,140
Policy acquisition costs deferred ............. (168,444) (346,396) (197,796)
Amortization:
Deferred policy acquisition costs .......... 55,154 33,119 5,148
Value of purchased insurance in force ...... 4,801 6,238 4,724
Goodwill ................................... 3,778 3,778 3,778
Expenses and charges reimbursed under
modified coinsurance agreements ............ (225,787) (9,247) (5,604)
--------- --------- ---------
172,716 121,683 70,141

Interest expense ................................. 19,867 8,894 4,390
--------- --------- ---------
192,583 130,577 74,531
--------- --------- ---------
Income before income taxes ....................... 32,862 19,737 10,353

Income taxes ..................................... 13,682 8,523 5,279
--------- --------- ---------

Net income ....................................... $ 19,180 $ 11,214 $ 5,074
========= ========= =========

See accompanying notes.

MRI-121979 68

GOLDEN AMERICAN LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
(Dollars in thousands)

Additional Accumulated Other Retained Total
Common Paid-in Comprehensive Earnings Stockholder's
Stock Capital Income (Loss) (Deficit) Equity
--------------------------------------------------------------------

Balance at December 31, 1997 ..... $ 2,500 $ 224,997 $ 241 $ (425) $ 227,313
Comprehensive income:
Net income ................. -- -- -- 5,074 5,074
Change in net unrealized
investment gains (losses) -- -- (1,136) -- (1,136)
Comprehensive income .......... 3,938
Contribution of capital ....... -- 122,500 -- -- 122,500
Other ......................... -- 143 -- -- 143
--------- --------- --------- --------- ---------
Balance at December 31, 1998 ..... 2,500 347,640 (895) 4,649 353,894
Comprehensive income:
Net income ................. -- -- -- 11,214 11,214
Change in net unrealized
investment gains (losses) -- -- (8,259) -- (8,259)
Comprehensive income .......... 2,955
Contribution of capital ....... -- 121,000 -- -- 121,000
--------- --------- --------- --------- ---------
Balance at December 31, 1999 ..... $ 2,500 $ 468,640 $ (9,154) $ 15,863 $ 477,849
Comprehensive income:
Net income ................. -- -- -- 19,180 19,180
Change in net unrealized
investment gains (losses) -- -- 5,108 -- 5,108
Comprehensive income .......... 24,288
Contribution of capital ....... -- 115,000 -- -- 115,000
--------- --------- --------- --------- ---------
Balance at December 31, 2000 ..... $ 2,500 $ 583,640 $ (4,046) $ 35,043 $ 617,137
========= ========= ========= ========= =========

See accompanying notes.

MRI-121979 69

GOLDEN AMERICAN LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)

Year Ended December 31 2000 1999 1998
--------- --------- ---------

OPERATING ACTIVITIES
Net income .......................................... $ 19,180 $ 11,214 $ 5,074
Adjustments to reconcile net income to net
cash provided by (used in) operations:
Adjustments related to annuity and interest
sensitive life products:
Interest credited and other charges on interest
sensitive products ......................... 195,088 175,257 94,845
Charges for mortality and administration ...... (313) 524 (233)
Change in unearned revenues ................... 517 2,460 2,651
Increase (decrease) in policy liabilities and
accruals ...................................... 74 8 (10)
Decrease (increase) in accrued investment
income ........................................ 1,592 (1,553) (3,222)
Policy acquisition costs deferred ................ (168,444) (346,396) (197,796)
Amortization of deferred policy acquisition costs 55,154 33,119 5,148
Amortization of value of purchased insurance
in force ...................................... 4,801 6,238 4,724
Change in other assets, due to/from affiliates,
other liabilities and accrued income taxes .... (63,840) 24,845 9,979
Provision for depreciation and amortization ...... 8,616 8,850 8,147
Provision for deferred income taxes .............. 13,728 8,523 5,279
Realized losses on investments ................... 6,554 2,923 1,491
--------- --------- ---------
Net cash provided by (used in) operating activities . 72,707 (73,988) (63,923)
--------- --------- ---------

INVESTING ACTIVITIES
Sale, maturity, or repayment of investments:
Fixed maturities - available for sale ............ 205,136 220,547 145,253
Mortgage loans on real estate .................... 12,701 6,572 3,791
Equity securities ................................ 6,128 -- --
Policy loans - net ............................... 834 -- --
--------- --------- ---------
224,799 227,119 149,044

Acquisition of investments:
Fixed maturities - available for sale ............ (154,028) (344,587) (476,523)
Equity securities ................................ -- -- (10,000)
Mortgage loans on real estate .................... (12,887) (9,659) (16,390)
Policy loans - net ............................... -- (2,385) (2,940)
Short-term investments - net ..................... (26,584) (39,039) (26,692)
--------- --------- ---------
(193,499) (395,670) (532,545)

Issuance of reciprocal loan agreement receivables ... (16,900) -- --
Receipt of repayment of reciprocal loan agreement
receivables ...................................... 16,900 -- --
Net purchase of property and equipment .............. (3,285) (8,968) (6,485)
--------- --------- ---------
Net cash provided by (used in) investing activities . 28,015 (177,519) (389,986)

See accompanying notes.

MRI-121979 70

GOLDEN AMERICAN LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(Dollars in thousands)

Year Ended December 31 2000 1999 1998
--------- --------- ---------

FINANCING ACTIVITIES
Proceeds from reciprocal loan agreement
borrowings ..................................... $ 178,900 $ 396,350 $ 500,722
Repayment of reciprocal loan agreement
borrowings ..................................... (178,900) (396,350) (500,722)
Proceeds from revolving note payable .............. 67,200 220,295 108,495
Repayment of revolving note payable ............... (68,600) (218,895) (108,495)
Proceeds from surplus note ........................ -- 160,000 60,000
Repayment of line of credit borrowings ............ -- -- (5,309)
Receipts from annuity and interest sensitive
life policies credited to account balances ..... 801,793 773,685 593,428
Return of account balances on annuity
and interest sensitive life policies ........... (141,440) (146,607) (72,649)

Net reallocations to separate accounts ............ (825,848) (650,270) (239,671)
Contributions of capital by parent ................ 115,000 121,000 103,750
--------- --------- ---------
Net cash provided by (used in) financing activities (51,895) 259,208 439,549
--------- --------- ---------

Increase (decrease) in cash and cash
equivalents .................................... 48,827 7,701 (14,360)

Cash and cash equivalents at beginning of
period ......................................... 14,380 6,679 21,039
--------- --------- ---------
Cash and cash equivalents at end of period ........ $ 63,207 $ 14,380 $ 6,679
========= ========= =========

SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION
Cash paid during the period for:
Interest ....................................... $ 22,444 $ 6,392 $ 4,305
Income taxes ................................... 957 -- 99
Non-cash financing activities:
Non-cash adjustment to additional paid-in
capital for adjusted merger costs ........... -- -- 143
Contribution of capital from parent to
repay line of credit borrowings ............. -- -- 18,750

See accompanying notes.

MRI-121979 71

GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000

1. SIGNIFICANT ACCOUNTING POLICIES

CONSOLIDATION
The consolidated financial statements include Golden American Life Insurance
Company ("Golden American") and its wholly owned subsidiary, First Golden
American Life Insurance Company of New York ("First Golden," and collectively
with Golden American, the "Companies"). All significant intercompany accounts
and transactions have been eliminated.

ORGANIZATION
Golden American, a wholly owned subsidiary of Equitable of Iowa Companies, Inc.,
offers variable insurance products and is licensed as a life insurance company
in the District of Columbia and all states except New York. First Golden is
licensed to sell insurance products in New York and Delaware. The Companies'
variable annuity products are marketed by broker/dealers, financial
institutions, and insurance agents. The Companies' primary customers are
consumers and corporations.

On October 24, 1997 ("the merger date"), PFHI Holding, Inc. ("PFHI"), a Delaware
corporation, acquired all of the outstanding capital stock of Equitable of Iowa
Companies ("Equitable") according to the terms of an Agreement and Plan of
Merger dated July 7, 1997 among Equitable, PFHI, and ING Groep N.V. ("ING").
PFHI is a wholly owned subsidiary of ING, a global financial services holding
company based in The Netherlands. As a result of this transaction, Equitable was
merged into PFHI, which was simultaneously renamed Equitable of Iowa Companies,
Inc. ("EIC" or the "Parent"), a Delaware corporation.

INVESTMENTS
Fixed Maturities: The Companies account for their investments under the
Statement of Financial Accounting Standards ("SFAS") No. 115, "Accounting for
Certain Investments in Debt and Equity Securities," which requires fixed
maturities to be designated as either "available for sale," "held for
investment," or "trading." Sales of fixed maturities designated as "available
for sale" are not restricted by SFAS No. 115. Available for sale securities are
reported at fair value and unrealized gains and losses on these securities are
included directly in stockholder's equity, after adjustment for related changes
in value of purchased insurance in force ("VPIF"), deferred policy acquisition
costs ("DPAC"), and deferred income taxes. At December 31, 2000 and 1999, all of
the Companies' fixed maturities are designated as available for sale, although
the Companies are not precluded from designating fixed maturities as held for
investment or trading at some future date.

Securities determined to have a decline in value that is other than temporary
are written down to estimated fair value, which becomes the new cost basis by a
charge to realized losses in the Companies' Statements of Operations. Premiums
and discounts are amortized/accrued utilizing a method which results in a
constant yield over the securities' expected lives. Amortization/accrual of
premiums and discounts on mortgage and other asset-backed securities
incorporates a prepayment assumption to estimate the securities' expected lives.

Equity Securities: Equity securities are reported at estimated fair value if
readily marketable. The change in unrealized appreciation and depreciation of
marketable equity securities (net of related deferred income taxes, if any) is
included directly in stockholder's equity. Equity securities determined to have
a decline in value that is other than temporary are written down to estimated
fair value, which becomes the new cost basis by a charge to realized losses in
the Companies' Statements of Operations.

Mortgage Loans on Real Estate: Mortgage loans on real estate are reported at
cost adjusted for amortization of premiums and accrual of discounts. If the
value of any mortgage loan is determined to be impaired (i.e., when it is
probable the Companies will be unable to collect all amounts due according to
the contractual terms of the loan agreement), the carrying value of the mortgage
loan is reduced to the present value of expected future cash flows from the loan
discounted at the loan's effective interest rate, or to the loan's observable
market price, or the fair value of the underlying collateral. The carrying value
of impaired loans is

MRI-121979 72

GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000

1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

reduced by the establishment of a valuation allowance, which is adjusted at each
reporting date for significant changes in the calculated value of the loan.
Changes in this valuation allowance are charged or credited to income.

Other Investments: Policy loans are reported at unpaid principal. Short-term
investments are reported at cost, adjusted for amortization of premiums and
accrual of discounts.

Realized Gains and Losses: Realized gains and losses are determined on the basis
of specific identification.

Fair Values: Estimated fair values, as reported herein, of conventional
mortgage-backed securities not actively traded in a liquid market are estimated
using a third party pricing process. This pricing process uses a matrix
calculation assuming a spread over U.S. Treasury bonds based upon the expected
average lives of the securities. Estimated fair values of publicly traded fixed
maturities are reported by an independent pricing service. Fair values of
private placement bonds are estimated using a matrix that assumes a spread
(based on interest rates and a risk assessment of the bonds) over U.S. Treasury
bonds. Estimated fair values of equity securities, which consist of the
Companies' investment in its registered separate accounts, are based upon the
quoted fair value of the securities comprising the individual portfolios
underlying the separate accounts.

CASH AND CASH EQUIVALENTS
For purposes of the accompanying Statements of Cash Flows, the Companies
consider all demand deposits and interest-bearing accounts not related to the
investment function to be cash equivalents. All interest-bearing accounts
classified as cash equivalents have original maturities of three months or less.

DEFERRED POLICY ACQUISITION COSTS
Certain costs of acquiring new insurance business, principally first year
commissions and interest bonuses, premium credit, and other expenses related to
the production of new business ($63.8 million during 2000, $153.0 million during
1999, and $73.4 million during 1998), have been deferred. Acquisition costs for
variable insurance products are being amortized generally in proportion to the
present value (using the assumed crediting rate) of expected future gross
profits. This amortization is adjusted retrospectively when the Companies revise
their estimate of current or future gross profits to be realized from a group of
products. DPAC is adjusted to reflect the pro forma impact of unrealized gains
and losses on fixed maturities the Companies have designated as "available for
sale" under SFAS No. 115.

VALUE OF PURCHASED INSURANCE IN FORCE
As a result of the merger, a portion of the purchase price was allocated to the
right to receive future cash flows from existing insurance contracts. This
allocated cost represents VPIF, which reflects the value of those purchased
policies calculated by discounting actuarially determined expected future cash
flows at the discount rate determined by the purchaser. Amortization of VPIF is
charged to expense in proportion to expected gross profits of the underlying
business. This amortization is adjusted retrospectively when the Companies
revise the estimate of current or future gross profits to be realized from the
insurance contracts acquired. VPIF is adjusted to reflect the pro forma impact
of unrealized gains and losses on available for sale fixed maturities.

PROPERTY AND EQUIPMENT
Property and equipment primarily represent leasehold improvements, office
furniture, certain other equipment, and capitalized computer software and are
not considered to be significant to the Companies' overall operations. Property
and equipment are reported at cost less allowances for depreciation.
Depreciation

MRI-121979 73

GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000

1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

expense is computed primarily on the basis of the straight-line method
over the estimated useful lives of the assets.

GOODWILL
Goodwill was established as a result of the merger and is being amortized
over 40 years on a straight-line basis.

FUTURE POLICY BENEFITS
Future policy benefits for divisions of the variable products with fixed
interest guarantees are established utilizing the retrospective deposit
accounting method. Policy reserves represent the premiums received plus
accumulated interest, less mortality and administration charges. Interest
credited to these policies ranged from 3.00% to 14.00% during 2000, 3.00% to
11.00% during 1999, and 3.00% to 10.00% during 1998. The unearned revenue
reserve represents unearned distribution fees. These distribution fees have been
deferred and are amortized over the life of the contracts in proportion to
expected gross profits.

SEPARATE ACCOUNTS
Assets and liabilities of the separate accounts reported in the accompanying
Balance Sheets represent funds separately administered principally for variable
contracts. Contractholders, rather than the Companies, bear the investment risk
for the variable insurance products. At the direction of the contractholders,
the separate accounts invest the premiums from the sale of variable insurance
products in shares of specified mutual funds. The assets and liabilities of the
separate accounts are clearly identified and segregated from other assets and
liabilities of the Companies. The portion of the separate account assets equal
to the reserves and other liabilities of variable contracts cannot be charged
with liabilities arising out of any other business the Companies may conduct.

Variable separate account assets are carried at fair value of the underlying
investments and generally represent contractholder investment values maintained
in the accounts. Variable separate account liabilities represent account
balances for the variable contracts invested in the separate accounts; the fair
value of these liabilities is equal to their carrying amount. Net investment
income and realized and unrealized capital gains and losses related to separate
account assets are not reflected in the accompanying Statements of Operations.

Product charges recorded by the Companies from variable insurance products
consist of charges applicable to each contract for mortality and expense risk,
cost of insurance, contract administration, and surrender charges. In addition,
some variable annuity and all variable life contracts provide for a distribution
fee collected for a limited number of years after each premium deposit. Revenue
recognition of collected distribution fees is amortized over the life of the
contract in proportion to its expected gross profits. The balance of
unrecognized revenue related to the distribution fees is reported as an unearned
revenue reserve.

DEFERRED INCOME TAXES
Deferred tax assets or liabilities are computed based on the difference between
the financial statement and income tax bases of assets and liabilities using the
enacted marginal tax rate. Deferred tax assets or liabilities are adjusted to
reflect the pro forma impact of unrealized gains and losses on equity securities
and fixed maturities the Companies have designated as available for sale under
SFAS No. 115. Changes in deferred tax assets or liabilities resulting from this
SFAS No. 115 adjustment are charged or credited directly to stockholder's
equity. Deferred income tax expenses or credits reflected in the Companies'
Statements of Operations are based on the changes in the deferred tax asset or
liability from period to period (excluding the SFAS No. 115 adjustment).

MRI-121979 74

GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000

1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

DIVIDEND RESTRICTIONS
Golden American's ability to pay dividends to its Parent is restricted. Prior
approval of insurance regulatory authorities is required for payment of
dividends to the stockholder which exceed an annual limit. During 2001, Golden
American cannot pay dividends to its Parent without prior approval of statutory
authorities. Under the provisions of the insurance laws of the State of New
York, First Golden cannot distribute any dividends to its stockholder, Golden
American, unless a notice of its intent to declare a dividend and the amount of
the dividend has been filed with the New York Insurance Department at least
thirty days in advance of the proposed declaration. If the Superintendent of the
New York Insurance Department finds the financial condition of First Golden does
not warrant the distribution, the Superintendent may disapprove the distribution
by giving written notice to First Golden within thirty days after the filing.

SEGMENT REPORTING
The Companies manage their business as one segment, the sale of variable
insurance products designed to meet customer needs for tax-advantaged saving for
retirement and protection from death. Variable insurance products are sold to
consumers and corporations throughout the United States.

USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
affecting the amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates.

Management is required to utilize historical experience and assumptions about
future events and circumstances in order to develop estimates of material
reported amounts and disclosures. Included among the material (or potentially
material) reported amounts and disclosures that require extensive use of
estimates and assumptions are: (1) estimates of fair values of investments in
securities and other financial instruments, as well as fair values of
policyholder liabilities, (2) policyholder liabilities, (3) deferred policy
acquisition costs and value of purchased insurance in force, (4) fair values of
assets and liabilities recorded as a result of merger, (5) asset valuation
allowances, (6) guaranty fund assessment accruals, (7) deferred tax benefits
(liabilities), and (8) estimates for commitments and contingencies including
legal matters, if a liability is anticipated and can be reasonably estimated.
Estimates and assumptions regarding all of the preceding items are inherently
subject to change and are reassessed periodically. Changes in estimates and
assumptions could materially impact the financial statements.

PENDING ACCOUNTING STANDARDS: DERIVATIVE FINANCIAL INSTRUMENTS
During 1998, the Financial Accounting Standards Board issued Statement No. 133
("SFAS 133"), Accounting for Derivative Financial Instruments and Hedging
Activities. SFAS 133 requires that all derivative instruments, including certain
derivative instruments embedded in other contracts, be recorded on the balance
sheet and measured at its fair value. The change in a derivative's fair value is
generally to be recognized in current period earnings.

If certain conditions are met, a derivative may be specifically designated as a
hedge of an exposure to changes in fair value, variability of cash flows, or
certain foreign currency exposures. When designated as a hedge, the fair value
should be recognized currently in earnings or other comprehensive income,
depending on whether such designation is considered a fair value or as a cash
flow hedge. With respect to fair value hedges, the fair value of the derivative,
as well as changes in the fair value of the hedged item, are reported in
earnings. For cash flow hedges, changes in the derivatives fair value are
reported in other comprehensive income and subsequently reclassified into
earnings when the hedged item affects earnings. The ineffective portion of a
derivative's change in fair value will be immediately recognized in earnings.
The Companies

MRI-121979 75

GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000

1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

adopted SFAS 133 on January 1, 2000. The cumulative effect of the accounting
change upon adoption was not material.

RECLASSIFICATIONS
Certain amounts in the 1999 and 1998 financial statements have been reclassified
to conform to the 2000 financial statement presentation.

2. BASIS OF FINANCIAL REPORTING

The financial statements of the Companies differ from related statutory-basis
financial statements principally as follows: (1) acquisition costs of acquiring
new business are deferred and amortized over the life of the policies rather
than charged to operations as incurred; (2) an asset representing the present
value of future cash flows from insurance contracts acquired was established as
a result of the merger/acquisition and is amortized and charged to expense; (3)
future policy benefit reserves for divisions with fixed interest guarantees of
the variable insurance products are based on full account values, rather than
the greater of cash surrender value or amounts derived from discounting
methodologies utilizing statutory interest rates; (4) reserves are reported
before reduction for reserve credits related to reinsurance ceded and a
receivable is established, net of an allowance for uncollectible amounts, for
these credits rather than presented net of these credits; (5) fixed maturity
investments are designated as "available for sale" and valued at fair value with
unrealized appreciation/depreciation, net of adjustments to value of purchased
insurance in force, deferred policy acquisition costs, and deferred income taxes
(if applicable), credited/charged directly to stockholder's equity rather than
valued at amortized cost; (6) the carrying value of fixed maturities is reduced
to fair value by a charge to realized losses in the Statements of Operations
when declines in carrying value are judged to be other than temporary, rather
than through the establishment of a formula-determined statutory investment
reserve (carried as a liability), changes in which are charged directly to
surplus; (7) deferred income taxes are provided for the difference between the
financial statement and income tax bases of assets and liabilities; (8) net
realized gains or losses attributed to changes in the level of interest rates in
the market are recognized when the sale is completed rather than deferred and
amortized over the remaining life of the fixed maturity security; (9) a
liability is established for anticipated guaranty fund assessments, net of
related anticipated premium tax credits, rather than capitalized when assessed
and amortized in accordance with procedures permitted by insurance regulatory
authorities; (10) revenues for variable insurance products consist of policy
charges applicable to each contract for the cost of insurance, policy
administration charges, amortization of policy initiation fees, and surrender
charges assessed rather than premiums received; (11) the financial statements of
Golden American's wholly owned subsidiary are consolidated rather than recorded
at the equity in net assets; (12) surplus notes are reported as liabilities
rather than as surplus; and (13) assets and liabilities are restated to fair
values when a change in ownership occurs, with provisions for goodwill and other
intangible assets, rather than continuing to be presented at historical cost.

The net loss for Golden American as determined in accordance with statutory
accounting practices was $71,134,000 in 2000, $85,578,000 in 1999, $68,002,000
in 1998. Total statutory capital and surplus was $406,923,000 and $368,928,000
at December 31, 2000 and 1999, respectively.

The National Association of Insurance Commissioners has revised the Accounting
Practices and Procedures Manual, the guidance that defines statutory accounting
principles. The revised manual will be effective January 1, 2001, and has been
adopted, at least in part, by the States of Delaware and New York, which are the
states of domicile for Golden American and First Golden, respectively. The
revised manual will result in changes to the accounting practices that the
Companies use to prepare their statutory-basis financial statements. Management
believes the impact of these changes to the Companies' statutory-basis capital
and surplus as of January 1, 2001 will not be significant.

MRI-121979 76

GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000

3. INVESTMENT OPERATIONS

INVESTMENT RESULTS
Major categories of net investment income are summarized below:

Year Ended December 31 2000 1999 1998
-------- -------- --------
(Dollars in thousands)
Fixed maturities ...................... $ 55,302 $ 50,352 $ 35,224
Equity securities ..................... 248 515 --
Mortgage loans on real estate ......... 7,832 7,074 6,616
Policy loans .......................... 516 485 619
Short-term investments ................ 2,253 2,583 1,311
Other, net ............................ 543 388 246
-------- -------- --------
Gross investment income ............... 66,694 61,397 44,016
Less investment expenses .............. (2,554) (2,228) (1,531)
-------- -------- --------
Net investment income ................. $ 64,140 $ 59,169 $ 42,485
======== ======== ========

Realized losses on investments follows:

Year Ended December 31 2000 1999 1998
-------- -------- --------
(Dollars in thousands)
Fixed maturities, available for sale .. $ (6,289) $ (2,910) $ (1,428)
Equity securities ..................... (213) -- --
Mortgage loans on real estate ......... (52) (13) (63)
-------- -------- --------
Realized losses on investments ........ $ (6,554) $ (2,923) $ (1,491)
======== ======== ========

The change in unrealized appreciation (depreciation) of securities at fair value
follows:

Year Ended December 31 2000 1999 1998
-------- -------- --------
(Dollars in thousands)
Fixed maturities, available for sale .. $ 16,558 $(24,944) $ 1,100
Equity securities ..................... (4,198) 5,301 (2,390)
-------- -------- --------
Unrealized appreciation (depreciation)
of securities ...................... $ 12,360 $(19,643) $ (1,290)
======== ======== ========

MRI-121979 77

GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000

3. INVESTMENT OPERATIONS (continued)

At December 31, 2000 and December 31, 1999, amortized cost, gross unrealized
gains and losses, and estimated fair values of fixed maturities, all of which
are designated as available for sale, follows:

Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
-------- -------- -------- --------
(Dollars in thousands)
December 31, 2000
- -----------------
U.S. government and governmental
agencies and authorities .... $ 18,607 $ 580 $ (16) $ 19,171
Public utilities ............... 54,132 294 (1,600) 52,826
Corporate securities ........... 355,890 1,318 (8,006) 349,202
Other assets-backed securities . 223,787 2,166 (1,831) 224,122
Mortgage-backed securities ..... 146,335 1,465 (543) 147,257
-------- -------- -------- --------
Total .......................... $798,751 $ 5,823 $(11,996) $792,578
======== ======== ======== ========

December 31, 1999
- -----------------
U.S. government and governmental
agencies and authorities .... $ 21,363 -- $ (260) $ 21,103
Public utilities ............... 53,754 $ 25 (2,464) 51,315
Corporate securities ........... 396,494 53 (12,275) 384,272
Other assets-backed securities . 207,044 850 (4,317) 203,577
Mortgage-backed securities ..... 179,397 39 (4,382) 175,054
-------- -------- -------- --------
Total .......................... $858,052 $ 967 $(23,698) $835,321
======== ======== ======== ========

Short-term investments with maturities of 30 days or less have been excluded
from the above schedules. Amortized cost approximates fair value for these
securities. At December 31, 2000, net unrealized investment loss on fixed
maturities designated as available for sale totaled $6,173,000. Depreciation of
$1,447,000 was included in stockholder's equity at December 31, 2000 (net of
adjustments of $801,000 to VPIF, $3,146,000 to DPAC, and $779,000 to deferred
income taxes). At December 31, 1999, net unrealized investment loss on fixed
maturities designated as available for sale totaled $22,731,000. Depreciation of
$6,955,000 was included in stockholder's equity at December 31, 1999 (net of
adjustments of $1,785,000 to VPIF, $10,246,000 to DPAC, and $3,745,000 to
deferred income taxes).

At December 31, 2000, net unrealized depreciation on equity securities was
comprised entirely of gross depreciation of $1,820,000. At December 31, 1999,
net unrealized appreciation on equity securities was comprised entirely of gross
appreciation of $2,378,000.

Amortized cost and estimated fair value of fixed maturities designated as
available for sale, by contractual maturity, at December 31, 2000 are shown
below. Expected maturities will differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or without call
or prepayment penalties.

MRI-121979 78

GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000

3. INVESTMENT OPERATIONS (continued)
Amortized Estimated
December 31, 2000 Cost Fair Value
- ----------------- --------- ----------
(Dollars in thousands)
Due within one year ......................... $ 51,001 $ 50,836
Due after one year through five years ....... 323,753 317,862
Due after five years through ten years ...... 45,812 44,891
Due after ten years ......................... 8,063 7,610
-------- --------
428,629 421,199
Other asset-backed securities ............... 223,787 224,122
Mortgage-backed securities .................. 146,335 147,257
-------- --------
Total ....................................... $798,751 $792,578
======== ========

An analysis of sales, maturities, and principal repayments of the Companies'
fixed maturities portfolio follows:

Gross Gross Proceeds
Amortized Realized Realized From
Cost Gains Losses Sale
-------- -------- -------- --------
(Dollars in thousands)

For the year ended December 31, 2000:
Scheduled principal repayments, calls, and
tenders ............................... $ 91,158 $ 122 $ (1) $ 91,279
Sales .................................... 120,125 285 (6,553) 113,857
-------- -------- -------- --------
Total .................................... $211,283 $ 407 $ (6,554) $205,136
======== ======== ======== ========

For the year ended December 31, 1999:
Scheduled principal repayments, calls, and
tenders ............................... $141,346 $ 216 (174) $141,388
Sales .................................... 80,472 141 $ (1,454) 79,159
-------- -------- -------- --------
Total .................................... $221,818 $ 357 $ (1,628) $220,547
======== ======== ======== ========

For the year ended December 31, 1998:
Scheduled principal repayments, calls, and
tenders ............................... $102,504 $ 60 $ (3) $102,561
Sales .................................... 43,204 518 (1,030) 42,692
-------- -------- -------- --------
Total .................................... $145,708 $ 578 $ (1,033) $145,253
======== ======== ======== ========

MRI-121979 79

GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000

3. INVESTMENT OPERATIONS (continued)

During the second quarter of 2000, Golden American determined that the carrying
value of an impaired bond exceeded its estimated net realizable value. As a
result, on June 30, 2000, Golden American recognized a total pre-tax loss of
approximately $142,000 to reduce the carrying value of the bond to its net
realizable value of $315,000 at December 31, 2000.

During the fourth quarter of 1998, Golden American determined that the carrying
value of two bonds exceeded their estimated net realizable value. As a result,
at December 31, 1998, Golden American recognized a total pre-tax loss of
$973,000 to reduce the carrying value of the bonds to their combined net
realizable value of $2,919,000. During the second quarter of 1999, further
information was received regarding these bonds and Golden American determined
that the carrying value of the two bonds exceeded their estimated net realizable
value. As a result, at June 30, 1999, Golden American recognized a total pre-tax
loss of $1,639,000 to further reduce the carrying value of the bonds to their
combined net realizable value of $1,137,000. During the year 2000, these bonds
had no further reduction in carrying value.

Investments on Deposit: At December 31, 2000 and 1999, affidavits of deposits
covering bonds with a par value of $6,870,000 and $6,470,000, respectively, were
on deposit with regulatory authorities pursuant to certain statutory
requirements.

Investment Diversifications: The Companies' investment policies related to the
investment portfolio require diversification by asset type, company, and
industry and set limits on the amount which can be invested in an individual
issuer. Such policies are at least as restrictive as those set forth by
regulatory authorities. The following percentages relate to holdings at December
31, 2000 and December 31, 1999. Fixed maturities included investments in basic
industrials (29% in 2000, 29% in 1999), conventional mortgage-backed securities
(20% in 2000, 22% in 1999), financial companies (14% in 2000, 16% in 1999), and
other asset-backed securities (20% in 2000, 19% in 1999). Mortgage loans on real
estate have been analyzed by geographical location with concentrations by state
identified as California (15% in 2000, 12% in 1999) and Utah (9% in 2000, 10% in
1999). There are no other concentrations of mortgage loans on real estate in any
state exceeding ten percent at December 31, 2000 and 1999. Mortgage loans on
real estate have also been analyzed by collateral type with significant
concentrations identified in office buildings (29% in 2000, 34% in 1999),
industrial buildings (35% in 2000, 33% in 1999), retail facilities (18% in 2000,
19% in 1999), and multi-family apartments (10% in 2000, 10% in 1999). Equity
securities are not significant to the Companies' overall investment portfolio.

No investment in any person or its affiliates (other than bonds issued by
agencies of the United States government) exceeded ten percent of stockholder's
equity at December 31, 2000.

4. COMPREHENSIVE INCOME

Comprehensive income includes all changes in stockholder's equity during a
period except those resulting from investments by and distributions to the
stockholder. Total comprehensive income (loss) for the Companies includes
$606,000 for the year ended December 31, 2000 for First Golden and $(452,000)
and $1,015,000 for the years ended December 31, 1999 and 1998, respectively.
Other comprehensive income excludes net investment gains (losses) included in
net income, which merely represent transfers from unrealized to realized gains
and losses. These amounts total $(2,670,000), $(1,468,000) and $(2,133,000) in
the years ended December 31, 2000, 1999 and 1998, respectively. Such amounts,
which have been measured through the date of sale, are net of income taxes and
adjustments to VPIF and DPAC totaling $(4,742,000), $(1,441,000) and $705,000 in
the years ended December 31, 2000, 1999 and 1998, respectively.

MRI-121979 80

GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000

5. FAIR VALUES OF FINANCIAL INSTRUMENTS

SFAS No. 107, "Disclosures about Fair Value of Financial Instruments," requires
disclosure of estimated fair value of all financial instruments, including both
assets and liabilities recognized and not recognized in a company's balance
sheet, unless specifically exempted. SFAS No. 119, "Disclosure about Derivative
Financial Instruments and Fair Value of Financial Instruments," requires
additional disclosures about derivative financial instruments. Most of the
Companies' investments, investment contracts, and debt fall within the
standards' definition of a financial instrument. Fair values for the Companies'
insurance contracts other than investment contracts are not required to be
disclosed. In cases where quoted market prices are not available, estimated fair
values are based on estimates using present value or other valuation techniques.
Those techniques are significantly affected by the assumptions used, including
the discount rate and estimates of future cash flows. Accounting, actuarial, and
regulatory bodies are continuing to study the methodologies to be used in
developing fair value information, particularly as it relates to such things as
liabilities for insurance contracts. Accordingly, care should be exercised in
deriving conclusions about the Companies' business or financial condition based
on the information presented herein.

The Companies closely monitor the composition and yield of invested assets, the
duration and interest credited on insurance liabilities, and resulting interest
spreads and timing of cash flows. These amounts are taken into consideration in
the Companies' overall management of interest rate risk, which attempts to
minimize exposure to changing interest rates through the matching of investment
cash flows with amounts expected to be due under insurance contracts. These
assumptions may not result in values consistent with those obtained through an
actuarial appraisal of the Companies' business or values that might arise in a
negotiated transaction.

The following compares carrying values as shown for financial reporting purposes
with estimated fair values:

December 31 2000 1999
----------------------- -----------------------
Estimated Estimated
Carrying Fair Carrying Fair
Value Value Value Value
---------- ---------- ---------- ----------
(Dollars in thousands)

ASSETS
Fixed maturities, available for sale .. $ 792,578 $ 792,578 $ 835,321 $ 835,321
Equity securities ..................... 6,791 6,791 17,330 17,330
Mortgage loans on real estate ......... 99,916 100,502 100,087 95,524
Policy loans .......................... 13,323 13,323 14,157 14,157
Short-term investments ................ 106,775 106,775 80,191 80,191
Cash and cash equivalents ............. 63,207 63,207 14,380 14,380
Separate account assets ............... 9,831,489 9,831,489 7,562,717 7,562,717

LIABILITIES
Annuity products ...................... 1,047,932 962,810 1,017,105 953,546
Surplus notes ......................... 245,000 204,455 245,000 226,100
Revolving note payable ................ -- -- 1,400 1,400
Separate account liabilities .......... 9,831,489 9,831,489 7,562,717 7,562,717

MRI-121979 81

GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000

5. FAIR VALUES OF FINANCIAL INSTRUMENTS (continued)

The following methods and assumptions were used by the Companies in estimating
fair values.

Fixed maturities: Estimated fair values of conventional mortgage-backed
securities not actively traded in a liquid market and publicly traded securities
are estimated using a third party pricing process. This pricing process uses a
matrix calculation assuming a spread over U.S. Treasury bonds based upon the
expected average lives of the securities.

Equity securities: Estimated fair values of equity securities, which consist of
the Companies' investment in the portfolios underlying its separate accounts,
are based upon the quoted fair value of individual securities comprising the
individual portfolios. For equity securities not actively traded, estimated fair
values are based upon values of issues of comparable returns and quality.

Mortgage loans on real estate: Fair values are estimated by discounting expected
cash flows, using interest rates currently offered for similar loans.

Policy loans: Carrying values approximate the estimated fair value for policy
loans.

Short-term investments and cash and cash equivalents: Carrying values reported
in the Companies' historical cost basis balance sheet approximate estimated fair
value for these instruments due to their short-term nature.

Separate account assets: Separate account assets are reported at the quoted fair
values of the individual securities in the separate accounts.

Annuity products: Estimated fair values of the Companies' liabilities for future
policy benefits for the divisions of the variable annuity products with fixed
interest guarantees and for supplemental contracts without life contingencies
are stated at cash surrender value, the cost the Companies would incur to
extinguish the liability.

Surplus notes: Estimated fair value of the Companies' surplus notes were based
upon discounted future cash flows using a discount rate approximating the
current market value.

Revolving note payable: Carrying value reported in the Companies' historical
cost basis balance sheet approximates estimated fair value for this instrument,
as the agreement carries a variable interest rate provision.

Separate account liabilities: Separate account liabilities are reported at full
account value in the Companies' historical cost balance sheet. Estimated fair
values of separate account liabilities are equal to their carrying amount.

6. VALUE OF PURCHASED IN FORCE

As a result of the merger, a portion of the purchase price was allocated to the
right to receive future cash flows from existing insurance contracts. This
allocated cost represents VPIF, which reflects the value of those purchased
policies calculated by discounting actuarially determined expected future cash
flows at the discount rate determined by the purchaser. Interest was accrued at
a rate of 7.32% during 2000 (7.33% during 1999, and 7.29% during 1998).

MRI-121979 82

GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000

6. VALUE OF PURCHASED IN FORCE (continued)

A reconciliation of the change in the VPIF asset follows:

Year Ended December 31 2000 1999 1998
-------- -------- --------
(Dollars in thousands)
Beginning balance ......................... $ 31,727 $ 35,977 $ 43,174
Accretion of interest .................. 2,016 2,372 2,802
Amortization of asset .................. (6,817) (8,610) (7,526)
Adjustment for unrealized gains (losses) (984) 1,988 (203)
Purchase price adjustment to opening
balance sheet ....................... -- -- (2,270)
-------- -------- --------
Ending balance ............................ $ 25,942 $ 31,727 $ 35,977
======== ======== ========

Based on current conditions and assumptions as to the impact of future events on
acquired policies in force, the expected approximate net amortization relating
to VPIF as of December 31, 2000, is $3.9 million in 2001, $3.6 million in 2002,
$3.0 million in 2003, $2.4 million in 2004, and $1.9 million in 2005. Actual
amortization may vary based upon changes in assumptions and experience.

7. INCOME TAXES

Golden American files a consolidated federal income tax return. Under the
Internal Revenue Code, a newly acquired insurance company cannot file as part of
the Parent's consolidated tax return for 5 years.

At December 31, 2000, the Companies have net operating loss ("NOL")
carryforwards for federal income tax purposes of approximately $189,656,000.
Approximately $5,094,000, $3,354,000, $50,449,000, $94,078,000 and $36,681,000
of these NOL carryforwards are available to offset future taxable income of the
Companies through the years 2011, 2012, 2018, 2019 and 2020, respectively.

INCOME TAX EXPENSE (BENEFIT)
Income tax expense (benefit) included in the consolidated financial statements
follows:

Year Ended December 31 2000 1999 1998
-------- -------- --------
(Dollars in thousands)
Current ................................... $ (46) $ -- $ --
Deferred .................................. 13,728 8,523 5,279
-------- -------- --------
$ 13,682 $ 8,523 $ 5,279
======== ======== ========

MRI-121979 83

GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000

7. INCOME TAXES (continued)

The effective tax rate on income before income taxes is different from the
prevailing federal income tax rate. A reconciliation of this difference follows:

Year Ended December 31 2000 1999 1998
-------- -------- --------
(Dollars in thousands)

Income before income taxes ................ $ 32,862 $ 19,737 $ 10,353
======== ======== ========
Income tax at federal statutory rate ...... $ 11,502 $ 6,908 $ 3,624
Tax effect of:
Goodwill amortization ................. 1,322 1,322 1,322
Meals and entertainment ............... 292 199 157
Other items ........................... 566 94 176
-------- -------- --------
Income tax expense ........................ $ 13,682 $ 8,523 $ 5,279
======== ======== ========

DEFERRED INCOME TAXES
The tax effect of temporary differences giving rise to the Companies' deferred
income tax assets and liabilities at December 31, 2000 and 1999 follows:

December 31 2000 1999
--------- ---------
(Dollars in thousands)

Deferred tax assets:
Net unrealized depreciation of securities at fair value .......... $ 637 $ --
Net unrealized depreciation of available for sale fixed maturities 779 3,745
Future policy benefits ........................................... 163,691 133,494
Goodwill ......................................................... 15,111 16,323
Net operating loss carryforwards ................................. 66,380 56,630
Other ............................................................ 1,333 1,333
--------- ---------
247,931 $ 211,525
Deferred tax liabilities:
Net unrealized appreciation of securities at fair value .......... -- (832)
Fixed maturity securities ........................................ (17,774) (17,774)
Deferred policy acquisition costs ................................ (184,743) (154,706)
Mortgage loans on real estate .................................... (715) (715)
Value of purchased insurance in force ............................ (8,512) (10,462)
Other ............................................................ (25,724) (1,348)
--------- ---------
(237,468) (185,837)
--------- ---------
Valuation allowance ................................................. (1,416) (3,745)
--------- ---------
Deferred income tax asset ........................................... $ 9,047 $ 21,943
========= =========

At December 31, 2000, the Company reported, for financial statement purposes,
unrealized losses on certain investments, which have not been recognized for tax
purposes. Since it is uncertain as to whether these capital losses, if ever
realized, could be utilized to offset capital gains, a valuation allowance has
been established for the tax effect of the financial statement losses.

MRI-121979 84

GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000

8. RETIREMENT PLANS AND EMPLOYEE STOCK COMPENSATION

DEFINED BENEFIT PLANS
In 2000, 1999 and 1998, the Companies were allocated their share of the pension
liability associated with their employees. The Companies' employees are covered
by the employee retirement plan of an affiliate, Equitable Life. Further,
Equitable Life sponsors a defined contribution plan that is qualified under
Internal Revenue Code Section 401(k).

The following tables summarize the benefit obligations and the funded status for
pension benefits over the two-year period ended December 31, 2000:

2000 1999
------- -------
(Dollars in thousands)
Change in benefit obligation:
Benefit obligation at January 1 ............... $ 4,221 $ 4,454
Service cost .................................. 1,569 1,500
Interest cost ................................. 554 323
Actuarial (gain) loss ......................... 1,562 (2,056)
------- -------
Benefit obligation at December 31 ............. $ 7,906 $ 4,221
======= =======

Funded status:
Funded status at December 31 .................. $(7,906) $(4,221)
Unrecognized past service cost ................ 141 --
Unrecognized net loss ......................... 1,627 210
------- -------
Net amount recognized ......................... $(6,138) $(4,011)
======= =======

The Companies' plan assets were held by Equitable Life, an affiliate. During
1998, the Equitable Life Employee Pension Plan began investing in an undivided
interest of the ING-NA Master Trust (the "Master Trust"). Boston Safe Deposit
and Trust Company holds the Master Trust's investment assets.

The weighted-average assumptions used in the measurement of the Companies'
benefit obligation follows:

December 31 2000 1999
------ ------
Discount rate .................................... 7.75% 8.00%
Expected return on plan assets ................... 9.25 9.25
Rate of compensation increase .................... 5.00 5.00

The following table provides the net periodic benefit cost for the fiscal years
2000, 1999, and 1998:

Year Ended December 31 2000 1999 1998
------ ------ ------
(Dollars in thousands)
Service cost ............................... $1,569 $1,500 $1,138
Interest cost .............................. 554 323 97
------ ------ ------
Net periodic benefit cost .................. $2,123 $1,823 $1,235
====== ====== ======

MRI-121979 85

GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000

8. RETIREMENT PLANS AND EMPLOYEE STOCK COMPENSATION (continued)

There were no gains or losses resulting from curtailments or settlements during
2000, 1999, or 1998.

The projected benefit obligation, accumulated benefit obligation, and fair value
of plan assets for pension plans with accumulated benefit obligations in excess
of plan assets were $7,906,000, $4,701,000, and $0, respectively, as of December
31, 2000 and $4,221,000, $2,488,000, and $0, respectively, as of December 31,
1999.

PHANTOM STOCK OPTION PLAN
The Phantom Stock Option Plan (the "Phantom Plan"), which covers certain key
employees, is similar to a standard stock option plan; however, the phantom
share option entitles the holder to a cash benefit in Dutch Guilders linked to
the rise in value of ING ordinary shares on the Amsterdam Stock Exchange. The
plan participants are entitled to any appreciation in the value of ING ordinary
shares over the Phantom Plan option price (strike price) of 53.85 Euros for
options issued on July 1, 1999, 140.40 Dutch Guilders for options issued on May
26, 1998, and 85.10 Dutch Guilders for options issued on May 23, 1997, not the
ordinary shares themselves.

Options are granted at fair value on the date of grant. Options in the Phantom
Plan are subject to forfeiture to ING should the individuals terminate their
relationship with ING before the three-year initial retention period has
elapsed. All options expire five years from the date of grant.

On July 1, 1999, ING issued 34,750 options to employees of Golden American
related to this plan at a strike price of 53.85 Euros.

On May 26, 1998, ING issued 42,400 options related to this plan at a strike
price of 140.40 Dutch Guilders. Since the strike price at December 31, 1998 was
higher than the ING share price, there was no compensation expense related to
these options in 1998.

On May 23, 1997, ING issued 3,500 options related to this plan at a strike price
of 85.10 Dutch Guilders. Since the strike price was lower than the ING share
price at December 31, 1998, Golden American incurred $46,000 of compensation
expense related to these options during 1998.

No expense was recognized in 1999 related to the above options. As of December
31, 1999, 58,250 options remain outstanding.

During 2000, the Phantom Plan liability was transferred to ING. As of December
31, 2000, the Companies held no liabilities under the Phantom Plan. There were
no expenses incurred related to this plan during the year ended December 31,
2000.

9. RELATED PARTY TRANSACTIONS

Operating Agreements: Directed Services, Inc. ("DSI"), an affiliate, acts as the
principal underwriter (as defined in the Securities Act of 1933 and the
Investment Company Act of 1940, as amended) and distributor of the variable
insurance products issued by the Companies. DSI is authorized to enter into
agreements with broker/dealers to distribute the Companies' variable insurance
products and appoint representatives of the broker/dealers as agents. For the
years ended December 31, 2000, 1999 and 1998, the Companies paid commissions to
DSI totaling $208,883,000, $181,536,000, and $117,470,000, respectively.

Golden American provides certain managerial and supervisory services to DSI. The
fee paid by DSI for these services is calculated as a percentage of average
assets in the variable separate accounts. For the years ended December 31, 2000,
1999 and 1998, the fee was $21,296,000, $10,136,000, and $4,771,000,
respectively.

MRI-121979 86

GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000

9. RELATED PARTY TRANSACTIONS (continued)

Effective January 1, 1998, the Companies have an asset management agreement with
ING Investment Management LLC ("ING IM"), an affiliate, in which ING IM provides
asset management and accounting services. Under the agreement, the Companies
record a fee based on the value of the assets under management. The fee is
payable quarterly. For the years ended December 31, 2000, 1999 and 1998, the
Companies incurred fees of $2,521,000, $2,227,000 and $1,504,000, respectively,
under this agreement.

Golden American has a guaranty agreement with Equitable Life Insurance Company
of Iowa ("Equitable Life"), an affiliate. In consideration of an annual fee,
payable June 30, Equitable Life guarantees to Golden American that it will make
funds available, if needed, to Golden American to pay the contractual claims
made under the provisions of Golden American's life insurance and annuity
contracts. The agreement is not, and nothing contained therein or done pursuant
thereto by Equitable Life shall be deemed to constitute, a direct or indirect
guaranty by Equitable Life of the payment of any debt or other obligation,
indebtedness, or liability, of any kind or character whatsoever, of Golden
American. The agreement does not guarantee the value of the underlying assets
held in separate accounts in which funds of variable life insurance and variable
annuity policies have been invested. The calculation of the annual fee is based
on risk based capital. On June 30, 2000, Golden American incurred a fee of
$7,000 under this agreement. No annual fee was paid in 1999.

Golden American provides certain advisory, computer, and other resources and
services to Equitable Life. Revenues for these services, which reduced general
expenses incurred by Golden American, totaled $6,193,000, $6,107,000 and
$5,833,000 for the years ended December 31, 2000, 1999 and 1998, respectively.

The Companies have a service agreement with Equitable Life in which Equitable
Life provides administrative and financial related services. Under this
agreement, the Companies incurred expenses of $1,270,000, $1,251,000 and
$1,058,000 for the years ended December 31, 2000, 1999 and 1998, respectively.

First Golden provided resources and services to DSI. Revenues for these
services, which reduce general expenses incurred by the Companies, totaled
$223,000, $387,000, and $75,000 for the years ended December 31, 2000, 1999 and
1998, respectively.

Golden American provides resources and services to ING Mutual Funds Management
Co., LLC, an affiliate. Revenues for these services, which reduced general
expenses incurred by Golden American, totaled $455,000 and $244,000 for the
years ended December 31, 2000 and 1999, respectively.

Golden American provides resources and services to United Life & Annuity
Insurance Company, an affiliate. Revenues for these services, which reduced
general expenses incurred by Golden American, totaled $593,000 and $460,000 for
the years ended December 31, 2000 and 1999, respectively.

The Companies provide resources and services to Security Life of Denver
Insurance Company, an affiliate. Revenues for these services, which reduced
general expenses incurred by the Companies, totaled $261,000 and $216,000 for
the years ended December 31, 2000 and 1999, respectively.

The Companies provide resources and services to Southland Life Insurance
Company, an affiliate. Revenues for these services, which reduce general
expenses incurred by the Companies, totaled $115,000 and $103,000 for the years
ended December 31, 2000 and 1999, respectively.

MRI-121979 87

GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000

9. RELATED PARTY TRANSACTIONS (continued)

In 2000, 1999, and 1998, the Companies received 11.3%, 10.0%, and 9.6% of total
premiums, net of reinsurance, for variable products sold through eight
affiliates as noted in the following table:

Year Ended December 31 2000 1999 1998
------- ------- -------
(Dollars in thousands)
LSSI ....................................... $ 127.0 $ 168.5 $ 122.9
Vestax Securities Corporation .............. 47.2 88.1 44.9
DSI ........................................ 1.4 2.5 13.6
Multi-Financial Securities Corporation ..... 38.6 44.1 13.4
IFG Network Securities, Inc. ............... 23.1 25.8 3.7
Washington Square .......................... 44.6 -- --
Primevest .................................. 6.2 -- --
Compulife .................................. 2.7 -- --
------- ------- -------
Total ...................................... $ 290.8 $ 329.0 $ 198.5
======= ======= =======

Modified Coinsurance Agreement: On June 30, 2000, effective January 1, 2000,
Golden American entered into a modified coinsurance agreement with Equitable
Life, an affiliate, covering a considerable portion of Golden American's
variable annuities issued on or after January 1, 2000, excluding those with an
interest rate guarantee. The financial statements are presented net of the
effects of the agreement.

Under this agreement, Golden American received a net reimbursement of expenses
and charges of $218.8 million. This was offset by a decrease in deferred
acquisition costs of $223.7 million. As at December 31, 2000, Golden American
also had a payable to Equitable Life of $16.3 million due to the overpayment by
Equitable Life of the cash settlement for the modified coinsurance agreement.

Reinsurance Agreement Covering Minimum Guaranteed Benefits: On December 28,
2000, Golden American entered into a reinsurance agreement with Security Life of
Denver International Limited, an affiliate, covering variable annuity minimum
guaranteed death benefits and minimum guaranteed living benefits of variable
annuities issued on or after January 1, 2000. An irrevocable letter of credit
was obtained through Bank of New York in the amount of $10,500,000 related to
this agreement. Under this agreement, Golden American recorded a reinsurance
recoverable of $14.6 million at December 31, 2000.

Reciprocal Loan Agreement: Golden American maintains a reciprocal loan agreement
with ING America Insurance Holdings, Inc. ("ING AIH"), a Delaware corporation
and affiliate, to facilitate the handling of unusual and/or unanticipated
short-term cash requirements. Under this agreement, which became effective
January 1, 1998 and expires December 31, 2007, Golden American and ING AIH can
borrow up to $65,000,000 from one another. Prior to lending funds to ING AIH,
Golden American must obtain the approval from the Department of Insurance of the
State of Delaware. Interest on any Golden American borrowings is charged at the
rate of ING AIH's cost of funds for the interest period plus 0.15%. Interest on
any ING AIH borrowings is charged at a rate based on the prevailing interest
rate of U.S. commercial paper available for purchase with a similar duration.
Under this agreement, Golden American incurred interest expense of $481,000,
$815,000 and $1,765,000 for the years ended December 31, 2000, 1999 and 1998,
respectively. At December 31, 2000, 1999 and 1998, Golden American did not have
any borrowings or receivables from ING AIH under this agreement.

MRI-121979 88

GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000

9. RELATED PARTY TRANSACTIONS (continued)

Line of credit: Golden American maintained a line of credit agreement with
Equitable to facilitate the handling of unusual and/or unanticipated short-term
cash requirements. Under this agreement, which became effective December 1, 1996
and expired December 31, 1997, Golden American could borrow up to $25,000,000.
Interest on any borrowings was charged at the rate of Equitable's monthly
average aggregate cost of short-term funds plus 1.00%. Under this agreement,
Golden American incurred interest expense of $211,000 for the year ended
December 31, 1998. The outstanding balance was paid by a capital contribution
and with funds borrowed from ING AIH.

Surplus Notes: On December 30, 1999, Golden American issued an 8.179% surplus
note in the amount of $50,000,000 to Equitable Life. The note matures on
December 29, 2029. Payment of the note and related accrued interest is
subordinate to payments due to policyholders, claimant and beneficiary claims,
as well as debts owed to all other classes of debtors, other than surplus note
holders, of Golden American. Any payment of principal and/or interest made is
subject to the prior approval of the Delaware Insurance Commissioner. Under this
agreement, Golden American incurred interest expense of $4,112,000 for the year
ended December 31, 2000. Golden American incurred no interest expense during the
year ended December 31, 1999.

On December 8, 1999, Golden American issued a 7.979% surplus note in the amount
of $35,000,000 to First Columbine Life Insurance Company ("First Columbine"), an
affiliate. The note matures on December 7, 2029. Payment of the note and related
accrued interest is subordinate to payments due to policyholders, claimant and
beneficiary claims, as well as debts owed to all other classes of debtors, other
than surplus note holders, of Golden American. Any payment of principal and/or
interest made is subject to the prior approval of the Delaware Insurance
Commissioner. Under this agreement, Golden American incurred interest expense of
$2,961,000 and $0 for the years ended December 31, 2000 and 1999, respectively.

On September 30, 1999, Golden American issued a 7.75% surplus note in the amount
of $75,000,000 to ING AIH. The note matures on September 29, 2029. Payment of
the note and related accrued interest is subordinate to payments due to
policyholders, claimant, and beneficiary claims, as well as debts owed to all
other classes of debtors, other than surplus note holders, of Golden American.
Any payment of principal and/or interest made is subject to the prior approval
of the Delaware Insurance Commissioner. Under this agreement, Golden American
incurred interest expense of $5,813,000 in 2000 and $1,469,000 in 1999. On
December 30, 1999, ING AIH assigned the note to Equitable Life.

On December 30, 1998, Golden American issued a 7.25% surplus note in the amount
of $60,000,000 to Equitable Life. The note matures on December 29, 2028. Payment
of the note and related accrued interest is subordinate to payments due to
policyholders, claimant, and beneficiary claims, as well as debts owed to all
other classes of debtors, other than surplus note holders, of Golden American.
Any payment of principal and/or interest made is subject to the prior approval
of the Delaware Insurance Commissioner. Under this agreement, Golden American
incurred interest expense of $4,350,000 in 2000 and 1999. Golden American
incurred no interest in 1998.

On December 17, 1996, Golden American issued an 8.25% surplus note in the amount
of $25,000,000 to Equitable. The note matures on December 17, 2026. Payment of
the note and related accrued interest is subordinate to payments due to
policyholders, claimant, and beneficiary claims, as well as debts owed to all
other classes of debtors of Golden American. Any payment of principal made is
subject to the prior approval of the Delaware Insurance Commissioner. Golden
American incurred interest totaling $2,063,000 in 2000, unchanged from 1999 and
1998. On December 17, 1996, Golden American contributed the $25,000,000 to First
Golden acquiring 200,000 shares of common stock (100% of outstanding stock).

MRI-121979 89

GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000

9. RELATED PARTY TRANSACTIONS (continued)

Stockholder's Equity: During 2000, 1999 and 1998, Golden American received
capital contributions from its Parent of $80,000,000, $121,000,000 and
$122,500,000, respectively. As at December 31, 2000, Golden American also had a
receivable of $35,000,000 from capital contributions made by its Parent.

10. COMMITMENTS AND CONTINGENCIES

Reinsurance: At December 31, 2000, the Companies had reinsurance treaties with
six unaffiliated reinsurers and three affiliated reinsurers covering a
significant portion of the mortality risks and guaranteed death and living
benefits under its variable contracts. Golden American remains liable to the
extent reinsurers do not meet their obligations under the reinsurance
agreements. Reinsurance ceded in force for life mortality risks were
$105,334,000, and $119,575,000 at December 31, 2000 and 1999, respectively. At
December 31, 2000 and 1999, the Companies have a net receivable of $33,973,000
and $14,834,000, respectively, for reserve credits, reinsurance claims, or other
receivables from these reinsurers comprised of $16,462,000 and $493,000,
respectively, for claims recoverable from reinsurers, $4,007,000 and $1,201,000,
respectively, for a payable for reinsurance premiums, and $21,518,000 and
$15,542,000, respectively, for a receivable from an unaffiliated reinsurer.
Included in the accompanying financial statements, excluding the modified
coinsurance agreements, are net considerations to reinsurers of $21,655,000,
$9,883,000 and $4,797,000 and net policy benefits recoveries of $8,927,000,
$3,059,000 and $2,170,000 for the years ended December 31, 2000, 1999 and 1998,
respectively.

On June 30, 2000, effective January 1, 2000, Golden American entered into a
modified coinsurance agreement with Equitable Life, an affiliate, covering a
considerable portion of Golden American's variable annuities issued on or after
January 1, 2000, excluding those with an interest rate guarantee. At December
31, 2000, Golden American had received a total settlement of $218.8 million
under this agreement. The carrying value of the separate account liabilities
covered under this agreement represent 17.6% of total separate account
liabilities outstanding at December 31, 2000. Golden American remains liable to
the extent Equitable Life does not meet its obligations under the agreement. The
accompanying statement of operations, statement of changes in stockholder's
equity and statement of cash flows are presented net of the effects of the
agreement.

On December 28, 2000, Golden American entered into a reinsurance agreement with
Security Life of Denver International Limited, an affiliate, covering variable
annuity minimum guaranteed death benefits and guaranteed living benefits of
variable annuities issued on or after January 1, 2000. An irrevocable letter of
credit was obtained through Bank of New York in the amount of $10,500,000
related to this agreement.

Effective June 1, 1994, Golden American entered into a modified coinsurance
agreement with an unaffiliated reinsurer. The accompanying financial statements
are presented net of the effects of the treaty which increased income by
$736,000, $1,729,000, $1,022,000 for the years ended December 31, 2000, 1999 and
1998, respectively.

MRI-121979 90

GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000

10. COMMITMENTS AND CONTINGENCIES (continued)

premium tax offset. The Companies have established an undiscounted reserve to
cover such assessments, review information regarding known failures, and revise
estimates of future guaranty fund assessments. Accordingly, the Companies
accrued and charged to expense an additional $3,000, $3,000 and $1,123,000 for
the years ended December 31, 2000, 1999 and 1998, respectively. At December 31,
2000 and 1999, the Companies have an undiscounted reserve of $2,430,000, and
$2,444,000, respectively, to cover estimated future assessments (net of related
anticipated premium tax credits) and have established an asset totaling
$733,000, and $618,000, respectively, for assessments paid which may be
recoverable through future premium tax offsets. The Companies believe this
reserve is sufficient to cover expected future guaranty fund assessments based
upon previous premiums and known insolvencies at this time.

Vulnerability from Concentrations: The Companies have various concentrations in
the investment portfolio (see Note 3 for further information). The Companies'
asset growth, net investment income, and cash flow are primarily generated from
the sale of variable insurance products and associated future policy benefits
and separate account liabilities. Substantial changes in tax laws that would
make these products less attractive to consumers and extreme fluctuations in
interest rates or stock market returns, which may result in higher lapse
experience than assumed, could cause a severe impact to the Companies' financial
condition. A broker/dealer, having at least ten percent of total net premiums,
generated 11% of the Companies' sales in 2000 (28% and 26% by two broker/dealers
during 1999 and 1998, respectively). Two broker dealers, having at least ten
percent of total gross premiums, generated 21% of the Companies' sales in 2000
(30% and 27% by two broker/dealers during 1999 and 1998, respectively). The
Premium Plus product generated 71% of the Companies' sales during 2000 (79%
during 1999 and 63% during 1998).

Leases: The Companies lease their home office space, certain other equipment,
and capitalized computer software under operating leases which expire through
2020. During the years ended December 31, 2000, 1999 and 1998, rent expense
totaled $2,874,000, $2,273,000, and $1,241,000, respectively. At December 31,
2000, minimum rental payments due under all non-cancelable operating leases with
initial terms of one year or more are: 2001 - $3,790,000; 2002 - $3,257,000;
2003 - $2,611,000; 2004 - $2,419,000; 2005 - $2,419,000, and 2006 and thereafter
- - $38,700,000.

Revolving Note Payable: To enhance short-term liquidity, the Companies
established a revolving note payable with SunTrust Bank, Atlanta (the "Bank")
which expires July 30, 2001. The note was approved by the Boards of Directors of
Golden American and First Golden on August 5, 1998 and September 29, 1998,
respectively. The total amount the Companies may have outstanding is
$85,000,000, of which Golden American and First Golden have individual credit
sublimits of $75,000,000 and $10,000,000, respectively. The note accrues
interest at an annual rate equal to: (1) the cost of funds for the Bank for the
period applicable for the advance plus 0.225% or (2) a rate quoted by the Bank
to the Companies for the advance. The terms of the agreement require the
Companies to maintain the minimum level of Company Action Level Risk Based
Capital as established by applicable state law or regulation. During the years
ended December 31, 2000, 1999 and 1998, the Companies incurred interest expense
of $87,000, $198,000 and $352,000, respectively. At December 31, 2000, there
were no amounts outstanding under this agreement. At December 31, 1999, the
Companies had a $1,400,000 note payable to the Bank under this agreement.

MRI-121979 91

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- --------------------------------------------------------------------------------
APPENDIX A
- --------------------------------------------------------------------------------

TERM INDEXED ACCOUNT EXAMPLES

EXAMPLE #1: END OF TERM S&P 500 INDEX VALUES - ISSUE DAY = 1 TO 28
The End of Term S&P 500 Index Value is calculated as an average of the 12
monthly S&P 500 index values in the final year of the term. The dates of the
monthly values are the monthiversary dates in the final Contract year. For
policies issued on the 1st through 28th day of the month, the monthly values are
based on the day of the month corresponding to the issue day in the final
Contract year. If the monthiversary date falls on a weekend or holiday, the
index value from the next business day is used.

Assume a Contract is issued 1/1/1994 for a 7 year term. The index values
for the final Contract year will correspond to the following dates:

----------------------- ---------------------- -----------------------
MONTHIVERSARY DATE DAY OF WEEK DATE OF INDEX RATE
----------------------- ---------------------- -----------------------
2/1/2000 Tuesday 2/1/2000
3/1/2000 Wednesday 3/1/2000
4/1/2000 Saturday 4/3/2000
5/1/2000 Monday 5/1/2000
6/1/2000 Thursday 6/1/2000
7/1/2000 Saturday 7/3/2000
8/1/2000 Tuesday 8/1/2000
9/1/2000 Friday 9/1/2000
10/1/2000 Sunday 10/2/2000
11/1/2000 Wednesday 11/1/2000
12/1/2000 Friday 12/1/2000
1/1/2001 Monday (Holiday) 1/2/2001

EXAMPLE #2: END OF TERM S&P 500 INDEX VALUES - ISSUE DAY = 29 TO 31
The End of Term S&P 500 Index Value is calculated as an average of the 12
monthly S&P 500 index values in the final year of the term. The dates of the
monthly values are the monthiversary dates in the final Contract year. For
policies issued on the 29th through 31st day of the month, the monthly values in
the final Contract year are based on the day of the month corresponding to the
issue day. For months that are shorter than the issue month, the monthiversary
date is the first day of the following month. If the monthiversary date falls on
a weekend or holiday, the index value from the next business day is used.

Assume a Contract is issued 1/31/1994 for a 7 year term. The index values
for the final Contract year will correspond to the following dates:

MRI-121979 A1

------------------------ ---------------------- ----------------------
MONTHIVERSARY DATE DAY OF WEEK DATE OF INDEX RATE
------------------------ ---------------------- ----------------------
3/1/2000 Wednesday 3/1/2000
3/31/2000 Friday 3/31/2000
5/1/2000 Monday 5/1/2000
5/31/2000 Wednesday 5/31/2000
7/1/2000 Saturday 7/3/2000
7/31/2000 Monday 7/31/2000
8/31/2000 Thursday 8/31/2000
10/1/2000 Sunday 10/2/2000
10/31/2000 Tuesday 10/31/2000
12/1/2000 Friday 12/1/2000
12/31/2000 Sunday 1/2/2000
1/31/2001 Wednesday 1/31/2001
------------------------ ---------------------- ----------------------

EXAMPLE #3: FUND ACCOUNT VALUE -- EXAMPLE OF POSITIVE S&P 500 GROWTH

Assume $100,000 single premium investment in Fund #2 with an index period
of 7 years, an issue date of 01/01/1994, and a participation rate of 75%.

FUND ACCOUNT VALUE DURING THE INDEX TERM

The Term Indexed Fund Account Value during the term equals the beginning of
term account value less gross withdrawals. In this example, from 01/01/1994
through 01/01/2001 the Fund Account Value is equal to $100,000.

CALCULATE THE FUND ACCOUNT VALUE AT THE END OF THE INDEX TERM
The following table contains the closing S&P 500 Index Values applicable to
this Contract:

----------------------- ----------------- --------------------- ------------------ --------------------- -------------
MONTHIVERSARY DATE S&P 500 INDEX MONTHIVERSARY DATE S&P 500 INDEX MONTHIVERSARY DATE S&P 500
INDEX
----------------------- ----------------- --------------------- ------------------ --------------------- -------------

1/1/1994 465.44
2/1/2000 1409.28 3/1/2000 1379.19 4/1/2000 1505.97
5/1/2000 1468.25 6/1/2000 1448.81 7/1/2000 1469.54
8/1/2000 1438.10 9/1/2000 1520.77 10/1/2000 1436.23
11/1/2000 1421.22 12/1/2000 1315.23 1/1/2001 1283.27
----------------------- ----------------- --------------------- ------------------ --------------------- -------------

1. Beginning of Term S&P 500 index value = 465.44

2. End of Term S&P 500 index value = Average of 12 monthly S&P 500 index
values in the final year of the term = (1409.28 + 1379.19 + 1505.97 +
1468.25 + 1448.81 + 1469.54 + 1438.10 +1520.77 + 1436.23 + 1421.22 +
1315.23 + 1283.27) / 12 = 17095.86 / 12 = 1424.66

3. Index Growth = (End of Term S&P 500 Index Value - Beginning of Term
S&P 500 Index Value) / Beginning of Term S&P 500 Index Value =
(1424.66 - 465.44) / 465.44 = 2.0609

MRI-121979 A2

4. Index Return = 1 + Maximum[(Index Growth * Participation Rate), 0] = 1
+ (2.0609 * 75%) = 1 + 1.5457 = 2.5457

5. Fund Account Value = (Beginning of Term Fund Value - Gross
Withdrawals) * Index Return = ($100,000 - $0) * (2.5457) = $254,570.

EXAMPLE #4: FUND ACCOUNT VALUE -- EXAMPLE OF NEGATIVE S&P 500 GROWTH

Assume $100,000 single premium investment in the Term Indexed Account with
an index period of 7 years, an issue date of 01/01/1973, and a participation
rate of 75%.

FUND ACCOUNT VALUE DURING THE INDEX TERM

The Fund Account Value during the term equals the beginning of term account
value less gross withdrawals. In this example, from 01/01/1973 through
01/01/1980 the Fund Account Value is equal to $100,000.

CALCULATE THE FUND ACCOUNT VALUE AT THE END OF THE INDEX TERM
The following table contains the closing S&P 500 Index Values applicable to
this Contract:

- ------------------------ ------------------ -------------------- ------------------- --------------------- -----------------
MONTHIVERSARY DATE S&P 500 INDEX MONTHIVERSARY DATE S&P 500 INDEX MONTHIVERSARY DATE S&P 500 INDEX
- ------------------------ ------------------ -------------------- ------------------- --------------------- -----------------

1/1/1973 119.10
2/1/1979 99.96 3/1/1979 96.90 4/1/1979 100.90
5/1/1979 101.68 6/1/1979 99.17 7/1/1979 101.99
8/1/1979 104.17 9/1/1979 107.44 10/1/1979 108.56
11/1/1979 102.57 12/1/1979 105.83 1/1/1980 105.76
- ------------------------ ------------------ -------------------- ------------------- --------------------- -----------------

1. Beginning of Term S&P 500 index value = 119.10.

2. End of Term S&P 500 index value = Average of 12 monthly S&P 500 index
values in the final year of the term = (99.96 + 96.90 + 100.90 +
101.68 + 99.17 + 101.99 + 104.17 +107.44 + 108.56 + 102.57 + 105.83 +
105.76) / 12 = 1234.93 / 12 = 102.91

3. Index Growth = (End of Term S&P 500 Index Value - Beginning of Term
S&P 500 Index Value) / Beginning of Term S&P 500 Index Value = (102.91
- 119.15) / 119.10 = -0.1359

4. Index Return = 1 + Maximum[(Index Growth * Participation Rate), 0] = 1
+ Maximum[(-0.1359 * 75%), 0} = 1 + 0 = 1

5. Fund Account Value = (Beginning of Term Fund Value - Gross
Withdrawals) * Index Return = ($100,000 - $0) * 1 = $100,000.

EXAMPLE #5: FUND ACCOUNT VALUE -- EXAMPLE OF MULTIPLE PREMIUMS

Assume $50,000 of premium investment in the Term Indexed Fund with an index
period of 7 years, an issue date of 01/01/1994, and a participation rate of 75%.
The premiums are received in two payments: $30,000 is received on the issue
date, 1/1/1994; the final premium of $20,000 is received on 2/15/1994.

MRI-121979 A3

FUND ACCOUNT VALUE DURING THE INDEX TERM

The Fund Account Value during the term equals the beginning of term account
value less gross withdrawals. In this example, from 01/01/1994 through
02/15/1994 the Term Index Fund Account Value is equal to $30,000. When the
second premium is paid on 02/15/1994, the Term Index Fund Account Value
increases to $50,000 ($30,000 + $20,000). The term index fund value remains at
$50,000 (assuming no withdrawals) until the end of the Index Term, 1/1/2001.

CALCULATE THE FUND ACCOUNT VALUE AT THE END OF THE INDEX TERM
In the initial index term, each premium payment will have its own BOP Index
value corresponding to the date the premium payment was received, and a common
EOP Index value based on the initial premium. In renewal Index Terms, the BOP
and EOP Index values will be the same for all contract value allocated to the
Term Index Fund.

The following tables contain the closing S&P 500 Index Values applicable to
this Contract:

--------------------------------------------------------------
BEGINNING OF PERIOD INDEX VALUES

--------------------------------------------------------------
Date S&P 500 Index
1/1/1994 465.44
2/15/1994 472.52
------------------------------- ------------------------------

----------------------------------------------------------------------------------------------------------------------
END OF PERIOD MONTHIVERSARY INDEX VALUES
----------------------------------------------------------------------------------------------------------------------
Date S&P 500 Index Date S&P 500 Index Date S&P 500 Index

2/1/2000 1409.28 3/1/2000 1379.19 4/1/2000 1505.97
5/1/2000 1468.25 6/1/2000 1448.81 7/1/2000 1469.54
8/1/2000 1438.10 9/1/2000 1520.77 10/1/2000 1436.23
11/1/2000 1421.22 12/1/2000 1315.23 1/1/2001 1283.27
----------------- --------------------- ------------------- -------------------- ----------------- -------------------

PREMIUM #1

1. Beginning of Term S&P 500 index value = 465.44

3. Index Growth = (End of Term S&P 500 Index Value - Beginning of Term
S&P 500 Index Value) / Beginning of Term S&P 500 Index Value =
(1424.66 - 465.44) / 465.44 = 2.0609

4. Index Return = 1 + Maximum[(Index Growth * Participation Rate), 0] = 1
+ (2.0609 * 75%) = 1 + 1.5457 = 2.5457

5. Fund Account Value = (Beginning of Term Fund Value - Gross
Withdrawals) * Index Return = ($30,000 - $0) * (2.5457) = $76,371.

MRI-121979 A4

PREMIUM #2

1. Beginning of Term S&P 500 index value for premium #2 = 472.52

3. Index Growth for Premium #2 = (End of Term S&P 500 Index Value -
Beginning of Term S&P 500 Index Value) / Beginning of Term S&P 500
Index Value = (1424.66 - 472.52) / 472.52 = 2.0150

4. Index Return = 1 + Maximum[(Index Growth * Participation Rate), 0] = 1
+ (2.0569 * 75%) = 1 + 1.5427 = 2.5113

5. Fund Account Value = (Beginning of Term Fund Value - Gross
Withdrawals) * Index Return = ($20,000 - $0) * (2.5113) = $50,226.

TOTAL END OF TERM FUND ACCOUNT VALUE

1. End of Term Fund Account Value = Premium #1 End of Term Fund Account
Value + Premium #2 End of Term Fund Account Value = $76,371 + $50,226
= $126,597.

MRI-121979 A5

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- --------------------------------------------------------------------------------
APPENDIX B
- --------------------------------------------------------------------------------

ANNUAL INDEXED ACCOUNT EXAMPLES

EXAMPLE #1: FUND ACCOUNT VALUE -- EXAMPLE OF S&P 500 GROWTH

Assume $100,000 single premium investment in the Annual Indexed Account
with an index term of 7 years, and an issue date of 01/01/1999. On 01/01/1999,
the participation rate is 75%, and the cap is 15%. On renewal on 01/01/2000, the
participation rate is 80% and the cap is 10%.

FUND ACCOUNT VALUE DURING THE FIRST CONTRACT YEAR

The Annual Indexed Fund Account Value prior to the end of each Contract
year equals the beginning of Contract year account value less gross withdrawals.
In this example, from 01/01/1999 through 01/01/2000 the Fund Account Value is
equal to $100,000.

CALCULATE THE FUND ACCOUNT VALUE AT THE END OF THE FIRST CONTRACT YEAR
The following table contains the closing S&P 500 Index Values applicable to
the first Contract year:

--------------------- ------------------ --------------------- -------------------- -------------------- --------------
MONTHIVERSARY DATE S&P 500 INDEX MONTHIVERSARY DATE S&P 500 INDEX MONTHIVERSARY DATE S&P 500 INDEX
--------------------- ------------------ --------------------- -------------------- -------------------- --------------

1/1/1999 1228.10
2/1/1999 1273.00 3/1/1999 1236.16 4/1/1999 1293.72
5/1/1999 1354.63 6/1/1999 1294.26 7/1/1999 1380.96
8/1/1999 1328.05 9/1/1999 1331.07 10/1/1999 1282.81
11/1/1999 1354.12 12/1/1999 1397.72 1/1/2000 1455.22
--------------------- ------------------ --------------------- -------------------- -------------------- --------------

1. Beginning of Contract Year S&P 500 index value = 1228.10

2. End of Contract Year S&P 500 index value = Average of 12 monthly S&P
500 index values in the Contract year = (1273.00 + 1236.16 + 1293.72 +
1354.63 + 1294.26 + 1380.96 + 1328.05 + 1331.07 + 1282.81 + 1354.12 +
1397.72 + 1455.22) / 12 = 15981.72 / 12 = 1331.81

3. Index Growth = Maximum[(End of Contract Year S&P 500 Index Value -
Beginning of Contract Year S&P 500 Index Value) / Beginning of
Contract Year S&P 500 Index Value, 0] = (1331.81 - 1228.10) / 1228.10
= 0.0844

4. Index Return = 1 + Minimum[(Index Growth * Participation Rate), Cap] =
1 + Minimum [(0.0844 * 75%), 0.15] = 1 + 0.0633 = 1.0633

5. Fund Account Value = (Beginning of Contract Year Fund Value - Gross
Withdrawals) * Index Return = ($100,000 - $0) * (1.0633) = $106,330.

FUND ACCOUNT VALUE DURING THE SECOND CONTRACT YEAR

The Annual Indexed Fund Account Value prior to the end of each Contract
year equals the beginning of Contract year account value less gross withdrawals.
In this example, from 01/01/2000 through 01/01/2001 the Fund Account Value is
equal to $106,330.

MRI-121979 B1

CALCULATE THE FUND ACCOUNT VALUE AT THE END OF THE SECOND CONTRACT YEAR
The following table contains the closing S&P 500 Index Values applicable to
the second Contract year:

---------------------- ------------------- -------------------- -------------------- ------------------- --------------
MONTHIVERSARY DATE S&P 500 INDEX MONTHIVERSARY DATE S&P 500 INDEX MONTHIVERSARY DATE S&P 500 INDEX
---------------------- ------------------- -------------------- -------------------- ------------------- --------------

1/1/2000 1455.22
2/1/2000 1409.28 3/1/2000 1379.19 4/1/2000 1505.97
5/1/2000 1468.25 6/1/2000 1448.81 7/1/2000 1469.54
8/1/2000 1438.10 9/1/2000 1520.77 10/1/2000 1436.23
11/1/2000 1421.22 12/1/2000 1315.23 1/1/2001 1283.27
---------------------- ------------------- -------------------- -------------------- ------------------- --------------

1. Beginning of Contract Year S&P 500 index value = 1455.22

2. End of Contract Year S&P 500 index value = Average of 12 monthly S&P
500 index values in the Contract year = (1409.28 + 1379.19 + 1505.97 +
1468.25 + 1448.81 + 1469.54 + 1438.10 +1520.77 + 1436.23 + 1421.22 +
1315.23 + 1283.27) / 12 = 17095.86 / 12 = 1424.66

3. Index Growth = Maximum[(End of Contract Year S&P 500 Index Value -
Beginning of Contract Year S&P 500 Index Value) / Beginning of
Contract Year S&P 500 Index Value, 0] = Maximum[(1424.66 - 1455.22) /
1455.22, 0] = Maximum[-0.0210, 0] = 0

4. Index Return = 1 + Minimum[(Index Growth * Participation Rate), Cap] =
1 + Minimum[(0 * 80%), 0.10] = 1 + 0 = 1

5. Fund Account Value at end of Second Contract Year = (Beginning of
Contract Year Fund Value - Gross Withdrawals) * Index Return =
($106,330 - $0) * (1.0) = $106,330.

EXAMPLE #2: FUND ACCOUNT VALUE -- EXAMPLE OF S&P 500 GROWTH THAT EXCEEDS CAP

Assume $100,000 single premium investment in the Annual Indexed Account
with an index term of 7 years, and an issue date of 01/01/1997. On 01/01/1997,
the participation rate is 80%, and the cap is 15%. On renewal on 01/01/1998, the
participation rate is 75% and the cap is 12%.

FUND ACCOUNT VALUE DURING THE FIRST CONTRACT YEAR

The Annual Indexed Fund Account Value prior to the end of each Contract
year equals the beginning of Contract year account value less gross withdrawals.
In this example, from 01/01/1997 through 01/01/1998 the Fund Account Value is
equal to $100,000.

CALCULATE THE FUND ACCOUNT VALUE AT THE END OF THE FIRST CONTRACT YEAR
The following table contains the closing S&P 500 Index Values applicable to
the first Contract year:

--------------------- ----------------- -------------------- ------------------- ---------------------- --------------
MONTHIVERSARY DATE S&P 500 INDEX MONTHIVERSARY DATE S&P 500 INDEX MONTHIVERSARY DATE S&P 500 INDEX
--------------------- ----------------- -------------------- ------------------- ---------------------- --------------

1/1/1997 737.01
2/1/1997 786.73 3/1/1997 795.31 4/1/1997 759.64
5/1/1997 798.53 6/1/1997 846.36 7/1/1997 891.03
8/1/1997 947.14 9/1/1997 927.58 10/1/1997 955.41
11/1/1997 938.99 12/1/1997 974.77 1/1/1998 975.04
--------------------- ----------------- -------------------- ------------------- ---------------------- --------------

MRI-121979 B2

1. Beginning of Contract Year S&P 500 index value = 737.01

2. End of Contract Year S&P 500 index value = Average of 12 monthly
S&P 500 index values in the Contract year = (786.73 + 795.31 +
759.64 + 798.53 + 846.36 + 891.03 + 947.14 + 927.58 + 955.41 +
938.99 + 974.77 + 975.04) / 12 = 10596.53 / 12 = 883.04

3. Index Growth = Maximum[(End of Contract Year S&P 500 Index Value
- Beginning of Contract Year S&P 500 Index Value) / Beginning of
Contract Year S&P 500 Index Value, 0] = (883.04 - 737.01) /
737.01 = 0.1981

4. Index Return = 1 + Minimum[(Index Growth * Participation Rate),
Cap] = 1 + Minimum [(0.1981* 80%), 0.15] = 1 + Minimum [0.1585,
0.15] = 1.15

5. Fund Account Value = (Beginning of Contract Year Fund Value -
Gross Withdrawals) * Index Return = ($100,000 - $0) * (1.15) =
$115,000.

FUND ACCOUNT VALUE DURING THE SECOND CONTRACT YEAR

The Annual Indexed Fund Account Value prior to the end of each Contract
year equals the beginning of Contract year account value less gross withdrawals.
In this example, from 01/01/1998 through 01/01/1999 the Fund Account Value is
equal to $115,000.

CALCULATE THE FUND ACCOUNT VALUE AT THE END OF THE SECOND CONTRACT YEAR
The following table contains the closing S&P 500 Index Values applicable to
the second Contract year:

--------------------- ----------------- --------------------- ------------------ -------------------- --------------
MONTHIVERSARY DATE S&P 500 INDEX MONTHIVERSARY DATE S&P 500 INDEX MONTHIVERSARY DATE S&P 500 INDEX
--------------------- ----------------- --------------------- ------------------ -------------------- --------------

1/1/1998 975.04
2/1/1998 1001.27 3/1/1998 1047.70 4/1/1998 1108.15
5/1/1998 1121.00 6/1/1998 1090.98 7/1/1998 1148.56
8/1/1998 1112.44 9/1/1998 994.26 10/1/1998 986.39
11/1/1998 1111.60 12/1/1998 1175.28 1/1/1999 1228.10
--------------------- ----------------- --------------------- ------------------ -------------------- --------------

1. Beginning of Contract Year S&P 500 index value = 975.04

2. End of Contract Year S&P 500 index value = Average of 12 monthly
S&P 500 index values in the Contract year = (1001.27 + 1047.70 +
1108.15 + 1121.00 + 1090.98 + 1148.56 + 1112.44 + 994.26 + 986.39
+ 1111.60 + 1175.28 + 1228.10) / 12 = 13125.73 / 12 = 1093.81

3. Index Growth = Maximum[(End of Contract Year S&P 500 Index Value
- Beginning of Contract Year S&P 500 Index Value) / Beginning of
Contract Year S&P 500 Index Value, 0] = Maximum[(1093.81 -
975.04) / 975.04, 0] = Maximum[0.1218, 0] = 0.1218

4. Index Return = 1 + Minimum[(Index Growth * Participation Rate),
Cap] = 1 + Minimum[(0.1218 * 75%), 0.12] = 1 + Minimum [0.0974,
0.12] = 1.0974

5. Fund Account Value at end of Second Contract Year = (Beginning of
Contract Year Fund Value - Gross Withdrawals) * Index Return =
($115,000 - $0) * (1.0974) = $126,201.

MRI-121979 B3

EXAMPLE #3: FUND ACCOUNT VALUE -- EXAMPLE OF MULTIPLE PREMIUMS

Assume $50,000 of premium investment in the Annual Indexed Account with an
index period of 7 years, and an issue date of 01/01/1999. On 01/01/1999, the
participation rate is 75%, and the cap is 15%. On renewal on 01/01/2000, the
participation rate is 80% and the cap is 10%. The premiums are received in two
payments: $30,000 is received on the issue date, 1/1/1999; the final premium of
$20,000 is received on 2/15/1999.

FUND ACCOUNT VALUE DURING THE FIRST CONTRACT YEAR

The Annual Indexed Fund Account Value during the first Contract year equals
the beginning of term account value less gross withdrawals. In this example,
from 01/01/1999 through 02/15/1999 the Annual Indexed Fund Account Value is
equal to $30,000. When the second premium is paid on 02/15/1999, the Annual
Indexed Fund Account Value increases to $50,000 ($30,000 + $20,000). The annual
indexed fund value remains at $50,000 (assuming no withdrawals) until the end of
the first Contract year, 1/1/2000.

CALCULATE THE FUND ACCOUNT VALUE AT THE END OF THE FIRST CONTRACT YEAR
In the first Contract year, each premium payment will have its own BOP
Index value corresponding to the date the premium payment was received, and a
common EOP Index value based on the date of the initial premium. In subsequent
Contract years, the BOP and EOP Index values will be the same for all contract
value allocated to the Annual Indexed Fund.

The following tables contain the closing S&P 500 Index Values applicable to
this Contract:

-----------------------------------------------------
BEGINNING OF PERIOD INDEX VALUES

-----------------------------------------------------
DATE S&P 500 INDEX
1/1/1999 1228.10
2/15/1999 1241.87
--------------------------- -------------------------

- -----------------------------------------------------------------------------------------------------------------------------
END OF PERIOD MONTHIVERSARY INDEX VALUES
- -----------------------------------------------------------------------------------------------------------------------------
S&P 500 S&P 500 S&P 500
DATE INDEX DATE INDEX DATE INDEX

2/1/1999 1273.00 3/1/1999 1236.16 4/1/1999 1293.72
5/1/1999 1354.63 6/1/1999 1294.26 7/1/1999 1380.96
8/1/1999 1328.05 9/1/1999 1331.07 10/1/1999 1282.81
11/1/1999 1354.12 12/1/1999 1397.72 1/1/2000 1455.22
- ---------------------- -------------------- ------------------- -------------------- ------------------- --------------------

PREMIUM #1

1. Beginning of Contract Year S&P 500 index value = 1228.10

2. End of Contract Year S&P 500 index value = Average of 12 monthly
S&P 500 index values in the Contract year = (1273.00 + 1236.16 +
1293.72 + 1354.63 + 1294.26 + 1380.96 + 1328.05 + 1331.07 +
1282.81 + 1354.12 + 1397.72 + 1455.22) / 12 = 15981.72 / 12 =
1331.81

3. Index Growth = Maximum[(End of Contract Year S&P 500 Index Value
- Beginning of Contract Year S&P 500 Index Value) / Beginning of
Contract Year S&P 500 Index Value, 0] = (1331.81 - 1228.10) /
1228.10 = 0.0844

MRI-121979 B4

4. Index Return = 1 + Minimum[(Index Growth * Participation Rate),
Cap] = 1 + Minimum [(0.0844 * 75%), 0.15] = 1 + 0.0633 = 1.0633

5. Fund Account Value = (Beginning of Contract Year Fund Value -
Gross Withdrawals) * Index Return = ($30,000 - $0) * (1.0633) =
$31,899.

PREMIUM #2

1. Beginning of Contract Year S&P 500 index value = 1241.87

2. End of Contract Year S&P 500 index value = Average of 12 monthly
S&P 500 index values in the Contract year = (1273.00 + 1236.16 +
1293.72 + 1354.63 + 1294.26 + 1380.96 + 1328.05 + 1331.07 +
1282.81 + 1354.12 + 1397.72 + 1455.22) / 12 = 15981.72 / 12 =
1331.81

3. Index Growth = Maximum[(End of Contract Year S&P 500 Index Value
- Beginning of Contract Year S&P 500 Index Value) / Beginning of
Contract Year S&P 500 Index Value, 0] = (1331.81 - 1241.87) /
1241.87 = 0.0724

4. Index Return = 1 + Minimum[(Index Growth * Participation Rate),
Cap] = 1 + Minimum [(0.0844 * 75%), 0.15] = 1 + 0.0543 = 1.0543

5. Fund Account Value = (Beginning of Contract Year Fund Value -
Gross Withdrawals) * Index Return = ($20,000 - $0) * (1.0543) =
$21,086.

TOTAL END OF FIRST CONTRACT YEAR FUND ACCOUNT VALUE

End of Contract Year Annual Indexed Fund Account Value = Premium #1 End of
Contract Year Annual Indexed Fund Account Value + Premium #2 End of Contract
Year Annual Indexed Fund Account Value = $31,899 + $21,086 = $52,985.

FUND ACCOUNT VALUE DURING THE SECOND CONTRACT YEAR

The Fund Account Value prior to the end of each Contract year equals the
beginning of Contract year account value less gross withdrawals. In this
example, from 01/01/2000 through 01/01/2001 the Fund Account Value is equal to
$52,985.

CALCULATE THE FUND ACCOUNT VALUE AT THE END OF THE SECOND CONTRACT YEAR
The following table contains the closing S&P 500 Index Values applicable to
the second Contract year:

----------------------- ------------------ -------------------- ---------------- ------------------- -------------
MONTHIVERSARY DATE S&P 500 INDEX MONTHIVERSARY DATE S&P 500 INDEX MONTHIVERSARY DATE S&P 500
INDEX
----------------------- ------------------ -------------------- ---------------- ------------------- -------------

1/1/2000 1455.22
2/1/2000 1409.28 3/1/2000 1379.19 4/1/2000 1505.97
5/1/2000 1468.25 6/1/2000 1448.81 7/1/2000 1469.54
8/1/2000 1438.10 9/1/2000 1520.77 10/1/2000 1436.23
11/1/2000 1421.22 12/1/2000 1315.23 1/1/2001 1283.27
----------------------- ------------------ -------------------- ---------------- ------------------- -------------

1. Beginning of Contract Year S&P 500 index value = 1455.22

2. End of Contract Year S&P 500 index value = Average of 12 monthly
S&P 500 index values in the Contract year = (1409.28 + 1379.19 +
1505.97 + 1468.25 + 1448.81 + 1469.54 + 1438.10 +1520.77 +
1436.23 + 1421.22 + 1315.23 + 1283.27) / 12 = 17095.86 / 12 =
1424.66

MRI-121979 B5

3. Index Growth = Maximum[(End of Contract Year S&P 500 Index Value
- Beginning of Contract Year S&P 500 Index Value) / Beginning of
Contract Year S&P 500 Index Value, 0] = Maximum[(1424.66 -
1455.22) / 1455.22, 0] = Maximum[-0.0210, 0] = 0

4. Index Return = 1 + Minimum[(Index Growth * Participation Rate),
Cap] = 1 + Minimum[(0 * 80%), 0.10] = 1 + 0 = 1

5. Fund Account Value at end of Second Contract Year = (Beginning of
Contract Year Fund Value - Gross Withdrawals) * Index Return =
($52,985 - $0) * (1.0) = $52,985.

MRI-121979 B6

- --------------------------------------------------------------------------------
APPENDIX C
- --------------------------------------------------------------------------------

MARKET VALUE ADJUSTMENT EXAMPLES

EXAMPLE #1: FULL SURRENDER -- EXAMPLE OF A NEGATIVE MARKET VALUE ADJUSTMENT

Assume $100,000 single premium with a term of 10 years, an initial Index
Rate ("I") of 7%; that a full surrender is requested 3 years into the term; that
the Account Value on the date of surrender is $115,000 that the then Index Rate
for a 7 year guaranteed interest period ("J") is 8%.

CALCULATE THE MARKET VALUE ADJUSTMENT

1. N = 2,555 ( 365 x 7 )

2. Market Value Adjustment =
2,555/365
$115,000 x [( 1.07/1.0850 ) -1 ] = $10,678

Therefore, the amount paid to you on full surrender ignoring any surrender
charge is $104,322 ($115,000 - $10,678).

EXAMPLE #2: FULL SURRENDER -- EXAMPLE OF A POSITIVE MARKET VALUE ADJUSTMENT

CALCULATE THE MARKET VALUE ADJUSTMENT

1. N = 2,555 ( 365 x 7 )

2. Market Value Adjustment =
2,555/365
$115,000 x [( 1.07/1.0650 ) -1 ] = $3,833

Therefore, the amount paid to you on full surrender ignoring any surrender
charge is $118,833 ($115,000 + $3,833).

EXAMPLE #3: WITHDRAWAL -- EXAMPLE OF A NEGATIVE MARKET VALUE ADJUSTMENT

Assume $200,000 was allocated to an account with a selected term of 10
years, an initial Index Rate ("I") of 7%; that a withdrawal of $128,000
requested 3 years into the guaranteed interest period; that the Account Value on
the date of surrender is $250,000; that the then Index Rate ("J") for a 7 year
guaranteed interest period is 8%; and that no prior transfers or withdrawals
affecting this account have been made.

First calculate the amount that must be withdrawn from the Fixed Interest
Allocation to provide the amount requested.

1. N = 2,555 ( 365 x 7 )

2. Amount that must be withdrawn =

2,555/365
$128,000 x [( 1.07/1.0850 ) -1 ] = $141,102

3. Then calculate the Market Value Adjustment on that amount.

4. Market Value Adjustment =

2,555/365
$141,102 x [( 1.07/1.0850 ) -1 ] = $13,102

Therefore, the amount of the withdrawal paid to you ignoring any surrender
charge is $128,000, as requested. The account value will be reduced by the
amount of the withdrawal, $128,000, and by the Market Value Adjustment of
- -$13,102, for a total reduction in the account value of $141,102.

MRI-121979 C1

EXAMPLE #4: WITHDRAWAL -- EXAMPLE OF A POSITIVE MARKET VALUE ADJUSTMENT

Assume $200,000 was allocated to an account with a selected term of 10
years, and the initial Index Rate ("I") of 7%. Also assume that a withdrawal of
$128,000 is requested 3 years into the guaranteed interest period; that the
Account Value on the date of surrender is $250,000; that the then Index Rate
("J") for a 7 year guaranteed interest period is 6%; and that no prior transfers
or withdrawals affecting this account have been made.

First calculate the amount that must be withdrawn from the Fixed Interest
Allocation to provide the amount requested.

1. N = 2,555 ( 365 x 7 )

2. Amount that must be withdrawn =

2,555/365
$128,000 x [( 1.07/1.0650 ) -1 ] = $123,871

3. Then calculate the Market Value Adjustment on that amount.

4. Market Value Adjustment =

2,555/365
$123,871 x [( 1.07/1.0650 ) -1 ] = $4,129

Therefore, the amount of the withdrawal paid to you ignoring any surrender
charge is $128,000, as requested. The account value will be reduced by the
amount of the withdrawal, $128,000, but increased by the Market Value Adjustment
of $4,129, for a total reduction in the account value of $123,871.

MRI-121979 C2

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APPENDIX D
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SURRENDER CHARGE FOR EXCESS WITHDRAWALS EXAMPLES

EXAMPLE #1: SURRENDER CHARGES -- PARTIAL WITHDRAWAL IN EXCESS OF FREE WITHDRAWAL
AMOUNT

The following assumes you made an initial single premium payment of $100,000. It
also assumes a withdrawal at the beginning of the fifth contract year of 25% of
the contract value. Assume the contract value at the time of the withdrawal is
$130,000.00.

In this example, $13,000.00 (10% of the contract value at withdrawal) is the
maximum amount that you may withdraw without a surrender charge. The total
amount requested is $32,500.00 ($130,000.00 x .25). Therefore, $19,500.00
($32,500.00 - $13,000.00) is considered an excess withdrawal and would be
subject to a surrender charge of $812.50 ($19,500 x (1/(1-0.04) - 1)) which
would be deducted from the remaining contract value. After the withdrawal, the
contract value would be $96,687.50.

This example does not take into account any Market Value Adjustment or deduction
of any premium taxes.

EXAMPLE #2: SURRENDER CHARGES -- WITHDRAWAL OF FREE WITHDRAWAL AMOUNT FOLLOWED
BY FULL SURRENDER 6 MONTHS LATER The following assumes you made an initial
single premium payment of $100,000 and that the contract value at the beginning
of the fifth contract year was $130,000.00. It also assumes a free withdrawal at
the beginning of the fifth contract year of $13,000.00 (10% of the contract
value), followed by a full surrender two months later. The maximum free
withdrawal amount that you may withdraw without a surrender charge is $13,000.00
(10% of the contract value). After the free withdrawal at the beginning of the
fifth contract year, the contract value is $117,000.00 ($130,000.00 -
$13,000.00).

Assume that 2 months later, the contract is surrendered. Assume also that the
contract value has grown to $118,000.00. On full surrender, surrender charges
are applied to all amounts withdrawn in that contract year. The cash surrender
value is calculated as follows:

1. The amount previously withdrawn without a charge in that contract year
is added back to the contract value to determine the surrender charge.

2. The surrender charge is $5,240 [.04 x {$118,000 + $13,000}].

3. The cash surrender value equals the contract value minus the surrender
charge or $112,760 ($118,000 - $5,240).

This example does not take into account any Market Value Adjustment or deduction
of any premium taxes.

MRI-121979 D1

ING (logo)

GOLDEN AMERICAN LIFE INSURANCE COMPANY

Golden American Life Insurance Company is a stock company
domiciled in Delaware.
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MRI-121979 02/13/2002