<PAGE>
As filed with the Securities and Exchange Commission on July 3, 1996
Registration No. 33-__________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
FORM S-6
------------------------------
FOR THE REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT TRUSTS
REGISTERED ON FORM N-8B-2
------------------------------
A. Exact name of trust:
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
CORPORATE SPONSORED VARIABLE UNIVERSAL LIFE SEPARATE ACCOUNT-I
B. Name of depositor:
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
C. Complete address of depositor's principal office:
51 Madison Avenue
New York, New York 10010
D. Name and complete address of agent for service:
Linda M. Reimer, Esq.
New York Life Insurance and
Annuity Corporation
51 Madison Avenue
New York, New York 10010
Copies to:
Michael Berenson, Esq. Michael J. McLaughlin, Esq.
Jordan Burt Berenson & Johnson, LLP Senior Vice President
Suite 400 East and General Counsel
1025 Thomas Jefferson Street, N.W. New York Life Insurance Company
Washington, DC 20007 51 Madison Avenue
New York, New York 10010
E. Title and amount of securities being registered:
Flexible Premium Universal Life Insurance Policy.
F. Proposed maximum aggregate offering price to the public of the
securities being registered: Pursuant to Rule 24f-2 of the Investment
Company Act of 1940, the Registrant hereby declares that an
indefinite amount of its securities are being registered under the
Securities Act of 1933.
<PAGE>
G. Amount of filing fee: $500
H. Approximate date of proposed public offering:
As soon as practicable after the effective date of this Registration
Statement.
------------------------------------
The registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
The Registrant hereby represents that it is relying on Paragraph (b)(13)(i)(A)
of Rule 6e-3(T).
<PAGE>
CROSS REFERENCE SHEET
INFORMATION REQUIRED IN A PROSPECTUS
<TABLE>
<CAPTION>
Item of Form N-8B-2 Prospectus Caption
- ------------------- ------------------
<S> <C>
1 Cover Page; Basic Questions and Answers
About Us and Our Policy
2 Cover Page
3 Not Applicable
4 Sales and Other Agreements
5 The Separate Account
6 The Separate Account
9 Legal Proceedings
10 General Provisions of the
Policy; Death Benefit
Under the Policy; Free
Look Provision; Exchange
Privilege; Cash Value and
Cash Surrender Value;
Loans; The Separate
Account; The Fixed
Account; Charges Under
the Policy; Sales and
Other Agreements; When We
Pay Proceeds; Payment
Options; Our Rights; Your
Voting Rights; Basic
Questions and Answers
About Us and Our Policy
11 The Separate Account; New York Life
MFA Series Fund, Inc.; Acacia Capital
Corporation
12 The Separate Account; Sales and Other
Agreements
13 The Separate Account; Charges Under
the Policy; New York Life MFA Series
Fund, Inc.; Acacia Capital Corporation
14 Basic Questions and Answers About Us
and Our Policy; The Separate Account;
Sales and Other Agreements
15 Basic Questions and Answers About Us
and Our Policy; General Provisions of
the Policy
16 The Separate Account; Investment
Return; Basic Questions and Answers
About Us and Our Policy; New York Life
MFA Series Fund, Inc.; Acacia Capital
Corporation
17 Cash Surrender Value; Partial
Withdrawals; General
Provisions of the Policy
18 The Separate Account; New York Life
MFA Series Fund, Inc.; Acacia Capital
Corporation; Investment Return
19 Records and Reports
20 Not Applicable
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Item of Form N-8B-2 Prospectus Caption
- ------------------- ------------------
21 Loans
22 Not Applicable
23 Not Applicable
24 Additional Provisions of the Policy
25 What are NYLIAC and New York Life?
26 Not Applicable
27 What are NYLIAC and New York Life?
28 Directors and Principal Officers of
NYLIAC
29 What are NYLIAC and New York Life?
30 Not Applicable
31 Not Applicable
32 Not Applicable
33 Not Applicable
34 Not Applicable
35 Not Applicable
37 Not Applicable
38 Sales and Other Agreements
39 Sales and Other Agreements
40 Not Applicable
41 Sales and Other Agreements
42 Not Applicable
43 Not Applicable
44 The Separate Account; Investment
Return; General Provisions
of the Policy
45 Not Applicable
46 The Separate Account; Investment Return
47 The Separate Account; New York Life
MFA Series Fund, Inc.
<PAGE>
Item of Form N-8B-2 Prospectus Caption
- ------------------- ------------------
48 Not Applicable
49 Not Applicable
50 The Separate Account
51 Cover Page; Basic Questions and Answers
About Us and Our Policy
52 The Separate Account; Our Rights
53 Federal Income Tax Considerations
54 Not Applicable
55 Not Applicable
59 Financial Statements
</TABLE>
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such state.
Subject to Completion July 3, 1996
NYLIAC CORPORATE SPONSORED VARIABLE UNIVERSAL LIFE SEPARATE ACCOUNT-I
PROSPECTUS DATED , 1996
FOR
CORPORATE SPONSORED VARIABLE
UNIVERSAL LIFE INSURANCE POLICIES
OFFERED BY
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A DELAWARE CORPORATION)
51 MADISON AVENUE, NEW YORK, NEW YORK 10010
This prospectus describes a flexible premium corporate sponsored variable
universal life insurance policy offered by New York Life Insurance and
Annuity Corporation ("NYLIAC"). The policy provides insurance protection for
group or sponsored arrangements. Group arrangements include those in which a
trustee or an employer, for example, purchases policies covering a group of
individuals on a group basis. Sponsored arrangements include those in which
an employer allows us to sell policies to its employees or retirees on an
individual basis. The policy offers flexible premium payments, a choice of
two death benefit options, loan privileges, increases and decreases to the
policy's face amount of insurance and a choice of funding options, including
a guaranteed interest option and the following eleven variable investment
options:
<TABLE>
<CAPTION>
<S> <C>
o Capital Appreciation o Total Return
o Cash Management o Value
o Government o Bond
o High Yield Corporate Bond o Growth Equity
o International Equity o Indexed Equity
o Socially Responsible
</TABLE>
We do not guarantee the investment performance of these investment
options, which involve varying degrees of risk.
The death benefit may, and the cash surrender value of a policy will, vary
up or down depending on the performance of the investment options. There is
no guaranteed minimum cash surrender value for a policy. However, a policy's
death benefit will never be less than its face amount, less outstanding
policy debt. Although premiums are flexible, additional premiums may be
required to keep the policy in effect. The policy may terminate if its cash
surrender value (net of any policy loan) is too small to pay the policy's
monthly charges.
You can borrow against or withdraw money from the policy, within limits.
Loans and withdrawals will reduce the policy's death benefit and cash
surrender value. You can also surrender the policy. A surrender charge will
apply if you surrender the policy during the first nine policy years. This
charge may also apply if you request a reduction of the face amount or if the
policy terminates.
You may examine the policy for a limited period and cancel it for a full
refund of the greater of cash value or premiums paid. Replacing existing
insurance with this policy may not be to your advantage.
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 ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
This prospectus should be read and retained for further reference; it
contains information that should be known before investing in a NYLIAC
corporate sponsored variable universal life insurance policy. This prospectus
is valid only when accompanied by the prospectuses of New York Life MFA
Series Fund., Inc. and Acacia Capital Corporation.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
SECTION I: DEFINITION OF TERMS ........... 4
SECTION II: BASIC QUESTIONS AND ANSWERS
ABOUT US AND OUR POLICY ................. 7
1. What are NYLIAC and New York Life? .. 7
2. What variable life insurance policy
are we offering? .................... 7
3. How is the Policy available? ........ 7
4. What is the Cash Value of the Policy? 8
5. What are the Investment Divisions of
the Separate Account? ............... 8
6. How is the value of an Accumulation
Unit determined? .................... 8
7. What is the Fixed Account? .......... 8
8. Does the Policy have a Cash Surrender
Value? .............................. 9
9. How long will the Policy remain in
force? .............................. 9
10. Is the amount of the Death Benefit
guaranteed? ......................... 9
11. Is the Death Benefit subject to
income taxes? ....................... 9
12. What is a modified endowment
contract? ........................... 9
13. Can the Policy become a modified
endowment contract? ................. 10
14. What are planned Premiums? ......... 10
15. What are unplanned Premiums? ....... 10
16. What happens when the first Premium
is paid? ............................ 10
17. When are Premiums put into the Fixed
Account and the Separate Account? ... 10
18. How are Premiums allocated among the
Allocation Alternatives? ............ 10
19. What are the current charges against
the Policy? ......................... 10
20. Are loans available under the
Policy? ............................. 11
21. Do I have a right to cancel? ....... 11
22. Can the Policy be exchanged? ....... 11
SECTION III: CHARGES UNDER
THE POLICY ............................. 12
Deductions from Premiums .............. 12
Sales Expense Charge ................. 12
Premium Tax Charge ................... 12
Federal Tax Charge ................... 12
Deductions from Accumulation Value and
Fixed Account Value ................. 12
Monthly Contract Charge .............. 12
Cost of Insurance Charge ............ 12
Deductions from the Separate Account .. 13
Mortality and Expense Risk Charge ... 13
Other Charges for Federal Income
Taxes .............................. 13
Fund Charges .......................... 13
Surrender Charge ...................... 14
How the Policy Works .................. 15
SECTION IV: THE SEPARATE ACCOUNT, THE
FUNDS AND THE FIXED ACCOUNT ............ 16
The Separate Account .................. 16
Your Voting Rights ................... 16
Our Rights ........................... 17
New York Life MFA Series Fund, Inc. ... 17
Acacia Capital Corporation ............ 18
Portfolios ............................ 18
The Fixed Account ..................... 21
Interest Crediting .................. 21
Transfers to Investment Divisions ... 21
Investment Return ..................... 21
SECTION V: GENERAL PROVISIONS OF THE
POLICY .................................. 22
Premiums .............................. 22
Termination ........................... 22
Death Benefit Under the Policy ........ 22
Selection of Life Insurance
Benefit Table ........................ 23
2
<PAGE>
PAGE
--------
Corridor Table ....................... 23
CVAT Table ........................... 24
The Effect of Investment
Performance on the Death
Benefit .............................. 25
Face Amount Changes .................. 25
Life Insurance Benefit Option Changes 25
Cash Value and Cash Surrender Value . 26
Cash Value .......................... 26
Cash Surrender Value ................ 26
Transfers .............................. 26
Partial Withdrawals .................... 26
Loans .................................. 27
Loan Account ........................ 27
Loan Interest ....................... 27
Repayment ........................... 28
Free Look Provision .................... 28
Exchange Privilege ..................... 28
SECTION VI: ADDITIONAL INFORMATION .... 29
Directors and Principal Officers of
NYLIAC ................................ 29
Federal Income Tax Considerations ..... 31
Tax Status of NYLIAC and the Separate
Account ............................. 31
Charges for Taxes .................. 31
Diversification Standards and
Control Issues .................... 31
Life Insurance Status of Policy .... 32
Modified Endowment Contract Status 33
Surrenders and Partial Withdrawals 33
Loans and Interest Deductions ...... 34
Corporate Alternative Minimum Tax 34
Exchanges or Assignments of
Policies .......................... 35
Other Tax Issues ................... 35
Withholding ........................ 35
Reinstatement Option ................... 35
Additional Benefits Available by Rider 36
Adjustable Term Insurance Rider ...... 36
Payment Options ........................ 36
Payees .............................. 36
Proceeds at Interest Options
(Options 1A and 1B) ................ 37
Life Income Option (Option 2) ....... 37
Beneficiary ............................ 37
Change of Ownership .................... 38
Assignment ............................. 38
Limits on Our Rights to Challenge the
Policy ................................ 38
Misstatement of Age or Sex ............. 38
Suicide ................................ 38
When We Pay Proceeds ................... 38
Records and Reports .................... 39
Sales and Other Agreements ............. 39
Legal Proceedings ...................... 39
Independent Accountants ................ 40
Experts ................................ 40
APPENDIX A: ILLUSTRATIONS ............... A-1
APPENDIX B: SURRENDER CHARGE PREMIUM
RATES PER THOUSAND ...................... A-5
FINANCIAL STATEMENTS .................... F-1
</TABLE>
THE POLICY IS NOT AVAILABLE IN ALL JURISDICTIONS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE. NYLIAC DOES NOT AUTHORIZE ANY INFORMATION OR
REPRESENTATIONS REGARDING THE OFFERING DESCRIBED IN THIS PROSPECTUS OTHER
THAN AS CONTAINED IN THIS PROSPECTUS OR ANY ATTACHED SUPPLEMENT THERETO OR IN
ANY SUPPLEMENTAL SALES MATERIAL AUTHORIZED BY NYLIAC.
3
<PAGE>
SECTION I:
DEFINITION OF TERMS
ACCUMULATION UNITS: Accumulation Units are the accounting units used to
calculate the value in the Investment Divisions. Net Premiums and transfers
that are allocated to the Investment Divisions purchase Accumulation Units in
those Investment Divisions.
ACCUMULATION VALUE: The dollar value of the sum of the Accumulation Units in
all of the Investment Divisions.
ALLOCATION ALTERNATIVES: The 11 Investment Divisions of the Separate Account
and the Fixed Account.
BENEFICIARY: The person(s) and/or entity(ies) named by the Policyowner to
receive the Death Benefit after the Insured dies.
BUSINESS DAY: Generally, our Business Day is any day on which NYLIAC is open
and the New York Stock Exchange is open for trading. We are closed on
national business holidays, Martin Luther King Jr. Day, the Friday after
Thanksgiving and Christmas Eve. Additionally, we may choose to close on the
day immediately preceding or following a national business holiday or due to
emergency conditions. Our Business Day ends at 4:00 p.m. Eastern Time or the
closing of the New York Stock Exchange, if earlier. Policy transactions such
as Loans, Premium payments, Face Amount changes, Partial Withdrawals, Surrenders
and transfers of Cash Value among Allocation Alternatives are processed on
Business Days.
CALVERT FUND: Acacia Capital Corporation, an open-end management investment
company registered under the Investment Company Act of 1940.
CASH SURRENDER VALUE: An amount equal to the Cash Value less any surrender
charges.
CASH VALUE: The sum of (a) the Accumulation Value, (b) the Fixed Account
Value, and (c) the Loan Account Value of the Policy.
CODE: The Internal Revenue Code of 1986, as amended.
DEATH BENEFIT: The amount payable to the named Beneficiary when the Insured
dies. The Death Benefit is equal to the amount calculated under the
applicable Life Insurance Benefit Option, plus any Death Benefit payable
under a Policy rider, less any Policy Debt.
FACE AMOUNT: The initial face amount shown on page 2 of the Policy, plus or
minus any changes made to the face amount, plus the face amount of any riders
in effect.
FIXED ACCOUNT: The Allocation Alternative that pays interest at guaranteed
fixed rates and is part of our General Account.
FIXED ACCOUNT VALUE: The dollar value of the sum of the Net Premiums and
transfers allocated to the Fixed Account, plus interest credited, less
amounts withdrawn, deductions and charges taken and/or amounts transferred
from the Fixed Account.
FUNDS: The MFA Series Fund and the Calvert Fund.
GENERAL ACCOUNT: An account representing all of NYLIAC's assets, liabilities,
capital and surplus, income, gains or losses that are not included in the
Separate Account or any other NYLIAC separate account.
INSURED: The person whose life the Policy insures.
4
<PAGE>
INVESTMENT DIVISION: The 11 divisions of the Separate Account that are
available as Allocation Alternatives under the Policy.
LOAN ACCOUNT: The account that holds a portion of Cash Value for the purpose
of securing Policy Debt. It is part of our General Account.
LOAN ACCOUNT VALUE: The dollar value of the amounts transferred to the Loan
Account, less amounts transferred out of the Loan Account.
LIFE INSURANCE BENEFIT OPTION: Two Life Insurance Benefit Options are
available under the Policy:
OPTION 1--Provides a life insurance benefit equal to the greater of (a) the
Face Amount and (b) the Cash Value times the percentage in the appropriate
Code Section 7702 table.
OPTION 2--Provides a life insurance benefit equal to the greater of (a) the
Face Amount plus the Cash Value and (b) the Cash Value times the percentage
in the appropriate Code Section 7702 table.
MFA SERIES FUND: New York Life MFA Series Fund, Inc., a diversified, open-end
management investment company registered under the Investment Company Act of
1940.
MINIMUM FACE AMOUNT: $25,000.
MONTHLY DEDUCTION DAY: The date on which the monthly contract charge, the
cost of insurance charge and a rider charge for the cost of any additional
riders are deducted from the Cash Value. The first Monthly Deduction Day will
be the Policy Date, and subsequent monthly deductions will be on the same
date of each succeeding calendar month.
NET PREMIUM: Premium paid less the sales expense, premium tax and federal tax
charges.
NON-QUALIFIED POLICIES: Policies that do not qualify for special federal
income tax treatment.
PARTIAL WITHDRAWAL: A withdrawal of a portion of the Cash Value by the
Policyowner.
POLICY: The flexible premium corporate sponsored variable universal life
insurance policy offered by NYLIAC that is described in this prospectus.
POLICY ANNIVERSARY: The anniversary of the Policy Date.
POLICYOWNER: The person(s) and/or entity(ies) who own(s) the Policy and have
(has) all rights of ownership in the Policy while the Insured is living.
POLICY DATE: The date shown on page 2 of the Policy, which is the starting
point for determining Policy Anniversaries, Policy Years, Monthly Deduction
Days and the commencement of insurance coverage.
POLICY DEBT: The amount of any outstanding loans under the Policy, including
accrued interest.
POLICY DELIVERY DATE: The date the Policy is signed for and received by the
Policyowner, as indicated on the Policy delivery receipt.
POLICY YEAR: The twelve month period commencing with the Policy Date, and
each twelve month period thereafter.
PORTFOLIOS: The ten mutual fund portfolios of the MFA Series Fund and the one
mutual fund portfolio of the Calvert Fund that correspond to the Investment
Divisions of the Separate Account.
5
<PAGE>
PREMIUM: A dollar amount contributed to the Policy.
PREMIUM REMITTANCE CENTER:
SEC: The Securities and Exchange Commission.
SEPARATE ACCOUNT: NYLIAC Corporate Sponsored Variable Universal Life
Separate Account-I, a segregated asset account established by NYLIAC to
receive and invest Premiums paid under Policies.
SERVICE OFFICE: New York Life Insurance and Annuity Corporation
NYLIFE Distributors Inc.
Attention: Executive Benefits
920 Main Street, Suite 2100
Kansas City, MO 64105
Telephone: (816) 889-4000
SURRENDER: A surrender by the Policyowner of all rights under the Policy in
exchange for the Policy's Cash Surrender Value, less any Policy Debt.
VALUATION PERIOD: The period, consisting of one or more days, from one Valuation
Time to the next succeeding Valuation Time.
VALUATION TIME: The time of the close of the New York Stock Exchange (currently
4:00 p.m. New York time) on any day on which the New York Stock Exchange is open
except the day after Thanksgiving and Christmas Eve.
WE OR US: NYLIAC.
YOU: The Policyowner.
6
<PAGE>
SECTION II:
BASIC QUESTIONS AND ANSWERS ABOUT US AND OUR POLICY
1. WHAT ARE NYLIAC AND NEW YORK LIFE?
New York Life Insurance and Annuity Corporation ("NYLIAC") is a stock life
insurance company incorporated in Delaware in 1980. NYLIAC is licensed to
sell life, accident and health insurance and annuities in all states and the
District of Columbia. In addition to the Policies described in this
prospectus, NYLIAC offers other life insurance policies and annuities.
NYLIAC's Financial Statements are included herein.
NYLIAC is a wholly-owned subsidiary of New York Life Insurance Company
("New York Life"), a mutual insurance company founded in New York in 1845.
New York Life had consolidated total assets amounting to $74.3 billion at the
end of 1995, and is authorized to do business in all states, the District of
Columbia and the Commonwealth of Puerto Rico. New York Life has invested in
NYLIAC, and may, in order to maintain capital and surplus in accordance with
state requirements, occasionally make additional contributions to NYLIAC.
2. WHAT VARIABLE LIFE INSURANCE POLICY ARE WE OFFERING?
In this prospectus we are offering a Flexible Premium Corporate Sponsored
Variable Universal Life Insurance Policy. We issue the Policy to provide for
a Death Benefit, Cash Surrender Value, loan privileges and flexible Premiums.
It is called "flexible" because the Policyowner may select the timing and
amount of Premiums and adjust the Death Benefit by increasing or decreasing
the Face Amount (subject to certain restrictions). It is called "variable"
because, unlike the fixed benefits of a traditional whole life policy, the
Death Benefits may, and Cash Surrender Values will, vary up or down depending
on the performance of the Investment Division(s) to which Cash Value has been
allocated.
The Policy is a legal contract between the Policyowner and NYLIAC. The
entire contract consists of the Policy, the application for the Policy and
any riders to the Policy.
3. HOW IS THE POLICY AVAILABLE?
The Policy is available as a Non-Qualified Policy. The minimum Face Amount
of a Policy is $25,000. Increases are subject to NYLIAC's maximum retention
limits. The Insured may not be older than age 85 as of the Policy Date or the
date of any increase in Face Amount. Before issuing any Policy we will
require satisfactory evidence of insurability. For certain eligible groups,
the Policy may be issued based on guaranteed issue or simplified underwriting
rules and procedures as defined by us.
In Massachusetts and Montana, the Policy is issued only on a unisex basis,
and we may issue on this basis in other states as well. For Policies issued
on a unisex basis, any reference in this prospectus that makes a distinction
based on the gender of the Insured shall be disregarded.
7
<PAGE>
4. WHAT IS THE CASH VALUE OF THE POLICY?
The Cash Value is determined by the amount, frequency and timing of
Premiums, the investment experience of the Investment Divisions chosen by the
Policyowner, the interest earned on amounts in the Fixed Account and the Loan
Account, and any Partial Withdrawals or charges imposed in connection with
the Policy. The Policyowner bears the investment risk of any depreciation in
value of the underlying assets of the Investment Divisions, but he or she
also reaps the benefit of any appreciation in their value.
5. WHAT ARE THE INVESTMENT DIVISIONS OF THE SEPARATE ACCOUNT?
You may allocate Net Premiums to, or transfer amounts among, a total of
twelve Allocation Alternatives, eleven of which are the Investment Divisions
of the Separate Account--the Capital Appreciation Division, the Cash
Management Division, the Government Division, the High Yield Corporate Bond
Division, the International Equity Division, the Total Return Division, the
Value Division, the Bond Division, the Growth Equity Division, the Indexed
Equity Division and the Socially Responsible Division. Each Investment
Division, except the Socially Responsible Division, invests only in the
shares of a corresponding Portfolio of the MFA Series Fund. The Socially
Responsible Division invests only in shares of the Calvert Responsibly
Invested Balanced Portfolio (the "Socially Responsible Portfolio") of the
Calvert Fund. Because amounts allocated to the Investment Divisions are
invested in mutual funds, investment return and principal will fluctuate and
your Accumulation Units may be worth more or less than their original cost
when redeemed.
6. HOW IS THE VALUE OF AN ACCUMULATION UNIT DETERMINED?
The value of an Accumulation Unit on any Business Day is determined by
multiplying the value of that unit on the immediately preceding Business Day
by the net investment factor for the Valuation Period. The net investment
factor used to calculate the value of an Accumulation Unit in any Investment
Division for the Valuation Period is determined by dividing (a) by (b) and
subtracting (c) from the result, where:
(a) is the sum of:
(1) the net asset value of a Portfolio share held in the Separate
Account for that Investment Division determined at the end of the
current Valuation Period, plus
(2) the per share amount of any dividends or capital gain
distributions made by the Portfolio for shares held in the Separate
Account for that Investment Division if the ex-dividend date occurs
during the Valuation Period.
(b) is the net asset value of a Portfolio share held in the Separate
Account for that Investment Division determined as of the end of the
immediately preceding Valuation Period.
(c) is a factor representing the mortality and expense risk charge.
This factor accrues daily and is currently equal, on an annual basis, to
.70% of the value of each Investment Division's assets (for Policy Years
one through ten) or .30% of the value of each Investment Division's assets
(for Policy Years eleven and later).
7. WHAT IS THE FIXED ACCOUNT?
In addition to the Investment Divisions, you may allocate or transfer
amounts to the Fixed Account. Net Premiums applied to and any amounts
transferred to the Fixed Account are
8
<PAGE>
credited with interest using a fixed interest rate that we will set in
advance at least annually. This rate will never be less than 4% per year.
Interest accrues daily and is credited on each Monthly Deduction Day. All Net
Premiums applied to, or amounts transferred to, the Fixed Account receive the
interest rate in effect at that time.
8. DOES THE POLICY HAVE A CASH SURRENDER VALUE?
The Policyowner may surrender the Policy at any time and receive its Cash
Surrender Value less any Policy Debt. Partial Withdrawals are also allowed
subject to certain restrictions. The Cash Surrender Value of a Policy
fluctuates with the investment performance of the Investment Divisions in
which the Policy has Cash Value and the amounts held in the Fixed Account and
the Loan Account. It may increase or decrease daily.
For federal income tax purposes, the Policyowner usually is not taxed on
increases in the Cash Surrender Value until he or she actually surrenders the
Policy. However, in connection with certain Partial Withdrawals and loans on
the Policy, the Policyowner may be taxed on all or a part of the amount
distributed. See "Section V: General Provisions of the Policy--Cash Value and
Cash Surrender Value" and "Section VI: Additional Information--Federal Income
Tax Considerations."
9. HOW LONG WILL THE POLICY REMAIN IN FORCE?
The Policy does not automatically terminate for failure to pay planned
Premiums. Payment of these Premiums, however, does not guarantee the Policy
will remain in force. The Policy terminates only when the Cash Surrender
Value less any Policy Debt is insufficient to pay the charges deducted on
each Monthly Deduction Day or where there is an excess loan, and a late
period expires without sufficient payment.
10. IS THE AMOUNT OF THE DEATH BENEFIT GUARANTEED?
As long as the Policy remains in force, the proceeds payable under the
Policy will be based on the Life Insurance Benefit Option in effect on the
date of death. Death Benefit proceeds will, however, be reduced by any
outstanding Policy Debt, and/or increased by any additional Death Benefits
added by rider.
11. IS THE DEATH BENEFIT SUBJECT TO INCOME TAXES?
A Death Benefit paid under our Policies may be fully excludable from the
gross income of the Beneficiary for federal income tax purposes. See "Section
VI: Additional Information-- Federal Income Tax Considerations."
12. WHAT IS A MODIFIED ENDOWMENT CONTRACT?
A modified endowment contract, as defined in the Code, is a life insurance
policy under which the cumulative premiums paid during the first seven policy
years exceed the cumulative premiums payable under a hypothetical policy
providing for guaranteed benefits upon the payment of seven level annual
premiums. Certain changes to a policy can subject it to retesting for a new
seven-year period. If your Policy is determined to be a modified endowment
contract, any distributions, including collateral assignments, loans and
Partial Withdrawals, are taxable to the extent that such distributions
represent income. In addition you may incur a penalty tax if you are not yet
age 59 1/2 and no other exceptions, as set forth in the Code, are applicable.
9
<PAGE>
13. CAN THE POLICY BECOME A MODIFIED ENDOWMENT CONTRACT?
Since the Policy permits flexible Premium payments, it may become a
modified endowment contract. NYLIAC currently tests a Policy at issue to
determine whether it will be classified as a modified endowment contract.
This at-issue test examines the Policy for the first seven Policy Years,
based on the Policy application and the first Premium requested, and based on
the assumption that there are no increases in Premiums or decreases in
benefits during the period. NYLIAC has also instituted procedures to monitor
whether a Policy may become a modified endowment contract after issue. See
"Section VI: Additional Information--Federal Income Tax
Considerations--Modified Endowment Contract Status."
14. WHAT ARE PLANNED PREMIUMS?
The amount and interval of any planned Premiums are shown on page 2 of the
Policy. A planned Premium does not have to be paid to keep the Policy in
force if the Cash Surrender Value, less any Policy Debt, is sufficient to
cover the charges made on the Monthly Deduction Day. The amount of any
planned Premium may be increased or decreased subject to the limits we set.
The frequency of Premiums may also be changed subject to our minimum Premium
rules. Planned Premiums end on the Policy Anniversary on which the Insured is
age 95.
15. WHAT ARE UNPLANNED PREMIUMS?
While the Insured is living, you may make unplanned Premium payments at
any time prior to the Policy Anniversary on which the Insured is age 95. If
an unplanned Premium would result in an increase in the Death Benefit greater
than the increase in the Cash Value, we reserve the right to require proof of
insurability before accepting that payment and applying it to the Policy. We
also reserve the right to limit the number and amount of any unplanned
Premiums. See "Section V: General Provisions of the Policy--Premiums."
16. WHAT HAPPENS WHEN THE FIRST PREMIUM IS PAID?
The first Premium payment will be allocated to the General Account until
the Policy is issued. On the Policy Date, Net Premiums will be transferred to
the Cash Management Investment Division.
17. WHEN ARE PREMIUMS PUT INTO THE FIXED ACCOUNT AND THE SEPARATE ACCOUNT?
Net Premiums will be allocated to the Cash Management Investment Division
until 20 days (10 days in New York) after the Policy Delivery Date.
Thereafter, Net Premiums will be allocated in accordance with the
Policyowner's instructions. Net Premiums will be applied to the Separate
Account at the Accumulation Unit value determined at the end of the Valuation
Period, and to the Fixed Account in accordance with your allocation election
in effect at that time, and before any other charges that may be due are
deducted.
18. HOW ARE PREMIUMS ALLOCATED AMONG THE ALLOCATION ALTERNATIVES?
You may maintain Accumulation Value in all 12 Allocation Alternatives.
Moreover, you may raise or lower the percentages of the Premium (which must
be in whole number percentages) allocated to each Allocation Alternative at
the time you make a Premium payment.
19. WHAT ARE THE CURRENT CHARGES AGAINST THE POLICY?
Three charges are deducted from each Premium, whether planned or
unplanned. A sales expenses charge of 2.25% is used to partially cover sales
expenses. Deductions of 2% and 1.25% are also made for premium tax and
federal tax charges, respectively.
10
<PAGE>
In addition, on each Monthly Deduction Day, the following deductions are
made:
(a) a monthly contract charge equal to $7.50 ($90.00 annually);
(b) a monthly cost of insurance charge; and
(c) the monthly cost for any riders attached to the Policy.
A deduction may also be made for any temporary flat extras as set forth on
page 2 of the Policy.
The Monthly Deduction Day for the Policy is shown on page 2 of the Policy.
The first Monthly Deduction Day is the Policy Date. All monthly deductions
are made on a pro-rata basis from each of the Investment Divisions and the
Fixed Account.
Also, a mortality and expense risk charge is made on a daily basis against
the assets of each Investment Division. For Policy Years one through ten,
this charge is calculated at an effective annual rate of .70% of the value of
each Investment Division's assets. For Policy Years eleven and later, the
mortality and expense risk charge is calculated at an effective annual rate
of .30% of the value of each Investment Division's assets. The mortality and
expense risk charge may be changed at NYLIAC's option subject to a maximum of
.90%.
Currently, we are not making any charges for income taxes, but we may make
charges in the future against the Separate Account for federal income taxes
attributable to it.
Additionally, upon a surrender or a requested decrease in Face Amount
during the first nine Policy years, a surrender charge is assessed. Partial
Withdrawals of Cash Value are subject to a charge equal to the lesser of $25
or 2% of the amount withdrawn.
See "Section III: Charges Under the Policies" and "Section VI: Additional
Information-- Federal Income Tax Considerations."
20. ARE LOANS AVAILABLE UNDER THE POLICY?
Using the Policy as sole security, you can borrow any amount up to the
loan value of the Policy. The loan value on any given date is equal to 90% of
the Cash Surrender Value, less any Policy Debt.
21. DO I HAVE A RIGHT TO CANCEL?
Under the Free Look Provision, you have 20 days (10 days in New York)
after you received the Policy to return the Policy and receive a refund. The
Policy may be returned to our Service Office or to the registered
representative who sold you the Policy. See "Section V: General Provisions of
the Policy--Free Look Provision."
22. CAN THE POLICY BE EXCHANGED?
You have the right during the first 24 months following the Policy Date to
exchange the Policy for a permanent fixed benefit policy offered by us for
this purpose. See "Section V: General Provisions of the Policy--Exchange
Privilege."
11
<PAGE>
SECTION III:
CHARGES UNDER THE POLICY
Certain charges are deducted to compensate for providing the insurance
benefits under the Policy, for any riders, for administering the Policy, for
assuming certain risks, and for incurring certain expenses in distributing
the Policy.
DEDUCTIONS FROM PREMIUMS
When we receive a Premium, whether planned or unplanned, we will deduct a
sales expense charge, a premium tax charge and a federal tax charge. The Net
Premium will then be applied to the Allocation Alternatives in accordance
with your allocation election in effect at that time, and before any other
charges are deducted.
SALES EXPENSE CHARGE.
The sales expense charge is 2.25% of any Premium. We reserve the right to
increase this charge in the future, but it will never exceed 4.5% of
Premiums. The amount of the sales expense charge in a Policy Year is not
necessarily related to our actual sales expenses for that particular year. To
the extent that sales expenses are not covered by the sales expense charge
and the surrender charge, they will be recovered from NYLIAC surplus,
including any amounts derived from the mortality and expense risk charge and
the cost of insurance charge.
PREMIUM TAX CHARGE.
Various states and jurisdictions impose a tax on premiums received by
insurance companies. We deduct 2% of each Premium to cover state premium
taxes. NYLIAC reserves the right to increase this charge consistent with
changes in applicable law.
FEDERAL TAX CHARGE.
NYLIAC's federal tax obligations will increase based upon Premiums
received under the Policies. We deduct 1.25% of each Premium to cover this
federal tax charge. NYLIAC reserves the right to increase this charge
consistent with changes in applicable law.
DEDUCTIONS FROM ACCUMULATION VALUE AND FIXED ACCOUNT VALUE
On each Monthly Deduction Day, a monthly contract charge, a cost of
insurance charge, and a rider charge for the cost of any additional riders
are deducted from the Investment Divisions and the Fixed Account in
proportion to the amount in each.
MONTHLY CONTRACT CHARGE.
There is a monthly charge currently equal to $7.50 ($90.00 annually) that
compensates NYLIAC for costs incurred in providing certain administrative
services including Premium collection, recordkeeping, processing claims and
communicating with Policyowners. This charge is not designed to produce a
profit. If the cost of providing these administrative services increases, we
reserve the right to increase this charge, subject to a maximum of $9.00
monthly ($108.00 annually).
COST OF INSURANCE CHARGE.
A charge for the cost of insurance is deducted on each Monthly Deduction
Day. Maximum cost of insurance rates are set forth on page 2.2 of your Policy
and are based on the gender,
12
<PAGE>
smoker class, duration, underwriting class, and issue age of the Insured. The
cost of insurance charge for any month will equal (1) multiplied by the
result of (2) minus (3) where: (1) is the applicable cost of insurance rate
(2) is the number of thousands of Face Amount as of the Monthly Deduction Day
divided by 1.0032737, and (3) is the number of thousands of Cash Value as of
the Monthly Deduction Day (before this cost of insurance charge, but after
the monthly contract charge and any charges for riders and flat extras are
deducted.) In rated cases, an additional charge may be assessed as part of
the cost of insurance charge. Charges for any flat extras and optional
benefits added by rider will also be deducted on each Monthly Deduction Day.
DEDUCTIONS FROM THE SEPARATE ACCOUNT
MORTALITY AND EXPENSE RISK CHARGE.
We charge the Investment Divisions for the mortality and expense risks we
assume. For Policy Years one through ten, we deduct a daily charge at an
effective annual rate of .70% of the value of each Investment Division's
assets. For Policy Years eleven and later, we deduct a daily charge at an
effective annual rate of .30% of the value of each Investment Division's
assets. The mortality and expense risk charge may be changed at NYLIAC's
option, subject to a maximum of .90%.
The mortality risk we assume is that the group of lives insured under our
Policies may, on average, live for shorter periods of time than we estimated.
The expense risk we assume is that our costs of issuing and administering
Policies may be more than we estimated.
If these charges are insufficient to cover actual costs and assumed risks,
the loss will be deducted from the NYLIAC surplus. Conversely, if the charge
proves more than sufficient, any excess will be added to the NYLIAC surplus.
OTHER CHARGES FOR FEDERAL INCOME TAXES.
We reserve the right to make a charge for Separate Account federal income
tax liabilities, should the law change to require the taxation of separate
accounts. See "Section VI: Additional Information--Federal Income Tax
Considerations."
FUND CHARGES
The Investment Divisions purchase shares of the relevant Funds at net
asset value. The price reflects management fees, administration fees and
other expenses that have already been deducted from the assets of the Funds.
The Funds do not impose a sales charge. Fund charges incurred in 1995 are set
forth in the following table.
<TABLE>
<CAPTION>
HIGH YIELD
CAPITAL CASH CORPORATE
APPRECIATION MANAGEMENT GOVERNMENT BOND
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ---------- ---------- ----------
<S> <C> <C> <C> <C>
ANNUAL EXPENSES
AFTER REIMBURSE-
MENT (as a % of
average net
assets)
Management Fees ... 0.36% 0.25% 0.30% 0.30%
Administration Fees 0.20% 0.20% 0.20% 0.20%
Other Expenses ..... 0.17% 0.17% 0.17% 0.17%
Total Portfolio
Annual Expenses* . 0.73% 0.62% 0.67% 0.67%
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
INTERNATIONAL TOTAL GROWTH INDEXED SOCIALLY
EQUITY RETURN VALUE BOND EQUITY EQUITY RESPONSIBLE
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------- --------- --------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
ANNUAL EXPENSES
AFTER REIMBURSE-
MENT (as a % of
average net
assets)
Management Fees ... 0.60% 0.32% 0.36% 0.25% 0.25% 0.10% 0.70%**
Administration Fees 0.20% 0.20% 0.20% 0.20% 0.20% 0.20% --
Other Expenses ..... 0.17% 0.17% 0.17% 0.17% 0.17% 0.17% 0.13%
Total Portfolio
Annual Expenses* . 0.97% 0.69% 0.73% 0.62% 0.62% 0.47% 0.83%
</TABLE>
13
<PAGE>
- ------------
* This number reflects an expense reimbursement agreement effective
through December 31, 1996, limiting "Other Expenses" to .17% annually
for the MFA Series Fund. In the absence of the expense reimbursement
agreement, the total annual expenses for the year ended December 31,
1995 would have been .90%, .94%, .82%, 1.25%, 2.51%, .81%, 1.45%, .91%,
.91% and .62% for the Capital Appreciation, Cash Management,
Government, High Yield Corporate Bond, International Equity, Total
Return, Value, Bond, Growth Equity and Indexed Equity Portfolios,
respectively. Numbers for the High Yield Corporate Bond, International
Equity and Value Portfolios have been annualized based on the period
from May 1, 1995 (the date of inception) to December 31, 1995.
** Commencing on July 1, 1996, this fee may be reduced or increased by up
to 0.15%, depending on the performance of the Socially Responsible
Portfolio relative to the Lipper Balanced Funds Index. See "Section IV:
The Separate Account, The Funds and The Fixed Account--Acacia Capital
Corporation" and the prospectus for the Calvert Fund which is attached
to this Prospectus. Calvert Asset Management Company, Inc. pays, at its
own expense, NCM Capital Management Group, Inc. an annual fee equal to
0.25% of one-half of the average net assets of the Portfolio. "Other
Expenses" reflects a fee of 0.02% paid pursuant to an expense offset
arrangement between the Socially Responsible Portfolio and its
custodian bank. Net Total Portfolio Annual Expenses are 0.81%.
SURRENDER CHARGE
During the first nine Policy Years, a surrender charge will be assessed on
a complete surrender or a requested decrease in Face Amount. The surrender
charge is based on the Policy Year in which the surrender or decrease in Face
Amount is made and will be deducted from the Investment Divisions and the
Fixed Account on a pro-rata basis.
For a surrender, the surrender charge is calculated by multiplying the
applicable percentage shown in the table below by the surrender charge
premium, which appears on page 2.1 of your Policy. A table of surrender
charge premium rates per thousand appears in Appendix B to this prospectus.
<TABLE>
<CAPTION>
PERCENTAGE OF
SURRENDER CHARGE
POLICY YEAR PREMIUM
- --------------- ------------------
<S> <C>
1-5 ............ 32.5%
6 .............. 26.0%
7 .............. 19.5%
8 .............. 13.0%
9 .............. 6.5%
10+ ............ 0%
</TABLE>
A requested decrease in Face Amount will result in the imposition of a
surrender charge equal to the difference between the surrender charge that
would have been payable on a complete surrender prior to the decrease and the
surrender charge that would be payable on a complete surrender after the
decrease. Requested decreases and increases in Face Amount will cause a
corresponding change in the amount of your surrender charge premium.
In no event will the surrender charge exceed 50% of Premiums paid to date,
less (i) any sales expense charges deducted from such Premium payments, less
(ii) any surrender charge previously deducted.
During the first two Policy Years, the surrender charge is further limited
to the sum of: (i) 30% of all Premium payments made during the first two
Policy Years up to one SEC guideline annual premium, plus (ii) 10% of all
Premium payments in the first two Policy Years in excess
14
<PAGE>
of one SEC guideline annual premium, but not more than two SEC guideline
annual premiums, plus (iii) 9% of all Premium payments in the first two
Policy Years in excess of two SEC guideline annual premiums, less (iv) any
sales expense charges deducted from such Premium payments, less (v) any
surrender charge previously deducted. An SEC guideline annual premium is the
level annual amount that would be payable in each Policy Year under certain
assumptions defined by the SEC. These assumptions include cost of insurance
charges based on the 1980 Commissioner's Standard Ordinary Mortality Tables,
net investment earnings at an annual rate of 5%, and the guaranteed fees and
charges associated with the Policy.
The percentages specified above and/or the year in which the surrender
charge is reduced may vary for individuals having a life expectancy of less
than 20 years either at the time that a Policy is issued or the Face Amount
is increased.
HOW THE POLICY WORKS.
This example is based on the illustration from page A-1, assuming a 6%
hypothetical gross annual investment return and current charges:
<TABLE>
<CAPTION>
<S> <C> <C>
Planned Annual Premium $7,500.00
less: Sales expense charge (2.25%) .............................. 168.75
Premium tax charge (2%) ................................... 150.00
Federal tax charge (1.25%) ................................ 93.75
-----------
equals: Net Premium ............................................... $7,087.50
plus: Net investment performance (varies monthly) ............... 310.46
less: Monthly contract charge ($7.50 per month) ................. 90.00
less: Charges for cost of insurance (varies monthly) ........... 566.23
-----------
equals: Cash Value ................................................ $6,741.73
less: Surrender charge (a percentage of surrender charge
premium) .................................................. 1,023.75
-----------
equals: Cash Surrender Value ...................................... $5,717.98
</TABLE>
15
<PAGE>
SECTION IV:
THE SEPARATE ACCOUNT, THE FUNDS AND THE FIXED ACCOUNT
THE SEPARATE ACCOUNT
The Separate Account was established as of May 24, 1996, pursuant to
resolutions of the NYLIAC Board of Directors. The Separate Account is
registered as a unit investment trust with the SEC under the Investment
Company Act of 1940 (the "1940 Act"), but such registration does not signify
that the SEC supervises the management, or the investment practices or
policies, of the Separate Account. The Separate Account meets the definition
of "separate account" under the federal securities laws.
Although the assets of the Separate Account belong to NYLIAC, they are
held separately from the other assets of NYLIAC, and are not chargeable with
liabilities incurred in any other business operations of NYLIAC (except to
the extent that assets in the Separate Account exceed the reserves and other
liabilities of that Account). The income, capital gains and capital losses
incurred on the assets of the Separate Account are credited to, or are
charged against, the assets of the Separate Account, without regard to the
income, capital gains or capital losses arising out of any other business
NYLIAC may conduct. NYLIAC may accumulate in the Separate Account the charge
for mortality and expense risks, monthly charges assessed against the Policy
and investment results applicable to those assets that are in excess of net
assets supporting the Policies.
The Separate Account currently has 11 Investment Divisions, each of which
invests solely in a corresponding Portfolio of the relevant Fund. The
Investment Divisions are: Capital Appreciation, Cash Management, Government,
High Yield Corporate Bond, International Equity, Total Return, Value, Bond,
Growth Equity, Indexed Equity and Socially Responsible. Investment Divisions
may, subject to any required regulatory approvals, be added or deleted at the
discretion of NYLIAC.
YOUR VOTING RIGHTS.
As explained previously, contributions allocated to the Investment
Divisions are invested in shares of the corresponding Portfolios of the
relevant Fund. Since we own the assets of the Separate Account, we are the
legal owner of the shares and, as such, have the right to vote on certain
matters. Among other things, we may vote:
o to elect the Board of Directors of the Funds;
o to ratify the selection of independent auditors for the Funds; and
o on any other matters described in the Funds' current prospectuses or
requiring a vote by shareholders under the 1940 Act.
The Funds are not required to hold, and do not hold, annual shareholder
meetings. Whenever a shareholder vote is taken, we will give Policyowners the
opportunity to instruct us how to vote the number of shares attributable to
their Policies. If we do not receive instructions in time from all
Policyowners, we will vote the shares of a Portfolio for which no
instructions have been received in the same proportion as we vote shares of
that Portfolio for which we have received instructions.
The Policyowner holds a voting interest in each Investment Division to
which Cash Value is allocated. The number of votes which are available to a
Policyowner will be calculated
16
<PAGE>
separately for each Investment Division and will be determined by dividing
the Accumulation Value attributable to an Investment Division by the net
asset value per share of the applicable Portfolios.
OUR RIGHTS.
We reserve the right to take certain actions in connection with the
operation of the Separate Account. These actions will be taken in accordance
with applicable laws (including obtaining any required approval of the SEC).
If necessary, we will seek approval by Policyowners.
Specifically, we reserve the right to:
o substitute, add or remove any Investment Division;
o create new separate accounts;
o combine the Separate Account with one or more other separate accounts;
o operate the Separate Account as a management investment company under
the 1940 Act or in any other form permitted by law;
o deregister the Separate Account under the 1940 Act;
o manage the Separate Account under the direction of a committee or
discharge such committee at any time;
o transfer the assets of the Separate Account to one or more other
separate accounts; and
o restrict or eliminate any of the voting rights of Policyowners or other
persons who have voting rights as to the Separate Account.
NEW YORK LIFE MFA SERIES FUND, INC.
The MFA Series Fund is a diversified open-end management investment
company, more commonly called a mutual fund. The MFA Series Fund currently
has ten Portfolios: the Capital Appreciation Portfolio, the Cash Management
Portfolio, the Government Portfolio, the High Yield Corporate Bond Portfolio,
the International Equity Portfolio, the Total Return Portfolio, the Value
Portfolio, the Bond Portfolio, the Growth Equity Portfolio and the Indexed
Equity Portfolio.
MacKay-Shields Financial Corporation ("MacKay-Shields") is the investment
adviser to the Capital Appreciation, Cash Management, Government, High Yield
Corporate Bond, International Equity, Total Return, and Value Portfolios.
Monitor Capital Advisors, Inc. ("Monitor") is the investment adviser to the
Indexed Equity Portfolio and New York Life is the investment adviser to the
Bond and Growth Equity Portfolios. MacKay-Shields, Monitor and New York Life
provide investment advisory services to the Portfolios in accordance with the
policies, programs and guidelines established by the Board of Directors of
the MFA Series Fund. As compensation for such services, the MFA Series Fund
pays MacKay-Shields a fee in the form of a daily charge at an annual rate of
.36%, .25%, .30%, .30%, .60%, .32% and .36% of the aggregate daily net assets
of the Capital Appreciation Portfolio, the Cash Management Portfolio, the
Government Portfolio, the High Yield Corporate Bond Portfolio, the
International Equity Portfolio, the Total Return Portfolio and the Value
Portfolio, respectively. The MFA Series Fund pays Monitor a fee in the form
of a daily charge at an annual rate of .10% of the aggregate daily net assets
of the Indexed Equity Portfolio. The MFA Series Fund pays New York Life a fee
in the form of a daily charge at an effective annual rate of .25% of the
aggregate daily net assets of the Bond and Growth Equity Portfolios.
17
<PAGE>
ACACIA CAPITAL CORPORATION
The Calvert Fund is an open-end management investment company, more
commonly called a mutual fund. Currently, the Socially Responsible Portfolio
is the only Portfolio available through the Calvert Fund for investment by
the Separate Account.
Calvert Asset Management provides investment advisory services to the
Socially Responsible Portfolio in accordance with the policies, programs and
guidelines established by the Board of Directors of the Calvert Fund. As
compensation for such services, the Calvert Fund pays Calvert Asset
Management a fee in the form of a daily charge at an annual rate of 0.70% of
the first $500 million of the average daily net assets of the Portfolio, and
0.60% of the average daily net assets of the Portfolio in excess of $1
billion. Commencing on July 1, 1996, this fee may be reduced or increased by
up to 0.15%, depending on the performance of the Socially Responsible
Portfolio relative to the Lipper Balanced Funds Index. See the prospectus for
the Calvert Fund, which is attached to this prospectus.
PORTFOLIOS
The assets of each Portfolio are separate from the others and each
Portfolio has different investment objectives and policies. As a result, each
Portfolio operates as a separate investment fund and the investment
performance of one Portfolio has no effect on the investment performance of
any other Portfolio. THERE IS NO ASSURANCE THAT ANY OF THE PORTFOLIOS WILL
ATTAIN THEIR RESPECTIVE STATED OBJECTIVES.
THE CAPITAL APPRECIATION PORTFOLIO.
The Capital Appreciation Portfolio seeks long-term growth of capital. It
seeks to achieve its primary investment objective by maintaining a flexible
approach towards investing in various types of companies as well as types of
securities depending upon the economic environment and the relative
attractiveness of the various securities markets. Generally, the Portfolio
will seek to invest in securities issued by companies with investment
characteristics such as participation in expanding markets, increasing unit
sales volume, growth in revenues and earnings per share superior to that of
the average common stocks comprising indices such as the Standard & Poor's
500 Composite Price Index ("S&P 500") and increasing return on investment.
Dividend income, if any, is a consideration incidental to the Portfolio's
objective of growth of capital.
THE CASH MANAGEMENT PORTFOLIO.
The Cash Management Portfolio seeks as high a level of current income as
is consistent with preservation of capital and maintenance of liquidity. It
invests primarily in short-term U.S. Government Securities, obligations of
banks, commercial paper, short-term corporate obligations and obligations of
U.S. and non-U.S. issuers denominated in U.S. dollars. An investment in the
Cash Management Portfolio is neither insured nor guaranteed by the U.S.
Government, and there can be no assurance that the Portfolio will be able to
maintain a stable net asset value of $1.00 per share.
THE GOVERNMENT PORTFOLIO.
The Government Portfolio seeks a high level of current income, consistent
with safety of principal. It will invest primarily in U.S. Government
securities, which include U.S. Treasury obligations and obligations issued or
guaranteed by the U.S. Government or its agencies or instrumentalities.
18
<PAGE>
THE HIGH YIELD CORPORATE BOND PORTFOLIO.
The High Yield Corporate Bond Portfolio seeks maximum current income
through investment in a diversified portfolio of high yield, high risk debt
securities. This Portfolio seeks to achieve its primary objective by
investment in a diversified portfolio of high yield debt securities that are
ordinarily in the lower rating categories of recognized rating agencies, that
is, rated Baa to B by Moody's Investors Services, Inc. ("Moody's") or BBB to
B by Standard & Poor's ("S&P"). Securities rated lower than Baa by Moody's or
BBB by S&P, or, if not rated, of equivalent quality, are sometimes referred
to as "high yield" securities or "junk bonds." The potential for high yield
is accompanied by higher risk. Certain of the Portfolio's investments have
speculative characteristics, as further discussed in the attached MFA Series
Fund prospectus. Capital appreciation is a secondary objective that will be
sought only when consistent with this Portfolio's primary objective.
THE INTERNATIONAL EQUITY PORTFOLIO.
The International Equity Portfolio seeks long-term growth of capital by
investing in a portfolio consisting primarily of non-U.S. equity securities.
Current income is a secondary objective. In pursuing its investment
objective, the Portfolio will seek to invest in securities that provide the
potential for strong return but that do not, in MacKay-Shields' judgment,
present undue or imprudent risk. The Portfolio pursues its objectives by
investing its assets in a diversified portfolio of common stocks, preferred
stocks, warrants and comparable equity securities. Foreign investing involves
certain risks that are discussed in greater detail in the attached MFA Series
Fund prospectus.
THE TOTAL RETURN PORTFOLIO.
The Total Return Portfolio seeks to realize current income consistent with
reasonable opportunity for future growth of capital and income. The Portfolio
maintains a flexible approach by investing in a broad range of securities,
which may be diversified by company, by industry and by type. The Portfolio
may invest in common stocks, convertible securities, warrants and
fixed-income securities, such as bonds, preferred stocks and other debt
obligations, including money market instruments.
THE VALUE PORTFOLIO.
The Value Portfolio seeks maximum long-term total return from a
combination of capital growth and income. It seeks to achieve this objective
by following flexible investment policies emphasizing investment in common
stocks that are, in the opinion of MacKay-Shields, undervalued at the time of
purchase. This Portfolio will normally invest in dividend-paying common
stocks that are listed on a national securities exchange or traded in the
over-the- counter market, but may also invest in non-dividend paying stocks
in accordance with MacKay-Shields' judgment.
THE BOND PORTFOLIO.
The Bond Portfolio seeks the highest income over the long term consistent
with preservation of principal. It will invest primarily in fixed-income debt
securities of an investment grade, but may also invest in lower-rated
securities, convertible debt, and preferred and convertible preferred stock.
19
<PAGE>
THE GROWTH EQUITY PORTFOLIO.
The Growth Equity Portfolio seeks long-term growth of capital with income
as a secondary consideration. It seeks to achieve this goal by investing
principally in common stocks and securities convertible into or with rights
to purchase common stocks of well established, well managed companies that
appear to have better than average growth potential.
THE INDEXED EQUITY PORTFOLIO.
The Indexed Equity Portfolio seeks to provide investment results that
correspond to the total return performance (reflecting reinvestment of
dividends) of common stocks in the aggregate, as represented by the S&P 500.
Using a full replication method, the Portfolio invests in all 500 stocks in
the S&P 500 in the same proportion as their representation in the S&P 500.
The S&P 500 is an unmanaged index considered representative of the U.S. stock
market. The Indexed Equity Portfolio is neither sponsored by nor affiliated
with the S&P 500.
THE SOCIALLY RESPONSIBLE PORTFOLIO.
The Socially Responsible Portfolio seeks to achieve a total return above
the rate of inflation through an actively managed portfolio of common and
preferred stocks, bonds and money market instruments that offer income and
capital growth opportunity and that satisfy the social concern criteria
established for this Portfolio.
Additional information concerning the Funds, investment objectives and
policies of the Portfolios, the risks associated with such objectives and
policies, investment advisory services and charges can be found in the
current prospectuses for the Funds, both of which are attached to this
prospectus. The prospectuses of the Funds should be read carefully before any
decision is made concerning the allocation of Premiums to an Investment
Division.
NYLIAC retains the right, subject to any applicable law, to make additions
to, deletions from, or substitutions for, the Portfolio shares held by any
Investment Division. NYLIAC reserves the right to eliminate the shares of any
of the Portfolios and to substitute shares of another portfolio of the Funds,
or of another registered open-end management investment company, if the
shares of the Portfolios are no longer available for investment or, if in
NYLIAC's judgment, investment in any Portfolio would become inappropriate in
view of the purposes of the Separate Account. To the extent required by the
1940 Act, substitutions of shares attributable to a Policyowner's interest in
an Investment Division will not be made until the Policyowner has been
notified of the change.
The Funds' shares may also be available to certain separate accounts
funding variable annuity policies offered by NYLIAC. This is called "mixed
funding." Shares of the Calvert Fund may also be available to separate
accounts of insurance companies unaffiliated with NYLIAC. This is called
"shared funding." Although we do not anticipate any inherent difficulties
arising from mixed and shared funding, it is theoretically possible that, due
to differences in tax treatment or other considerations, the interests of
owners of various contracts participating in the Funds might at some time be
in conflict. The Board of Directors of each Fund, each Fund's investment
advisers, and NYLIAC are required to monitor events to identify any material
conflicts that arise from the use of the Funds for mixed and shared funding.
For more information about the risks of mixed and shared funding, please
refer to the relevant Fund prospectus.
20
<PAGE>
THE FIXED ACCOUNT
The Fixed Account is supported by the assets in the General Account.
NYLIAC has sole discretion to invest the assets of the Fixed Account subject
to applicable law. An interest in the Fixed Account is not registered under
the Securities Act of 1933, and the Fixed Account is not registered as an
investment company under the 1940 Act. Accordingly, neither the Fixed Account
nor any interests therein are generally subject to the provisions of these
statutes, and NYLIAC has been advised that the staff of the SEC has not
reviewed the disclosures in this prospectus relating to the Fixed Account.
These disclosures regarding the Fixed Account may, however, be subject to
certain applicable provisions of the federal securities laws relating to the
accuracy and completeness of statements made in prospectuses.
INTEREST CREDITING.
Any amounts in the Fixed Account are credited with interest using a fixed
interest rate, which we declare periodically. We will set this rate in
advance at least annually. This rate will never be less than 4% per year.
Interest accrues daily and is credited on each Monthly Deduction Day. All Net
Premiums applied to, and amounts transferred to, the Fixed Account receive
the rate in effect at that time.
TRANSFERS TO INVESTMENT DIVISIONS.
In each Policy Year, you may make one transfer from the Fixed Account to
the Investment Divisions, subject to the following three conditions:
1. Maximum Transfer. An amount not greater than 10% of the Fixed Account
Value at the beginning of the Policy Year may be transferred during that
Policy Year. During the retirement year only, however, (the Policy Year
following the Insured's 65th birthday, the date you indicate in the
application or another date if we approve), the 10% maximum transfer
limitation does not apply.
2. Minimum Transfer. The minimum amount that may be transferred is $500,
unless we agree otherwise.
3. Minimum Remaining Value. The Fixed Account Value remaining after the
transfer must be at least $500. If the remaining Fixed Account Value would be
less than $500, that amount must be included in the transfer.
Transfer requests must be in writing on a form approved by NYLIAC.
INVESTMENT RETURN
The investment return of a Policy is based on:
o the Accumulation Units held in each Investment Division for that
Policy;
o the investment experience of each Investment Division as measured by
its actual net rate of return;
o the interest rate credited on amounts held in the Fixed Account; and
o the interest rate credited on amounts held in the Loan Account, if any.
The investment experience of an Investment Division reflects increases or
decreases in the net asset value of the shares of the underlying Portfolio,
any dividend or capital gains distributions declared by the Funds, and any
charges against the assets of the Investment Division. This investment
experience is determined at the end of each Valuation Period.
21
<PAGE>
SECTION V:
GENERAL PROVISIONS OF THE POLICY
This section of the prospectus describes the general provisions of the
Policy, and is subject to the terms of the Policy. You may review a copy of
the Policy upon request.
PREMIUMS
While the Policy is in force, Premiums may be paid at any time while the
Insured is living and before the Policy Anniversary on which the Insured is
age 95. Subject to certain restrictions, Premiums can be paid at any interval
and by any method we make available. Premiums should be sent to our Premium
Remittance Center or to the address indicated for payment on the notice. The
Policyowner selects a Premium schedule in the Application and this amount,
along with the amount of the first Premium, is set forth on page 2 of the
Policy. You may elect not to make a planned Premium payment at any time.
You may also make other Premium payments that are not planned. If an
unplanned Premium payment would result in an increase in the Death Benefit
greater than the increase in the Cash Value, we reserve the right to require
proof of insurability before accepting that payment and applying it to the
Policy. We also reserve the right to limit the number and amount of any
unplanned Premiums.
There is no penalty if a planned Premium is not paid, since Premiums,
other than the first Premium, are not specifically required. Paying planned
Premiums, however, does not guarantee coverage for any period of time.
Instead, the duration of the Policy depends upon the Policy's Cash Surrender
Value, less any Policy Debt.
TERMINATION
If, on a Monthly Deduction Day, the Cash Surrender Value less any Policy
Debt is less than the amount of the charges to be deducted on the next
Monthly Deduction Day, the Policy will go into default status and will
continue for a late period of 62 days commencing with the current Monthly
Deduction Day. If we do not receive a Premium sufficient to take your Policy
out of default status before the end of the late period, the Policy will
lapse and there will be no Cash Value or Death Benefit.
NYLIAC will mail a notice to you at your last known address, and a copy to
the last known assignee on our records, at least 31 days before the end of
the late period. During the late period, the Policy remains in force. If the
Insured dies during the late period, we will pay the Death Benefit. However,
these proceeds will be reduced by the amount of any unpaid loan and the
amount of the charges to be deducted on each Monthly Deduction Day from the
beginning of the late period through the Policy month in which the Insured
dies.
DEATH BENEFIT UNDER THE POLICY
The Death Benefit is the amount payable to the named Beneficiary when the
Insured dies. Upon receiving due proof of death at our Service Office, we
will pay the Beneficiary the Death Benefit determined as of the date the
Insured dies. All or part of the Death Benefit can be paid in cash or applied
under one or more of our payment options described under "Section VI:
Additional Information--Payment Options."
The amount of the Death Benefit is determined by whether you have chosen
Life Insurance Benefit Option 1 or Life Insurance Benefit Option 2. See "Life
Insurance Benefit Options" under Definition of Terms. Added to the amount
determined by the selected Life Insurance Benefit Option is the value of any
additional benefits provided by rider. We pay interest on the Death Benefit
from the date of death to the date the Death Benefit is paid or a
22
<PAGE>
payment option becomes effective. The interest rate equals the rate
determined under the Interest Payment Option as described in "Section VI:
Additional Information--Payment Options." We subtract any outstanding Policy
Debt and any charges incurred but not yet deducted, and then credit the
interest.
Beginning on the Policy Anniversary on which the Insured is age 95, the
Face Amount, as shown on page 2 of the Policy, will no longer apply. Instead,
the life insurance benefit under the Policy will equal the Cash Value, less
outstanding Policy Debt. Also, no further monthly deductions will be made for
cost of insurance.
SELECTION OF LIFE INSURANCE BENEFIT TABLE.
Under either Life Insurance Benefit Option, the Death Benefit cannot be
less than the Policy's Cash Value times a percentage determined from the
appropriate Code Section 7702 table. The Policyowner may choose either the
"CVAT" table or the "Corridor" table, which are described below, before the
Policy is issued. The Death Benefit will vary depending on which table is
selected. If the Policyowner does not choose a table, the Corridor table will
be used. Once the Policy is issued, the Policyowner may not change to a
different table.
Under Code Section 7702, a Policy will be treated as life insurance for
federal tax purposes if at all times it meets either (1) a "cash value
accumulation" test or (2) both a "guideline premium" test and a "cash value
corridor" test. The CVAT table is designed to meet the cash value
accumulation test, while the Corridor table is designed to meet the cash
value corridor test. A Policy using the Corridor table must also satisfy the
"guideline premium" test of Code Section 7702. This test limits the amount of
Premiums that may be paid into the Policy.
CORRIDOR TABLE
<TABLE>
<CAPTION>
INSURED'S AGE INSURED'S AGE
ON POLICY % OF CASH ON POLICY % OF CASH
ANNIVERSARY VALUE ANNIVERSARY VALUE
- --------------- ------------ --------------- ------------
<S> <C> <C> <C>
0-40 250 61 128
41 243 62 126
42 236 63 124
43 229 64 122
44 222 65 120
45 215 66 119
46 209 67 118
47 203 68 117
48 197 69 116
49 191 70 115
50 185 71 113
51 178 72 111
52 171 73 109
53 164 74 107
54 157 75-90 105
55 150 91 104
56 146 92 103
57 142 93 102
58 138 94 101
59 134 95 & Over 100
60 130
</TABLE>
23
<PAGE>
CVAT TABLE
<TABLE>
<CAPTION>
INSURED'S AGE
ON POLICY % OF
ANNIVERSARY CASH VALUE
- ------------- --------------------------
MALE FEMALE UNISEX
------ -------- --------
<S> <C> <C> <C>
18 691 830 715
19 671 803 694
20 652 778 674
21 634 753 654
22 615 729 635
23 597 705 616
24 579 683 597
25 564 661 579
26 544 639 561
27 527 618 543
28 511 598 526
29 494 579 509
30 478 560 493
31 463 541 477
32 448 524 461
33 433 507 446
34 419 490 432
35 405 474 417
36 392 458 404
37 380 443 391
38 367 429 378
39 356 415 366
40 344 402 354
41 333 389 343
42 323 377 332
43 313 365 322
44 303 354 312
45 294 343 303
46 285 333 293
47 276 323 285
48 268 313 276
49 260 303 268
50 253 294 260
51 245 286 252
52 238 277 245
53 231 269 238
54 225 261 231
55 219 254 225
56 213 247 219
</TABLE>
<TABLE>
<CAPTION>
INSURED'S AGE
ON POLICY % OF
ANNIVERSARY CASH VALUE
- ------------- --------------------------
MALE FEMALE UNISEX
------ -------- --------
<S> <C> <C> <C>
57 207 240 213
58 202 233 207
59 196 226 202
60 191 220 197
61 187 214 192
62 182 208 187
63 178 202 182
64 173 197 178
65 169 191 174
66 166 186 170
67 162 182 166
68 159 177 162
69 155 172 159
70 152 168 155
71 149 164 152
72 146 160 149
73 143 156 146
74 141 152 143
75 138 149 141
76 136 146 138
77 134 143 136
78 132 140 134
79 130 137 132
80 128 134 130
81 126 132 128
82 125 130 126
83 123 127 124
84 122 125 123
85 120 123 121
86 119 121 120
87 118 119 118
88 116 118 117
89 115 116 115
90 113 114 114
91 112 112 112
92 110 110 110
93 107 108 108
94 104 104 104
95 & Over 100 100 100
</TABLE>
24
<PAGE>
THE EFFECT OF INVESTMENT PERFORMANCE ON THE DEATH BENEFIT.
Positive investment experience in the Investment Divisions may result in a
Death Benefit that will be greater than the Face Amount, but negative
investment experience will never result in a Death Benefit that will be less
than the Face Amount, so long as the Policy remains in force.
Example. The following example shows how the Death Benefit varies as a
result of investment performance on a Policy, assuming that Life Insurance
Benefit Option 1 and the Corridor Table have been selected, and assuming age
at death is 45:
<TABLE>
<CAPTION>
POLICY A POLICY B
---------- ----------
<S> <C> <C>
Face Amount ................................ $100,000 $100,000
Cash Value on Date of Death ................ $ 50,000 $ 40,000
Code Section 7702 Life Insurance Percentage
on Date of Death .......................... 215% 215%
</TABLE>
The Death Benefit will equal the greater of the $100,000 Face Amount or the
Cash Value times the Code Section 7702 Life Insurance Percentage. For Policy
A, the Death Benefit will equal $107,500. For Policy B, the Death Benefit
will equal the $100,000 Face Amount.
FACE AMOUNT CHANGES.
You can apply in writing to have the Face Amount of your Policy increased.
In addition, on or after the first Policy Anniversary, you can apply in
writing to have the Face Amount of your Policy decreased. Face Amount changes
may be made while the Insured is living, but only if your Policy will
continue to qualify as life insurance under Code Section 7702 after the
change is made. Requested decreases and increases in Face Amount will cause a
corresponding change in the amount of your surrender charge premium.
The amount of an increase in Face Amount is subject to NYLIAC's maximum
retention limits. Evidence of insurability which is satisfactory to us is
required for an increase. If this evidence results in a change of
underwriting class, a new Policy will be issued for the amount of the
increase. We reserve the right to limit increases. Any increase will take
effect on the Monthly Deduction Day on or after the Business Day we approve
your request for the increase. An increase in Face Amount may increase the
cost of insurance charge.
Decreases in coverage may be requested. The Face Amount will be reduced
and the appropriate surrender charge will be deducted from the Cash Value.
See "Section III: Charges Under the Policy--Surrender Charge." A decrease in
Face Amount is effective on the Monthly Deduction Day on or after the
Business Day we receive your request for the decrease. The Face Amount may
not be decreased to less than $25,000.
LIFE INSURANCE BENEFIT OPTION CHANGES.
On or after the first Policy Anniversary, you can change the Life
Insurance Benefit Option of the Policy. Any change of Option will take effect
on the Monthly Deduction Day on or after the Business Day we approve your
signed request. If you change from Option 1 to Option 2, the Face Amount of
the Policy will be decreased by the Cash Value. No surrender charge will
apply to this automatic decrease in Face Amount. If you change from Option 2
to Option 1, the Face Amount of the Policy will be increased by the Cash
Value. The surrender charge premium will not be affected by changes in the
Life Insurance Benefit Option. See "Section III: Charges Under the
Policy--Surrender Charge."
25
<PAGE>
CASH VALUE AND CASH SURRENDER VALUE
CASH VALUE.
The Cash Value of the Policy is the sum of the Accumulation Value in the
Separate Account, the Fixed Account Value and the Loan Account Value.
Initially, the Cash Value equals the Net Premium paid under the Policy. This
amount is allocated among the Fixed Account and the Investment Divisions
according to the allocation percentages requested in the Application, or as
subsequently changed by the Policyowner. A portion of your Cash Value is
allocated to the Loan Account if you take a loan under your Policy. See
"Section V: General Provisions of the Policy--Loans." The Cash Value also
reflects various charges. See "Section III: Charges Under the Policy."
CASH SURRENDER VALUE.
The Policy may be surrendered for its Cash Surrender Value, less any
unpaid loan, at any time before the Insured dies. Unless a later effective
date is selected, the surrender is effective on the Business Day we receive
the Policy and a signed surrender request in proper form at our Service
Office. The Cash Surrender Value is the Cash Value, less any surrender
charges.
TRANSFERS
All or part of the Cash Value may be transferred among Investment
Divisions or from an Investment Division to the Fixed Account. Transfers may
also be made from the Fixed Account to the Investment Divisions in certain
situations. See "Section IV: The Separate Account, the Funds and the Fixed
Account--The Fixed Account."
The minimum amount that may be transferred from one Investment Division to
another Investment Division or to the Fixed Account, is the lesser of (i)
$500 or (ii) the value of the Accumulation Units in the Investment Division
from which the transfer is being made. If, after the transfer, the value of
the remaining Accumulation Units in an Investment Division or the Fixed
Account Value would be less than $500, that amount will be included in the
transfer. There is no charge for the first twelve transfers in any one Policy
Year. NYLIAC reserves the right to charge $30 for each transfer in excess of
twelve per year. This charge will be applied on a pro-rata basis to the
Allocation Alternatives to which the transfer is being made.
Transfer requests must be made in writing on a form approved by NYLIAC.
Transfers to or from Investment Divisions will be made based on the
Accumulation Unit values on the Business Day on which
NYLIAC receives the transfer request.
PARTIAL WITHDRAWALS
The owner of a Policy may make a Partial Withdrawal of the Policy's Cash
Value, at any time while the Insured is living. The minimum Partial
Withdrawal is $500, and at least $500 of Cash Surrender Value, plus any
Policy Debt, must remain following the withdrawal. The Partial Withdrawal
will be made on a pro-rata basis from the Fixed Account and each Investment
Division, unless you indicate otherwise. There will be a processing charge
equal to the lesser of $25 or 2% of the amount withdrawn applied to any
Partial Withdrawal.
A Partial Withdrawal will be prohibited if it would cause the Face Amount
to drop below $25,000. If Life Insurance Benefit Option 1 is in effect, the
Face Amount will be reduced by the
26
<PAGE>
amount of the Partial Withdrawal. If Life Insurance Benefit Option 2 is in
effect, the Face Amount will not be changed by the amount of the Partial
Withdrawal. A Partial Withdrawal will not be permitted during the first
Policy Year if Life Insurance Benefit Option 1 is in effect.
LOANS
Using the Policy as sole security, you can borrow up to the loan value of
the Policy. The loan value on any given date is equal to 90% of the Cash
Surrender Value, less any Policy Debt.
LOAN ACCOUNT.
The Loan Account secures Policy Debt and is part of our General Account.
When a loan is requested, an amount is transferred to the Loan Account from
the Investment Divisions and the Fixed Account (on a pro-rata basis unless
you request otherwise) equal to: (1) the requested loan amount; plus (2) any
Policy Debt; plus (3) the interest to the next Policy Anniversary on the
requested loan amount and on any Policy Debt; minus (4) the amount in the
Loan Account. On each Policy Anniversary, the Loan Account will be increased
by an amount equal to the loan interest to the next Policy Anniversary on any
Policy Debt. The effective date of the loan is the Business Day we make
payment.
The Loan Account Value will never be less than (a) plus (b) minus (c),
where (a) is the amount in the Loan Account on the prior Policy Anniversary,
(b) is the amount of any loan taken since the prior Policy Anniversary and
(c) is any loan amount repaid since the prior Policy Anniversary. On each
Policy Anniversary, if the amount in the Loan Account exceeds the amount of
any outstanding loans plus interest to the next Policy Anniversary, the
excess will be transferred from the Loan Account to the Investment Divisions
and to the Fixed Account. Amounts transferred will first be transferred to
the Fixed Account up to an amount equal to the total amounts transferred from
the Fixed Account to the Loan Account. Any subsequent amounts transferred
will be allocated according to your Premium allocation in effect at the time
of transfer unless you tell us otherwise.
The Loan Account Value earns interest at a rate of not less than the
greater of 4% per year and the effective annual loan interest rate less 2%.
Interest accrues daily and is credited on each Monthly Deduction Day.
LOAN INTEREST.
Unless we set a lower rate for any period, the effective annual loan
interest rate is 6%, payable in arrears. Loan interest accrues each day and
is compounded annually. Loan interest not paid as of the Policy Anniversary
becomes part of the loan. An amount may need to be transferred to the Loan
Account to cover this increased loan amount.
On the date of death, the date the Policy ends, the date of a loan
repayment, or on any other date we specify, we will make any adjustment in
the loan that is required to reflect any interest paid for any period beyond
that date.
If we have set a rate lower than 6% per year, any subsequent increase in
the interest rate shall be subject to the following conditions:
(1) The effective date of any increase in the interest rate for loans
shall not be earlier than one year after the effective date of the
establishment of the previous rate.
27
<PAGE>
(2) The amount by which the interest rate may be increased shall not
exceed one percent per year, but the interest shall in no event ever exceed
6%.
(3) We will give notice of the interest rate in effect when a loan is made
and when sending notice of loan interest due.
(4) If a loan is outstanding 40 days or more before the effective date of
an increase in the interest rate, we will notify you of that increase at
least 30 days prior to the effective date of the increase.
(5) We will give notice of any increase in the interest rate when a loan
is made during the 40 days before the effective date of the increase.
REPAYMENT.
All or part of an unpaid loan can be repaid before the Insured's death or
before the Policy is surrendered. Excess amounts in the Loan Account
(resulting from either loan repayments or interest accrued) will be
transferred in accordance with the procedures set forth in "Loan Account"
above.
If a loan is outstanding when the life insurance or surrender proceeds
become payable, we will deduct the amount of any Policy Debt from these
proceeds. In addition, if an unpaid loan exceeds the Cash Surrender Value of
the Policy, we will mail a notice to you at your last known address, and a
copy to the last known assignee on our records. All insurance will end 31
days after the date on which we mail that notice to you if the excess of the
unpaid loan over the Cash Surrender Value is not paid within that 31 days.
FREE LOOK PROVISION
The Policy contains a provision that permits cancellation by returning it
to us, or to the registered representative through whom it was purchased,
within 20 days (10 days in New York) after the Policyowner receives it.
Premiums will be allocated to the Cash Management Division until 20 days
after the Policy Delivery Date. The Policyowner will then receive from us the
greater of the Policy's Cash Value as of the date the Policy is returned or
the Premiums paid, less loans and Partial Withdrawals.
EXCHANGE PRIVILEGE
At any time within 24 months of the Policy Date, the Policyowner may
exchange the Policy for a policy on a permanent plan of life insurance on the
Insured which we are offering for this purpose. NYLIAC will not require
evidence of insurability. Upon an exchange of a Policy, all riders and
benefits will end unless we agree otherwise or unless required under state
law. The replacement policy will have the same Policy Date, issue age, risk
classification, and initial Face Amount as the original Policy, but will not
offer variable investment options such as the Investment Divisions.
In order to exchange the Policy, we will require: (a) that the Policy be
in effect on the date of exchange; (b) repayment of any unpaid loan; and (c)
an adjustment, if any, for differences in premiums and cash values under the
Policy and the new policy. The date of exchange will be the later of: (a) the
Business Day you send us the Policy along with a signed request; or (b) the
Business Day we receive at our Service Office, or such other location that we
indicate to you in writing, the necessary payment for the exchange, if any.
28
<PAGE>
SECTION VI:
ADDITIONAL INFORMATION
DIRECTORS AND PRINCIPAL OFFICERS OF NYLIAC
DIRECTORS:POSITIONS DURING LAST FIVE YEARS:
Seymour Sternberg ...... President and Chief Operating Officer of New
York Life from October 1995 to date; Vice
Chairman and President Elect from February
1995 to October 1995; Executive Vice
President prior thereto. President of NYLIAC
from November 1995 to date.
Jay S. Calhoun, III .... Vice President and Treasurer of New York
Life from November 1992 to date; Vice
President and Associate Treasurer from March
1992 to November 1992; Corporate Vice
President prior thereto. Vice President and
Treasurer of NYLIAC from January 1993 to
date.
Lee M. Gammill, Jr. .... Vice Chairman of New York Life from February
1995 to date; Executive Vice President prior
thereto. President of NYLIAC from July 1991
to November 1995.
Richard M. Kernan, Jr. . Executive Vice President and Chief
Investment Officer of New York Life from
March 1991 to date.
Gary R. McPhail ........ Executive Vice President of New York Life
from August 1995 to date. Executive Vice
President of NYLIAC from November 1995 to
date. Executive Vice President in charge of
Sales and Marketing, Lincoln National
Corporation, prior thereto.
Robert D. Rock ......... Senior Vice President in charge of the
Individual Annuity Department of New York
Life from March 1992 to date; Vice President
in charge of the Individual Annuity
Department from November 1991 to March 1992;
Vice President prior thereto. Senior Vice
President of NYLIAC from April 1992 to date;
Vice President prior thereto.
Frederick J. Sievert ... Executive Vice President of New York Life
from February 1995 to date; Senior Vice
President and Chief Financial
Officer--Individual Operations from January
1992 to February 1995. Executive Vice
President of NYLIAC from November 1995 to
date; Senior Vice President from June 1992
to November 1995. Senior Vice President,
Individual Insurance Division, Royal
Maccabees Life Insurance Company, prior
thereto.
29
<PAGE>
Stephen N. Steinig ..... Senior Vice President and Chief Actuary of
New York Life from February 1994 to date;
Chief Actuary and Controller from January
1992 to February 1994; Senior Vice President
and Chief Actuary prior thereto. Senior Vice
President and Chief Actuary of NYLIAC from
May 1991 to date.
OFFICERS:
Michael Gallo .......... Senior Vice President in charge of the
Individual Life Department of New York Life
from July 1995 to date; Senior Vice
President--Northeastern Agencies from
February 1994 to July 1995; Vice President
prior thereto. Senior Vice President of
NYLIAC from August 1995 to date.
Solomon Goldfinger ..... Senior Vice President in charge of Financial
Management of New York Life from July 1995
to date; Senior Vice President in charge of
the Individual Life Department from March
1992 to July 1995; Vice President and
Actuary in charge of the Individual Life
Department prior thereto. Senior Vice
President of NYLIAC from April 1992 to date;
Vice President from February 1992 to April
1992; Vice President and Actuary prior
thereto.
Maryann L. Ingenito .... Vice President of New York Life from April
1990 to date. Vice President and Controller
(Principal Accounting Officer) of NYLIAC
from December 1994 to date; Vice President
and Assistant Controller prior thereto.
Robert A. Slepicka ..... Senior Vice President of New York Life from
March 1996 to date; Vice President prior
thereto. Vice President of NYLIAC from March
1993 to date.
Lawrence R. Stoehr ..... Vice President of New York Life from March
1993 to date; Corporate Vice President prior
thereto. Vice President of NYLIAC from July
1994 to date; Corporate Vice President prior
thereto.
30
<PAGE>
FEDERAL INCOME TAX CONSIDERATIONS
THE DISCUSSION CONTAINED HEREIN IS GENERAL IN NATURE, IS NOT AN EXHAUSTIVE
DISCUSSION OF ALL TAX QUESTIONS THAT MIGHT ARISE UNDER THE POLICIES, AND IS
NOT INTENDED AS TAX ADVICE. NO ATTEMPT IS MADE TO CONSIDER ANY APPLICABLE
STATE OR OTHER TAX LAWS AND NO REPRESENTATION IS MADE AS TO THE LIKELIHOOD OF
CONTINUATION OF CURRENT FEDERAL INCOME TAX LAWS AND TREASURY REGULATIONS OR
OF CURRENT INTERPRETATIONS OF THE INTERNAL REVENUE SERVICE.
WHILE NYLIAC RESERVES THE RIGHT TO MAKE CHANGES IN THE POLICY TO ASSURE
THAT IT CONTINUES TO QUALIFY AS LIFE INSURANCE FOR TAX PURPOSES, NYLIAC
CANNOT MAKE ANY GUARANTEE REGARDING THE FUTURE TAX TREATMENT OF ANY POLICY.
FOR COMPLETE INFORMATION ON THE IMPACT OF CHANGES WITH RESPECT TO THE POLICY
AND FEDERAL AND STATE CONSIDERATIONS, A QUALIFIED TAX ADVISOR SHOULD BE
CONSULTED.
The ultimate effect of federal income taxes on values under the Policy and
on the economic benefit to the Policyowner or Beneficiary depends upon
NYLIAC's tax status, upon the terms of the Policy and upon the tax status of
the individual concerned.
TAX STATUS OF NYLIAC AND THE SEPARATE ACCOUNT.
NYLIAC is taxed as a life insurance company under Subchapter L of the
Code. The Separate Account is not a separate taxable entity from NYLIAC and
its operations are taken into account by NYLIAC in determining its income tax
liability. All investment income and realized net capital gains on the assets
of the Separate Account are reinvested and taken into account in determining
Policy Cash Values and are automatically applied to increase the book
reserves associated with the Policies. Under existing federal income tax law,
neither the investment income nor any net capital gains of the Separate
Account are taxed to NYLIAC to the extent those items are applied to increase
reserves associated with the Policies.
CHARGES FOR TAXES.
NYLIAC imposes a Federal Tax Charge equal to 1.25% of Premiums received
under the Policy to compensate NYLIAC for the federal income tax liability it
incurs under Code Section 848 by reason of its receipt of Premiums under the
Policy. NYLIAC believes that this charge is reasonable in relation to the
increased tax burden it incurs as a result of Section 848. No other charge is
currently made to the Separate Account for federal income taxes of NYLIAC
that may be attributable to the Separate Account. Periodically, NYLIAC
reviews the appropriateness of charges to the Separate Account for NYLIAC's
federal income taxes, and in the future, a charge may be made for federal
income taxes incurred by NYLIAC that are attributable to the Separate
Account. In addition, depending on the method of calculating interest on
Policy Values allocated to the Fixed Account (see preceding section), a
charge may also be imposed for the Policy's share of NYLIAC's federal income
taxes attributable to the Fixed Account.
DIVERSIFICATION STANDARDS AND CONTROL ISSUES.
In addition to other requirements imposed by the Code, a Policy will
qualify as life insurance under the Code only if the diversification
requirements of Code Section 817(h) are satisfied by the Separate Account. To
assure that each Policy continues to qualify as life
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insurance for federal income tax purposes, NYLIAC intends to comply with Code
Section 817(h) and the Regulations thereunder for each Portfolio. To satisfy
these diversification standards, the Regulations generally require that on
the last day of each quarter of a calendar year: no more than 55% of the
value of a Separate Account's assets can be represented by any one
investment; no more than 70% can be represented by any two investments; no
more than 80% can be represented by any three investments; and no more than
90% can be represented by any four investments. For purposes of these rules,
all securities of the same issuer generally are treated as a single
investment, but each government agency or instrumentality is treated as a
separate issuer. In addition a "look-through" rule applies to treat a
pro-rata portion of each asset of each Portfolio as an asset of the Separate
Account.
The general diversification requirements of Code Section 817(h) are
modified with regard to assets of the Separate Account that are direct
obligations of the United States Treasury. Even if a separate account invests
only in United States Treasury Securities it will be treated as adequately
diversified under Code Section 817(h). In addition, for purposes of
determining whether its holdings of assets other than United States Treasury
Securities are adequately diversified, the generally applicable percentage
limitations are increased based on the value of a separate account's
investment in United States Treasury Securities. Notwithstanding this
modification of the general diversification requirements, however, the
investments of the Portfolios will be structured to comply with the general
diversification standards because they serve as investment vehicles for
certain variable annuity contracts that must comply with the general
standards.
In connection with its issuance of temporary regulations under Code
Section 817(h) in 1986, the Treasury Department announced that such temporary
regulations did not provide guidance concerning the extent to which
Policyowners could be permitted to direct their investments to particular
divisions of a separate account and that guidance on this issue would be
forthcoming. Regulations addressing this issue have not yet been issued or
proposed, and it is not clear, at this time, whether such regulations will
ever be issued or what such regulations might provide. If such regulations
were to be issued in the future, it is possible that the Policy might need to
be modified to comply with such regulations. For these reasons, NYLIAC
reserves the right to modify the Policy, as necessary, to prevent the
Policyowner from being considered the owner of the assets of the Separate
Account.
LIFE INSURANCE STATUS OF POLICY.
NYLIAC believes that the Policy meets the statutory definition of life
insurance under Code Section 7702 and that the Policyowner and Beneficiary of
any Policy will receive the same federal income tax treatment as that
accorded to owners and beneficiaries of fixed benefit life insurance
policies. Specifically, the Death Benefit under the Policy will be excludable
from the gross income of the Beneficiary subject to the terms and conditions
of Code Section 101(a)(1). (Death benefits under a "modified endowment
contract" as discussed below are treated in the same manner as death benefits
under life insurance contracts that are not so classified.)
In addition, unless the Policy is a "modified endowment contract," in
which case the receipt of any loan under the Policy may result in recognition
of income to the Policyowner, the Policyowner will not be deemed to be in
constructive receipt of the Cash Values, including increments thereon, under
the Policy until proceeds of the Policy are received upon a surrender of the
Policy or a Partial Withdrawal.
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MODIFIED ENDOWMENT CONTRACT STATUS.
A Policy will be a modified endowment contract if it satisfies the
definition of life insurance contained in the Internal Revenue Code, but it
either fails the additional "7-pay test" set forth in Code Section 7702A or
was received in exchange for a modified endowment contract. A Policy will
fail the 7-pay test if the accumulated amount paid under the contract at any
time during the first seven contract years exceeds the total premiums that
would have been payable under a policy providing for guaranteed benefits upon
the payment of seven level annual premiums. A Policy received in exchange for
a modified endowment contract will be taxed as a modified endowment contract
even if it would otherwise satisfy the 7-pay test.
While the 7-pay test is generally applied as of the time the policy is
issued, certain changes in the contractual terms of a Policy will require a
Policy to be retested to determine whether the change has caused the Policy
to become a modified endowment contract. For example, a reduction in death
benefits during the first seven contract years will cause the Policy to be
retested as if it had originally been issued with the reduced death benefit.
In addition, if a "material change" occurs at any time while the Policy is
in force, a new 7-pay test period will start and the Policy will need to be
retested to determine whether it continues to meet the 7-pay test. The term
"material change" generally includes increases in death benefits, but does
not include an increase in death benefits attributable to the payment of
premiums necessary to fund the lowest level of death benefits payable during
the first seven contract years, or which is attributable to the crediting of
interest with respect to such premiums.
Because the Policy provides for flexible Premiums, NYLIAC has instituted
procedures to monitor whether increases in the Death Benefit or additional
Premiums either cause the start of a new seven-year test period or cause the
Policy to be a modified endowment contract. All additional Premiums will be
considered in these determinations.
If you pay a Premium that exceeds the 7-pay limit, we will notify you and
give you the opportunity to prevent your Policy from becoming a modified
endowment contract by requesting that the excess Premium be returned to you.
If your Policy becomes a modified endowment contract, all distributions
(including loans) occurring in the year of failure and thereafter will be
subject to the rules for modified endowment contracts. A recapture provision
also applies to loans and distributions that are received in anticipation of
failing the 7-pay test. Under the Code, any distribution or loan made within
two years prior to the date that a Policy fails the 7-pay test is considered
to have been made in anticipation of the failure.
SURRENDERS AND PARTIAL WITHDRAWALS.
Upon a surrender of a Policy for its Cash Surrender Value, less any Policy
Debt, the Policyowner will recognize ordinary income for federal tax purposes
to the extent that the Cash Surrender Value exceeds the investment in the
contract (the total of all Premiums paid but not previously recovered plus
any other consideration paid for the Policy). The tax consequences of a
Partial Withdrawal from a Policy will depend upon whether the Partial
Withdrawal results in a reduction of future benefits under the Policy and
whether the Policy is a modified endowment contract.
If the Policy is not a modified endowment contract, the general rule is
that a Partial Withdrawal from a Policy is taxable only to the extent that it
exceeds the total investment in the contract. An exception to this general
rule applies, however, if a reduction of future benefits
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occurs during the first 15 years after a Policy is issued and there is a cash
distribution associated with that reduction. In such a case, Code Section
7702(f)(7) overrides the general rule and prescribes a formula under which
the Policyowner may be taxed on all or a part of the amount
distributed. After 15 years, the rule of Code Section 7702(f)(7) no longer
applies so that cash distributions from a Policy that is not a modified
endowment contract will not be subject to federal income tax, except to the
extent they exceed the total investment in the contract. NYLIAC suggests that
a Policyowner consult with a tax advisor in advance of a proposed decrease in
Face Amount or a Partial Withdrawal. In addition, any amounts distributed
under a "modified endowment contract" (including proceeds of any loan) are
taxable to the extent of any accumulated income in the Policy. In general,
the amount that may be subject to tax is the excess of the Cash Value (both
loaned and unloaned) over the previously unrecovered Premiums.
Under certain circumstances, a distribution under a modified endowment
contract (including a loan) may be taxable even though it exceeds the amount
of accumulated income in the Policy. This can occur because for purposes of
determining the amount of income received upon a distribution (or loan) from
a modified endowment contract, the Code requires the aggregation of all
modified endowment contracts issued to the same Policyowner by an insurer and
its affiliates within the same calendar year. Therefore, loans and
distributions from any one such Policy are taxable to the extent of the
income accumulated in all the modified endowment contracts required to be so
aggregated.
If any amount is taxable as a distribution of income under a modified
endowment contract (as a result of a policy surrender, a Partial Withdrawal
or a loan), it may also be subject to a 10% penalty tax under Code Section
72(v). Limited exceptions from the additional penalty tax are available for
certain distributions to individual Policyowners. The penalty tax will not
apply to distributions: (i) that are made on or after the date the taxpayer
attains age 59 1/2 ; or (ii) that are attributable to the taxpayer's becoming
disabled; or (iii) that are part of a series of substantially equal periodic
payments (made not less frequently than annually) made for the life or life
expectancy of the taxpayer.
LOANS AND INTEREST DEDUCTIONS.
NYLIAC also believes that under current law any loan received under the
Policy will be treated as Policy Debt of a Policyowner and that, unless the
Policy is a modified endowment contract, no part of any loan under a Policy
will constitute income to the Policyowner. If the Policy is a modified
endowment contract (see discussion above) loans will be fully taxable to the
extent of the income in the Policy (and in any other contracts with which it
must be aggregated) and could be subject to the additional 10 percent tax.
Code Section 264 imposes stringent limitations on the deduction of
interest paid or accrued on loans in connection with a Policy. In addition,
under the "personal" interest limitation provisions of Code Section 163, no
deduction is allowed for interest on any Policy loan if the proceeds are used
for personal purposes, even if the Policy and loan otherwise meet the
requirements of Code Section 264. The limitations on deductibility of
personal interest may not apply to disallow all or part of the interest
expense as a deduction if the loan proceeds are used for "trade or business"
or "investment" purposes. NYLIAC suggests consultation with a tax advisor for
further guidance.
CORPORATE ALTERNATIVE MINIMUM TAX.
Ownership of a Policy by a corporation may affect the Policyowner's
exposure to the corporate alternative minimum tax. In determining whether it
is subject to alternative minimum
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tax a corporate Policyowner must make two computations. First, the
corporation must take into account a portion of the current year's increase
in the built-in gain in its corporate-owned policies. Second, the corporation
must take into account a portion of the amount by which the Death Benefits
received under any Policy exceed the sum of (i) the premiums paid on that
Policy in the year of death, and (ii) the corporation's basis in the Policy
(as measured for alternative minimum tax purposes) as of the end of the
corporation's tax year immediately preceding the year of death.
EXCHANGES OR ASSIGNMENTS OF POLICIES.
A change of the Policyowner or the Insured or an exchange or assignment of
a Policy may have significant tax consequences depending on the
circumstances. For example, an assignment or exchange of a Policy may result
in taxable income to the transferring Policyowner. Further, Code Section
101(a) provides, subject to certain exceptions, that where a Policy has been
transferred for value, only the portion of the Death Benefit that is equal to
the total consideration paid for the Policy may be excluded from gross
income. For complete information with respect to Policy assignments and
exchanges, a qualified tax advisor should be consulted.
OTHER TAX ISSUES.
Federal estate and state and local estate, inheritance, and other tax
consequences of ownership or receipt of Policy proceeds depend on the
circumstances of each Policyowner or Beneficiary.
WITHHOLDING.
Under Code Section 3405, withholding is generally required with respect to
certain taxable distributions under insurance contracts. In the case of
periodic payments (payments made as an annuity or on a similar basis), the
withholding is at graduated rates (as though the payments were employee
wages). With respect to non-periodic distributions, the withholding is at a
flat rate of 10%. A policyholder can elect to have either non-periodic or
periodic payments made without withholding except where the Policyowner's tax
identification number has not been furnished to NYLIAC or the Internal
Revenue Service has notified NYLIAC that the tax identification number
furnished by the Policyowner is incorrect.
REINSTATEMENT OPTION
For a period of five years after termination, you can request that we
reinstate the Policy (and any riders) during the Insured's lifetime. We will
not reinstate the Policy if it has been returned for its Cash Surrender
Value. Note that a termination or reinstatement may cause the Policy to
become a modified endowment contract.
Before we will reinstate the Policy, we must receive the following:
o A payment in an amount that is sufficient to keep the Policy (and any
riders) in force for at least 2 months. This payment will be in lieu of the
payment of all Premiums in arrears.
o Any unpaid loan must also be repaid, together with loan interest at 6%
compounded once each year from the end of the late period to the date of
reinstatement. If a loan interest rate of less than 6% is in effect when the
Policy is reinstated, the interest rate for any unpaid loan at the time of
reinstatement will be the same as the loan rate.
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o Evidence of insurability satisfactory to us if the reinstatement is
requested more than 31 days after termination.
If we do reinstate the Policy, the Face Amount for the reinstated Policy
will be the same as it would have been if the Policy had not terminated. The
effective date of reinstatement will be the Monthly Deduction Day on or
following the date we approve the request for reinstatement.
ADDITIONAL BENEFITS AVAILABLE BY RIDER
The Policy can include additional benefits that we approve based on our
standards and limits for issuing insurance and classifying risks. None of
these benefits depends on the investment performance of the Separate Account
or the Fixed Account. An additional benefit is provided by a rider and is
subject to the terms of both the Policy and the rider. The following rider is
currently available.
ADJUSTABLE TERM INSURANCE RIDER.
This rider provides term insurance coverage on the Insured. The initial
term amount is shown on page 2 of your Policy. You can also elect to change
the term amount at any time. Evidence of insurability, satisfactory to us,
must be furnished in connection with any request to increase the term amount.
PAYMENT OPTIONS
Death Benefits will be paid in one sum or, if elected, all or part of the
Death Benefit can be placed under one or more of the options described in
this section. If we agree, the Death Benefit may be placed under some other
method of payment instead. Any Death Benefits paid in one sum will bear
interest compounded each year from the Insured's death to the date of
payment. We set the interest rate each year. This rate will be at least 3%
per year, and will not be less than required by law.
While the Insured is living, you can elect or change an option. You can
also elect or change one or more beneficiaries who will be the payee or
payees under that option. After the Insured dies, any person who is to
receive proceeds in one sum (other than an assignee) can instead elect a
payment option and name payees. The person who elects an option can also name
one or more successor payees to receive any amount remaining at the death of
the payee. Naming these payees cancels any prior choice of successor payees.
A payee who did not elect the option does not have the right to advance or
assign payments, take the payments in one sum, or make any other change.
However, the payee may be given the right to do one or more of these things
if the person who elects the option tells us in writing and we agree.
If we agree, a payee who has elected a payment option may later elect to
have any unpaid amount, or the present value of any elected payments, placed
under another option described in this section. When any payment under an
option would be less than $100, we may pay any unpaid amount or present value
in one sum.
PAYEES.
Only individuals who are to receive payments in their own behalf may be
named as payees or successor payees, unless we agree to some other payee. We
may require proof of the age or the survival of a payee.
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It may happen that when the last surviving payee dies, we still have an
unpaid amount, or there are some payments that remain to be made. If so, we
will pay the unpaid amount with interest to the date of payment, or pay the
present value of the remaining payments, to that payee's estate in one sum.
The present value of the remaining payments is based on the interest rate
used to compute them, and is always less than their sum.
PROCEEDS AT INTEREST OPTIONS (OPTIONS 1A AND 1B).
The Policy proceeds may be left with us at interest. We will set the
interest rate each year. This rate will be at least 3% per year.
For the Interest Accumulation Option (Option 1A), we credit interest each
year on the amount we still have. This amount can be withdrawn at any time in
sums of $100 or more. We pay interest to the date of withdrawal on sums
withdrawn.
For the Interest Payment Option (Option 1B), we pay interest once each
month, every 3 months, every 6 months, or once each year, as chosen, based on
the amount we still have.
LIFE INCOME OPTION (OPTION 2) (NOT AVAILABLE IN MASSACHUSETTS AND MONTANA).
We make equal payments each month during the lifetime of the payee or
payees. We determine the amount of the monthly payment by applying the Death
Benefit to purchase a corresponding single premium life annuity contract that
is being issued when the first payment is due. Payments are based on the
appropriately adjusted annuity premium rate in effect at that time, but will
not be less than the corresponding minimum amount shown in the Option 2
Table, which appears in Section 9 of your Policy. These minimum amounts are
based on the 1983 Table "a" with Projection Scale G and with interest
compounded each year at 3%.
Upon request, we will state in writing what the minimum amount of each
monthly payment would be under this option. It is based on the sex and
adjusted age of the payee or payees. To find the adjusted age in the year the
first payment is due, we increase or decrease the payee's age at that time,
as follows:
<TABLE>
<CAPTION>
1996 AND 2036 AND
EARLIER 1997-2005 2006-2015 2016-2025 2026-2035 LATER
- --------- --------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
+2 +1 0 -1 -2 -3
</TABLE>
We make a payment each month while the payee is living. Payments do not
change, and are guaranteed for 10 years, even if both payees die sooner.
BENEFICIARY
A Beneficiary is any person or entity named by the Policyowner to receive
the Death Benefit after the Insured dies. You name the Beneficiary when you
apply for the Policy. There may be different classes of Beneficiaries, such
as primary and secondary. These classes set the order of payment. There may
be more than one Beneficiary in a class.
The Beneficiary may be changed during the Insured's lifetime by writing to
our Service Office or such other location that we indicate to you in writing.
Generally, the change will take effect as of the date the request is signed.
If no Beneficiary is living when the Insured dies, unless provided otherwise,
the Death Benefit is paid to the Policyowner or, if deceased, the
Policyowner's estate.
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CHANGE OF OWNERSHIP
A successor Policyowner can be named in the application, or in a signed
notice that gives us the facts we need. The successor Policyowner will become
the new Policyowner when you die, if you die before the Insured. If no
successor Policyowner survives you and you die before the Insured, your
estate becomes the new Policyowner.
You can also change the Policyowner in a signed notice that gives us the
facts we need. When this change takes effect, all rights of ownership in this
Policy will pass to the new Policy owner.
When we record a change of Policyowner or successor Policyowner, these
changes will take effect as of the date of the Policyowner's signed notice,
subject to any payments we made or action we took before recording these
changes. We may require that these changes be endorsed in the Policy.
Changing the Policyowner or naming a new successor Policyowner cancels any
prior choice of Policyowner or successor Policyowner, respectively, but does
not change the Beneficiary.
ASSIGNMENT
While the Insured is living, the Policy may be assigned as collateral for
a loan or other obligation. For an assignment to be binding on us, we must
receive a signed copy of it at our Service Office or such other location that
we indicate to you in writing. We are not responsible for the validity of any
assignment.
LIMITS ON OUR RIGHTS TO CHALLENGE THE POLICY
Except for any increases in Face Amount, other than one due solely to a
change in the Life Insurance Benefit Option, we must bring any legal action
to contest the validity of a Policy within two years from its Policy Date.
After that we cannot contest its validity, except for failure to pay Premiums
or unless the Insured died within that two year period. For any increase in
the Face Amount, other than one due solely to a change in the Life Insurance
Benefit Option, we must bring legal action to contest that increase within
two years from the effective date of the increase.
MISSTATEMENT OF AGE OR SEX
If the Insured's age or sex is misstated in the Policy application, the
Death Benefit payable under the Policy will be adjusted based on what the
Policy would provide according to the most recent mortality charge for the
correct date of birth or correct sex.
SUICIDE
If the Insured commits suicide within two years from the Policy Date or
less where required by law (or, with respect to an increase in Face Amount,
the effective date of the increase), and while the Policy is in force, the
Policy will end, and the only amount payable to the Beneficiary will be the
Premiums paid, less any Policy Debt and any Partial Withdrawals.
WHEN WE PAY PROCEEDS
If the Policy has not terminated, payment of the Cash Surrender Value,
Partial Withdrawal, loan proceeds or the Death Benefit are made within 7 days
after we receive all requirements at our Service Office or such other
location that we indicate to you in writing. However, we can delay payment of
the Cash Surrender Value or any Partial Withdrawal from the Separate
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Account, loan proceeds attributable to the Separate Account, or the Death
Benefit during any period that: (1) it is not reasonably practicable to
determine the amount because the New York Stock Exchange is closed (other
than customary weekend and holiday closings), trading is restricted by the
SEC, or the SEC declares that an emergency exists; or (2) the SEC, by order,
permits us to delay payment in order to protect our Policyowners.
Amounts payable from the Fixed Account may be deferred for up to 6 months
from the date the request is received at our Service Office.
We can delay payment of the entire Death Benefit if payment is contested.
We investigate all death claims arising within the two-year limit on our
right to challenge the Policy. Upon receiving the information from a
completed investigation, we generally make a determination within 5 days as
to whether the claim should be authorized for payment. Payments are made
promptly after authorization. If payment of a Cash Surrender Value or Partial
Withdrawal is delayed for 30 days or more, we add interest at an annual rate
of 3%. We add interest to a Death Benefit from the date of death to the date
of payment at the same rate as is paid under the Interest Payment Option. See
"Section VI: Additional Information -- Payment Options."
RECORDS AND REPORTS
All records and accounts relating to the Separate Account and the Fixed
Account are maintained by New York Life or NYLIAC. Each year we will mail you
a report showing the Cash Value and Policy Debt as of the latest Policy
Anniversary. This report contains any additional information required by
applicable law or regulation.
SALES AND OTHER AGREEMENTS
NYLIFE Distributors Inc., ("NYLIFE Distributors") 51 Madison Avenue, New
York, New York 10010 is the principal underwriter and the distributor of the
Policies and is an indirect wholly-owned subsidiary of New York Life. The
commissions paid to registered representatives of broker-dealers who have
entered into dealer agreements with NYLIFE Distributors during a Policy's
first year will not exceed 35% of the Premiums paid up to a Policy's
surrender charge premium (5% in Policy Years two through ten) plus 3% of
Premiums paid in excess of such amount. Commissions paid in Policy Years
eleven and beyond are 2% of Premiums paid. A table of surrender charge
premium rates per thousand appears in Appendix B to this prospectus.
LEGAL PROCEEDINGS
The New York State Supreme Court on January 31, 1996 approved the
settlement of a consolidated nationwide class action lawsuit alleging certain
sales practice claims against NYLIAC and New York Life. In entering into the
settlement, NYLIAC specifically denied any wrongdoing. The class consists of
approximately three million policyowners who purchased whole life or
universal life policies from January 1, 1982 through December 31, 1994.
Appeals from the order may be filed within the prescribed statutory period.
Under the terms of the settlement, the class members receive benefits
intended to address the issues presented in the case or an opportunity to
redress individual claims in an alternative dispute resolution process. The
settlement (including awards made in the alternative dispute resolution
process) will not have a material adverse effect upon NYLIAC's financial
position, and NYLIAC believes that,
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after consideration of provisions made, the settlement will not have a
material adverse effect on operating results. NYLIAC, its affiliates and its
agents have been released from liability to class members for transactions
during the class period relating to the sales practice claims in the
lawsuits.
There are also actions in various jurisdictions by individual
policyowners, many of whom excluded themselves from the settlement of the
nationwide class action. Most of these actions seek substantial or
unspecified compensatory and punitive damages.
NYLIAC is also a defendant in other actions arising from its insurance and
investment operations, including actions involving retail sales practices.
Most of these actions also seek substantial or unspecified compensatory and
punitive damages. NYLIAC is also from time to time involved as a party in
various governmental, administrative and investigative proceedings and
inquiries.
Given the uncertain nature of litigation and regulatory inquiries, the
outcome of the above and other actions pending against NYLIAC cannot be
predicted. NYLIAC nevertheless believes that the ultimate outcome of all
pending litigation should not have a material adverse effect on NYLIAC's
financial position; however, it is possible that settlements or adverse
determinations in one or more actions or other proceedings in the future
could have a material adverse effect on NYLIAC's operating results for a
given year.
INDEPENDENT ACCOUNTANTS
The financial statements of NYLIAC have been included herein in reliance
upon the report of Price Waterhouse LLP, independent accountants, given on
the authority of that firm as experts in accounting and auditing.
The financial statements of NYLIAC included herein should be considered
only as bearing upon the ability of NYLIAC to meet its obligations under the
Policy.
EXPERTS
Actuarial matters in this prospectus have been examined by Frederick J.
Garland, Jr., Actuary. An opinion on actuarial matters is filed as an exhibit
to the registration statement we have filed with the SEC.
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APPENDIX A
ILLUSTRATIONS
The following tables demonstrate the way in which your Policy works. The
tables are based on the age, initial Death Benefit and Premium as follows:
The table is for a Policy issued to a male, non-smoker, age 45, on a
medically underwritten basis, with a scheduled annual Premium of $7,500 and
an initial Death Benefit of $350,000. It assumes that Life Insurance Benefit
Option 1 and Code Section 7702 Corridor Table have been selected.
The table shows how the Cash Value, Cash Surrender Value and Death Benefit
would vary over an extended period of time assuming hypothetical gross rates
of return equivalent to a constant annual rate of 0%, 6% or 12%. The table
will assist in the comparison of the Death Benefit, Cash Value and Cash
Surrender Value of the Policy with other corporate sponsored variable
universal life insurance plans.
The Death Benefit, Cash Value and Cash Surrender Value for a Policy would
be different from the amounts shown if the actual gross rates of return
averaged 0%, 6% or 12%, but varied above and below those averages for the
period. They would also be different depending on the allocation of the Cash
Value among the Investment Divisions of the Separate Account, the Fixed
Account and the Loan Account, if the actual gross rate of return for all
Investment Divisions averaged 0%, 6% or 12%, but varied above or below that
average for individual Investment Divisions. They would also differ if any
Policy loans or Partial Withdrawals were made during the period of time
illustrated.
The illustration reflects all charges under the Policy and assumes that
the cost of insurance charges are based on our guaranteed maximum cost of
insurance rates and reflect the deduction of all charges from the Cash Value
at their guaranteed maximum levels. They also reflect a daily mortality and
expense risk charge assessed against the assets of the Separate Account
equivalent to an annual charge of 0.70% (on a current basis for Policy Years
one through ten); 0.30% (on a current basis for Policy Years eleven and
later); and 0.90% (on a guaranteed basis for all Policy Years).
The illustration also reflects total assumed fees and expenses incurred by
the Funds of 0.69% of the average daily net assets of the Funds. The total is
based upon (a) 0.34% of average daily net assets, which is an average of the
management fees of each Portfolio; (b) 0.18% of average daily net assets,
which is an average of the administrative fees for each Portfolio; and (c)
0.17% of average daily net assets, which is an average of the other expenses
after expense reimbursement for each Portfolio. Actual fees and expenses of
the Funds may be more or less than the amounts illustrated and will depend on
the allocations made by the Policyowner.
There is an expense reimbursement agreement effective through December 31,
1996. In the absence of the expense reimbursement agreement, the total annual
MFA Series Fund fees and expenses for the year ended December 31, 1995, would
have been 0.90%, 0.94%, 0.82%, 1.25%, 2.51%, 0.81%, 1.45%, 0.91%, 0.91%, and
0.62% for the Capital Appreciation, Cash Management, Government, High Yield
Corporate Bond, International Equity, Total Return, Value, Bond, Growth
Equity and Indexed Equity Portfolios, respectively. Numbers for the period
from May 1, 1995 (the date of inception) to December 31, 1995 for the High
Yield Corporate Bond, International Equity and Value Portfolios have been
annualized.
A-1
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Taking into account the assumed charges for mortality and expense risks
in the Separate Account and the average fees and expenses of the Funds, the
gross rates of return of 0%, 6% and 12% would correspond to actual net
investment returns of -1.39%, 4.61% and 10.61%, respectively, based on the
current charge for mortality and expense risks, applicable to Policy Years
one through ten; -0.99%, 5.01% and 11.01%, respectively, based on the current
charge for mortality and expense risks, applicable to Policy Years eleven and
later; and -1.59%, 4.41% and 10.41%, respectively, based on the guaranteed
maximum charge for mortality and expense risks, applicable to all Policy
Years.
The second column of the tables show the amount which would accumulate if an
amount equal to the first Premium were invested and earned interest, after
taxes, at 5% per year, compounded annually.
NYLIAC will furnish upon request a comparable illustration using the age,
sex and underwriting classification of an Insured for any initial Death
Benefit and Premium requested. In addition to an illustration assuming Policy
charges at their maximum, we will furnish an illustration assuming current
Policy charges and current cost of insurance rates.
A-2
<PAGE>
CORPORATE SPONSORED VARIABLE UNIVERSAL LIFE INSURANCE POLICY
MALE ISSUE AGE: 45, NON-SMOKER, MEDICALLY UNDERWRITTEN CLASS
SCHEDULED ANNUAL PREMIUM: $7,500
INITIAL FACE AMOUNT: $350,000
SECTION 7702 CORRIDOR TABLE/LIFE INSURANCE BENEFIT OPTION 1
ASSUMING CURRENT CHARGES
<TABLE>
<CAPTION>
END OF YEAR
END OF YEAR DEATH BENEFIT(2) END OF YEAR CASH VALUE(2) CASH SURRENDER VALUE
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
TOTAL PREMIUMS PAID ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
VALUE(2) PLUS INTEREST AT 5% ---------------------------- ---------------------------- ----------------------------
POLICY YEAR AS OF END OF YEAR(1) 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ----------- -------------------- ------- -------- ------- ------- ------- ------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 7,875 350,000 350,000 350,000 6,337 6,742 7,146 5,313 5,718 6,122
2 16,144 350,000 350,000 350,000 12,500 13,706 14,962 11,477 12,683 13,938
3 24,826 350,000 350,000 350,000 18,527 20,942 23,557 17,503 19,918 22,533
4 33,942 350,000 350,000 350,000 24,405 28,448 33,004 23,381 27,424 31,980
5 43,514 350,000 350,000 350,000 30,139 36,241 43,399 29,115 35,217 42,375
6 53,565 350,000 350,000 350,000 35,722 44,328 54,841 34,903 43,509 54,022
7 64,118 350,000 350,000 350,000 41,141 52,710 67,432 40,527 52,096 66,818
8 75,199 350,000 350,000 350,000 46,279 61,287 81,190 45,869 60,877 80,780
9 86,834 350,000 350,000 350,000 51,355 70,284 96,458 51,150 70,079 96,253
10 99,051 350,000 350,000 350,000 56,366 79,720 113,401 56,366 79,720 113,401
15 169,931 350,000 350,000 350,000 80,023 134,948 233,228 80,023 134,948 233,228
20 260,394 350,000 350,000 532,263 98,473 203,621 436,281 98,473 203,621 436,281
30 523,206 350,000 439,140 1,433,690 116,385 410,411 1,339,897 116,385 410,411 1,339,897
</TABLE>
[FN]
- -----------------
(1) All premiums are illustrated as if made at the beginning of the Policy Year.
(2) Assumes no Policy loan or Partial Withdrawal has been made.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN
ABOVE ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR LESS
THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY THE POLICYOWNER AND THE INVESTMENT EXPERIENCE OF
THE PORTFOLIOS. THE DEATH BENEFIT, CASH VALUE AND CASH SURRENDER VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS ANNUAL RATES OF
RETURN AVERAGED 0%, 6% OR 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE
OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. THEY WOULD ALSO BE
DIFFERENT IF ANY POLICY LOANS OR PARTIAL WITHDRAWALS WERE MADE. NO
REPRESENTATIONS CAN BE MADE BY NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
OR THE SEPARATE ACCOUNT OR THE FUNDS THAT THESE HYPTOTHETICAL RATES OF RETURN
CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER A PERIOD OF TIME.
A-3
<PAGE>
CORPORATE SPONSORED VARIABLE UNIVERSAL LIFE INSURANCE POLICY
MALE ISSUE AGE: 45, NON-SMOKER, MEDICALLY UNDERWRITTEN CLASS
SCHEDULED ANNUAL PREMIUM: $7,500
INITIAL FACE AMOUNT: $350,000
SECTION 7702 CORRIDOR TABLE/LIFE INSURANCE BENEFIT OPTION 1
ASSUMING GUARANTEED CHARGES
<TABLE>
<CAPTION>
END OF YEAR
END OF YEAR DEATH BENEFIT(2) END OF YEAR CASH VALUE(2) CASH SURRENDER VALUE
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
TOTAL PREMIUMS PAID ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
VALUE(2) PLUS INTEREST AT 5% ---------------------------- ---------------------------- ----------------------------
POLICY YEAR AS OF END OF YEAR(1) 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ----------- -------------------- ------- -------- ------- ------- ------- ------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 7,875 350,000 350,000 350,000 5,152 5,514 5,877 4,128 4,490 4,853
2 16,144 350,000 350,000 350,000 10,124 11,173 12,267 9,101 10,149 11,243
3 24,826 350,000 350,000 350,000 14,923 16,988 19,231 13,899 15,964 18,207
4 33,942 350,000 350,000 350,000 19,513 22,931 26,797 18,489 21,907 25,773
5 43,514 350,000 350,000 350,000 23,902 29,014 35,038 22,878 27,990 34,015
6 53,565 350,000 350,000 350,000 28,095 35,251 44,039 27,276 34,432 43,220
7 64,118 350,000 350,000 350,000 32,062 41,618 53,856 31,448 41,003 53,241
8 75,199 350,000 350,000 350,000 35,771 48,091 64,555 35,362 47,682 64,145
9 86,834 350,000 350,000 350,000 39,230 54,688 76,252 39,025 54,483 76,048
10 99,051 350,000 350,000 350,000 42,410 61,387 89,047 42,410 61,387 89,047
15 169,931 350,000 350,000 350,000 53,563 96,322 174,797 53,563 96,322 174,797
20 260,394 350,000 350,000 389,502 54,469 133,303 319,264 54,469 133,303 319,264
30 523,206 0 350,000 998,991 0 208,342 933,636 0 208,342 933,636
</TABLE>
[FN]
- -----------------
(1) All premiums are illustrated as if made at the beginning of the Policy Year.
(2) Assumes no Policy loan or Partial Withdrawal has been made.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN
ABOVE ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR LESS
THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY THE POLICYOWNER AND THE INVESTMENT EXPERIENCE OF
THE PORTFOLIOS. THE DEATH BENEFIT, CASH VALUE AND CASH SURRENDER VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS ANNUAL RATES OF
RETURN AVERAGED 0%, 6% OR 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE
OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. THEY WOULD ALSO BE
DIFFERENT IF ANY POLICY LOANS OR PARTIAL WITHDRAWALS WERE MADE. NO
REPRESENTATIONS CAN BE MADE BY NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
OR THE SEPARATE ACCOUNT OR THE FUNDS THAT THESE HYPTOTHETICAL RATES OF RETURN
CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER A PERIOD OF TIME.
A-4
<PAGE>
APPENDIX B
SURRENDER CHARGE PREMIUM RATES PER THOUSAND
The surrender charge premium for the Policy at the time of issue is
equal to (a x b) divided by 1000 where (a) is the surrender charge premium rates
per thousand applicable to the age of the insured on the Policy Date, as set
forth in the table below, and (b) is the initial Face Amount.
<TABLE>
<CAPTION>
SURRENDER CHARGE SURRENDER CHARGE
PREMIUM RATES PREMIUM RATES
AGE PER THOUSAND AGE PER THOUSAND
---- --------------- ----- ---------------
<S> <C> <C> <C>
18 2.60 52 13.20
19 2.80 53 13.80
20 3.00 54 14.40
21 3.20 55 15.00
22 3.40 56 16.40
23 3.60 57 17.80
24 3.80 58 19.20
25 4.00 59 20.60
26 4.20 60 22.00
27 4.40 61 23.60
28 4.60 62 25.20
29 4.80 63 26.60
30 5.00 64 25.40
31 5.20 65 30.00
32 5.40 66 31.80
33 5.60 67 33.60
34 5.80 68 35.40
35 6.00 69 37.20
36 6.30 70 39.00
37 6.60 71 41.40
38 6.90 72 43.80
39 7.20 73 46.20
40 7.50 74 48.60
41 7.80 75 51.00
42 8.10 76 54.00
43 8.40 77 57.00
44 8.70 78 60.00
45 9.00 79 63.00
46 9.60 80 66.00
47 10.20 81 69.60
48 10.80 82 73.20
49 11.40 83 76.80
50 12.00 84 80.40
51 12.60 85 84.00
</TABLE>
<TABLE>
<CAPTION>
December 31,
1995 1994
- -----------------------------------------------------------------------------------------------------------
(in millions)
<S> <C> <C>
ASSETS:
Bonds..................................................................................... $12,262 $11,141
Mortgage loans............................................................................ 1,062 969
Preferred and common stocks............................................................... 64 69
Real estate............................................................................... 141 119
Policy loans.............................................................................. 445 420
Cash and short-term investments........................................................... 343 580
Investment income due and accrued......................................................... 181 175
Separate account assets................................................................... 1,444 971
Other assets.............................................................................. 35 55
------- -------
Total assets.............................................................................. $15,977 $14,499
======= =======
LIABILITIES AND STOCKHOLDER'S EQUITY:
LIABILITIES:
Policy reserves........................................................................... $12,821 $12,100
Deposit funds............................................................................. 7 -
Policy proceeds deposited with the Company................................................ 88 70
Policy claims............................................................................. 79 67
Payable to parent......................................................................... 202 41
Securities sold under agreements to repurchase............................................ 86 254
Separate account liabilities.............................................................. 1,396 905
Other liabilities......................................................................... 256 92
Interest maintenance reserve.............................................................. 26 20
Asset valuation reserve................................................................... 138 105
------- -------
Total liabilities......................................................................... 15,099 13,654
------- -------
STOCKHOLDER'S EQUITY:
Capital stock-par value $10,000 (20,000 shares authorized, 2,500 issued and outstanding).. 25 25
Additional paid-in capital................................................................ 480 480
Surplus................................................................................... 373 340
------- -------
Total stockholder's equity................................................................ 878 845
------- -------
Total liabilities and stockholder's equity................................................ $15,977 $14,499
======= =======
</TABLE>
Statement of Financial Position
(Prepared from the Annual Statement filed
with the Delaware Insurance Department)
See accompanying notes to financial statements.
F-1
(This page intentionally left blank)
F-2
<TABLE>
<CAPTION>
Year Ended December 31,
1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------------
(in millions)
<S> <C> <C> <C>
INCOME:
Premiums............................................................................................. $1,348 $1,203 $1,321
Net investment income................................................................................ 1,037 1,020 1,025
Policy proceeds deposited with the Company........................................................... 121 118 97
Other income......................................................................................... 41 39 16
------- ------- -------
Total income......................................................................................... 2,547 2,380 2,459
------- ------- -------
BENEFITS AND EXPENSES:
Benefit payments:
Death benefits....................................................................................... 117 117 88
Annuity benefits..................................................................................... 324 276 194
Health and disability insurance benefits............................................................. 23 20 18
Surrender benefits................................................................................... 650 718 802
Payments of amounts previously deposited with the Company............................................ 111 107 72
------- ------- -------
1,225 1,238 1,174
Additions to policy reserves......................................................................... 522 442 603
Additions to other insurance reserves................................................................ 369 183 172
Operating expenses................................................................................... 276 250 215
------- ------- -------
Total benefits and expenses.......................................................................... 2,392 2,113 2,164
------- ------- -------
Gain from operations before federal income taxes..................................................... 155 267 295
Federal income taxes................................................................................. 60 105 129
------- ------- -------
Net gain from operations............................................................................. 95 162 166
Net realized capital gains (losses), after transferring $23 million, ($25) million and $44 million of
net realized capital gains (losses) to the interest maintenance reserve for 1995, 1994 and 1993,
respectively......................................................................................... - 4 (61)
------- ------- -------
Net income........................................................................................... $95 $166 $105
======= ======= =======
</TABLE>
See accompanying notes to financial statements.
Statement of Operations
(Prepared from the Annual Statement filed
with the Delaware Insurance Department)
New York Life
Insurance and
Annuity Corporation
(A WHOLLY OWNED SUBSIDIARY OF
NEW YORK LIFE INSURANCE COMPANY)
F-3
<TABLE>
<CAPTION>
Year Ended December 3
1995 1994 1993
- ---------------------------------------------------------------------
(in millions)
<S> <C> <C> <C>
Surplus, beginning of year...................... $340 $275 $206
Net income...................................... 95 166 105
Net unrealized (losses) gains on investments.... (1) (1) 41
(Increase) decrease in asset valuation reserve.. (33) (27) 3
Dividend to stockholder......................... - (70) (71)
Other adjustments, net.......................... (28) (3) (9)
------ ------ ------
Surplus, end of year............................ $373 $340 $275
====== ====== ======
</TABLE>
See accompanying notes to financial statements.
Statement of Changes in Surplus
(Prepared from the Annual Statement filed
with the Delaware Insurance Department)
F-4
<TABLE>
<CAPTION>
Year Ended December 31,
1995 1994 1993
- -------------------------------------------------------------------------------
(in millions)
<S> <C> <C> <C>
CASH FLOW FROM OPERATIONS:
Premiums received................................... $1,339 $1,195 $1,338
Net investment income received...................... 978 959 950
Other............................................... 347 350 113
-------- -------- --------
Total received...................................... 2,664 2,504 2,401
-------- -------- --------
Benefits and other payments......................... 1,207 1,228 1,173
Operating expenses.................................. 279 249 206
Other............................................... 323 315 285
-------- -------- --------
Total paid.......................................... 1,809 1,792 1,664
-------- -------- --------
Net cash provided from operations................... 855 712 737
-------- -------- --------
Proceeds from investments sold...................... 2,415 3,137 2,839
Proceeds from investments matured or repaid......... 1,307 1,579 2,669
Securities sold under agreements to repurchase...... 3,029 1,938 1,632
Securities repurchased.............................. (3,196) (1,833) (1,483)
Cost of investments acquired........................ (4,846) (4,925) (6,320)
-------- -------- --------
Net cash used for investments....................... (1,291) (104) (663)
-------- -------- --------
Dividend paid to stockholder........................ - (70) (71)
-------- -------- --------
Other, net.......................................... 199 (151) (85)
-------- -------- --------
Net change in cash and short-term investments....... (237) 387 (82)
Cash and short-term investments, beginning of year.. 580 193 275
-------- -------- --------
Cash and short-term investments, end of year........ $343 $580 $193
======== ======== ========
</TABLE>
See accompanying notes to financial statements.
Statement of Cash Flows
(Prepared from the Annual Statement filed
with the Delaware Insurance Department)
New York Life
Insurance and
Annuity Corporation
(A WHOLLY OWNED SUBSIDIARY OF
NEW YORK LIFE INSURANCE COMPANY)
F-5
NOTE 1-Nature of Operations:
- -------------------------------------------------------------------------------
New York Life Insurance and Annuity Corporation ("NYLIAC"), a direct, wholly
owned subsidiary of New York Life Insurance Company ("New York Life"), is a
stock life insurance company. NYLIAC offers a wide variety of interest
sensitive insurance and annuity products to a large cross section of the total
insurance market. NYLIAC markets its products in all 50 of the United States,
the District of Columbia and Taiwan, primarily through its agency force. In
addition, NYLIAC markets Corporate Owned Life Insurance through independent
brokers and brokerage general agents.
The following companies are also direct, wholly owned subsidiaries of New
York Life: New York Life and Health Insurance Company, NYLIFE Insurance Company
of Arizona and NYLIFE Inc.
- -------------------------------------------------------------------------------
NOTE 2-Significant Accounting Policies:
- -------------------------------------------------------------------------------
Basis of Presentation-The accompanying financial statements have been prepared
on the basis of accounting practices prescribed or permitted by the Delaware
Insurance Department ("statutory accounting practices"). Statutory accounting
practices are currently considered generally accepted accounting principles for
mutual life insurance companies and their stock life subsidiaries, such as
NYLIAC. The Financial Accounting Standards Board has issued an Interpretation
which establishes a different definition of generally accepted accounting
principles for mutual life insurance companies. Under that Interpretation,
financial statements of mutual life insurance companies for periods beginning
after December 15, 1995 which are prepared on the basis of statutory accounting
practices will no longer be characterized as in conformity with generally
accepted accounting principles. Financial statements prepared in conformity
with statutory accounting practices will continue to be required by insurance
regulatory authorities.
Management of NYLIAC has not yet determined the effect on its December 31,
1995 financial statements of applying the new Interpretation nor whether it
will continue to present its general purpose financial statements in conformity
with the statutory basis of accounting or adopt the accounting changes required
in order to continue to present its financial statements in conformity with
generally accepted accounting principles. If NYLIAC chooses to adopt the
accounting changes required, the effect of the changes would be reported
retroactively through restatement of all previously issued financial statements
presented for comparative purposes. The cumulative effect of adopting these
changes would be included in the earliest year restated.
Investments-Investments are carried in accordance with methods and values
prescribed by the National Association of Insurance Commissioners ("NAIC").
Bonds are generally stated at amortized cost. Preferred stocks are generally
stated at cost. Common stocks are stated at market value. Mortgage loans on
real estate are stated at cost or amortized cost, but at no time stated at more
than the appraised value of the underlying collateral. Real estate is stated at
the lower of cost less accumulated depreciation and encumbrances or market
value, except for real estate joint ventures which are stated on an equity
basis. Depreciation of real estate (excluding foreclosed properties which are
not depreciated) is calculated using the straight-line method over the
estimated lives of the assets (generally 30 years). Policy loans are stated at
the aggregate balance due (which approximates fair value). Limited partnership
investments (included in other assets) are stated on the equity basis. The
value of invested assets has been adjusted for impairments that are other than
temporary. Investment income is recorded on the accrual basis, except where
collection is 90 days past due or is considered uncertain.
Notes to Financial Statements
December 31, 1995 and 1994
F-6
Prepayment assumptions for loan-backed bonds were developed internally using
a proprietary model; outside services were used for structured securities. The
prospective adjustment method is used to adjust the amortization of premiums
and discounts on such securities.
Derivative financial instruments used by NYLIAC to hedge exposure to interest
rate and foreign currency fluctuations are accounted for on an accrual basis.
Gains and losses related to contracts that are effective hedges on specific
assets are deferred and recognized in income in the same period as gains and
losses on the hedged asset.
The Asset Valuation Reserve ("AVR") is required by insurance regulators to
stabilize surplus from fluctuations in the market value of bonds, stocks,
mortgage loans, real estate and other invested assets. Changes in the reserve
are accounted for as direct increases or decreases in surplus. The Interest
Maintenance Reserve ("IMR"), also required by insurance regulators, captures
interest related realized gains and losses (net of taxes) on fixed income
investments (bonds, preferred stocks and mortgage loans) which are amortized
into net investment income over the expected years to maturity of the
investments sold using the seriatim method for bonds and the grouped method for
mortgage loans and preferred stock.
Amounts payable or receivable under interest rate swap, commodity swap and
interest rate floor agreements are recognized as investment income or expense
when earned. Premiums paid for interest rate floor agreements are amortized
into interest expense over the life of the agreement. Unamortized premiums are
included in other assets in the Statement of Financial Position.
Unrealized gains and losses on foreign exchange forward contracts are
reported as other assets or liabilities, as appropriate. Realized gains and
losses are recognized in net income upon termination of the contracts.
Premiums and Related Expenses-Premiums are taken into income over the
premium-paying period of the policies. Commissions and other costs associated
with acquiring new business are charged to operations as incurred.
Policy Reserves-Policy reserves are based on mortality tables and valuation
interest rates which are consistent with statutory requirements and are
designed to be sufficient to provide for contractual benefits.
F ederal Income Taxes-Provision is made for federal income taxes estimated to
be payable to New York Life under a tax allocation agreement, including an
allocation of the equity base tax. Adjustments to such estimates, including
those related to the true-up or true-down of the equity base tax, are recorded
in gain from operations when known. Realized gains and losses are reported
after adjustment for the associated federal income tax.
Change in Accounting Policy for the Equity Base Tax-Each year, an estimated
Differential Earnings Rate (DER) is used to determine the equity base tax
reported in the annual statement as part of gain from operations for that year.
When the final DER is known, NYLIAC records a true-up or true-down adjustment
for the difference between the estimated and final DER.
Based on recent NAIC discussions of this item, NYLIAC changed that policy to
accelerate the recognition of the DER adjustment by one year and to record DER
adjustments through net gain. Previously, NYLIAC recorded such adjustments
directly to surplus. The effect of this change, including $18,000,000 for the
effect of adjusting for prior years, was an increase to net gain of
$12,000,000, and a decrease to surplus of $15,000,000.
New York Life
Insurance and
Annuity Corporation
(A WHOLLY OWNED SUBSIDIARY OF
NEW YORK LIFE INSURANCE COMPANY)
F-7
Separate Accounts-NYLIAC has established separate accounts with varying
investment objectives which are segregated from NYLIAC's general account and
are maintained for the benefit of separate account contractholders and NYLIAC.
Separate account assets are generally stated at market value. The liability for
separate accounts represents contractholders' interests in the separate account
assets, including accumulated net investment income and realized and unrealized
gains and losses on those assets. Separate account liabilities generally
reflect market value.
Nonadmitted Assets-Under statutory accounting practices, certain assets are
designated as "nonadmitted assets" and are not included in the Statement of
Financial Position.
Fair Values of Financial Instruments-Fair values of various assets and
liabilities are included throughout the notes to financial statements.
Specifically, fair value disclosure of bonds, mortgage loans, and cash and
short-term investments is reported in Note 3. Fair values for insurance
liabilities (policy reserves) are reported in Note 7. Fair values for
derivative financial instruments are included in Note 12.
Permitted Statutory Accounting Practices-NYLIAC prepares its statutory
financial statements in accordance with accounting principles and practices
prescribed or permitted by the Delaware Insurance Department. Prescribed
statutory accounting practices include state laws and regulations along with
NAIC regulations. Permitted statutory accounting practices encompass accounting
practices that are not prescribed; such practices differ from state to state,
may differ from company to company within a state, and may change in the
future. Furthermore, the NAIC has started a project to codify statutory
accounting practices, the result of which is expected to constitute the only
source of "prescribed" statutory accounting practices. Accordingly, that
project, which is expected to be completed in 1997, will likely change the
definition of what comprises prescribed versus permitted statutory accounting
practices, and may result in changes to the accounting policies that insurance
enterprises use to prepare their statutory financial statements. NYLIAC has no
material permitted statutory accounting practices.
Business Risks and Uncertainties-The preparation of financial statements of
life insurance enterprises requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements. As a provider of life insurance and annuity
products, NYLIAC's operating results in any given period depend on estimates of
policy reserves required to provide for future policyowner benefits.
The development of policy reserves for NYLIAC's products requires management
to make estimates and assumptions regarding mortality, morbidity, lapse,
expense and investment experience. Such estimates are primarily based on
historical experience and, in many cases, state insurance laws require specific
mortality, morbidity and investment assumptions to be used by NYLIAC. Actual
results could differ materially from those estimates. Management monitors
actual experience, and where circumstances warrant, revises its assumptions and
the related reserve estimates.
NYLIAC regularly invests in mortgage backed securities and other securities
subject to prepayment and call risk. Significant changes in prevailing interest
rates may adversely affect the timing and amount of cash flows on such
securities. In addition, the amortization of market discount and accretion of
market premium for mortgage backed securities is based on historical experience
and estimates of future payment speeds on the underlying mortgage loans. Actual
prepayment speeds will differ from original estimates and may result in
material adjustments to amortization or accretion recorded in future periods.
Notes to Financial Statements (Continued)
F-8
NYLIAC distributes a Corporate Owned Life Insurance product to targeted
corporate customers, primarily banks, through individual brokers and brokerage
general agents. Sales of this product by one broker generated $270,000,000 of
premium income in 1995, which represents 20% of NYLIAC's total premium income.
As a subsidiary of a mutual insurance company, NYLIAC is subject to a tax on
its equity base. The rates applied to NYLIAC's equity base are determined
annually by the Internal Revenue Service after comparison of mutual life
insurance company earnings for the year to the average earnings of the 50
largest stock life insurance companies for the prior three years. Due to the
timing of earnings information, estimates of the current year's tax must be
made by management. The ultimate amounts of equity base tax incurred may vary
considerably from the original estimates. (See Note 2-Federal Income Taxes and
Change in Accounting Policy for the Equity Base Tax).
- -------------------------------------------------------------------------------
NOTE 3-Investments
- -------------------------------------------------------------------------------
Bonds-Fair values of bonds as shown below are based on published market values,
if available. For investments without readily ascertainable market values, fair
value has been determined using one of the following sources: market dealer
quotations, a discounted cash flow approach, or a proprietary matrix pricing
model. Fair values do not necessarily represent the values for which these
securities could have been sold at December 31, 1995 or 1994; therefore, care
should be exercised in drawing any conclusions from these fair values. The
method for determining statement values is described in Note 2.
At December 31, 1995 and 1994, the maturity distribution of bonds was as
follows (in millions):
1995 1994
------------------- -------------------
Estimated Estimated
Statement Fair Statement Fair
Value Value Value Value
--------- --------- --------- ---------
Due in one year or less................. $756 $763 $218 $218
Due after one year through five years... 3,012 3,082 3,267 3,179
Due after five years through ten years.. 1,853 1,957 1,901 1,801
Due after ten years..................... 1,863 2,042 1,916 1,795
Asset-backed securities:
Government or government agency......... 4,089 4,233 3,310 3,128
Other................................... 689 720 529 523
--------- --------- --------- ---------
Total................................... $12,262 $12,797 $11,141 $10,644
========= ========= ========= =========
New York Life
Insurance and
Annuity Corporation
(A WHOLLY OWNED SUBSIDIARY OF
NEW YORK LIFE INSURANCE COMPANY)
F-9
At December 31, 1995 and 1994, the distribution of unrealized gains and
losses on bonds was as follows (in millions):
<TABLE>
<CAPTION>
1995
--------------------------------
Estimated
Statement Fair
Value Gains Losses Value
--------- ----- ------ ---------
<S> <C> <C> <C> <C>
U.S. Treasury and U.S. Government corporations and agencies.. $1,840 $82 $2 $1,920
U.S. agencies, state and municipal........................... 3,563 150 8 3,705
Foreign governments.......................................... 324 20 1 343
Corporate.................................................... 5,846 274 11 6,109
Other........................................................ 689 32 1 720
--------- ----- ------ ---------
Total........................................................ $12,262 $558 $23 $12,797
========= ===== ====== =========
</TABLE>
<TABLE>
<CAPTION>
1994
--------------------------------
Estimated
Statement Fair
Value Gains Losses Value
--------- ----- ------ ---------
<S> <C> <C> <C> <C>
U.S. Treasury and U.S. Government corporations and agencies.. $1,679 $10 $96 $1,593
U.S. agencies, state and municipal........................... 2,965 14 193 2,786
Foreign governments.......................................... 298 4 21 281
Corporate.................................................... 5,670 60 269 5,461
Other........................................................ 529 10 16 523
--------- ----- ------ ---------
Total........................................................ $11,141 $98 $595 $10,644
========= ===== ====== =========
</TABLE>
Mortgage Loans-NYLIAC attempts to minimize the risk of investing in mortgage
loans by diversification of geographic locations and types of properties,
collateralization of mortgage loans based on management's credit assessment of
the borrower, and by traditionally requiring loan-to-value ratios of 75% or
less on new loans. The maximum and minimum lending rates for mortgage loans
during 1995 were: commercial loans, 9.50% and 7.25% (9.50% and 6.80% for 1994);
residential loans, 7.24% and 7.19% (no residential loans for 1994).
Notes to Financial Statements (Continued)
F-10
At December 31, 1995 and 1994, the distribution of the mortgage loan
portfolio by geographic location and property type was as follows (in
millions):
<TABLE>
<CAPTION>
1995 1994
----------------- -----------------
Statement % of Statement % of
Value Total Value Total
--------- ------- --------- -------
<S> <C> <C> <C> <C>
Geographic Distribution:
Middle Atlantic......... $421 39.7% $432 44.6%
South Atlantic.......... 275 25.9 202 20.8
Pacific................. 132 12.4 140 14.4
East North Central...... 132 12.4 130 13.4
West South Central...... 52 4.9 15 1.6
East South Central...... 22 2.1 29 3.0
Mountain................ 15 1.4 13 1.4
New England............. 12 1.1 7 .7
West North Central...... 1 .1 1 .1
--------- ------- --------- -------
Total................... $1,062 100.0% $969 100.0%
========= ======= ========= =======
Property Type:
Office Building......... $696 65.5% $649 67.0%
Retail.................. 185 17.4 166 17.1
Apartments.............. 152 14.3 125 12.9
Industrial.............. 21 2.0 29 3.0
Residential............. 8 .8 - -
--------- ------- --------- -------
Total................... $1,062 100.0% $969 100.0%
========= ======= ========= =======
</TABLE>
At December 31, 1995 and 1994, anticipated maturities in NYLIAC's mortgage
loan portfolio were as follows (in millions):
<TABLE>
<CAPTION>
1995 1994
------ ----
<S> <C> <C>
Due in one year or less................. $84 $142
Due after one year through five years... 398 345
Due after five years through ten years.. 460 408
Due after ten years..................... 120 74
------ ----
Total................................... $1,062 $969
====== ====
</TABLE>
Fair values for the mortgage loan portfolio at December 31, 1995 and 1994
were estimated to be $1,103,000,000 and $946,000,000, respectively, and were
determined by discounting the projected cash flow for each individual loan to
determine the current net present value. The discount rate used approximates
the current rate for new mortgages with comparable characteristics and similar
remaining maturities. As mortgage loans are generally intended to be held to
maturity and fair
New York Life
Insurance and
Annuity Corporation
(A WHOLLY OWNED SUBSIDIARY OF
NEW YORK LIFE INSURANCE COMPANY)
F-11
values do not necessarily represent the values for which these loans could have
been sold at December 31, 1995 or 1994, care should be exercised in drawing any
conclusions from these fair values. The method of determining statement values
is described in Note 2.
Real Estate-At December 31, 1995 and 1994, NYLIAC's real estate portfolio, at
statement value, consisted of the following (in millions):
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Commercial:
Investment.................... $101 $90
Acquired through foreclosure.. 40 29
---- ----
Total real estate............. $141 $119
==== ====
</TABLE>
Accumulated depreciation on real estate at December 31, 1995 amounted to
$5,033,000 ($2,379,000 for 1994). Depreciation expense for 1995 was $2,654,000
($1,729,000 for 1994 and $699,000 for 1993), and was recorded as an investment
expense.
Cash and Short-Term Investments-Short-term investments consist of securities
that have maturities of one year or less at acquisition. The carrying amount
reported in the Statement of Financial Position for cash and short-term
investments approximates fair value.
- -------------------------------------------------------------------------------
NOTE 4-Investment Income and Capital Gains and Losses
- -------------------------------------------------------------------------------
The components of net investment income for the years ended December 31, 1995,
1994 and 1993 were as follows (in millions):
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Bonds........................ $887 $877 $881
Mortgage loans............... 83 86 98
Preferred and common stocks.. 3 5 7
Real estate.................. 19 15 11
Policy loans................. 34 31 29
Short-term investments....... 25 13 8
Amortization of IMR.......... 16 10 3
Other........................ 5 9 9
------ ------ ------
Gross investment income...... 1,072 1,046 1,046
Investment expenses.......... 35 26 21
------ ------ ------
Net investment income........ $1,037 $1,020 $1,025
====== ====== ======
</TABLE>
Notes to Financial Statements (Continued)
F-12
For the years ended December 31, 1995, 1994 and 1993 realized capital gains
and losses were as follows (in millions):
<TABLE>
<CAPTION>
1995 1994 1993
------------- ------------- -------------
Gains Losses Gains Losses Gains Losses
----- ------- ----- ------- ----- -------
<S> <C> <C> <C> <C> <C> <C>
Bonds..................................................................... $62 $(31) $94 $(132) $99 $(115)
Mortgage loans............................................................ 4 (8) 1 - 2 -
Preferred and common stocks............................................... 16 (6) 6 (1) 7 -
Real estate............................................................... - (1) - (3) - (3)
Derivative instruments.................................................... 102 (103) 4 (14) - -
Other assets.............................................................. 10 (3) 5 - 3 (13)
----- ------- ----- ------- ----- -------
$194 $(152) $110 $(150) $111 $(131)
===== ======= ===== ======= ===== =======
Net realized capital gains (losses) before capital gains tax and transfers
to the IMR................................................................ 42 (40) (20)
Less:
Capital gains tax (benefit)............................................... 19 (19) (3)
Gains (losses) transferred to the IMR..................................... 23 (25) 44
----- ----- -------
Net realized capital gains (losses) after capital gains tax and transfers
to the IMR................................................................ $0 $4 $(61)
===== ===== =======
</TABLE>
Proceeds from investments in bonds sold, matured or repaid were
$3,395,000,000, $4,520,000,000 and $5,197,000,000 for the years ended December
31, 1995, 1994 and 1993, respectively.
- -------------------------------------------------------------------------------
NOTE 5-Dividends to Stockholder
- -------------------------------------------------------------------------------
No dividends were declared or paid to New York Life in 1995. In 1994 and 1993,
NYLIAC declared and paid dividends of $70,000,000 and $71,000,000,
respectively, to New York Life. These dividends were paid from current year
earnings, as permitted by the Delaware Insurance Department.
- -------------------------------------------------------------------------------
NOTE 6-Service Agreement with New York Life
- -------------------------------------------------------------------------------
New York Life provides NYLIAC with services and facilities for the sale of
insurance and other activities related to the business of insurance. NYLIAC
reimburses New York Life for the identified costs associated with these
services and facilities under the terms of a Service Agreement between New York
Life and NYLIAC. Such costs, amounting to $166,000,000 for the year ended
December 31, 1995 ($147,000,000 for 1994 and $124,000,000 for 1993) are
reflected in operating expenses and net investment income in the accompanying
Statement of Operations.
In 1993, the NAIC approved a new accounting treatment for postretirement
benefits other than pensions which requires the reporting of expected future
benefit costs (primarily life and health benefits) for retirees and fully
eligible active
New York Life
Insurance and
Annuity Corporation
(A WHOLLY OWNED SUBSIDIARY OF
NEW YORK LIFE INSURANCE COMPANY)
F-13
employees. The liabilities for postretirement benefits are held by New York
Life. However, NYLIAC was allocated $5,000,000 for its share of the net
periodic postretirement benefits expense in 1995 ($5,000,000 and $6,000,000 in
1994 and 1993, respectively) under the provisions of the service agreement.
- -------------------------------------------------------------------------------
NOTE 7-Insurance Liabilities
- -------------------------------------------------------------------------------
Policy Reserves and Deposit Funds-Reserves for life insurance policies are
maintained principally using the 1958 and 1980 Commissioners' Standard Ordinary
(CSO) Mortality Tables under the Commissioners' Reserve Valuation Method (CRVM)
with valuation interest rates ranging from 4% to 6.5%. Reserves for annuities
are based principally on 1971 Individual Annuity and 1983-a Mortality Tables
and the Commissioners' Annuity Reserve Valuation Method (CARVM), with valuation
interest rates ranging from 4% to 10%. Generally, owners of NYLIAC deferred
annuities are able, at their discretion, to withdraw funds from their policies.
The following table reflects the withdrawal characteristics of annuity
reserves and deposit funds (in millions):
<TABLE>
<CAPTION>
1995 1994
------------ ------------
% of % of
Amount Total Amount Total
------ ----- ------ -----
<S> <C> <C> <C> <C>
Subject to discretionary withdrawal:
With market value adjustment........................................... $- -% $- -%
At book value less surrender charge of 5% or more...................... 1,730 19 1,289 16
Market value........................................................... 1,303 14 862 10
------ ----- ------ -----
Total with adjustment or at market value............................... 3,033 33 2,151 26
At book value without adjustment (minimal or no charge or adjustment).. 5,875 65 6,064 72
Not subject to discretionary withdrawal provisions..................... 189 2 184 2
------ ----- ------ -----
Total annuity reserves and deposit fund liabilities.................... $9,097 100% $8,399 100%
====== ===== ====== =====
</TABLE>
NYLIAC's liabilities under investment-type contracts, primarily deferred
annuities, of $7,614,000,000 and $7,343,000,000 at December 31, 1995 and 1994,
respectively, are included in policy reserves on the Statement of Financial
Position. Fair value of these liabilities at December 31, 1995 is approximately
$7,619,000,000 (statement value at December 31, 1994 generally reflects fair
value).
Notes to Financial Statements (Continued)
F-14
Liability for Unpaid Accident and Health Claims and Claim Adjustment
Expenses-Activity in the liability for unpaid accident and health claims and
claim adjustment expenses is summarized as follows (in millions):
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Net Balance at January 1.... $20 $18
Incurred related to:
Current Year................ 22 20
Prior Year.................. - -
---- ----
Total Incurred.............. 22 20
---- ----
Paid related to:
Current Year................ - -
Prior Year.................. 20 18
---- ----
Total Paid.................. 20 18
---- ----
Net Balance at December 31.. $22 $20
</TABLE>
- -------------------------------------------------------------------------------
NOTE 8-Separate Accounts
- -------------------------------------------------------------------------------
NYLIAC maintains seven nonguaranteed separate accounts for its variable
deferred annuity and variable universal life products. The assets of the
separate accounts represent shares of New York Life sponsored MFA Series Fund
and Acacia Capital Corporation Calvert Socially Responsible Portfolio as
follows (in millions):
<TABLE>
<CAPTION>
1995 1994
----------------- -----------------
No. of Statement No. of Statement
Portfolio Shares Value Shares Value
- --------------------------- ------- --------- ------- ---------
<S> <C> <C> <C> <C>
Growth Equity.............. 24.823 $428 22.479 $330
Bond....................... 17.514 235 17.099 207
Capital Appreciation....... 15.784 244 9.952 114
Indexed Equity............. 7.776 105 6.088 63
Total Return............... 14.699 195 11.562 122
Government................. 6.477 65 6.691 62
Cash Management............ 88.930 89 72.526 73
International Equity....... 1.435 15 - -
High Yield Corporate Bond.. 4.105 43 - -
Value...................... 2.109 24 - -
Socially Responsible....... .356 1 - -
------- --------- ------- ---------
Total...................... 184.008 $1,444 146.397 $971
======= ========= ======= =========
</TABLE>
New York Life
Insurance and
Annuity Corporation
(A WHOLLY OWNED SUBSIDIARY OF
NEW YORK LIFE INSURANCE COMPANY)
F-15
During the second quarter of 1996, NYLIAC is expected to offer for sale a new
variable product, Corporate Owned Life Insurance Variable Universal Life, for
the purpose of investing payments received under new variable universal life
contracts issued by NYLIAC.
NYLIAC's total investment in the separate accounts was $48,000,000 and
$64,000,000 at December 31, 1995 and 1994, respectively.
Variable separate accounts held by NYLIAC for Individual Life and Annuity
policies represent nonguaranteed funds. The assets of these accounts are
carried at market value.
The following is a reconciliation of net transfers from NYLIAC to the
Separate Accounts (in millions):
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -----
<S> <C> <C> <C>
Transfers as reported in Summary of Operations of the
Separate Accounts Statement:
Transfers to Separate Accounts........................ $404 $312 $215
Transfers from Separate Accounts...................... (174) (143) (69)
------- ------- -----
Net transfers to Separate Accounts.................... $230 $169 $146
======= ======= =====
Transfers as reported in "additions to other insurance
reserves" on the Statement of Operations of NYLIAC.... $230 $169 $146
======= ======= =====
</TABLE>
- -------------------------------------------------------------------------------
NOTE 9-Federal Income Taxes
- -------------------------------------------------------------------------------
NYLIAC is a member of an affiliated group which joins in the filing of a
consolidated federal income tax return with New York Life. The consolidated
income tax liability is allocated among the members of the group in accordance
with a tax allocation agreement. The tax allocation agreement provides that
NYLIAC is allocated its share of the consolidated tax provision or benefit,
including the equity base tax, determined generally on a separate return basis,
but may, where applicable, recognize the tax benefits of net operating losses
or capital losses utilizable in the consolidated group. Estimated payments for
taxes are made between the members of the consolidated group during the year.
At December 31, 1995 and 1994, federal income taxes payable to New York Life
were $62,000,000 and $19,000,000, respectively.
Notes to Financial Statements (Continued)
F-16
Set forth below is a reconciliation of the statutory federal income tax rate
to the effective tax rate for 1995, 1994 and 1993:
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Statutory federal income tax rate..................................... 35.0% 35.0% 35.0%
Exempt interest....................................................... (1.7) (2.8) (1.0)
Allocable share of equity base tax imposed on New York Life:
Current year estimate................................................. 5.0 2.7 2.3
Change in accounting policy........................................... (8.0) - -
Deferred acquisition costs............................................ 8.3 6.0 5.6
Increase (decrease) in statutory reserves in excess of increase in tax
reserves.............................................................. 1.6 (1.5) 2.1
Other................................................................. (1.4) (.1) (.2)
------ ------ ------
Effective tax rate.................................................... 38.8% 39.3% 43.8%
====== ====== ======
</TABLE>
- -------------------------------------------------------------------------------
NOTE 10-Reinsurance
- -------------------------------------------------------------------------------
NYLIAC enters into reinsurance agreements in the normal course of its insurance
business to reduce overall risks. NYLIAC remains liable for reinsurance ceded
if the reinsurer fails to meet its obligations on the business it has assumed.
Life insurance reinsured was 11% and 9% of total life insurance in-force at
December 31, 1995 and 1994, respectively.
In 1994, NYLIAC entered into a coinsurance/modified coinsurance reinsurance
agreement, covering a specific block of NYLIAC's Single Premium Multi-Life
Corporate Owned Life Insurance business. In 1995, this treaty was amended to
cover 1995 and future years' business. In 1995, NYLIAC ceded $216,000,000 in
premiums ($220,000,000 in 1994) reduced by an experience refund of $8,000,000
($4,000,000 in 1994). In addition, in 1995 NYLIAC recorded a commission and
expense allowance of $22,000,000 ($22,000,000 in 1994), a modco reserve
adjustment of $185,000,000 ($194,000,000 in 1994), and a reserve credit of
$43,000,000 ($22,000,000 in 1994), related to the coinsurance portion of the
agreement.
A group reinsurance agreement between NYLIAC and New York Life was approved
by the New York State Insurance Department in 1981 and was terminated effective
December 31, 1995. Under the terms of the agreement, NYLIAC assumed the
liabilities for group health long-term disability policies issued by New York
Life. NYLIAC assumed premiums of $29,000,000, $26,000,000 and $25,000,000 for
the years 1995, 1994 and 1993, respectively. A settlement is made between the
companies in the subsequent year. In 1995, NYLIAC received $4,000,000 from New
York Life (NYLIAC paid $1,000,000 and received $24,000,000 from New York Life
in 1994 and 1993, respectively), consisting of premiums due to NYLIAC of
$32,000,000 ($33,000,000 in 1994 and $41,000,000 in 1993), reduced by a benefit
reimbursement of $20,000,000 ($18,000,000 in 1994 and $15,000,000 in 1993) and
an experience refund of $8,000,000 ($16,000,000 in 1994 and $2,000,000 in
1993).
New York Life
Insurance and
Annuity Corporation
(A WHOLLY OWNED SUBSIDIARY OF
NEW YORK LIFE INSURANCE COMPANY)
F-17
As a result of the termination, NYLIAC will transfer an amount to New York
Life equal to the reserves held to support the claims of those disabled lives.
At December 31, 1995 NYLIAC established a liability to New York Life of
$119,000,000 for the transfer of such reserves.
- -------------------------------------------------------------------------------
NOTE 11-Other Adjustments to Surplus
- -------------------------------------------------------------------------------
Other adjustments in the Statement of Changes in Surplus include principally
the effects of the following:
For 1995: (1) $18,000,000 decrease due to a change in accounting policy for
the equity base tax (see Note 2); (2) $14,000,000 decrease due to a change in
valuation basis; (3) $10,000,000 increase due to the change in separate account
surplus; (4) $3,000,000 decrease due to an increase in nonadmitted assets; and
(5) $3,000,000 decrease resulting from an increase in the liability for federal
income taxes of prior years.
For 1994: (1) $6,000,000 decrease due to an increase in nonadmitted assets;
(2) $5,000,000 increase resulting from a decrease in the liability for federal
income taxes of prior years; and (3) $2,000,000 decrease due to the change in
separate account surplus.
For 1993: (1) $18,000,000 decrease due to an adjustment to the Agents'
Progress Sharing Plan liability; (2) $6,000,000 increase due to the change in
separate account surplus; (3) $5,000,000 increase resulting from a decrease in
the liability for federal income taxes of prior years; and (4) $1,000,000
decrease due to the funding of the New York Life Foundation.
- -------------------------------------------------------------------------------
NOTE 12-Derivative Financial Instruments and Risk Management
- -------------------------------------------------------------------------------
NYLIAC uses derivative financial instruments to manage interest rate, currency
and market risk. These derivative financial instruments include foreign
exchange forward contracts, interest rate floors, and interest rate and
commodity swaps. NYLIAC does not engage in derivative financial instrument
transactions for the purpose of trading.
Notional or contractual amounts of derivative financial instruments provide
only a measure of involvement in these types of transactions and do not
represent the amounts exchanged between the parties engaged in the transaction.
The amounts exchanged are determined by reference to the notional amounts and
other terms of the derivative financial instruments which relate to interest
rates, exchange rates, or other financial indices.
Interest Rate Risk Management-NYLIAC enters into various types of interest
rate contracts primarily to minimize exposure of specific assets held by NYLIAC
to fluctuations in interest rates.
Notes to Financial Statements (Continued)
F-18
The following table summarizes the notional amounts and credit exposures of
interest rate related derivative transactions (in thousands):
<TABLE>
<CAPTION>
1995 1994
----------------- -----------------
Notional Credit Notional Credit
Amount Exposure Amount Exposure
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Interest Rate Swaps.. $50,000 - $80,000 $2,636
Floors Purchased..... $150,000 - $150,000 $15
</TABLE>
Interest rate swaps are agreements with other parties to exchange, at
specified intervals, the difference between fixedrate and floating-rate
interest amounts calculated by reference to an agreed notional amount. Swap
contracts outstanding at December 31, 1995 are between ten months and eight
years, seven months in maturity. At December 31, 1994 such contracts are
between seven months and eight years, seven months in maturity. NYLIAC does not
act as an intermediary or broker in interest rate swaps.
The following table shows the type of swaps used by NYLIAC and the weighted
average interest rates. Average variable rates are based on the rates which
determine the last payment received or paid on each contract; those rates may
change significantly, affecting future cash flows.
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Receive-fixed swaps-Notional amount (in thousands).. $15,000 $45,000
Average receive rate................................ 7.93% 8.30%
Average pay rate.................................... 7.39% 5.85%
Pay-fixed swaps-Notional amount (in thousands)...... $35,000 $35,000
Average pay rate.................................... 7.46% 7.46%
Average receive rate................................ 6.02% 5.74%
</TABLE>
During the term of the swap, net settlement amounts are recorded as
investment income or expense when earned. Fair values of interest rate swaps at
December 31, 1995 and 1994 were $(2,298,000) and $1,760,000 respectively, based
on quoted market prices.
Interest rate floor agreements entitle NYLIAC to receive amounts from
counterparties based upon the difference between a strike price and current
interest rates. Such agreements serve as hedges against declining interest
rates on a portfolio of assets.
Premiums paid for interest rate floor agreements purchased are included in
other assets in the Statement of Financial Position and are amortized into
interest expense over the terms of the agreements. At December 31, 1995 and
1994, unamortized premiums amounted to $597,000 and $672,000, respectively.
Amounts received during the term of interest rate floor agreements are recorded
as investment income. Fair values of interest rate floors at December 31, 1995
and 1994 were $395,000 and $15,000, respectively, based on quoted market
prices.
NYLIAC is exposed to credit-related losses in the event that a counterparty
fails to perform its obligations under contractual terms. The credit exposure
of derivative financial instruments is represented by the sum of the fair
values of contracts with each counterparty, if the net value is positive, at
the reporting date.
New York Life
Insurance and
Annuity Corporation
(A WHOLLY OWNED SUBSIDIARY OF
NEW YORK LIFE INSURANCE COMPANY)
F-19
NYLIAC deals with highly rated counterparties and does not expect the
counterparties to fail to meet their obligations. NYLIAC has controls in place
to monitor credit exposures by limiting transactions with specific
counterparties within specified dollar limits and assessing the future
creditworthiness of counterparties. NYLIAC uses master netting agreements and
adjusts transaction levels, when appropriate, to minimize risk.
Foreign Exchange Risk Management-NYLIAC enters into foreign exchange forward
contracts primarily as a portfolio hedge against foreign currency fluctuations.
The purpose of NYLIAC's foreign currency hedging activities is to protect it
from the risk that eventual dollar net cash inflows from investment income, or
the eventual sale, of a foreign currency denominated investment, will be
adversely affected by changes in exchange rates.
NYLIAC's foreign exchange forward contracts involve the exchange of two
currencies at a specified future date and at a specified price. The average
term of the contracts is three to six months.
The table below summarizes, by major currency, the contractual amounts of
NYLIAC's foreign exchange forward contracts. The amounts represent the U.S.
dollar equivalent of commitments to sell foreign currencies, translated at
December 31, 1995 and 1994 exchange rates (in thousands):
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Japanese Yen... $49,000 $29,000
French Francs.. 24,000 27,000
Italian Lire... 21,000 14,000
Other.......... 107,000 92,000
-------- --------
Total.......... $201,000 $162,000
======== ========
</TABLE>
The fair value of foreign exchange forward contracts at December 31, 1995 and
1994 was $(2,746,000) and $(1,046,000), respectively, and was based on current
market rates.
NYLIAC is exposed to credit-related losses in the event of non-performance by
counterparties, which could result in an unhedged position. NYLIAC deals with
highly rated, investment grade counterparties and does not expect the
counterparties to fail to meet their obligations under the contracts. For
contracts with counterparties where no master netting arrangement exists in the
event of default on the part of the counterparty, credit exposure is defined as
the fair value of contracts in a gain position at the reporting date. Credit
exposure to counterparties where a master netting arrangement is in place in
the event of default is defined as the net fair value, if positive, of all
outstanding contracts with each specific counterparty. The credit exposure of
NYLIAC's foreign exchange forward contracts at December 31, 1995 and 1994 was
$137,000 and $26,000, respectively.
Commodity Management-In 1994, NYLIAC entered into a $10,145,000 notional gold
swap in order to hedge variable interest payments on a gold denominated
Eurobond. The bond pays interest in U.S. dollars based upon the prevailing
price of gold. Under the terms of the agreement, NYLIAC pays to the
counterparty the variable interest payments on the bond in exchange for a fixed
payment in U.S. dollars at 8.46%. The counter party is highly rated and NYLIAC
does not expect the
Notes to Financial Statements (Continued)
F-20
counterparty to fail to meet its obligation. The fair value of the swap at
December 31, 1995 and 1994 was $1,244,000 and $51,000, respectively, based on
current market quotes.
- -------------------------------------------------------------------------------
NOTE 13-Commitments and Contingencies
- -------------------------------------------------------------------------------
Litigation-The New York State Supreme Court on January 31, 1996 approved the
settlement of a consolidated nationwide class action lawsuit alleging certain
sales practice claims against NYLIAC and New York Life. In entering into the
settlement, NYLIAC specifically denied any wrongdoing. The class consists of
approximately three million policyowners who purchased whole life or universal
life policies from January 1, 1982 through December 31, 1994. Appeals from the
order may be filed within the prescribed statutory period. Under the terms of
the settlement, the class members receive benefits intended to address the
issues presented in the case or an opportunity to redress individual claims in
an alternative dispute resolution process. The settlement (including awards
made in an alternative dispute resolution process) will not have a material
adverse effect upon NYLIAC's financial position, and NYLIAC believes that,
after consideration of provisions made, the settlement will not have a material
adverse effect on operating results. NYLIAC, its affiliates and its agents have
been released from liability to class members for transactions during the class
period relating to the sales practice claims in the lawsuits.
There are also actions in various jurisdictions by individual policyowners,
many of whom excluded themselves from the settlement of the nationwide class
action. Most of the these actions seek substantial or unspecified compensatory
and punitive damages.
NYLIAC is also a defendant in other actions arising from its insurance and
investment operations, including actions involving retail sales practices. Most
of these actions also seek substantial or unspecified compensatory and punitive
damages. NYLIAC is also from time to time involved as a party in various
governmental, administrative and investigative proceedings and inquiries.
Given the uncertain nature of litigation and regulatory inquiries, the
outcome of the above and other actions pending against NYLIAC cannot be
predicted. NYLIAC nevertheless believes that the ultimate outcome of all
pending litigation should not have a material adverse effect on NYLIAC's
financial position; however, it is possible that settlements or adverse
determinations in one or more actions or other proceedings in the future could
have a material adverse effect on NYLIAC's operating results for a given year.
Loaned Securities and Repurchase Agreements-NYLIAC participates in a
securities lending program for the purpose of enhancing income on securities
held. At December 31, 1995, $1,222,000,000 ($1,143,000,000 at December 31,
1994) of NYLIAC's bonds were on loan to others, but were fully collateralized
in an account held in trust for NYLIAC. Such assets reflect the extent of
NYLIAC's involvement in securities lending, not its risk of loss.
NYLIAC has entered into agreements to sell and repurchase securities for the
purpose of enhancing income on securities held. Under these agreements, NYLIAC
obtains the use of funds from a broker for approximately one month. The
liability reported in the Statement of Financial Position at December 31, 1995
of $86,000,000 ($254,000,000 at December 31, 1994) is considered to be fair
value. The investments acquired with the funds received from the securities
sold are generally included in short-term investments.
New York Life
Insurance and
Annuity Corporation
(A WHOLLY OWNED SUBSIDIARY OF
NEW YORK LIFE INSURANCE COMPANY)
F-21
REPORT OF INDEPENDENT ACCOUNTANTS
- -------------------------------------------------------------------------------
To the Board of Directors and Stockholder of
New York Life Insurance and Annuity Corporation
In our opinion, the accompanying statement of financial position and the
related statements of operations, of changes in surplus and of cash flows
present fairly, in all material respects, the financial position of New York
Life Insurance and Annuity Corporation at December 31, 1995 and 1994, and the
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1995 in conformity with generally accepted accounting
principles (practices prescribed or permitted by insurance regulatory
authorities, see Note 2). These financial statements are the responsibility of
the Corporation's management; our responsibility is to express an opinion on
these financial statements based on our audits. We conducted our audits of
these statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
As described in Note 2, in 1995 the Corporation changed its accounting policy
for reporting the effect of changes in the Differential Earnings Rate on its
equity base tax.
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
February 16, 1996
F-22
<PAGE>
PART II
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the
Securities Exchange Act of 1934 , the undersigned Registrant hereby undertakes
to file with the Securities and Exchange Commission such supplementary and
periodic information, documents and reports as may be prescribed by any rule
or regulation of the Commission heretofore or hereafter duly adopted pursuant
to authority conferred in that section.
RULE 484 UNDERTAKING
Reference is made to Article VIII of the Depositor's By-Laws.
New York Life maintains Directors and Officers Liability/Company
Reimbursement ("D&O") insurance which covers directors, officers and trustees
of New York Life, its subsidiaries, and its subsidiaries and certain
affiliates including the Depositor while acting in their capacity as such. The
total annual aggregate of D&O coverage is $100 million applicable to all
insureds under the D&O policies. There is no assurance that such coverage will
be maintained by New York Life or for the Depositor in the future as, in the
past, there have been large variances in the availability of D&O insurance for
financial institutions.
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Depositor pursuant to the foregoing provisions, or otherwise, the
Depositor has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Depositor of expenses incurred or paid by a director, officer or controlling
person of the Depositor in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Depositor will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
REPRESENTATION PURSUANT TO RULE 6E-3(T)
Registrant makes the following representations:
(1) Section 6e-3(T)(b)(13)(iii)(F) has been relied upon.
(2) The total level of the mortality and expense risk charge is
within the range of industry practice for comparable
flexible premium variable life insurance contracts.
(3) NYLIAC has concluded that a reasonable likelihood exists
that the distribution financing arrangement of the Separate
Account will benefit the Separate Account and Policyowners
and will keep and make available to the Commission on
request a memorandum setting forth the basis for this
representation.
(4) The Separate Account will invest only in management
investment companies which have undertaken to have a board
of directors, a majority of whom are not interested persons
of NYLIAC, formulate and approve any plan under Rule 12b-1
to finance distribution expenses.
(5) The Separate Account meets the definition of a "separate
account" under the federal securities laws.
The methodology used to support the representation made in paragraph
(2) above is based upon an analysis
II-1
<PAGE>
of the mortality and expense risk charges contained in other flexible premium
variable life insurance policies. Registrant undertakes to keep and make
available to the Commission on request the documents used to support the
representation in paragraph (2) above.
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and
documents:
The facing sheet.
The prospectus consisting of 67 pages.
The undertaking to file reports.
The undertaking pursuant to Rule 484.
Representations pursuant to Rule 6e-3(T).
The signatures.
Written consents of the following persons:
(a) Robert J. Hebron, Esq. - to be filed by Amendment.
(b) Fred Garland, Actuary - to be filed by Amendment.
(c) Price Waterhouse, LLP
The following exhibits:
1. The following exhibits correspond to those required by paragraph A
of the instructions as to exhibits in Form N-8B-2:
(1) Resolution of the Board of Directors of NYLIAC establishing
the Separate Account - filed herewith.
(2) Not applicable.
(3) (a) Distribution Agreement between NYLIFE Distributors Inc.
and NYLIAC - to be filed by Amendment.
(b) Form of Sales Agreement, by and between NYLIFE
Distributors Inc., as Underwriter, NYLIAC as Issuer,
and Dealers - to be filed by Amendment.
(c) Not applicable.
(4) Not applicable.
(5) Form of Policy - filed herewith.
(6) (a) Restated Certificate of Incorporation of NYLIAC - filed
herewith.
II-2
<PAGE>
(b) By-Laws of NYLIAC - filed herewith.
(7) Not applicable.
(8) Not applicable.
(9) (a) Stock Sales Agreement between NYLIAC and New York Life
MFA Series Fund, Inc. - to be filed by Amendment.
(b) Participation Agreement among Acacia Capital Corporation,
Calvert Asset Management Company, Inc. and NYLIAC, as
amended - to be filed by Amendment.
(c) Powers of Attorney for the Directors and Officers of
NYLIAC - previously filed as Exhibit (10)(b) to
Post-Effective Amendment No. 5 to Form N-4 for NYLIAC
Variable Annuity Separate Account-I (File No. 33-53342)
for the following:
Jay S. Calhoun, Vice President, Treasurer and Director
(Principal Financial Officer)
Lee M. Gammill, Jr., Director
Richard M. Kernan, Jr., Director
Gary McPhail, Executive Vice President and Director
Robert D. Rock, Senior Vice President and Director
Frederick J. Sievert, Executive Vice President and
Director
Stephen N. Steinig, Senior Vice President, Chief Actuary
and Director
Seymour Sternberg, President and Director (Principal
Executive Officer)
(d) Power of Attorney for Maryann L. Ingenito, Vice
President and Controller (Principal Accounting
Officer) - previously filed as Exhibit 10(c) to
Post-Effective Amendment No. 4 for NYLIAC Variable
Annuity Separate Account I (File No. 33-53342).
(e) Memorandum describing NYLIAC's issuance, transfer and
redemption procedures for the Policies- to be filed
by Amendment.
(10) Form of Application - to be filed by Amendment.
2. Opinion and Consent of Robert J. Hebron, Esq. - to be filed by
Amendment.
3. Not applicable.
4. Not applicable.
5. Not applicable.
6. Opinion and Consent of Fred Garland, Actuary - to be filed by Amendment.
7. Consent of Price Waterhouse, LLP.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant,
NYLIAC Corporate Sponsored Variable Universal Life Separate Account-I, has
duly caused this Registration Statement to be signed on its behalf by the
undersigned thereunto duly authorized, in the City and State of New York on
the 3rd day of July, 1996.
NYLIAC CORPORATE SPONSORED VARIABLE
UNIVERSAL LIFE SEPARATE ACCOUNT-I
(Registrant)
By /s/ Robert A. Slepicka
-----------------------------------
Robert A. Slepicka
Senior Vice President
NEW YORK LIFE INSURANCE AND
ANNUITY CORPORATION
(Depositor)
By /s/ Robert A. Slepicka
------------------------------------
Robert A. Slepicka
Senior Vice President
As required by the Securities Act of 1933, this Registration Statement has
been signed by the following persons in the capacities and on the date
indicated.
Jay S. Calhoun, III* Vice President, Treasurer and Director (Principal
Financial Officer)
Lee M. Gammill, Jr.* Director
Maryann L. Ingenito* Vice President and Controller (Principal
Accounting Officer)
Richard M. Kernan, Jr.* Director
Gary McPhail* Executive Vice President and Director
Robert D. Rock* Senior Vice President and Director
Frederick J. Sievert* Executive Vice President and Director
Stephen N. Steinig* Senior Vice President, Chief Actuary and Director
Seymour Sternberg* President and Director (Principal Executive
Officer)
*By /s/ Robert A. Slepicka
----------------------------------
Robert A. Slepicka
Attorney-in-Fact
July 3, 1996
II-4
<PAGE>
EXHIBITS
1.(1) RESOLUTION OF BOARD OF DIRECTORS OF NYLIAC ESTABLISHING THE SEPARATE
ACCOUNT
1.(5) FORM OF POLICY
1.(6) (a) RESTATED CERTIFICATE OF INCORPORATION OF NYLIAC
(b) BY-LAWS OF NYLIAC
7. CONSENT OF PRICE WATERHOUSE, LLP.
<PAGE>
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
* * * * * *
CONSENT OF BOARD OF DIRECTORS
In Lieu of
Special Meeting of Board of Directors
Dated as of May 24, 1996
* * * * * *
Pursuant to Section 141(f) of the General Corporation Law of the
State of Delaware and the By-Laws of NEW YORK LIFE INSURANCE AND ANNUITY
CORPORATION ("Corporation"), a Delaware corporation, the undersigned, being
all the directors of the Corporation, consent that the Special Meeting of the
Board of Directors be dispensed with and the following resolutions be adopted:
RESOLVED, that the Corporation establish, in accordance with Section
2932 of the Delaware Insurance Code, a separate account to be known as "New
York Life Insurance and Annuity Corporation Corporate Sponsored Variable
Universal Life Separate Account I" ("CSVUL Separate Account I"), or such other
name as the President may determine, for the purpose of investing payments
received under corporate sponsored variable universal life insurance contracts
("CSVUL Policies") issued by the Corporation and under other variable
universal life insurance contracts issued by the Corporation on a
substantially similar basis to the CSVUL Policies, any such contracts having
been designed to qualify for favored tax treatment under the Internal Revenue
Code of 1986, as amended ("Code"); that the assets of CSVUL Separate Account I
be invested in shares of New York Life MFA Series Fund, Inc. ("MFA Series
Fund"), an open-ended diversified management investment company of the series
type, or in lieu thereof or in addition thereto, in the shares of any other
investment company approved by an officer of the Corporation and registered
under the Investment Company Act of 1940 ("Investment Company Act"), at the
net asset value of such shares at the time of acquisition.
FURTHER RESOLVED, that the President, any Vice President or the
Secretary of the Corporation, or any person designated by them, are severally
authorized and empowered to take all action deemed necessary or appropriate to
effect the establishment of CSVUL Separate Account I, and to file, or cause to
be filed, with the New York Department of Insurance and the Delaware
Department of Insurance, in the name and on behalf of the Corporation and
CSVUL Separate Account I, the Plan of Operations, in substantially the form
attached hereto, and any amendments thereto as are necessary or advisable in
connection with the offering of the CSVUL Policies, and any other
substantially similar variable universal life insurance contracts issued by
the Corporation, and as are consistent with the purpose for establishing CSVUL
Separate Account I as stated in the resolution authorizing such establishment.
<PAGE>
FURTHER RESOLVED, that the officers of the Corporation, or any person
designated by them, are severally authorized to take all action deemed
necessary or appropriate to operate and manage CSVUL Separate Account I in
accordance with the Plan of Operations, as may be amended from time to time,
and to comply with applicable federal and state laws in order that CSVUL
Policies, and any other substantially similar variable universal life
insurance contracts issued by the Corporation, may be offered and sold in all
jurisdictions in which the Corporation is authorized to conduct a variable
life insurance business.
FURTHER RESOLVED, that CSVUL Separate Account I be organized as a
unit investment trust, that it be registered, if necessary or appropriate,
with the United States Securities and Exchange Commission ("SEC") under the
Investment Company Act, and that the CSVUL Policies, and any other
substantially similar variable universal life insurance contracts issued by
the Corporation, be registered for sale under the Securities Act of 1933; that
for such purpose the President, any Vice President, the Secretary and any
Assistant Secretary of the Corporation are severally authorized and empowered
to execute and file or cause to be filed with the SEC, in the name and on
behalf of the Corporation and CSVUL Separate Account I, a Notification of
Registration on Form N-8A and Registration Statements on Forms N-8B-2 and S-6
or on any other forms which the Rules and Regulations of the SEC may, from
time to time, permit, and to take all other actions which are necessary or
advisable in connection with the offering of the CSVUL Policies, and any other
substantially similar variable universal life insurance contracts issued by
the Corporation, for sale and the operation of CSVUL Separate Account I, in
order to comply with the Investment Company Act, the Securities Exchange Act
of 1934, the Securities Act of 1933, and other applicable federal and state
laws, including the filing of any amendments or supplements to registration
statements, any undertakings, and any applications for exemptions from the
Investment Company Act or other applicable federal or state laws as the
individual or individuals so acting shall deem necessary, advisable or
appropriate, including applications which seek exemptive relief in connection
with separate accounts established in the future; and that the Secretary of
the Corporation hereby is appointed as designated agent for service under any
such registration statements and duly authorized to receive communications and
notices from the SEC and to respond with respect thereto.
FURTHER RESOLVED, that the Corporation has established and maintains
Standards of Conduct in regard to the sale of variable life insurance policies
and the establishment of separate accounts in connection therewith; and
Standards of Suitability which reflect the policy of the Corporation with
respect to determining the suitability of its variable life insurance
products. Such Standards of Conduct and Standards of Suitability shall apply
to the sale of CSVUL Policies; and shall be binding upon the Corporation and
applicable to its officers, directors, employees, affiliates and agents, and
shall specify that no recommendation shall be made to an applicant to purchase
a CSVUL Policy and no such contract shall be issued in the absence of
reasonable grounds to believe that the purchase of such contract is not
unsuitable for such applicant on the basis of information furnished after
reasonable inquiry of such applicant concerning the applicant's insurance
<PAGE>
and investment objectives, financial situation and needs, and any other
information known to the Corporation or any of its affiliates or to the agent
making the recommendation.
FURTHER RESOLVED, that the monthly cost of insurance rate structure
and methodology filed with this resolution in the minute book as well as all
guaranteed charges set forth in the Plan of Operations filed with this
resolution in the minute book are approved for use in connection with the
CSVUL Policies issued by the Corporation and, based on that methodology and
rate structure, the officers of the Corporation are hereby authorized to take
all appropriate actions to effect a rate structure for CSVUL Policies. These
rates will become effective on such date or dates as the President or other
such officers designated by him may determine.
FURTHER RESOLVED, that the Distribution Agreement, in substantially
the form attached hereto, to be entered into between the Corporation, on its
behalf and on behalf of CSVUL Separate Account I, and NYLIFE Distributors
Inc., be, and it hereby is, approved.
FURTHER RESOLVED, that the officers of the Corporation are severally
authorized to execute in the names and on behalf of the Corporation and CSVUL
Separate Account I, a Distribution Agreement, in substantially the form
attached hereto.
/s/Jay S. Calhoun, III /s/Robert D. Rock
- ---------------------- -----------------
Jay S. Calhoun, III Robert D. Rock
/s/Lee M. Gammill, Jr. /s/Frederick J. Sievert
- ---------------------- ------------------------
Lee M. Gammill, Jr. Frederick J. Sievert
/s/Richard M. Kernan, Jr. /s/Stephen N. Steinig
- ------------------------ ---------------------
Richard M. Kernan, Jr. Stephen N. Steinig
/s/Gary R. McPhail /s/Seymour Sternberg
- ------------------ --------------------
Gary R. McPhail Seymour Sternberg
<PAGE>
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A Delaware Corporation)
THE CORPORATION will pay the benefits of this policy in accordance with its
provisions. The pages that follow are also a part of this policy.
RIGHT TO EXAMINE POLICY. Please examine your policy. Within 20 days after
delivery, you can return the policy to the Corporation or to the Registered
Representative through whom it was purchased. If this policy is returned, the
policy will be void from the start and a refund will be made. The amount we
refund will equal the greater of the policy's Cash Value as of the date the
policy is returned or the premiums paid, less loans and withdrawals.
VARIABLE LIFE INSURANCE BENEFIT. THE LIFE INSURANCE BENEFIT OF THIS POLICY MAY
INCREASE OR DECREASE, DEPENDING ON THE INVESTMENT EXPERIENCE OF THE SEPARATE
ACCOUNT AND THE LIFE INSURANCE BENEFIT OPTION SELECTED. FURTHER INFORMATION
REGARDING THIS BENEFIT IS GIVEN IN THE LIFE INSURANCE BENEFITS SECTION ON PAGE
4 OF THE POLICY.
CASH VALUE. TO THE EXTENT THE POLICY'S CASH VALUE IS ALLOCATED TO THE SEPARATE
ACCOUNT, THE CASH VALUE OF THIS POLICY WILL VARY FROM DAY TO DAY REFLECTING
THE INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT. THE METHOD OF DETERMINING
THE CASH VALUE IS DESCRIBED IN THE CASH SURRENDER VALUE AND PARTIAL
WITHDRAWALS SECTION. THERE IS NO GUARANTEED MINIMUM CASH VALUE.
PAYMENT OF PREMIUMS. While this policy is in force, premiums can be paid at
any time before the Policy Anniversary on which the Insured is age 95, and
while the Insured is living. They can be paid at any interval or by any method
we make available, subject to the Premiums Section. The amount and interval of
Planned Premiums, as stated in the application for this policy, are shown on
Page 2.
ANNUAL REPORT TO OWNER. An annual report in connection with this policy will
be provided to you without charge. This report will tell you how much Cash
Value and Cash Surrender Value there is as of the most recent Policy
Anniversary, together with the amount of any unpaid loan. The report will also
give you any other facts required by state law or regulation.
President
Secretary
Flexible Premium Variable Universal Life Insurance Policy
Variable Life Insurance Benefit - Flexible Premium Payments
Proceeds Payable at Insured's Death.
AMOUNT OF VARIABLE LIFE INSURANCE OR CASH VALUE
PROCEEDS MAY VARY, REFLECTING THE INVESTMENT EXPERIENCE
OF THE SEPARATE ACCOUNT.
No Premiums Payable on or after Age 95.
Policy is Non-Participating.
796-40
<PAGE>
Insured - John Doe Insured's Age and Sex
As of the Policy Date - 35 Male
Policy Number - 60 000 000 Insured's Class
of Risk - Non Smoker
Policy Date - November 1, 1995 Life Insurance Benefit Option - 1
Initial Face Amount - $250,000
Initial Term Amount - $500,000
Target Face Amount - $750,000
First Premium - $5,000
Planned Premium payable* at semi-annual intervals - $2,500
Beneficiary/Owner as designated in the application unless changed as provided
in the policy.
Additional Flat Extras - $0
*Premiums cannot be paid on or after the Policy Anniversary on which the
insured is age 95, which is November 1, 2055. Coverage will expire when the
Cash Surrender Value, less any unpaid loan, is insufficient to cover the
monthly deduction. Making the Planned Premium payments shown above will not
guarantee that the policy will remain in force. The period for which the
Policy and coverage will continue in force will depend on: (1) the amount,
timing and frequency of premium payments; (2) changes in the Life Insurance
Benefit Option or in the Face Amount; (3) changes in the interest rate
credited to the Fixed Account and in the investment performance of the
Investment Divisions of the Separate Account; (4) changes in the Monthly Cost
of Insurance deductions for the Base Policy and in the Monthly Cost of Riders
attached to this Policy, and in any other fee deductions; and (5) loan and
partial withdrawal activity.
Monthly Deduction Day is the first day of each calendar month.
Policy Months are measured from the Monthly Deduction Day.
Policy Years and Policy Anniversaries are measured from the Policy Date.
The Separate Account is the Corporate Sponsored Variable Universal Life
Separate Account I.
Service Office: New York Life Insurance and Annuity Corporation
NYLIFE Distributors Inc.
Attention: Executive Benefits
920 Main Street, Suite 2100
Kansas City, MO 64105
Telephone: (816) 889-4000
See the most current prospectus, which is on file with the Securities and
Exchange Commission, for service days on which transactions may be initiated
(transaction date).
9640-2 Page 2 New York Life Insurance and Annuity Corporation
NYLIFE Distributors Inc., Distributor, 51 Madison Avenue, New York, NY 10010
<PAGE>
Policy Number - 60 000 000 Insured - John Doe
TABLE OF MAXIMUM CHARGES
The following charges are not prorated for any portion of the Policy Month.
For current charges, see the most current prospectus, which is on file with
the Securities and Exchange Commission.
MONTHLY DEDUCTION CHARGES CONSIST OF:
- - A Contract Charge not to exceed $9.00 in each month.
- - Monthly Cost of Insurance for Base Policy not to exceed amount on Page 2.2.
- - Monthly Cost of any Riders not to exceed amount on Page 2.2.
OTHER CHARGES AGAINST THE POLICY:
- - Sales Expense Charge not to exceed 4.5% of any premium paid.
- - Premium Tax Charge of 2% of each premium payment. We reserve the right to
change this percentage to conform to changes in the law.
- - Federal Tax Charge of 1.25% of each premium payment. We reserve the right to
change this percentage to conform to changes in the law.
- - Monthly Mortality and Expense Charges against the Separate Account not to
exceed .90% of the daily net asset value in each Policy Year.
- - Surrender Charge is equal to a percentage of the Surrender Charge Premium.
The Surrender Charge Premium is $1,500. This Surrender Charge is subject to
maximums as described in the most current prospectus, which is on file with
the Securities and Exchange Commission.
<TABLE>
<CAPTION>
Policy Percentage of
Year Surrender Charge Premium
---- ------------------------
<S> <C>
1 32.5%
2 32.5%
3 32.5%
4 32.5%
5 32.5%
6 26.0%
7 19.5%
8 13.0%
9 6.5%
</TABLE>
After November 1, 2005 there will be no Surrender Charge.
- - Partial Withdrawals are subject to a processing charge of $25.
- - We reserve the right to make a charge for Separate Account federal income
tax liabilities, if law should change to require taxation of separate
accounts.
9640-2.1 Page 2.1 New York Life Insurance and Annuity Corporation
NYLIFE Distributors Inc., Distributor, 51 Madison Avenue, New York, NY 10010
<PAGE>
TABLE OF GUARANTEED MAXIMUM MONTHLY COST OF INSURANCE RATES
FOR BASE POLICY AND TERM RIDER
(PER $1,000 OF INSURANCE)
<TABLE>
<CAPTION>
Attained Attained
Age Male Age Male
-------- ----- -------- ------
<S> <C> <C> <C>
0 .35 48 .48
1 .09 49 .52
2 .08 50 .56
3 .08 51 .61
4 .08 52 .67
5 .08 53 .73
6 .07 54 .80
7 .07 55 .88
8 .06 56 .96
9 .06 57 1.05
10 .06 58 1.14
11 .06 59 1.24
12 .07 60 1.35
13 .08 61 1.48
14 .10 62 1.62
15 .11 63 1.78
16 .13 64 1.95
17 .14 65 2.15
18 .15 66 2.36
19 .16 67 2.58
20 .16 68 2.82
21 .16 69 3.07
22 .16 70 3.36
23 .16 71 3.70
24 .15 72 4.08
25 .15 73 4.52
26 .14 74 5.01
27 .14 75 5.54
28 .14 76 6.11
29 .14 77 6.71
30 .14 78 7.33
31 .15 79 7.99
32 .15 80 8.71
33 .16 81 9.52
34 .17 82 10.45
35 .18 83 11.50
36 .19 84 12.67
37 .20 85 13.93
38 .22 86 15.25
39 .23 87 16.63
40 .25 88 18.06
41 .27 89 19.55
42 .30 90 21.11
43 .32 91 22.80
44 .35 92 24.66
45 .38 93 26.82
46 .41 94 29.67
47 .44 95+ 0.00
</TABLE>
9640-2.2 Page 2.2 New York Life Insurance and Annuity Corporation
NYLIFE Distributors Inc., Distributor, 51 Madison Avenue, New York, NY 10010
<PAGE>
<TABLE>
<CAPTION>
WE & YOU
In this policy, the words "we" When you write to us, please
"our" or "us" refer to New York Life include the policy number,
Insurance and Annuity the Insured's full name,
Corporation, and the words and your current address.
"you" or "your" refer
to the owner of this policy.
<S> <C>
- ------------------------------------------------------CONTENTS----------------------------------------------------------
SECTION PROVISIONS PAGE
------- ---------- ----
POLICY DATA PAGES Policy Identification and Specification 2
ONE LIFE INSURANCE BENEFITS Life Insurance Benefit; 4
Life Insurance Benefit Options
TWO OWNER AND BENEFICIARY Rights of Ownership; Successor Owner; 4 - 5
Change of Ownership; How to Name or Change
Beneficiaries; Death of Beneficiary
THREE POLICY CHANGES Right to Change Your Policy; Increase or 5
Decrease in Face Amount; Change in Life
Insurance Benefit Option
FOUR PREMIUMS Premium Limitations; Payment of Premiums; 6 - 7
Planned Premiums; Allocation; Continuation
of Coverage; Late Period; Reinstatement
FIVE SEPARATE ACCOUNT Establishment of Separate Account; Investment; 7 - 9
(Separate Account Charges) Ownership and Value of Assets; Transfer of Assets;
Other Rights; Change in Investment Strategy;
Interest; Accumulation Units; Fund Transfer
SIX FIXED ACCOUNT Fixed Account; Transfers to Separate Account 9
SEVEN CASH SURRENDER VALUE Cash Value; Surrender Charge; Partial 9 - 11
AND PARTIAL WITHDRAWALS Withdrawal; Monthly Deduction Charge;
(Policy Charges) Cost of Insurance
EIGHT LOANS Loan Value; Loan Request; Loan Account; 11 - 12
Loan Interest Rate; Loan Repayment
NINE PAYMENT OF POLICY PROCEEDS Alternative ways in which proceeds of the policy 12 - 13
may be paid
TEN GENERAL PROVISIONS Entire Contract; Application; Incontestability; 13 - 15
Suicide Exclusion; Age and Sex; Deferment;
Assignment; Protection Against Creditors;
Payment to Us; Conformity with Law;
Dividends; Status Update; Policy Exchange; Basis
of Computation
APPLICATION Attached to the Policy
RIDERS OR ENDORSEMENTS (if any) Attached to the Policy
Note: This policy is a legal contract between the policyowner and the Corporation.
PLEASE READ THIS POLICY CAREFULLY FOR FULL DETAILS.
</TABLE>
PAGE 3
9640-
<PAGE>
SECTION ONE - LIFE INSURANCE BENEFITS
1.1 IS A LIFE INSURANCE BENEFIT PAYABLE UNDER THIS
POLICY? We will pay the Life Insurance Benefit to
the Beneficiary promptly, when we have proof that
the Insured died while the Life Insurance under this
policy was in effect, subject to the General
Provisions Section. A claim for the Life Insurance
Benefit must be made in writing to our Service
Office.
1.2 WHAT IS THE AMOUNT OF LIFE INSURANCE BENEFIT
PROCEEDS THAT ARE PAYABLE UNDER THIS POLICY?
The amount of Life Insurance Benefit proceeds
payable under this policy will be based on the Life
Insurance Benefit Option and the Face Amount
plus the Face Amount of any riders in effect on the
date of death. We will deduct any unpaid loan
from this amount. Payment of proceeds will be
made according to the Payment of Policy Proceeds
Section.
The Face Amount is the Initial Face Amount shown on Page 2 plus or
minus any changes made as described in the Policy Changes Section.
1.3 WHAT ARE THE LIFE INSURANCE BENEFIT OPTIONS THAT ARE AVAILABLE UNDER
THIS POLICY? The Life Insurance Benefit payable under this policy
will be determined in accordance with one of the following options:
OPTION 1 - This option provides a Life Insurance Benefit equal to the
greater of (a) or (b), where: (a) is the Face Amount; and (b) is the
Corridor Life Insurance Benefit.
.
OPTION 2 - This option provides a Life Insurance Benefit equal to the
greater of (a) or (b), where: (a) is the Face Amount plus the Cash
Value; and (b) is the Corridor Life Insurance Benefit.
The Corridor Life Insurance Benefit is equal to the
Cash Value times the percentage in the following
table.
<TABLE>
<CAPTION>
Insured's Age Insured's Age
on Policy % of Cash on Policy % of Cash
Anniversary Value Anniversary Value
------------- --------- ----------- ---------
<S> <C> <C> <C>
0-40 250 68 117
41 243 69 116
42 236 70 115
43 229 71 113
44 222 72 111
45 215 73 109
46 209 74 107
47 203 75 105
48 197 76 105
49 191 77 105
50 185 78 105
51 178 79 105
52 171 80 105
53 164 81 105
54 157 82 105
55 150 83 105
56 146 84 105
57 142 85 105
58 138 86 105
59 134 87 105
60 130 88 105
61 128 89 105
62 126 90 105
63 124 91 104
64 122 92 103
65 120 93 102
66 119 94 101
67 118 95 & Over 100
</TABLE>
Under either of these options, if the Insured dies on or after the
Policy Anniversary on which he or she is age 95, the Life Insurance
Benefit will equal the Cash Value.
SECTION TWO - OWNER AND BENEFICIARY
2.1 WHO IS THE OWNER OF THIS POLICY AND WHAT ARE
THE OWNER'S RIGHTS? The Owner of this policy is
shown on Page 2. As the Owner, you will have all
rights of ownership in this policy while the Insured is
living. To exercise these rights, you do not need
the consent of any Successor Owner or
Beneficiary.
2.2 CAN A SUCCESSOR TO THE OWNER BE NAMED? A
Successor Owner can be named in the application,
or in a notice you sign that gives us the facts that
we need. The Successor Owner will become the
new Owner when you die, if you die before the
Insured. If no Successor Owner survives you and
you die before the Insured, your estate becomes
the new Owner.
2.3 HOW DO YOU CHANGE THE OWNER OF THIS POLICY? You can change the Owner of
this policy, from yourself to a new Owner, in a notice you sign that
gives us the facts we need. When this change takes effect, all rights
of ownership in this policy will pass to the new Owner.
When we record a change of Owner or Successor Owner, these changes will
take effect as of the date of your signed notice, subject to any
payments we made or action we took before recording these changes. We
may require that these changes be endorsed in the policy. Changing the
Owner or naming a new Successor Owner cancels any prior choice of Owner
or Successor Owner, respectively, but does not change the Beneficiary.
PAGE 4
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SECTION TWO - OWNER AND BENEFICIARY (CONTINUED)
2.4 MAY MORE THAN ONE BENEFICIARY BE NAMED FOR
THIS POLICY? One or more Beneficiaries for any Life
Insurance Benefit proceeds can be named in the
application, or in a notice you sign that gives us the
facts we need. If more than one Beneficiary is named,
they can be classed as first, second, and so on. If two
or more are named in a class, their shares in the
proceeds are equal unless the shares are stated
otherwise.
The stated shares of the proceeds will be paid to any first
Beneficiaries who survive the Insured. If no first Beneficiaries
survive, payment will be made to any Beneficiary surviving in the
second class, and so on.
2.5 MAY YOU CHANGE A BENEFICIARY? While the Insured is living, you can
change a Beneficiary in a notice you sign that gives us the facts we
need.
When we record a change of Beneficiary, it will take effect as of the
date you signed the notice, subject to any payment we made or action we
took before recording the change.
2.6 WHAT HAPPENS IF NO BENEFICIARIES ARE LIVING
WHEN THE PROCEEDS BECOME PAYABLE? If no
Beneficiary for the Life Insurance Benefit
proceeds, or for a stated share, survives the
Insured, the right to these proceeds, or this share
will pass to you. If you are the Insured, this right
will pass to your estate. Unless stated otherwise in
the policy or in a notice you sign, which is in effect
at the Insured's death, if any Beneficiary dies at the
same time as the Insured, or within 15 days after
the Insured but before we receive proof of the
Insured's death, we will pay the proceeds as
though that Beneficiary died first.
SECTION THREE - POLICY CHANGES
3.1 WHAT CHANGES MAY YOU MAKE TO THIS POLICY? On
or after the first Policy Anniversary, you can apply in
writing to have the Face Amount decreased (without
having the Life Insurance Benefit Option changed), or
have the Life Insurance Benefit Option changed. You
may also have riders added to your policy or increase
the Face Amount at any time, if we agree. To apply
for these changes, we must receive your signed
request at our Service Office.
To increase the Face Amount or to change the Life Insurance Benefit
Option, we may also require a written application, signed by you and
the Insured, and proof of insurability. Any increase in Face Amount, or
change in the Life Insurance Benefit Option will be subject to our
approval and the limits we set.
Changes may only be made while the Insured is living, and only if this
policy would continue to qualify as Life Insurance, as defined under
Section 7702 of the Internal Revenue Code, as amended.
3.2 WHAT HAPPENS WHEN YOU INCREASE THE FACE AMOUNT? An increase will take
effect on the Monthly Deduction Day on or after the day we approve your
request for the increase.
The Cost of Insurance for each increase will be based on the Policy
Year, and on the Insured's age, sex, and class of risk on the Policy
Date. There will be an increase in your Surrender Charge Premium.
For the amount of each increase, new Incontestability
and Suicide Exclusion Provision periods will apply, and will each start
on the date when such increase takes effect.
3.3 WHAT HAPPENS WHEN YOU DECREASE THE FACE AMOUNT? A decrease will take
effect on the Monthly Deduction Day on or after the day we receive your
signed request at our Service Office.
The decrease will first be applied against the most recent increase in
the Face Amount. It will then be applied to other increases in the Face
Amount and then to the Initial Face Amount in the reverse order in
which they took place.
When the Face Amount is decreased, we will deduct from the Cash Value a
pro-rata share of any applicable Surrender Charge as described in the
Cash Surrender Value and Partial Withdrawals Section. There will be a
decrease in your
Surrender Charge Premium.
You can decrease your Face Amount, provided at least $25,000 of Face
Amount remains in effect.
3.4 WHAT HAPPENS WHEN YOU CHANGE THE LIFE
INSURANCE BENEFIT OPTION? If you change from
Option 2 to Option 1, the Face Amount will be
increased by the Cash Value. If you change from
Option 1 to Option 2, the Face Amount will be
decreased by the Cash Value. Any change of
Option will take effect on the Monthly Deduction
Day on or following the date we approve your
signed request to change the Option.
PAGE 5
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SECTION FOUR - PREMIUMS
4.1 ARE THERE PREMIUM LIMITATIONS? Premium payments may not be made if such
payments would disqualify the policy as Life Insurance, as defined
under Section 7702 of the Internal Revenue Code, as amended.
4.2 HOW DO YOU PAY PREMIUMS? At any time before the Policy Anniversary on
which the Insured is age 95, and while the Insured is living, premiums
can be paid at any interval and by any method we make available.
Premiums are payable at our Service Office, or at any other location
that we indicate to you in writing.
4.3 WHAT ARE PLANNED PREMIUMS? The amount of your
first premium, and the amount and interval of Planned
Premiums, as stated in the application, are shown on
Page 2. The amount of any Planned Premium may
be increased or decreased subject to the limits we set.
The frequency of Planned Premium payments may
also be changed subject to our minimum premium
rules. You may elect not to make a Planned Premium
payment at any time.
You may also make other premium payments that are not planned. However,
no Planned or Unplanned Premiums may be made after the Policy
Anniversary on which the Insured is age 95.
If an Unplanned Premium payment results in an increase in the
difference between the Life Insurance Benefit and the Cash Value, we
reserve the right to require proof of insurability for that increase.
We also reserve the right to limit the number and amount of any
unplanned premium payments.
4.4 HOW ARE YOUR PREMIUM PAYMENTS ALLOCATED? When we receive a premium
payment, we will deduct a Sales Expense Charge not to exceed the amount
shown on Page 2.1. We will also deduct an amount equal to the Premium
Tax Charge and the Federal Tax Charge in effect at that time.
The balance of the premium (the net premium) will be applied to the
Separate Account Investment Divisions or to the Fixed Account in
accordance with your allocation election in effect at that time, and
before any other deductions and charges that may be due are made. See
Page 2.1 for an explanation of deductions and charges.
4.5 CAN YOUR ALLOCATION ELECTION BE CHANGED? You
can change your allocation election stated in the
application by a signed request. Your allocation
percentages must total 100%. Each percentage must
be either zero, or a whole number that is at least 1%. The change will
become effective on the date we receive the signed request at our
Service Office.
4.6 WHAT HAPPENS IF YOU STOP MAKING PREMIUM PAYMENTS? This policy and its
riders will continue in effect as long as the Cash Surrender Value,
less any unpaid loan, is sufficient to pay Monthly Deduction Charges.
4.7 WHAT IS THE LATE PERIOD? If, on a Monthly
Deduction Day, the Cash Surrender Value less
any unpaid loan, is less than the Monthly
Deduction Charges for the next policy month, the
policy will continue for a late period of 62 days
after that Monthly Deduction Day. If we do not
receive a premium payment before the end of the
late period, the policy will end and there will be no
more benefits under the policy.
To inform you of this event, we will mail a notice to you at your last
known address at least 31 days before the end of the late period. We
will also mail a copy of the notice to the last known address of any
assignee on our records.
4.8 WHAT IF THE INSURED DIES DURING THE LATE
PERIOD? It may happen that the Insured dies
during a late period. In that case, we will pay the
Life Insurance Benefit. However, the proceeds will
be reduced by the amount of any unpaid loan and
Monthly Deduction Charges for the full Policy
Month or Months that run from the beginning of the
late period, through the Policy Month in which the
Insured died.
4.9 CAN YOU REINSTATE THIS POLICY? Within 5 years
after the policy has ended, you may apply to
reinstate the policy (and any other benefits
provided by riders), if you did not surrender it for its
full Cash Surrender Value. When you apply, you
must provide proof of insurability that is acceptable
to us, unless the required payment is made within
31 days after the end of the late period.
PAGE 6
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SECTION FOUR - PREMIUMS (CONTINUED)
4.10 WHAT PAYMENT IS REQUIRED TO REINSTATE THE
POLICY? The required payment will be an amount
sufficient to keep this policy in force for at least two
months. This payment will be in lieu of the payment of
all premiums in arrears. Any unpaid loan must also
be repaid, together with loan interest at 6%
compounded once each year from the end of the late
period to the date of reinstatement. If a loan interest
rate of less than 6% is in effect when the
policy is reinstated, the interest rate for any unpaid
loan at the time of reinstatement will be the same
as the loan rate.
The effective date of reinstatement will be the Monthly Deduction Day
on or following the date we approve your signed request for
reinstatement at our Service Office.
SECTION FIVE - SEPARATE ACCOUNT
5.1 HOW IS THE SEPARATE ACCOUNT ESTABLISHED AND
MAINTAINED? We have established and maintained
the Separate Account under the laws of the State of
Delaware. Any realized or unrealized income, net
gains and losses from the assets of the Separate
Account are credited or charged to it without regard to
our other income, gains or losses, including income,
gains or losses from our other separate accounts. We
put assets in the Separate Account for this policy, and
we may also do the same for any other variable life
insurance policies we may issue.
5.2 HOW ARE THE SEPARATE ACCOUNT ASSETS INVESTED?
The Separate Account invests its assets in shares of
one or more mutual funds. Fund shares are
purchased, redeemed and valued on behalf of the
Separate Account. The Separate Account is divided
into Investment Divisions. We reserve the right to
substitute, add or remove any Investment Division of
the Separate Account. We will notify you prior to any
such change in the Investment Divisions.
5.3 TO WHOM DO THE ASSETS IN THE SEPARATE ACCOUNT
BELONG? The assets of the Separate Account are our
property. The Separate Account assets will be at least
equal to the reserves and other contract liabilities of
the Separate Account. Those assets will not be
chargeable with liabilities arising out of any other
business we conduct. We reserve the right to transfer
assets of an Investment Division, in excess of the
reserves and other contract liabilities with respect to
that Investment Division, to another Investment
Division or to our General Account.
5.4 HOW WILL THE ASSETS OF THE SEPARATE ACCOUNT BE
VALUED? We will determine the value of the assets of
the Separate Account on each day the New York
Stock Exchange is open for trading except the day
after Thanksgiving and Christmas Eve. However, if
the value of the asset is needed on a day that the
Separate Account has not been valued, the value on
the next valuation date will be used. The assets of the
Separate Account will be valued at fair market value,
as determined in accordance with a method of
valuation that we established in good faith.
5.5 CAN WE TRANSFER ASSETS OF THE SEPARATE ACCOUNT
TO ANOTHER SEPARATE ACCOUNT? We reserve the
right to transfer assets of the Separate Account,
which we determine to be associated with the class
of policies to which this policy belongs, to another
separate account. If this type of transfer is made,
the term "Separate Account," as used in this
policy, shall then mean the separate account to
which the assets were transferred.
5.6 WHAT OTHER RIGHTS DO WE HAVE? We also
reserve the right, when permitted by law, to:
(a) de-register the Separate Account under the
Investment Company Act of 1940;
(b) manage the Separate Account under the
direction of a committee or discharge such
committee at any time;
(c) restrict or eliminate any voting rights of
policyowners or other persons who have
voting rights as to the Separate Account; and
(d) combine the Separate Account with one or
more other separate accounts.
5.7 CAN A CHANGE IN THE INVESTMENT OBJECTIVE OR
STRATEGY OF THE SEPARATE ACCOUNT BE
REQUIRED? When required by law or regulation,
an investment objective of the Separate Account
may be changed. It will only be changed if
approved by the appropriate insurance official of
the State of Delaware or deemed approved in
accordance with such law or regulation. If so
required, the request to obtain approval will also
be filed with the insurance official of the state or
district in which this policy is delivered.
PAGE 7
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SECTION FIVE - SEPARATE ACCOUNT (CONTINUED)
5.8 WHAT IS THE INTEREST OF THIS POLICY IN THE SEPARATE ACCOUNT? The
interest of this policy in the Separate Account prior to the date on
which the Life Insurance Benefit becomes payable is represented by
Accumulation Units.
5.9 WHAT ARE ACCUMULATION UNITS? Accumulation
Units are the accounting units used to calculate the
values under this policy. The number of
Accumulation Units purchased in an Investment
Division will be determined by dividing the part of any
premium payment or the part of any transfer applied
to that Investment Division, by the value of an
Accumulation Unit for that Division on the transaction
date. Payments allocated, transferred, or otherwise
added to the Investment Divisions will be applied to
provide Accumulation Units in those Investment
Divisions. Accumulation Units are redeemed when
amounts are loaned, transferred, surrendered or
otherwise deducted. These transactions are called
policy transactions.
5.10 HOW IS THE NUMBER OF ACCUMULATION UNITS
DETERMINED? Accumulation Units are bought and
sold each time there is a policy transaction. The
number of Accumulation Units in an Investment
Division on any date is determined as follows:
Step 1: From the units as of the prior Monthly Deduction Day,
subtract the units sold to pay any partial withdrawals per Section
7.4.
Step 2: Add units bought with premiums received since the prior
Monthly Deduction Day per Section 4.4.
Step 3: Subtract units sold to transfer amounts into the Loan Account
per Section 8.2.
Step 4: Add units bought with transfers from the Loan Account per
Section 8.3.
Step 5: Subtract units sold to transfer amounts into other Investment
Divisions and to the Fixed Account per Section 5.12.
Step 6: Add units bought from amounts transferred from other
Investment Divisions and from the Fixed Account per Sections 5.12 and
6.2, respectively.
The number of units on a Monthly Deduction Day is the result of steps
1 to 6, minus the number of units sold to pay the Monthly Deduction
Charges per Section 7.5. The number of units will be increased by
units bought with any amounts transferred from the Loan Account or
from the Fixed Account.
5.11 HOW IS THE VALUE OF AN ACCUMULATION UNIT
DETERMINED? The value of an Accumulation Unit on
any business day is determined by multiplying
the value of that unit on the immediately
preceding business day by the net investment
factor for the valuation period. The valuation
period is the period from the close of the
immediately preceding business day to the close
of the current business day. The net investment
factor for this policy used to calculate the value
of an Accumulation Unit in any Investment
Division of the Separate Account for the valuation
period is determined by dividing (a) by (b) and
subtracting (c) from the result, where:
(a) is the sum of:
(1) the net asset value of the fund share held in the Separate
Account for that Investment Division determined at the end
of the current valuation period, plus
(2) the per share amount of any dividends or capital gain
distributions made by the fund for shares held in the
Separate Account for that Investment Division if the
ex-dividend date occurs during the valuation period.
(b) is the net asset value of the fund share held in the Separate
Account for that Investment Division determined as of the end of
the immediately preceding valuation period.
(c) is a factor representing the Mortality and
Expense Risk Charge. It will not exceed the
amount shown on Page 2.1.
The net investment factor may be greater or less than one; therefore,
the value of an Accumulation Unit may increase or decrease.
5.12 CAN YOU TRANSFER FUNDS BETWEEN INVESTMENT
DIVISIONS AND THE FIXED ACCOUNT? Transfers
may be made between Investment Divisions of
the Separate Account.
Transfers can also be made from an Investment Division to the Fixed
Account. Transfers can also be made from the Fixed Account to the
Investment Divisions, subject to the limits described in the Fixed
Account Section.
We reserve the right to apply a charge, not to exceed $30, for each
transfer after the first 12 transfers in a given Policy Year. This
charge is applied on a pro-rata basis to the Fixed Account and
Investment Divisions to which the transfer is being made.
PAGE 8
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SECTION FIVE - SEPARATE ACCOUNT (CONTINUED)
5.13 WHEN WILL THESE TRANSFERS TAKE EFFECT? Transfers will take effect as
of the date after we receive your signed request that gives us the
facts that we need at our Service Office.
5.14 ARE THERE LIMITS ON WHAT YOU MAY TRANSFER?
The minimum amount that can be transferred is the lesser of $500 or
the value of all remaining Accumulation Units in the Investment
Division
from which the transfer is being made, unless we agree otherwise. The
Investment Division from which the transfer is being made must maintain
a minimum balance of $500 after the transfer is completed. If, after a
transfer, the remaining balance in an Investment Division would be less
than $500, we have the right to include that amount as part of the
transfer.
SECTION SIX - FIXED ACCOUNT
6.1 WHAT IS THE FIXED ACCOUNT? The Fixed Account is
supported by assets of our General Account. Our
General Account represents all of our assets,
liabilities, capital and surplus, income, gains or losses
that are not in any separate account. Any amounts in
the Fixed Account are credited with interest using a
fixed interest rate, which we declare periodically. We
will set this rate in advance at least annually. This rate
will never be less than 4% per year. Interest accrues
daily and is credited on the Monthly Deduction Day.
All payments applied to, or amounts transferred to, the
Fixed Account receive the rate in effect at that time.
6.2 CAN TRANSFERS BE MADE FROM THE FIXED ACCOUNT
TO THE SEPARATE ACCOUNT? Each Policy Year, you
may make one transfer from the Fixed Account to the
Investment Divisions. The minimum amount which may be transferred is
$500, unless we agree otherwise. However, if the values remaining in
the Fixed Account would be less than $500, we have the right to
include that remaining amount as part of the transfer. The amount
transferred in any one Policy Year may not be greater than 10% of the
amount in the Fixed Account at the beginning of that Policy Year,
except during the Retirement Year. During the Retirement Year only,
the 10% limit will not apply to a transfer from the Fixed Account to
the Investment Divisions. The Retirement Year is the Policy Year
following the Insured's 65th birthday, or the date you indicate in
the application, or another date if we approve.
SECTION SEVEN - CASH SURRENDER VALUE AND PARTIAL WITHDRAWALS
7.1 WHAT IS THE CASH VALUE OF THIS POLICY? The Cash Value on any date is
the value of your policy's Accumulation Units in the Separate Account
plus the amount in the Fixed Account plus the amount in the Loan
Account.
The Cash Value on the Policy Date is determined by subtracting the
Monthly Deduction Charges listed on Page 2.1 from the initial net
premium. The Cash Surrender Value at any time equals the Cash Value
minus any Surrender Charge.
7.2 CAN YOU SURRENDER THIS POLICY? You can apply to
receive the full Cash Surrender Value, less any
unpaid loan while the Insured is alive and this policy
is in effect. The Cash Value and the Surrender
Charges will be calculated as of the date on which
we receive your signed request at our Service Office, unless a later
effective date is selected. All insurance will end on the date we
receive your signed request for a full cash surrender at our Service
Office.
7.3 HOW IS THE SURRENDER CHARGE DETERMINED? A
Surrender Charge for a full surrender is equal to the Surrender
Charge percentage shown on Page 2.1 times the Surrender Charge
Premium
shown on Page 2.1.
A Surrender Charge will be assessed for the portion of the Face
Amount that is decreased due to a requested decrease in the Face
Amount. The Surrender Charge is based on the applicable portion
surrendered and the Policy Year.
PAGE 9
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SECTION SEVEN - CASH SURRENDER VALUE AND PARTIAL WITHDRAWALS (CONTINUED)
7.4 CAN YOU MAKE A PARTIAL WITHDRAWAL FROM THIS
POLICY? You can apply for a partial withdrawal of at
least $500, provided that at least $500 of Cash
Surrender Value, plus the amount of any unpaid
loan, would remain after the withdrawal. A partial
withdrawal will not be allowed if it causes the Face
Amount to drop below $25,000. There will be a
processing charge equal to the lessor of $25, or 2%
of the amount withdrawn, applied to any partial
withdrawal.
The amount withdrawn and processing charges are taken on a pro-rata
basis from the Fixed Account and each Investment Division, or from
only the Investment Divisions in an amount or ratio that you tell us.
To withdraw funds from the policy, we must receive your signed
request at our Service Office.
The Cash Value and the Cash Surrender Value will be reduced, as of
the date of payment, by the amount of partial withdrawal that you
make.
If Life Insurance Benefit Option 1 is in effect, the Face Amount will
also be reduced by the amount of the partial withdrawal. If Life
Insurance Benefit Option 2 is in effect, the Face Amount will not be
changed by the amount of the partial withdrawal. A partial withdrawal
will not be permitted during the first Policy Year if Life Insurance
Benefit Option 1 is in effect.
7.5 WHAT MONTHLY DEDUCTION CHARGES ARE MADE AGAINST THE CASH VALUE? The
Monthly Deduction Day for each calendar month is shown on Page 2. The
first Monthly Deduction Day is the Policy Date. On each Monthly
Deduction Day, the following deductions are made from the policy's
Cash Value:
(a) a monthly Contract Charge not to exceed
the amount shown on Page 2.1;
(b) the monthly Cost of Insurance for the
amount of the Life Insurance Benefit in
effect at that time;
(c) the monthly cost for any riders attached to
this policy.
A deduction may also be made for any temporary flat extras that may
apply. The amount and duration of these flat extras, if any, are
shown in a footnote on Page 2.1.
All Monthly Deduction Charges are made on a pro-rata basis from the
Fixed Account and each of the Investment Divisions. Beginning with
the Policy Anniversary on which the Insured is age 95, no further
Cost of Insurance deductions will be made.
7.6 HOW IS THE COST OF INSURANCE FOR THIS POLICY
CALCULATED? The Cost of Insurance is calculated
on each Monthly Deduction Day. We will do this
regardless of whether a premium is paid in that
month. The monthly Cost of Insurance is equal to
(1) multiplied by the result of (2) minus (3),
where:
(1) is the monthly Cost of Insurance rate
per $1,000 of insurance;
(2) is the number of thousands of Life Insurance Benefit (as
defined in the applicable Option 1 or Option 2 in the Life
Insurance Benefits Section) divided by 1.0032737; and
(3) is the number of thousands of Cash Value as of the Monthly
Deduction Day (before this Cost of Insurance, and after any
applicable Contract Charge, and the monthly cost of any
riders are
subtracted).
7.7 HOW ARE COST OF INSURANCE RATES ALLOCATED
TO FACE AMOUNT INCREASES? The same rate is
used to obtain the Cost of Insurance for the Initial
Face Amount, and for each increase in the Face
Amount. The rate is based on the Policy Year,
and on the Insured's age, sex and class of risk on
the Policy Date. These same rates are used for
benefit increases solely in accordance with the
Option 1 or Option 2 calculations described in the
Life Insurance Benefits Section.
7.8 WHAT ARE THE COST OF INSURANCE RATES? The
monthly rates that apply to the Cost of Insurance
for the Initial Face Amount at all ages will not be
greater than the maximum rates shown in the
Table of Guaranteed Maximum Monthly Cost of
Insurance Rates attached to this policy. The
actual rate applicable will be set by us in
advance, at least once a year. Any change in the
Cost of Insurance rate will be made on a uniform
basis for Insureds of the same classification, such
as attained age, sex and risk classification.
PAGE 10
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SECTION SEVEN - CASH SURRENDER VALUE AND PARTIAL WITHDRAWALS (CONTINUED)
7.9 WHAT IS THE MONTHLY COST OF RIDERS? For any
rider made a part of this policy, its guaranteed
monthly cost is as described in the rider or on
Page 2.
SECTION EIGHT - LOANS
8.1 WHAT IS THE LOAN VALUE OF THIS POLICY? Using this policy as sole
security, you can borrow up to the loan value of this policy. The
loan value on any given date is equal to 90% of Cash Surrender Value,
less any unpaid loan to that date.
8.2 WHAT HAPPENS WHEN YOU REQUEST A LOAN?
When a loan is requested, an amount is transferred
from the Investment Divisions and the Fixed Account
to the Loan Account equal to:
(a) the requested loan amount; plus
(b) the loan interest to the next Policy Anniversary;
plus
(c) any outstanding loan; minus
(d) the amount in the Loan Account.
This transfer will be made on a pro-rata basis from the various
Investment Divisions and the Fixed Account unless you request
otherwise.
8.3 WHAT IS THE LOAN ACCOUNT? The Loan Account
secures policy debt and is a part of our General
Account. The amount in the Loan Account on any
date will not be less than:
(a) the amount in the Loan Account on the prior
Policy Anniversary; plus
(b) any loan taken since the prior Policy
Anniversary; less
(c) any loan amount repaid since the prior Policy
Anniversary.
On each Policy Anniversary, the Loan Account will be increased by an
amount equal to the loan interest to the next Policy Anniversary on
any outstanding policy debt.
The amount in the Loan Account will be credited with interest at a
rate which will never be less than the greater of (1) the guaranteed
interest rate of 4%, or (2) the effective annual loan interest rate
less 2%.
Interest accrues daily and is credited on the Monthly Deduction Day.
On each Policy Anniversary, if the amount in the Loan Account exceeds
the amount of any outstanding loans plus interest to the next Policy
Anniversary, the excess will be transferred from the Loan Account to
the Investment Divisions and to the Fixed Account. Amounts
transferred will first be transferred to the Fixed Account up to an
amount equal to the total amounts transferred from the Fixed Account
to the Loan Account. Any subsequent amounts transferred will be
allocated according to your premium allocation in effect at the time
of transfer unless you tell us otherwise.
8.4 WHAT IS THE LOAN INTEREST RATE FOR THE
POLICY? Unless we set a lower rate for any
period, the effective annual loan interest rate is
6%, which is payable in arrears. Loan interest
accrues and is due each day. Loan interest not
paid on a Policy Anniversary becomes part of the
loan.
On the date of death, the date the policy ends, the date of a loan
repayment, or on any other date we specify, we will make any
adjustment in the loan that is required to reflect any interest paid
for any period beyond that date.
If we have set a rate lower than 6% per year, any subsequent increase
in the interest rate shall be subject to the following conditions:
(1) The effective date of any increase in the
interest rate for loans shall not be earlier than one year after
the effective date of the establishment of the previous rate.
(2) The amount by which the interest rate may be increased shall not
exceed one percent per year, but the rate of interest shall in
no event ever exceed 6%.
(3) We will give notice of the interest rate in effect when a loan
is made and when sending notice of loan interest due.
(4) If a loan is outstanding 40 days or more before the effective
date of an increase in the interest rate, we will notify you of
that increase at least 30 days prior to the effective date of
the increase.
(5) We will give notice of any increase in the interest rate when a
loan is made during the 40 days before the effective date of the
increase.
PAGE 11
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<PAGE>
SECTION EIGHT - LOANS (CONTINUED)
8.5 HOW ARE LOAN REPAYMENTS CREDITED? All or
part of an unpaid loan can be repaid before the
Insured's death or before the policy is surrendered.
8.6 WHAT HAPPENS IF A LOAN IS NOT REPAID? If an
unpaid loan exceeds the Cash Surrender Value,
we will mail a notice to you at your last known address, and a copy to
the last known address of any assignee on our records.
All insurance will end 31 days after the date on which we mail that
notice to you if the excess of the unpaid loan over the Cash Surrender
Value is not paid within that 31 days.
SECTION NINE - PAYMENT OF POLICY PROCEEDS
9.1 HOW WILL POLICY PROCEEDS BE PAID? We will pay the Life Insurance
Benefit proceeds in one sum or, if elected, all or part of these
proceeds may be placed under one or more of the options described in
this section. If we agree, the proceeds may be placed under some
other method of payment instead.
The amount of Life Insurance Benefit proceeds will be determined
according to Section 1.2 as of the date of the Insured's death.
Proceeds from a surrender benefit or partial withdrawal will be paid
in a lump sum. The amount of proceeds will be determined as of the
date we receive your signed request at our Service Office.
Any proceeds paid in one sum will bear interest compounded as of the
date the amount of proceeds was determined to the date of payment. We
set the interest rate each year. This rate will be at least 3% per
year, and will not be less than required by law.
9.2 HOW DO YOU ELECT AN OPTIONAL METHOD OF
PAYMENT? While the Insured is living, you can elect
or change an option. You can also name or change
one or more beneficiaries who will be the payee or
payees under that option.
After the Insured dies, any person who is to receive proceeds in one
sum (other than an assignee) can elect an option and name payees. The
person who elects an option can also name one or more successor
payees to receive any unpaid amount we have at the death of the
payee. Naming these payees cancels any prior choice of successor
payee.
A payee who did not elect the option does not have the right to
advance or assign payments, take the payments in one sum, or make any
other change. However, the payee may be given the right to do one or
more of these things if the person who elects the option tells us in
writing and we agree.
9.3 HOW CAN AN OPTION BE CHANGED? If we agree, a
payee who elects Option 1A, 1B, or 2 may later
elect to have any unpaid amount we still have, or the present value
of any elected payments, placed under some other option described in
this section.
9.4 WHO CAN BE NAMED PAYEES? Only individuals
who are to receive payments in their own behalf
may be named as payees or successor payees,
unless we agree to some other payee. We may
require proof of the age or the survival of a
payee.
9.5 WHAT HAPPENS IF THE PAYEE DIES BEFORE ALL
PROCEEDS HAVE BEEN PAID? It may happen that
when the last surviving payee dies, we still have
an unpaid amount, or there are some payments
that remain to be made. If so, we will pay the
unpaid amount with interest to the date of
payment, or pay the present value of the
remaining payments, to that payee's estate in one
sum. The present value of any remaining
payments is based on the interest rate used to
compute them, and is always less than their sum.
9.6 IS THERE A MINIMUM PAYMENT THE COMPANY
WILL MAKE? When any payment under an option
would be less than $100, we may pay any unpaid
amount or present value in one sum.
9.7 WHAT ARE THE PROCEEDS AT INTEREST OPTIONS
(1A AND 1B)? The policy proceeds may be left
with us at interest. We will set the interest rate
each year. This rate will be at least 3% per year.
For the Interest Accumulation Option (Option 1A), we credit interest
each year on the amount we still have. This amount can be withdrawn
at any time in sums of $100 or more. We pay interest to the date of
withdrawal on sums withdrawn.
For the Interest Payment Option (Option 1B), we pay interest once
each month, every 3 months, every 6 months, or once each year, as
chosen, based on the amount we still have.
PAGE 12
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<PAGE>
SECTION NINE - PAYMENT OF POLICY PROCEEDS (CONTINUED)
9.8 WHAT IS THE LIFE INCOME OPTION (2)? We make
equal payments each month during the lifetime of
the payee or payees. We determine the amount of
the monthly payment by applying the policy proceeds
to purchase a corresponding single premium life
annuity policy that is being issued when the first
payment is due. Payments are based on the
appropriately adjusted annuity premium rate in effect
at that time, but will not be less than the
corresponding minimum shown in the Option 2
Table. These minimum amounts are based on the
1983 Table "a" with Projection Scale G and, with
interest compounded each year at 3%.
When asked, we will state in writing what the minimum amount of each
monthly payment would be under this option. It is based on the sex
and adjusted age of the payee or payees.
To find the adjusted age in the year the first payment is due, we
increase or decrease the payee's age at the time, as follows:
<TABLE>
<CAPTION>
1996 & 1997-2005 2006-2015 2016-25 2026-35 2036 &
earlier later
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
+2 +1 -2 -3
</TABLE>
We make a payment each month during the lifetime
of the payee. Payments do not change, and are
guaranteed for 10 years, even if that payee dies
sooner.
- -----------------------------------------------------------------------------
OPTION 2 TABLE
- -----------------------------------------------------------------------------
MINIMUM MONTHLY PAYMENT PER $1,000 OF PROCEEDS
GUARANTEED FOR 10 YEARS
<TABLE>
<CAPTION>
PAYEE'S
ADJUSTED
AGE MALE FEMALE
- -----------------------------------------------------------------------------
<S> <C> <C>
60 4.46 4.03
61 4.55 4.11
62 4.66 4.19
63 4.76 4.27
64 4.87 4.37
65 4.99 4.46
66 5.11 4.57
67 5.24 4.67
68 5.38 4.79
69 5.52 4.91
70 5.66 5.04
71 5.81 5.18
72 5.96 5.32
73 6.12 5.47
74 6.28 5.63
75 6.45 5.79
76 6.61 5.96
77 6.78 6.14
78 6.96 6.32
79 7.13 6.51
80 7.30 6.70
81 7.46 6.89
82 7.63 7.07
83 7.78 7.26
84 7.93 7.44
85 & over 8.07 7.62
</TABLE>
SECTION TEN - GENERAL PROVISIONS
10.1 WHAT CONSTITUTES THE ENTIRE CONTRACT? The entire
contract consists of this policy, any attached riders or
endorsements, and the attached copy of the
application. Also, any application used to apply for
increases in the policy Face Amount will be attached to
and made a part of this policy. Only an Executive
Officer is authorized to change the contract, and then,
only in writing. No change will be made to this contract
without your consent. No agent is authorized to
change this contract.
10.2 HOW IMPORTANT IS THE INFORMATION YOU PROVIDE IN
THE APPLICATION FOR THIS POLICY? In issuing this
policy, we have relied on the statements made in the
application. All such statements are deemed to be
representations and not warranties. We assume these
statements are true and complete to the best of the
knowledge and belief of those who made them.
No statement made in connection with the application will be used by us
to void this policy, or to deny a claim unless that statement is a
material misrepresentation and is part of the application.
10.3 WILL WE BE ABLE TO CONTEST THIS POLICY? We will not contest the
payment of the Life Insurance proceeds, based on the Initial Face
Amount, after this policy has been in force during the lifetime of
the Insured for two years from the date of issue.
If the Face Amount of this policy is increased as described in the
Policy Changes Section, the two year contestable period for such
increase shall begin on the effective date of such increase. We may
contest the payment of that amount only on the basis of those
statements made in the application in connection with such increase
in Face Amount.
However, if the increase in Face Amount is the result of a
corresponding decrease in the amount of insurance under any attached
term rider, the two year contestable period for the amount of
increase in Face Amount will be measured from the date this
corresponding portion of term insurance became effective. Please
refer to the Incontestability of Rider provision that may be in any
rider or riders attached to this policy.
This section will not apply to an increase in Face Amount that is due
solely to a change in Life Insurance Benefit Option.
PAGE 13
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<PAGE>
SECTION TEN - GENERAL PROVISIONS (CONTINUED)
10.4 DOES THIS POLICY COVER SUICIDE OF THE INSURED? Suicide of the
Insured, while sane or insane, within two years of the date of issue,
is not covered by this policy. In that event, this policy will end
and the only amount payable will be the premiums paid to us, less any
loan and less any partial withdrawals paid.
If the Face Amount is increased as described in the Policy Changes
Section, then the two year suicide exclusion period for such increase
will begin on the date on which this increase takes effect.
If the suicide exclusion applies to an increase in the Face Amount,
the only amount payable with respect to that increase will be the
total Cost of Insurance we deducted for that increase.
However, if the increase in Face Amount is the result of a
corresponding decrease in the amount of insurance under any attached
term rider, the two year suicide exclusion period for the increase in
Face Amount will be measured from the date that the corresponding
portion of term insurance became effective.
10.5 HOW IS A PERSON'S AGE CALCULATED FOR THE PURPOSES OF THIS POLICY? In
this policy, when we refer to a person's age on any date, we mean his
or her age on the nearest birthday. However, the Cost of Insurance
will be based on the Insured's age on the prior Policy Anniversary.
10.6 WHAT HAPPENS IF A PERSON'S AGE OR SEX HAS
BEEN STATED INCORRECTLY? If we would pay too little
or too much because the age or sex of the Insured is
not correct as stated, we will adjust the proceeds, up
or down, to reflect the correct age or sex. The
amount of the death benefit shall be that which
would be purchased by the most recent mortality
charge at the correct age and sex.
10.7 CAN PAYMENT OF A LOAN OR SURRENDER PROCEEDS
BE DEFERRED? Generally, we will grant any loan, or
pay any surrender or partial withdrawal or Life
Insurance Benefit proceeds within 7 days after we
receive all the requirements that we need. However,
we may defer making any of these payments for any
period during which the New York Stock Exchange is
closed for trading (other than the usual weekend or
holiday closings), or if the Securities and Exchange
Commission restricts trading or has determined that
a state of emergency exists. If so, it may not be
practical for us to
determine the investment experience of the
Separate Account. In addition, we reserve the right
to defer any of these payments based on funds allocated to the Fixed
Account for as long as six months.
10.8 MAY YOU ASSIGN OR TRANSFER THE POLICY? While the Insured is living,
you can assign this policy, or any interest in it. If you do this,
your interest, and anyone else's is subject to that of the assignee.
As owner, you still have rights of ownership that have not been
assigned.
10.9 MAY THE ASSIGNEE CHANGE THE OWNER OR
BENEFICIARY? An assignee may not change the
Owner or the Beneficiary, and cannot elect or
change an optional method of payment. Any
amount payable to the assignee will be paid in
one sum.
10.10 HOW DO YOU ASSIGN THE POLICY? We must have a copy of any assignment.
We will not be responsible for the validity of any assignment. Any
assignment will be subject to any payment we make or other action we
take before we record the assignment.
10.11 ARE THE PAYMENTS MADE UNDER THIS POLICY
PROTECTED AGAINST CREDITORS? Except as stated
in the Assignment Provision, payments we make
under this policy are, to the extent the law
permits, exempt from the claims, attachments, or
levies of any creditors.
10.12 TO WHOM SHOULD PAYMENTS FOR THIS POLICY
BE MADE? Any payment made to us by check or
money order must be payable to
New York Life Insurance and Annuity
Corporation. When asked, we will give a receipt
for any premium paid to us.
10.13 DOES THIS POLICY CONFORM TO ALL LAWS? This
policy conforms to and is subject to all laws that
apply.
10.14 ARE ANY DIVIDENDS PAYABLE ON THIS POLICY?
This is a non-participating policy, on which no
dividends are payable.
10.15 WILL YOU BE UPDATED REGARDING THE STATUS OF
YOUR POLICY? Each Policy Year after the first,
while this policy is in force and the Insured is
living, we will send a written report to you within
30 days after the Policy Anniversary. It will show,
as of that anniversary, the Cash Value, and the
amount of any unpaid loan. This report will also
give you any other facts required by state law or
regulation.
PAGE 14
9640-
<PAGE>
SECTION TEN - GENERAL PROVISIONS (CONTINUED)
10.16 CAN YOU EXCHANGE YOUR POLICY? Within 24 months of the issue date of
this policy, you may exchange it for a new policy on the life of the
Insured without evidence of insurability. In order to exchange this
policy, we will require:
(a) that this policy be in effect on the date of
exchange;
(b) repayment of any unpaid loan;
(c) an adjustment, if any, for differences in
premiums and Cash Values of this and the
new policy.
The date of exchange will be the later of: (a) the date you send us
this policy along with a signed request for an exchange; or (b) the
date we receive at our Service Office, or at any other location that
we indicate to you in writing, the necessary payment for the
exchange.
The new policy will be on a permanent plan of life
insurance that we were offering for this
purpose on the date of issue of this policy. The new policy will have
a Face Amount equal to the Initial Face Amount of this policy. It
will be based on the same issue age, sex and class of risk as this
policy, but will not offer variable investment options such as the
Investment Divisions. All riders attached to this policy will end on
the date of exchange, unless we agree otherwise.
10.17 WHAT IS THE BASIS USED FOR COMPUTATION OF
POLICY VALUES? All Cash Surrender Values and
maximum Cost of Insurance rates referred to in
this policy are based on the 1980 CSO Tables of
Mortality if the Insured is in a standard class of
risk. Separate scales of maximum Cost of
Insurance rates apply to other risk classes.
Continuous functions are used, with 4% interest.
We have filed a statement with the insurance
official in the state or district in which this policy is
delivered. It describes, in detail, how we
compute policy benefits and Cash Surrender
Values.
PAGE 15
9640-
<PAGE>
RESTATED CERTIFICATE OF INCORPORATION
OF
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
It is hereby certified that:
1. (a) The present name of the corporation is New York Life Insurance
and Annuity Corporation ("Corporation").
(b) The name under which the Corporation was originally incorporated
is New York Life Insurance and Annuity Corporation. The date of
filing the original Certificate of Incorporation of the Corporation
with the Secretary of State of the State of Delaware is November 3,
1980.
2. The Certificate of Incorporation of the Corporation is hereby amended
by striking out Article II thereof and by substituting in lieu
thereof new Article II which is set forth in the Restated Certificate
of Incorporation hereinafter provided for.
3. The provisions of the Certificate of Incorporation of the Corporation
as heretofore amended and/or supplemented, and as herein amended, are
hereby restated and integrated into the single instrument which is
hereinafter set forth, and which is entitled Restated Certificate of
Incorporation of New York Life Insurance and Annuity Corporation
without any further amendments other than the amendment herein
certified and without any discrepancy between the provisions of the
Certificate of Incorporation as heretofore amended and supplemented,
and the provisions of the said single instrument hereinafter set
forth.
4. The amendment and the restatement of the Certificate of Incorporation
herein certified have been duly adopted by the stockholders in
accordance with the provisions of Sections 228, 242 and 245 of the
General Corporation Law of the State of Delaware.
The Certificate of Incorporation of the Corporation, as amended and
restated herein, shall read as follows:
Restated Certificate of Incorporation
of
New York Life Insurance and Annuity Corporation
ARTICLE I
The name of the corporation is NEW YORK LIFE INSURANCE AND ANNUITY
CORPORATION (hereinafter the "Corporation").
ARTICLE II
The registered office of the Corporation in the State of Delaware is
located at 200 Continental Drive, Suite 306, in the City of Newark, County of
New Castle. The name of its registered agent at that address is New York Life
Insurance Company.
ARTICLE III
The purpose of the Corporation is to engage in the life, accident and
health insurance and annuity business and such other kinds of business
activities which are reasonable and necessarily incidental thereto.
<PAGE>
ARTICLE IV
The total number of shares of stock which the Corporation shall have
authority to issue is Twenty Thousand (20,000) shares of common stock, all of
one class, and having a par value equal to Ten Thousand Dollars ($10,000) per
share.
ARTICLE V
The following provisions are inserted for the management of the
business and for the conduct of the affairs of the Corporation and for the
purpose of creating, defining, limiting and regulating the powers of the
Corporation and its directors and stockholders:
(A) The election of directors shall be conducted in the manner
prescribed in the By-Laws of the Corporation and need not be
by ballot.
(B) The Board of Directors shall have the power to adopt, amend
or repeal By-Laws of the Corporation without the assent or
vote of the stockholders except to the extent that any
stockholder assent or vote is required by the By-Laws.
(C) The Corporation may issue any or all of its policies or
contracts either with participation or without participation
in profits, savings, unabsorbed portions of premiums, or
surplus, may classify policies issued and perils insured on
a participating or nonparticipating basis, and may determine
the right to participate and the extent of participation of
any class or classes of policies.
(D) Only the officers of the Corporation shall have the power on
its behalf to make or modify any contract of insurance. All
insurance contracts shall be in writing. Oral contracts of
insurance are prohibited.
ARTICLE VI
The name of the incorporator is Robert B. Schneider and his mailing
address is 51 Madison Avenue, New York, New York 10010.
Signed as of March 26, 1996.
NEW YORK LIFE INSURANCE AND
ANNUITY CORPORATION
By: /s/ Seymour Sternberg
----------------------
Seymour Sternberg
President
<PAGE>
BY-LAWS
OF
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
ARTICLE I
Offices
1.01 Principal and Other Offices. The principal office of the Corporation
shall be located in the City of New York, County of New York. The Corporation
may have such other offices, either within or without the State of Delaware,
as the Board of Directors may designate or as the business of the Corporation
may require from time to time.
ARTICLE II
Stockholders' Meeting
2.01 Place of Meetings. Annual and special meetings of stockholders shall be
held at such place, within or without the State of Delaware, as may be fixed
by the Board of Directors and as stated in the notice of meeting or in a duly
executed waiver of notice thereof.
2.02 Annual Meetings. The annual meeting of stockholders shall be held on the
first Wednesday of April in each year, commencing 1988, if not a legal
holiday, and if a legal holiday, then on the next business day following, at
2:00 p.m., or on such other day and hour as the Board of Directors may
determine. The meeting shall be convened for the election of directors and the
transaction of such business as may properly come before it.
2.03 Special Meetings. Special meetings of the stockholders shall be held
whenever called by the President, a majority of the Board of Directors, or the
stockholders of record of a majority of the outstanding voting stock of the
Corporation. A special meeting of the stockholders shall be held at such place
(within or without the state of Delaware) as shall be specified in the notice
of such meeting. The business transacted at each such meeting shall be
confined to the subjects stated in the notice of meeting.
2.04 Fixing Record Date. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders
or any adjournment thereof, or to express consent to or dissent from any
proposal without a meeting, or for the purpose of determining stockholders
entitled to receive payment of any dividend or the allotment of any rights or
for the purpose of any other action, the board of directors may fix in advance
a date as record date, which shall not be more than sixty nor less than ten
days before the date of such meeting or action.
2.05 Notice of Stockholders' Meetings. The Secretary shall cause written
notice of the place, date and hour of each meeting of stockholders, and in the
case of a special meeting, the purpose or purposes for which such meeting is
called, to be given no less than ten nor more than sixty days before the date
of such meeting to each stockholder of record entitled to vote at such
meeting. Notice may be delivered personally or sent by first class mail
addressed to the stockholders at such stockholder's address as it appears on
the records of the Corporation and shall be deemed given upon mailing. Notice
of any adjourned meeting of the stockholders of the Corporation need not be
given except as otherwise required by law.
2.06 Waiver of Notice. Whenever notice is required to be given under any
provision of law, the Certificate of Incorporation, By-Laws or by resolution
of the Board of Directors, a written waiver thereof, signed by the person
entitled to notice, whether before or after the time stated therein, shall be
deemed equivalent to notice. Attendance of a person at a meeting shall
constitute a waiver of notice of such meeting, except when the person attends
a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not
lawfully called or convened, and makes such objection immediately upon the
commencement thereof.
<PAGE>
2.07 Quorum. Except as otherwise required by law, the presence in person or
by proxy of the holders of record of a majority of the stock entitled to vote
at a meeting of stockholders shall constitute a quorum for the transaction of
business at such meeting. When a quorum is once present to organize a meeting,
it is not broken by the subsequent withdrawal of any stockholder.
2.08 Voting. Every holder of record of stock entitled to vote at a meeting of
stockholders shall be entitled to one vote in person or by proxy for each
share standing in such stockholder's name on the books of the Corporation.
Except as otherwise required by law, the Certificate of Incorporation or these
By-Laws, the vote of a majority of the shares represented in person or by
proxy at any meeting at which a quorum is present shall be sufficient for the
transaction of any business at such meeting.
2.09 Consent of Stockholder in Lieu of Meeting. To the fullest extent
permitted by law, whenever any action is required or permitted to be taken at
a meeting of stockholders by law, by the Certificate of Incorporation or by
these By-Laws, such action may be taken without a meeting, without prior
notice and without a vote of shareholders, if a consent in writing, setting
forth the action so taken, shall be signed by the holders of outstanding
shares having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. Prompt notice of the taking
of the corporate action without a meeting by less than unanimous written
consent shall be given to those shareholders who have not consented in
writing.
ARTICLE III
Board of Directors
3.01 General Powers. Except as may be otherwise provided by law, by the
Certificate of Incorporation or by these By-Laws, the property, affairs and
business of the Corporation shall be managed under the direction of the Board
of Directors and the Board may exercise all powers of the Corporation.
3.02 Number. The Board of Directors shall consist of such number of Directors
as may be determined from time to time by the Board but such number shall not
be less than one.
3.03 Election and Term of Directors. Except as otherwise provided in Section
3.11 of these By-Laws, the Directors shall be elected at each annual meeting
of the shareholders to hold office until the next annual meeting of
shareholders. Each Director shall hold office until the expiration of the term
for which such Director is elected and until a successor has been elected and
has qualified, or until such Director's earlier death, resignation or removal.
If the annual meeting of stockholders is not held on the date designated
therefor, the Directors shall cause the meeting to be held as soon thereafter
as convenient. At each meeting of the stockholders for the election of
Directors, at which a quorum is present, the Directors shall be elected by a
plurality of the votes cast by the holders of shares entitled to vote in such
election. Members of the initial Board of Directors shall hold office until
the first annual meeting of stockholders or until their successors have been
elected and qualified.
3.04 Annual and Regular Meetings. An annual meeting of the Board of Directors
shall be held immediately following adjournment of the annual meeting of
stockholders at the place of such annual meeting. Notice of such meeting of
the Board need not be given. The Board from time to time may provide for the
holding of other regular meetings and fix the place (which may be within or
without the State of Delaware) and the date and hour of such meetings. Notice
of such regular meetings need not be given, except that if the Board shall fix
or change the time or place of any such regular meeting, notice of such action
shall be promptly communicated personally or by telephone or sent by first
class mail, telegraph, radio or cable, to each Director who shall have not
been present at the meeting at which such action was taken, addressed to such
Director at such Director's residence, usual place of business or other
address designated with the Secretary for such purpose.
3.05 Special Meetings; Notice. Special meetings of the Board of Directors
shall be held whenever called by the President, or in the absence or
disability of the President, by any Vice President, or by the Secretary at the
<PAGE>
request of any two Directors, at such place (within or without the State of
Delaware as may be specified in the respective notices or waivers of notice of
such meeting. Except as otherwise provided by law, a notice of each special
meeting, stating the time and place thereof, shall be mailed to each Director
addressed to such Director's residence, usual place of business, or other
address designated with the Secretary for such purpose, at least two business
days before the special meeting is to be held, or shall be sent to such
Director at such place by telegraph, radio or cable, or delivered personally
or by telephone not later than the day before the day on which such meeting is
to be held. Notice may be waived in accordance with Section 2.06 of these
By-Laws.
3.06 Quorum; Voting. Subject to the provisions of Section 3.12 hereof, at all
meetings of the Board of Directors the presence of a majority of the total
number of Directors shall constitute a quorum for the transaction of business.
Except as otherwise required by law, the vote of a majority of the Directors
present at any meeting at which a quorum is present shall be the act of the
Board of Directors.
3.07 Adjournment. A majority of the Directors present, whether or not a quorum
is present, may adjourn any regular or special meeting to another time and
place. Notice of the adjourned meeting conforming to the requirements of
Section 3.05 hereof shall be given to each Director except that no notice of
an adjournment or postponement of a meeting need be given if a majority of the
Board of Directors is present or if the adjournment or postponement is to a
later hour on the same date, at the same place.
3.08 Action Without a Meeting. Any action required or permitted to be
taken at any meeting of the Board of Directors may be taken without a meeting
if all members of the Board consent thereto in writing, and such
writing or writings are filed with the minutes of proceedings of the Board.
3.09 Regulations; Manner of Acting. To the extent consistent with law, the
Certificate of Incorporation and these By-Laws, the Board of Directors may
adopt such rules and regulations for the conduct of meetings of the Board and
for the management of the property, affairs and business of the Corporation as
the Board may deem appropriate. Members of the Board of Directors or of any
Committee thereof may participate in a meeting of the Board or of such
Committee, as the case may be, by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and such participation shall constitute presence
in person at such meeting.
3.10 Resignation. Any director may resign at any time by delivering a written
notice of resignation signed by such Director to the President, a Vice President
or the Secretary. Such resignation shall take effect upon the latter of the date
of delivery or the date specified therein.
3.11 Removal of Directors. Any or all of the Directors may be removed at any
time, either with or without cause, by the holders of a majority of the shares
then entitled to vote at an election of directors. Any vacancy in the Board,
caused by any removal of a Director by such vote of the stockholders, may be
filled by the majority of the stockholders entitled to vote for the election
of the Director so removed. If such stockholders do not fill such vacancy at
the next meeting at which such removal was effected (or in the written
instrument effecting such removal, if such removal was effected by consent
without a meeting), such vacancy may be filled in the manner provided in
Section 3.12 hereof.
3.12 Vacancies and Newly Created Directorships. Subject to the provisions of
Section 3.11 hereof, any newly created directorship resulting from an increase
in the number of Directors and any vacancy occurring in the Board of Directors
for any reason (including without limitation the removal of a Director) may be
filled by vote of a majority of the Directors then in office, although less
than a quorum exists, or by a sole remaining Director. A Director elected to
fill a vacancy shall be elected to hold office for the unexpired term of a
predecessor. Any such newly created directorship and any such vacancy may also
be filled at any time by majority vote of the stockholders.
3.13 Compensation. The amount, if any, which each Director shall be entitled
to receive as compensation for services as a Director may be fixed from time
to time by the Board of Directors within limits established by the
stockholders. This Section of the By-Laws may not be amended or repealed
except by the
<PAGE>
stockholders.
3.14 Reliance on Accounts and Reports, etc. Any Director, or a member of any
Committee designated by the Board of Directors, shall, in the performance of
such duties, be fully protected in relying in good faith upon the books of
account or reports made to the Corporation by any of its officers, or by an
independent certified public accountant or by an appraiser selected with
reasonable care by the Board or by any such Committee, or in relying in good
faith upon other records of the Corporation.
ARTICLE IV
Committees
4.01 How Constituted. The Board of Directors, by resolution adopted by a
majority of the whole Board, may designate one or more Committees of the
Board, each such Committee to have and exercise the powers and authority of
the Board of Directors in the management of the property, affairs and business
of the Corporation, to the extent provided by the resolution of the Board of
Directors establishing or designating such Committee and may authorize the
seal of the Corporation to be affixed to all papers which may require it.
ARTICLE V
Officers
5.01 Term and Titles. The officers of the Corporation shall be elected or
appointed by the Board of Directors and shall hold office at the pleasure of
the Board or until the election or appointment and the qualification of a
successor. There shall be a President, a Secretary and a Treasurer. There may
also be one or more Vice-Presidents. The Board of Directors may also elect or
appoint such other officers and agents, having such titles as it deems
appropriate. Any two or more offices may be held by the same person, except
the offices of President and Secretary.
5.02 Authority and Duties of Officers. The officers of the Corporation shall
have such authority and shall exercise such powers and perform such duties as
may be specified in these By-Laws, or to the extent not so provided, shall
exercise such powers and perform such duties as may be required by law.
5.03 Removal and Resignation; Vacancies. Any officer may be removed at any
time by the Board of Directors, with or without cause. Any officer may resign
at any time by delivering a signed notice of resignation to the Board of
Directors, the President, a Vice-President or the Secretary. Such resignation
shall take effect upon the latter of the date of delivery or the date
specified therein. Any vacancy occurring in any office of the Corporation by
death, resignation, removal or otherwise, may be filled by the Board at any
regular or special meeting.
5.04 The President. The President shall supervise the carrying out of the
policies adopted or approved by the Board, shall exercise a general
supervision and superintendence over all the business and affairs of the
Corporation and shall possess such other powers and perform such other duties
as any be incident to the office of the president.
5.05 The Vice-Presidents. Each Vice President shall exercise such powers and
perform such duties as from time to time may be assigned to such Vice
President by the Board of Directors or the President. At the request, in the
absence or during the disability of the President, the Vice President
designated by the Board of Directors or by the President or if no such
designation shall have been made, then the senior ranking Vice- President
present shall perform all the duties of the President and, when so acting,
shall have all the powers of and be subject to all the restrictions upon the
President.
5.06 The Secretary. Except as may otherwise be provided by the Board of
Directors, the Secretary shall have the following powers and duties:
(a) To keep or cause to be kept a record of all the proceedings
of the meetings of the stockholders and of
<PAGE>
the Board of Directors.
(b) To cause all notices to the Board of Directors and stockholders to be duly
given in accordance with the provisions of these By-Laws and as required by
law. (c) To be the custodian of the records and of the seal of the
Corporation. The Secretary may cause such seal (or a facsimile thereof ) to be
affixed to all instruments the execution of which on behalf of the Corporation
under its seal shall have been duly authorized in accordance with these
By-Laws, and when so affixed may attest the same. (d) To have charge of the
stock books and ledgers of the Corporation and to cause the stock and transfer
books to be kept in such manner as to show at any time the number of shares of
stock of the Corporation of each class issued and outstanding, the names
(alphabetically arranged) and the addresses of the holders of record of such
shares, the number of shares held by each holder and the date as of which each
became such holder of record. (e) To perform, in general, all duties incident
to the office of Secretary and such other duties as may be given to the
Secretary by these By-Laws or as may be assigned to the Secretary from time to
time by the Board of Directors or the President. (f) To the extent consistent
with law, the Secretary may from time to time delegate performance of any one
or more of the foregoing powers and duties, or powers and duties otherwise
conferred upon the Secretary by these By-Laws, to one or more officers, agents
or employees of the Corporation.
5.07 The Treasurer. Except as may otherwise be provided by the Board of
Directors, the Treasurer shall have the following powers and duties: (a) To
have charge and supervision over and be responsible for the moneys,
securities, receipts and disbursements of the Corporation. (b) To cause the
moneys and other valuable effects of the Corporation to be deposited in the
name and to the credit of the Corporation in such banks or trust companies or
with such other depositories as shall be selected in accordance with Section
6.03 of these By-Laws. (c) To cause the moneys of the Corporation to be
disbursed by checks, drafts, other instruments or fund transfers (signed as
provided in Section 6.04 of these By-Laws) upon the authorized depositories of
the Corporation and cause to be taken and preserved proper vouchers for all
moneys disbursed. (d) To render to the Board of Directors, whenever requested,
a statement of the financial condition of the Corporation and of all the
financial transactions of the Corporation. (e) To be empowered from time to
time to require from all officers or agents of the Corporation reports or
statements giving such information as the Treasurer may desire with respect to
any and all financial transactions of the Corporations. (f) To perform all
duties incident to the office of Treasurer, and such other duties as from time
to time may be assigned to the Treasurer by the Board of Directors or the
President.
5.08 Surety Bonds. In case the Board of Directors shall so require, any
officer or agent of the Corporation shall execute to the Corporation a bond in
such sum with such surety or sureties as the Board may direct, conditional
upon the faithful performance of such person's duties to the Corporation,
including responsibility for negligence and for the accounting for all
property, moneys or securities of the Corporation which may be in such
person's possession, custody or control.
ARTICLE VI
Execution of Instruments, Borrowing of
Money and Deposit of Corporate Funds
6.01 Execution of Instruments. Except as may otherwise be provided in this
Article or in a resolution adopted by the Board of Directors, the President,
any Vice President, the Secretary or the Treasurer may enter into any contract
or execute and deliver any instrument and affix the corporate seal in the name
and on behalf of the Corporation. The Board may authorize any other officer,
employee or agent to enter into any contract or execute and deliver any
instrument and affix the corporate seal in the name and on behalf of the
Corporation. If any such instrument shall be required by law or otherwise to
be executed by more than one person, any two or more of such officers or
designated persons, or any one or more such officers or designated persons
with any other officer shall, as so required, have power to execute such
instrument and affix the corporate seal. Any such authorization may be general
or limited to specific contract or instruments.
<PAGE>
6.02 Loans. No loan or advance shall be contracted on behalf of the
Corporation and no note, bond or other evidence of indebtedness shall be
executed or delivered in its name, except as may be authorized by the Board of
Directors. Any such authorization may be general or limited to specific loans
or advances, or notes, bonds or other evidences of indebtedness. Any officer
or agent of the Corporation so authorized may effect loans and advances on
behalf of the Corporation, and in return for any such loans or advances may
execute and deliver notes, bonds or other evidences of indebtedness of the
Corporation.
6.03 Deposits. Any funds of the Corporations may be deposited from time to
time in such banks, trust companies or other depositories as may be determined
by the Board of Directors, or by such officers or agents as may be authorized
by the Board to make such determination.
6.04 Checks, Drafts, Payments, etc. All notes, drafts, bills of exchange,
acceptances, checks, endorsements, other instruments and other evidences of
indebtedness of the Corporation, and its orders for the payment of money and
fund transfers, shall be signed as may be determined by the Board of Directors
or by such officer or agents as may be authorized by the Board to make such
determination.
6.05 Sale, Transfer, etc., of Securities. The President, any Vice President,
the Treasurer and such other person or persons as the Board of Directors may
from time to time authorize shall each have full power and authority on behalf
of the Corporation to sell, transfer, endorse, and assign any shares of stock,
bonds or other securities owned by or held in the name of the Corporation, and
may make, execute and deliver in the name of the Corporation, under its
corporate seal, any instruments that may be appropriate to effect any such
sale, transfer, endorsement or assignment, subject to such restrictions or
limitations as the Board of Directors may from time to time impose.
6.06 Voting as Securityholder. The President, the Treasurer and such person or
persons as the Board of Directors may from time to time authorize, shall each
have full power and authority on behalf of the Corporation, to attend any
meeting of securityholders of any corporation in which the Corporation may
hold securities, and to act, vote (or execute proxies to vote) and exercise in
person or by proxy all other rights, powers and privileges incident to the
ownership of such securities, and to execute any instrument expressing consent
to or dissent from any action of any such corporation without a meeting,
subject to such restrictions or limitations as the Board of Directors may from
time to time impose.
6.07 Facsimile Signatures. The Board of Directors may authorize the use of a
facsimile signature or signatures on any instrument. If any officer whose
facsimile signature has been placed upon any form of instrument shall have
ceased to be such officer before an instrument is issued, such instrument may
be issued with the same effect as if such person has been such officer at the
time of its issue.
ARTICLE VII
Capital Stock
7.01 Certificates of Stock. Every stockholder shall be entitled to have a
certificate signed by, or in the name of, the Corporation by the President or
a Vice-President, and by the Treasurer, an Assistant Treasurer, the Secretary
or an Assistant Secretary, certifying the number of shares owned by such
stockholder in the Corporation. Such certificate shall be in such form as the
Board of Directors may determine, to the extent consistent with applicable
provisions of law, the Certificate of Incorporation and these By-Laws.
7.02 Lost, Stolen or Destroyed Certificates. The Board of Directors may direct
that a new certificate be issued in place of any certificate theretofore
issued by the Corporation alleged to have been lost, stolen or destroyed, upon
deliver to the Board of an affidavit of the owner or owners of such
certificate, setting forth such allegation. The Board may require the owner
of such lost, stolen or destroyed certificate, or such person's legal
representative, to give the Corporation a bond sufficient to indemnify it
against any claim that nay be made against it on account of the alleged loss,
theft or destruction of any such certificate or the issuance of any such new
certificate.
<PAGE>
7.03 Transfers of Stock. Upon surrender to the Corporation or the transfer
agent of the Corporation of a certificate representing shares, duly endorsed
or accompanied by appropriate evidence of succession, assignment or authority
to transfer, the Corporation shall issue a new certificate to the person
entitled thereto, cancel the old certificate, and record the transaction upon
its books. Subject to the provisions of law, the Certificate of Incorporation
and these By-Laws, the Board of Directors may prescribe such additional rules
and regulations as it may deem appropriate relating to the issue, transfer and
registration of shares of the Corporation.
7.04 Registered Stockholder. Prior to due surrender of a certificate for
registration of transfer, the Corporation may treat the registered owner as
the person exclusively entitled to receive dividends and other distributions,
to vote, to receive notice and otherwise to exercise all the rights and powers
of the owner of the shares represented by such certificate, and the
Corporation shall not be bound to recognize any equitable or legal claim to or
interest in such shares on the part of any other person, whether or not the
Corporation shall have the notice of such claim or interest.
ARTICLE VIII
Indemnification
8.01 Indemnification of Directors and Offices. To the fullest extent permitted
by applicable law now or hereafter in effect, any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that such person is or was at any time
since the inception of the Corporation a Director or officer of the
Corporation, or, while such person is or was a Director or officer of the
Corporation, is or was at any time serving another corporation, partnership,
joint venture, trust or other enterprise in any capacity at the request of the
Corporation, shall be indemnified by the Corporation against judgments, fines,
amounts paid in settlement and reasonable expenses (including attorneys' fees)
actually and necessarily incurred in connection with or as a result of such
action, suit or proceeding. Indemnification under this Section shall continue
as to a person who has ceased to be a Director or officer of the Corporation
and shall inure to the benefit of the heirs, executors and administrator of
such a person.
No director of the corporation shall be liable to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
provided that the foregoing shall not eliminate or limit liability of a
director (i) for any breach of such director's duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, (iii)
for unlawful payment of dividend or unlawful stock purchase or redemption, or
(iv) for any transaction from which such director derived an improper personal
benefit.
ARTICLE IX
Miscellaneous Provisions
9.01 Fiscal Year. Unless otherwise determined by the Board of Directors, the
fiscal year of the Corporation shall commence on the first day of January in
each calendar year and terminate on the 31st day of December of such year.
9.02 Seal. The seal of the Corporation shall be in the form adopted by the
Board of Directors. The seal may be used by causing it or a facsimile thereof
to be impressed, affixed or reproduced, or in any other lawful manner.
9.03 Books and Records. Except to the extent otherwise required by law, the
books and records of the Corporation shall be kept at such place or places
(within or without the State of Delaware) as may be determined from time to
time by the Board of Directors.
9.04 Independent Public Accountant. The Board of Directors may annually
appoint an independent public
<PAGE>
accountant or firm of independent public accountants to audit the books of the
Corporation for each fiscal year.
ARTICLE X
Amendments
10.01 Amendments. These By-Laws may be amended or repealed, and any new By-Law
may be adopted, by majority vote of the stockholders entitled to vote or by
the Board of Directors.
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-6 (the
"Registration Statement") of our report dated February 16, 1996, relating to
the financial statements of New York Life Insurance and Annuity Corporation.
We also consent to the incorporation by reference in such Prospectus of the
reference to us which appears under "Selection of Independent Accountants" in
such Registration Statement.
/s/Price Waterhouse LLP
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, NY
June 27, 1996
