File No. 333-16279
Filed under Rule 424(b)(3)
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ GOLDENSELECT DVA PLUS +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
FIRST GOLDEN AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
First Golden American Life Insurance Company of New York is a stock company
domiciled in New York, New York.
DEFERRED COMBINATION VARIABLE AND
FIXED ANNUITY PROSPECTUS
GOLDENSELECT DVA PLUS
- --------------------------------------------------------------------------------
This prospectus describes individual deferred variable annuity Contracts (the
"Contract") offered by First Golden American Life Insurance Company of New York
("First Golden," "we," "our" or "us"). The Owner ("you" or "your") purchases
the Contract with an Initial Premium and is permitted to make additional pre-
mium payments.
The Contract is funded by two accounts, Separate Account NY-B ("Account NY-B")
and the Fixed Account (collectively, the "Accounts").
Nineteen Divisions of Account NY-B are currently available under the Contract.
The investments available through the Divisions of Account NY-B include mutual
fund portfolios (the "Series") of The GCG Trust (the "GCG Trust") and the Equi-
Select Series Trust (the "ESS Trust"). The investments available through the
Fixed Account include various Fixed Allocations which we credit with fixed
rates of interest for the Guarantee Periods you select. We currently offer
Guarantee Periods with durations of 1, 3, 5, 7 and 10 years. We reserve the
right at any time to increase or decrease the number of Guarantee Periods of-
fered. Not all Guarantee Periods may be available for new allocations.
This prospectus describes the Contract and provides background information re-
garding Account NY-B and the Fixed Account. The prospectuses for the GCG Trust
and the ESS Trust (individually, "a Trust," and collectively, "the Trusts"),
which must accompany this prospectus, provide information regarding investment
activities and policies of the Trusts.
You may allocate your premiums among the nineteen Divisions and the Fixed Allo-
cations available under the Contract in any way you choose, subject to certain
restrictions. You may change the allocation of your Accumulation Value during a
Contract Year free of charge. We reserve the right, however, to assess a charge
for each allocation change after the twelfth allocation change in a Contract
Year.
Your Accumulation Value in Account NY-B will vary in accordance with the in-
vestment performance of the Divisions selected by you. Therefore, you bear the
entire investment risk for all amounts allocated to Account NY-B. You also bear
the investment risk with respect to surrenders, partial withdrawals, transfers
and annuitization from a Fixed Allocation prior to the end of the applicable
Guarantee Period. Such surrender, partial withdrawal, transfer or annuitization
may be subject to a Market Value Adjustment, which could have the effect of ei-
ther increasing or decreasing your Accumulation Value.
We will pay a death benefit to the Beneficiary if the Owner dies prior to the
Annuity Commencement Date or the Annuitant dies prior to the Annuity Commence-
ment Date when the Owner is other than an individual.
This prospectus describes your principal rights and limitations and sets forth
the information concerning the Accounts that investors should know before in-
vesting. A Statement of Additional Information, dated March 25, 1997, about Ac-
count NY-B has been filed with the Securities and Exchange Commission ("SEC")
and is available without charge upon request. To obtain a copy of this document
call or write our Customer Service Center. The Table of Contents of the State-
ment of Additional Information may be found on the last page of this prospec-
tus. The Statement of Additional Information is incorporated herein by refer-
ence.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE AC-
CURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
CONTRACTS AND UNDERLYING SERIES SHARES WHICH FUND THE CONTRACTS ARE NOT INSURED
BY THE FDIC OR ANY OTHER AGENCY. THEY ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF
ANY BANK AND ARE NOT BANK GUARANTEED. THEY ARE SUBJECT TO MARKET FLUCTUATION,
REINVESTMENT RISK AND POSSIBLE LOSS OF PRINCIPAL INVESTED.
PLEASE READ THIS PROSPECTUS AND KEEP IT FOR FUTURE REFERENCE. IT IS NOT VALID
UNLESS ACCOMPANIED BY THE CURRENT PROSPECTUSES FOR THE GCG TRUST AND THE ESS
TRUST.
DISTRIBUTED BY: ISSUED BY: ADMINISTERED
Directed Serv- First Golden Ameri- AT:
ices, Inc. can Life Insurance Customer Serv-
Wilmington, Company of New York ice Center
Delaware 19801 230 Park Ave-
nue, Suite 966
HOME OFFICE:
New York, New York New York, NY
10169
1-800-963-9539
PROSPECTUS DATED: MARCH 25, 1997
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
- -------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
DEFINITION OF TERMS....................................................... 1
SUMMARY OF CONTRACT....................................................... 3
FEE TABLE................................................................. 5
CONDENSED FINANCIAL AND OTHER INFORMATION................................. 8
FINANCIAL STATEMENTS...................................................... 8
Performance Related Information
INTRODUCTION.............................................................. 9
First Golden
The GCG Trust and the ESS Trust
Separate Account NY-B
Account NY-B Divisions
Changes Within Account NY-B
The Fixed Account
FACTS ABOUT THE CONTRACT.................................................. 16
The Owner
The Annuitant
The Beneficiary
Change of Owner or Beneficiary
Availability of the Contract
Types of Contracts
Your Right to Select or Change Contract Options
Premiums
Making Additional Premium Payments
Crediting Premium Payments
Restrictions on Allocation of Premium Payments
Your Right to Reallocate
Dollar Cost Averaging
What Happens if a Division is Not Available
Accumulation Value in Each Division
Measurement of Investment Experience
Cash Surrender Value
Surrendering to Receive the Cash Surrender Value
Partial Withdrawals
Automatic Rebalancing
Proceeds Payable to the Beneficiary
Death Benefit Options
Reports to Owners
When We Make Payments
</TABLE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
CHARGES AND FEES........................................................... 24
Charge Deduction Division
Charges Deducted from the Accumulation Value
Charges Deducted from the Divisions
Trust Expenses
CHOOSING YOUR ANNUITIZATION OPTIONS........................................ 26
Annuitization of Your Contract
Annuity Commencement Date Selection
Frequency Selection
The Annuitization Options
Payment When Named Person Dies
OTHER CONTRACT PROVISIONS.................................................. 28
In Case of Errors in Application Information
Contract Changes--Applicable Tax Law
Your Right to Cancel or Exchange Your Contract
Other Contract Changes
Group or Sponsored Arrangements
Selling the Contract
REGULATORY INFORMATION..................................................... 29
Voting Rights
State Regulation
Legal Proceedings
Legal Matters
Experts
MORE INFORMATION ABOUT FIRST GOLDEN AMERICAN LIFE INSURANCE COMPANY OF NEW
YORK....................................................................... 30
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Directors and Executive Officers
FEDERAL TAX CONSIDERATIONS................................................. 34
Introduction
Tax Status of First Golden
Taxation of Non-Qualified Annuities
IRA Contracts and Other Qualified Retirement Plans
Federal Income Tax Withholding
FINANCIAL STATEMENTS OF FIRST GOLDEN AMERICAN LIFE INSURANCE COMPANY OF NEW
YORK....................................................................... 41
STATEMENT OF ADDITIONAL INFORMATION........................................ 52
Table of Contents
APPENDIX A................................................................. A-1
Market Value Adjustment Examples
</TABLE>
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO PERSON IS AUTHORIZED TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS.
I
<PAGE>
- -------------------------------------------------------------------------------
DEFINITION OF TERMS
ACCOUNTS
Separate Account NY-B and the Fixed Account.
ACCUMULATION VALUE
The total amount invested under the Contract. Initially, this amount is equal
to the premium paid. Thereafter, the Accumulation Value will reflect the pre-
miums paid, investment experience of the Divisions and interest credited to
your Fixed Allocations, charges deducted and any partial withdrawals.
ANNUAL RATCHET ENHANCED DEATH BENEFIT OPTION
An enhanced death benefit option that may be elected only at issue and only if
the Owner or Annuitant (when the Owner is other than an individual) is age 79
or younger. The enhanced death benefit provided by this option is the highest
Accumulation Value on any Contract Anniversary on or prior to the Owner turn-
ing age 80, as adjusted for additional premiums and partial withdrawals.
ANNUITANT
The person designated by the Owner to be the measuring life in determining An-
nuity Payments.
ANNUITY COMMENCEMENT DATE
The date on which Annuity Payments begin.
ANNUITY OPTIONS
Options the Owner selects that determine the form and amount of Annuity Pay-
ments.
ANNUITY PAYMENT
The periodic payment an Owner receives. It may be either a fixed or a variable
amount based on the Annuity Option chosen.
ATTAINED AGE
The Issue Age of the Owner or Annuitant plus the number of full years elapsed
since the Contract Date.
BENEFICIARY
The person designated to receive benefits in the case of the death of the
Owner or the Annuitant (when the Owner is other than an individual).
BUSINESS DAY
Any day the New York Stock Exchange ("NYSE") is open for trading, exclusive of
Federal holidays, or any day on which the SEC requires that mutual funds, unit
investment trusts or other investment portfolios be valued.
CASH SURRENDER VALUE
The amount the Owner receives upon surrender of the Contract, including any
Market Value Adjustment.
CHARGE DEDUCTION DIVISION
The Division from which all charges are deducted if so designated by you. The
Charge Deduction Division currently is the Liquid Asset Division.
CONTINGENT ANNUITANT
The person designated by the Owner who, upon the Annuitant's death prior to
the Annuity Commencement Date, becomes the Annuitant.
CONTRACT
The entire Contract consisting of the basic Contract and any riders or en-
dorsements.
CONTRACT ANNIVERSARY
The anniversary of the Contract Date.
CONTRACT DATE
The date on which we have received the Initial Premium and upon which we begin
determining the Contract values. It may or may not be the same as the Issue
Date. This date is used to determine Contract months, processing dates, years
and anniversaries.
CONTRACT PROCESSING DATES
The days when we deduct certain charges from the Accumulation Value. If the
Contract Processing Date is not a Valuation Date, it will be on the next suc-
ceeding Valuation Date. The Contract Processing Dates will be once each year
on the Contract Anniversary.
CONTRACT PROCESSING PERIOD
The first Contract processing period begins with the Contract Date and ends at
the close of business on the first Contract Processing Date. All subsequent
Contract processing periods begin at the close of business on the most recent
Contract Processing Date and extend to the close of business on the next Con-
tract Processing Date. There is one Contract processing period each year.
CONTRACT YEAR
The period between Contract anniversaries.
CUSTOMER SERVICE CENTER
Where service is provided to you. The mailing address and telephone number of
the Customer Service Center are shown on the cover.
1
<PAGE>
DIVISIONS
The investment options available under Account NY-B.
ENDORSEMENTS
An endorsement changes or adds provisions to the Contract.
EXPERIENCE FACTOR
The factor which reflects the investment experience of the portfolio in which
a Division invests and also reflects the charges assessed against the Division
for a Valuation Period.
FIXED ACCOUNT
An Account which contains all of our assets that support Owner Fixed Alloca-
tions and any interest credited thereto.
FIXED ALLOCATION
An amount allocated to the Fixed Account that is credited with a Guaranteed
Interest Rate for a specified Guarantee Period.
FREE LOOK PERIOD
The period of time within which the Owner may examine the Contract and return
it for a refund.
GUARANTEED INTEREST RATE
The effective annual interest rate which we will credit for a specified Guar-
antee Period. The Guaranteed Interest Rate will never be less than 3%.
GUARANTEE PERIOD
The period of time for which a rate of interest is guaranteed to be credited
to a Fixed Allocation. We currently offer Guarantee Periods with durations of
1, 3, 5, 7 and 10 years.
INDEX OF INVESTMENT EXPERIENCE
The index that measures the performance of a Division.
INITIAL PREMIUM
The payment required to put a Contract into effect.
ISSUE AGE
The Owner's or Annuitant's age on his or her last birthday on or before the
Contract Date.
ISSUE DATE
The date the Contract is issued at our Customer Service Center.
MARKET VALUE ADJUSTMENT
A positive or negative adjustment made to a Fixed Allocation. It may apply to
certain withdrawals and transfers, whether in whole or in part, and
annuitizations of all or part of a Fixed Allocation prior to the end of a
Guarantee Period.
MATURITY DATE
The date on which a Guarantee Period matures.
OWNER
The person who owns the Contract and is entitled to exercise all rights under
the Contract. This person's death also initiates payment of the death benefit.
RIDER
A rider amends the Contract, in certain instances adding benefits.
SPECIALLY DESIGNATED DIVISION
The Division to which distributions from a portfolio underlying a Division in
which reinvestment is not available will be allocated unless you specify oth-
erwise. The Specially Designated Division currently is the Liquid Asset Divi-
sion.
STANDARD DEATH BENEFIT OPTION
The death benefit option that you will receive under the Contract unless the
Annual Ratchet Death Benefit Option is elected. The death benefit provided by
this option is equal to the greatest of (i) Accumulation Value; (ii) total
premium payments less any partial withdrawals; and (iii) Cash Surrender Value.
VALUATION DATE
The day at the end of a Valuation Period when each Division is valued.
VALUATION PERIOD
Each business day together with any non-business days before it.
2
<PAGE>
- -------------------------------------------------------------------------------
SUMMARY OF CONTRACT
This prospectus has been designed to provide you with information regarding
the Contract and the Accounts which fund the Contract. Information concerning
the Series underlying the Divisions of Account NY-B and the Fixed Account is
set forth in the Trusts' prospectuses.
This summary is intended to provide only a very brief overview of the more
significant aspects of the Contract. Further detail is provided in this pro-
spectus and in the Contract. The Contract, together with any riders or en-
dorsements, constitutes the entire agreement between you and us and should be
retained as part of your permanent records.
This prospectus has been designed to provide you with the necessary informa-
tion to make a decision on purchasing the Contract. You have a choice of in-
vestments. We do not promise that your Accumulation Value will increase. De-
pending on the investment experience of the Divisions and interest credited to
the Fixed Allocations in which you are invested, your Accumulation Value, Cash
Surrender Value and death benefit may increase or decrease on any day. You
bear the investment risk.
DESCRIPTION OF THE CONTRACT
The Contract is designed to establish retirement benefits for two types of
purchasers. The first type of purchaser is one who is eligible to participate
in, and purchases a Contract for use with, an individual retirement annuity
("IRA") meeting the requirements of section 408(b) of the Internal Revenue
Code of 1986 ("qualified plan"). For a Contract funding a qualified plan, dis-
tributions may be made to you to satisfy requirements imposed by Federal tax
law. The second type of purchaser is one who purchases a Contract outside of a
qualified plan ("non-qualified plan").
The Contract also offers a choice of Annuity Options to which you may apply
all or a portion of the Accumulation Value on the annuity commencement date or
the Cash Surrender Value upon surrender of the Contract. See Choosing Your An-
nuity Options.
AVAILABILITY
We can issue a Contract if both the Annuitant and the Owner are not older than
age 85 and accept additional premium payments until either the Annuitant or
Owner reaches the Attained Age of 85 for non-qualified plans (age 70 for qual-
ified plans, except for rollover contributions). The minimum Initial Premium
is $10,000 for a non-qualified plan and $1,500 for a qualified plan. We may
change the minimum initial or additional premium requirements for certain
group or sponsored arrangements. See Other Contract Provisions, Group or Spon-
sored Arrangements.
The minimum additional premium payment we will accept is $500 for a non-quali-
fied plan and $250 for a qualified plan. You must receive our prior approval
before making a premium payment that causes the Accumulation Value of all an-
nuities that you maintain with us to exceed $1,000,000.
THE DIVISIONS
Each of the nineteen Divisions of Account NY-B offered under this prospectus
invests in a mutual fund portfolio with its own distinct investment objectives
and policies. Each Division of Account NY-B invests in a corresponding Series
of the GCG Trust, managed by Directed Services, Inc. ("DSI"), or a correspond-
ing Series of the ESS Trust, managed by Equitable Investment Services, Inc.
("EISI," and together with DSI, the "Managers"). The Trusts and the Managers
have retained several portfolio managers to manage the assets of each Series.
See Facts About the Company and the Accounts, Account NY-B Divisions.
HOW THE ACCUMULATION VALUE VARIES
The Accumulation Value in the Divisions varies each day based on investment
results. You bear the risk of poor investment performance and you receive the
benefits from favorable investment performance. The Accumulation Value also
reflects premium payments, charges deducted and partial withdrawals. See Facts
About the Contract, Accumulation Value in Each Division.
THE FIXED ACCOUNT
The investments available through the Fixed Account include various Fixed Al-
locations which we credit with fixed rates of interest for the Guarantee Peri-
ods you select. We reset the interest rates for new Guarantee Periods periodi-
cally based on our sole discretion. We may offer Guarantee Periods from one to
ten years. We currently offer Guarantee Periods with durations of 1, 3, 5, 7
and 10 years.
You bear the investment risk with respect to surrenders, partial withdrawals,
transfers and annuitization from your Fixed Allocations. A surrender, partial
withdrawal, transfer or annuitization made prior to the end of a Guarantee Pe-
riod may be subject to a Market Value Adjustment, which could have the effect
of either increasing or decreasing your Accumulation Value. We will not apply
a Market Value Adjustment on a surrender, partial withdrawal, transfer or
annuitization made within 30 days prior to the Maturity Date of the applicable
Guarantee Period or certain transfers made in connection with the dollar cost
averaging
3
<PAGE>
program. Systematic withdrawals from a Fixed Allocation also are not subject
to a Market Value Adjustment.
MARKET VALUE ADJUSTMENT
We will apply a Market Value Adjustment, subject to certain exceptions, to a
surrender, partial withdrawal, transfer or annuitization from a Fixed Alloca-
tion made prior to the end of a Guarantee Period. The Market Value Adjustment
does not apply to amounts invested in Account NY-B.
SURRENDERING YOUR CONTRACT
You may surrender the Contract and receive its Cash Surrender Value at any
time while both the Annuitant and Owner are living and before the Annuity Com-
mencement Date. See Facts About the Contract, Cash Surrender Value and Surren-
dering to Receive the Cash Surrender Value.
TAKING PARTIAL WITHDRAWALS
After the Free Look Period, prior to the annuity commencement date and while
the Contract is in effect, you may take partial withdrawals from the Accumula-
tion Value of your Contract. You may elect in advance to take systematic par-
tial withdrawals on a monthly or quarterly basis. If you have an IRA Contract,
you may elect IRA partial withdrawals on a monthly, quarterly or annual basis.
Partial withdrawals are subject to certain restrictions as defined in this
prospectus, including a surrender charge and a Market Value Adjustment. Par-
tial withdrawals above a specified percentage of your Accumulation Value may
be subject to a surrender charge. See Facts About the Contract, Partial With-
drawals.
DOLLAR COST AVERAGING
Under this program, you may choose to have a specified dollar amount trans-
ferred from either the Limited Maturity Bond Division, Liquid Asset Division
or a Fixed Allocation with a one year Guarantee Period to the other Divisions
of Account NY-B on a monthly basis with the objective of shielding your in-
vestment from short-term price fluctuations. See Facts About the Contract,
Dollar Cost Averaging.
YOUR RIGHT TO CANCEL THE CONTRACT
You may cancel your Contract within the Free Look Period which is a ten day
period of time beginning once you receive the Contract. For purposes of admin-
istering our allocation and certain other administrative rules, we deem this
period to end 15 days after the Contract is mailed from our Customer Service
Center. Some states may require that we provide a longer free look period. In
some states we restrict the Initial Premium allocation during the Free Look
Period. See Other Contract Provisions, Your Right to Cancel or Exchange Your
Contract.
YOUR RIGHT TO CHANGE THE CONTRACT
The Contract may be changed to another annuity plan subject to our rules at
the time of the change. See Other Contract Provisions, Other Contract Changes.
DEATH BENEFIT OPTIONS
The Contract provides a death benefit to the beneficiary if the Owner dies
prior to the Annuity Commencement Date. Subject to our rules, there are two
death benefit options that may be available to you under the Contract: the
Standard Death Benefit Option and the Annual Ratchet Enhanced Death Benefit
Option. See Facts About the Contract, Death Benefit Options. We may offer a
reduced death benefit under certain group and sponsored arrangements. See
Other Contract Provisions, Group or Sponsored Arrangements.
DEDUCTIONS FOR CHARGES AND FEES
We invest the entire amount of the initial and any additional premium payments
in the Divisions and the Fixed Allocations you select, subject to certain re-
strictions we impose. See Facts About the Contract, Restrictions on Allocation
of Premium Payments. We then may deduct an annual Contract fee from your Accu-
mulation Value; other charges, including the mortality and expense risk charge
and asset based administrative charge, are deducted from the Account NY-B Di-
visions. See Fee Table, Other Contract Provisions, Charges and Fees. We may
reduce certain charges under group or sponsored arrangements. See Other Con-
tract Provisions, Group or Sponsored Arrangements. Unless you have elected the
Charge Deduction Division, charges are deducted proportionately from all
Account NY-B Divisions in which you are invested. If there is no Accumulation
Value in these Divisions, charges will be deducted from your Fixed Allocations
starting with Guarantee Periods nearest their Maturity Dates until such
charges have been deducted.
FEDERAL INCOME TAXES
The ultimate effect of Federal income taxes on the amounts held under an annu-
ity Contract, on Annuity Payments and on the economic benefits to the Owner,
Annuitant or Beneficiary depends on First Golden's tax status and upon the tax
status of the individuals concerned. In general, an Owner is not taxed on in-
creases in value under an annuity Contract until some form of distribution is
made under it. There may be tax penalties if you make a withdrawal or surren-
der the Contract before reaching age 59 1/2. See Federal Tax Considerations.
4
<PAGE>
- -------------------------------------------------------------------------------
FEE TABLE
TRANSACTION EXPENSES/1/
Contingent Deferred Sales Charge/2/ (imposed as a percentage of premium pay-
ments withdrawn upon excess partial withdrawal or surrender):/3/
<TABLE>
<CAPTION>
COMPLETE YEARS ELAPSED SURRENDER
SINCE PREMIUM PAYMENT CHARGE
<S> <C>
0 7%
1 6%
2 5%
3 4%
4 3%
5 2%
6 1%
7+ 0%
</TABLE>
<TABLE>
<S> <C>
Excess Allocation Charge............................................ $0/4/
</TABLE>
ANNUAL CONTRACT FEES
<TABLE>
<S> <C>
Administrative Charge................................................ $30
(Waived if the Accumulation Value equals or exceeds $100,000 at the
end of the Contract Year, or once the sum of premiums paid equals or
exceeds $100,000.)
</TABLE>
SEPARATE ACCOUNT ANNUAL EXPENSES (percentage of assets in each Division):/5/
<TABLE>
<CAPTION>
STANDARD ENHANCED
DEATH BENEFIT ANNUAL RATCHET
------------- --------------
<S> <C> <C>
Mortality and Expense Risk Charge............. 1.10% 1.25%
Asset Based Administrative Charge............. 0.15% 0.15%
----- -----
Total Separate Account Expenses............... 1.25% 1.40%
</TABLE>
THE GCG TRUST ANNUAL EXPENSES (based on combined net assets of the indicated
groups of Series):
<TABLE>
<CAPTION>
OTHER TOTAL
SERIES FEES/6/ EXPENSES/7/ EXPENSES
------ ----------- ------------------- -------------
<S> <C> <C> <C>
Multiple Allocation, Fully
Managed, Capital
Appreciation, Rising
Dividends, All-Growth, 1.00% 0.01% 1.01%
Real Estate, Hard Assets,
Value Equity, Strategic
Equity, and Small Cap
Series:
Emerging Markets Series: 1.50% 0.03% 1.53%
Managed Global Series:/8/ 1.25% 0.01% 1.26%
Limited Maturity Bond and 0.60% 0.01% 0.61%
Liquid Asset Series:
THE ESS TRUST ANNUAL EXPENSES:
<CAPTION>
OTHER TOTAL
EXPENSES EXPENSES
AFTER EXPENSE AFTER EXPENSE
SERIES FEES/6///9/ REIMBURSEMENT/1//0/ REIMBURSEMENT
------ ----------- ------------------- -------------
<S> <C> <C> <C>
OTC, Research and Total 0.80% 0.40% 1.20%
Return Portfolios
Growth & Income and Value 0.95% 0.40% 1.35%
+ Growth Portfolios
</TABLE>
- -------------------
1 A Market Value Adjustment, which may increase or decrease your Accumulation
Value, may apply to certain transactions. See Market Value Adjustment.
2 We also deduct a charge for premium taxes (which can range from 0% to 3.5%
of premium) from your Accumulation Value upon surrender, excess partial
withdrawals or on the Annuity Commencement Date. See Premium Taxes.
3 For purposes of calculating the surrender charge for the excess partial
withdrawal, (i) we treat premium payments as being withdrawn on a first-in
first-out basis, and (ii) amounts withdrawn which are not considered an ex-
cess partial withdrawal are not treated as a withdrawal of any premium pay-
ments. See Charges Deducted from the Accumulation Value, Surrender Charge
for Excess Partial Withdrawals.
4 We reserve the right to impose a charge in the future at a maximum of $25
or each allocation change in excess of twelve per Contract Year. See Excess
Allocation Charge.
5
<PAGE>
5 See Facts About the Contract, Death Benefit Options, for a description of
the Contract's Standard and Annual Ratchet Death Benefit Options.
6 Fees decline as combined assets increase (see Account NY-B Divisions and
the Trust prospectuses for details). Subject to approval by
contractholders, the management fee for the Emerging Markets Series will be
increased to 1.75% on May 1, 1997.
7 Other Expenses generally consist of independent trustees fees and expenses.
8 The estimated expenses for the Managed Global Series are based on the ac-
tual experience of its predecessor for accounting purposes, the Managed
Global Account of Separate Account D.
9 Other expenses shown take into account the effect of EISI's agreement to
reimburse each portfolio for all operating expenses, excluding management
fees, that exceed 0.40% of its average daily net assets. This reimbursement
is voluntary and can be terminated at any time. Prior to February 3, 1997,
EISI had an agreement to reimburse each portfolio for all operating ex-
penses, excluding management fees, that exceeded 0.75% of its average daily
net assets. For the year ended December 31, 1996, no such reimbursement was
necessary for the OTC, Research, Total Return and Growth & Income Portfo-
lios. In the absence of such reimbursement agreement, Total Expenses would
have been 1.90% for the Value + Growth Portfolio for the year ended Decem-
ber 31, 1996.
10 Prior to October 6, 1995, EISI waived its management fee for each of the
OTC, Research and Total Return Portfolios.
Examples:
The examples do not take into account any deduction for premium taxes. Premium
taxes currently range from 0% to 3.5% of premium payments. There may be sur-
render charges if you choose to annuitize within the first three Contract
Years.
If at issue you elect the Annual Ratchet Enhanced Death Benefit Option and you
surrender your Contract at the end of the applicable time period, you would
pay the following expenses for each $1,000 of Initial Premium assuming a 5%
annual return on assets:
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DIVISION ONE YEAR THREE YEARS
<S> <C> <C>
Multiple Allocation........................................ $85.01 $116.91
Fully Managed.............................................. $85.01 $116.91
Capital Appreciation....................................... $85.01 $116.91
Rising Dividends........................................... $85.01 $116.91
All-Growth................................................. $85.01 $116.91
Real Estate................................................ $85.01 $116.91
Hard Assets................................................ $85.01 $116.91
Value Equity............................................... $85.01 $116.91
Strategic Equity........................................... $85.01 $116.91
Small Cap.................................................. $85.01 $116.91
Emerging Markets........................................... $90.20 $132.41
Managed Global............................................. $87.51 $124.39
OTC........................................................ $86.91 $122.60
Research................................................... $86.91 $122.60
Total Return............................................... $86.91 $122.60
Growth & Income............................................ $88.41 $127.07
Value + Growth............................................. $88.41 $127.07
Limited Maturity Bond...................................... $81.00 $104.81
Liquid Asset............................................... $81.00 $104.81
</TABLE>
- -------------------------------------------------------------------------------
6
<PAGE>
If at issue you elect the Annual Ratchet Enhanced Death Benefit Option and you
do not surrender your Contract or if you annuitize on the Annuity Commencement
Date, you would pay the following expenses for each $1,000 of Initial Premium
assuming a 5% annual return on assets:
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DIVISION ONE YEAR THREE YEARS
<S> <C> <C>
Multiple Allocation........................................ $25.01 $76.91
Fully Managed.............................................. $25.01 $76.91
Capital Appreciation....................................... $25.01 $76.91
Rising Dividends........................................... $25.01 $76.91
All-Growth................................................. $25.01 $76.91
Real Estate................................................ $25.01 $76.91
Hard Assets................................................ $25.01 $76.91
Value Equity............................................... $25.01 $76.91
Strategic Equity........................................... $25.01 $76.91
Small Cap.................................................. $25.01 $76.91
Emerging Markets........................................... $30.20 $92.41
Managed Global............................................. $27.51 $84.39
OTC........................................................ $26.91 $82.60
Research................................................... $26.91 $82.60
Total Return............................................... $26.91 $82.60
Growth & Income............................................ $28.41 $87.07
Value + Growth............................................. $28.41 $87.07
Limited Maturity Bond...................................... $21.00 $64.81
Liquid Asset............................................... $21.00 $64.81
</TABLE>
- -------------------------------------------------------------------------------
The purpose of the Fee Table is to The examples reflect the election at
assist you in understanding the vari- issue of the Annual Ratchet Enhanced
ous costs and expenses that you will Death Benefit Option. If the Standard
bear directly or indirectly. For pur- Death Benefit Option is elected, the
poses of computing the annual per actual expenses incurred will be less
Contract administrative charge, the than those represented in the Exam-
dollar amounts shown in the examples ples.
are based on an Initial Premium of
$50,000.
THIS EXAMPLE SHOULD NOT BE CONSIDERED
A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE
GREATER OR LESS THAN THOSE SHOWN,
SUBJECT TO THE GUARANTEES UNDER THE
CONTRACT.
7
<PAGE>
- -------------------------------------------------------------------------------
CONDENSED FINANCIAL AND OTHER INFORMATION
No condensed financial information for Account NY-B is presented because, as
of the date of this prospectus, Account NY-B had not yet commenced operations.
FINANCIAL STATEMENTS
The audited financial statements of First Golden prepared in accordance with
generally accepted accounting principles for the period ended December 31,
1996 (as well as the auditors' report thereon) are contained in the Prospec-
tus.
PERFORMANCE RELATED INFORMATION
Performance information for the Divisions of Account NY-B, including the yield
and effective yield of the Liquid Asset Division, the yield of the remaining
Divisions, and the total return of all Divisions may appear in reports and
promotional literature to current or prospective Owners.
Current yield for the Liquid Asset Division will be based on income received
by a hypothetical investment over a given 7-day period (less expenses accrued
during the period), and then "annualized" (i.e., assuming that the 7-day yield
would be received for 52 weeks, stated in terms of an annual percentage return
on the investment). "Effective yield" for the Liquid Asset Division is calcu-
lated in a manner similar to that used to calculate yield, but when
annualized, the income earned by the investment is assumed to be reinvested.
The "effective yield" will be slightly higher than the "yield" because of the
compounding effect of earnings.
For the remaining Divisions, quotations of yield will be based on all invest-
ment income per unit (Accumulation Value divided by the index of investment
experience, see Facts About the Contract, Measurement of Investment Experi-
ence, Index of Investment Experience and Unit Value) earned during a given 30-
day period, less expenses accrued during the period ("net investment income").
Quotations of average annual total return for any Division will be expressed
in terms of the average annual compounded rate of return on a hypothetical in-
vestment in a Contract over a period of one, five, and ten years (or, if less,
up to the life of the Division), and will reflect the deduction of the appli-
cable surrender charge, the administrative charge and the applicable mortality
and expense risk charge. See Charges and Fees. Quotations of total return may
simultaneously be shown for other periods that do not take into account cer-
tain contractual charges, such as the surrender charge.
Performance information for a Division may be compared, in reports and promo-
tional literature, to: (i) the Standard & Poor's 500 Stock Index ("S&P 500"),
Dow Jones Industrial Average ("DJIA"), Donoghue Money Market Institutional Av-
erages, or other indices measuring performance of a pertinent group of securi-
ties so that investors may compare a Division's results with those of a group
of securities widely regarded by investors as representative of the securities
markets in general; (ii) other variable annuity separate accounts or other in-
vestment products tracked by Lipper Analytical Services, a widely used inde-
pendent research firm which ranks mutual funds and other investment companies
by overall performance, investment objectives, and assets, or tracked by other
ratings services, including VARDS, companies, publications, or persons who
rank separate accounts or other investment products on overall performance or
other criteria; and (iii) the Consumer Price Index (measure for inflation) to
assess the real rate of return from an investment in the Contract. Unmanaged
indices may assume the reinvestment of dividends but generally do not reflect
deductions for administrative and management costs and expenses.
Performance information for any Division reflects only the performance of a
hypothetical Contract under which the Accumulation Value is allocated to a Di-
vision during a particular time period on which the calculations are based.
Performance information should be considered in light of the investment objec-
tives and policies, characteristics and quality of the portfolio of the Series
of the respective Trust in which the Division invests and the market condi-
tions during the given time period, and should not be considered as a repre-
sentation of what may be achieved in the future. For a description of the
methods used to determine yield and total return for the Divisions, see the
Statement of Additional Information.
Reports and promotional literature may also contain other information includ-
ing the ranking of any Division derived from rankings of variable annuity sep-
arate accounts or other investment products tracked by Lipper Analytical Serv-
ices or by rating services, companies, publications, or other persons who rank
separate accounts or other investment products on overall performance or other
criteria. First Golden may, from time to time, include in its advertising and
sales materials, tax deferred compounding charts and other hypothetical illus-
trations, which may include comparisons of currently taxable and tax deferred
investment programs, based on selected tax brackets.
8
<PAGE>
- -------------------------------------------------------------------------------
INTRODUCTION
The following information describes the Contract and the Accounts which fund
the Contract, Account NY-B and the Fixed Account. Account NY-B invests in mu-
tual fund portfolios of the Trusts. The Fixed Account contains all of the as-
sets that support Owner Fixed Allocations which we credit with Guaranteed In-
terest Rates for the Guarantee Periods you select.
FIRST GOLDEN
First Golden American Life Insurance Company of New York ("First Golden" or
the "Company") is a stock life insurance company organized under the laws of
the State of New York. First Golden is a wholly owned subsidiary of Golden
American Life Insurance Company. Golden American Life Insurance Company, in
turn, is an indirect wholly owned subsidiary of Equitable of Iowa Companies, a
holding company for Equitable Life Insurance Company of Iowa, USG Annuity &
Life Company, Locust Street Securities, Inc. and Equitable Investment Servic-
es, Inc. ("EISI"), EIC Variable, Inc., and Directed Services, Inc. ("DSI").
First Golden is authorized to do business only in the State of New York. First
Golden offers variable annuities.
THE GCG TRUST AND THE ESS TRUST
The GCG Trust is an open-end management investment company, more commonly
called a mutual fund. The GCG Trust's shares may also be available to other
separate accounts funding variable insurance products offered by First Golden.
This is called "mixed funding."
The GCG Trust may also sell its shares to separate accounts of other insurance
companies, both affiliated and not affiliated with First Golden. This is
called "shared funding." Although we do not anticipate any inherent difficul-
ties arising from either mixed or shared funding, it is theoretically possible
that, due to differences in tax treatment or other considerations, the inter-
est of Owners of various Contracts participating in the GCG Trust might at
sometime be in conflict. After the GCG Trust receives the requisite order from
the SEC, shares of the GCG Trust may also be sold to certain qualified pension
and retirement plans. The Board of Trustees of the GCG Trust, the GCG Trust's
Manager, and we and any other insurance companies participating in the GCG
Trust are required to monitor events to identify any material conflicts that
arise from the use of the GCG Trust for mixed and/or shared funding or between
various policy Owners and pension and retirement plans. For more information
about the risks of mixed and shared funding, please refer to the GCG Trust
prospectus.
The ESS Trust is also an open-end management investment company. Currently,
the ESS Trust's shares are not available to separate accounts of other insur-
ance companies except affiliated insurance companies such as First Golden. It
is anticipated that in the future the ESS Trust will become available to sepa-
rate accounts of unaffiliated companies.
You will find complete information about both the GCG Trust and the ESS Trust,
including the risks associated with each Series, in the accompanying Trusts'
prospectuses. You should read them carefully in conjunction with this prospec-
tus before investing. Additional copies of the Trusts' prospectuses may be ob-
tained by contacting our Customer Service Center.
SEPARATE ACCOUNT NY-B
All obligations under the Contract are general obligations of First Golden.
Account NY-B is a separate investment account used to support our variable an-
nuity Contracts and for other purposes as permitted by applicable laws and
regulations. The assets of Account NY-B are kept separate from our general ac-
count and any other separate accounts we may have. We may offer other variable
annuity Contracts investing in Account NY-B which are not discussed in this
prospectus. Account NY-B may also invest in other series which are not avail-
able to the Contract described in this prospectus.
We own all the assets in Account NY-B. Income and realized and unrealized
gains or losses from assets in the account are credited to or charged against
that account without regard to other income, gains or losses in our other in-
vestment accounts. As required, the assets in Account NY-B are at least equal
to the reserves and other liabilities of that account. These assets may not be
charged with liabilities from any other business we conduct.
They may, however, be subject to liabilities arising from Divisions whose as-
sets are attributable to other variable annuity Contracts supported by Account
NY-B. If the assets exceed the required reserves and other liabilities, we may
transfer the excess to our general account.
Account NY-B was established on June 13, 1996 to invest in mutual funds, unit
investment trusts or other investment portfolios which we determine to be
suitable for the Contract's purposes. Account NY-B is treated as a unit in-
vestment trust under Federal securities laws. It is registered with the
9
<PAGE>
SEC under the Investment Company Act of 1940 (the "1940 Act") as an investment
company and meets the definition of a separate account under the Federal secu-
rities laws. It is governed by the laws of the state of New York, our state of
domicile. Registration with the SEC does not involve any supervision by the
SEC of the management or investment policies or practices of Account NY-B.
ACCOUNT NY-B DIVISIONS
Account NY-B is divided into Divisions. Currently, each Division of Account
NY-B offered under this prospectus invests in a portfolio of the GCG Trust or
the ESS Trust. DSI serves as the Manager to each Series of the GCG Trust, and
EISI serves as the Manager to each Series of the ESS Trust. See the Trusts'
prospectuses for details. The Trusts, DSI and EISI have retained several port-
folio managers to manage the assets of each Series as indicated below. There
may be restrictions on the amount of the allocation to certain Divisions based
on state laws and regulations. The investment objectives of the various Series
in the Trusts are described below. There is no guarantee that any portfolio or
Series will meet its investment objectives. Meeting objectives depends on var-
ious factors, including, in certain cases, how well the portfolio managers an-
ticipate changing economic and market conditions. Account NY-B also has other
Divisions investing in other series which are not available to the Contract
described in this prospectus.
DSI and EISI provide the overall business management and administrative serv-
ices necessary for the Series' operation and provide or procure the services
and information necessary to the proper conduct of the business of the Series.
See the Trusts' prospectuses for details.
DSI is responsible for providing or procuring, at DSI's expense, the services
reasonably necessary for the ordinary operation of the Series of the GCG
Trust. DSI does not bear the expense of brokerage fees and other transactional
expenses for securities or other assets (which are generally considered part
of the cost for assets), taxes (if any) paid by a Series of the GCG Trust, in-
terest on borrowing, fees and expenses of the independent trustees, and ex-
traordinary expenses, such as litigation or indemnification expenses. See the
GCG Trust prospectus for details.
EISI is also responsible for providing or procuring the services reasonably
necessary for the ordinary operation of the ESS Trust. The expenses associated
with providing such services, however, in the absence of any expense reim-
bursement by EISI, are expenses of the ESS Trust. See the ESS Trust prospectus
for details.
Each Trust pays its respective Manager for its services a fee, payable month-
ly, based on the annual rates of the average daily net assets of the Series
shown in the tables below. DSI and EISI (and not the Trusts) pay each portfo-
lio manager a monthly fee for managing the assets of the Series.
THE GCG TRUST
<TABLE>
<CAPTION>
SERIES FEES (based on combined assets of the indicated groups of Series)
------------------------------------------------ -----------------------------------------------------------------
<C> <S>
Multiple Allocation, Fully Managed, Capital 1.00% of first $750 million;
Appreciation, Rising Dividends, All-Growth, 0.95% of next $1.250 billion;
Real Estate, Hard Assets, Value Equity, 0.90% of next $1.5 billion; and
Strategic Equity, and Small Cap Series: 0.85% of amount in excess of $3.5 billion
Emerging Markets Series: 1.50% of average daily net assets
Managed Global Series: 1.25% of first $500 million;
1.05% of amount in excess of $500 million
Limited Maturity Bond and Liquid Asset Series: 0.60% of first $200 million;
0.55% of next $300 million; and
0.50% of amount in excess of $500 million
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ESS TRUST
<TABLE>
<CAPTION>
SERIES FEES
------------------------------------------------ ------------------------------------------------
<C> <S>
OTC, Research and Total Return Portfolios: 0.80% of first $300 million;
0.55% of amount in excess of $300 million
Growth & Income and Value + Growth Portfolios: 0.95% of first $200 million;
0.75% of amount in excess of $200 million
- --------------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE>
The following Divisions invest in designated Series of the GCG Trust.
MULTIPLE ALLOCATION DIVISION
MULTIPLE ALLOCATION SERIES
OBJECTIVE
The highest total return, consisting of capital appreciation and current in-
come, consistent with the preservation of capital and elimination of unneces-
sary risk.
INVESTMENTS
Investment in equity and debt securities and the use of certain sophisticated
investment strategies and techniques.
PORTFOLIO MANAGER
Zweig Advisors Inc.
FULLY MANAGED DIVISION
FULLY MANAGED SERIES
OBJECTIVE
High total investment return over the long term, consistent with the preser-
vation of capital and prudent investment risk.
INVESTMENTS
Pursues an active asset allocation strategy whereby investments are allocat-
ed, based upon an evaluation of economic and market trends and the antici-
pated relative total return available, among three asset classes -- debt se-
curities, equity securities and money market instruments.
PORTFOLIO MANAGER
T. Rowe Price Associates, Inc.
CAPITAL APPRECIATION DIVISION
CAPITAL APPRECIATION SERIES
OBJECTIVE
Long-term capital growth.
INVESTMENTS
Invests in common stocks and preferred stock that will be allocated among
various categories of stocks referred to as "components" which consist of the
following: (i) The Growth Component -- Securities that the Portfolio Manager
believes have the following characteristics: stability and quality of earn-
ings and positive earnings momentum; dominant competitive positions; and dem-
onstrate above-average growth rates as compared to published S&P 500 earnings
projections; and (ii) The Value Component--Securities that the portfolio man-
ager regards as fundamentally undervalued, i.e., securities selling at a dis-
count to asset value and securities with a relatively low price/earnings ra-
tio. The securities eligible for this component may include real estate
stocks, such as securities of publicly owned companies that, in the portfolio
manager's judgement, offer an optimum combination of current dividend yield,
expected dividend growth, and discount to current real estate value.
PORTFOLIO MANAGER
Chancellor LGT Asset Management, Inc.
RISING DIVIDENDS DIVISION
RISING DIVIDENDS SERIES
OBJECTIVE
Capital appreciation, with dividend income as a secondary objective.
INVESTMENTS
Investment in equity securities of high quality companies that meet the fol-
lowing four criteria: consistent dividend increases; substantial dividend in-
creases; reinvested profits; and an under-leveraged balance sheet.
PORTFOLIO MANAGER
Kayne, Anderson Investment Management, L.P.
ALL-GROWTH DIVIDENDS
ALL-GROWTH SERIES
OBJECTIVE
Capital appreciation.
INVESTMENTS
Investment in securities selected for their long- term growth prospects.
PORTFOLIO MANAGER
Pilgrim, Baxter & Associates, Ltd.
REAL ESTATE DIVISION
REAL ESTATE SERIES
OBJECTIVE
Capital appreciation, with current income as a secondary objective.
INVESTMENTS
Investment in publicly traded equity securities of companies in the real es-
tate industry listed on national exchanges or on the National Association of
Securities Dealers Automated Quotation System.
PORTFOLIO MANAGER
E.I.I. Realty Securities, Inc.
HARD ASSETS DIVISION
HARD ASSETS SERIES
OBJECTIVE
Long-term capital appreciation.
INVESTMENTS
Investment in equity and debt securities of companies engaged in the explora-
tion, development, production, management, and distribution of natural re-
sources.
PORTFOLIO MANAGER
Van Eck Associates Corporation
VALUE EQUITY DIVISION
VALUE EQUITY SERIES
OBJECTIVE
Capital appreciation with a secondary objective of dividend income.
11
<PAGE>
INVESTMENTS
Investment primarily in equity securities of U.S. and foreign issuers which,
when purchased, meet quantitative standards believed by the Portfolio Manager
to indicate above average financial soundness and high intrinsic value rela-
tive to price.
PORTFOLIO MANAGER
Eagle Asset Management, Inc.
STRATEGIC EQUITY DIVISION
STRATEGIC EQUITY SERIES
OBJECTIVE
Long-term capital appreciation.
INVESTMENTS
Investment primarily in equity securities based on various equity market tim-
ing techniques. The amount of the Series' assets allocated to equities shall
vary from time to time to seek positive investment performance from advancing
equity markets and to reduce exposure to equities when risk/reward character-
istics are believed to be less attractive.
PORTFOLIO MANAGER
Zweig Advisors Inc.
SMALL CAP DIVISION
SMALL CAP SERIES
OBJECTIVE
Long-term capital appreciation.
INVESTMENTS
Investment primarily in equity securities of companies that, at the time of
purchase, have a total market capitalization -- present market value per
share multiplied by the total number of shares outstanding -- within the
range of companies included in the Russell 2000 Growth Index.
PORTFOLIO MANAGER
Fred Alger Management, Inc.
EMERGING MARKETS DIVISION
EMERGING MARKETS SERIES
OBJECTIVE
Long-term growth of capital.
INVESTMENTS
Investment primarily in equity securities of companies that are considered to
be in emerging market countries in the Pacific Basin and Latin America. In-
come is not an objective, and any production of current income is considered
incidental to the objective of growth of capital.
PORTFOLIO MANAGER
Putnam Investment Management, Inc.
MANAGED GLOBAL DIVISION
MANAGED GLOBAL SERIES
OBJECTIVE
High total investment return, consistent with a prudent regard for capital
preservation.
INVESTMENTS
Investment in a wide range of equity and debt securities and money market in-
struments of both domestic and foreign issuers.
PORTFOLIO MANAGER
Putnam Investment Management, Inc.
LIMITED MATURITY BOND DIVISION
LIMITED MATURITY BOND SERIES
OBJECTIVE
Highest current income consistent with low risk to principal and liquidity.
Also seeks to enhance its total return through capital appreciation when mar-
ket factors indicate that capital appreciation may be available without sig-
nificant risk to principal.
INVESTMENTS
Investment primarily in a diversified portfolio of limited maturity debt se-
curities. No individual security will at the time of purchase have a remain-
ing maturity longer than seven years and the dollar-weighted average maturity
of the Series will not exceed five years.
PORTFOLIO MANAGER
Equitable Investment Services, Inc.
LIQUID ASSET DIVISION
LIQUID ASSET SERIES
OBJECTIVE
High level of current income consistent with the preservation of capital and
liquidity.
INVESTMENTS
Obligations of the U.S. Government and its agencies and instrumentalities;
bank obligations; commercial paper and short-term corporate debt securities.
TERM
All issues maturing in less than one year.
PORTFOLIO MANAGER
Equitable Investment Services, Inc.
The following Divisions invest in designated Series of the ESS Trust.
OTC DIVISION
OTC PORTFOLIO
OBJECTIVE
Long-term growth of capital.
INVESTMENTS
Investment primarily in securities of companies that are traded principally
on the over-the-counter (OTC) market.
12
<PAGE>
PORTFOLIO MANAGER
Massachusetts Financial Services Company
RESEARCH DIVISION
RESEARCH PORTFOLIO
OBJECTIVE
Long term growth of capital and future income.
INVESTMENTS
Investment primarily in common stocks or securities convertible into common
stocks of companies believed to possess better than average prospects for
long-term growth.
PORTFOLIO MANAGER
Massachusetts Financial Services Company
TOTAL RETURN DIVISION
TOTAL RETURN PORTFOLIO
OBJECTIVE
Above-average income consistent with prudent employment of capital.
INVESTMENTS
Investment primarily in equity securities.
PORTFOLIO MANAGER
Massachusetts Financial Services Company
GROWTH & INCOME DIVISION
GROWTH & INCOME PORTFOLIO
OBJECTIVE
Long-term total return.
INVESTMENTS
Investment primarily in equity and debt securities, focusing on small- and
mid-cap companies that offer potential appreciation, current income, or both.
PORTFOLIO MANAGER
Robertson, Stephens & Company Investment Management, L.P.
VALUE + GROWTH DIVISION
VALUE + GROWTH PORTFOLIO
OBJECTIVE
Capital appreciation.
INVESTMENTS
Investment primarily in mid-cap growth companies with favorable relationships
between price /earnings ratios and growth rates. Mid-cap companies are those
with market capitalizations ranging from $750 million to approximately $2
billion.
PORTFOLIO MANAGER
Robertson, Stephens & Company Investment Management, L.P.
CHANGES WITHIN ACCOUNT NY-B
We may from time to time make additional Divisions available. These Divisions
will invest in investment portfolios we find suitable for the Contract. We
also have the right to eliminate investment Divisions from Account NY-B, to
combine two or more Divisions, or to substitute a new portfolio for the port-
folio in which a Division invests. A substitution may become necessary if, in
our judgment, a portfolio no longer suits the purposes of the Contract. This
may happen due to a change in laws or regulations, or a change in a portfo-
lio's investment objectives or restrictions, or because the portfolio is no
longer available for investment, or for some other reason. In addition, we re-
serve the right to transfer assets of Account NY-B, which we determine to be
associated with the class of Contracts to which your Contract belongs, to an-
other account. If necessary, we will get prior approval from the insurance de-
partment of our state of domicile before making such a substitution or trans-
fer. We will also get any required approval from the SEC and any other
required approvals before making such a substitution or transfer. We will no-
tify you as soon as practicable of any proposed changes.
When permitted by law, We reserve the right to:
(1) deregister Account NY-B under the 1940 Act;
(2) operate Account NY-B as a management company under the 1940 Act if it is
operating as a unit investment trust;
(3) restrict or eliminate any voting rights as to Account NY-B; and
(4) combine Account NY-B with other accounts.
THE FIXED ACCOUNT
Premium payments may be allocated to the Fixed Account at the time of the Ini-
tial Premium payment or as subsequently made. In addition, all or part of your
Accumulation Value may be transferred to the Fixed Account. Assets supporting
amounts allocated to the Fixed Account are available to fund the claims of all
classes of our customers, Owners and other creditors. Interests under your
Contract relating to the Fixed Account are registered under the Securities Act
of 1933, but the Fixed Account is not registered under the 1940 Act.
SELECTING A GUARANTEE PERIOD
You may select one or more Fixed Allocations with specified Guarantee Periods
for investment. We currently offer Guarantee Periods with durations of 1, 3,
5, 7 and 10 years. We reserve the right at any time to decrease or increase
the number of Guarantee Periods offered. Not all Guarantee Periods may be
available for new allocations. Each Fixed Allocation will have a Maturity
Date corresponding to the last day of the calendar month of the applicable
Guarantee Period.
13
<PAGE>
Your Accumulation Value in the Fixed Account equals the sum of your Fixed Al-
locations plus the interest credited thereto, as adjusted for any partial
withdrawals, reallocations or other charges we may impose. Your Fixed Alloca-
tion will be credited with the Guaranteed Interest Rate in effect on the date
we receive and accept your premium or reallocation of Accumulation Value. The
Guaranteed Interest Rate will be credited daily to yield the quoted Guaran-
teed Interest Rate.
GUARANTEED INTEREST RATES
Each Guarantee Period will have an interest rate that is guaranteed. We do
not have a specific formula for establishing the Guaranteed Interest Rates
for the different Guarantee Periods. The determination made will be influ-
enced by, but not necessarily correspond to, interest rates available on
fixed income investments which we may acquire with the amounts we receive as
premium payments or reallocations of Accumulation Value under the Contracts.
These amounts will be invested primarily in investment-grade fixed income se-
curities including: securities issued by the United States Government or its
agencies or instrumentalities, which issues may or may not be guaranteed by
the United States Government; debt securities that have an investment grade
rating, at the time of purchase, within the four highest grades assigned by
Moody's Investor Services, Inc. (Aaa, Aa, A or Baa), Standard & Poor's Rat-
ings Group (AAA, AA, A or BBB) or any other nationally recognized rating
service; mortgage-backed securities collateralized by the Federal Home Loan
Mortgage Association, the Federal National Mortgage Association or the Gov-
ernment National Mortgage Association, or that have an investment grade rat-
ing at the time of purchase within the four highest grades described above;
other debt investments; commercial paper; and cash or cash equivalents. You
will have no direct or indirect interest in these investments. We will also
consider other factors in determining the Guaranteed Interest Rates, includ-
ing regulatory and tax requirements, sales commissions and administrative ex-
penses borne by us, general economic trends and competitive factors. We can-
not predict or guarantee the level of future interest rates. However, no
Fixed Allocation will ever have a Guaranteed Interest Rate of less than 3%
per year.
While the foregoing generally describes our investment strategy with respect
to the Fixed Account, we are not obligated to invest according to any partic-
ular strategy, except as may be required by New York and other state insur-
ance laws.
TRANSFERS FROM A FIXED ALLOCATION
You may transfer your Accumulation Value from a Fixed Allocation to one or
more new Fixed Allocations with new Guarantee Periods of any length offered
by us or to the Divisions of Account NY-B. Unless you specify in writing the
Fixed Allocations from which such transfers will be made, we will transfer
amounts from the Fixed Allocations starting with the Guarantee Period nearest
its Maturity Date, until we have honored your transfer request.
Transfers from a Fixed Allocation made within 30 days prior to the Maturity
Date of the applicable Guarantee Period or pursuant to the dollar cost aver-
aging program will not be subject to a Market Value Adjustment. All other
transfers from your Fixed Allocations will be subject to a Market Value Ad-
justment. The minimum amount that can be transferred to or from any Fixed Al-
location is $250. If a transfer request would reduce the Accumulation Value
remaining in your Fixed Allocation to less than $250, we will treat such
transfer request as a request to transfer the entire Accumulation Value in
such Fixed Allocation.
At the end of a Fixed Allocation's Guarantee Period, you may transfer amounts
in that Fixed Allocation to the Divisions and one or more new Fixed Alloca-
tions with Guarantee Periods of any length then offered by us. You may not,
however, transfer amounts to any Fixed Allocation with a Guarantee Period
that extends beyond your Annuity Commencement Date.
At least 30 calendar days prior to a Maturity Date of any of your Fixed Allo-
cations, or earlier if required by state law, we will send you a notice of
the Guarantee Periods then available. Prior to the Maturity Date of your
Fixed Allocations you must notify us as to which Division or new Guarantee
Period you have selected. If timely instructions are not received, we will
transfer your Accumulation Value in the maturing Fixed Allocation to a Fixed
Allocation with a Guarantee Period equal in length to the expiring Guarantee
Period. If such Guarantee Period is not available or extends beyond your an-
nuity commencement date, we will transfer your Accumulation Value in the ma-
turing Fixed Allocation to the next shortest Guarantee Period which does not
extend beyond the Annuity Commencement Date. If no such Guarantee Period is
available, we will transfer your Accumulation Value to the Specially Desig-
nated Division.
PARTIAL WITHDRAWALS FROM A FIXED ALLOCATION
Prior to the Annuity Commencement Date and while your Contract is in effect,
you may take
14
<PAGE>
partial withdrawals from the Accumulation Value in a Fixed Allocation by
sending satisfactory notice to our Customer Service Center. You may make sys-
tematic withdrawals of interest earnings only from a Fixed Allocation under
our Systematic Partial Withdrawal Option. (See Partial Withdrawals, System-
atic Partial Withdrawal Option.) Systematic withdrawals from a Fixed Alloca-
tion are not permitted if such Fixed Allocation participates in the dollar
cost averaging program. Withdrawals from a Fixed Allocation taken within 30
days prior to the Maturity Date and systematic withdrawals are not subject to
a Market Value Adjustment; however, a surrender charge may be imposed. With-
drawals may have federal income tax consequences, including a 10% penalty
tax. See Surrender Charge, Surrender Charge for Excess Partial Withdrawals
and Federal Tax Considerations.
If you specify a Fixed Allocation from which your partial withdrawal will be
made, we will assess the partial withdrawal against that Fixed Allocation. If
you do not specify the investment option from which the partial withdrawal
will be taken, we will not assess your partial withdrawal against any Fixed
Allocations unless the partial withdrawal exceeds the Accumulation Value in
the Divisions of Account NY-B. If there is no Accumulation Value in those Di-
visions, partial withdrawals will be deducted from your Fixed Allocations
starting with the Guarantee Periods nearest their Maturity Dates until we
have honored your request.
MARKET VALUE ADJUSTMENT
We will apply a Market Value Adjustment, determined by application of the
formula described below, in the following circumstances: (i) whenever you
make a withdrawal or transfer from a Fixed Allocation, other than withdrawals
or transfers made within 30 days prior to the Maturity Date of the applicable
Guarantee Period, systematic partial withdrawals, or pursuant to the dollar
cost averaging program; and (ii) on the Annuity Commencement Date with re-
spect to any Fixed Allocation having a Guarantee Period that does not end on
or within 30 days after the annuity commencement date.
The Market Value Adjustment is determined by multiplying the amount with-
drawn, transferred or annuitized by the following factor:
1+I
( 1+J+.0025) N//3//6//5/ -1
Where "I" is the Index Rate for a Fixed Allocation as of the first day of the
applicable Guarantee Period; "J" is the Index Rate for new Fixed Allocations
with Guarantee Periods equal to the number of years remaining in the Guaran-
tee Period at the time of the withdrawal, transfer or annuitization; and "N"
is the remaining number of days in the Guarantee Period at the time of the
withdrawal, transfer or annuitization.
The Index Rate is the average of the Ask Yields for U.S. Treasury Strips as
reported by a national quoting service for the applicable maturity. The aver-
age currently is based on the period from the 22nd day of the calendar month
two months prior to the calendar month of the Index Rate determination to the
21st day of the calendar month immediately prior to the month of determina-
tion. The applicable maturity is the maturity date for these U.S. Treasury
Strips on or next following the last day of the Guarantee Period. If the Ask
Yields are no longer available, the Index Rate will be determined using a
suitable replacement method approved where required.
We currently calculate the Index Rate once each calendar month. However, we
reserve the right to calculate the Index Rate more frequently than monthly,
but in no event will such Index Rate be based upon a period of less than 28
days.
The Market Value Adjustment may result in either an increase or decrease in
the Accumulation Value of your Fixed Allocation. If a full surrender, trans-
fer or annuitization from the Fixed Allocation has been requested, the bal-
ance of the Market Value Adjustment will be added to or subtracted from the
amount surrendered, transferred or annuitized. If a partial withdrawal,
transfer or annuitization has been requested, the Market Value Adjustment
will be calculated on the total amount that must be withdrawn, transferred or
annuitized in order to provide the amount requested. If a negative Market
Value Adjustment exceeds the Accumulation Value in the Fixed Allocation, such
transaction will be considered a full surrender, transfer or annuitization.
The Appendix contains several examples which illustrate the application of
the Market Value Adjustment.
Because of the Market Value Adjustment provision of the Contract, you bear
the investment risk that the Guaranteed Interest Rates offered by us at the
time you make a withdrawal or transfer from a Fixed Allocation or start re-
ceiving annuity payments may be higher or lower than the Guaranteed Interest
Rate of the Fixed Allocation to which the Market Value Adjustment is applied,
with the result that the Accumulation Value of your Fixed Allocation may be
substantially reduced or increased. This will depend on the relationship of
(1) the initial Index Rate,
15
<PAGE>
- -------------------------------------------------------------------------------
FACTS ABOUT THE CONTRACT
applicable at the time the allocation is made, on the Fixed Allocation from
which the withdrawal, transfer or annuitization is made to (2) the current
Index Rate offered by us for the Guarantee Period equal to the number of
years remaining in the Guarantee Period as of such date. If the initial Index
Rate of (1) is higher than the then current Index Rate of (2) plus .0025, ap-
plication of the Market Value Adjustment will result in an increase in your
Accumulation Value. If the Index Rate of (1) is lower than the then current
Index Rate of (2) plus .0025, application of the Market Value Adjustment will
result in a decrease in your Accumulation Value.
THE OWNER
You are the Owner. You are also the Annuitant unless another Annuitant is
named in the application. You have the rights and options described in the
Contract. One or more persons may own the Contract. If there are multiple Own-
ers named, the age of the oldest Owner shall determine the applicable death
benefit.
Death of an Owner activates the death benefit provision. In the case of a sole
Owner who dies prior to the annuity commencement date, we will pay the Benefi-
ciary the death benefit when due. The sole Owner's estate will be the Benefi-
ciary if no Beneficiary designation is in effect, or if the designated Benefi-
ciary has predeceased the Owner. In the case of a joint Owner of the Contract
dying prior to the annuity commencement date, we will designate the surviving
Owner(s) as the Beneficiary(ies). This supersedes any previous Beneficiary
designation.
In the case where the Owner is a trust and a beneficial Owner of the trust has
been designated, the beneficial Owner will be treated as the Owner of the Con-
tract solely for the purpose of determining the death benefit provisions. If a
beneficial Owner is changed or added after the Contract Date, this will be
treated as a change of Owner for purposes of determining the death benefit.
See Change of Owner or Beneficiary. If no beneficial Owner of the Trust has
been designated, the availability of enhanced death benefits will be deter-
mined by the age of the Annuitant at issue.
THE ANNUITANT
The Annuitant is the person designated by the Owner to be the measuring life
in determining Annuity Payments. The Owner will receive the annuity benefits
of the Contract if the Annuitant is living on the Annuity Commencement Date.
If the Annuitant dies before the Annuity Commencement Date, and a contingent
Annuitant has been named, the contingent Annuitant becomes the Annuitant (un-
less the Owner is not an individual, in which case the death benefit becomes
payable). Once named, the Annuitant may not be changed at any time.
If there is no contingent Annuitant when the Annuitant dies prior to the Annu-
ity Commencement Date, the Owner will become the Annuitant. The Owner may des-
ignate a new Annuitant within 60 days of the death of the Annuitant.
If there is no contingent Annuitant when the Annuitant dies prior to the Annu-
ity Commencement Date and the Owner is not an individual, we will pay the Ben-
eficiary the death benefit then due. The Beneficiary will be as provided in
the Beneficiary designation then in effect. If no Beneficiary designation is
in effect, or if there is no designated Beneficiary living, the Owner will be
the Beneficiary. If the Annuitant was the sole Owner and there is no Benefi-
ciary designation, the Annuitant's estate will be the Beneficiary.
Regardless of whether a death benefit is payable, if the Annuitant dies and
any Owner is not an individual, such death will trigger application of the
distribution rules imposed by Federal tax law.
THE BENEFICIARY
The Beneficiary is the person to whom we pay death benefit proceeds and who
becomes the successor Owner if the Owner dies prior to the annuity commence-
ment date. We pay death benefit proceeds to the primary Beneficiary (unless
there are joint Owners, in which case death proceeds are payable to the sur-
viving Owner(s)). See Proceeds Payable to the Beneficiary.
If the Beneficiary dies before the Annuitant or Owner, the death benefit pro-
ceeds are paid to the contingent Beneficiary, if any. If there is no surviving
Beneficiary, we pay the death benefit proceeds to the Owner's estate.
One or more persons may be named as Beneficiary or contingent Beneficiary. In
the case of more than one Beneficiary, unless otherwise specified, we will as-
sume any death benefit proceeds are to be paid in equal shares to the surviv-
ing beneficiaries.
You have the right to change beneficiaries during the Annuitant's lifetime un-
less you have designated an irrevocable Beneficiary. When an irrevocable Bene-
ficiary has been designated, you and the irrevocable Beneficiary may have to
act together to exercise certain rights and options under the Contract.
16
<PAGE>
CHANGE OF OWNER OR BENEFICIARY
During the Annuitant's lifetime and while your Contract is in effect, you may
transfer ownership of the Contract (if purchased in connection with a non-
qualified plan) subject to our published rules at the time of the change. A
change in Ownership may affect the amount of the death benefit and the guaran-
teed death benefit. You may also change the Beneficiary. To make either of
these changes, you must send us written notice of the change in a form satis-
factory to us. The change will take effect as of the day the notice is signed.
The change will not affect any payment made or action taken by us before re-
cording the change at our Customer Service Center. See Federal Tax Considera-
tions, Transfer of Annuity Contracts, and Assignments.
AVAILABILITY OF THE CONTRACT
We can issue a Contract if both the Annuitant and the Owner are not older than
age 85.
TYPES OF CONTRACTS
QUALIFIED CONTRACTS
The Contract may be issued as an Individual Retirement Annuity or in connec-
tion with an individual retirement account. In the latter case, the Contract
will be issued without an Individual Retirement Annuity endorsement, and the
rights of the participant under the Contract will be affected by the terms
and conditions of the particular individual retirement trust or custodial ac-
count, and by provisions of the Code and the regulations thereunder. For ex-
ample, the individual retirement trust or custodial account will impose mini-
mum distribution rules, which may require distributions to commence not later
than April 1st of the calendar year following the calendar year in which you
attain age 70 1/2. For both Individual Retirement Annuities and individual
retirement accounts, the minimum Initial Premium is $1,500.
IF THE CONTRACT IS PURCHASED TO FUND A QUALIFIED PLAN, DISTRIBUTION MUST COM-
MENCE NOT LATER THAN APRIL 1ST OF THE CALENDAR YEAR FOLLOWING THE CALENDAR
YEAR IN WHICH YOU ATTAIN AGE 70 1/2. IF YOU OWN MORE THAN ONE QUALIFIED PLAN,
YOU SHOULD CONSULT YOUR TAX ADVISOR.
NON-QUALIFIED CONTRACTS
The Contract may fund any non-qualified plan. Non-qualified Contracts do not
qualify for any tax-favored treatment other than the benefits provided for by
annuities.
YOUR RIGHT TO SELECT OR CHANGE CONTRACT OPTIONS
Before the Annuity Commencement Date, you may change the Annuity Commencement
Date, frequency of Annuity Payments or the Annuity Option by sending a written
request to our Customer Service Center. The Annuitant may not be changed at
any time.
PREMIUMS
You purchase the Contract with an Initial Premium. After the end of the Free
Look Period, you may make additional premium payments. See Making Additional
Premium Payments. The minimum Initial Premium is $10,000 for a non-qualified
Contract and $1,500 for a qualified Contract.
You must receive our prior approval before making a premium payment that
causes the Accumulation Value of all annuities that you maintain with us to
exceed $1,000,000. We may change the minimum initial or additional premium re-
quirements for certain group or sponsored arrangements. See Group or Sponsored
Arrangements.
QUALIFIED PLANS
For IRA Contracts, the annual premium on behalf of any individual Contract
may not exceed $2,000. Provided your spouse does not make a contribution to
an IRA, you may set up a spousal IRA even if your spouse has earned some com-
pensation during the year. The maximum deductible amount for a spousal IRA
program is the lesser of $2,250 or 100% of your compensation reduced by the
contribution (if any) made by you for the taxable year to your own IRA. How-
ever, no more than $2,000 can go to either your or your spouse's IRA in any
one year. For example, $1,750 may go to your IRA and $500 to your spouse's
IRA. These maximums are not applicable if the premium is the result of a
rollover from another qualified plan.
WHERE TO MAKE PAYMENTS
Remit premium payments to our Customer Service Center. The address is shown
on the cover. We will send you a confirmation notice.
MAKING ADDITIONAL PREMIUM PAYMENTS
You may make additional premium payments after the end of the Free Look Peri-
od. We can accept additional premium payments until either the Annuitant or
Owner reaches the Attained Age of 85 under non-qualified plans. For qualified
plans, no contributions may be made to an IRA Contract for the taxable year in
which you attain age 70 1/2 and thereafter (except for rollover contribu-
tions). The minimum additional premium payment we will
17
<PAGE>
accept is $500 for a non-qualified plan and $250 for a qualified plan.
CREDITING PREMIUM PAYMENTS
The Initial Premium will be accepted or rejected within two business days of
receipt by us if accompanied by information sufficient to permit us to deter-
mine if we are able to issue a Contract. We may retain an Initial Premium for
up to five business days while attempting to obtain information sufficient to
enable us to issue the Contract. If we are unable to do so within five busi-
ness days, the applicant will be informed of the reasons for the delay and the
Initial Premium will be returned immediately unless the applicant consents to
our retaining the Initial Premium until we have received the information we
require. Thereafter, all additional premiums will be accepted on the day re-
ceived.
We will also accept, by agreement with broker-dealers and when permissible in
a state, transmittal of initial and additional premium payments by wire order
from the broker-dealer to our Customer Service Center. Such transmittals must
be accompanied by a simultaneous facsimile transmission of an application.
Contact our Customer Service Center to find out about state availability and
broker-dealer requirements.
Upon our acceptance of premium payments received via wire order and accompa-
nied by a facsimile of an application, we will issue the Contract, allocate
the premium payment according to your instructions, and invest the payment at
the value next determined following receipt. See Restrictions on Allocation of
Premium Payments. Wire orders not accompanied by an application may be re-
tained for up to five business days while we attempt to obtain information
sufficient to enable us to issue the Contract. If we are unable to do so, our
Customer Service Center will inform the broker-dealer, on behalf of the appli-
cant, of the reasons for the delay and return the premium payment immediately
to the broker-dealer for return to the applicant, unless the applicant specif-
ically consents to allow us to retain the premium payment until our Customer
Service Center receives the application.
On the date we receive and accept your initial or additional premium payment:
(1) We allocate the Initial Premium among the Divisions and Fixed Allocations
according to your instructions, subject to any restrictions. See Restric-
tions on Allocation of Premium Payments. For additional premium payments,
the Accumulation Value will increase by the amount of the premium. If we
do not receive instructions from you, the increase in the Accumulation
Value will be allocated among the Divisions in proportion to the amount of
Accumulation Value in each Division as of the date we receive and accept
the additional premium payment. If there is no Accumulation Value in the
Divisions, the increase in the Accumulation Value will be allocated to a
Fixed Allocation with the shortest Guarantee Period then available.
(2) For an Initial Premium, we calculate your applicable death benefit. When
an additional premium payment is made, we increase your applicable death
benefit in accordance with the death benefit option in effect for your
Contract.
Following receipt and acceptance of the application, and investment of the
premium payment, we will issue the Contract.
RESTRICTIONS ON ALLOCATION OF PREMIUM PAYMENTS
We may require that an Initial Premium designated for a Division of Account
NY-B be allocated to the Specially Designated Division during the Free Look
Period for Initial Premiums received. After the free look period, if your Ini-
tial Premium was allocated to the Specially Designated Division, we will
transfer the Accumulation Value to the Divisions you previously selected based
on the index of investment experience next computed for each Division. See
Facts About the Contract, Measurement of Investment Experience, Index of In-
vestment Experience and Unit Value. Initial premiums designated for the Fixed
Account will be allocated to a Fixed Allocation with the Guarantee Period you
have chosen.
YOUR RIGHT TO REALLOCATE
You may reallocate your Accumulation Value among the Divisions and Fixed Allo-
cations at the end of the free look period. We currently do not assess a
charge for allocation changes made during a Contract Year. We reserve the
right, however, to assess a $25 charge for each allocation change after the
twelfth allocation change in a Contract Year. We require that each realloca-
tion of your Accumulation Value equal at least $250 or, if less, your entire
Accumulation Value within a Division or Fixed Allocation. We reserve the right
to limit, upon notice, the maximum number of reallocations you may make within
a Contract Year. In addition, we reserve the right to defer the reallocation
privilege at any time we are unable to purchase or redeem shares of the GCG
Trust or the ESS Trust. We also reserve the right to modify or terminate your
right to reallocate your Accumulation Value at any time in accordance with ap-
plicable law. Reallocations from the Fixed Account are subject to the Market
Value Adjustment unless taken as part of the
18
<PAGE>
dollar cost averaging program or within 30 days prior to the Maturity Date of
the applicable Guarantee Period. To make a reallocation change, you must pro-
vide us with satisfactory notice at our Customer Service Center.
We reserve the right to limit the number of reallocations of your Accumulation
Value among the Divisions and Fixed Allocations or refuse any reallocation re-
quest if we believe that: (a) excessive trading by you or a specific realloca-
tion request may have a detrimental effect on unit values or the share prices
of the underlying Series; or (b) we are informed by the GCG Trust or the ESS
Trust that the purchase or redemption of shares is to be restricted because of
excessive trading or a specific reallocation or group of reallocations is
deemed to have a detrimental effect on share prices of the GCG Trust or the
ESS Trust.
Where permitted by law, we may accept your authorization of third party real-
location on your behalf, subject to our rules. We may suspend or cancel such
acceptance at any time. We will notify you of any such suspension or cancella-
tion. We may restrict the Divisions and Fixed Allocations that will be avail-
able to you for reallocations of premiums during any period in which you au-
thorize such third party to act on your behalf. We will give you prior
notification of any such restrictions. However, we will not enforce such re-
strictions if we are provided evidence satisfactory to us that: (a) such third
party has been appointed by a court of competent jurisdiction to act on your
behalf; or (b) such third party has been appointed by you to act on your be-
half for all your financial affairs.
Some restrictions may apply based on the free look provisions of the state
where the Contract is issued. See Your Right to Cancel or Exchange Your
Contract.
DOLLAR COST AVERAGING
If you have at least $10,000 of Accumulation Value in the Limited Maturity
Bond Division, the Liquid Asset Division or a Fixed Allocation with a one year
Guarantee Period, you may elect the dollar cost averaging program and have a
specified dollar amount transferred from those Divisions or such Fixed Alloca-
tion on a monthly basis.
The main objective of dollar cost averaging is to attempt to shield your in-
vestment from short-term price fluctuations. Since the same dollar amount is
transferred to other Divisions each month, more units are purchased in a Divi-
sion if the value per unit is low and less units are purchased if the value
per unit is high.
Therefore, a lower than average value per unit may be achieved over the long
term. This plan of investing allows investors to take advantage of market
fluctuations but does not assure a profit or protect against a loss in declin-
ing markets.
Dollar cost averaging may be elected at issue or at a later date. The minimum
amount that may be transferred each month is $250. The maximum amount which
may be transferred is equal to your Accumulation Value in the Limited Maturity
Bond Division, the Liquid Asset Division or a Fixed Allocation with a one year
Guarantee Period when you elect the dollar cost averaging program, divided by
12.
The transfer date will be the same calendar day each month as the Contract
Date. The dollar amount will be allocated to the Divisions in which you are
invested in proportion to your Accumulation Value in each Division unless you
specify otherwise. If, on any transfer date, your Accumulation Value is equal
to or less than the amount you have elected to have transferred, the entire
amount will be transferred and the program will end. You may change the trans-
fer amount once each Contract Year, or cancel this program by sending satis-
factory notice to our Customer Service Center at least seven days before the
next transfer date. Any allocation under this program will not be included in
determining if the excess allocation charge will apply. We currently do not
permit transfers under the dollar cost averaging program from Fixed Alloca-
tions with other than one year Guarantee Periods. Transfers from a Fixed Allo-
cation under the dollar cost averaging program will not be subject to a Market
Value Adjustment. See Market Value Adjustment. A Fixed Allocation may not par-
ticipate simultaneously in both the dollar cost averaging program and the Sys-
tematic Partial Withdrawal Option.
WHAT HAPPENS IF A DIVISION IS NOT AVAILABLE
When a distribution is made from an investment portfolio supporting a Division
of Account NY-B in which reinvestment is not available, we will allocate the
distribution, unless you specify otherwise, to the Specially Designated Divi-
sion.
Such a distribution can occur when (a) an investment portfolio matures, or (b)
a distribution from a portfolio or Division cannot be reinvested in the port-
folio or Division due to the unavailability of securities for acquisition.
When an investment portfolio matures, we will notify you in writing 30 days in
advance of that date. To elect an allocation of the distribution to other than
the Specially Designated Division, you must provide satisfactory notice to us
at least seven days prior to the date the portfolio matures. Such allocations
are not counted for purposes of the number of free allocation changes permit-
ted. When a distribution from a portfolio or Division cannot be reinvested in
the portfolio due to
19
<PAGE>
the unavailability of securities for acquisition, we will notify you promptly
after the allocation has occurred. If, within 30 days, you allocate the Accu-
mulation Value from the Specially Designated Division to other Divisions or
Fixed Allocations of your choice, such allocations will not be included in de-
termining if the excess allocation charge will apply.
YOUR ACCUMULATION VALUE
Your Accumulation Value is the sum of the amounts in each of the Divisions and
the Fixed Allocations in which you are invested, and is the amount available
for investment at any time. You select the Divisions and Fixed Allocations to
which to allocate your Accumulation Value. We adjust your Accumulation Value
on each Valuation Date to reflect the Divisions' investment performance and
interest credited to your Fixed Allocations, any additional premium payments
or partial withdrawals since the previous Valuation Date, and on each Contract
processing date to reflect any deduction of the annual Contract fee. Your Ac-
cumulation Value is applied to your choice of an Annuity Option on the Annuity
Commencement Date subject to our published rules at such time. See Choosing an
Income Plan.
ACCUMULATION VALUE IN EACH DIVISION
ON THE CONTRACT DATE
On the Contract Date, your Accumulation Value is allocated to each Division
as you have specified, unless the Contract is issued in a state that requires
the return of premium payments during the Free Look Period, in which case,
the portion of your Initial Premium not allocated to a Fixed Allocation will
be allocated to the Specially Designated Division during the Free Look Peri-
od. See Your Right to Cancel or Exchange Your Contract.
ON EACH VALUATION DATE
At the end of each subsequent Valuation Period, the amount of Accumulation
Value in each Division will be calculated as follows:
(1) We take the Accumulation Value in the Division at the end of the preceding
Valuation Period.
(2) We multiply (1) by the Division's net rate of return for the current Valu-
ation Period.
(3) We add (1) and (2).
(4) We add to (3) any additional premium payments allocated to the Division
during the current Valuation Period.
(5) We add or subtract allocations to or from that Division during the current
Valuation Period.
(6) We subtract from (5) any partial withdrawals and any associated charges
allocated to that Division during the current Valuation Period.
(7) We subtract from (6) the amounts allocated to that Division for: (a) any
Contract fees; and (b) any charge for premium taxes.
All amounts in (7) are allocated to each Division in the proportion that (6)
bears to the Accumulation Value in Account NY-B, unless the Charge Deduction
Division has been specified. See Charges Deducted from the Accumulation Value.
MEASUREMENT OF INVESTMENT EXPERIENCE
INDEX OF INVESTMENT EXPERIENCE AND UNIT VALUE
The investment experience of a Division is determined on each Valuation Date.
We use an index to measure changes in each Division's experience during a
Valuation Period. In most cases, we set the index at $10 when the first in-
vestments in an underlying series are made. The index for a current Valuation
Period equals the index for the preceding Valuation Period multiplied by the
experience factor for the current Valuation Period.
We may express the value of amounts allocated to the Divisions in terms of
units. We determine the number of units for a given amount on a Valuation
Date by dividing the dollar value of that amount by the index of investment
experience for that date. The index of investment experience is equal to the
value of a unit.
HOW WE DETERMINE THE EXPERIENCE FACTOR
For Divisions of Account NY-B the experience factor reflects the investment
experience of the Series of the Trust in which a Division invests as well as
the charges assessed against the Division for a Valuation Period. The factor
is calculated as follows:
(1) We take the net asset value of the portfolio in which the Division invests
at the end of the current Valuation Period.
(2) We add to (1) the amount of any dividend or capital gains distribution de-
clared for the investment portfolio and reinvested in such portfolio dur-
ing the current Valuation Period. We subtract from that amount a charge
for our taxes, if any.
(3) We divide (2) by the net asset value of the portfolio at the end of the
preceding Valuation Period.
20
<PAGE>
(4) We subtract the applicable daily mortality and expense risk charge from
each Division for each day in the valuation period.
(5) We subtract the daily asset based administrative charge from each Division
for each day in the valuation period.
Calculations for Divisions investing in a Series are made on a per share ba-
sis.
NET RATE OF RETURN FOR A DIVISION
The net rate of return for a Division during a valuation period is the expe-
rience factor for that Valuation Period minus one.
CASH SURRENDER VALUE
Your Contract's Cash Surrender Value fluctuates daily with the investment re-
sults of the Divisions, interest credited to Fixed Allocations and any Market
Value Adjustment. We do not guarantee any minimum Cash Surrender Value. On any
date before the Annuity Commencement Date while the Contract is in effect, the
cash surrender value is calculated as follows:
(1) We take the Contract's Accumulation Value;
(2) We deduct from (1) any surrender charge and any charge for premium taxes;
(3) We deduct from (2) any charges incurred but not yet deducted; and
(4) We adjust (3) for any Market Value Adjustment.
SURRENDERING TO RECEIVE THE CASH SURRENDER VALUE
The Contract may be surrendered by the Owner at any time while the Annuitant
is living and before the Annuity Commencement Date.
A surrender will be effective on the date your written request and the Con-
tract are received at our Customer Service Center. The Cash Surrender Value is
determined and all benefits under the Contract will then be terminated, as of
that date. You may receive the Cash Surrender Value in a single sum payment or
apply it under one or more Annuity Options. See The Annuity Options. We will
usually pay the Cash Surrender Value within seven days but we may delay pay-
ment. See When We Make Payments.
PARTIAL WITHDRAWALS
Prior to the Annuity Commencement Date, while the Annuitant is living and the
Contract is in effect, you may take partial withdrawals from the Accumulation
Value by sending satisfactory notice to our Customer Service Center. Unless
you specify otherwise, the amount of the withdrawal, including any surrender
charge and Market Value Adjustment, will be taken in proportion to the amount
of Accumulation Value in each Division in which you are invested. If there is
no Accumulation Value in those Divisions, partial withdrawals will be deducted
from your Fixed Allocations starting with the Guarantee Periods nearest their
Maturity Dates until we have honored your request.
There are three options available for selecting partial withdrawals, the Con-
ventional Partial Withdrawal Option, the Systematic Partial Withdrawal Option
and the IRA Partial Withdrawal Option. All three options are described below.
The maximum amount you may withdraw each Contract Year without incurring a
surrender charge is 15% of your Accumulation Value. See Surrender Charge for
Excess Partial Withdrawals. Partial withdrawals may not be repaid. A partial
withdrawal request for an amount in excess of 90% of the Cash Surrender Value
will be treated as a request to surrender the Contract.
CONVENTIONAL PARTIAL WITHDRAWAL OPTION
After the Free Look Period, you may take conventional partial withdrawals.
The minimum amount you may withdraw under this option is $1,000. A conven-
tional partial withdrawal from a Fixed Allocation may be subject to a Market
Value Adjustment.
SYSTEMATIC PARTIAL WITHDRAWAL OPTION
This option may be elected at the time you apply for a Contract, or at a
later date. This option may be elected to commence in a Contract Year where a
conventional partial withdrawal has been taken. However, it may not be
elected while the IRA Partial Withdrawal Option is in effect.
You may choose to receive systematic partial withdrawals on a monthly, quar-
terly or annual basis from your Accumulation Value in the Divisions or the
Fixed Allocations. The commencement of payments under this option may not be
elected to start sooner than 28 days after the Contract Issue Date. You se-
lect the date of the quarter or month when the withdrawals will be made but
no later than the 28th day of the month. If no date is selected, the with-
drawals will be made on the same calendar day of each month as the Contract
Date.
You may select a dollar amount or a percentage of the Accumulation Value from
the Divisions in which you are invested as the amount of your withdrawal sub-
ject to the following maximums, but in no event can a payment be less than
$100:
<TABLE>
<CAPTION>
FREQUENCY MAXIMUM PERCENTAGE
--------- ------------------
<S> <C>
Monthly 1.25%
Quarterly 3.75%
Annual 15.00%
</TABLE>
21
<PAGE>
If a dollar amount is selected and the amount to be systematically withdrawn
would exceed the applicable maximum percentage of your Accumulation Value on
the withdrawal date, the amount withdrawn will be reduced so that it equals
such percentage.
For example, if a $500 monthly withdrawal was elected and on the withdrawal
date 1.25% of the Accumulation Value equaled $300, the withdrawal amount
would be reduced to $300. If a percentage is selected and the amount to be
systematically withdrawn based on that percentage would be less than the min-
imum of $100, we would increase the amount to $100 provided it does not ex-
ceed the maximum percentage. If it is below the maximum percentage we will
send the minimum. If it is above the maximum percentage we will send the
amount and then cancel the option. For example, if you selected 1.0% to be
systematically withdrawn on a monthly basis and that amount equaled $90, and
since $100 is less than 1.25% of the Accumulation Value, we would send $100.
If 1.0% equaled $75, and since $100 is more than 1.25% of the Accumulation
Value we would send $75 and then cancel the option. In such a case, in order
to receive systematic partial withdrawals in the future, you would be re-
quired to submit a new notice to our Customer Service Center.
Systematic Partial Withdrawals from Fixed Allocations are limited to interest
earnings during the prior month or quarter, depending on whether you have
chosen a monthly or quarterly frequency, respectively. Systematic Partial
Withdrawals are not subject to a Market Value Adjustment. A Fixed Allocation,
however, may not participate simultaneously in both the dollar cost averaging
program and the Systematic Partial Withdrawal Option.
You may change the amount or percentage of your withdrawal once each Contract
Year or cancel this option at any time by sending satisfactory notice to our
Customer Service Center at least seven days prior to the next scheduled with-
drawal date. However, you may not change the amount or percentage of your
withdrawals in any Contract Year during which you have previously taken a
conventional partial withdrawal.
IRA PARTIAL WITHDRAWAL OPTION
If you have an IRA Contract and will attain age 70 1/2 in the current calen-
dar year, distributions may be made to you to satisfy requirements imposed by
Federal tax law. IRA partial withdrawals provide payout of amounts required
to be distributed by the Internal Revenue Service rules governing mandatory
distributions under qualified plans. See Federal Tax Considerations. We will
send you a notice before your distributions commence, and you may elect this
option at that time, or at a later date. You may not elect IRA partial with-
drawals while the Systematic Partial Withdrawal Option is in effect. If you
do not elect the IRA Partial Withdrawal Option, and distributions are re-
quired by Federal tax law, distributions adequate to satisfy the requirements
imposed by Federal tax law may be made. Thus, if the Systematic Partial With-
drawal Option is in effect, distributions under that option must be adequate
to satisfy the mandatory distribution rules imposed by Federal tax law.
You may choose to receive IRA partial withdrawals on a monthly, quarterly or
annual frequency. You select the day of the month when the withdrawals will
be made, but it cannot be later than the 28th day of the month. If no date is
selected, the withdrawals will be made on the same calendar day of the month
as the Contract Date.
At your request, we will determine the amount that is required to be with-
drawn from your Contract each year based on the information you give us and
various choices you make. For information regarding the calculation and
choices you have to make, see the Statement of Additional Information. The
minimum dollar amount you can withdraw is $100. At the time we determine the
required partial withdrawal amount for a taxable year based on the frequency
you select, if that amount is less than $100, we will pay $100. At any time
where the partial withdrawal amount is greater than the Accumulation Value,
we will cancel the Contract and send you the amount of the Cash Surrender
Value.
You may change the payment frequency of your withdrawals once each Contract
Year or cancel this option at any time by sending us satisfactory notice to
our Customer Service Center at least seven days prior to the next scheduled
withdrawal date.
An IRA partial withdrawal in excess of the amount allowed under the System-
atic Partial Withdrawal Option may be subject to a Market Value Adjustment.
PARTIAL WITHDRAWALS IN GENERAL
CONSULT YOUR TAX ADVISOR REGARDING THE TAX CONSEQUENCES ASSOCIATED WITH TAK-
ING PARTIAL WITHDRAWALS. A partial withdrawal made before the taxpayer
reaches age 59 1/2 may result in imposition of a tax penalty of 10% of the
taxable portion withdrawn. See Federal Tax Considerations for more details.
22
<PAGE>
AUTOMATIC REBALANCING
If you have at least $10,000 of Accumulation Value invested in the Divisions,
you may elect to participate in our automatic rebalancing program. Automatic
rebalancing provides you with an easy way to maintain the particular asset al-
location that you and your financial advisor have determined are most suitable
for your individual long-term investment goals. We do not charge a fee for
participating in our automatic rebalancing program.
Under the program you may elect to have all your allocations among the Divi-
sions rebalanced on a quarterly, semi-annual, or annual calendar basis. The
minimum size of an allocation to a Division must be in full percentage points.
Rebalancing does not affect any amounts that you have allocated to the Fixed
Account. The program may be used in conjunction with the systematic partial
withdrawal option only where such withdrawals are taken pro rata. Automatic
rebalancing is not available if you participate in dollar cost averaging. Au-
tomatic rebalancing will not take place during the free look period.
To participate in automatic rebalancing you must submit to our Customer Serv-
ice Center written notice in a form satisfactory to us. We will begin the pro-
gram on the last Valuation Date of the applicable calendar period in which we
receive the notice. You may cancel the program at any time. The program will
automatically terminate if you choose to reallocate your Accumulation Value
among the Divisions or if you make an additional premium payment or partial
withdrawal on other than a pro rata basis. Additional premium payments and
partial withdrawals effected on a pro rata basis will not cause the automatic
rebalancing program to terminate.
PROCEEDS PAYABLE TO THE BENEFICIARY
If the Owner or the Annuitant (when the Owner is other than an individual)
dies prior to the annuity commencement date, we will pay the Beneficiary the
death benefit proceeds under the Contract. Such amount may be received in a
single sum or applied to any of the Annuity Options. See The Annuity Options.
If we do not receive a request to apply the death benefit proceeds to an Annu-
ity Option, a single sum distribution will be made. Any distributions from
non-qualified Contracts must comply with applicable Federal tax law distribu-
tion requirements.
DEATH BENEFIT OPTIONS
Subject to our rules, there are two death benefit options that may be elected
by you at issue under the Contract: the Standard Death Benefit Option and the
Annual Ratchet Enhanced Death Benefit Option.
The Annual Ratchet Enhanced Death Benefit Option may only be elected at issue
and only if the Owner or Annuitant (when the Owner is other than an individu-
al) is age 79 or younger at issue.
We may offer a reduced death benefit under certain group and sponsored ar-
rangements. See Other Contract Provisions, Group or Sponsored Arrangements.
STANDARD DEATH BENEFIT OPTION
You will automatically receive the Standard Death Benefit Option unless you
elect the Annual Ratchet Enhanced Death Benefit. The Standard Death Benefit
Option for the Contract is equal to the greatest of: (i) your Accumulation
Value; (ii) total premiums less any partial withdrawals; and (iii) the Cash
Surrender Value.
ANNUAL RATCHET ENHANCED DEATH BENEFIT OPTION.
The Annual Ratchet Enhanced Death Benefit under the Contract, if elected, is
equal to the greatest of: (i) the Accumulation Value; (ii) total premium pay-
ments less any partial withdrawals; (iii) the Cash Surrender Value; or (iv)
the following valuation:
(1) We take the enhanced death benefit from the prior Valuation Date. On the
Contract Date, the enhanced death benefit is equal to the Initial Premi-
um.
(2) We add to (1) any additional premiums paid since the prior Valuation Date
and subtract from (1) any partial withdrawals (including any Market Value
Adjustments and surrender charges incurred) taken since the prior Valua-
tion Date.
(3) On a Valuation Date that occurs on or prior to the Owner's Attained Age
80 which is also a Contract Anniversary, we set the enhanced death bene-
fit equal to the greater of (2) or the Accumulation Value as of such
date.
On all other Valuation Dates, the enhanced death benefit is equal to (2).
HOW TO CLAIM PAYMENTS TO BENEFICIARY
We must receive due proof of the death of the Owner or the Annuitant (if the
Owner is other than an individual) (such as an official death certificate) at
our Customer Service Center before we will make any payments to the Benefi-
ciary. We will calculate the death benefit as of the date we receive due
proof of death. The Beneficiary should contact our Customer Service Center
for instructions.
23
<PAGE>
- -------------------------------------------------------------------------------
CHARGES AND FEES
REPORTS TO OWNERS
We will send you a report once each calendar quarter within 31 days after the
end of each calendar quarter. The report will show the Accumulation Value,
the Cash Surrender Value, and the death benefit as of the end of the calendar
quarter. The report will also show the allocation of your Accumulation Value
as of such date and the amounts deducted from or added to the Accumulation
Value since the last report. The report will also include any other informa-
tion that may be currently required by the insurance supervisory official of
the jurisdiction in which the Contract is delivered.
We will also send you copies of any shareholder reports of the portfolios or
securities in which Account NY-B invests, as well as any other reports, no-
tices or documents required by law to be furnished to Owners.
WHEN WE MAKE PAYMENTS
We will generally pay death benefit proceeds and the cash surrender value
within seven days after our Customer Service Center receives all the informa-
tion needed to process the payment.
However, we may delay payment of amounts derived from the Divisions if it is
not practical for us to value or dispose of shares of Account NY-B because:
(1) The NYSE is closed for trading;
(2) The SEC determines that a state of emergency exists;
(3) An order or pronouncement of the SEC permits a delay for the protection of
Owners; or,
(4) The check used to pay the premium has not cleared through the banking sys-
tem. This may take up to 15 days.
During such times, as to amounts allocated to the Divisions, we may delay:
(1) Determination and payment of any Cash Surrender Value;
(2) Determination and payment of any death benefit if death occurs before the
Annuity Commencement Date;
(3) Allocation changes of the Accumulation Value; or,
(4) Application under an Annuity Option of the Accumulation Value.
We reserve the right to delay payment of amounts from the Fixed Account for up
to six months.
CHARGE DEDUCTION DIVISION
You may specify at issue if you wish to have all charges against the Accumula-
tion Value deducted from the Liquid Asset Division. We call this the Charge
Deduction Division Option, and within this context refer to the Liquid Asset
Division as the Charge Deduction Division. If you do not elect this option, or
if the amount of the charges is greater than the amount in the Division, the
charges will be deducted as discussed below. You may also choose to elect or
cancel this option while the Contract is in force by sending satisfactory no-
tice to our Customer Service Center.
CHARGES DEDUCTED FROM THE ACCUMULATION VALUE
We invest the entire amount of the initial and any additional premium payments
in the Divisions and the Fixed Allocations you select, subject to certain re-
strictions. See Restrictions on Allocation of Premium Payments. We then may
deduct certain amounts from your Accumulation Value. We may reduce certain
fees and charges, including any surrender, administration, and mortality and
expense risk charges, under group or sponsored arrangements. See Group or
Sponsored Arrangements. Unless you have elected the Charge Deduction Division,
charges are deducted proportionately from all affected Divisions in which you
are invested. If there is no Accumulation Value in those Divisions, we will
deduct charges from your Fixed Allocations starting with the Guarantee Periods
nearest their Maturity Dates until such charges have been paid. The charges we
deduct are:
SURRENDER CHARGE
A contingent deferred sales charge ("Surrender Charge") is imposed as a per-
centage of each premium payment if the Contract is surrendered or an excess
partial withdrawal is taken during the seven year period from the date we re-
ceive and accept such premium payment. The percentage of premium payments de-
ducted at the time of surrender or excess partial withdrawal depends upon the
number of complete years that have elapsed since that premium payment was
made. We determine the surrender charge as a percentage of each premium pay-
ment as follows:
<TABLE>
<CAPTION>
Complete Years Elapsed Surrender
Since Premium Payment Charge
------------------- ---------
<S> <C>
0 7%
1 6%
2 5%
3 4%
4 3%
5 2%
6 1%
7+ 0%
</TABLE>
24
<PAGE>
SURRENDER CHARGE FOR EXCESS PARTIAL WITHDRAWALS
There is considered to be an excess partial withdrawal in any Contract Year
in which the amount withdrawn exceeds 15% of your Accumulation Value on the
date of the withdrawal minus any amount withdrawn during that Contract Year.
Where you are receiving systematic partial withdrawals, any combination of
conventional partial withdrawals taken and any systematic partial withdrawals
expected to be received in a Contract Year will be considered in determining
the amount of the excess partial withdrawal. Such a withdrawal will be con-
sidered a partial surrender of the Contract and we will impose a surrender
charge and any associated premium tax. See Facts About the Contract, The
Fixed Account, Market Value Adjustment. Such charges will be deducted from
the Accumulation Value in proportion to the Accumulation Value in each Divi-
sion or Fixed Allocation from which the excess partial withdrawal was taken.
In instances where the excess partial withdrawal equals the entire Accumula-
tion Value in each such Division or Fixed Allocation, charges will be de-
ducted proportionately from all other Divisions and Fixed Allocations in
which you are invested.
For purposes of calculating the surrender charge for the excess partial with-
drawal, (i) we treat premium payments as being withdrawn on a first-in first-
out basis, and (ii) amounts withdrawn which are not considered an excess par-
tial withdrawal are not treated as a withdrawal of any premium payments.
Although we treat premium payments as being withdrawn before earnings for
purposes of calculating the surrender charge for excess partial withdrawals,
the Federal income tax law treats earnings as withdrawn first. See Federal
Tax Considerations, Taxation of Non-Qualified Annuities.
For example, the following assumes an Initial Premium payment of $10,000 and
additional premium payments of $10,000 in each of the second and third Con-
tract Years, for total premium payments under the Contract of $30,000. It
also assumes a partial withdrawal at the beginning of the fourth Contract
Year of 20% of the Accumulation Value of $35,000.
In this example, $5,250 ($35,000 x .15) is the maximum partial withdrawal
that may be withdrawn during the Contract Year without the imposition of a
surrender charge. The total partial withdrawal would be $7,000 ($35,000 x
.2). Therefore, $1,750 ($7,000-$5,250) is considered an excess partial with-
drawal of a part of the Initial Premium payment of $10,000 and would be sub-
ject to a 4% surrender charge of $70.00 ($1,750 x .04). This example does not
take into account any Market Value Adjustment or deduction of any premium
taxes.
PREMIUM TAXES
We make a charge for state and local premium taxes in certain states which
can range from 0% to 3.5% of premium. The charge depends on the Owner's state
of residence. We reserve the right to change this amount to conform with
changes in the law or if the Owner changes state of residence.
Premium taxes are generally incurred on the annuity commencement date and a
charge for such premium taxes is then deducted from your Accumulation Value
on such date. However, some jurisdictions impose a premium tax at the time
that initial and additional premiums are paid, regardless of the Annuity Com-
mencement Date. In those states we may initially defer collection of the
amount of the charge for premium taxes from your Accumulation Value and de-
duct it against Accumulation Value on surrender of the Contract, excess par-
tial withdrawals or on the Annuity Commencement Date.
ADMINISTRATIVE CHARGE
The administrative charge is incurred at the beginning of the Contract
processing period and deducted at the end of each Contract processing period.
We deduct this charge when determining the Cash Surrender Value payable if
you surrender the Contract prior to the end of a Contract processing period.
If the Accumulation Value at the end of the Contract processing period equals
or exceeds $100,000 or the sum of the premiums paid equals or exceeds
$100,000, the charge is zero. Otherwise, the amount deducted is $30 per Con-
tract Year. This charge is to cover a portion of our administrative expenses.
See Asset Based Administrative Charge, below.
EXCESS ALLOCATION CHARGE
We currently do not assess a charge for allocation changes made during a Con-
tract Year. We reserve the right, however, to assess a $25 charge for each
allocation change after the twelfth allocation change in a Contract Year.
This amount represents the maximum we will charge. The charge would be de-
ducted from the Divisions and the Fixed Allocations from which each such re-
allocation is made in proportion to the amount being transferred from each
such Division and Fixed Allocation unless you have chosen to use the Charge
Deduction Division. Any allocations or transfers due to the election of dol-
lar cost averaging and reallocation under the provision What Happens if a Di-
vision is Not Available will
25
<PAGE>
- -------------------------------------------------------------------------------
CHOOSING YOUR ANNUITIZATION OPTIONS
not be included in determining if the excess allocation charge should apply.
CHARGES DEDUCTED FROM THE DIVISIONS
MORTALITY AND EXPENSE RISK CHARGE
The amount of the mortality and expense risk charge depends on the death ben-
efit option that has been elected. If the Standard Death Benefit Option is
elected, the charge is equivalent, on an annual basis, to 1.10% of the assets
in each Division. The charge is deducted on each Valuation Date at the rate
of .003030% for each day in the Valuation Period. Approximately .75% is allo-
cated to the mortality risk and .35% is allocated to the expense risk. If the
Annual Ratchet Enhanced Death Benefit is elected, the charge is equivalent,
on an annual basis, to 1.25% of the assets in each Division. The charge is
deducted on each Valuation Date at the rate of .003446% for each day in the
Valuation Period. Approximately .90%, is allocated to the mortality risk.
This charge will compensate us for mortality and expense risks we assume un-
der the Contract. The mortality risk assumed is the risk that Annuitants as a
group will live for a longer time than our actuarial tables predict. As a re-
sult, we would be paying more in annuity income than we planned. First Golden
also assumes a risk under the Contract for paying a guaranteed death benefit.
The expense risk assumed is the risk that it will cost us more to issue and
administer the Contract than we expect.
ASSET BASED ADMINISTRATIVE CHARGE
We will deduct a daily charge from the assets in each Division, to compensate
us for a portion of the administrative expenses under the Contract. The daily
charge is at a rate of 0.000411% (equivalent to an annual rate of 0.15%) on
the assets in each Division.
TRUST EXPENSES
There are fees and charges deducted from each Series of the GCG Trust and the
ESS Trust. Please read the respective Trust prospectus for details.
ANNUITIZATION OF YOUR CONTRACT
If the Annuitant and Owner are living on the Annuity Commencement Date, we
will begin making payments to the Owner under an income plan. We will make
these payments under the Annuity Option chosen. You may change an Annuity Op-
tion by making a written request to us at least 30 days prior to the Annuity
Commencement Date of the Contract. The amount of the payments will be deter-
mined by applying your Accumulation Value adjusted for any applicable Market
Value Adjustment on the Annuity Commencement Date in accordance with The Annu-
ity Options section below, subject to our published rules at such time. See
When We Make Payments.
You may also elect an Annuity Option on surrender of the Contract for its Cash
Surrender Value or you may choose one or more Annuity Options for the payment
of death benefit proceeds while it is in effect and before the Annuity Com-
mencement Date. If, at the time of the Owner's death or the Annuitant's death
(if the Owner is not an individual), no option has been chosen for paying
death benefit proceeds, the Beneficiary may choose an option within 60 days.
In all events, payments of death benefit proceeds must comply with the distri-
bution 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 Accumulation Value is less
than $2,000 or if the calculated monthly annuity income payment is less than
$20.
For each option we will issue a separate written agreement putting the option
into effect. Before we pay any annuity benefits, we require the return of the
Contract. If your Contract has been lost, we will require that you complete
and return the applicable Contract form. Various factors will affect the level
of annuity benefits including the Annuity Option chosen, the applicable pay-
ment rate used and the investment results of the Divisions and interest cred-
ited to the Fixed Allocations in which the Accumulation Value has been invest-
ed.
Some annuity options may provide only for fixed payments. Fixed Annuity Pay-
ments are regular payments, the amount of which is fixed and guaranteed by us.
The amount of the payments will depend only on the form and duration of pay-
ments chosen, the age of the Annuitant or Beneficiary (and sex, where appro-
priate), the total Accumulation Value applied to purchase the fixed option,
and the applicable payment rate.
Our approval is needed for any option where:
(1) The person named to receive payment is other than the Owner or Beneficia-
ry;
(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.
26
<PAGE>
ANNUITY COMMENCEMENT DATE SELECTION
You select the Annuity Commencement Date. You may select any date following
the fifth Contract Anniversary but before the Contract Processing Date in the
month following the Annuitant's 90th birthday. If, on the Annuity Commencement
Date, a Surrender Charge remains, the elected Annuity Option must include a
life annuity or a period certain of at least five years duration. If you do
not select a date, the annuity commencement date will be in the month follow-
ing the Annuitant's 90th birthday. If the Annuity Commencement Date occurs
when the Annuitant is at an advanced age, such as over age 85, it is possible
that the Contract will not be considered an annuity for Federal tax purposes.
See Federal Tax Considerations. For a Contract purchased in connection with a
qualified plan, distribution must commence not later than April 1st of the
calendar year following the calendar year in which you attain age 70 1/2. Con-
sult your tax advisor.
FREQUENCY SELECTION
You choose the frequency of the Annuity Payments. They may be monthly, quar-
terly, semi-annually or annually. If we do not receive written notice from
you, the payments will be made monthly. There may be certain restrictions on
minimum payments that we will allow.
THE ANNUITIZATION OPTIONS
There are four options to choose from as shown below. Options 1 through 3 are
fixed and option 4 may be fixed or variable. For a fixed option, the Accumula-
tion Value in the Divisions is transferred to the general account.
OPTION 1. INCOME FOR A FIXED PERIOD
Payment is made in equal installments for a fixed number of years based on
the Accumulation Value as of the annuity commencement date. We guarantee that
each monthly payment will be at least the amount set forth in the Contract.
Guaranteed amounts for annual, semi-annual and quarterly payments are avail-
able upon request. Illustrations are available upon request. If the Cash Sur-
render Value or Accumulation Value is applied under this option, a 10% pen-
alty tax may apply to the taxable portion of each income payment until the
Owner reaches age 59 1/2.
OPTION 2. INCOME FOR LIFE
Payment is made in equal monthly installments and guaranteed for at least a
period certain. The period certain can be 10 or 20 years. Other periods cer-
tain may be available on request. A refund certain may be chosen instead. Un-
der this arrangement, income is guaranteed until payments equal the amount
applied. If the person named lives beyond the guaranteed period, payments
continue until his or her death. We guarantee that each payment will be at
least the amount set forth in the Contract corresponding to the person's age
on his or her last birthday before the option's effective date. Amounts for
ages not shown in the Contract are available upon request.
OPTION 3. JOINT LIFE INCOME
This option is available if there are two persons named to receive payments.
At least one of the persons named must be either the Owner or Beneficiary of
the Contract. Monthly payments are guaranteed and are made as long as at
least one of the named persons is living. There is no minimum number of pay-
ments. Monthly payment amounts are available upon request.
OPTION 4. ANNUITY PLAN
An amount can be used to buy any single premium annuity we offer on the op-
tion's effective date.
PAYMENT WHEN NAMED PERSON DIES
When the person named to receive payment dies, we will pay any amounts still
due as provided by the option agreement. The amounts still due are determined
as follows:
(1) For option 1, or any remaining guaranteed payments under option 2, pay-
ments will be continued. Under options 1 and 2, the discounted values of
the remaining guaranteed payments may be paid in a single sum. This means
we deduct the amount of the interest each remaining guaranteed payment
would have earned had it not been paid out early. The discount interest
rate is never less than 3% for option 1 and 3.50% for option 2 per year.
We will, however, base the discount interest rate on the interest rate
used to calculate the payments for options 1 and 2 if such payments were
not based on the tables in the Contract.
(2) For option 3, no amounts are payable after both named persons have died.
(3) For option 4, the annuity agreement will state the amount due, if any.
27
<PAGE>
- -------------------------------------------------------------------------------
OTHER CONTRACT PROVISIONS
IN CASE OF ERRORS IN APPLICATION INFORMATION
If an age or sex given in the application or enrollment form is misstated, the
amounts payable or benefits provided by the Contract shall be those that the
premium payment would have bought at the correct age or sex.
SENDING NOTICE TO US
Any written notices, inquiries or requests should be sent to our Customer
Service Center. Please include your name, your Contract number and, if you
are not the Annuitant, the name of the Annuitant.
ASSIGNING THE CONTRACT AS COLLATERAL
You may assign a non-qualified Contract as collateral security for a loan or
other obligation. This does not change the Ownership. However, your rights
and any Beneficiary's rights are subject to the terms of the assignment. See
Transfer of Annuity Contracts, and Assignments. An assignment may have Fed-
eral tax consequences. See Federal Tax Considerations.
You must give us satisfactory written notice at our Customer Service Center
in order to make or release an assignment. We are not responsible for the va-
lidity of any assignment.
NON-PARTICIPATING
The Contract does not participate in the divisible surplus of First Golden.
AUTHORITY TO MAKE AGREEMENTS
All agreements made by us must be signed by our president or a vice president
and by our secretary or an assistant secretary. No other person, including an
insurance agent or broker, can change any of the Contract's terms, make any
can change any of the Contract's terms, make any agreements binding on us or
extend the time for premium payments.
CONTRACT CHANGES -- APPLICABLE TAX LAW
We reserve the right to make changes in the Contract to the extent we deem it
necessary to continue to qualify the Contract as an annuity. Any such changes
will apply uniformly to all Contracts that are affected. You will be given ad-
vance written notice of such changes.
YOUR RIGHT TO CANCEL OR EXCHANGE YOUR CONTRACT
CANCELLING YOUR CONTRACT
You may cancel your Contract within your Free Look Period, which is ten days
after you receive your Contract. For purposes of administering our allocation
and administrative rules, we deem this period to expire 15 days after the
Contract is mailed to you. Some states may require a longer Free Look Period.
If you decide to cancel, you may mail or deliver the Contract to our Customer
Service Center. We will refund the greater of the premium paid or the Accumu-
lation Value plus any charges we deducted; and the contract will be void as
of the effective date of cancellation. We may require your premiums desig-
nated for investment in the Divisions of Account NY-B be allocated to the
Specially Designated Division during the Free Look Period. Premiums desig-
nated for the Fixed Account will be allocated to a Fixed Allocation with the
Guarantee Period you have chosen. If you do not choose to exercise your right
to cancel during the Free Look Period, then at the end of the Free Look Pe-
riod your money will be invested in the Divisions chosen by you, based on the
index of investment experience next computed for each Division. See Facts
About the Contract, Measurement of Investment Experience, Index of Experience
and Unit Value.
EXCHANGING YOUR CONTRACT
For information regarding Section 1035 Exchanges, see Federal Tax Considera-
tions.
OTHER CONTRACT CHANGES
You may change the Contract to another annuity plan subject to our rules at
the time of the change.
GROUP OR SPONSORED ARRANGEMENTS
For certain group or sponsored arrangements, we may reduce any surrender, ad-
ministration, and mortality and expense risk charges. We may also change the
minimum initial and additional premium requirements, or offer a reduced death
benefit. Group arrangements include those in which a trustee or an employer,
for example, purchases Contracts covering a group of individuals on a group
basis. Sponsored arrangements include those in which an employer allows us to
sell Contracts to its employees on an individual basis.
Our costs for sales, administration, and mortality generally vary with the
size and stability of the group among other factors. We take all these factors
into account when reducing charges. To qualify for reduced charges, a group or
sponsored arrangement must meet certain requirements, including our require-
ments for size and number of years in existence. Group or sponsored arrange-
ments that have been set up solely to buy Contracts or that have been in ex-
istence less than six months will not qualify for reduced charges.
We will make these and any similar reductions according to our rules in effect
when an application or
28
<PAGE>
- -------------------------------------------------------------------------------
REGULATORY INFORMATION
enrollment form for a Contract is approved. We may change these rules from
time to time. Any variation in the administrative charge will reflect differ-
ences in costs or services and will not be unfairly discriminatory.
SELLING THE CONTRACT
DSI is also principal underwriter and distributor of the Contract as well as
for any other Contracts issued through Account NY-B and any other separate ac-
counts of First Golden and Golden American. We pay DSI for acting as principal
underwriter under a distribution agreement. The offering of the Contract will
be continuous.
DSI has entered into and will continue to enter into sales agreements with
broker-dealers to solicit for the sale of the Contract through registered rep-
resentatives who are licensed to sell securities and variable insurance prod-
ucts including variable annuities. These agreements provide that applications
for Contracts may be solicited by registered representatives of the broker-
dealers appointed by First Golden to sell its variable life insurance and
variable annuities. These broker-dealers are registered with the SEC and are
members of the National Association of Securities Dealers, Inc. ("NASD"). The
registered representatives are authorized under applicable state regulations
to sell variable life insurance and variable annuities. The writing agent will
receive commissions and expense allowances totaling up to 6.0% of any initial
or additional premium payments made.
VOTING RIGHTS
ACCOUNT NY-B
We will vote the shares of a Trust owned by Account NY-B according to your
instructions. However, if the Investment Company Act of 1940 or any related
regulations should change, or if interpretations of it or related regulations
should change, and we decide that we are permitted to vote the shares of a
Trust in our own right, we may decide to do so.
We determine the number of shares that you have in a Division by dividing the
Contract's Accumulation Value in that Division by the net asset value of one
share of the portfolio in which a Division invests. Fractional votes will be
counted. We will determine the number of shares you can instruct us to vote
180 days or less before a Trust's meeting. We will ask you for voting in-
structions by mail at least 10 days before the meeting.
If we do not get your instructions in time, we will vote the shares in the
same proportion as the instructions received from all Contracts in that Divi-
sion. We will also vote shares we hold in Account NY-B which are not attrib-
utable to Owners in the same proportion.
STATE REGULATION
We are regulated and supervised by the Insurance Department of the State of
New York, which periodically examines our financial condition and operations.
We are also subject to the insurance laws and regulations of all jurisdictions
where we do business. The variable Contract offered by this prospectus has
been approved by the Insurance Department of the State of New York. We are re-
quired 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
First Golden, as an insurance company, is ordinarily involved in litigation.
We do not believe that any current litigation is material and we do not expect
to incur significant losses from such actions.
LEGAL MATTERS
The legal validity of the Contract described in this prospectus has been
passed on by Myles R. Tashman, Esquire, Executive Vice President, General
Counsel and Secretary of First Golden. Sutherland, Asbill & Brennan, L.L.P. of
Washington, D.C. has provided advice on certain matters relating to Federal
securities laws.
EXPERTS
The audited financial statements of First Golden American Life Insurance Com-
pany of New York, appearing in this Prospectus and Registration Statement 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
and are included in reliance upon such report given upon the authority of such
firm as experts in accounting and auditing.
29
<PAGE>
- -------------------------------------------------------------------------------
MORE INFORMATION ABOUT FIRST GOLDEN AMERICAN LIFE INSURANCE COMPANY OF NEW
YORK
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
This Management's Discussion and Analysis of Financial Condition and Results
of Operations should be read in conjunction with the GAAP Basis Financial
Statements and Notes to Financial Statements included herein.
First Golden, a wholly owned subsidiary of Golden American Life Insurance Com-
pany ("Golden American" or the "Parent"), was incorporated on May 24, 1996.
Golden American is a wholly owned indirect subsidiary of Equitable of Iowa
Companies. Equitable of Iowa Companies is a holding company for Equitable Life
Insurance Company of Iowa, USG Annuity & Life Company, Locust Street Securi-
ties, Inc., EIC Variable, Inc. and Equitable of Iowa Securities Network, Inc.
First Golden's primary purpose will be to offer insurance products in the
State of New York. On January 2, 1997, First Golden became licensed as a life
insurance company in the State of New York. First Golden is authorized to do
business only in the State of New York.
First Golden's primary business purpose is to offer variable insurance prod-
ucts ("Contracts"). First Golden Contracts are funded by Separate Account NY-B
and are being offered to the public for the first time through this prospec-
tus. As of the date of this prospectus, Separate Account NY-B had not received
any premium payments under the Contracts.
BUSINESS ENVIRONMENT
The current business and regulatory environment remains challenging for the
insurance industry. Increasing competition from traditional insurance carri-
ers as well as banks and mutual fund companies offer consumers many choices.
However, overall demand for variable annuity product remains strong for sev-
eral reasons including: a dynamic stock market performance over the last 3
years; relatively low interest rates; an aging United States population that
is increasingly concerned about retirement and estate planning, as well as
maintaining their standard of living in retirement; potential reductions in
government and employer-provided benefits at retirement as well as lower pub-
lic confidence in the adequacy of those benefits.
RESULTS OF OPERATIONS FOR THE PERIOD DECEMBER 17, 1996 (COMMENCEMENT OF
OPERATIONS) THROUGH DECEMBER 31, 1996.
Net income for the period from December 17, 1996 through December 31, 1996
was $42,000. Net investment income of $65,000 was earned and income taxes
were $23,000.
Future revenues will be generated from the sale of variable products result-
ing in product charge revenues as well as investment income from the invest-
ments. Future benefits and expenses will include policy benefits, operating
expenses and commission expenses associated with the sale and maintenance of
the Contracts.
LIQUIDITY AND CAPITAL RESOURCES
Positive cash flow elements from operations included net income and increases
in liabilities. Negative cash flow elements from operations were produced
from two sources, the increase in accrued investment income and the net amor-
tization of discounts on short-term investments.
Future cash flows will consist of product charges, investment income and ma-
turities of fixed maturity investments. Future cash flow uses will include
the payment of annuity and insurance benefits, operating expenses and commis-
sions and the purchase of new investments.
On December 17, 1996, Golden American made capital contributions to First
Golden of $25,000,000. Of this amount, $2,000,000 represented 200,000 shares
of common stock with a par value of $10.00 per share. The remaining
$23,000,000 was contributed as additional paid-in capital. First Golden be-
lieves that it will be able to fund the capital and surplus required for pro-
jected new business from existing statutory capital and surplus as well as
future surplus contributions from its Parent. First Golden expects to con-
tinue to receive capital contributions from Golden American if necessary.
First Golden is required to maintain a minimum capital and surplus of not
less than $4,000,000 under the provisions of the insurance laws of the State
of New York in which it became licensed to sell insurance products on January
2, 1997.
Under the provisions of the insurance laws of the State of New York, First
Golden cannot distribute any dividends to its stockholders unless a notice of
its intention to declare a dividend and the amount of the dividend has been
filed not less than 30 days in advance of the proposed declaration. The su-
perintendent may disapprove the distribution by giving written notice to the
Company within 30 days after the filing should the superintendent find that
the financial condition of the Company does not warrant the distribution.
30
<PAGE>
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 identify inade-
quately capitalized insurance companies based upon the type and mixture of
risks inherent in the Company's operations. The formula includes components
for asset risk, liability risk, interest rate exposure and other factors. The
Company intends to comply with these requirements in 1997, as its insurance
license was approved on January 2, 1997, and expects its total adjusted capi-
tal to exceed levels which require regulatory action.
SEGMENT INFORMATION
First Golden's operations will consist of one business segment, the sale of
insurance products. First Golden anticipates that it will not be dependent
upon any single customer but anticipates three brokers-dealers will account
for a significant portion of its revenue in 1997. All premiums will be re-
ceived from consumers in the State of New York.
FINANCIAL CONDITION
INVESTMENTS
First Golden's assets are invested in accordance with applicable New York
laws. These laws govern the nature and the quality of investments that may be
made by life insurance companies and the percentage of their assets that may
be committed to any particular type of investment. In general, these laws
permit investments, within specified limits subject to certain qualifica-
tions, in federal, state, and municipal obligations, corporate bonds, pre-
ferred or common stocks, real estate mortgages, real estate and certain other
investments.
First Golden makes investments in accordance with investment guidelines that
take into account investment quality, liquidity and diversification, and in-
vests primarily in investment grade securities. All of First Golden's assets
except for variable separate account assets are available to meet its obliga-
tions under the Contracts. At December 31, 1996, First Golden had invested
assets of $24,570,000 consisting of $24,220,000 of bonds, and $350,000 of
short-term securities.
Based on amortized cost, at December 31, 1996, 91.6% of the investment port-
folio were invested in investment grade bonds and 8.4% were invested in non-
investment grade securities. First Golden defines non-investment grade as
unsecured corporate debt obligations which do not have a rating equivalent to
Standard & Poor's (or similar rating agency) BBB or higher and are not guar-
anteed by an agency of the federal government.
RESERVES
Future policy benefits for the fixed account will be established utilizing
the retrospective deposit accounting method. Policy reserves represent the
premiums received plus accrued interest less mortality and administration
charges.
REINSURANCE
The Company intends to reinsure its mortality risk associated with the Con-
tract's guaranteed death benefit with one or more appropriately licensed in-
surance companies.
COMPETITION
In 1997, First Golden will be engaged in a business that is highly competi-
tive because of the number of competitors including banks, mutual funds and
life insurance companies which all compete for retirement savings from con-
sumers. There are approximately 142 stock, mutual and other types of insurers
in the life insurance business in the State of New York, a substantial number
of which offer similar products and are significantly larger than First Gold-
en.
CERTAIN AGREEMENTS
On November 8, 1996, First Golden and Golden American entered into an admin-
istrative service agreement pursuant to which Golden American agreed to pro-
vide certain accounting, actuarial, tax, underwriting, sales, management and
other services to Golden American. Expenses incurred by Golden American in
relation to this service agreement will be reimbursed by First Golden on an
allocated cost basis. As of December 31, 1996, no such charges have been
billed to First Golden. First Golden expects to enter into a similar agree-
ment with another affiliate, Equitable Life Insurance Company of Iowa, for
additional services.
Also on November 8, 1996, First Golden and DSI entered into a service agree-
ment pursuant to which First Golden has agreed to provide DSI certain of its
personnel to perform management, administrative and clerical services and the
use of certain of its facilities. First Golden expects to charge DSI for such
expenses and all other general and administrative costs, first on the basis
of direct charges when identifiable, and second allocated based on the esti-
mated amount of time spent by First Golden's employees on behalf of DSI. As
of December 31, 1996, no such charges have been billed to DSI.
31
<PAGE>
DISTRIBUTION AGREEMENT
First Golden has entered into agreements with DSI to perform services related
to the distribution of its products. DSI will act as the principal under-
writer (as defined in the Securities Act of 1933 and the Investment Company
Act of 1940, as amended) of the variable insurance products issued by First
Golden.
EMPLOYEES
During 1996, Golden American provided the support necessary for the incorpo-
ration and licensing of First Golden. During 1997, First Golden will have a
few direct employees due to its small size and will continue to receive sup-
port pursuant to various management services from DSI, Golden American and
other affiliates as described above under "Certain Agreements." The cost of
these services are allocated to First Golden.
Certain officers of First Golden are also officers of Golden American and
DSI, and certain officers of First Golden are also officers of Equitable of
Iowa Companies, Equitable Life Insurance Company of Iowa and/or of Equitable
of Iowa Securities Network, Inc. See "Directors and Executive Officers."
PROPERTIES
First Golden's principal office is located at 230 Park Avenue, Suite 966, New
York, New York 10169, where certain of the Company's records are maintained.
The 2,568 square feet of office space is leased for a 5 year term.
DIRECTORS AND EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
POSITIONS(S) WITH THE
NAME (AGE) COMPANY
- ------------------------- ---------------------------
<S> <C>
Terry L. Kendall (50) Chairman, President,
Chief Executive Officer
and Director
Myles R. Tashman (54) Executive Vice President,
General Counsel, Secretary
and Director
Barnett Chernow (47) Executive Vice President,
Director
Edward C. Wilson (55) Executive Vice President
Carol V. Coleman (47) Director
Stephen J. Friedman (59) Director
Frederick S. Hubbell (45) Director
Bernard Levitt (71) Director
Roger R. Martin (65) Director
Andrew Kalinowski (52) Director
David L. Jacobson (47) Senior Vice President
and Assistant Secretary
Stephen J. Preston (39) Senior Vice President
and Chief Actuary
Mary B. Wilkinson (40) Senior Vice President
and Treasurer
(Chief Financial Officer)
Marilyn Talman (50) Vice President, Associate
Counsel and Assistant
Secretary
</TABLE>
Each director is elected to serve for one year or until the next annual meet-
ing of shareholders or until his or her successor is elected. Some directors
are directors of insurance company subsidiaries of First Golden's ultimate
parent, Equitable of Iowa Companies.
The principal positions of First Golden's directors and senior executive offi-
cers for the past five years are listed below:
Mr. Terry L. Kendall is President, Chief Executive Officer and Chairman of the
Board of the First Golden American Life Insurance Company of New York. Since
September, 1993, Mr. Kendall has also served as President and Chief Executive
Officer of Golden American Life Insurance Company. From September, 1993
through September, 1996, Mr. Kendall also served as Chairman of the Board of
Golden American Life Insurance Company. From 1982 through June 1993, he was
President and Chief Executive Officer of United Pacific Life Insurance Compa-
ny. He was elected to serve as director of First Golden in June, 1996.
Mr. Myles R. Tashman is Executive Vice President, General Counsel, Secretary
and Director of First Golden American Life Insurance Company of New York.
Since December, 1995, Mr. Tashman has also served as Executive Vice President
of Golden American Life Insurance Company. From 1986 through 1993, he was Se-
nior Vice President and General Counsel of United Pacific Life Insurance Com-
pany. He was elected to serve as a director of First Golden in June, 1996.
Mr. Barnett Chernow is Executive Vice President and Director of First Golden
American Life Insurance Company of New York. Since 1996, Mr. Chernow has also
served as Executive Vice President of Golden American Life Insurance Company.
From 1977 through 1993, he held various positions with Reliance Insurance Com-
panies and was Senior Vice President and Chief Financial Officer of United Pa-
cific Life Insurance Company from 1984 through 1993. He was elected to serve
as a director of First Golden in June, 1996.
Mr. Edward C. Wilson is Executive Vice President of First Golden American Life
Insurance Company. Since January, 1997, Mr. Wilson has also served as Presi-
dent of Directed Services, Inc. Since January, 1996, Mr. Wilson has also
served as Executive Vice President of Golden American Life Insurance Company.
From August, 1994 to December, 1995, he was Senior Managing Director at Van
Eck Global Investors. From July, 1990 to August, 1994, he was Vice President
and National Sales Manager at Keyport Life Insurance Company.
Ms. Carol V. Coleman is a Director of First Golden, having been first ap-
pointed in December, 1997. She
32
<PAGE>
is a financial recruiter with Vantage Staffing since 1994. From 1991 through
1993, she was a consultant with Executive Edge. She also served as a Chair of
the Board for Typa Youth Program Association from 1988 through 1990. Prior to
that, she held various executive and board positions with banking institu-
tions.
Mr. Stephen J. Friedman is a Director of First Golden, having been first ap-
pointed in June, 1996. Mr. Friedman is a partner of the law firm of Debevoise
& Plimpton in New York, NY since 1993. From 1988 through 1993, he was Execu-
tive Vice President and General Counsel to Equitable Life Assurance Society of
the United States.
Mr. Frederick S. Hubbell is a Director of First Golden, having been first ap-
pointed in December, 1997. Mr. Hubbell is Chairman, President and Chief Execu-
tive Officer of Equitable of Iowa since 1991. He also has served as Chairman
and President of Equitable Life Insurance Company of Iowa since 1987. He
serves in a similar capacity for most Equitable of Iowa affiliate companies.
Mr. Bernard Levitt is a Director of First Golden, having been first appointed
in June, 1996. Until his retirement in 1990, Mr. Levitt was a life insurance
consultant with American Life Insurance Company or New York, since 1989.
Mr. Roger R. Martin is a Director of First Golden, having been first appointed
in June, 1996. Until his retirement in July, 1995, Mr. Martin was a Vice Pres-
ident with Bear Sterns since 1984.
Mr. Andrew Kalinowski is a Director of First Golden, having been first ap-
pointed in June, 1996. Mr. Kalinowski is a Principal and the President of Up-
state Special Risk Services, Incorporated since 1974. He is also a Principal,
the Chief Marketing Officer and Vice President of LifeMark Securities Corpora-
tion since 1983, a Principal, Vice President and Secretary of LifeMark Associ-
ates, Incorporated since 1993, and a Principal and Director of LIFE Incorpo-
rated.
Mr. David L. Jacobson is Senior Vice President and Assistant Secretary of
First Golden American Life Insurance Company. Since November, 1993, Mr. Jacob-
son has also served as Senior Vice President and Assistant Secretary of Golden
American Life Insurance Company. Since September, 1996, Mr. Jacobson has also
served as Assistant Secretary of Equitable Life Insurance Company of Iowa and
as Vice President of Equitable of Iowa Securities Network, Inc. From April,
1974 through November, 1993, he held various positions with United Pacific
Life Insurance Company and was Vice President upon leaving.
Mr. Stephen J. Preston is Senior Vice President and Chief Actuary of First
Golden American Life Insurance Company. Since December, 1993, Mr. Preston has
served in an identical capacity with Golden American Life Insurance Company.
From September, 1993 through November, 1993, he was Senior Vice President and
Actuary for Mutual of America Insurance Company. From July, 1987 through Au-
gust, 1993, he held various positions with United Pacific Life Insurance Com-
pany and was Vice President and Actuary upon leaving.
Ms. Mary Bea Wilkinson is Senior Vice President and Treasurer of First Golden
American Life Insurance Company. From November, 1993 through 1996, Ms. Wilkin-
son served as Senior Vice President, Assistant Secretary and Treasurer of
Golden American Life Insurance Company. From August, 1993 through October,
1993, she was an Assistant Vice President with CIGNA Insurance Companies. From
January, 1987 through July, 1993, she held various positions with United Pa-
cific Life Insurance Company and was Vice President and Controller upon leav-
ing.
Ms. Marilyn Talman is Vice President, Associate General Counsel and Assistant
Secretary of First Golden American Life Insurance Company of New York. Since
April, 1996, Ms. Talman has also served as Vice President, Associate General
Counsel and Assistant Secretary for Golden American Life Insurance Company.
Since September, 1996, Ms. Talman has also served as Assistant Secretary of
Equitable Life Insurance Company of Iowa and as Vice President of Equitable of
Iowa Securities Network, Inc. From March, 1992 through March, 1994, she held
various positions with Rodney Square Management Corp. and was Vice President
and General Counsel upon leaving. From June, 1989 through February, 1992, she
was an Associate with the law firm of Ballard, Spahr, Andrews & Ingersoll.
33
<PAGE>
- -------------------------------------------------------------------------------
FEDERAL TAX CONSIDERATIONS
INTRODUCTION
The following discussion of the federal income tax treatment of the Contract
is not exhaustive, does not purport to cover all situations, and is not in-
tended as tax advice. The federal income tax treatment of the Contract is un-
clear in certain circumstances, and a qualified tax adviser should always be
consulted with regard to the application of the tax law to individual circum-
stances. This discussion is based on the Internal Revenue Code of 1986, as
amended (the "Code"), Treasury Department regulations, and interpretations ex-
isting on the date of this prospectus. These authorities, however, are subject
to change by Congress, the Treasury Department, and judicial decisions.
This discussion does not address state or local tax consequences associated
with the purchase of the Contract. In addition, FIRST GOLDEN MAKES NO GUARAN-
TEE REGARDING ANY TAX TREATMENT--FEDERAL, STATE OR LOCAL--OF ANY CONTRACT OR
OF ANY TRANSACTION INVOLVING A CONTRACT.
TAX STATUS OF FIRST GOLDEN
First Golden is taxed as a life insurance company under the Code. Since the
operations of Account NY-B are a part of, and are taxed with, the operations
of First Golden, Account NY-B is not separately taxed as a "regulated invest-
ment company" under the Code. Under existing federal income tax laws, invest-
ment income and capital gains of Account NY-B are not taxed to First Golden to
the extent they are applied under a Contract. First Golden does not anticipate
that it will incur any federal income tax liability in Account NY-B attribut-
able to Contract obligations, and therefore First Golden does not intend to
make provision for any such taxes. If First Golden is taxed on investment in-
come or capital gains of Account NY-B, then First Golden may impose a charge
against Account NY-B, as appropriate, in order to make provision for such tax-
es.
TAXATION OF NON-QUALIFIED ANNUITIES
TAX DEFERRAL DURING ACCUMULATION PERIOD
Under existing provisions of the Code, except as described below, any in-
crease in an Owner's Accumulation Value is generally not taxable to the Owner
until amounts are received from the Contract, either in the form of annuity
payments as contemplated by the Contract, or in some other form of distribu-
tion. However, this rule allowing deferral applies only if (1) the invest-
ments of Account NY-B are "adequately diversified" in accordance with Trea-
sury Department regulations, (2) First Golden, rather than the Owner, is
considered the owner of the assets of Account NY-B for federal income tax
purposes, and (3) the Contract is owned by an individual (or is treated as
owned by an individual). In addition to the foregoing, if the Contract's an-
nuity commencement date occurs at a time when the Annuitant is at an advanced
age, such as over age 85, it is possible that the Owner will be taxable cur-
rently on the annual increase in the Accumulation Value.
Diversification Requirements. The Code and Treasury Department regulations
prescribe the manner in which the investments of a segregated asset ac-
count, such as the Divisions of Account NY-B, are to be "adequately diver-
sified." If a Division of Account NY-B failed to comply with these diversi-
fication standards, Contracts based on that segregated asset account would
not be treated as an annuity contract for federal income tax purposes and
the Owner would generally be taxable currently on the income on the con-
tract (as defined in the tax law) beginning with the period of non-
diversification. First Golden expects that the Divisions of Account NY-B
will comply with the diversification requirements prescribed by the Code
and Treasury Department regulations.
Ownership Treatment. In certain circumstances, variable annuity contract
owners may be considered the owners, for federal income tax purposes, of
the assets of a segregated asset account, such as the Divisions of Account
NY-B, used to support their contracts. In those circumstances, income and
gains from the segregated asset account would be includible in the contract
owners' gross income. The Internal Revenue Service (the "IRS") has stated
in published rulings that a variable contract owner will be considered the
owner of the assets of a segregated asset account if the owner possesses
incidents of ownership in those assets, such as the ability to exercise in-
vestment control over the assets. In addition, the Treasury Department an-
nounced, in connection with the issuance of regulations concerning invest-
ment diversification, that those regulations "do not provide guidance
concerning the circumstances in which investor control of the investments
of a segregated asset account may cause the investor, rather than the in-
surance company, to be treated as the owner of the assets in the account."
This announcement also stated that guidance would be issued by way of regu-
lations or rulings on the "extent to which policyholders may direct their
investments to particular subaccounts (of a segregated asset account) with-
out being treated as owners of the
34
<PAGE>
underlying assets." As of the date of this prospectus, no such guidance has
been issued.
The ownership rights under the Contract are similar to, but different in
certain respects from, those described by the IRS in rulings in which it
was determined that contract owners were not owners of the assets of a seg-
regated asset account. For example, the Owner of this Contract has the
choice of more investment options to which to allocate purchase payments
and the Accumulation Value, and may be able to transfer among investment
options more frequently, than in such rulings. These differences could re-
sult in the Owner being treated as the owner of all or a portion of the as-
sets of Account NY-B. In addition, First Golden does not know what stan-
dards will be set forth in the regulations or rulings which the Treasury
Department has stated it expects to issue. First Golden therefore reserves
the right to modify the Contract as necessary to attempt to prevent Con-
tract Owners from being considered the owners of the assets of Account NY-
B. However, there is no assurance that such efforts would be successful.
Frequently, if the IRS or the Treasury Department sets forth a new position
which is adverse to taxpayers, the position is applied on a prospective ba-
sis only. Thus, if the IRS or the Treasury Department were to issue regula-
tions or a ruling which treated an Owner of this Contract as the owner of
Account NY-B, that treatment might apply on a prospective basis. However,
if the regulations or ruling were not considered to set forth a new posi-
tion, an Owner might retroactively be determined to be the owner of the as-
sets of Account NY-B.
Non-Natural Owner. As a general rule, Contracts held by "non-natural per-
sons" such as a corporation, trust or other similar entity, as opposed to a
natural person, are not treated as annuity contracts for federal tax pur-
poses. The income on such Contracts (as defined in the tax law) is taxed as
ordinary income that is received or accrued by the Owner of the Contract
during the taxable year. There are several exceptions to this general rule
for non-natural Owners. First, Contracts will generally be treated as held
by a natural person if the nominal Owner is a trust or other entity which
holds the Contract as an agent for a natural person. However, this special
exception will not apply in the case of any employer who is the nominal
Owner of a Contract under a non-qualified deferred compensation arrangement
for its employees.
In addition, exceptions to the general rule for non-natural Owners will ap-
ply with respect to (1) Contracts acquired by an estate of a decedent by
reason of the death of the decedent, (2) certain Contracts issued in con-
nection with qualified retirement plans, (3) certain Contracts purchased by
employers upon the termination of certain qualified retirement plans, (4)
certain Contracts used in connection with structured settlement agreements,
and (5) Contracts purchased with a single purchase payment when the annuity
starting date (as defined in the tax law) is no later than a year from pur-
chase of the Contract and substantially equal periodic payments are made,
not less frequently than annually, during the annuity period.
The remainder of this discussion assumes that the Contract will be treated
as an annuity contract for federal income tax purposes.
TAXATION OF PARTIAL WITHDRAWALS AND SURRENDERS
In the case of a partial withdrawal prior to the annuity commencement date,
amounts received generally are includible in income to the extent the Owner's
Accumulation Value (determined without regard to any surrender charge, within
the meaning of the tax law) before the surrender exceeds his or her "invest-
ment in the contract." In the case of a surrender of the Contract for the
cash surrender value, amounts received are includible in income to the extent
they exceed the "investment in the contract." For these purposes, the invest-
ment in the contract at any time equals the total of the premium payments
made under the Contract to that time (to the extent such payments were nei-
ther deductible when made nor excludable from income as, for example, in the
case of certain contributions to IRAs and other qualified retirement plans)
less any amounts previously received from the Contract which were not includ-
ible in income.
In the case of systematic partial withdrawals, the amount of each withdrawal
will generally be taxed in the same manner as a partial withdrawal made prior
to the annuity commencement date, as described above. However, there is some
uncertainty regarding the tax treatment of systematic partial withdrawals,
and it is possible that additional amounts may be includible in income.
The Contract provides a death benefit that in certain circumstances may ex-
ceed the greater of the premium payments and the Accumulation Value. As de-
scribed elsewhere in this prospectus, First Golden imposes certain charges
with respect to the death benefit. It is possible that some portion
35
<PAGE>
of those charges could be treated for federal tax purposes as a partial with-
drawal from the Contract.
TAXATION OF ANNUITY PAYMENTS
Normally, the portion of each annuity payment taxable as ordinary income is
equal to the excess of the payment over the exclusion amount. In the case of
fixed annuity payments, the exclusion amount is the amount determined by mul-
tiplying (1) the fixed annuity payment by (2) the ratio of the "investment in
the contract" (defined above), adjusted for any period certain or refund fea-
ture, allocated to the fixed annuity option to the total expected amount of
fixed annuity payments for the period of the Contract (determined under Trea-
sury Department regulations). In the case of variable annuity payments, the
exclusion amount for each variable annuity payment is a specified dollar
amount equal to the investment in the contract allocated to the variable an-
nuity option when payments begin divided by the number of variable payments
expected to be made (determined by Treasury Department regulations).
Once the total amount of the investment in the contract is excluded using
these formulas, annuity payments will be fully taxable. If annuity payments
cease because of the death of the Annuitant and before the total amount of
the investment in the contract is recovered, the unrecovered amount generally
will be allowed as a deduction to the Annuitant or Beneficiary (depending
upon the circumstances).
TAXATION OF DEATH BENEFIT PROCEEDS
Prior to the annuity commencement date, amounts may be distributed from a
Contract because of the death of an Owner or, in certain circumstances, the
death of the Annuitant. Such death benefit proceeds are includible in income
as follows: (1) if distributed in a lump sum, they are taxed in the same man-
ner as a surrender, as described above, or (2) if distributed under an annu-
ity option, they are taxed in the same manner as annuity payments, as de-
scribed above. After the annuity commencement date, where a guaranteed period
exists under an annuity option and the Annuitant dies before the end of that
period, payments made to the Beneficiary for the remainder of that period are
includible in income as follows: (1) if received in a lump sum, they are in-
cludible in income to the extent that they exceed the unrecovered investment
in the contract at that time, or (2) if distributed in accordance with the
existing annuity option selected, they are fully excludable from income until
the remaining investment in the contract is deemed to be recovered, and all
annuity payments thereafter are fully includible in income.
If certain amounts become payable in a lump sum from a Contract, such as the
death benefit, it is possible that such amounts might be viewed as construc-
tively received and thus subject to tax, even though not actually received. A
lump sum will not be constructively received if it is applied under an annu-
ity option within 60 days after the date on which it becomes payable. (Any
annuity option selected must comply with applicable mimimum distribution re-
quirements imposed by the Code.)
ASSIGNMENTS, PLEDGES, AND GRATUITOUS TRANSFERS
Other than in the case of Contracts issued as IRAs or in connection with cer-
tain other qualified retirement plans (which generally cannot be assigned or
pledged), any assignment or pledge (or agreement to assign or pledge) of any
portion of the value of the Contract is treated for federal income tax pur-
poses as a partial withdrawal of such amount or portion. The investment in
the contract is increased by the amount includible as income with respect to
such assignment or pledge, though it is not affected by any other aspect of
the assignment or pledge (including its release). If an Owner transfers a
Contract without adequate consideration to a person other than the Owner's
spouse (or to a former spouse incident to divorce), the Owner will be taxed
on the difference between the cash surrender value (within the meaning of the
tax law) and the investment in the contract at the time of transfer. In such
case, the transferee's investment in the contract will be increased to re-
flect the increase in the transferor's income.
SECTION 1035 EXCHANGES
Code section 1035 provides that no gain or loss is recognized when an annuity
contract is received in exchange for a life, endowment, or annuity contract,
provided that no cash or other property is received in the exchange transac-
tion. Special rules and procedures apply in order for an exchange to meet the
requirements of section 1035. Also, there are additional tax considerations
involved when the contracts are issued in connection with qualified retire-
ment plans. Prospective Owners of this Contract should consult a tax advisor
before entering into a section 1035 exchange (with respect to non-qualified
annuity contracts) or a trustee-to-trustee transfer or rollover (with respect
to qualified annuity contracts).
PENALTY TAX ON PREMATURE DISTRIBUTIONS
Where a Contract has not been issued as an IRA or in connection with another
qualified retirement plan, there generally is a 10% penalty tax
36
<PAGE>
on the taxable amount of any payment from the Contract unless the payment is:
(a) received on or after the Owner reaches age 59 1/2; (b) attributable to
the Owner's becoming disabled (as defined in the tax law); (c) made on or af-
ter the death of the Owner or, if the Owner is not an individual, on or after
the death of the primary annuitant (as defined in the tax law); (d) made as a
series of substantially equal periodic payments (not less frequently than an-
nually) for the life (or life expectancy) of the Owner or the joint lives (or
joint life expectancies) of the Owner and a designated beneficiary (as de-
fined in the tax law), or (e) made under a Contract purchased with a single
purchase payment when the annuity starting date (as defined in the tax law)
is no later than a year from purchase of the Contract and substantially equal
periodic payments are made, not less frequently than annually, during the an-
nuity period.
In the case of systematic partial withdrawals, it is unclear whether such
withdrawals will qualify for exception (d) above. (For reporting purposes, we
currently treat such withdrawals as if they do not qualify for this excep-
tion). In addition, if withdrawals are of interest amounts only, as is the
case with systematic partial withdrawals from a Fixed Allocation, exception
(d) will not apply.
AGGREGATION OF CONTRACTS
In certain circumstances, the amount of an annuity payment, withdrawal or
surrender from a Contract that is includible in income is determined by com-
bining some or all of the annuity contracts owned by an individual not issued
in connection with qualified retirement plans. For example, if a person pur-
chases two or more deferred annuity contracts from the same insurance company
(or its affiliates) during any calendar year, all such contracts will be
treated as one contract for purposes of determining whether any payment not
received as an annuity (including withdrawals and surrenders prior to the an-
nuity commencement date) is includible in income. In addition, if a person
purchases a Contract offered by this prospectus and also purchases at approx-
imately the same time an immediate annuity, the IRS may treat the two con-
tracts as one contract. The effects of such aggregation are not clear; howev-
er, it could affect the time when income is taxable and the amount which
might be subject to the 10% penalty tax described above.
IRA CONTRACTS AND OTHER QUALIFIED RETIREMENT PLANS
IN GENERAL
In addition to issuing the Contracts as non-qualified annuities, First Golden
also currently issues the Contracts as IRAs. (As indicated above, in this
prospectus, IRAs are referred to as "qualified plans.") First Golden may also
issue the Contracts in connection with certain other types of qualified re-
tirement plans which receive favorable treatment under the Code. Numerous
special tax rules apply to the owners under IRAs and other qualified retire-
ment plans and to the contracts used in connection with such plans. These tax
rules vary according to the type of plan and the terms and conditions of the
plan itself. For example, for both surrenders and annuity payments under cer-
tain contracts issued in connection with qualified retirement plans, there
may be no "investment in the contract" and the total amount received may be
taxable. Also, special rules apply to the time at which distributions must
commence and the form in which the distributions must be paid. Therefore, no
attempt is made to provide more than general information about the use of
Contracts with the various types of qualified retirement plans. A qualified
tax advisor should be consulted before purchase of a Contract in connection
with a qualified retirement plan.
When issued in connection with a qualified retirement plan, a Contract will
be amended as necessary to conform to the requirements of the plan. However,
Owners, Annuitants, and Beneficiaries are cautioned that the rights of any
person to any benefits under qualified retirement plans may be subject to the
terms and conditions of the plans themselves, regardless of the terms and
conditions of the Contract. In addition, First Golden is not bound by terms
and conditions of qualified retirement plans to the extent such terms and
conditions contradict the Contract, unless First Golden consents.
INDIVIDUAL RETIREMENT ANNUITIES
As indicated above, First Golden currently issues the Contract as an IRA. If
the Contract is used for this purpose, the Owner must be the Annuitant.
Premium Payments. Both the premium payments that may be paid, and the tax
deduction that an individual may claim for such premium payments, are lim-
ited under an IRA. In general, the premium payments that may be made for an
IRA for any year are limited to the lesser of $2,000 or 100% of the indi-
vidual's earned income for the year. Also, with respect to an individual
who has less income than his or her spouse, premium payments may be made by
that individual to an IRA to the extent of the lesser of (1) $2,000, or (2)
the sum of (i) the compensation includible in the gross income of the indi-
vidual's spouse for the taxable year and
37
<PAGE>
(ii) the compensation includible in the gross income of the individual's
spouse for the taxable year reduced by the amount allowed as a deduction
for IRA contributions to such spouse. An excise tax is imposed on IRA con-
tributions that exceed the law's limits.
The deductible amount of the premium payments made for an IRA for any tax-
able year (including a contract for a noncompensated spouse) is limited to
the amount of premium payments that may be paid for the contract for that
year, or a lesser amount where the individual or his or her spouse is an
active participant in certain qualified retirement plans. A single person
who is an active participant in a qualified retirement plan (including a
qualified pension, profit-sharing, or annuity plan, a simplified employee
pension plan, or a "section 403(b)" annuity plan, as discussed below) and
who has adjusted gross income in excess of $35,000 may not deduct premium
payments, and such a person with adjusted gross income between $25,000 and
$35,000 may deduct only a portion of such payments. Also, married persons
who file a joint return, one of whom is an active participant in a quali-
fied retirement plan, and who have adjusted gross income in excess of
$50,000 may not deduct premium payments, and those with adjusted gross in-
come between $40,000 and $50,000 may deduct only a portion of such pay-
ments. Married persons filing separately may not deduct premium payments if
either the taxpayer or the taxpayer's spouse is an active participant in a
qualified retirement plan.
In applying these and other rules applicable to an IRA, all individual re-
tirement accounts and IRAs owned by an individual are treated as one con-
tract, and all amounts distributed during any taxable year are treated as
one distribution.
Tax Deferral During Accumulation Period. Until distributions are made from
an IRA, increases in the Accumulation Value of the Contract are not taxed.
IRAs and individual retirement accounts (that may invest in this Contract)
generally may not invest in life insurance contracts, but an annuity con-
tract that is issued as an IRA (or that is purchased by an individual re-
tirement account) may provide a death benefit that equals the greater of
the premiums paid and the contract's cash value. The Contract provides a
death benefit that in certain circumstances may exceed the greater of the
premium payments and the Accumulation Value. It is possible that an en-
hanced death benefit could be viewed as violating the prohibition on in-
vestment in life insurance contracts, with the result that the Contract
would not be viewed as satisfying the requirements of an IRA and would not
be a permissible investment for an individual retirement account.
Taxation of Distributions and Rollovers. If all premium payments made to an
IRA were deductible, all amounts distributed from the Contract are included
in the recipient's income when distributed. However, if nondeductible pre-
mium payments were made to an IRA (within the limits allowed by the tax
laws), a portion of each distribution from the Contract typically is in-
cludible in income when it is distributed. In such a case, any amount dis-
tributed as an annuity payment or in a lump sum upon death or surrender is
taxed as described above in connection with such a distribution from a non-
qualified contract, treating as the investment in the contract the sum of
the nondeductible premium payments at the end of the taxable year in which
the distribution commences or is made (less any amounts previously distrib-
uted that were excluded from income). Also, in such a case, any amount dis-
tributed upon a partial withdrawal is partially includible in income. The
includible amount is the excess of the distribution over the exclusion
amount, which in turn generally equals the distribution multiplied by the
ratio of the investment in the contract to the Accumulation Value.
In any event, subject to the direct rollover and mandatory withholding re-
quirements (discussed below), amounts may be "rolled over" from certain
qualified retirement plans to an IRA (or from one IRA or individual retire-
ment account to an IRA) without incurring current income tax if certain
conditions are met. Only certain types of distributions to eligible indi-
viduals from qualified retirement plans, individual retirement accounts,
and IRAs may be rolled over.
Penalty Taxes. Subject to certain exceptions, a penalty tax is imposed on
distributions from an IRA equal to 10% of the amount of the distribution
includible in income. (Amounts rolled over from an IRA generally are ex-
cludable from income.) The exceptions provide, however, that this penalty
tax does not apply to distributions made to the Owner (1) on or after age
59 1/2, (2) on or after death or because of disability (as defined in the
tax law), or (3) as part of a series of substantially equal periodic pay-
ments over the life (or life expectancy) of the
38
<PAGE>
Owner or the joint lives (or joint life expectancies) of the Owner and his
or her beneficiary (as defined in the tax law). In addition to the forego-
ing, failure to comply with a minimum distribution requirement will result
in the imposition of a penalty tax of 50% of the amount by which a minimum
required distribution exceeds the actual distribution from an IRA. Under
this requirement, distributions of minimum amounts from an IRA as specified
in the tax law must generally commence by April 1 of the calendar year fol-
lowing the calendar year in which the owner attains age 70 1/2.
OTHER TYPES OF QUALIFIED RETIREMENT PLANS
The following sections describe tax considerations of Contracts used in con-
nection with various types of qualified retirement plans other than IRAs.
First Golden does not currently offer all of the types of qualified retire-
ment plans described and may not offer them in the future. Prospective pur-
chasers of Contracts for use in connection with such qualified retirement
plans should therefore contact First Golden's Customer Service Center to as-
certain the availability of the Contract for qualified retirement plans at
any given time.
Simplified Employee Pensions (SEP-IRAs). Section 408(k) of the Code allows
employers to establish simplified employee pension plans for their employ-
ees, using the employees' IRAs for such purposes, if certain criteria are
met. Under these plans the employer may, within specified limits, make de-
ductible contributions on behalf of the employees to IRAs. As discussed
above (see Individual Retirement Annuities), there is some uncertainty re-
garding the treatment of the Contract's enhanced death benefit for purposes
of certain tax rules governing IRAs (which would include SEP-IRAs). Employ-
ers intending to use the contract in connection with such plans should seek
competent advice.
SIMPLE IRAs. Section 408(p) of the Code permits certain small employers to
establish "SIMPLE retirement accounts," including SIMPLE IRAs, for their
employees. Under SIMPLE IRAs, certain deductible contributions are made by
both employees and employers. SIMPLE IRAs are subject to various require-
ments, including limits on the amounts that may be contributed, the persons
who may be eligible, and the time when distributions may commence. As dis-
cussed above (see Individual Retirement Annuities), there is some uncer-
tainty regarding the proper characterization of the Contract's enhanced
death benefit for purposes of certain tax rules governing IRAs (which would
include SIMPLE IRAs). Employers intending to use the Contract in connection
with a SIMPLE retirement account should seek competent advice.
Corporate and Self-Employed ("H.R. 10" or "Keogh") Pension and Profit-Shar-
ing Plans. Sections 401(a) and 403(a) of the Code permit corporate employ-
ers to establish various types of tax-favored retirement plans for employ-
ees. The Self-Employed Individuals' Tax Retirement Act of 1962, as amended,
commonly referred to as "H.R. 10" or "Keogh," permits self-employed indi-
viduals also to establish such tax-favored retirement plans for themselves
and their employees. Such retirement plans may permit the purchase of the
Contract in order to provide benefits under the plans. The Contract pro-
vides a death benefit that in certain circumstances may exceed the greater
of the premium payments and the Accumulation Value. It is possible that
such death benefit could be characterized as an incidental death benefit.
There are limitations on the amount of incidental benefits that may be pro-
vided under pension and profit sharing plans. In addition, the provision of
such benefits may result in currently taxable income to participants. Em-
ployers intending to use the Contract in connection with such plans should
seek competent advice.
Section 403(b) Annuity Contracts. Section 403(b) of the Code permits public
school employees, employees of certain types of charitable, educational and
scientific organizations exempt from tax under section 501(c)(3) of the
Code, and employees of certain types of State educational organizations
specified in section 170(b)(l)(A)(ii), to have their employers purchase an-
nuity contracts for them and, subject to certain limitations, to exclude
the amount of premium payments from gross income for federal income tax
purposes. Purchasers of the Contracts for use as a "Section 403(b) Annuity
Contract" should seek competent advice as to eligibility, limitations on
permissible amounts of premium payments and other tax consequences associ-
ated with such contracts. In particular, purchasers and their advisors
should consider that this Contract provides a death benefit that in certain
circumstances may exceed the greater of the premium payments and the Accu-
mulation Value. It is possible that such death benefit could be character-
ized as an incidental death benefit. If the death benefit were so charac-
terized, this could result in currently taxable income to employees. In
addition, there are limitations on the amount of incidental death
39
<PAGE>
benefits that may be provided under a Section 403(b) Annuity Contract. Even
if the death benefit under the Contract were characterized as an incidental
death benefit, it is unlikely to violate those limits unless the purchaser
also purchases a life insurance contract as part of his or her Section
403(b) Annuity Contract.
Section 403(b) Annuity Contracts contain restrictions on withdrawals of (i)
contributions made pursuant to a salary reduction agreement in years begin-
ning after December 31, 1988, (ii) earnings on those contributions, and
(iii) earnings after 1988 on amounts attributable to salary reduction con-
tributions (and earnings on those contributions) held as of the last year
beginning before January 1, 1989. These amounts can be paid only if the em-
ployee has reached age 59 1/2, separated from service, died, become disa-
bled (within the meaning of the tax law), or in the case of hardship.
Amounts permitted to be distributed in the event of hardship are limited to
actual contributions; earnings thereon cannot be distributed on account of
hardship. (These limitations on withdrawals do not apply to the extent
First Golden is directed to transfer some or all of the Accumulation Value
as a tax-free direct transfer to the issuer of another Section 403(b) Annu-
ity Contract or into a section 403(b)(7) custodial account subject to with-
drawal restrictions which are at least as stringent.)
Eligible Deferred Compensation Plans of State and Local Governments and
Tax-Exempt Organizations. Section 457 of the Code permits employees of
state and local governments and tax-exempt organizations to defer a portion
of their compensation without paying current federal income taxes. The em-
ployees must be participants in an eligible deferred compensation plan.
Generally, a Contract purchased by a state or local government or a tax-ex-
empt organization will not be treated as an annuity contract for federal
income tax purposes. Those who intend to use the Contracts in connection
with such plans should seek competent advice.
DIRECT ROLLOVERS AND FEDERAL INCOME TAX WITHHOLDING FOR "ELIGIBLE ROLLOVER
DISTRIBUTIONS"
In the case of an annuity contract used in connection with a pension, profit-
sharing, or annuity plan qualified under sections 401(a) or 403(a) of the
Code, or that is a Section 403(b) Annuity Contract, any "eligible rollover
distribution" from the contract will be subject to direct rollover and manda-
tory withholding requirements. An eligible rollover distribution generally is
the taxable portion of any distribution from a qualified pension plan under
section 401(a) of the Code, qualified annuity plan under Section 403(a) of
the Code, or Section 403(b) Annuity or custodial account, excluding certain
amounts (such as minimum distributions required under section 401(a)(9) of
the Code and distributions which are part of a "series of substantially equal
periodic payments" made not less frequently than annually for the life (or
life expectancy) of the employee, or for the joint lives (or joint life ex-
pectancies) of the employee and the employee's designated beneficiary (within
the meaning of the tax law), or for a specified period of 10 years or more).
Under these new requirements, federal income tax equal to 20% of the eligible
rollover distribution will be withheld from the amount of the distribution.
Unlike withholding on certain other amounts distributed from the Contract,
discussed below, the taxpayer cannot elect out of withholding with respect to
an eligible rollover distribution. However, this 20% withholding will not ap-
ply to that portion of the eligible rollover distribution which, instead of
receiving, the taxpayer elects to have directly transferred to certain eligi-
ble retirement plans (such as to this Contract when issued as an IRA).
If this Contract is issued in connection with a pension, profit-sharing, or
annuity plan qualified under sections 401(a) or 403(a) of the Code, or is a
Section 403(b) Annuity Contract, then, prior to receiving an eligible
rollover distribution, the Owner will receive a notice (from the plan admin-
istrator or First Golden) explaining generally the direct rollover and manda-
tory withholding requirements and how to avoid the 20% withholding by elect-
ing a direct transfer.
FEDERAL INCOME TAX WITHHOLDING
First Golden will withhold and remit to the federal government a part of the
taxable portion of each distribution made under the Contract unless the dis-
tributee notifies First Golden at or before the time of the distribution that
he or she elects not to have any amounts withheld. In certain circumstances,
First Golden may be required to withhold tax, as explained above. The with-
holding rates applicable to the taxable portion of periodic annuity payments
(other than eligible rollover distributions) are the same as the withholding
rates generally applicable to payments of wages. In addition, the withholding
rate applicable to the taxable portion of non-periodic payments (including
surrenders prior to the annuity commencement date) is 10%. Regardless of
whether you elect to have federal income tax withheld, you are still liable
for payment of federal income tax on the taxable portion of the payment. As
discussed above, the withholding rate applicable to eligible rollover distri-
butions is 20%.
40
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS OF FIRST GOLDEN AMERICAN LIFE INSURANCE COMPANY OF NEW
YORK
December 17, 1996 (Commencement of Operations) through December 31, 1996 with
Report of Independent Auditors
41
<PAGE>
FIRST GOLDEN AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
FINANCIAL STATEMENTS
DECEMBER 17, 1996 (COMMENCEMENT OF OPERATIONS) THROUGH DECEMBER 31, 1996
CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Auditors............................................. 43
Audited Financial Statements
Balance Sheet.............................................................. 44
Statement of Income........................................................ 45
Statement of Changes in Stockholder's Equity............................... 46
Statement of Cash Flows.................................................... 47
Notes to Financial Statements.............................................. 48
</TABLE>
42
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholder
First Golden American Life Insurance Company of New York
We have audited the accompanying balance sheet of First Golden American Life
Insurance Company of New York (wholly owned by Golden American Life Insurance
Company) as of December 31, 1996 and the related statements of income, changes
in stockholder's equity, and cash flows for the period from December 17, 1996
(commencement of operations) through December 31, 1996. These financial state-
ments are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audit in accordance with generally accepted auditing stan-
dards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of mate-
rial misstatement. An audit includes examining, on a test basis, evidence sup-
porting 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 pre-
sentation. We believe that our audits provide a reasonable basis for our opin-
ion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of First Golden American Life
Insurance Company of New York at December 31, 1996, and the results of its op-
erations and its cash flows for the period from December 17, 1996 through De-
cember 31, 1996, in conformity with generally accepted accounting principles.
LOGO
Des Moines, Iowa
January 24, 1997
43
<PAGE>
FIRST GOLDEN AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
BALANCE SHEET
DECEMBER 31, 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<S> <C>
ASSETS
Investments:
Fixed maturities available for sale, at fair value (cost--$24,373).. $24,220
Short-term investments.............................................. 350
-------
Total investments.................................................... 24,570
Cash and cash equivalents............................................ 5
Accrued investment income............................................ 338
Deferred income tax benefit.......................................... 54
-------
Total assets......................................................... $24,967
=======
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Other liabilities................................................... $ 1
Income taxes payable................................................ 23
-------
Total liabilities.................................................... 24
Commitments and contingencies
STOCKHOLDER'S EQUITY
Preferred stock, par value $5,000 per share, authorized 6,000
shares............................................................... --
Common stock, par value $10 per share, authorized, issued, and
outstanding 200,000 shares........................................... 2,000
Additional paid-in capital........................................... 23,000
Unrealized depreciation of fixed maturities.......................... (99)
Retained earnings.................................................... 42
-------
Total stockholder's equity........................................... 24,943
-------
Total liabilities and stockholder's equity........................... $24,967
=======
</TABLE>
See accompanying notes.
44
<PAGE>
FIRST GOLDEN AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
STATEMENT OF INCOME
PERIOD FROM DECEMBER 17, 1996* THROUGH DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C>
REVENUES
Net investment income (net of expenses of $1).............................. $65
---
Total revenues............................................................. 65
Income taxes............................................................... 23
---
Net income................................................................. $42
===
</TABLE>
- ----------------------
*Commencement of operations
See accompanying notes.
45
<PAGE>
FIRST GOLDEN AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
PERIOD FROM DECEMBER 17, 1996* THROUGH DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
UNREALIZED
ADDITIONAL DEPRECIATION TOTAL
COMMON PAID-IN OF FIXED RETAINED STOCKHOLDER'S
STOCK CAPITAL MATURITIES EARNINGS EQUITY
------ ---------- ------------ -------- -------------
<S> <C> <C> <C> <C> <C>
Capitalization of Company
by issuance of common
stock and contribution of
paid-in capital.......... $2,000 $23,000 $25,000
Net income............... -- -- $42 42
Change in unrealized
depreciation of fixed
maturities............... -- -- $(99) -- (99)
------ ------- ---- --- -------
Balance at December 31,
1996..................... $2,000 $23,000 $(99) $42 $24,943
====== ======= ==== === =======
</TABLE>
- ----------------------
*Commencement of operations
See accompanying notes
46
<PAGE>
FIRST GOLDEN AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
STATEMENT OF CASH FLOWS
PERIOD FROM DECEMBER 17, 1996* THROUGH DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C>
OPERATING ACTIVITIES
Net income.......................................................... $ 42
Adjustments to reconcile net income to net cash provided by
operating activities:
Increase in accrued investment income.............................. (58)
Net amortization of discount on short-term investments............. (7)
Increase in income taxes payable................................... 23
Increase in other liabilities...................................... 1
--------
Net cash provided by provided operating activities.................. 1
INVESTING ACTIVITIES
Purchases of fixed maturities including accrued interest............ (24,653)
Purchases of short-term investments................................. (25,598)
Sales of short-term investments..................................... 25,255
--------
Net cash used in investing activities............................... (24,996)
FINANCING ACTIVITIES
Capitalization of Company by issuance of common stock and
contribution of paid-in capital..................................... 25,000
--------
Net cash provided by financing activities........................... 25,000
--------
Net increase in cash and cash equivalents........................... 5
Cash and cash equivalents at beginning of period.................... --
--------
Cash and cash equivalents at end of period.......................... $ 5
========
</TABLE>
- ----------------------
*Commencement of operations
See accompanying notes.
47
<PAGE>
FIRST GOLDEN AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. SIGNIFICANT ACCOUNTING POLICIES
Organization
First Golden American Life Insurance Company of New York ("First Golden" or
the "Company") a wholly-owned subsidiary of Golden American Life Insurance
Company ("Golden American" or the "Parent"), was incorporated on May 24, 1996.
Golden American is a wholly-owned indirect subsidiary of Equitable of Iowa
Companies. On December 17, 1996, Golden American provided capitalization in
the amount of $25,000,000 to First Golden (see note 5). First Golden commenced
investment operations on December 17, 1996. First Golden's primary purpose
will be to offer insurance products in the State of New York. On January 2,
1997, First Golden became licensed as a life insurance company in the State of
New York and is currently pursuing policy approvals.
Use of Estimates
The preparation of the financial statements in conformity with generally ac-
cepted accounting principles requires management to make estimates and assump-
tions that affect the amounts reported in the financial statements and accom-
panying notes. Actual results could differ from those estimates.
Investments
The Company accounts for its investments under the Statement of Financial
Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments in
Debt and Equity Securities". Pursuant to SFAS No. 115, fixed maturity securi-
ties are 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 de-
ferred income taxes.
At December 31, 1996, all of the Company's fixed maturity securities are
designated as available for sale although the Company is not precluded from
designating fixed maturity securities as held for investment or trading at
some future date. Securities that the company has the positive intent and
ability to hold to maturity are designated as "held for investment". Held for
investment securities are reported at cost adjusted for amortization of premi-
ums and discounts.
Changes in the fair value of these securities, except for declines that are
other than temporary, are not reflected in the Company's financial statements.
Sales of securities designated as held for investment are severely restricted
by SFAS No. 115. Securities that are bought and held principally for the pur-
pose of selling them in the near term are designated as trading securities.
Unrealized gains and losses on trading securities are included in current
earnings. Transfers of securities between categories are restricted and are
recorded at fair value at the time of the transfer. Securities that are deter-
mined to have a decline in value that is other than temporary are written down
to estimated fair value which becomes the security's new cost basis by a
charge to realized losses in the Company's statement of income. Premiums and
discounts are amortized/accrued utilizing the scientific interest method which
results in a constant yield over the securities' expected life.
Amortization/accrual of premiums and discounts on mortgage-backed securities
incorporates a prepayment assumption to estimate the securities' expected
life.
Short-term investments are carried at cost, adjusted for amortization of
premiums and accrual of discounts.
Estimated fair values, as reported herein, of publicly-traded fixed maturity
securities are as reported by an independent pricing service. Fair values of
conventional mortgage-backed securities not actively traded in a liquid market
are estimated using a third-party pricing system, which uses a matrix calcula-
tion assuming a spread over U.S. Treasury bonds based upon the expected aver-
age lives of the securities. Fair values of private placement bonds are esti-
mated using a matrix that assumes a spread (based on interest rates and a risk
assessment of the bonds) over U.S. Treasury bonds. Realized gains and losses
are determined on the basis of specific identification and average cost meth-
ods for manager initiated and issuer initiated disposals, respectively.
48
<PAGE>
FIRST GOLDEN AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all de-
mand 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 Income Taxes
Deferred tax assets or liabilities are computed based on the difference be-
tween 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
fixed maturity securities the Company has designated as available for sale un-
der 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 Company's
Statement of Income are based on the changes in the deferred tax asset or lia-
bility from period to period (excluding the SFAS No. 115 adjustment).
Fair Value of Financial Instruments
First Golden has evaluated its financial instruments, including short-term
investments, and determined that carrying amounts reported in the balance
sheet approximate fair value.
2. INVESTMENT OPERATIONS
The Company accounts for its investments under the Statement of Financial
Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments in
Debt and Equity Securities". SFAS No. 115 requires companies to classify their
securities as either "available for sale", "held to maturity" or "trading". At
December 31, 1996, all of First Golden's fixed maturities are designated as
available for sale.
SFAS No. 115 requires the carrying value of fixed maturity securities clas-
sified as available for sale to be adjusted for changes in fair value, primar-
ily caused by interest rates. While other related accounts are adjusted as
discussed in Note 1, the insurance liabilities supported by these securities
are not adjusted under SFAS No. 115, thereby creating volatility in stockhold-
er's equity as interest rates change. As a result, the Company expects that
its stockholder's equity will be exposed to incremental volatility due to
changes in market interest rates and the accompanying changes in the reported
value of securities classified as available for sale, with equity increasing
as market interest rates decline and, conversely, decreasing as market inter-
est rates rise.
For the period December 17, 1996 through December 31, 1996, there were no
realized gains or losses on investments.
The major categories of investment income for the period December 17, 1996
through December 31, 1996 are summarized as follows (dollars in thousands):
<TABLE>
<S> <C>
Fixed maturities.............................. $57
Short-term investments........................ 9
---
66
Less investment expenses...................... (1)
---
Net investment income......................... $65
===
</TABLE>
49
<PAGE>
FIRST GOLDEN AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996
2. INVESTMENT OPERATIONS (CONTINUED)
At December 31, 1996, amortized cost, gross unrealized gains and losses and
estimated fair value of the Company's fixed maturity securities designated as
available for sale are as follows:
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------- ---------- ---------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
U.S. government and governmental
agencies and authorities:
Mortgage-backed securities..... $ 4,870 $ 1 $ (36) $ 4,835
Other.......................... 396 -- (2) 394
Public utilities................ 983 -- (5) 978
Investment grade corporates..... 16,046 -- (120) 15,926
Below investment grade
corporates...................... 2,078 15 (6) 2,087
------- --- ----- -------
$24,373 $16 $(169) $24,220
======= === ===== =======
</TABLE>
The amortized cost and estimated fair value of fixed maturity securities by
contractual maturity at December 31, 1996, are shown below. Expected maturi-
ties will differ from contractual maturities because borrowers may have the
right to call or prepay obligations with or without call or prepayment penal-
ties.
<TABLE>
<CAPTION>
ESTIMATED FAIR
AMORTIZED COST VALUE
-------------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Due after one year through five years.......... $ 919 $ 912
Due after five years through ten years......... 18,584 18,473
------- -------
19,503 19,385
Mortgage-backed securities..................... 4,870 4,835
------- -------
$24,373 $24,220
======= =======
</TABLE>
During periods of significant interest rate volatility, the mortgages under-
lying mortgage-backed securities may prepay more quickly or more slowly than
anticipated. If the principal amount of such mortgages are prepaid earlier
than anticipated during periods of declining interest rates, investment income
may decline due to reinvestment of these funds at lower current market rates.
If principal repayments are slower than anticipated during periods of rising
interest rates, increases in investment yield may lag behind increases in in-
terest rates because funds will remain invested at lower historical rates
rather than reinvested at higher current rates. To mitigate this prepayment
volatility, the Company invests primarily in intermediate tranche collateral-
ized mortgage obligations ("CMOs"). CMOs are pools of mortgages that are seg-
regated into sections, or tranches, which provide sequential retirement of
bonds rather than a pro-rata share of principal return in the pass-through
structure. The Company owns no "interest only" or "principal only" mortgage-
backed securities. Further, the Company has not purchased obligations at sig-
nificant premiums, thereby limiting exposure to loss during periods of accel-
erated prepayments. At December 31, 1996, unamortized premiums on mortgage-
backed securities totaled $18,000 and unaccrued discounts on mortgage-backed
securities totaled $43,000.
The Company analyzes its investment portfolio at least quarterly in order to
determine if the carrying value of its investments has been impaired. The car-
rying value of debt and equity securities is written down to fair value by a
charge to realized losses when an impairment in value appears to be other than
temporary. During 1996, there were no investments having impairments in value
that were other than temporary.
At December 31, 1996, $400,000 in par value of fixed maturity investments
were on deposit with regulatory authorities pursuant to certain statutory re-
quirements.
No investment in any person or its affiliates (other than bonds issued by
agencies of the United States government) exceeded ten percent of stockhold-
er's equity at December 31, 1996.
50
<PAGE>
FIRST GOLDEN AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996
3. INCOME TAXES
First Golden will file a separate federal income tax return. Deferred income
taxes have been established based upon temporary differences, the reversal of
which will result in taxable or deductible amounts in future years when the
related asset or liability is recovered or settled. The only component of
First Golden's deferred taxes is an asset in the amount of $54,000 related to
the unrealized depreciation of fixed maturities.
4. STOCKHOLDER'S EQUITY
First Golden is required to maintain a minimum total statutory-basis capital
and surplus of not less than $4,000,000 under the provisions of the insurance
laws of the State of New York in which it became licensed to sell variable an-
nuity products on January 2, 1997.
Under the provisions of the insurance laws of the State of New York, First
Golden cannot distribute any dividends to its stockholders unless a notice of
its intention to declare a dividend and the amount of the dividend has been
filed not less than thirty days in advance of the proposed declaration. The
superintendent may disapprove the distribution by giving written notice to the
Company within thirty days after the filing should the superintendent find
that the financial condition of the Company does not warrant the distribution.
5. RELATED PARTY TRANSACTIONS
On December 17, 1996, Golden American contributed $25,000,000 to First Gold-
en, $2,000,000 in common stock (200,000 shares at $10 per share) and
$23,000,000 of additional capital.
All expenses related to the incorporation and licensing of First Golden were
incurred by its Parent.
The Company has a service agreement with Golden American in which Golden
American will provide administrative and financial related services. As of De-
cember 31, 1996, no services had been rendered.
6. COMMITMENTS AND CONTINGENCIES
Leases
The Company leases its home office space which expires December 31, 2001.
The office space is currently under construction with an expected completion
date of February, 1997. As a result, no rent expense was incurred for the year
ended December 31, 1996. At December 31, 1996, minimum rental payments due un-
der the operating lease are:
<TABLE>
<S> <C>
1997..................................... $ 47,348
1998..................................... 75,756
1999..................................... 75,756
2000..................................... 75,756
2001..................................... 75,756
--------
$350,372
========
</TABLE>
51
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM PAGE
<S> <C>
INTRODUCTION.............................................................. 1
Description of First Golden American Life Insurance Company of New York... 1
Safekeeping of Assets..................................................... 1
The Administrator......................................................... 1
Independent Auditors...................................................... 1
Distribution of Contracts................................................. 1
Performance Information................................................... 2
IRA Partial Withdrawal Option............................................. 5
Other Information......................................................... 6
Financial Statements of Separate Account NY-B............................. 6
Appendix--Description of Bond Ratings..................................... A-1
</TABLE>
52
<PAGE>
- -------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION (CONTINUED)
- -------------------------------------------------------------------------------
PLEASE TEAR OFF, COMPLETE AND RETURN THE FORM BELOW TO ORDER A FREE STATEMENT
OF ADDITIONAL INFORMATION FOR THE CONTRACTS OFFERED UNDER THE PROSPECTUS. AD-
DRESS THE FORM TO OUR CUSTOMER SERVICE CENTER, THE ADDRESS IS SHOWN ON THE
COVER.
...............................................................................
PLEASE SEND ME A FREE COPY OF THE STATEMENT OF ADDITIONAL INFORMATION FOR SEP-
ARATE ACCOUNT NY-B
PLEASE PRINT OR TYPE
----------------------------------
NAME
----------------------------------
SOCIAL SECURITY NUMBER
----------------------------------
STREET ADDRESS
----------------------------------
CITY, STATE, ZIP
(IN FG-3120 NY DVA PLUS 3/97)
...............................................................................
53
<PAGE>
(This page has been intentionally left blank.)
54
<PAGE>
APPENDIX A
MARKET VALUE ADJUSTMENT EXAMPLES
EXAMPLE #1: FULL SURRENDER -- EXAMPLE OF A NEGATIVE MARKET VALUE ADJUSTMENT
Assume $100,000 was allocated to a Fixed Allocation with a Guarantee Period
of ten years, a Guaranteed Interest Rate of 7.50%, an initial Index Rate ("I")
of 7.00%; that a full surrender is requested three years into the Guarantee
Period; that the then Index Rate for a seven year Guarantee Period ("J") is
8.0%; and that no prior transfers or partial withdrawals affecting this Fixed
Allocation have been made.
CALCULATE THE MARKET VALUE ADJUSTMENT
1. The Accumulation Value of the Fixed Allocation on the date of surrender
is $124,230 ($100,000 X 1.075/3/)
2. N = 2,555 (365 X 7)
3. Market Value Adjustment = $124,230 X [( 1.07 ) /2,555/365/) ] = $9,700
[(------) ]
[(1.0825) -1]
Therefore, the amount paid to you on full surrender ignoring any surrender
charge is $114,530 ($124,230 - $9,700).
EXAMPLE #2: FULL SURRENDER -- EXAMPLE OF A POSITIVE MARKET VALUE ADJUSTMENT
Assume $100,000 was allocated to a Fixed Allocation with a Guarantee Period
of ten years, a Guaranteed Interest Rate of 7.5%, an initial Index Rate ("I")
of 7.00%; that a full surrender is requested three years into the Guarantee
Period; that the then Index Rate for a seven year Guarantee Period ("J") is
6.0%; and that no prior transfers or partial withdrawals affecting this Fixed
Allocation have been made.
CALCULATE THE MARKET VALUE ADJUSTMENT
1. The Accumulation Value of the Fixed Allocation on the date of surrender
is $124,230 ($100,000 X 1.075)
2. N = 2,555 (365 X 7)
3. Market Value Adjustment = $124,230 X [( 1.07 ) (/2,555/365/) ] = $6,270
[(------) ]
[(1.0625) -1]
Therefore, the amount paid to you on full surrender ignoring any surrender
charge is $130,500 ($124,230 + $6,270).
EXAMPLE #3: PARTIAL WITHDRAWAL -- EXAMPLE OF A NEGATIVE MARKET VALUE
ADJUSTMENT
Assume $200,000 was allocated to a Fixed Allocation with a Guarantee Period
of ten years, a Guaranteed Interest Rate of 7.5%, an initial Index Rate ("I")
of 7.00%; that a partial withdrawal of $114,530 is requested three years into
the Guarantee period; that the then Index Rate ("J") for a seven year Guaran-
tee Period is 8.0%; and that no prior transfers or partial withdrawals affect-
ing this Fixed Allocation have been made.
First calculate the amount that must be withdrawn from the Fixed Allocation
to provide the amount requested.
1. The Accumulation Value of the Fixed Allocation on the date of withdrawal
is $248,459 ($200,000 X 1.075)
2. N = 2,555 (365 X 7)
3. Amount that must be withdrawn = [$114,530/ (1.07 ) /2,555/365/] = $124,230
[ (------) ]
[ (1.0825) ]
Then calculate the Market Value Adjustment on that amount
4. Market Value Adjustment = $124,230 X [( 1.07 ) (/2,555/365/) ] = $9,700
[(------) ]
[(1.0825) -1]
A1
<PAGE>
Therefore, the amount of the partial withdrawal paid to you is $114,530, as
requested. The Fixed Allocation will be reduced by the amount of the partial
withdrawal, $114,530, and also reduced by the Market Value Adjustment of
$9,700, for a total reduction in the Fixed Allocation of $124,230.
EXAMPLE #4: PARTIAL WITHDRAWAL -- EXAMPLE OF A POSITIVE MARKET VALUE
ADJUSTMENT
Assume $200,000 was allocated to a Fixed Allocation with a Guarantee Period
of ten years, a Guaranteed Interest Rate of 7.5%, an initial Index Rate of
7.0%; that a partial withdrawal of $130,500 requested three years into the
Guarantee Period; that the then Index Rate ("J") for a seven year Guarantee
Period is 6.0%; and that no prior transfers or partial withdrawals affecting
this Fixed Allocation have been made.
First calculate the amount that must be withdrawn from the Fixed Allocation
to provide the amount requested.
1. The Accumulation Value of Fixed Allocation on the date of surrender is
$248,459 ($200,000 X 1.075)
2.N = 2,555 (365 X 7)
3. Amount that must be withdrawn = [$130,500/( 1.07 ) /2,555/365/] = $124,230
[ (------) ]
[ (1.0625) ]
Then calculate the Market Value Adjustment on that amount
4. Market Value Adjustment = $124,230 X [( 1.07 ) /2,555/365/ ] = $6,270
[(------) ]
[(1.0625) -1]
Therefore, the amount of the partial withdrawal paid to you is $130,500, as
requested. The Fixed Allocation will be reduced by the amount of the partial
withdrawal, $130,500, but increased by the Market Value Adjustment of $6,270,
for a total reduction in the Fixed Allocation of $124,230.
A2
<PAGE>
FIRST GOLDEN AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
First Golden American Life Insurance Company of New York
is a stock company domiciled in New York, New York.
IN FG-3120 NY DVA PLUS 3/97
