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File No. 333-16279
Filed under Rule 424(b)(3)
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++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ GOLDENSELECT DVA PLUS +
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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
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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,
and up to five additional Divisions of Account NY-B will become available upon
approval by regulatory authorities. The investments currently available and
those to become available through the Divisions of Account NY-B include mutual
fund portfolios (the "Series") of The GCG Trust (the "GCG Trust"), the Equi-Se-
lect Series Trust (the "ESS Trust"), and the PIMCO Variable Insurance Trust
(the "PIMCO Trust"). The investments available through the Fixed Account in-
clude 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 in-
crease or decrease the number of Guarantee Periods offered. 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,
the ESS Trust and the PIMCO Trust (individually, "a Trust," and collectively,
"the Trusts"), which must accompany this prospectus, provide information re-
garding 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 May 1, 1998, 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.
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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, THE ESS TRUST
AND THE PIMCO TRUST.
DISTRIBUTED BY: ISSUED BY: ADMINISTERED AT:
Directed Services, Inc. First Golden American Customer Service Center
Wilmington, Delaware 19801 Life Insurance 230 Park Avenue, Suite 966
Company of New York New York, NY 10169
1-800-963-9539
HOME OFFICE:
New York, New York
PROSPECTUS DATED: MAY 1, 1998
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
DEFINITION OF TERMS........................................................ 3
SUMMARY OF CONTRACT........................................................ 5
FEE TABLE.................................................................. 8
CONDENSED FINANCIAL AND OTHER INFORMATION.................................. 13
Index of Investment Experience............................................ 13
Financial Statements...................................................... 13
Performance Related Information........................................... 13
INTRODUCTION............................................................... 15
First Golden.............................................................. 15
The Trusts................................................................ 15
Separate Account NY-B..................................................... 16
Account NY-B Divisions.................................................... 16
Changes Within Account NY-B............................................... 22
The Fixed Account......................................................... 22
FACTS ABOUT THE CONTRACT................................................... 26
The Owner................................................................. 26
The Annuitant............................................................. 26
The Beneficiary........................................................... 26
Change of Owner or Beneficiary............................................ 27
Availability of the Contract.............................................. 27
Types of Contracts........................................................ 27
Your Right to Select or Change Contract Options........................... 27
Premiums.................................................................. 27
Making Additional Premium Payments........................................ 28
Crediting Premium Payments................................................ 28
Restrictions on Allocation of Premium Payments............................ 29
Your Right to Reallocate.................................................. 29
Dollar Cost Averaging..................................................... 29
What Happens if a Division is Not Available............................... 30
Accumulation Value in Each Division....................................... 31
Measurement of Investment Experience...................................... 31
Cash Surrender Value...................................................... 32
Surrendering to Receive the Cash Surrender Value.......................... 32
Partial Withdrawals....................................................... 32
Automatic Rebalancing..................................................... 34
Proceeds Payable to the Beneficiary....................................... 34
Death Benefit Options..................................................... 34
Reports to Owners......................................................... 35
When We Make Payments..................................................... 35
CHARGES AND FEES........................................................... 36
Charge Deduction Division................................................. 36
</TABLE>
<TABLE>
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PAGE
<S> <C>
Charges Deducted from the Divisions...................................... 38
Trust Expenses........................................................... 38
CHOOSING YOUR ANNUITIZATION OPTIONS....................................... 38
Annuitization of Your Contract........................................... 38
Annuity Commencement Date Selection...................................... 39
Frequency Selection...................................................... 39
The Annuitization Options................................................ 39
Payment When Named Person Dies........................................... 40
OTHER CONTRACT PROVISIONS................................................. 40
In Case of Errors in Application Information............................. 40
Contract Changes -- Applicable Tax Law................................... 40
Your Right to Cancel or Exchange Your Contract........................... 40
Other Contract Changes................................................... 41
Group or Sponsored Arrangements.......................................... 41
Selling the Contract..................................................... 41
REGULATORY INFORMATION.................................................... 41
Voting Rights............................................................ 41
State Regulation......................................................... 42
Legal Proceedings........................................................ 42
Legal Matters............................................................ 42
Experts.................................................................. 42
MORE INFORMATION ABOUT FIRST GOLDEN AMERICAN LIFE INSURANCE COMPANY OF NEW
YORK..................................................................... 42
Selected Financial Data.................................................. 42
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 43
Directors and Executive Officers......................................... 49
FEDERAL TAX CONSIDERATIONS................................................ 52
Introduction............................................................. 52
Tax Status of First Golden............................................... 52
Taxation of Non-Qualified Annuities...................................... 53
IRA Contracts and Other Qualified Retirement Plans....................... 56
Federal Income Tax Withholding........................................... 60
FINANCIAL STATEMENTS OF FIRST GOLDEN AMERICAN LIFE INSURANCE COMPANY OF
NEW YORK................................................................. 61
STATEMENT OF ADDITIONAL INFORMATION....................................... 81
Table of Contents........................................................ 81
APPENDIX A................................................................ A-1
Market Value Adjustment Examples......................................... A-1
</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.
2
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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 premiums paid, investment experience of the Divisions and in-
terest credited to your Fixed Allocations, charges deducted and any partial
withdrawals.
ANNUAL RATCHET ENHANCED DEATH BENEFIT OPTION -- An enhanced death benefit op-
tion 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 en-
hanced death benefit provided by this option is the highest Accumulation Value
on any Contract Anniversary on or prior to the Owner turning age 80, as ad-
justed for additional premiums and partial withdrawals.
ANNUITANT -- The person designated by the Owner to be the measuring life in
determining Annuity 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 Payments.
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 individu-
al).
BUSINESS DAY -- Any day the New York Stock Exchange ("NYSE") is open for trad-
ing, 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 Annui-
tant.
CONTRACT -- The entire Contract consisting of the basic Contract and any rid-
ers or endorsements.
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 succeeding 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 Contract Processing Date. There is one Contract
processing period each year.
3
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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.
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 as-
sessed against the Division for a Valuation Period.
FIXED ACCOUNT -- An Account which contains all of our assets that support
Owner Fixed Allocations 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 Guarantee Period. The Guaranteed Interest Rate will
never be less than 3%.
GUARANTEE PERIOD -- The period of time for which a rate of interest is guaran-
teed to be credited to a Fixed Allocation. We currently offer Guarantee Peri-
ods 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 otherwise. The Specially Designated Division cur-
rently is the Liquid Asset Division.
STANDARD DEATH BENEFIT OPTION -- The death benefit option that you will re-
ceive 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 withdraw-
als; 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 be-
fore it.
4
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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 a "qualified plan." A qualified plan
is an individual retirement annuity ("IRA") meeting the requirements of sec-
tion 408(b) of the Internal Revenue Code of 1986, as amended (the "Code"), an
individual retirement annuity ("Roth IRA") meeting the requirements of section
408A of the Code, or some other retirement plan meeting the respective section
of the Code. For a Contract funding a qualified plan, distributions 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 and contributions to a Roth
IRA). 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 Sponsored 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 annual limits on contributions to IRAs and Roth IRAs are described under
Federal Tax Considerations.
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, or a corresponding Series of the ESS Trust. The GCG and the
ESS Trusts are each managed by Directed Services, Inc. ("DSI"). From its in-
ception through December 31, 1997, the ESS Trust was managed by Equitable In-
vestment Services, Inc. ("EISI"), an affiliate of DSI. As of January 1, 1998,
DSI assumed EISI's responsibilities to the ESS Trust. The Trusts and DSI have
retained several portfolio managers to manage the assets of each Series. The
PIMCO Trust is managed by Pacific Investment Management Company ("PIMCO"). See
Facts About the Company and the Accounts, Account NY-B Divisions.
5
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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 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, quarterly or annual basis. If you have an IRA
Contract or a Roth 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.
6
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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.
7
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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>
ENHANCED
STANDARD DEATH BENEFIT
DEATH BENEFIT ANNUAL RATCHET
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<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 (as a percentage of the average daily net assets
of a Series or on the combined average daily net assets of the indicated
groups of Series):
<TABLE>
<CAPTION>
MANAGEMENT OTHER TOTAL
SERIES AVAILABLE CURRENTLY FEES(/6/) EXPENSES EXPENSES
- -------------------------- ---------- -------- --------
<S> <C> <C> <C>
Multiple Allocation, Fully Managed, Capital
Appreciation, Rising Dividends, All-Growth, Real 0.98% 0.01% 0.99%
Estate, Hard Assets, Value Equity, Strategic
Equity, and Small Cap Series:
Managed Global Series: 1.25% 0.11% 1.36%
Emerging Markets(/7/): 1.75% 0.05% 1.80%
Limited Maturity Bond and Liquid Asset Series: 0.60% 0.01% 0.61%
</TABLE>
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<TABLE>
<CAPTION>
SERIES ADDED TO THE GCG TRUST OTHER EXPENSES TOTAL EXPENSES
AND AVAILABLE AFTER TRUST MANAGEMENT AFTER EXPENSE AFTER EXPENSE
CONSOLIDATION(/8/) FEES(/6/) REIMBURSEMENT(/9/) REIMBURSEMENT(/9/)
- ----------------------------- ---------- ------------------ ------------------
<S> <C> <C> <C>
Mid-Cap Growth
Series(/10/)(/11/):.......... 0.96% 0.01% 0.97%
Research Series(/10/):....... 0.96% 0.00% 0.96%
Total Return
Series(/10/):................ 0.96% 0.01% 0.97%
Growth
Opportunities(/12/):......... 1.10% 0.01% 1.11%
Growth & Income and Value +
Growth Series(/12/):......... 1.09% 0.01% 1.10%
Global Fixed Income Series:.. 1.60% 0.00% 1.60%
Developing World
Series(/7/):................. 1.75% 0.05% 1.80%
</TABLE>
THE ESS TRUST ANNUAL EXPENSES (Prior to Trust Consolidation) (as a percentage
of the average daily net assets):
<TABLE>
<CAPTION>
MANAGEMENT OTHER TOTAL
SERIES FEES(/6/) EXPENSES EXPENSES
- ------ ---------- -------- --------
<S> <C> <C> <C>
OTC Portfolio:.................................... 0.80% 0.19% 0.99%
Research Portfolio:............................... 0.80% 0.16% 0.96%
Total Return Portfolio:........................... 0.80% 0.17% 0.97%
Growth & Income Portfolio:........................ 0.95% 0.17% 1.12%
Value + Growth Portfolio:......................... 0.95% 0.25% 1.20%
</TABLE>
THE PIMCO TRUST(/13/) ANNUAL EXPENSES (as a percentage of average daily net
assets of a series):
<TABLE>
<CAPTION>
SERIES (available upon notice to ADVISORY OTHER TOTAL
Contractholders): FEES EXPENSES(/14/) EXPENSES
- -------------------------------- -------- ---------------- --------
<S> <C> <C> <C>
PIMCO High Yield Bond Portfolio............. 0.50% 0.25% 0.75%
PIMCO StocksPLUS Growth and Income
Portfolio................................... 0.40% 0.25% 0.65%
</TABLE>
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(1) A Market Value Adjustment, which may increase or decrease your Accumula-
tion Value, may apply to certain transactions. See Market Value Adjust-
ment.
(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 par-
tial 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 excess partial withdrawal are not treated as a withdrawal of any pre-
mium payments. See Charges Deducted from the Accumulation Value, Surren-
der Charge for Excess Partial Withdrawals.
(4) We reserve the right to impose a charge in the future at a maximum of $25
for each allocation change in excess of twelve per Contract Year. See Ex-
cess Allocation Charge.
(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).
9
<PAGE>
(7) After Trust Consolidation (see The Trusts, Proposed Trust Consolidation),
the assets of the Emerging Markets and Developing World will be combined
to determine the actual fee payable to Directed Services, Inc. ("DSI"),
the manager of the GCG Trust.
(8) See Facts about the Company and the Contracts, The Trusts, Proposed Trust
Consolidation for more information regarding the proposed Trust Consoli-
dation. Upon Trust Consolidation, the ESS Trust will cease to exist and
new GCG Trust Series will be substituted for the ESS Portfolios.
(9) Other Expenses generally consist of independent trustees fees and ex-
penses and certain expenses associated with investing in international
markets. Other expenses are estimated for the Growth Opportunities and
Developing World Series, since as of December 31, 1997, these Series had
not yet commenced operations. DSI has agreed voluntarily to reimburse ex-
penses and waive management fees, if necessary, to maintain total ex-
penses at the levels shown for the Research and the Global Fixed Income
Series (formerly the International Fixed Income Portfolio). This agree-
ment will remain in place through December 31, 1999, and after that time
may be terminated at any time. Without this agreement and based on cur-
rent estimates, Total Expenses would be 0.97% and 1.65%, for the Re-
search, and the Global Fixed Income Series, respectively.
(10) After Trust Consolidation (see The Trusts, Proposed Trust Consolidation),
the assets of the Mid-Cap Growth (formerly the OTC Portfolio), the Re-
search and the Total Return Series will be combined to determine the ac-
tual fee payable to DSI.
(11) The OTC Portfolio prior to Trust Consolidation.
(12) The International Fixed Income Portfolio prior to Trust Consolidation.
(13) The Series of the PIMCO Trust will become available following approval by
regulatory authorities and notice to Contractholders.
(14) Other Expenses are estimated for the PIMCO High Yield Bond and PIMCO
StocksPLUS Growth and Income Portfolios, since as of December 31, 1997,
these Series had not yet commenced operations.
10
<PAGE>
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 FIVE YEARS TEN YEARS
- -------- -------- ----------- ---------- ---------
<S> <C> <C> <C> <C>
Multiple Allocation.................. $ 94.67 $125.90 $159.74 $276.70
Fully Managed........................ $ 94.67 $125.90 $159.74 $276.70
Capital Appreciation................. $ 94.67 $125.90 $159.74 $276.70
Rising Dividends..................... $ 94.67 $125.90 $159.74 $276.70
All-Growth........................... $ 94.67 $125.90 $159.74 $276.70
Real Estate.......................... $ 94.67 $125.90 $159.74 $276.70
Hard Assets.......................... $ 94.67 $125.90 $159.74 $276.70
Value Equity......................... $ 94.67 $125.90 $159.74 $276.70
Strategic Equity..................... $ 94.67 $125.90 $159.74 $276.70
Small Cap............................ $ 94.67 $125.90 $159.74 $276.70
Emerging Markets..................... $102.75 $149.96 $199.51 $354.24
Managed Global....................... $ 98.37 $136.96 $178.11 $312.97
OTC.................................. $ 94.67 $125.90 $159.74 $276.70
Research............................. $ 94.37 $125.00 $158.23 $273.70
Total Return......................... $ 94.47 $125.30 $158.74 $274.70
Growth & Income...................... $ 95.97 $129.80 $166.24 $289.61
Value + Growth....................... $ 96.77 $132.19 $170.21 $297.47
Limited Maturity Bond................ $ 90.86 $114.41 $140.50 $237.92
Liquid Asset......................... $ 90.86 $114.41 $140.50 $237.92
- -------------------------------------------------------------------------------
<CAPTION>
DIVISION AFTER TRUST CONSOLIDATION ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
- ---------------------------------- -------- ----------- ---------- ---------
<S> <C> <C> <C> <C>
Growth Opportunities................. $ 95.87 $129.50 $165.74 $288.63
Developing World..................... $102.75 $149.96 $199.51 $354.24
Research............................. $ 94.37 $125.00 $158.23 $273.70
Total Return......................... $ 94.47 $125.30 $158.74 $274.70
Mid-Cap Growth*...................... $ 94.47 $125.30 $158.74 $274.70
Growth & Income...................... $ 95.77 $129.20 $165.24 $287.64
Value + Growth....................... $ 95.77 $129.20 $165.24 $287.64
Global Fixed Income**................ $100.76 $144.07 $189.85 $335.73
High Yield Bond...................... $ 92.27 $118.66 $147.63 $252.39
StocksPLUS Growth and Income......... $ 91.26 $115.62 $142.54 $242.08
</TABLE>
- -------------------------------------------------------------------------------
- ---------------------
(*)The OTC Portfolio prior to Trust Consolidation.
(**)The International Fixed Income Portfolio prior to Trust Consolidation.
11
<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 FIVE YEARS TEN YEARS
- -------- -------- ----------- ---------- ---------
<S> <C> <C> <C> <C>
Multiple Allocation.................. $24.67 $75.90 $129.74 $276.70
Fully Managed........................ $24.67 $75.90 $129.74 $276.70
Capital Appreciation................. $24.67 $75.90 $129.74 $276.70
Rising Dividends..................... $24.67 $75.90 $129.74 $276.70
All-Growth........................... $24.67 $75.90 $129.74 $276.70
Real Estate.......................... $24.67 $75.90 $129.74 $276.70
Hard Assets.......................... $24.67 $75.90 $129.74 $276.70
Value Equity......................... $24.67 $75.90 $129.74 $276.70
Strategic Equity..................... $24.67 $75.90 $129.74 $276.70
Small Cap............................ $24.67 $75.90 $129.74 $276.70
Emerging Markets..................... $32.75 $99.96 $169.51 $354.24
Managed Global....................... $28.37 $86.96 $148.11 $312.97
OTC.................................. $24.67 $75.90 $129.74 $276.70
Research............................. $24.37 $75.00 $128.23 $273.70
Total Return......................... $24.47 $75.30 $128.74 $274.70
Growth & Income...................... $25.97 $79.80 $136.24 $289.61
Value + Growth....................... $26.77 $82.19 $140.21 $297.47
Limited Maturity Bond................ $20.86 $64.41 $110.50 $237.92
Liquid Asset......................... $20.86 $64.41 $110.50 $237.92
- -------------------------------------------------------------------------------
<CAPTION>
DIVISION AFTER TRUST CONSOLIDATION ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
- ---------------------------------- -------- ----------- ---------- ---------
<S> <C> <C> <C> <C>
Growth Opportunities................. $25.87 $79.50 $135.74 $288.63
Developing World..................... $32.75 $99.96 $169.51 $354.24
Research............................. $24.37 $75.00 $158.23 $273.70
Total Return......................... $24.47 $75.30 $128.74 $274.70
Mid-Cap Growth*...................... $24.47 $75.30 $128.74 $274.70
Growth & Income...................... $25.77 $79.20 $165.24 $287.64
Value + Growth....................... $25.77 $79.20 $165.24 $287.64
Global Fixed Income**................ $30.76 $94.07 $189.85 $335.73
High Yield Bond...................... $22.27 $68.66 $117.63 $252.39
StocksPLUS Growth and Income......... $21.26 $65.62 $112.54 $242.08
- -------------------------------------------------------------------------------
</TABLE>
- ---------------------
(*)The OTC Portfolio prior to Trust Consolidation.
(**)The International Fixed Income Portfolio prior to Trust Consolidation.
The purpose of the Fee Table is to assist you in understanding the various
costs and expenses that you will bear directly or indirectly. For purposes of
computing the annual per Contract administrative charge, the dollar amounts
shown in the examples are based on an Initial Premium of $65,000.
The examples reflect the election at issue of the Annual Ratchet Enhanced
Death Benefit Option. If the Standard Death Benefit Option is elected, the ac-
tual expenses incurred will be less than those represented in the Examples.
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EX-
PENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN, SUBJECT TO
THE GUARANTEES UNDER THE CONTRACT.
12
<PAGE>
- -------------------------------------------------------------------------------
CONDENSED FINANCIAL AND OTHER INFORMATION
INDEX OF INVESTMENT EXPERIENCE
The following table gives the index of investment experience for each Division
of Account NY-B available under the Contract for each death benefit option.
The Divisions became available on May 6, 1997, and started with the index of
investment experience as shown below, except for the Growth Opportunities and
Developing World Divisions which became available for investment on February
19, 1998 and the Global Fixed Income Division which became available for in-
vestment on May 1, 1998. The index of investment experience is equal to the
value of a unit for each Division of the Accounts. The total investment value
of each Division as of the end of 1997 is shown in the right hand columns.
<TABLE>
<CAPTION>
TOTAL INVESTMENT VALUE
INDEX OF INVESTMENT EXPERIENCE IN THOUSANDS
------------------------------- -------------------------
ANNUAL ANNUAL
DIVISION STANDARD RATCHET STANDARD RATCHET
- -------- --------------- --------------- ----------- -----------
5/6/97 12/31/97 5/6/97 12/31/97 12/31/97 12/31/97
------ -------- ------ -------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Multiple Allocation..... $18.54 $20.83 $18.32 $20.55 -- $ 26
Fully Managed........... $17.95 $19.93 $17.73 $19.66 -- $ 33
Capital Appreciation.... $18.45 $22.24 $18.31 $22.05 -- $ 16
Rising Dividends........ $17.27 $20.22 $17.18 $20.09 $ 2 $165
All-Growth.............. $13.10 $14.48 $12.94 $14.28 -- $ 8
Real Estate............. $21.31 $25.82 $21.05 $25.48 -- $ 12
Hard Assets............. $19.34 $20.85 $19.11 $20.57 -- $ 5
Value Equity............ $15.72 $18.36 $15.66 $18.28 $19 $ 19
Strategic Equity........ $11.96 $14.36 $11.93 $14.31 -- $ 18
Small Cap............... $10.72 $12.92 $10.70 $12.88 -- $ 44
Emerging Markets........ $10.38 $ 8.75 $10.33 $ 8.70 -- $ 16
Managed Global.......... $11.24 $11.76 $11.16 $11.67 -- $ 35
OTC..................... $15.76 $18.64 $15.68 $18.52 -- $ 10
Research................ $16.72 $18.95 $16.66 $18.87 $ 2 $ 8
Total Return............ $14.36 $16.18 $14.31 $16.10 -- $ 18
Growth & Income ........ $12.46 $15.45 $12.44 $15.41 -- $ 5
Value + Growth.......... $12.47 $13.06 $12.45 $13.03 -- $ 40
Limited Maturity Bond... $15.43 $16.13 $15.24 $15.91 -- $ 10
Liquid Asset............ $13.67 $14.02 $13.51 $13.83 -- --
</TABLE>
FINANCIAL STATEMENTS
The audited financial statements of Separate Account NY-B for the year ended
1997 (as well as the auditors' report thereon) appear in the Statement of Ad-
ditional Information. The audited financial statements of First Golden pre-
pared in accordance with generally accepted accounting principles for the
years ended December 31, 1997 and 1996 (as well as the auditors' report there-
on) are contained in the Prospectus.
PERFORMANCE RELATED INFORMATION
Performance information for the Divisions of Account NY-B, including the
yields, standard annual total returns and other nonstandard measures of per-
formance may appear in reports and promotional literature to current or pro-
spective Owners. Such performance data will be computed, or accompanied by
performance data computed, in accordance with standards defined by the SEC.
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,
13
<PAGE>
Measurement of Investment Experience, 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 investment 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 applicable surrender charge, the administra-
tive charge and the applicable mortality and expense risk charge. See Charges
and Fees. Quotations of total return may simultaneously be shown for other pe-
riods that do not take into account certain 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.
14
<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"). Golden American, in turn,
is a wholly owned subsidiary of Equitable of Iowa Companies, Inc. ("Equitable
of Iowa") which, in turn, is a wholly owned subsidiary of ING Groep, N.V.
("ING"). First Golden is authorized to do business in the states of New York
and Delaware. First Golden offers variable annuities.
Equitable of Iowa is the holding company for Equitable Life Insurance Company
of Iowa, USG Annuity & Life Company, Locust Street Securities, Inc., Equitable
American Insurance Company, Directed Services, Inc. ("DSI"), and Golden Ameri-
can. On October 24, 1997, ING acquired all interest in Equitable of Iowa and
its subsidiaries, including First Golden. ING, based in the Netherlands, is a
global financial services holding company with over $307 billion in assets.
Equitable of Iowa and another ING affiliate own ING Investment Management,
LLC, who assumed EISI's portfolio management responsibilities for the GCG
Trust and the ESS Trust as of January 1, 1998.
THE TRUSTS
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." 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 ESS Trust is also an open-end management investment company. The ESS
Trust's shares are not available to separate accounts of other insurance com-
panies except affiliated insurance companies such as First Golden.
The PIMCO Trust is also an open-end management investment company. The Series
of the PIMCO Trust were designated to be used as investment vehicles by sepa-
rate accounts of insurance companies, including First Golden, for both vari-
able annuity contracts and variable life insurance policies and by qualified
pension and retirement plans.
Proposed Trust Consolidation. In an effort to consolidate the operations of
the GCG Trust and the ESS Trust ("Trust Consolidation"), the affiliated insur-
ance companies of Equitable of Iowa, including First Golden (the "Companies"),
filed an application with the SEC requesting permission via an order to sub-
stitute shares of each Series of the ESS Trust with shares of similar Series
of the GCG Trust (the "Substitution"). The table below identifies the ESS
Portfolios currently available under the Contract and the new GCG Series sub-
stituted for each. The Substitution of shares will reduce operating expenses
and create larger economies of scale from which a further reduction of ex-
penses is anticipated. Contractholders will benefit directly from any reduc-
tion of Trust expenses. CONTRACTHOLDERS WILL NOT BEAR ANY EXPENSE ASSOCIATED
WITH THE SUBSTITUTION.
<TABLE>
<CAPTION>
ESS TRUST REPLACED PORTFOLIO GCG TRUST SUBSTITUTE SERIES
---------------------------- ---------------------------
<S> <C>
OTC Portfolio Mid-Cap Growth Series
Research Portfolio Research Series
Total Return Portfolio Total Return Series
Growth & Income Portfolio Growth & Income Series
Value + Growth Portfolio Value + Growth Portfolio
</TABLE>
15
<PAGE>
Upon obtaining the requested order for substitution from the SEC, and subject
to any required prior approval by applicable insurance authorities, the Compa-
nies will effect the Substitution by simultaneously placing an order for each
Division to redeem the shares of the Series of the ESS Trust and an order for
each Division to purchase shares of the designated respective Series of the
GCG Trust. After the Trust Consolidation has occurred, Customer Service will
send affected contractholders a notice within five days.
You will find complete information about the Trusts, including the risks asso-
ciated with each Series, in the accompanying Trusts' prospectuses. You should
read them carefully in conjunction with this prospectus before investing. Ad-
ditional copies of the Trusts' prospectuses may be obtained by contacting our
Customer Service Center.
First Golden does not anticipate any inherent difficulties arising from the
mixed and/or shared funding or sales to pension or retirement plans by the GCG
Trust or the PIMCO Trust. However, there is a possibility that, due to differ-
ences in tax treatment or other considerations, the interests of
Contractowners of various contracts participating in the Trusts may conflict.
The Board of Trustees of the GCG Trust and the PIMCO Trust, DSI, PIMCO and we
and any other insurance companies participating in the Trusts are required to
monitor events to identify any material conflicts that arise from the use of
the GCG Trust and/or the PIMCO Trust for mixed and/or shared funding between
various policy owners and pension and retirement plans. In the event of a ma-
terial conflict, First Golden will take the necessary steps, including remov-
ing the Separate Account from that Trust, to resolve the matter. See the GCG
Trust and PIMCO Trust prospectuses for more information.
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 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,
the ESS Trust or, after regulatory approval, the PIMCO Trust. DSI serves as
the Manager to each Series of the GCG Trust, EISI serves as the Manager to
each Series of the ESS Trust and PIMCO serves as the Manager to the PIMCO
Trust. See the Trusts' prospectuses for details. The GCG and ESS Trusts and
DSI have retained several portfolio managers to manage the assets of each Se-
ries of the GCG or ESS Trusts as indicated below. There may be restrictions on
the amount of the allocation to certain Divisions based on state laws and reg-
ulations. The investment objectives of the various Series in the Trusts are
described below. There is no guaran-
16
<PAGE>
tee that any portfolio or Series will meet its investment objectives. Meeting
objectives depends on various factors, including, in certain cases, how well
the portfolio managers anticipate changing economic and market conditions. Ac-
count NY-B also has other Divisions investing in other series which are not
available to the Contract described in this prospectus.
DSI and PIMCO 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 and PIMCO are responsible for providing or procuring, at DSI's or PIMCO's
expense, the services reasonably necessary for the ordinary operation of the
Series of the GCG Trust or the PIMCO Trust. DSI and PIMCO do not bear the ex-
pense 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 or the PIMCO Trust, interest
on borrowing, fees and expenses of the independent trustees, and extraordinary
expenses, such as litigation or indemnification expenses. See the GCG and
PIMCO Trust prospectuses for details.
The GCG and the ESS Trust, each pay DSI 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 not the Trusts) pays each portfolio man-
ager a monthly fee for managing the assets of the Series.
THE GCG TRUST
<TABLE>
<CAPTION>
SERIES AVAILABLE CURRENTLY 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 $1.25 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
Managed Global Series: 1.25% of first $500 million;
1.05% of amount in excess of $500
million
Emerging Markets Series(/1/): 1.75% of average daily net assets
Limited Maturity Bond and Liquid Asset 0.60% of first $200 million;
Series: 0.55% of next $300 million; and
0.50% of amount in excess of $500
million
</TABLE>
<TABLE>
<CAPTION>
SERIES ADDED UPON TRUST CONSOLIDATION FEES (based on combined assets of the indicated groups of Series)
--------------------------------------------- -----------------------------------------------------------------
<C> <S>
Growth Opportunities, Growth & Income and 1.10% of first $250 million;
Value + Growth Series 1.05% of next $400 million;
1.00% of next $450 million; and
0.95% of amount in excess of $1.1
billion
Mid-Cap Growth, Total Return, and Research 1.00% of first $250 million;
Series: 0.95% of next $400 million;
0.90% of next $450 million; and
0.85% of amount in excess of $1.1
billion
Global Fixed Income Series: 1.60%
Developing World Series(/1/): 1.75% of average daily net assets
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The assets of the Emerging Markets and Developing World Series are com-
bined for the purposes of determining fees.
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 Portfolio: 0.95% of first $200 million;
0.75% of amount in excess of $200
million
Value + Growth Portfolio: 0.95% of first $500 million;
0.75% of amount in excess of $500
million
- --------------------------------------------------------------------------------------
</TABLE>
The PIMCO Trust pays PIMCO an advisory fee (see the table following) and an
administrative fee of 0.25%, each payable monthly, based on the average daily
net assets of each of the Series for managing the assets of the Series and for
administering the Trust.
THE PIMCO TRUST
<TABLE>
<CAPTION>
SERIES ADVISORY FEES
--------------------------------------------- --------------------------------------
<C> <S>
PIMCO High Yield Bond Portfolio: 0.50%
PIMCO StocksPLUS Growth and Income Portfolio: 0.40%
</TABLE>
17
<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 INCOME, CONSISTENT WITH THE PRESERVATION OF CAPITAL AND ELIMINATION OF
UNNECESSARY 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 preservation of capital and prudent investment risk.
INVESTMENTS - Pursues an active asset allocation strategy whereby investments
are allocated, based upon an evaluation of economic and market trends and the
anticipated relative total return available, among three asset classes -- debt
securities, 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 allo-
cated 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 earnings and positive earnings momentum; dominant competitive posi-
tions; and demonstrate above-average growth rates as compared to published S&P
500 earnings projections; and (ii) The Value Component -- securities that the
portfolio manager regards as fundamentally undervalued, i.e., securities sell-
ing at a discount to asset value and securities with a relatively low price-
/earnings ratio. 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 divi-
dend yield, expected dividend growth, and discount to current real estate val-
ue.
PORTFOLIO MANAGER - Chancellor LGT Asset Management, Inc.
RISING DIVIDENDS DIVISION
RISING DIVIDENDS SERIES
OBJECTIVE - Capital appreciation, with dividend income as a secondary objec-
tive.
INVESTMENTS - Investment in equity securities of high quality companies that
meet the following four criteria: consistent dividend increases; substantial
dividend increases; reinvested profits; and an under-leveraged balance sheet.
PORTFOLIO MANAGER - Kayne Anderson Investment Management, LLC
ALL-GROWTH DIVISION
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 objec-
tive.
INVESTMENTS - Investment in publicly traded equity securities of companies in
the real estate industry listed on national exchanges or on the National Asso-
ciation of Securities Dealers Automated Quotation System.
PORTFOLIO MANAGER - EII Realty Securities, Inc.
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HARD ASSETS DIVISION
HARD ASSETS SERIES
OBJECTIVE - Long-term capital appreciation.
INVESTMENTS - Investment in equity and debt securities of companies engaged in
the exploration, development, production, management, and distribution of nat-
ural resources.
PORTFOLIO MANAGER - Van Eck Associates Corporation
VALUE EQUITY DIVISION
VALUE EQUITY SERIES
OBJECTIVE - Capital appreciation with a secondary objective of dividend in-
come.
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 in-
trinsic value relative 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 eq-
uity market timing 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 characteristics 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 capital appreciation.
INVESTMENTS - Investment primarily in equity securities of companies that are
considered to be in emerging market countries in the Pacific Basin, Latin
America and elsewhere. Income is not an objective, and any production of cur-
rent income is considered incidental to the objective of growth of capital.
PORTFOLIO MANAGER - Putnam Investment Management, Inc.
MANAGED GLOBAL DIVISION
MANAGED GLOBAL SERIES
OBJECTIVE - Capital appreciation.
INVESTMENTS - Investment primarily in common stocks of both domestic and for-
eign 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 market factors indicate that capital appreciation may be available with-
out significant risk to principal.
INVESTMENTS - Investment primarily in a diversified portfolio of limited matu-
rity debt securities. No individual security will at the time of purchase have
a remaining maturity longer than seven years and the dollar-weighted average
maturity of the Series will not exceed five years.
PORTFOLIO MANAGER - ING Investment Management, LLC
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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 instru-
mentalities; bank obligations; commercial paper and short-term corporate debt
securities.
TERM - All issues maturing in less than one year.
PORTFOLIO MANAGER - ING Investment Management, LLC
The following Divisions invest in designated Series of the ESS Trust. After
Trust Consolidation, they will invest in designated Series of the GCG Trust.
OTC DIVISION (At the time of Trust Consolidation, the OTC Division will be re-
named the Mid-Cap Growth Division and it will then invest in the
Mid-Cap Growth Series of the GCG Trust.)
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.
PORTFOLIO MANAGER - Massachusetts Financial Services Company
After Trust Consolidation:
MID-CAP GROWTH DIVISION
MID-CAP GROWTH SERIES OF THE GCG TRUST
OBJECTIVE - Long-term growth of capital.
INVESTMENTS - Investment primarily in equity securities
with medium market capitalization.
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 pros-
pects for long-term growth.
PORTFOLIO MANAGER - Massachusetts Financial Services Company
After Trust Consolidation:
RESEARCH DIVISION
RESEARCH SERIES OF THE GCG TRUST
OBJECTIVE - Long-term growth of capital and future in-
come.
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 capi-
tal.
INVESTMENTS - Investment primarily in equity securities.
PORTFOLIO MANAGER - Massachusetts Financial Services Company
After Trust Consolidation:
TOTAL RETURN DIVISION
TOTAL RETURN SSERIES OF THE GCG TRUST
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 in-
come, or both.
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PORTFOLIO MANAGER - Robertson, Stephens & Company Investment Management, L.P.
After Trust Consolidation:
GROWTH & INCOME DIVISION
GROWTH & INCOME SERIES OF THE GCG TRUST
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 In-
vestment 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 compa-
nies are those with market capitalizations ranging from $750 million to ap-
proximately $2 billion.
PORTFOLIO MANAGER - Robertson, Stephens & Company Investment Management, L.P.
After Trust Consolidation:
VALUE + GROWTH DIVISION
VALUE + GROWTH SERIES OF GCG TRUST
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 mil-
lion to approximately $2.0 billion.
PORTFOLIO MANAGER - Robertson, Stephens & Company In-
vestment Management, L.P.
The following Divisions of the ESS Trust and the PIMCO Trust are not currently
available under the Contract, but Golden American expects them to be made
available after Trust Consolidation (see The Trusts) and certain regulatory
approvals. Contractholders will be notified when these Series become available
for investment under the Contract.
GROWTH OPPORTUNITIES DIVISION
GROWTH OPPORTUNITIES SERIES OF THE GCG TRUST
OBJECTIVE - Capital appreciation.
INVESTMENTS - Investment primarily in equity securities of domestic companies
emphasizing companies with market capitalizations of $1 billion or more.
PORTFOLIO MANAGER - Montgomery Asset Management, LLC
DEVELOPING WORLD DIVISION
DEVELOPING WORLD SERIES OF THE GCG TRUST
OBJECTIVE - Capital appreciation.
INVESTMENTS - Investment primarily in equity securities of companies in coun-
tries having economies and markets generally considered to be emerging or de-
veloping.
PORTFOLIO MANAGER - Montgomery Asset Management, LLC
GLOBAL FIXED INCOME DIVISION
GLOBAL FIXED INCOME SERIES OF THE GCG TRUST
OBJECTIVE - High Total Return.
INVESTMENTS - Investment in both domestic and foreign debt securities and re-
lated foreign currency transactions. The total return will be sought through a
combination of current income, capital gains and gains in currency positions.
PORTFOLIO MANAGER - Baring International Investment Limited
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HIGH YIELD BOND DIVISION
PIMCO HIGH YIELD BOND PORTFOLIO
OBJECTIVE - Maximize total return.
INVESTMENTS - Investment in at least 65% of its assets in a diversified
portfolio of junk bonds rated at least B by Moody's Investor Services, Inc. or
Standard & Poor's Ratings Services, a Division of the McGraw Hill Cos., Inc.,
or, if unrated, determined by the Adviser to be of comparable quality.
PORTFOLIO MANAGER - PIMCO
STOCKPLUS GROWTH AND INCOME DIVISION
PIMCO STOCKSPLUS GROWTH AND INCOME PORTFOLIO
OBJECTIVE - Total return that exceeds the total return of the S&P 500.
INVESTMENTS - Invests in common stocks, options, futures, options on futures
and swaps consistent with its portfolio management strategy to attempt to
equal or exceed the performance of the S&P 500.
PORTFOLIO MANAGER - PIMCO
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.
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
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may impose. Your Fixed Allocation will be credited with the Guaranteed Inter-
est Rate in effect on the date we receive and accept your premium or realloca-
tion of Accumulation Value. The Guaranteed Interest Rate willbe credited daily
to yield the quoted Guaranteed Interest Rate.
GUARANTTEED INTEREST RATES. Each Guarantee Period will have an interest rate
that is guaranteed. We do not have a specific formula for establishing tyhe
Guaranteed Interest Rates for the different Guarantee periods. The determina-
tion made will be influenced 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 securities 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 Ratings Services, a Division of the McGraw Hill, Cos.,
Inc. (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 Government Na-
tional Mortgage Association, or that have an investment grade rating 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, including regulatory and
tax requirements, sales commissions and administrative expenses borne by us,
general economic trends and competitive factors. We cannot predict or guaran-
tee 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 particu-
lar strategy, except as may be required by New York and other state insurance
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 Guaran-
tee 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 averag-
ing program will not be subject to a Market Value Adjustment. All other trans-
fers from your Fixed Allocations will be subject to a Market Value Adjustment.
The minimum amount that can be transferred to or from any Fixed Allocation 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 Alloca-
tion.
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 Al-
locations 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 annuity commencement
date, we will transfer your Accumulation Value in the maturing Fixed Alloca-
tion 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 Designated Division.
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PARTIAL WITHDRAWALS FROM A FIXED ALLOCATION. Prior to the Annuity Commencement
Date and while your Contract is in effect, you may take partial withdrawals
from the Accumulation Value in a Fixed Allocation by sending satisfactory no-
tice to our Customer Service Center. You may make systematic withdrawals of
interest earnings only from a Fixed Allocation under our Systematic Partial
Withdrawal Option. (See Partial Withdrawals, Systematic Partial Withdrawal Op-
tion.) Systematic withdrawals from a Fixed Allocation are not permitted if
such Fixed Allocation participates in the dollar cost averaging program. With-
drawals 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. Withdrawals may have federal in-
come tax consequences, including a 10% penalty tax. See Surrender Charge, Sur-
render 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 pursu-
ant to the dollar cost averaging program; and (ii) on the Annuity Commencement
Date with respect 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 withdrawn,
transferred or annuitized by the following factor:
1+I
(1+J+.0025) /N365/ -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 Guarantee
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 with-
drawal, 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, transfer
or annuitization from the Fixed Allocation has been requested, the balance 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 calcu-
lated on the total amount that must be
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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, trans-
fer or annuitization. The Appendix contains several examples which illustrate
the application of the Market Value Adjustment.
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FACTS ABOUT THE CONTRACT
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.
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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.
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 connection with an individual retirement account. In the latter
case, the Contract will be issued without an Individual Retirement Annuity en-
dorsement, and the rights of the participant under the Contract will be af-
fected by the terms and conditions of the particular individual retirement
trust or custodial account, and by provisions of the Code and the regulations
thereunder. For example, the individual retirement trust or custodial account
will impose minimum 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. The
annual limits on contributions to IRAs and Roth IRAs are described under Fed-
eral Tax Consideration.
IF THE CONTRACT IS PURCHASED TO FUND A QUALIFIED PLAN OTHER THAN A ROTH IRA,
DISTRIBUTION MUST COMMENCE NOT LATER THAN APRIL 1ST OF THE CALENDAR YEAR FOL-
LOWING 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 Commence-
ment 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 indi-
vidual 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 compensation during the year. The maximum deductible amount for a
spousal IRA program is the lesser of $2,250 or 100% of your compensation re-
duced by the contribution (if any) made by you for the taxable year to your
own IRA. However, 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
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<PAGE>
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.
For Roth IRA Contracts, the annual premium on behalf of any individual Con-
tract, together with the total amount of any contributions you have made to
any non-Roth IRAs (except for rollover contributions), may not exceed the
lesser of $2,000 or 100% of your compensation. Contributions to a Roth IRA are
subject to income limits. See IRA Contracts and Other Qualified Retirement
Plans.
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 other than a Roth IRA
for the taxable year in which you attain age 70 1/2 and thereafter (except for
rollover contributions). The minimum additional premium payment we will 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.
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<PAGE>
(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 a Trust.
We also reserve the right to modify or terminate your right to reallocate your
Accumulation Value at any time in accordance with applicable law.
Reallocations from the Fixed Account are subject to the Market Value Adjust-
ment unless taken as part of the 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 provide us with satisfactory notice at our Cus-
tomer 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 a 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 detrimen-
tal effect on share prices of the respective 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.
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<PAGE>
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 the unavailability of securities for acquisition, we will
notify you promptly after the allocation has occurred. If, within 30 days, you
allocate the Accumulation Value from the Specially Designated Division to
other Divisions or Fixed Allocations of your choice, such allocations will not
be included in determining 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.
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<PAGE>
ACCUMULATION VALUE IN EACH DIVISION
ON THE CONTRACT DATE. On the Contract Date, your Accumulation Value is allo-
cated 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 Pe-
riod, 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 Period. 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 investments in an underlying se-
ries are made unless the underlying Series in which a Division invests has
been available under other contracts (offered by First Golden or an affiliate)
for some period of time. See Condensed Financial Information, Index of Invest-
ment Experience, for the initial index value for each Division when the first
investment was made in the Division under the Contract. The index for a cur-
rent Valuation Period equals the index for the preceding Valuation Period mul-
tiplied 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 experi-
ence 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 ex-
perience factor reflects the investment experience of the Series of the Trust
in which a Division invests as well as the charges assessed against the Divi-
sion 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.
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(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 dur-
ing a valuation period is the experience factor for that Valuation Period mi-
nus 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 un-
der this option is $1,000. A conventional partial withdrawal from a Fixed Al-
location 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.
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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 select
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 withdrawals
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>
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 systemat-
ically withdrawn based on that percentage would be less than the minimum of
$100, we would increase the amount to $100 provided it does not exceed 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 required to submit a new no-
tice 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 cho-
sen a monthly, quarterly or annual 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 con-
ventional partial withdrawal.
IRA PARTIAL WITHDRAWAL OPTION. If you have an IRA Contract and will attain age
70 1/2 in the current calendar year, distributions may be made to you to sat-
isfy 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 withdrawals while the Systematic Partial Withdrawal Option
is in effect. If you do not elect the IRA Partial Withdrawal Option, and dis-
tributions are required by Federal tax law, distributions adequate to satisfy
the requirements imposed by Federal tax law may be made. Thus, if the System-
atic Partial Withdrawal Option is in effect, distributions under that option
must be adequate to satisfy the mandatory distribution rules imposed by Fed-
eral tax law.
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<PAGE>
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 se-
lected, 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 withdrawn
from your Contract each year based on the information you give us and various
choices you make. For information regarding the calculation and choices you
have to make, see the Statement of Additional Information. 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 Systematic
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 TAKING 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 Considera-
tions for more details.
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.
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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 Bene-
fit. The Standard Death Benefit Option for the Contract is equal to the great-
est 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 payments less any partial withdraw-
als; (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 Premium.
(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 benefit
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 Beneficiary. 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.
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 Accu-
mulation 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 Ac-
cumulation 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 information 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.
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<PAGE>
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.
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CHARGES AND FEES
We deduct the charges described below to cover our costs and expenses, serv-
ices provided and risks assumed under the Contracts. We incur certain costs
and expenses for the distribution and administration of the Contracts, for
providing the benefits payable thereunder and for bearing various risks there-
under. The amount of a charge will not necessarily correspond to the costs as-
sociated with providing the services or benefits indicated by the designation
of the charge. For example, the Surrender Charge collected may not fully cover
all of the distribution expenses incurred by us. In the event there are any
profits from fees and charges deducted under the Contract, including but not
limited to mortality and risk expense charges, such profits could be used to
finance distribution of the Contracts.
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 percentage 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 receive and accept such premium payment. The percentage of premium
payments deducted at the time of surrender or excess partial withdrawal de-
pends 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 payment 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>
36
<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 with-
drawal. Such a withdrawal will be considered a partial surrender of the Con-
tract 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 Ac-
cumulation Value in each Division or Fixed Allocation from which the excess
partial withdrawal was taken. In instances where the excess partial withdrawal
equals the entire Accumulation Value in each such Division or Fixed Alloca-
tion, charges will be deducted 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 pur-
poses 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 surren-
der 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 withdrawal
of a part of the Initial Premium payment of $10,000 and would be subject 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 con-
form 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 Commence-
ment Date. In those states we may initially defer collection of the amount of
the charge for premium taxes from your Accumulation Value and deduct it
against Accumulation Value on surrender of the Contract, excess partial with-
drawals 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 Contract Year. See Asset Based Administrative Charge, below.
EXCESS ALLOCATION CHARGE. 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. This amount represents the maximum we will charge. The charge
would be deducted from the Divisions and the Fixed Allocations from which each
such
37
<PAGE>
reallocation 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 dollar
cost averaging and reallocation under the provision What Happens if a Division
is Not Available will 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 benefit option that has been elected. If the
Standard Death Benefit Option is elected, the charge is equivalent, on an an-
nual 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 Pe-
riod. 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.
ASSET BASED ADMINISTRATIVE CHARGE. We will deduct a daily charge from the as-
sets 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 Trusts. Please
read the respective Trust prospectus for details.
- -------------------------------------------------------------------------------
CHOOSING YOUR ANNUITIZATION OPTIONS
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.
38
<PAGE>
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.
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, other than a Roth IRA, distribution must commence not later
than April 1st of the calendar year following the calendar year in which you
attain age 70 1/2. Consult 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 com-
mencement 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 available upon request. Illustrations are available
upon request. If the Cash Surrender Value or Accumulation Value is applied un-
der this option, a 10% penalty 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 certain may be available on request. A refund certain may
be chosen instead. Under this arrangement, income is guaranteed until payments
equal the amount applied. If the person named lives beyond the guaranteed pe-
riod, 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 payments. Monthly payment amounts are available upon re-
quest.
OPTION 4. ANNUITY PLAN. An amount can be used to buy any single premium annu-
ity we offer on the option's effective date.
39
<PAGE>
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.
- -------------------------------------------------------------------------------
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 Assign-
ments. An assignment may have Federal tax consequences. See Federal Tax Con-
siderations.
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 valid-
ity 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 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 ad-
ministering 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 Accumulation Value plus any charges we deducted; and the
contract will be void as of the effective date of cancellation. We may require
your premiums designated for investment in the Divisions of Account NY-B be
allocated to the Specially Designated Division during the Free Look Period.
Premiums designated for the Fixed Account will be allocated to a Fixed Alloca-
tion with the Guarantee Period you have chosen. If you do not choose to exer-
cise your right to cancel during the Free Look Period, then at the end of the
Free
40
<PAGE>
Look Period 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 Expe-
rience and Unit Value.
EXCHANGING YOUR CONTRACT. For information regarding Section 1035 Exchanges,
see Federal Tax Considerations.
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 enrollment form for a Contract is approved. We may
change these rules from time to time. Any variation in the administrative
charge will reflect differences 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 6.5% of any initial
or additional premium payments made.
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REGULATORY INFORMATION
VOTING RIGHTS
ACCOUNT NY-B. We will vote the shares of a Trust owned by Account NY-B accord-
ing 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
41
<PAGE>
to vote 180 days or less before a Trust's meeting. We will ask you for voting
instructions 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 attribut-
able 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
The Company and its parent, like other insurance companies, are involved in
lawsuits, including class action lawsuits. In some class action and other law-
suits involving insurers, substantial damages have been sought and/or material
settlement payments have been made. Although the outcome of any litigation
cannot be predicted with certainty, the Company believes that at the present
time, there are no pending or threatened lawsuits that are reasonably likely
to have a material adverse impact on Separate Account NY-B or the Company.
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 LLP 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 and Separate Account NY-B, appearing or incorporated by ref-
erence in this Prospectus, the Statement of Additional Information and the
Registration Statement have been audited by Ernst & Young LLP, independent au-
ditors, as set forth in their reports thereon appearing or incorporated by
reference in this Prospectus, the Statement of Additional Information and the
Registration Statement and are included in reliance upon such reports given
upon the authority of such firm as experts in accounting and auditing.
- -------------------------------------------------------------------------------
MORE INFORMATION ABOUT FIRST GOLDEN AMERICAN LIFE INSURANCE COMPANY OF NEW
YORK
SELECTED FINANCIAL DATA
The following selected financial data prepared in accordance with generally
accepted accounting principles ("GAAP") for First Golden should be read in
conjunction with the financial statements and notes thereto included in this
Prospectus.
On October 24, 1997, PFHI Holdings, Inc. ("PFHI"), a wholly owned subsidiary
of ING Groep, N.V. ("ING") and a Delaware corporation, acquired all of the
outstanding capital stock of First Golden's parent, Equitable of Iowa Compa-
nies, pursuant to a merger agreement. For financial statement purposes, the
change in control of First Golden was accounted for as a purchase effective
October 25, 1997. This merger results in a new basis of accounting reflecting
estimated fair values of assets and liabilities at that date. As a result, the
GAAP financial data presented below for the period subsequent to October 24,
1997, is presented on the Post-Merger new basis of accounting, while the fi-
nancial statements for October 24, 1997 and prior periods are presented on the
Pre-Merger historical cost basis of accounting.
42
<PAGE>
<TABLE>
<CAPTION>
SELECTED GAAP BASIS
FINANCIAL DATA
(IN THOUSANDS)
-------------------------------------
POST-MERGER PRE-MERGER
------------ ------------------------
FOR THE
FOR THE PERIOD FOR THE
PERIOD JANUARY 1, PERIOD
OCTOBER 25, 1997 DECEMBER 17,
1997 THROUGH THROUGH 1996 THROUGH
DECEMBER 31, OCTOBER 24, DECEMBER 31,
1997 1997 1996
------------ ----------- ------------
<S> <C> <C> <C>
Annuity Product Charges.................. $ 8 $ 4 --
Net Income before Federal Income Tax..... $ 97 $ 953 $ 65
Net Income............................... $ 63 $ 666 $ 42
Total Assets............................. $33,927 N/A $24,967
Total Liabilities........................ $ 7,832 N/A $ 24
Total Stockholder's Equity............... $26,095 N/A $24,943
</TABLE>
The following selected financial data was prepared on the basis of statutory
accounting practices ("SAP"), which have been prescribed by the Department of
Insurance of the State of New York and the National Association of Insurance
Commissioners. These practices differ in certain respects from GAAP. The se-
lected financial data should be read in conjunction with the financial state-
ments and notes thereto included in this Prospectus, which describe the dif-
ferences between SAP and GAAP. See First Golden's Annual Report for more
detail.
<TABLE>
<CAPTION>
SELECTED STATUTORY
FINANCIAL DATA
(IN THOUSANDS)
-------------------------
FOR THE
YEAR ENDED
DECEMBER 31, 1997
-----------------
<S> <C>
Premiums and Annuity Considerations.................. $ 2,514
Net Income (Loss) before Federal Income Tax.......... $ 635
Net Income (Loss).................................... $ 439
Total Assets......................................... $32,965
Total Liabilities.................................... $ 7,541
Total Capital and Surplus............................ $25,424
</TABLE>
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.
First Golden's primary purpose is to offer insurance products in the State of
New York. On January 2, 1997 and December 23, 1997, First Golden became li-
censed as a life insurance company in the states of New York and Delaware, re-
spectively. First Golden is authorized to do business only in the states of
New York and Delaware.
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 were first offered to the public on March 25, 1997.
BUSINESS ENVIRONMENT. The current business and regulatory environment remains
challenging for the insurance industry. Increasing competition from tradi-
tional insurance carriers as well as banks and mutual fund companies offer
consumers many choices. However, overall demand for variable products remains
strong for several reasons including: a strong stock market performance over
the last 4 years; relatively low interest rates; an aging United States popu-
lation that is increasingly concerned about retirement and estate planning, as
well as maintaining their standard of living in retirement; potential reduc-
tions in government and employer-provided benefits at retirement as well as
lower public confidence in the adequacy of those benefits.
43
<PAGE>
RESULTS OF OPERATIONS
MERGER. On October 23, 1997, Equitable of Iowa Companies ("Equitable") share-
holders approved the Agreement and Plan of Merger ("Merger Agreement") dated
as of July 7, 1997, among Equitable, PFHI Holdings, Inc. ("PFHI"), and ING
Groep, N.V. ("ING"). On October 24, 1997, PFHI, a Delaware corporation, ac-
quired all of the outstanding capital stock of Equitable pursuant to the
Merger Agreement. PFHI is a wholly owned subsidiary of ING, a global financial
services holding company based in The Netherlands. Equitable, an Iowa corpora-
tion, in turn, owned all the outstanding capital stock of Equitable Life In-
surance Company of Iowa and Golden American and their wholly owned subsidiar-
ies. Equitable also owned all the outstanding capital stock of Locust Street
Securities, Inc., Equitable Investment Services, Inc., Directed Services,
Inc., Equitable of Iowa Companies Capital Trust, Equitable of Iowa Companies
Capital Trust II and Equitable of Iowa Securities Network, Inc. In exchange
for the outstanding capital stock of Equitable, ING paid total consideration
of approximately $2.1 billion in cash and stock plus the assumption of approx-
imately $400 million in debt according to the Merger Agreement. As a result of
the merger, Equitable was merged into PFHI which was simultaneously renamed
Equitable of Iowa Companies, Inc. ("EIC").
For financial statement purposes, the change in control of the Company through
the ING merger with EIC, was accounted for as a purchase effective October 25,
1997. This merger resulted in a new basis of accounting reflecting estimated
fair values of assets and liabilities at that date. As a result, the Company's
financial statements for the period subsequent to October 24, 1997, are pre-
sented on the Post-Merger new basis of accounting, while the financial state-
ments for October 24, 1997 and prior periods are presented on the Pre-Merger
historical cost basis of accounting.
The purchase price was allocated to the companies mentioned previously. Good-
will of $1.4 billion was established for the excess of the merger cost over
the fair value of the assets and liabilities of EIC with $96,000 pushed down
to the Company. The allocation of the purchase price to the Company was $25.9
million. The cost of the acquisition is preliminary as it relates to estimated
expenses, and as a result, the allocation of the purchase price to the Company
may change. Goodwill resulting from the merger is being amortized over 40
years on a straight-line basis. The carrying value will be reviewed periodi-
cally for any indication of impairment in value.
The following analysis combines the Post-Merger and Pre-Merger activity for
1997 in order to compare to the results of 1996. Such a comparison does not
recognize the impact of the purchase accounting and goodwill amortization ex-
cept for the period after October 24, 1997.
PREMIUMS. On March 25, 1997 and December 23, 1997, First Golden received pol-
icy approvals in New York and Delaware, respectively. The Company reported
$7.3 million in variable annuity premiums during the year ending December 31,
1997.
Premiums, net of reinsurance, for variable products from two significant
broker/dealers for the year ended December 31, 1997, totaled $6.9 million, or
94.5% of premiums. One of these distributors sold 59.4% of the Company's prod-
ucts in 1997. This distributor has indicated that it may discontinue the sales
relationship by the end of 1998.
REVENUES. Product charges from variable annuities totaled $12,000 in 1997. Net
investment income was $1,735,000 and $65,000 for the year ending December 31,
1997 and for the period December 17, 1996 through December 31, 1996, respec-
tively.
EXPENSES. The Company reported total insurance benefits and expenses of
$698,000 for the year ending December 31, 1997. Insurance benefits and ex-
penses consisted of interest credited to account balances, commissions, gen-
eral expenses, insurance taxes, amortization of deferred policy acquisition
expenses, goodwill and present value of in force acquired, net of deferred
policy acquisition costs. In-
44
<PAGE>
terest credited to account values was $74,000 for the year ending December 31,
1997. For the year ending December 31, 1997, commissions, general expenses and
insurance taxes were $312,000, $681,000 and $109,000, respectively.
The Company's deferred policy acquisition costs ("DPAC") was eliminated as of
the merger date and an asset of $132,000 representing present value of in
force acquired ("PVIF") was established for policies in force at the merger
date. First Golden deferred $502,000 of expenses associated with the sale of
variable annuity contracts for the year ending December 31, 1997. These acqui-
sition costs are amortized in proportion to the expected gross profits. Amor-
tization of deferred policy acquisition costs was $20,000 for the year ending
December 31, 1997. The amortization of PVIF for the period October 25, 1997
through December 31, 1997 was $3,000. Based on current conditions and assump-
tions as to the impact of future events on acquired policies in force, the ex-
pected approximate net amortization for the next five years, relating to the
PVIF as of December 31, 1997 is $19,000 in 1998, $18,000 in 1999, $17,000 in
2000, $15,000 in 2001 and $13,000 in 2002. Certain expense estimates inherent
in the cost of the merger may change resulting in changes of the allocation of
the purchase price. If changes occur, the impact could result in changes to
PVIF and the related amortization and deferred taxes. Actual amortization may
vary based upon final purchase price allocation and changes in assumptions and
experience.
Amortization of goodwill during the period from the merger date to December
31, 1997 totaled approximately $1,000. Goodwill is being amortized on a
straight-line basis over 40 years and is expected to total approximately
$2,400 annually.
NET INCOME. Net income was $729,000 and $42,000 for the year ending December
31, 1997 and the period December 17, 1996 through December 31, 1997, respec-
tively.
FINANCIAL CONDITION
RATINGS. At December 31, 1997, the Company's ratings were at A+ by A.M. Best
Company and AA+ by Duff Phelps Inc.
INVESTMENTS. First Golden's assets are invested in accordance with applicable
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 per-
mit investments, within specified limits subject to certain qualifications, in
federal, state, and municipal obligations, corporate bonds, preferred or com-
mon stocks, real estate mortgages, real estate and certain other investments.
First Golden purchases investments in accordance with investment guidelines
that take into account investment quality, liquidity and diversification, and
invests 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.
All of the Company's investments are carried at fair value in the Company's
financial statements. The increase in the carrying value of the Company's in-
vestment portfolio included changes in unrealized appreciation and deprecia-
tion of fixed maturity securities as well as a growth in the cost basis of
these securities. Growth in the cost basis of the Company's investment portfo-
lio resulted from the investment of premiums from the sale of the fixed ac-
count option of the Company's variable insurance products. The Company manages
the growth of its insurance operations in order to maintain adequate capital
ratios.
Fixed Maturity Securities: At December 31, 1997, the Company had fixed maturi-
ties with an amortized cost of $26.6 million and an estimated fair value of
$26.7 million. The individual securities in the Company's fixed maturities
portfolio (at amortized cost) include investment grade securities ($25.0 mil-
lion or 94.0%), which include securities issued by the U.S. Government, agen-
cies and corporations that are rated at least BBB- by Standard & Poor's Rating
Services ("Standard & Poor's"), and below investment grade securities ($1.6
million or 6.0%), which are securities issued by corporations that are rated
BB+ to BB- by Standard & Poor's.
45
<PAGE>
The Company classifies 100% of its securities as available for sale. Net
unrealized appreciation on fixed maturity securities of $151,000 was comprised
of gross appreciation of $183,000 and gross depreciation of $32,000. Net
unrealized holding losses on these securities, net of adjustments to DPAC and
deferred income taxes, increased stockholder's equity by $96,000 at December
31, 1997.
At December 31, 1997, the amortized cost value of the Company's total invest-
ment in below investment grade securities was $1.6 million or 6.0% of the
Company's investment portfolio. The Company intends to purchase additional be-
low investment grade securities, but it does not expect the percentage of its
portfolio invested in below investment grade securities to exceed 10% of its
investment portfolio. At December 31, 1997, the yield at amortized cost on the
Company's below investment grade portfolio was 7.86% compared to 6.60% for the
Company's investment grade bond portfolio. The Company estimates the fair
value of its below investment grade portfolio was $1.57 million or 98.0% of
amortized cost value, at December 31, 1997.
Below investment grade securities have different characteristics than invest-
ment grade corporate debt securities. Risk of loss upon default by the bor-
rower is significantly greater with respect to below investment grade securi-
ties than with other corporate debt securities. Below investment grade
securities are generally unsecured and are often subordinated to other credi-
tors of the issuer. Also, issuers of below investment grade securities usually
have higher levels of debt and are more sensitive to adverse economic condi-
tions, such as recession or increasing interest rates, than are issuers of in-
vestment grade securities. The Company attempts to reduce the overall risk in
its below investment grade portfolio, as in all of its investments, through
careful credit analysis, strict investment policy guidelines, and diversifica-
tion by company and by industry.
The Company analyzes its investment portfolio, including below investment
grade securities, at least quarterly in order to determine if its ability to
realize its carrying value on any investment has been impaired. For debt secu-
rities, if impairment in value is determined to be other than temporary (i.e.
if it is probable the Company will be unable to collect all amounts due ac-
cording to the contractual terms of the security), the cost basis of the im-
paired security is written down to fair value, which becomes the security's
new cost basis. The amount of the write-down is included in earnings as a re-
alized loss. Future events may occur, or additional or updated information may
be received, which may necessitate future write-downs of securities in the
Company's portfolio. Significant write-downs in the carrying value of invest-
ments could materially adversely affect the Company's net income in future pe-
riods.
During the year ended December 31, 1997, the amortized cost basis of the
Company's fixed maturity portfolio was reduced by $269,000 as a result of
scheduled principal repayments.
At December 31, 1997, no fixed maturity securities were deemed to have impair-
ments in value that are other than temporary. The Company's investment portfo-
lio had a combined yield at amortized cost of 6.57% at December 31, 1997.
OTHER ASSETS. DPAC represents certain deferred costs of acquiring new insur-
ance business, principally commissions and other expenses related to the pro-
duction of new business subsequent to the merger. The Company's DPAC was elim-
inated as of the merger date and an asset of $132,000 representing PVIF was
established for all policies in force at the merger date. PVIF is amortized
into income in proportion to the expected gross profits of in force acquired
in a manner similar to DPAC amortization. At December 31, 1997, PVIF and DPAC
were $126,000 and $189,000, respectively.
Goodwill totaling $96,000, representing the excess of the acquisition cost
over the fair value of net assets acquired, was established at the merger
date. Amortization of goodwill through December 31, 1997 was approximately
$1,000.
At December 31, 1997, the Company had $4.9 million of separate account assets.
At December 31, 1997, the Company had total assets of $33.9 million, an in-
crease of 36% over total assets at December 31, 1996.
Liabilities. At December 31, 1997, future policy benefits of $2.5 million were
established utilizing the retrospective deposit accounting method. Policy re-
serves represent the premiums received plus accu-
46
<PAGE>
mulated interest less mortality and administration charges. At December 31,
1997, the Company had $4.9 million of separate account liabilities.
The Company's total liabilities were $7.8 million at December 31, 1997. The
increase from $25,000 at December 31, 1996 is primarily the result of an in-
crease in future policy benefits and separate account liabilities. Liabilities
will continue to show significant growth as the Company increases its sales of
variable annuities.
LIQUIDITY AND CAPITAL RESOURCES
The liquidity requirements of the Company are met by cash flow from investment
income and premiums. The Company primarily uses funds for the payment of annu-
ity benefits, commissions, operating expenses and the purchase of new invest-
ments. Additional sources of future cash flows will include maturities of
fixed maturity investments.
First Golden's principal office is located in New York, New York, where cer-
tain of the Company's records are maintained. The 2,568 square feet of office
space is leased for a five year term.
On December 17, 1996, Golden American made capital contributions to First
Golden of $25 million. Of this amount, $2.0 million represented 200,000 shares
of common stock with a par value of $10.00 per share. The remaining $23.0 mil-
lion was contributed as additional paid-in capital. First Golden believes it
will be able to fund the capital required for projected new business primarily
with existing capital and future capital contributions from its Parent. First
Golden expects to continue to receive capital contributions from Golden Ameri-
can if necessary.
The Golden American board of directors has agreed by resolution to provide
funds as needed for the Company to maintain policyholders' surplus that meets
or exceeds the greater of: (1) the minimum capital adequacy standards to main-
tain a level of capitalization necessary to meet A.M. Best Company's guide-
lines or one level less than the one originally given to First Golden, or (2)
the New York State Insurance Department risk-based capital minimum require-
ments as determined in accordance with New York statutory accounting princi-
ples. No funds were transferred from Golden American in 1997.
First Golden is required to maintain a minimum capital and surplus of not less
than $4 million 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 stockholder 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.
The National Association of Insurance Commissioners' ("NAIC's") risk-based
capital requirements require insurance companies to calculate and report in-
formation under a risk-based capital formula. These requirements are intended
to allow insurance regulators to identify inadequately 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 has complied with the
NAIC's risk-based capital reporting requirements. Amounts reported indicate
the Company has total adjusted capital which is above all required capital
levels.
SEGMENT INFORMATION. First Golden's operations consist of one business seg-
ment, the sale of insurance products. First Golden is not dependent upon any
single customer, however, two broker/dealers accounted for a significant por-
tion of its sales volume in 1997. One of these distributors sold 59.4% of the
Company's products in 1997. This Distributor has indicated that it may discon-
tinue the sales relationship by the end of 1998. All premiums are generated
from consumers in the states of New York and Delaware.
47
<PAGE>
REINSURANCE. At December 31, 1997, First Golden had a reinsurance treaty with
a reinsurer covering a significant portion of the mortality risks under its
variable contracts with an unaffiliated reinsurer. First Golden remains liable
to the extent its reinsurer does not meet its obligation under the reinsurance
agreement.
YEAR 2000 PROJECT. Based on a study of its computer software and hardware,
First Golden's parent, Golden American, has determined its exposure to the
Year 2000 change of the century date issue. Management believes the Company's
systems are or will be substantially compliant by the Year 2000, and Golden
American has engaged external consultants to validate this assumption. The
only system known to be affected by this issue is a system maintained by an
affiliate who will incur the related costs to make the system compliant. To
mitigate the effect of outside influences and other dependencies relative to
the Year 2000, Golden American will continue to contact significant customers,
suppliers and other third parties. To the extent these third parties would be
unable to transact business in the Year 2000 and thereafter, the Company's
operations could be adversely affected.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Any forward-looking statements contained herein or in any other oral or writ-
ten statement by the Company or any of its officers, directors or employees is
qualified by the fact that actual results of the Company may differ materially
from such statement due to the following important factors, among other risks
and uncertainties inherent in the Company's business:
1. Prevailing interest rate levels and stock market performance, which may
affect the ability of the Company to sell its products, the market value of
the Company's investments and the lapse rate of the Company's policies,
notwithstanding product design features intended to enhance persistency of
the Company's products.
2. Changes in the federal income tax laws and regulations which may affect
the relative tax advantages of the Company's products.
3. Changes in the regulation of financial services, including bank sales
and underwriting of insurance products, which may affect the competitive
environment for the Company's products.
4. Increasing competition in the sale of the Company's products.
5. Other factors affecting the performance of the Company, including, but
not limited to, potential market conduct claims and other litigation, in-
surance industry insolvencies, investment performance of the underlying
portfolios of the variable products, variable product design and sales vol-
ume by significant sellers of the Company's variable products.
OTHER INFORMATION
CERTAIN AGREEMENTS. On November 8, 1996, First Golden and Golden American en-
tered into an administrative service agreement pursuant to which Golden Ameri-
can agreed to provide certain accounting, actuarial, tax, underwriting, sales,
management and other services to First Golden. Expenses incurred by Golden
American in relation to this service agreement will be reimbursed by First
Golden on an allocated cost basis. First Golden entered into a similar agree-
ment with another affiliate, Equitable Life Insurance Company of Iowa ("Equi-
table Life"), for additional services. For the year ended December 31, 1997,
First Golden incurred expenses of $24,000 and $29,000 under the agreements
with Golden American and Equitable Life, respectively.
First Golden also entered into an agreement with EISI, under which EISI per-
formed investment advisory services. For the year ended December 31, 1997,
First Golden incurred expenses of $62,000 under this agreement which was ter-
minated as of December 31, 1997.
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 estimated
amount of time spent by First Golden's employees on behalf of DSI. As of De-
cember 31, 1997, no such charges have been billed to DSI.
48
<PAGE>
DISTRIBUTION AGREEMENT. First Golden has entered into agreements with DSI to
perform services related to the distribution of its products. DSI acts as the
principal underwriter (as defined in the Securities Act of 1933 and the In-
vestment Company Act of 1940, as amended) of the variable insurance products
issued by First Golden. For the year ended December 31, 1997, commissions paid
by First Golden to DSI $408,000.
EMPLOYEES. During 1996, Golden American provided the support necessary for the
incorporation and licensing of First Golden. During 1997, First Golden had few
direct employees due to its small size and will continue to receive support
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 EIC, 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>
NAME (AGE) POSITIONS(S) WITH THE COMPANY
---------- -----------------------------
<S> <C>
Barnett Chernow (48) Director and President
Myles R. Tashman (55) Director, Executive Vice President, General Counsel and Secretary
James R. McInnis (50) Executive Vice President
Carol V. Coleman (48) Director
Stephen J. Friedman (60) Director
Frederick S. Hubbell Director and Chairman
(47)
Bernard Levitt (72) Director
Roger A. Martin (66) Director
Andrew Kalinowski (53) Director
Keith T. Glover (47) Executive Vice President
David L. Jacobson (48) Senior Vice President and Assistant Secretary
Stephen J. Preston (40) Senior Vice President and Chief Actuary
Mary B. Wilkinson (41) Senior Vice President and Treasurer (Chief Financial Officer)
Marilyn Talman (51) 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 parent, EIC.
The principal positions of First Golden's directors and senior executive offi-
cers for the past five years are listed below:
Mr. Frederick S. Hubbell is a Director and Chairman of First Golden, having
been appointed as a Director in December, 1997 and as Chairman in April, 1998.
He also serves as a Director, since August, 1996, and Chairman, since
September, 1996, of Golden American. He was appointed General Manager of
Financial Services International, an ING affiliate, in October, 1997, and
President and Chief Executive Officer of ING U.S. life and annuities companies
in April, 1998. Mr. Hubbell served as Chairman, President and Chief Executive
Officer of Equitable of Iowa from 1991 until October, 1997. He also has served
as Chairman and President of Equitable Life Insurance Company of Iowa from
1987 until October 1997.
Mr. Barnett Chernow became President of First Golden and Golden American in
April, 1998. From 1996 to 1998, Mr. Chernow served as Executive Vice President
of First Golden. From 1993 to 1998, Mr. Chernow also served as Executive Vice
President of Golden American. From 1977 through 1993, he held various posi-
tions with Reliance Insurance Companies and was Senior Vice President and
Chief Financial Officer of United Pacific Life Insurance Company from 1984
through 1993. He was elected to serve as a director of First Golden in June,
1996 and Golden American in April, 1998.
49
<PAGE>
Mr. Myles R. Tashman is Executive Vice President, General Counsel, Secretary
and Director of First Golden. Since December, 1995, Mr. Tashman has also
served as Executive Vice President of Golden American, and since January,
1998, he has served as a director of Golden American. From 1986 through 1993,
he was Senior Vice President and General Counsel of United Pacific Life Insur-
ance Company. He was elected to serve as a director of First Golden in June,
1996.
Mr. James R. McInnis is Executive Vice President of First Golden since Decem-
ber, 1997. From 1982 through November, 1997, he was with the Endeavor Group
and was President upon leaving.
Ms. Carol V. Coleman is a Director of First Golden, having been first ap-
pointed in December, 1997. She 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 institutions.
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. Keith T. Glover became Executive Vice President of First Golden and Golden
American in April, 1998. From 1991 to 1998, Mr. Glover served as Executive
Vice President of several First Golden affiliates; from 1996 to 1998, South-
land Life Insurance Company; from 1995 to 1996, ING Financial Services Inter-
national, North America; and from 1991 to 1994, Security Life of Denver. From
1994 to 1995, Mr. Glover served as President of ING Insurance Services-ING
America Life, another First Golden affiliate.
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 A. 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. Since November, 1993, Mr. Jacobson has also served as Senior
Vice President and Assistant Secretary of Golden American. 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 Securi-
ties 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. Since December, 1993, Mr. Preston has served in an identical capacity
with Golden American. From September, 1993 through November, 1993, he was Se-
nior Vice President and Actuary for Mutual of America Insurance Company. From
July, 1987 through August, 1993, he held various positions with United Pacific
Life Insurance Company and was Vice President and Actuary upon leaving.
Ms. Mary Bea Wilkinson is Senior Vice President and Treasurer of First Golden.
From November, 1993 through 1996, Ms. Wilkinson served as Senior Vice Presi-
dent, Assistant Secretary and Treasurer of Golden American. From August, 1993
through October, 1993, she was an Assistant Vice President with CIGNA Insur-
ance Companies. From January, 1987 through July, 1993, she held various posi-
tions with United Pacific Life Insurance Company and was Vice President and
Controller upon leaving.
50
<PAGE>
Ms. Marilyn Talman is Vice President, Associate General Counsel and Assistant
Secretary of First Golden. Since April, 1996, Ms. Talman has also served as
Vice President, Associate General Counsel and Assistant Secretary for Golden
American. Since September, 1996, Ms. Talman has also served as Assistant Sec-
retary 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.
COMPENSATION TABLES AND OTHER INFORMATION
The following sets forth information with respect to the Chief Executive Offi-
cer of First Golden as well as the annual salary and bonus for the next five
highly compensated executive officers for the fiscal year ended December 31,
1997. Certain executive officers of First Golden are also officers of DSI and
Golden American. The salaries of such individuals are allocated among First
Golden, DSI and Golden American. Executive officers of First Golden are also
officers of DSI and Golden American. The salaries of such individuals are al-
located among First Golden, DSI and Golden American pursuant to an arrangement
among these companies.
EXECUTIVE COMPENSATION TABLE
The following table sets forth information with respect to the annual salary
and bonus for First Golden Chief Executive Officer and the next five most
highly compensated executive officers for the fiscal year ended December 31,
1997.
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION
------------------- ------------------------
RESTRICTED SECURITIES
NAME AND STOCK UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS(/1/) AWARDS(/2/) OPTIONS(/3/) COMPENSATION(/4/)
- ------------------ ---- -------- ---------- ----------- ------------ -----------------
<S> <C> <C> <C> <C> <C> <C>
Terry L. Kendall, ...... 1997 $362,833 $ 80,365 $644,844 16,000 $10,000
President and
Chief Executive Officer
Barnett Chernow, ....... 1997 $234,167 $ 31,859 $277,576 4,000 $ 5,000
Executive Vice President
Edward C. Wilson, ...... 1997 $ 80,383 $137,700 5,000
Executive Vice President
Myles R. Tashman, ...... 1997 $181,417 $ 25,000 $165,512 5,000 $ 5,000
Executive Vice
President,
General Counsel and
Secretary
Stephen J. Preston, .... 1997 $160,758 $ 16,470 2,000
Senior Vice President
and
Chief Actuary
Mary Bea Wilkenson, .... 1997 $141,234 $ 14,466 2,000
Senior Vice President
</TABLE>
- ---------------------
(1) The amount shown relates to bonuses paid in 1997.
(2) Restricted stock awards granted to executive officers vested on October
24, 1997 with the change in control of Equitable of Iowa.
(3) Awards comprised of qualified and non-qualified stock options. All options
were granted with an exercise price equal to the then fair market value of
the underlying stock. All options vested with the change of control of Eq-
uitable of Iowa and were cashed out for the difference between $68.00 and
the exercise price.
(4) For 1997, this compensation includes payment to each named executive as
perquisite payments which are classified as taxable income and are re-
quired to be applied to specific business expenses of the named executive.
51
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR (1997)
On October 24, 1997, in conjunction with the acquisition of Equitable of Iowa,
all outstanding options vested and were cashed out for the difference between
$68.00 and the exercise price. The table below represents the options granted
in 1997.
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE AT
ASSUMED ANNUAL
% OF TOTAL RATES OF STOCK
NUMBER OF OPTIONS PRICE APPRECIATION
SECURITIES GRANTED TO FOR OPTION
UNDERLYING EMPLOYEES TERM(/4/)
OPTIONS IN FISCAL EXERCISE EXPIRATION -------------------
NAME GRANTED(/1/) YEAR PRICE(/2/) DATE(/3/) 5% 10%
---- ------------ ---------- ---------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Terry L. Kendall........ 16,000 5.26 $47.875 2/12/2007 $481,733 $1,220,807
Barnett Chernow......... 4,000 1.32 $47.875 2/12/2007 $120,433 $ 305,202
Edward C. Wilson........ 5,000 1.64 $47.875 2/12/2007 $150,542 $ 381,502
Myles R. Tashman........ 5,000 1.64 $47.875 2/12/2007 $150,542 $ 381,502
Stephen J. Preston...... 2,000 0.66 $47.875 2/12/2007 $ 60,217 $ 152,601
Mary Bea Wilkenson...... 2,000 0.66 $47.875 2/12/2007 $ 60,217 $ 152,601
</TABLE>
- ---------------------
(1) Stock options granted on February 12, 1997 by Equitable of lowa to the of-
ficers of Golden American had a five-year vesting period with 20% exercis-
able after 3rd year, an additional 30% after 4th year, and the final 50%
after 5th year. The options vested with the change of control of Equitable
of lowa.
(2) The exercise price was equal to the fair market value of the Common Stock
on the date of grant.
(3) Incentive Stock Options had a term of ten years. They were subject to ear-
lier termination in certain events related to termination of employment.
(4) Total dollar gains based on indicated rates of appreciation of share price
over a ten-year term.
Employee Directors of First Golden receive no additional compensation for
serving as a director.
- -------------------------------------------------------------------------------
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 AccountNY-B are a part of, and are taxed with, the operations of
First Golden, Account NY-B is not separately taxed as a "regulated investment
company" under the Code. Under existing federal income tax laws, investment
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
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intend to make provision for any such taxes. If First Golden is taxed on in-
vestment income 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 taxes.
TAXATION OF NON-QUALIFIED ANNUITIES
TAX DEFERRAL DURING ACCUMULATION PERIOD. Under existing provisions of the
Code, except as described below, any increase in an Owner's Accumulation Value
is generally not taxable to the Owner until amounts are received from the Con-
tract, either in the form of annuity payments as contemplated by the Contract,
or in some other form of distribution. However, this rule allowing deferral
applies only if (1) the investments of Account NY-B are "adequately diversi-
fied" in accordance with Treasury 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 individ-
ual (or is treated as owned by an individual). In addition to the foregoing,
if the Contract's annuity commencement date occurs at a time when the Annui-
tant is at an advanced age, such as over age 85, it is possible that the Owner
will be taxable currently 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 account,
such as the Divisions of Account NY-B, are to be "adequately diversified." If
a Division of Account NY-B failed to comply with these diversification stan-
dards, 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 contract (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 diversifica-
tion requirements prescribed by the Code and Treasury Department regulations.
Ownership Treatment. In certain circumstances, variable annuity contract own-
ers may be considered the owners, for federal income tax purposes, of the as-
sets 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 rul-
ings 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 investment control over the as-
sets. In addition, the Treasury Department announced, in connection with the
issuance of regulations concerning investment diversification, that those reg-
ulations "do not provide guidance concerning the circumstances in which in-
vestor control of the investments of a segregated asset account may cause the
investor, rather than the insurance 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 regulations or rulings on the "extent to which policyholders
may direct their investments to particular subaccounts (of a segregated asset
account) without being treated as owners of the 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 cer-
tain respects from, those described by the IRS in rulings in which it was de-
termined that contract owners were not owners of the assets of a segregated
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 result in the Owner being
treated as the owner of all or a portion of the assets of Account NY-B. In ad-
dition, First Golden does not know what standards 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 Contract Owners from being considered the own-
ers 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 basis
only. Thus, if the IRS or the Treasury Department
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were to issue regulations or a ruling which treated an Owner of this Contract
as the owner of Account NY-B, that treatment might apply on a prospective ba-
sis. However, if the regulations or ruling were not considered to set forth a
new position, an Owner might retroactively be determined to be the owner of
the assets of Account NY-B.
Non-Natural Owner. As a general rule, Contracts held by "non-natural persons"
such as a corporation, trust or other similar entity, as opposed to a natural
person, are not treated as annuity contracts for federal tax purposes. The in-
come 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 Own-
ers. 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 apply
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 connection with
qualified retirement plans, including certain Roth IRA Contracts, (3) certain
Contracts purchased by employers upon the termination of certain qualified re-
tirement plans, (4) certain Contracts used in connection with structured set-
tlement 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 purchase 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 with-
drawal 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) be-
fore the surrender exceeds his or her "investment in the contract." In the
case of a surrender of the Contract for the cash surrender value, amounts re-
ceived are includible in income to the extent they exceed the "investment in
the contract." For these purposes, the investment 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 neither 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 includible 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 exceed
the greater of the premium payments and the Accumulation Value. As described
elsewhere in this prospectus, First Golden imposes certain charges with re-
spect to the death benefit. It is possible that some portion of those charges
could be treated for federal tax purposes as a partial withdrawal 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 ex-
clusion amount. In the case of fixed annuity payments, the exclusion amount is
the amount determined by multiplying (1) the fixed annuity payment by (2) the
ratio of the "investment in the contract" (defined above), adjusted for any
period certain or refund feature, allocated to the fixed annuity option to the
total expected amount of fixed annuity payments for the period of the Contract
(determined under Treasury 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 annuity
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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 manner as a surrender, as described above, or
(2) if distributed under an annuity option, they are taxed in the same manner
as annuity payments, as described 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 includible 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 ex-
cludable 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 annuity
option within 60 days after the date on which it becomes payable. (Any annuity
option selected must comply with applicable mimimum distribution requirements
imposed by the Code.)
ASSIGNMENTS, PLEDGES, AND GRATUITOUS TRANSFERS. Other than in the case of Con-
tracts issued as IRAs or in connection with certain 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 purposes 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 con-
tract will be increased to reflect 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, endow-
ment, or annuity contract, provided that no cash or other property is received
in the exchange transaction. Special rules and procedures apply in order for
an exchange to meet the requirements of section 1035. Also, there are addi-
tional tax considerations involved when the contracts are issued in connection
with qualified retirement plans. Prospective Owners of this Contract should
consult a tax advisor before entering into a section 1035 exchange (with re-
spect 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 gen-
erally is a 10% penalty tax on the taxable amount of any payment from the Con-
tract 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 after 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 annually) 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 defined in the tax law), or (e) made under a Contract pur-
chased with a single purchase payment when the annuity starting
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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 fre-
quently than annually, during the annuity 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 combining some or all of the annuity contracts owned by an
individual not issued in connection with qualified retirement plans. For exam-
ple, if a person purchases 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 annuity commencement date) is includible in income. In addition,
if a person purchases a Contract offered by this prospectus and also purchases
at approximately the same time an immediate annuity, the IRS may treat the two
contracts as one contract. The effects of such aggregation are not clear; how-
ever, 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 quali-
fied retirement plans which receive favorable treatment under the Code. Numer-
ous special tax rules apply to the owners under IRAs and other qualified re-
tirement 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
certain 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 Con-
tracts 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, Own-
ers, 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 condi-
tions 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 de-
duction that an individual may claim for such premium payments, are limited
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 individual'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 individual for the taxable
year and (ii) the compensation includible in the gross income of the individu-
al'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 contri-
butions that exceed the law's limits.
The deductible amount of the premium payments made for an IRA for any taxable
year (including a contract for a noncompensated spouse) is limited to the
amount of premium payments that may be paid
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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 $40,000 may not deduct premium
payments, and such a person with adjusted gross income between $30,000 and
$40,000 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 qualified re-
tirement plan, and who have adjusted gross income in excess of $60,000 may not
deduct premium payments, and those with adjusted gross income between $50,000
and $60,000 may deduct only a portion of such payments.
In applying these and other rules applicable to an IRA, all individual retire-
ment accounts and IRAs owned by an individual are treated as one contract, and
all amounts distributed during any taxable year are treated as one distribu-
tion.
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 contract
that is issued as an IRA (or that is purchased by an individual retirement ac-
count) 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 enhanced death benefit could be
viewed as violating the prohibition on investment in life insurance contracts,
with the result that the Contract would not be viewed as satisfying the re-
quirements of an IRA and would not be a permissible investment for an individ-
ual 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 premium
payments were made to an IRA (within the limits allowed by the tax laws), a
portion of each distribution from the Contract typically is includible in in-
come when it is distributed. In such a case, any amount distributed as an an-
nuity 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 pre-
mium payments at the end of the taxable year in which the distribution com-
mences or is made (less any amounts previously distributed that were excluded
from income). Also, in such a case, any amount distributed upon a partial
withdrawal is partially includible in income. The includible amount is the ex-
cess of the distribution over the exclusion amount, which in turn generally
equals the distribution multiplied by the ratio of the investment in the con-
tract 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 quali-
fied retirement plans to an IRA (or from one IRA or individual retirement ac-
count to an IRA) without incurring current income tax if certain conditions
are met. Only certain types of distributions to eligible individuals 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 dis-
tributions from an IRA equal to 10% of the amount of the distribution includ-
ible in income. (Amounts rolled over from an IRA generally are excludable 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 payments over the life (or life ex-
pectancy) of the 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 foregoing, 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 min-
imum 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 following
the calendar year in which the Owner attains age 70 1/2.
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OTHER TYPES OF QUALIFIED RETIREMENT PLANS. The following sections describe tax
considerations of Contracts used in connection with various types of qualified
retirement plans other than IRAs. First Golden does not currently offer all of
the types of qualified retirement plans described and may not offer them in
the future. Prospective purchasers of Contracts for use in connection with
such qualified retirement plans should therefore contact First Golden's Cus-
tomer Service Center to ascertain the availability of the Contract for quali-
fied retirement plans at any given time.
Simplified Employee Pensions (SEP-IRAs). Section 408(k) of the Code allows em-
ployers to establish simplified employee pension plans for their employees,
using the employees' IRAs for such purposes, if certain criteria are met. Un-
der these plans the employer may, within specified limits, make deductible
contributions on behalf of the employees to IRAs. As discussed above (see In-
dividual Retirement Annuities), there is some uncertainty regarding the treat-
ment of the Contract's enhanced death benefit for purposes of certain tax
rules governing IRAs (which would include SEP-IRAs). Employers 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 es-
tablish "SIMPLE retirement accounts," including SIMPLE IRAs, for their employ-
ees. Under SIMPLE IRAs, certain deductible contributions are made by both em-
ployees and employers. SIMPLE IRAs are subject to various requirements,
including limits on the amounts that may be contributed, the persons who may
be eligible, and the time when distributions may commence. As discussed above
(see Individual Retirement Annuities), there is some uncertainty regarding the
proper characterization of the Contract's enhanced death benefit for purposes
of certain tax rules governing IRAs (which would include SIMPLE IRAs). Employ-
ers intending to use the Contract in connection with a SIMPLE retirement ac-
count should seek competent advice.
Roth Individual Retirement Annuity (Roth IRA). First Golden currently issues
the Contract as a Roth IRA. If the contract is used for this purpose, the
Owner must be the Annuitant.
Premium Payments. All premium payments to a Roth IRA are limited and are non-
deductible. In general, premium payments to a Roth IRA in a taxable year are
limited to the lesser of $2,000 or 100% of an individual's earned income less
any contributions made to other IRAs, including both Roth and non-Roth IRAs,
but excluding any rollover contributions to IRAs. Subject to coordinated IRA
contribution limits, contributions to a Roth IRA for an individual and a
spouse cannot exceed $4,000 or 100% of the individual's and spouse's earned
income, if less. The maximum contribution can be made if either of the follow-
ing applies: (a) for joint tax filers, their adjusted gross income is $150,000
or less, or (b) for individual tax filers, their adjusted gross income is
$95,000 or less. For amounts over these adjusted gross incomes, the contribu-
tion limit is reduced as follows: (a) for a joint tax filer, the maximum is
reduced by 20% of the excess adjusted gross income over $150,000 (no contribu-
tions over $160,000); (b) for an individual tax filer, the maximum is reduced
by 13.3% of the excess adjusted gross income over $95,000 (no contributions
over $110,000).
Conversions of Non-Roth IRA to a Roth IRA. A Roth IRA may be purchased with
amounts received as a qualified rollover ("Rollover Roth IRA") if the follow-
ing conditions are met: (a) when a rollover is from a non-Roth IRA, the tax-
payer must not be a married individual filing separately and the taxpayer's
adjusted gross income must not exceed $100,000; (b) rollovers must be made
within 60 days of receipt by the taxpayer; (c) minimum distributions from a
non-Roth IRA cannot be contributed to a Rollover Roth IRA; (d) an asset re-
ceived in a distribution may be sold and the proceeds put in a Rollover Roth
IRA; (e) all or part of a non-Roth IRA may be contributed to a Rollover Roth
IRA except an inherited IRA or a SIMPLE IRA; (f) a rollover contribution must
be designated in writing as such by the Owner at the time the rollover contri-
bution must be designated in writing as such by the Owner at the time the
rollover is made. Any distribution from a non-Roth IRA made within 60 days to
a Roth IRA is taxable in the year of the distribution. For rollovers or con-
versions completed in 1998, taxable income due to the distribution may be in-
cluded evenly over 1998-2001 tax years.
Rollovers from a Roth IRA to a Roth IRA. A rollover from a Roth IRA to a Roth
IRA may be accomplished if the following conditions are met: (a) the rollover
must be a direct rollover for the five year
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holding period of the original Roth IRA to be preserved; (b) the rollover may
be made for all or a portion of the Roth IRA; (c) a rollover contribution must
be designated as such in writing at the time the rollover is made.
Taxation of Roth IRA Distributions. A distribution from a Roth IRA is not sub-
ject to income tax or to the additional 10% penalty tax on premature distribu-
tions if it is a "qualified distribution." A qualified distribution is any
payment or distribution from a Roth IRA which is made: (a) following the end
of the fifth taxable period (year) after a contribution or rollover is made to
a Roth IRA, and (b) on or after the Owner attains age 59 1/2, or made to a
beneficiary on or after the Owner's death, or as a result of the Owner becom-
ing disabled, or qualified first-time home buyer distribution (subject to a
$10,000 lifetime limit). Distributions not meeting these definitions are "non-
qualified distributions." Non-qualified distributions are treated as being
made from contributions to a Roth IRA to the extent the distribution, when
added to all previous distributions from a Roth IRA, does not exceed the sum
of contributions to a Roth IRA. A non-qualified distribution in excess of the
sum of contributions is subject to ordinary income tax in the year a distribu-
tion is made. Such taxable distribution is also subject to a 10% penalty tax
unless the distribution is made under certain limited circumstances.
Roth IRAs are not subject to required distributions at age 70 1/2.
Corporate and Self-Employed ("H.R. 10" or "Keogh") Pension and Profit-Sharing
Plans. Sections 401(a) and 403(a) of the Code permit corporate employers to
establish various types of tax-favored retirement plans for employees. The
Self-Employed Individuals' Tax Retirement Act of 1962, as amended, commonly
referred to as "H.R. 10" or "Keogh," permits self-employed individuals also to
establish such tax-favored retirement plans for themselves and their
employees. Such retirement plans may permit the purchase of the Contract in
order to provide benefits under the plans. 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 such death benefit
could be characterized as an incidental death benefit. There are limitations
on the amount of incidental benefits that may be provided under pension and
profit sharing plans. In addition, the provision of such benefits may result
in currently taxable income to participants. Employers 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 annuity 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 pay-
ments and other tax consequences associated with such contracts. In particu-
lar, 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 Accumulation Value. It is possible that such death
benefit could be characterized as an incidental death benefit. If the death
benefit were so characterized, this could result in currently taxable income
to employees. In addition, there are limitations on the amount of incidental
death benefits that may be provided under a Section 403(b) Annuity Contract.
Even if the death benefit under the Contract were characterized as an inciden-
tal 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 beginning
after December 31, 1988, (ii) earnings on those contributions, and (iii) earn-
ings after 1988 on amounts attributable to salary reduction contributions (and
earnings on those contributions) held as of the last year beginning before
January 1, 1989. These amounts can be paid only if the employee has reached
age 59 1/2, separated from service, died, become disabled (within the meaning
of the tax law), or in the case of hardship. Amounts permitted to be
59
<PAGE>
distributed in the event of hardship are limited to actual contributions;
earnings thereon cannot be distributed on account of hardship. (These limita-
tions 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) Annuity Contract or into a section
403(b)(7) custodial account subject to withdrawal 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 employees must
be participants in an eligible deferred compensation plan. Generally, a Con-
tract purchased by a state or local government or a tax-exempt organization
will not be treated as an annuity contract for federal income tax purposes.
Those who intend to use the Contracts in connection with such plans should
seek competent advice.
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 "eligi-
ble rollover distribution" from the contract will be subject to direct
rollover and mandatory withholding requirements. An eligible rollover distri-
bution 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 sec-
tion 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 expectancies) of the employee and the employee's designated benefi-
ciary (within the meaning of the tax law), or for a specified period of 10
years or more).
Under these 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 administrator or
First Golden) explaining generally the direct rollover and mandatory withhold-
ing requirements and how to avoid the 20% withholding by electing 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%.
60
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS OF FIRST GOLDEN AMERICAN LIFE INSURANCE COMPANY OF NEW
YORK
For the fiscal year ended December 31, 1997 with Report of Independent Auditors
61
<PAGE>
FIRST GOLDEN AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
FINANCIAL STATEMENTS
DECEMBER 31, 1997
CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Auditors............................................. 48
Audited Financial Statements
Balance Sheets............................................................. 49
Statements of Income....................................................... 50
Statements of Changes in Stockholder's Equity.............................. 51
Statements of Cash Flows................................................... 52
Notes to Financial Statements.............................................. 53
</TABLE>
62
<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 sheets of First Golden American Life
Insurance Company of New York as of December 31, 1997 and 1996 and the related
statements of income, changes in stockholder's equity, and cash flows for the
periods from October 25, 1997 through December 31, 1997, January 1, 1997
through October 24, 1997, and December 17, 1996 (commencement of operations)
through December 31, 1996. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our 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, 1997 and 1996, and the results
of its operations and its cash flows for the Periods from October 25, 1997
through December 31, 1997, January 1, 1997 through October 24, 1997, and De-
cember 17, 1996 through December 31, 1996, in conformity with generally ac-
cepted accounting principles.
/s/ Ernst & Young LLP
Des Moines, Iowa
February 12, 1998
63
<PAGE>
BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
POST-MERGER PRE-MERGER
----------------- -----------------
DECEMBER 31, 1997 DECEMBER 31, 1996
----------------- -----------------
<S> <C> <C>
ASSETS
Investments:
Fixed maturities, available for sale, at
fair value (cost:
1997--$26,570, 1996--$24,373)............ $26,721 $24,220
Short-term investments.................... 799 350
------- -------
Total investments.......................... 27,520 24,570
Cash and cash equivalents.................. 621 5
Accrued investment income.................. 376 338
Deferred policy acquisition costs.......... 189 --
Present value of in force acquired......... 126 --
Current income taxes recoverable........... 63 --
Deferred income tax asset.................. -- 54
Property and equipment, less allowances for
depreciation of $3 in 1997................ 57 --
Goodwill, less accumulated amortization of
$1 in 1997................................ 95 --
Other assets............................... 2 --
Separate account assets.................... 4,878 --
------- -------
Total assets............................... $33,927 $24,967
======= =======
======= =======
LIABILITIES AND STOCKHOLDER'S EQUITY
Policy liabilities and accruals:
Future policy benefits:
Annuity products......................... $ 2,506 --
Deferred income tax liability.............. 247 --
Due to affiliates.......................... 61 --
Other liabilities.......................... 140 $ 1
Income taxes payable....................... -- 23
Separate account liabilities............... 4,878 --
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 2,000
Additional paid-in capital................ 23,936 23,000
Unrealized appreciation (depreciation) of
fixed maturities......................... 96 (99)
Retained earnings......................... 63 42
------- -------
Total stockholder's equity................. 26,095 24,943
------- -------
Total liabilities and stockholder's
equity.................................... $33,927 $24,967
======= =======
</TABLE>
See accompanying notes.
64
<PAGE>
STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
POST-MERGER PRE-MERGER
-------------- -----------------------------
FOR THE PERIOD FOR THE PERIOD FOR THE PERIOD
OCTOBER 25, JANUARY 1, DECEMBER 17,
1997 1997 1996*
THROUGH THROUGH THROUGH
DECEMBER 31, OCTOBER 24, DECEMBER 31,
1997 1997 1996
-------------- -------------- --------------
<S> <C> <C> <C>
REVENUES
Annuity product charges.......... $ 8 $ 4 --
Net investment income............ 286 1,449 $65
Realized gains on investments.... 1 -- --
----- ------ ---
295 1,453 65
Insurance benefits and expenses:
Annuity benefits:
Interest credited to account
balances....................... 26 48 --
Underwriting, acquisition and
insurance expenses:
Commissions..................... 45 267 --
General expenses................ 220 461 --
Insurance taxes................. 94 15 --
Policy acquisition costs de-
ferred......................... (204) (298) --
Amortization:
Deferred policy acquisition
costs......................... 13 7 --
Present value of in force
acquired...................... 3 -- --
Goodwill....................... 1 -- --
----- ------ ---
198 500 --
----- ------ ---
Income before income taxes........ 97 953 65
Income taxes...................... 34 287 23
----- ------ ---
Net income........................ $ 63 $ 666 $42
===== ====== ===
</TABLE>
- ---------------------
*Commencement of operations on December 17, 1996.
See accompanying notes.
65
<PAGE>
STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NET UNREALIZED
APPRECIATION
ADDITIONAL (DEPRECIATION) TOTAL
COMMON PAID-IN OF FIXED RETAINED STOCKHOLDER'S
STOCK CAPITAL MATURITIES EARNINGS EQUITY
------ ---------- -------------- -------- -------------
PRE-MERGER
-------------------------------------------------------
<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
Unrealized depreciation
of fixed maturities... -- -- $ (99) -- (99)
------ ------- ----- ---- -------
Balance at December 31,
1996................... 2,000 23,000 (99) 42 24,943
Net income............. -- -- -- 666 666
Unrealized depreciation
of fixed maturities... -- -- (130) -- (130)
------ ------- ----- ---- -------
Balance at October 24,
1997................... $2,000 $23,000 $(229) $708 $25,479
====== ======= ===== ==== =======
<CAPTION>
POST-MERGER
-------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at October 25,
1997................... $2,000 $23,936 -- -- $25,936
Net income............. -- -- -- $ 63 63
Unrealized appreciation
of fixed maturities... -- -- $ 96 -- 96
------ ------- ----- ---- -------
Balance at December 31,
1997................... $2,000 $23,936 $ 96 $ 63 $26,095
====== ======= ===== ==== =======
</TABLE>
- ---------------------
*Commencement of operations on December 17, 1996.
See accompanying notes.
66
<PAGE>
STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
POST-MERGER PRE-MERGER
-------------- -----------------------------
FOR THE PERIOD FOR THE PERIOD FOR THE PERIOD
OCTOBER 25, JANUARY 1, DECEMBER 17,
1997 1997 1996*
THROUGH THROUGH THROUGH
DECEMBER 31, OCTOBER 24, DECEMBER 31,
1997 1997 1996
-------------- -------------- --------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income....................... $ 63 $ 666 $ 42
Adjustments to reconcile net
income to net cash provided by
(used in) operations:
Adjustments related to annuity
products:
Interest credited to account
balances...................... 26 48 --
Charges for mortality and
administration................ -- (1) --
Decrease (increase) in accrued
investment income.............. 35 (73) (58)
Policy acquisition costs
deferred....................... (204) (298) --
Amortization of deferred policy
acquisition costs.............. 13 7 --
Amortization of present value of
in force acquired.............. 3 -- --
Net amortization of discount on
short-term investments......... -- -- (7)
Change in other assets, other
liabilities and accrued income
taxes.......................... (625) 739 24
Provision for depreciation and
amortization................... 12 17 --
Provision for deferred income
taxes.......................... 98 26 --
Realized gains on investments... (1) -- --
------- ------ --------
Net cash provided by (used in)
operating activities............ (580) 1,131 1
INVESTING ACTIVITIES
Sale, maturity or repayment of
investments:
Fixed maturities--available for
sale........................... 556 226 --
Short-term investments.......... -- -- 25,255
------- ------ --------
556 226 25,255
Acquisition of investments:
Fixed maturities--available for
sale........................... (2,635) -- (24,653)
Short-term investments.......... (59) (390) (25,598)
------- ------ --------
(2,694) (390) (50,251)
Purchase of property and
equipment....................... (2) (64) --
------- ------ --------
Net cash used in investing
activities...................... (2,140) (228) (24,996)
======= ====== ========
FINANCING ACTIVITIES
Capitalization of Company by
issuance of common stock and
contribution of paid-in
capital......................... -- -- 25,000
Receipts from investment
contracts credited to
policyholder account balances... 354 2,160 --
Return of policyholder account
balances on investment
contracts....................... (8) (15) --
Net reallocations to Separate
Account......................... (20) (38) --
------- ------ --------
Net cash provided by financing
activities...................... 326 2,107 25,000
------- ------ --------
Increase (decrease) in cash and
cash equivalents................ (2,394) 3,010 5
Cash and cash equivalents at
beginning of period............. 3,015 5 --
------- ------ --------
Cash and cash equivalents at end
of period....................... $ 621 $3,015 $ 5
======= ====== ========
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash paid during the period for
income taxes.................... -- $ 283 --
</TABLE>
- ---------------------
*Commencement of operations on December 17, 1996.
See accompanying notes.
67
<PAGE>
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
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 subsidiary of Equitable of Iowa Companies,
Inc. On December 17, 1996, Golden American provided capitalization in the
amount of $25,000,000 to First Golden. First Golden commenced investment oper-
ations on December 17, 1996. On January 2, 1997 and December 23, 1997, First
Golden became licensed as a life insurance company under the laws of the
states of New York and Delaware, respectively. First Golden received policy
approvals on March 25, 1997 and December 23, 1997 in New York and Delaware,
respectively. See Note 7 for further information regarding related party
transactions.
On October 24, 1997, PFHI Holdings, Inc. ("PFHI"), a Delaware corporation,
acquired all of the outstanding capital stock of Equitable of Iowa Companies
("Equitable") pursuant to the terms of the Agreement and Plan of Merger
("Merger Agreement") among Equitable, PFHI, and ING Groep, N.V. ("ING"). PFHI
is a wholly owned subsidiary of ING, a global financial services holding com-
pany based in The Netherlands. As a result of the merger, Equitable was merged
into PFHI which was simultaneously renamed Equitable of Iowa Companies, Inc.
("EIC"), a Delaware corporation. Refer to Note 5 for additional information
regarding the merger.
For financial statement purposes, the merger was accounted for as a purchase
effective October 25, 1997. The merger resulted in a new basis of accounting
reflecting estimated fair values of assets and liabilities. As a result, the
Company's financial statements for the period subsequent to October 24, 1997
are presented on the Post-Merger new basis of accounting, and financial state-
ments for October 24, 1997 and prior periods are presented on the Pre-Merger
historical cost basis of accounting.
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," which requires fixed maturity securities to be
designated as either "available for sale," "held for investment" or "trading."
Sales of fixed maturities designated as "available for sale" are not re-
stricted by SFAS No. 115. Available for sale securities are reported at fair
value and unrealized gains and losses on these securities are included di-
rectly in stockholder's equity after adjustment for related changes in de-
ferred policy acquisition costs ("DPAC"), present value of in force acquired
("PVIF"), policy reserves and deferred income taxes. At December 31, 1997 and
1996, all of the Company's fixed maturity securities are designated as avail-
able for sale although the Company is not precluded from designating fixed ma-
turity securities as held for investment or trading at some future date.
Securities determined to have a decline in value that is other than tempo-
rary 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 In-
come. Premiums and discounts are amortized/accrued utilizing the scientific
interest method which results in a constant yield over the security's expected
life. Amortization/accrual of premiums and discounts on mortgage-backed secu-
rities incorporates a prepayment assumption to estimate the securities' ex-
pected lives.
Short-term investments are reported at cost, adjusted for amortization of
premiums and accrual of discounts.
Fair Values
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. This pricing system uses a
matrix calculation assuming a spread over U.S. Treasury bonds based upon the
expected average lives of the securities. Fair values of private placement
bonds are estimated using a matrix
68
<PAGE>
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1997
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 methods for manager ini-
tiated and issuer initiated disposals, respectively.
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 Policy Acquisition Costs
Certain costs of acquiring new insurance business, principally commissions
and other expenses related to the production of new business, have been de-
ferred. Acquisition costs for variable annuity products are being amortized
generally in proportion to the present value (using the assumed crediting
rate) of expected future gross profits. This amortization is "unlocked" when
the Company revises its estimate of current or future gross profits to be re-
alized from a group of products. DPAC is adjusted to reflect the pro forma im-
pact of unrealized gains and losses on fixed maturity securities the Company
has designated as "available for sale" under SFAS No. 115.
Present Value of In Force Acquired
As the result of the merger, a portion of the acquisition cost was allocated
to the right to receive future cash flows from the existing insurance con-
tracts. This allocated cost represents the PVIF which reflects the value of
those purchased policies calculated by discounting actuarially determined ex-
pected future cash flows at the discount rate by the purchaser. Amortization
of PVIF is charged to expense in proportion to expected gross profits. This
amortization is "unlocked" when the Company revises its estimate of current or
future gross profits to be realized from the insurance contracts acquired.
PVIF is adjusted to reflect the pro forma impact of unrealized gains (losses)
on available for sale fixed maturities. See Note 5 for additional information
on PVIF resulting from the merger.
Property and Equipment
Property and equipment include leasehold improvements and office furniture
and equipment and are not considered to be significant to the Company's over-
all operations. Property and equipment are reported at cost less allowances
for depreciation. Depreciation expense is computed primarily on the basis of
the straight-line method over the estimated useful lives of the assets.
Goodwill
Goodwill was established as a result of the merger discussed previously and
is being amortized over 40 years on a straight-line basis. See Note 5 for ad-
ditional information on the merger.
Future Policy Benefits
Future policy benefits for the fixed interest division of the variable prod-
ucts are established utilizing the retrospective deposit accounting method.
Policy reserves represent the premiums received plus accumulated interest,
less mortality and administration charges. Interest credited to these policies
ranged from 5.60% to 7.50% during 1997.
Separate Account
Assets and liabilities of the separate account reported in the accompanying
balance sheets represent funds that are separately administered principally
for variable annuity contracts. Contractholders, rather than the Company, bear
the investment risk for variable products. At the direction of the
Contractholders, the separate account invests the premiums from the sale of
variable annuity products in shares of specified mutual funds. The assets and
liabilities of the separate account are clearly identified and segregated from
other assets and liabilities of the Company. The portion of
the separate account assets applicable to variable annuity contracts cannot be
charged with liabilities arising out of any other business the Company may
conduct.
69
<PAGE>
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1997
Variable separate account assets carried at fair value of the underlying in-
vestments generally represent Contractholder investment values maintained in
the accounts. Variable separate account liabilities represent account balances
for the variable annuity contracts invested in the separate account. Net in-
vestment income and realized and unrealized capital gains and losses related
to separate account assets are not reflected in the accompanying Statements of
Income.
Product charges recorded by the Company from variable annuity products con-
sist of charges applicable to each contract for mortality and expense risk,
contract administration and surrender charges.
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
Statements of Income are based on the changes in the deferred tax asset or li-
ability from period to period (excluding the SFAS No. 115 adjustment).
Dividend Restrictions
Under the provisions of the insurance laws of the State of New York, First
Golden cannot distribute any dividends to its stockholder 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.
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 affecting the amounts reported in the financial statements and accompa-
nying notes. Actual results could differ from those estimates.
Management is required to utilize historical experience and assumptions
about future events and circumstances in order to develop estimates of mate-
rial reported amounts and disclosures. Included among the material (or poten-
tially material) reported amounts and disclosures that require extensive use
of estimates and assumptions are (1) estimates of fair values of investments
in securities and other financial instruments, as well as fair values of poli-
cyholder liabilities, (2) policyholder liabilities, (3) deferred policy acqui-
sition costs and present value of in force acquired, (4) fair values of assets
and liabilities recorded as a result of acquisition transactions, (5) asset
valuation allowances, (6) deferred tax benefits (liabilities) and (7) esti-
mates for commitments and contingencies including legal matters, if a liabil-
ity is anticipated and can be reasonably estimated. Estimates and assumptions
regarding all of the preceding are inherently subject to change and are reas-
sessed periodically. Changes in estimates and assumptions could materially im-
pact the financial statements.
Reclassification
Certain amounts in the 1996 financial statements have been reclassified to
conform to the 1997 financial statement presentation.
2. BASIS OF FINANCIAL REPORTING
The financial statements of the Company differ from related statutory-basis
financial statements principally as follows: (1) acquisition costs of acquir-
ing new business are deferred and amortized over the life of the policies
rather than charged to operations as incurred; (2) an asset representing the
present value of future cash flows from insurance contracts acquired was es-
tablished as a result of the
70
<PAGE>
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1997
merger and is amortized and charged to expense; (3) future policy benefit re-
serves for the fixed interest divisions of the variable products are based on
full account values, rather than the greater of cash surrender value or
amounts derived from discounting methodologies utilizing statutory interest
rates; (4) reserves are reported before reduction for reserve credits related
to reinsurance ceded and a receivable is established, net of an allowance for
uncollectible amounts, for these credits rather than presented net of these
credits; (5) fixed maturity investments are designated as "available for sale"
and valued at fair value with unrealized appreciation/depreciation, net of ad-
justments to deferred income taxes (if applicable), present value of in force
acquired and deferred policy acquisition costs, credited/charged directly to
stockholder's equity rather than valued at amortized cost; (6) the carrying
value of fixed maturity securities is reduced to fair value by a charge to re-
alized losses in the Statement of Income when declines in carrying value are
judged to be other than temporary, rather than through the establishment of a
formula-determined statutory investment reserve (carried as a liability),
changes in which are charged directly to surplus; (7) deferred income taxes
are provided for the difference between the financial statement and income tax
bases of assets and liabilities; (8) net realized gains or losses attributed
to changes in the level of interest rates in the market are recognized when
the sale is completed rather than deferred and amortized over the remaining
life of the fixed maturity security; (9) revenues for variable annuity prod-
ucts consist of policy administration charges and surrender charges assessed
rather than premiums received; and (10) assets and liabilities are restated to
fair values when a change in ownership occurs, with provisions for goodwill
and other intangible assets, rather than continuing to be presented at histor-
ical cost.
A reconciliation of net income and stockholder's equity as reported to regula-
tory authorities under statutory accounting principles to equivalent amounts
reported under generally accepted accounting principles is as follows:
<TABLE>
<CAPTION>
POST-MERGER PRE-MERGER POST-MERGER
-------------- -------------- --------------------
NET INCOME STOCKHOLDER'S EQUITY
----------------------------- --------------------
FOR THE PERIOD FOR THE PERIOD
OCTOBER 25, JANUARY 1,
1997 1997
THROUGH THROUGH
DECEMBER 31, OCTOBER 24,
1997 1997 DECEMBER 31, 1997
-------------- -------------- --------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
As reported under
statutory
accounting principles... $(142) $581 $25,424
Asset valuation reserve.. -- -- 54
Future policy benefits... 115 (179) (61)
Unrealized appreciation
(depreciation) of fixed
maturities at fair
value................... -- -- 151
Change in investment
basis as result
of merger............... (1) -- 357
Deferred policy
acquisition costs....... 191 291 189
Present value of in force
acquired................ (3) -- 126
Goodwill................. (1) -- 95
Deferred income taxes.... (98) (26) (247)
Other.................... 2 (1) 7
----- ---- -------
As reported herein....... $ 63 $666 $26,095
===== ==== =======
</TABLE>
71
<PAGE>
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1997
3. INVESTMENT OPERATIONS
Investment Results
Major categories of net investment income are summarized below:
<TABLE>
<CAPTION>
POST-MERGER PRE-MERGER
-------------- -----------------------------
FOR THE PERIOD FOR THE PERIOD FOR THE PERIOD
OCTOBER 25, JANUARY 1, DECEMBER 17,
1997 1997 1996
THROUGH THROUGH THROUGH
DECEMBER 31, OCTOBER 24, DECEMBER 31,
1997 1997 1996
-------------- -------------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Fixed maturities............... $294 $1,449 $57
Short-term investments......... 13 30 9
Other, net..................... -- 2 --
---- ------ ---
Gross investment income........ 307 1,481 66
Less investment expenses....... (21) (32) (1)
---- ------ ---
Net investment income.......... $286 $1,449 $65
==== ====== ===
</TABLE>
For the period October 25, 1997 through December 31, 1997 realized gains of
$1,000 were recognized from the fixed maturities designated as available for
sale. No other realized gains or losses were recognized during the year.
The change in unrealized appreciation (depreciation) on fixed maturities
designated as available for sale at fair value for the period October 25, 1997
through December 31, 1997, the period January 1, 1997 through October 24, 1997
and the period December 17, 1996 through December 31, 1996 were $151,000,
$363,000 and ($153,000), respectively.
At December 31, 1997 and December 31, 1996, amortized cost, gross unrealized
gains and losses and estimated fair values of the Company's fixed maturity se-
curities, all of which are designated as available for sale, are as follows:
<TABLE>
<CAPTION>
POST-MERGER
-----------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------- ---------- ---------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
DECEMBER 31, 1997
-----------------
U.S. government and governmental
agencies and authorities:
Mortgage-backed securities...... $ 4,616 $ 9 -- $ 4,625
Other........................... 3,033 4 -- 3,037
Public utilities................. 1,000 10 -- 1,010
Investment grade corporate....... 16,324 160 -- 16,484
Below investment grade
corporate....................... 1,597 -- $(32) 1,565
------- ---- ---- -------
Total............................ $26,570 $183 $(32) $26,721
======= ==== ==== =======
</TABLE>
72
<PAGE>
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRE-MERGER
---------------------------
<S> <C> <C> <C> <C>
DECEMBER 31, 1996
-----------------
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 corporate..................... 16,046 -- (120) 15,926
Below investment grade corporate............... 2,078 15 (6) 2,087
------- ---- ----- -------
Total.......................................... $24,373 $ 16 $(169) $24,220
======= ==== ===== =======
</TABLE>
At December 31, 1997, net unrealized investment gains on fixed maturities
designated as available for sale totaled $151,000. This appreciation caused an
increase to stockholder's equity of $96,000 at December 31, 1997 (net of de-
ferred income taxes of $51,000 and adjustments of $1,000 and $3,000 to DPAC
and PVIF, respectively). Short-term investments with maturities of 30 days or
less have been excluded from the above schedules. Amortized cost approximates
fair values for these securities.
Amortized cost and estimated fair value of fixed maturity securities desig-
nated as available for sale, by contractual maturity, at December 31, 1997,
are shown below. Expected maturities will differ from contractual maturities
because borrowers may have the right to call or prepay obligations with or
without call or prepayment penalties.
<TABLE>
<CAPTION>
POST-MERGER
------------------------
AMORTIZED ESTIMATED
DECEMBER 31, 1997 COST FAIR VALUE
----------------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Due after one year through five years............. $ 1,631 $ 1,631
Due after five years through ten years............ 20,323 20,465
----------- -----------
21,954 22,096
Mortgage-backed securities........................ 4,616 4,625
----------- -----------
Total............................................. $ 26,570 $ 26,721
=========== ===========
</TABLE>
An analysis of sales, maturities and principal repayments of the Company's
fixed maturities portfolio is as follows:
<TABLE>
<CAPTION>
GROSS GROSS PROCEEDS
AMORTIZED REALIZED REALIZED FROM
COST GAINS LOSSES SALE
--------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
For the period October 25, 1997
through
December 31, 1997:
Scheduled principal repayments, calls
and tenders.......................... $555 $ 1 -- $556
==== ==== ==== ====
For the period January 1, 1997 through
October 24, 1997:
Scheduled principal repayments, calls
and tenders.......................... $226 -- -- $226
==== ==== ==== ====
</TABLE>
For the period December 17, 1996 through December 31, 1996, the Company did
not have any sales, maturities or repayments of its fixed maturities portfo-
lio. During the year ended December 31, 1997, the amortized cost basis of the
Company's fixed maturity portfolio was reduced by $269,000 as a result of
scheduled principal repayments.
73
<PAGE>
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1997
Investment Valuation Analysis: The Company analyzes its investment portfolio
at least quarterly in order to determine if the carrying value of any of its
investments has been impaired. The carrying value of fixed maturity securities
is written down to fair value by a charge to realized losses when an impair-
ment in value appears to be other than temporary. During 1997 and 1996, no in-
vestments were identified as having an impairment other than temporary.
Investments on Deposit: At December 31, 1997 and 1996, affidavits of deposits
covering bonds with a par value of $400,000 were on deposit with regulatory
authorities pursuant to certain statutory requirements.
Investment Diversifications: The Company's investment policies related to its
investment portfolio require diversification by asset type, company and indus-
try and set limits on the amount which can be invested in an individual issu-
er. Such policies are at least as restrictive as those set forth by regulatory
authorities. The following percentages relate to holdings at December 31, 1997
and December 31, 1996. Fixed maturity investments included investments in ba-
sic industrials (31% in 1997, 33% in 1996), financial companies (23% in 1997,
25% in 1996), various government bonds and government or agency mortgage-
backed securities (29% in 1997, 22% in 1996) and consumer products (10% in
1997 and 1996).
No investment in any person or its affiliates (other than bonds issued by
agencies of the United States government) exceed ten percent of stockholder's
equity at December 31, 1997.
4. FAIR VALUES OF FINANCIAL INSTRUMENTS
SFAS No. 107, "Disclosures about Fair Value of Financial Instruments," re-
quires disclosure of estimated fair value of all financial instruments, in-
cluding both assets and liabilities recognized and not recognized in a
Company's balance sheet, unless specifically exempted. SFAS No. 119, "Disclo-
sure about Derivative Financial Instruments and Fair Value of Financial In-
struments," requires additional disclosures about derivative financial instru-
ments. Most of the Company's investments, investment contracts and debt fall
within the standards' definition of a financial instrument. Fair values for
the Company's insurance contracts other than investment contracts are not re-
quired to be disclosed. In cases where quoted market prices are not available,
estimated fair values are based on estimates using present value or other val-
uation techniques. Those techniques are significantly affected by the assump-
tions used, including the discount rate and estimates of future cash flows.
Accounting, actuarial and regulatory bodies are continuing to study the meth-
odologies to be used in developing fair value information, particularly as it
relates to such things as liabilities for insurance contracts. Accordingly,
care should be exercised in deriving conclusions about the Company's business
or financial condition based on the information presented herein.
The Company closely monitors the composition and yield of its invested as-
sets, the duration and interest credited on insurance liabilities and result-
ing interest spreads and timing of cash flows. These amounts are taken into
consideration in the Company's overall management of interest rate risk, which
attempts to minimize exposure to changing interest rates through the matching
of investment cash flows with amounts expected to be due under the insurance
contracts. As discussed below, the Company has used discount rates in its de-
termination of fair values for its liabilities which are consistent with mar-
ket yields for related assets. The use of the asset market yield is consistent
with management's opinion that the risks inherent in its asset and liability
portfolios are similar. This assumption, however, might not result in values
consistent with those obtained through an actuarial appraisal of the Company's
business or values that might arise in a negotiated transaction.
74
<PAGE>
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1997
The following compares carrying values as shown for financial reporting pur-
poses with estimated fair values:
<TABLE>
<CAPTION>
DECEMBER 31
-------------------------------------
1997 1996
------------------ ------------------
ESTIMATED ESTIMATED
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
-------- --------- -------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
Fixed maturities, available for
sale............................... $26,721 $26,721 $24,220 $24,220
Short-term investments.............. 799 799 350 350
Cash and cash equivalents........... 621 621 5 5
Separate account assets............. 4,878 4,878 -- --
LIABILITIES
Annuity products.................... 2,506 2,340 -- --
Separate account liabilities........ 4,878 4,569 -- --
</TABLE>
The following methods and assumptions were used by the Company in estimating
fair values.
Fixed maturities: Estimated fair values of publicly traded securities are as
reported by an independent pricing service. Estimated fair values of conven-
tional mortgage-backed securities not actively traded in a liquid market are
estimated using a third party pricing system. This pricing system uses a ma-
trix calculation assuming a spread over U.S. Treasury bonds based upon the ex-
pected average lives of the securities.
Short-term investments and cash and cash equivalents: Carrying values reported
in the Company's historical cost basis balance sheet approximate estimated
fair value for these instruments, due to their short-term nature.
Separate account assets: Separate account assets are based upon the quoted
fair values of the individual securities in the separate account.
Annuity Products: Estimated fair values of the Company's liabilities for fu-
ture policy benefits for the fixed interest division of the variable products
are based upon discounted cash flow calculations. Cash flows of future policy
benefits are discounted using the market yield rate of the assets supporting
these liabilities.
Separate account liabilities: Separate account liabilities are reported at
full account value in the Company's historical cost balance sheet. Estimated
fair values of separate account liabilities are based upon assumptions using
an estimated long-term average market rate of return to discount future cash
flows. The reduction in fair values for separate account liabilities reflect
the present value of future revenue from product and surrender charges.
75
<PAGE>
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1997
5. MERGER
Transaction
On October 23, 1997, Equitable shareholders approved the Merger Agreement
dated as of July 7, 1997, among Equitable, PFHI, and ING. On October 24, 1997,
PFHI, a Delaware corporation, acquired all of the outstanding capital stock of
Equitable pursuant to the Merger Agreement. PFHI is a wholly owned subsidiary
of ING, a global financial services holding company based in The Netherlands.
Equitable, an Iowa corporation, in turn, owned all the outstanding capital
stock of Equitable Life Insurance Company of Iowa and Golden American and
their wholly owned subsidiaries. Equitable also owned all the outstanding cap-
ital stock of Locust Street Securities, Inc., Equitable Investment Services,
Inc., Directed Services, Inc., Equitable of Iowa Companies Capital Trust, Eq-
uitable of Iowa Companies Capital Trust II and Equitable of Iowa Securities
Network, Inc. In exchange for the outstanding capital stock of Equitable, ING
paid total consideration of approximately $2.1 billion in cash and stock plus
the assumption of approximately $400 million in debt according to the Merger
Agreement. As a result of the merger, Equitable was merged into PFHI which was
simultaneously renamed Equitable of Iowa Companies, Inc. ("EIC"), a Delaware
corporation. All costs of the merger, including expenses to terminate certain
benefit plans, were paid by EIC.
Accounting Treatment
The merger has been accounted for as a purchase resulting in a new basis of
accounting, reflecting estimated fair values for assets and liabilities at Oc-
tober 24, 1997. The purchase price was allocated to EIC and its subsidiaries.
Goodwill was established for the excess of the merger cost over the fair value
of the net assets and pushed down to EIC and its subsidiaries including Golden
American and First Golden. The allocation of the purchase price to First
Golden was approximately $25,936,000. The cost of the acquisition is prelimi-
nary as it relates to estimated expenses, and as a result the allocation to
the Company may change. The amount of goodwill was $96,000 at the merger date
and is being amortized over 40 years on a straight-line basis. The carrying
value of goodwill will be reviewed periodically for any indication of impair-
ment in value.
Present Value of In Force Acquired
As part of the merger, a portion of the acquisition cost was allocated to
the right to receive future cash flows from the insurance contracts existing
with the Company at the date of merger. This allocated cost represents the
present value of in force acquired reflecting the value of those purchased
policies calculated by discounting the actuarially determined expected future
cash flows at the discount rate determined by ING.
An analysis of the PVIF asset is as follows:
<TABLE>
<CAPTION>
POST-MERGER
----------------------
FOR THE PERIOD
OCTOBER 25,
1997
THROUGH
DECEMBER 31,
1997
----------------------
(DOLLARS IN THOUSANDS)
<S> <C>
Beginning balance................................... $132
Imputed interest.................................... 3
Amortization........................................ (6)
Adjustment for unrealized gains on available for
sale securities.................................... (3)
----
Ending balance...................................... $126
====
</TABLE>
76
<PAGE>
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1997
Interest is imputed on the unamortized balance of PVIF at a rate of 7.03%
for the period October 25, 1997 through December 31, 1997. The amortization of
PVIF, net of imputed interest, is charged to expense. PVIF is also adjusted
for the unrealized gains (losses) on available for sale securities; such
changes are included directly in stockholder's equity. Based on current condi-
tions and assumptions as to the impact of future events on acquired policies
in force, the expected approximate net amortization for the next five years,
relating to the PVIF as of December 31, 1997 is $19,000 in 1998, $18,000 in
1999, $17,000 in 2000, $15,000 in 2001 and $13,000 in 2002. Actual amortiza-
tion may vary based upon final purchase price allocations and changes in as-
sumptions and experience.
6. INCOME TAXES
The Company will file a consolidated federal income tax return with Golden
American, also a life insurance company.
Income Tax Expense
Income tax expense included in the financial statements is as follows:
<TABLE>
<CAPTION>
POST-MERGER PRE-MERGER
-------------- -----------------------------
FOR THE PERIOD FOR THE PERIOD FOR THE PERIOD
OCTOBER 25, JANUARY 1, DECEMBER 17,
1997 1997 1996
THROUGH THROUGH THROUGH
DECEMBER 31, OCTOBER 24, DECEMBER 31,
1997 1997 1996
-------------- -------------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Current....................... $(64) $261 $23
Deferred...................... 98 26 --
---- ---- ---
$ 34 $287 $23
==== ==== ===
The effective tax rate on income before income taxes is different from the
prevailing federal income tax rate. A reconciliation of this difference is as
follows:
<CAPTION>
POST-MERGER PRE-MERGER
-------------- -----------------------------
FOR THE PERIOD FOR THE PERIOD FOR THE PERIOD
OCTOBER 25, JANUARY 1, DECEMBER 17,
1997 1997 1996
THROUGH THROUGH THROUGH
DECEMBER 31, OCTOBER 24, DECEMBER 31,
1997 1997 1996
-------------- -------------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Income before income taxes.... $ 97 $953 $65
==== ==== ===
Income tax at federal
statutory rate............... $ 34 $334 $23
Tax effect (decrease) of:
Compensatory stock option and
restricted stock expense.... -- (35) --
Other items.................. -- (12) --
---- ---- ---
Income tax expense............ $ 34 $287 $23
==== ==== ===
</TABLE>
77
<PAGE>
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1997
Deferred Income Taxes
The tax effect of temporary differences giving rise to the Company's de-
ferred income tax assets and liabilities at December 31, 1997 and 1996 is as
follows:
<TABLE>
<CAPTION>
POST-MERGER PRE-MERGER
----------- ----------
DECEMBER 31, 1997 1996
------------ ----------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Future policy benefits............................ $ 22 --
Unrealized appreciation (depreciation) of
available for sale fixed maturity securities..... -- $ 54
----- ----
22 54
Deferred tax liabilities:
Unrealized appreciation (depreciation) of
available for sale fixed maturity securities..... (51) --
Fixed maturity securities......................... (134) --
Deferred policy acquisition costs................. (39) --
Present value of in force acquired................ (45) --
----- ----
(269) --
----- ----
Deferred income tax asset (liability)............... $(247) $ 54
===== ====
</TABLE>
7. 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 Golden American.
The Company has service agreements with Golden American, Equitable Invest-
ment Services, Inc. ("EISI") and Equitable Life Insurance Company of Iowa
("Equitable Life") in which Golden American, EISI and Equitable Life provide
administrative and financial related services. For the period October 25, 1997
through December 31, 1997, First Golden incurred expenses of $8,000 and
$13,000 under the agreement with Golden American and Equitable Life, respec-
tively. General expenses of $16,000 and $16,000 were incurred by First Golden
under these agreements for Golden American and Equitable Life, respectively,
for the period January 1, 1997 through October 24, 1997. For the period Octo-
ber 25, 1997 through December 31, 1997 and the period January 1, 1997 through
October 24, 1997, payments to EISI for investment advisory services were
$11,000 and $51,000, respectively.
The Company has a service agreement with Directed Services, Inc. ("DSI", a
wholly owned subsidiary of Equitable of Iowa Companies, Inc.) under which it
will provide certain administrative services to DSI relating to customer ac-
counts. First Golden paid commissions and overrides to DSI totaling $141,000
and $267,000, for the period October 25, 1997 through December 31, 1997, and
the period January 1, 1997 through October 24, 1997, respectively.
The Golden American board of directors has agreed by resolution to provide
funds as needed for the Company to maintain policyholders' surplus that meets
or exceeds the greater of: (1) the minimum capital adequacy standards to main-
tain a level of capitalization necessary to meet A.M. Best Company's guide-
lines or one level less than the one originally given to First Golden, or (2)
the New York State Insurance Department risk-based capital minimum require-
ments as determined in accordance with New York statutory accounting princi-
ples. No funds were transferred from Golden American in 1997.
78
<PAGE>
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1997
8. COMMITMENTS AND CONTINGENCIES
Reinsurance: At December 31, 1997, First Golden had a reinsurance treaty with
a reinsurer covering a significant portion of the mortality risks under its
variable contracts with an unaffiliated reinsurer. First Golden remains liable
to the extent its reinsurer does not meet its obligation under the reinsurance
agreement. At December 31, 1997, the Company has a payable of $1,000 for rein-
surance premiums. Included in the accompanying financial statements are net
considerations to the reinsurer of $1,000 for the period October 25, 1997
through December 31, 1997.
Litigation: The Company is not involved in any legal proceeding as of the date
of this report.
Leases: The Company has a lease for its home office space which expires Decem-
ber 31, 2001. The office space was not occupied until 1997. The Company also
leases certain other equipment under an operating lease which expires in 1998.
Rent expense for the year ended December 31, 1997 was $59,000. At December 31,
1997, minimum rental payments due under the operating leases are $78,000 in
1998, $76,000 in 1999, $76,000 in 2000 and $76,000 in 2001.
Vulnerability From Concentrations: The Company has various concentrations in
its investment portfolio (see Note 3 for further information). The Company's
asset growth, net investment income and cash flow are primarily generated from
the sale of variable products and associated future policy benefits. A signif-
icant portion of the Company's sales is generated by two broker/dealers. One
of these distributors sold 59.4% of the Company's products in 1997. This dis-
tributor has indicated that it may discontinue the sales relationship by the
end of 1998. Substantial changes in tax laws would make these products less
attractive to consumers, and extreme fluctuations in interest rates or stock
market returns which may result in higher lapse experience than assumed, could
cause a severe impact to the Company's financial condition.
Year 2000 Project (Unaudited): Based on a study of its computer software and
hardware, First Golden's parent, Golden American, has determined its exposure
to the Year 2000 change of the century date issue. Management believes the
Company's systems are or will be substantially compliant by the Year 2000, and
Golden American has engaged external consultants to validate this assumption.
The only system known to be affected by this issue is a system maintained by
an affiliate who will incur the related costs to make the system compliant. To
mitigate the effect of outside influences and other dependencies relative to
the Year 2000, Golden American will continue to contact significant customers,
suppliers and other third parties. To the extent these third parties would be
unable to transact business in the Year 2000 and thereafter, the Company's op-
erations could be adversely affected.
79
<PAGE>
[This Page Intentionally Left Blank]
80
<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...................................... 7
Other Information.................................................. 8
Financial Statements of Separate Account NY-B...................... 8
Appendix--Description of Bond Ratings.............................. A-1
</TABLE>
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 COV-
ER.
................................................................................
PLEASE SEND ME A FREE COPY OF THE STATEMENT OF ADDITIONAL INFORMATION FOR SEPA-
RATE ACCOUNT NY-B
PLEASE PRINT OR TYPE
----------------------------------
NAME
----------------------------------
SOCIAL SECURITY NUMBER
----------------------------------
STREET ADDRESS
----------------------------------
CITY, STATE, ZIP
(FG-3120 NY DVA PLUS 5/98)
................................................................................
81
<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 1.075/3/)
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.
A1
<PAGE>
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 1.075/3/)
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]
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 1.075/3/)
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.
FG-3120 NY DVA PLUS 5/98
<PAGE>
<PAGE>
