<PAGE> 1
TABLE OF CONTENTS
<TABLE>
<S> <C>
Vice Chairman's Letter.................. 2
Performance Summary..................... 4
MacKay-Shields Financial Corporation
Adviser's Report...................... 6
New York Life Insurance Company
Adviser's Report...................... 8
Portfolio Managers' Comments............ 9
Glossary................................ 39
NYLIAC Corporate Sponsored Variable
Universal Life Separate Account-I
Statement of Assets and Liabilities..... 44
Statement of Operations................. 46
Statement of Changes in Total Equity.... 48
Notes to Financial Statements........... 51
MainStay VP Series Fund, Inc.
Chairman's Letter....................... 62
Capital Appreciation Portfolio.......... 63
Cash Management Portfolio............... 67
Convertible Portfolio................... 71
Government Portfolio.................... 76
High Yield Corporate Bond Portfolio..... 80
International Equity Portfolio.......... 89
Total Return Portfolio.................. 96
Value Portfolio......................... 104
Bond Portfolio.......................... 108
Growth Equity Portfolio................. 112
Indexed Equity Portfolio................ 117
Notes to Financial Statements........... 127
The Semi-Annual Reports for the
Portfolios listed below follow:
Alger American Small Capitalization
Portfolio
Calvert Social Balanced Portfolio
Fidelity Variable Insurance Products
Fund II Contrafund Portfolio
Fidelity Variable Insurance Products
Fund Equity-Income Portfolio
Janus Aspen Series Balanced Portfolio
and Janus Aspen Series Worldwide
Growth Portfolio
Morgan Stanley Emerging Markets Equity
Portfolio
</TABLE>
1
<PAGE> 2
LETTER FROM THE VICE CHAIRMAN
- --------------------------------------------------------------------------------
TO THE OWNERS OF NYLIAC CORPORATE SPONSORED VARIABLE UNIVERSAL LIFE POLICIES:
I am pleased to present the unaudited NYLIAC Corporate Sponsored Variable
Universal Life (CSVUL) Semi-Annual Report for the six month period ended June
30, 1998. NYLIAC Corporate Sponsored Variable Universal Life Separate Account-I
serves as the separate account for the NYLIAC CSVUL policies.
The semi-annual report contains valuable financial information including
mid-year performance data and separate account financial statements for each of
the 18 investment divisions that are available with our NYLIAC CSVUL policies.
Also included in this book are the semi-annual reports for the MainStay VP
Series Fund, Inc., The Alger American Fund, Calvert Variable Series, Inc.,
Fidelity Variable Insurance Products Fund, Fidelity Variable Insurance Products
Fund II, Janus Aspen Series, and Morgan Stanley Universal Funds, Inc.
LIFE INSURANCE PROTECTION WITH A VARIETY OF INVESTMENT OPTIONS
Last October, New York Life Insurance and Annuity Corporation introduced NYLIAC
Corporate Sponsored Variable Universal Life. NYLIAC CSVUL is available as a
non-qualified policy for all corporate sponsored and corporate owned plans.
The investment options offered in the NYLIAC CSVUL policies consist of 18
investment divisions and the fixed account. As a CSVUL policyowner, you benefit
from the experience and professional management of leading investment advisors.
The extensive selection of diversified investment offerings gives flexibility in
customizing a policy to suit individual investment styles. Please refer to the
CSVUL Prospectus for complete descriptions of the investment divisions. The
following is NYLIAC's view of the current and anticipated economic conditions
that may affect the performance of the investment divisions.
ECONOMIC ENVIRONMENT MID-YEAR REVIEW
Growth continued to exceed expectations in the first half of 1998, while
inflation remained surprisingly subdued. Real Gross Domestic Product (GDP) grew
at an astounding annual rate of 5.4 percent in the first quarter, as the
negative effects of the Asian crisis on net exports and industrial production
were more than offset by robust consumer spending, residential construction,
business capital spending, and a quickened pace of inventory investment.
Growth appears to have been somewhat slower in the second quarter as demand
moderated, the trade deficit continued to widen, and inventory investment
declined. A strike at General Motors began in June and is likely to have a
negative impact on both the second and third quarters.
Inflation slowed further in the first quarter before beginning to pick up again
in the second. As a result, the Consumer Price Index(1) in June was up just 1.7
percent from a year ago, virtually the same rate of inflation as in December,
despite a further decline in the unemployment rate from 4.7 percent to 4.5
percent, well below levels previously associated with accelerating prices.
Wage rates have begun to accelerate, but this has been offset by decelerating
benefit costs, rising productivity, the continued appreciation of the dollar,
falling oil prices, and increasing competition from low priced imports.
Over the rest of the year, the economy is expected to slow to a more sustainable
pace as excess inventory accumulation continues to be pared and weakness from
the trade and manufacturing sectors spreads to the rest of the economy.
Inflation should pick up only slightly as oil prices stop declining and the
lagged effects of the higher dollar begin to dissipate. We believe the
unemployment rate should begin to rise again as the economy slows, helping to
moderate any rise in inflation.
The Federal Reserve has not changed monetary policy since March of 1997 and,
although it adopted a tightening bias at its May meeting, it is unlikely to
tighten over the remainder of the year. Bond yields have fallen to record lows
and may fall further over the rest of the year.
The stock market continued its spectacular advance in the first half of the
year, with the Dow Jones Industrial Average(2) gaining another 13.2 percent,
following a 22.6 percent gain in 1997, 26.0 percent in 1996, and 33.5 percent in
1995. Corporate earnings growth already has begun to moderate and should slow
further over the rest of the year in response to the slowing economy, rising
wages, and the strengthening dollar.
2
<PAGE> 3
Conditions in Japan and Southeast Asia have continued to deteriorate and may get
worse before the economies begin to recover. On the positive side, the economic
expansion in the U.S. is likely to continue with no recession in sight, and
interest rates should remain low.
FUNDING YOUR CORPORATE SPONSORED VARIABLE UNIVERSAL LIFE INSURANCE POLICY
As part of your long-term financial plan or corporate strategy, NYLIAC's CSVUL
product offers permanent life insurance protection with a variety of investment
options. One of the attractive features of your CSVUL policy is that you select
a premium payment schedule, which indicates the amount and frequency of premium
payments you intend to make. The policy's fees and charges are deducted from the
cash value, and your life insurance coverage will remain in effect as long as
your cash surrender value is sufficient to cover these deductions. In order to
help optimize potential investment results for the future, you may increase your
scheduled premium payments or make additional, unscheduled premium payments.
A higher level of premium funding may maximize the policy's investment potential
and reduce the likelihood that your policy will terminate due to lower than
anticipated investment performance, which could result in the cash surrender
value being insufficient to cover the required monthly deductions. Your
registered representative can assist you in evaluating the effects of different
premium funding levels so that you can make an informed choice.
NYLIAC CSVUL SALES
Since NYLIAC Corporate Sponsored Variable Universal Life was introduced, over
$131 million of face amount has been purchased. We anticipate continued growth
throughout the remainder of 1998.
Our ongoing commitment to our policyowners remains stronger than ever. Thank you
for making us "The Company You Keep(R)."
/s/ FREDERICK J. SIEVERT
Frederick J. Sievert
Vice Chairman
New York Life Insurance Company
the parent of New York Life Insurance and Annuity Corporation
(1) The Consumer Price Index (CPI) is a commonly used measure of the rate of
inflation.
(2) The Dow Jones Industrial Average is a trademark of, and the property of, Dow
Jones and Co., Inc. The DJIA Index is a price-weighted average of 30
actively traded blue chip stocks, primarily industrials, but also including
financial, leisure, and other service-oriented firms.
3
<PAGE> 4
NYLIAC CORPORATE SPONSORED VARIABLE UNIVERSAL LIFE
PERFORMANCE SUMMARY*:
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIOD ENDING JUNE 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTMENT DIVISION YEAR- SINCE INVESTMENT
INVESTMENT DIVISIONS INCEPTION DATE 1 MONTH 3 MONTHS 6 MONTHS TO-DATE DIVISION INCEPTION
<S> <C> <C> <C> <C> <C> <C>
MAINSTAY VP SERIES FUNDS:
Bond 10/01/97 0.85% 2.39% 2.50% 2.50% 2.50%
Capital Appreciation 10/01/97 6.41% 3.85% 3.36% 3.36% 3.36%
Cash Management 10/01/97 0.39% 1.10% 1.17% 1.17% 1.17%
Convertible 10/01/97 N/A# N/A# N/A# N/A# N/A#
Government 10/01/97 1.07% 2.87% 2.87% 2.87% 2.87%
Growth Equity 10/01/97 4.72% 1.02% 1.02% 1.02% 1.02%
High Yield Corporate Bond 10/01/97 -0.43% 0.08% 0.08% 0.08% 0.08%
Indexed Equity 10/01/97 4.00% 3.04% 3.12% 3.12% 3.12%
International Equity 10/01/97 1.48% 4.04% 2.86% 2.86% 2.86%
Total Return 10/01/97 N/A# N/A# N/A# N/A# N/A#
Value 10/01/97 -2.61% -3.05% -3.05% -3.05% -3.05%
Alger American Small Capitalization 10/01/97 6.41% 5.33% 5.33% 5.33% 5.33%
Calvert Social Balanced 10/01/97 2.13% 2.22% 2.22% 2.22% 2.22%
Fidelity VIP II Contrafund 10/01/97 5.32% 5.96% 5.96% 5.96% 5.96%
Fidelity VIP Equity-Income 10/01/97 1.06% -1.75% -1.75% -1.75% -1.75%
Janus Aspen Series Balanced 10/01/97 2.13% 2.22% 2.22% 2.22% 2.22%
Janus Aspen Series Worldwide Growth 10/01/97 2.23% 7.28% 7.28% 7.28% 7.28%
Morgan Stanley Emerging Markets Equity 10/01/97 N/A# N/A# N/A# N/A# N/A#
</TABLE>
* The values shown are unaudited.
# No performance information is shown for the MainStay VP Convertible, MainStay
VP Total Return and the Morgan Stanley Emerging Markets Equity Investment
Divisions because as of 6/30/98, the Separate Account had no money invested in
these Investment Divisions.
4
<PAGE> 5
Past performance is no guarantee of future results. The investment return and
the accumulation value of your policy will fluctuate so that your contract, when
surrendered, may be worth more or less than the original cost. Performance
reflects the percentage change for the period shown with capital gains and
dividends reinvested.
Performance reflects the deduction of the policy's current mortality and expense
risk charge of .70% for policy years one through ten and total fund operating
expenses. However, it does not reflect the policy fees or charges. These include
the cost of insurance, surrender charges, monthly contract charges, sales
expense charges, and premium and federal tax charges. Had these expenses been
deducted, total returns would have been lower.
NYLIAC has agreed to assume a portion of the expenses of the MainStay VP
Convertible and the MainStay VP International Equity Investment Divisions until
12/31/98. This expense limitation was in effect until 12/31/97 for the MainStay
VP High Yield Corporate Bond and MainStay VP Value Investment Divisions. In
addition, Janus Capital Corporation has agreed to reduce the advisory fee for
the Janus Aspen Series Balanced and the Janus Aspen Series Worldwide Growth
Investment Divisions; and Morgan Stanley Asset Management Inc. has agreed to
reduce the advisory fee and assume certain expenses of the Morgan Stanley
Emerging Markets Equity Investment Division. Had these expenses not been assumed
or reduced, the total returns for these Investment Divisions would have been
lower.
For additional information, including illustrations which reflect guaranteed
maximum cost of insurance rates, please consult the prospectus.
5
<PAGE> 6
- --------------------------------------------------------------------------------
MAINSTAY VP SERIES FUND, INC. PORTFOLIOS
MACKAY-SHIELDS FINANCIAL CORPORATION
ADVISER'S REPORT
Market Overview
The equity market retreated from its blistering pace in the first quarter to
more modest advances in the second quarter, chiefly as a result of a more
sobering assessment of the Asian economic crisis. Any thoughts that the Asian
crisis would be a short-lived event have been put to rest. The main question now
is how will U.S. corporate profits fare in the second half of the year and in
1999? Most companies will soon report second-quarter earnings and give guidance
on future prospects. One thing is clear: the likely slowing of corporate profits
will be far from uniform. While the basic material, energy and
commodity-technology sectors appear most vulnerable, the consumer and healthcare
sectors continue to show signs of strength.
The second quarter of 1998 saw the market lose the wind at its back, with the
average general U.S. equity mutual fund losing 0.2% to 0.3% according to
Lipper(1) and Morningstar(2) with initial gains followed by losses. The S&P 500
Index(3) (with dividends) returned 3.30%, the Dow Jones Industrial Average(4)
returned 2.1% and NASDAQ(5) posted a 3.2% gain. The stock market has displayed
two characteristics over the past 18 months: a mix of strongly performing
quarters followed by sputtering quarters. The engine of the stock market did not
seem to be able to remain energized for more than three months before it took a
breath. Also, the narrowness of the best-performing part of the market has
remained markedly consistent. Investors fared best in blue chip investments such
as U.S. Treasury bonds and "nifty-fifty" type equity investments such as large
capitalization stocks with prospects of rising earnings. Smaller stocks and
investments in fundamentally cheaper "value" stocks were not rewarded in this
environment. In fact, as stocks got smaller or more value oriented, the
performance got worse for the quarter. As a result, S&P Index funds, emphasizing
the large-cap names that dominate the Index, have outshone active managers. The
only stock funds that outperformed the S&P during the quarter were large-cap
growth funds which returned 5.24%. During the second quarter, large cap blend
funds were up 2.12% and mid-cap growth funds posted a small gain of 0.87%.
The outperformance of the largest names in the S&P 500 is particularly notable
as these companies' earnings as a whole have been shrinking, are influenced by
currency depreciations outside the U.S., and may be greatly affected by the
continuing Asian financial crisis. The recent increase in wages could signal
coming inflation, which has been an insignificant factor for several years.
Fueling the market despite these weaknesses, these companies are also viewed by
investors as "safe havens" with expectations of lower volatility if the market
goes down. Also, because of their liquidity, investors believe large-cap blue
chips will be easier to sell in a market downturn.
On the fixed income side, the safest bonds and the funds that hold them
outperformed the riskier end of the spectrum. According to Lipper, general U.S.
Treasury funds posted a return of 2.92% for the quarter, A-rated corporate bonds
recorded gains of 2.36% for the period and tax-free funds had returns of 1.29%.
Interest rate declines help performance of the bond market because bond prices
rise as interest rates decline. This is in direct contrast to the average
emerging market bond fund which lost 7.7% in the second quarter and junk-bond
funds which gained a paltry 0.29%. This reflects a new cautiousness on the part
of investors, who added $6.2 billion into taxable bond funds in May, versus $3.6
billion in April. Municipal funds listed $2.4 billion in new investments in May,
versus $544 million in April. Foreign buyers continued their love affair with
U.S. bonds, despite the 30-year U.S. Treasury bond's lowest yield in several
years. Adding fuel to the fire, a positive Federal budget picture is sure to
decrease the supply of U.S. Treasuries, as the Government has less debt to
finance going forward.
Internationally, the second quarter was a tale of two markets. Investors in
developed markets fared far better than those who invested in emerging markets.
European markets embracing American production and management efficiencies are
soaring. According to Lipper, funds investing in Europe posted the most positive
results, on average returning 6.30% for the second quarter. On the other hand,
Asia's financial crisis is not over and is
6
<PAGE> 7
- --------------------------------------------------------------------------------
spilling over into Latin America. The flight to quality and the American markets
have only exacerbated emerging market economic woes.
Looking forward, several factors are lurking which may hurt the robustness of
the U.S. economy. Increasing wages, which constitute two-thirds of the CPI(6),
may ignite inflation if productivity gains do not increase proportionately.
Also, the Asian financial crisis is not over. Many economists who participated
in The Wall Street Journal's latest semi-annual forecasting survey believe that
the brunt of the Asian crisis will hit the U.S. over the next several months,
causing growth to slow and unemployment to increase. However, on the positive
side, many Asian countries are facing the enormity of their respective
economies' problems and are taking steps to solve them. In the meantime, we
continue to enjoy low inflation, stable interest rates and steady growth -- key
ingredients for an ebullient economy.
Ravi Akhoury
Chairman and Chief Executive Officer
MacKay-Shields Financial Corporation
(1) Lipper Analytical Services, Inc. is an independent monitor of mutual fund
performance.
(2) Morningstar, Inc. is an independent fund performance monitor. Its ratings
reflect historic risk-adjusted performance, taking fees and sales charges
into account, and may change monthly. Its ratings of 1 (low) and 5 (high)
stars are based on a fund's three- and five-year average annual returns with
fee adjustments, and a risk factor that reflects fund performance relative
to 3-month Treasury bill monthly returns. The top 10% of funds in a rating
group may receive 5 stars, the next 22.5% receive 4 stars, the middle 35%
receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive
1 star. Portfolios are not rated until they have three years of performance
history.
(3) "Standard and Poor's 500 Composite Stock Price Index(R)" and "S&P 500(R)"
are registered trademarks of The McGraw-Hill Companies, Inc. The MainStay VP
Series Fund, Inc. is not sponsored, endorsed, sold or promoted by Standard &
Poor's. The S&P 500 is an unmanaged index considered generally
representative of the U.S. stock market. Results assume the reinvestment of
all income and capital gains distributions.
(4) The Dow Jones Industrial Average is a trademark of, and the property of, Dow
Jones and Co., Inc. The DJIA Index is a price-weighted average of 30
actively traded blue chip stocks, primarily industrials, but also including
financial, leisure, and other service-oriented firms.
(5) "NASDAQ Composite Index" is an unmanaged index and is considered to be
generally representative of the U.S. small capitalization stock market.
(6) The Consumer Price Index (CPI) is a commonly used measure of the rate of
inflation.
7
<PAGE> 8
- --------------------------------------------------------------------------------
NEW YORK LIFE INSURANCE COMPANY
ADVISER'S REPORT
Market Overview
The first half of 1998 has resulted in another period of attractive investment
returns for the U.S. financial markets, with particularly strong returns from
the stock market.
The U.S. economy continues to enjoy robust expansion -- with strong growth, low
inflation, a Federal budget surplus and a structurally sound economy. As a
result, the financial health of most U.S. firms remains strong. Overseas,
however, the Asian economy is suffering as many emerging Asian countries are
ravaged by currency devaluations, capital flight and heightened balance of
payment pressures. Near term, the crisis has caused a flight to quality to the
U.S. financial markets, bolstering values here. Longer term, the Asian crisis
will have a negative impact on the worldwide economy, particularly on U.S.
companies in commodity and export related industries.
The stock market has reached historically high price levels in both absolute and
relative terms. While corporate earnings growth has slowed, valuation levels
have increased as interest rates have declined and merger and acquisition
activity has increased.
The bond market produced returns in line with interest income and modest price
appreciation. The modestly lower interest rate environment has caused spreads to
widen on mortgage-backed securities and corporate bonds due to prepayment
concerns and unprecedented new issue supply as corporations sought to lock-in
lower financing costs.
Looking forward for the rest of the year, we anticipate a stable monetary policy
will be maintained by the Federal Reserve Board. A stable interest rate outlook
combined with continued strength in consumer demand, should provide a favorable
environment for the stock and bond markets.
Jean Hoysradt
Senior Vice President
in Charge of the Investment Department
New York Life Insurance Company
8
<PAGE> 9
MAINSTAY VP CAPITAL APPRECIATION PORTFOLIO
MARKET RECAP FOR THE SIX MONTH PERIOD ENDED 6/30/98
- - A robust economy, with low interest rates, modest inflation, and low
unemployment moved stocks higher in the first six months of 1998.
- - Weaknesses in Asian economies caused a flight to quality, liquid companies
that investors felt may perform relatively well in the event of an economic
downturn.
- - Merger and acquisition activity was high, with several large transactions that
stimulated interest in the stock market.
- - The S&P 500(1) advanced to record levels in June.
PORTFOLIO RECAP FOR THE SIX MONTH AND ONE YEAR PERIODS ENDED 6/30/98
- - The MainStay VP Capital Appreciation Portfolio returned 18.97% for the six
month period ended 6/30/98 and 30.10% for the one year period ended 6/30/98.
- - The Portfolio outperformed the S&P 500, which returned 17.71% during the six
month reporting period.
- - The Portfolio benefited from individual security selection among consumer
retail stocks, and a reduction in its technology and energy holdings.
- - The Portfolio outperformed the average Lipper(2) capital appreciation
portfolio, which returned 15.63% for the six months ended 6/30/98.
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
With U.S. gross domestic product increasing more than investors anticipated in
the first half of 1998, the stock market enjoyed robust returns. Low interest
rates, benign inflation, low unemployment, and a rallying bond market all
contributed to positive investor psychology during the reporting period.
A number of factors combined to focus investor attention on large-capitalization
growth stocks. Continuing difficulties in Asian markets spread to China, Latin
America, and Russia, causing a flight to quality which attracted investors to
domestic companies and highly liquid securities. Asian difficulties also caused
problems for several technology companies. Declining oil, gold, and copper
prices caused weakness among energy and commodity-related issues and moved many
investors from undervalued securities into large, dependable growth companies.
Strong merger and acquisition activity stimulated interest in the stock market,
with several large deals in the financial sector. Problems with an earlier
merger, however, had a negative impact on Cendant, which was among the worst
performing stocks in the S&P 500 during the second quarter of 1998.
WHY WAS THE PORTFOLIO ABLE TO OUTPERFORM ITS PEERS?
The Portfolio benefited from strong security selection, strategic sales, and
strong growth among many of its core holdings. The Portfolio's domestic retail
holdings provided excellent performance. We reduced the Portfolio's technology
holdings, particularly among commodity-type products. At the same time, the
Portfolio benefited from strength in companies with proprietary products, such
as Microsoft and certain pharmaceuticals. Also, our decision to reduce holdings
in the oil services sector helped us reduce the impact of declining oil prices
on the Portfolio.
WHAT WERE SOME OF THE PORTFOLIO'S SIGNIFICANT PURCHASES DURING THE REPORTING
PERIOD?
The Portfolio purchased EMC, a corporate data storage provider with a consistent
growth record. The Portfolio sold some 3Com stock to make the purchase, a result
of our decision to reduce commodity-based technology companies and increase the
Portfolio's exposure to companies which offer more proprietary products and
services. EMC rose 63% in the first half of 1998 and had a positive impact on
the Portfolio's performance.
The Portfolio also purchased Pfizer, which had a slightly negative impact on
performance as some investors sold their positions in order to take profits in
the stock. Nevertheless, we believe that their accelerated earnings growth,
broad product line, and direct-to-the-consumer marketing strategy may result in
strong performance over the next six to twelve months.
Another large purchase for the Portfolio was Disney, which we quickly sold when
the stock began to decline, with a slightly negative impact on performance. A
more positive holding was Colgate-Palmolive, which the Portfolio bought in late
April. The company is benefiting from its global scope, cost cutting, and track
record of generating dependable earnings. With the recent sales success of the
company's toothpaste called Total, we believe it will have excellent potential
going forward.
9
<PAGE> 10
WERE THERE ANY SIGNIFICANT SALES DURING THE REPORTING PERIOD?
The Portfolio sold Adaptec, which had a dramatically negative change in
fundamentals, due to Asian difficulties and a slowdown in earnings. The stock
declined 40% during the first half of 1998. The Portfolio also sold 3Com, which
we mentioned earlier, because of Asian difficulties and the company's inventory
problems in their U.S. robotics unit, which we expect to have a negative impact
on earnings.
As interest rates declined, mortgage refinancing activity increased, which had a
negative impact on mortgage insurer, MGIC Investment. With a declining growth
profile, we decided to sell the Portfolio's position late in the second quarter
of 1998 to take profits earned over the last several years. The Portfolio also
took profits in Mattel, a stock it has owned and sold over the years. We saw the
fundamentals weakening when sales of their Barbie Doll declined, Toys "R" Us cut
back on its inventory, and the company's Tyco toy division provided lower than
anticipated earnings estimates. The sale had a positive impact on the
Portfolio's performance.
DID YOU SAY YOU REDUCED HOLDINGS IN THE ENERGY SERVICES SECTOR?
Yes. We decided that with declining oil prices and reduced demand from Asia, we
would sell the Portfolio's position in Diamond Offshore Drilling and ENSCO
International. The Portfolio continued to hold Halliburton, which is an
exploration and drilling company, but we reviewed its prospects during the
reporting period. The general effect of holding energy services companies was
negative, so we viewed the sales as positive for the Portfolio.
WHICH STOCKS WERE THE BEST PERFORMERS?
Lucent Technologies was up 108.6% in the first half and had a substantial
positive impact on the Portfolio's performance, as it won telecommunications
contracts and continued to have solid earnings per share growth and an
attractive cost structure.
Tyco International is a conglomerate with holdings in fire retardation, security
systems, fiber optic cable, and health care. Tyco bought ADT Limited
International and Sherwood Davis, a medical device manufacturer, and advanced
nearly 40%, with a large and positive impact on the Portfolio's performance.
Schering-Plough is a premier pharmaceutical company. Its Claritin product for
allergy sufferers was an excellent performer, with $1.7 billion in sales and
rapid sales and earnings growth. Once again, the Portfolio benefited strongly as
the stock rose 48.3%.
WERE THERE OTHER STOCKS THAT PERFORMED WELL FOR THE PORTFOLIO?
Yes, there were several. Kohl's is a family apparel retailer that benefited from
many investors focusing on purely domestic names. The stock was up 52% with a
substantial positive impact on the Portfolio. Staples and Home Depot were other
retailers that fit a similar profile and also had a positive impact on
performance.
In the financial sector, the Portfolio had good success with SunAmerica, a major
annuity provider. The company markets fixed and variable annuities to a variety
of distribution channels including banks and stockbrokers. SunAmerica's
purchases of fixed and variable annuities have helped contribute to SunAmerica's
earnings per share growth in the 18% to 20% range during the reporting period.
Although the company had faced some questions last year about accounting
practices, it rose 35% during the reporting period.
Finally, in the communications area, the first quarter announcement that
WorldCom would purchase MCI, a telecommunications, long-distance, local, and
internet provider, caused WorldCom to rise 60% during the first half of the
year.
WERE THERE NAMES THAT DETRACTED FROM THE PORTFOLIO'S PERFORMANCE?
Cendant was a stock the Portfolio owned that had major problems in April. The
company was formed in the fourth quarter of 1997 from the merger of HFS and CUC
International. When certain of CUC's accounting practices came into question in
April, the stock price was cut in half. We believe the business units have
robust trends and are in vibrant sectors such as housing and travel, so as of
the end of June, the Portfolio continued to hold the stock. But the overall
impact of the news was negative for the Portfolio's performance.
WHAT DO YOU BELIEVE WERE THE BEST DECISIONS YOU MADE FOR THE PORTFOLIO DURING
THE FIRST HALF OF 1998?
Sticking to our investment disciplines and proactively reviewing every stock in
the portfolio. We decided to increase the Portfolio's weighting in the
securities we felt most confident about, within our diversification guidelines.
That led us to increase the Portfolio's holdings in companies like Lucent
Technologies, which were strongly positive.
10
<PAGE> 11
We also believe our decision to reduce technology and energy stocks helped the
Portfolio, and sticking with the Portfolio's heavy exposure to domestic
retailers and financial firms helped performance in a low-interest rate
environment that stimulated consumer spending and loan activity.
WERE THERE ANY DECISIONS YOU MADE THAT YOU NOW REGRET?
Of course, in hindsight, we wish we hadn't held the Portfolio's position in
Cendant in April, but we could never have foreseen the difficulties the company
faced. We would have liked to have had zero energy exposure in the Portfolio,
but we're glad we sold the names we did.
WHICH SECTORS DID THE PORTFOLIO EMPHASIZE DURING THE FIRST HALF OF THE YEAR?
We're bottom-up investors that select stocks on their individual merits. As a
result of this approach, the Portfolio was overweighted in communications.
Although this sector underperformed as a whole, the Portfolio's communication
holdings returned more than 60% in the first half of the year. We were also
heavy in consumer cyclicals, such as retailers and restaurants, automotive
stocks, and housing, which were generally positive for the Portfolio's
performance, with the exception of Cendant.
Being overweighted in technology stocks was beneficial, primarily because we
chose companies with proprietary products for the Portfolio. Over the reporting
period, we decreased the Portfolio's exposure in light of the impact the Asian
difficulties had on technology production and the declining interest in
commodity-type products such as memory chips and adapter cards.
The Portfolio was also overweighted in financial stocks, although the companies
it held underperformed the market in general. Several were tied up in merger
transactions, and may perform well when the deals are completed.
WERE THERE SECTORS WHERE THE PORTFOLIO WAS UNDERWEIGHTED?
During the reporting period, the Portfolio was underweighted in basic materials
and capital goods, which was beneficial for performance. The Portfolio was also
underweighted in consumer staples, since many of the companies didn't meet our
growth criteria. While this sector underperformed in general, the Portfolio's
holdings outperformed the market.
Our decision to underweight in energy, utilities, and transportation stocks
generally had a positive impact on the Portfolio's performance.
WHAT IS YOUR OUTLOOK FOR THE FUTURE?
We believe the domestic economy is slowing down and may continue to do so as we
begin to feel the full impact of the Asian difficulties. That could result in
lower corporate profits, which may have a generally positive effect on companies
with dependable earnings growth, such as proprietary technology companies,
pharmaceuticals, retailers, and financial firms. Of course, it could also have a
negative effect if the impact of the Asian difficulties is severe.
We anticipate low inflation and possibly even lower interest rates. Whatever the
future brings, we will continue to apply our proprietary research disciplines as
the Portfolio seeks long-term growth of capital, with dividend income, if any,
as an incidental consideration.
Edmund Spelman
Rudolph Carryl
Portfolio Managers
MacKay-Shields Financial Corporation
(1) "Standard and Poor's 500 Composite Stock Price Index(R)" and "S&P 500(R)"
are registered trademarks of The McGraw-Hill Companies, Inc. The MainStay VP
Series Fund, Inc. is not sponsored, endorsed, sold or promoted by Standard &
Poor's Corporation. The S&P 500 is an unmanaged index considered generally
representative of the U.S. stock market. Results assume the reinvestment of
all income and capital gains distributions.
(2) The Lipper Variable Insurance Products Performance Analysis Service
(L-VIPPAS) ranks the portfolios that invest in the separate accounts of
insurance companies. Its rankings are based on total returns with capital
gains and dividends reinvested. Results do not reflect any deduction of
sales charges.
Total returns for the Portfolio shown indicate past performance and are not
indicative of future results. Investment return and principal value will
fluctuate so that shares, upon redemption, may be worth more or less than their
original cost. These results do not reflect any deduction of sales charges,
mortality and expense charges, contract charges, or administrative charges.
Please refer to the Performance Summary for returns reflective of these charges.
11
<PAGE> 12
MAINSTAY VP CASH MANAGEMENT PORTFOLIO
MARKET RECAP FOR THE SIX MONTH PERIOD ENDED 6/30/98
- - Domestic bond and money markets were influenced by Asian economic
contractions, a solid U.S. economy, and relatively tame inflation during the
first six months of 1998.
- - During the reporting period, the money market yield curve was flat and
exhibited low volatility.
- - During the first half of the year, the average money market portfolio remained
within a narrow range of 55 to 60 days to maturity.
- - Treasury bills were relatively expensive throughout most of the reporting
period, moving opportunities into other segments of the money market.
PORTFOLIO RECAP FOR THE SIX MONTH PERIOD ENDED 6/30/98
- - The Portfolio stayed within 50 to 60 days to maturity throughout most of the
first six months of 1998.
- - The Portfolio avoided Treasury securities in favor of commercial paper,
floating-rate notes, certificates of deposit, Yankee obligations, and
asset-backed securities.
- - The Portfolio owned only top-tier securities throughout the reporting period.
- - The Portfolio's 2.58% return outperformed the average Lipper(1) money market
portfolio, which returned 2.54% for the six months ended 6/30/98.
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
During the first half of 1998, domestic bond and money markets were largely
influenced by world events. Economic contractions in Asian markets, including
Japan, caused difficulties in markets from Latin America to Russia and China.
One positive outcome has been relatively tame inflation, keeping the Federal
Reserve Board from adjusting domestic interest rates. As a result, interest
rates in general have remained within a relatively narrow range.
With a yield curve that was virtually flat, there were few advantages to
changing average maturity. The average money market portfolio stayed within a
range of 55 to 60 days to maturity throughout the first half of the year. With
the flight to quality surrounding the Asian difficulties and reduced federal
issuance, Treasury bills became somewhat expensive, shifting opportunities to
other market sectors.
WHAT ACCOUNTED FOR THE PORTFOLIO'S ABOVE-AVERAGE PERFORMANCE?
In an environment where the yield curve remains steady and relatively flat,
there was little opportunity to add value by extending maturities. We also
believed that Treasury bills were severely overpriced and avoided them in the
Portfolio. Instead, we looked for securities that offered yield advantages
without taking on substantial risk. We focused on domestic and Yankee financial
issues, corporate and asset-backed commercial paper, and floating rate notes.
Each of these sectors contributed to the Portfolio's above-average performance.
DID THE PORTFOLIO OWN ANY ASIAN SECURITIES?
No. We saw the problems in Asia and avoided their securities entirely. We did,
however, invest the Portfolio's assets in a number of international securities,
primarily Yankee issues of banks and insurance companies. In a low interest rate
environment, we felt financial firms would do well -- and their securities
showed strong performance throughout the reporting period. We selected credits
that were rated AA(2) or better, and the Portfolio remained focused on issuers
we felt had minimal Asian exposure.
DID THE PORTFOLIO FACE ANY CURRENCY RISK?
No. Yankee issues are denominated in dollars, so there's no currency risk.
ARE THERE ANY ADVANTAGES TO GLOBAL DIVERSIFICATION?
By diversifying with strong European issuers, we were able to expand the
Portfolio's horizons beyond domestic securities without increasing its risk. We
believe that diversification is an effective way of seeking to manage risk, so
we believe investors may benefit from global diversification, as long as the
quality remains high.
HOW MUCH DID THE PORTFOLIO INVEST IN COMMERCIAL PAPER?
A significant portion of the Portfolio's assets were invested in commercial
paper, including direct issues by corporations -- and asset-backed issues with
high credit quality, strong cash flows backed by collateral and highly rated
credit enhancement. Commercial paper contributed positively to the Portfolio's
performance.
12
<PAGE> 13
WERE THERE OTHER SECTORS IN WHICH THE PORTFOLIO INVESTED?
Yes, the Portfolio purchased some one-year floating rate notes that we believed
were inexpensively priced relative to commercial paper. The notes helped the
Portfolio's performance and gave us a good way to manage the Portfolio's average
maturity.
DID THE PORTFOLIO INVEST IN CALLABLE CDS OR OTHER ESOTERIC SECURITIES?
While the Portfolio has utilized those securities in the past, they offered few
advantages to issuers or investors during this relatively calm period in the
money markets. So the Portfolio invested primarily in simpler, "plain vanilla"
securities that offered greater liquidity. That decision was positive for the
Portfolio's overall performance.
HOW DO YOU SEEK TO MANAGE RISK IN THE MAINSTAY VP CASH MANAGEMENT PORTFOLIO?
One way is through careful credit analysis. In addition to seeing what the
rating agencies have to say, we watch the performance of corporate issuers in
the stock market. If their stock falters, we use it as a trigger to sell their
debt securities held in the Portfolio. We believe that the stock market can
discount new information much faster than rating agencies can reflect it.
The Portfolio also focuses on securities in the highest rating categories. The
Portfolio did not invest in second-tier issues and split-rated issues. In fact,
the lowest rating on any security the Portfolio owned was A-1/P-1(3) which is
very high. During the reporting period, the Portfolio only invested in top-tier
securities.
WHAT IS YOUR OUTLOOK GOING FORWARD?
Looking ahead, we believe that Asian turmoil, inflation expectations and
reactions to reduced Treasury financing have been almost fully priced into the
market. So we're taking a relatively neutral stand. While we remain bullish over
the long-term, we believe unusual movements in the yield curve and other minor
market fluctuations may present the most obvious opportunities in the next
couple of months. Whatever happens, we will continue to seek high-quality
securities that may provide a high level of current income consistent with
preservation of capital and liquidity.
Ed Munshower
Claude Athaide
Portfolio Managers
MacKay-Shields Financial Corporation
(1) The Lipper Variable Insurance Products Performance Analysis Service
(L-VIPPAS) ranks the portfolios that invest in the separate accounts of
insurance companies. Its rankings are based on total returns with capital
gains and dividends reinvested. Results do not reflect any deduction of
sales charges.
(2) Debt rated AA by Standard & Poor's differs from the highest rated issues
only in small degree.
(3) A Standard & Poor's Corporation Commercial Paper Rating is a current
assessment of the likelihood of timely payment of debt having an original
maturity of no more than 365 days. Issues assigned an A-1 designation
indicates that the degree of safety regarding timely payment is either
overwhelming or very strong. Moody's Investors Services, Inc. employs an
investment grade to indicate the relative repayment capacity of rated
issuers of commercial paper not having an original maturity in excess of
nine months. Issuers rated P-1 (Prime-1) (or related supporting
institutions) have a superior capacity for repayment of short-term
promissory obligations.
Total returns for the Portfolio shown indicate past performance and are not
indicative of future results. Investment return and principal value will
fluctuate so that shares, upon redemption, may be worth more or less than their
original cost. These results do not reflect any deduction of sales charges,
mortality and expense charges, contract charges, or administrative charges.
Please refer to the Performance Summary for returns reflective of these charges.
An investment in the 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.
13
<PAGE> 14
MAINSTAY VP CONVERTIBLE PORTFOLIO
MARKET RECAP FOR THE SIX MONTH PERIOD ENDED 6/30/98
- - During the first half of 1998, domestic stocks and bonds both rallied, with
the S&P 500(1) reaching record highs.
- - In general, convertible securities underperformed equities by a substantial
margin.
- - Convertibles with exposure to Asian markets suffered as demand slackened
throughout the Pacific region.
- - Difficulties among some major high yield issuers led convertible investors to
reevaluate risks.
- - Telecommunications and media mergers pushed valuations to high levels, while
declining oil prices resulted in losses among energy-related issues.
PORTFOLIO RECAP FOR THE SIX MONTH AND ONE YEAR PERIODS ENDED 6/30/98
- - The MainStay VP Convertible Portfolio returned 8.29% for the six month period
ended 6/30/98 and 17.86% for the one year period ended 6/30/98.
- - Careful evaluation of risk and reward helped the Portfolio make sound
investments in a market filled with individual disasters.
- - The Portfolio benefited from convertibles in a wide range of industries, while
energy and commodity holdings underperformed.
- - The Portfolio underperformed the Lipper(2) Specialty/Miscellaneous Average,
which returned 15.95% for the six months ended 6/30/98.
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
The first six months of 1998 provided positive stock market returns. Indeed, the
S&P 500 Index rose more than 17%, reaching record levels by the end of June.
Unfortunately, the convertible bond market didn't keep pace with the equity
market's advance. Problems among certain high yield issuers, notably Sunbeam,
Western Digital, FPA Medical, and Boston Chicken, caused investors to rethink
their risk parameters. Problems in Asian markets also took a toll, with
investors being forced to take losses even in highly liquid names.
As a result, the convertible landscape was strewn with individual disasters,
giving investors added incentive to carefully evaluate both the risk and reward
potential of the securities they selected. Merger and acquisition activity in
the telecommunications, cable and media industries pushed prices to high levels,
increasing the risk parameters of these convertibles, thus reducing the
opportunities in some of the largest sectors of the convertible market.
Declining oil prices caused energy-related issues to underperform and slipping
gold and silver prices caused precious-metal names to show poor performance.
Nevertheless, the market provided a wide range of opportunities among technology
companies, retailers, and other issuers with strong fundamentals and positive
earnings potential.
WHICH SECURITIES WERE THE WORST PERFORMERS DURING THE REPORTING PERIOD?
There were a few high yield issuers that faced serious problems. Sunbeam and FPA
Medical were large issuers whose fundamentals deteriorated. Fortunately, the
Portfolio didn't participate in either of those companies' offerings. Another
troublesome company was Boston Chicken, which the Portfolio held going into the
reporting period. Although we had hoped to see a turn in operations, the
management team failed to fix the company's problems and was eventually fired,
and the convertibles performed very poorly. Although it was the worst holding in
the Portfolio, the position was small and had a 40 basis point impact on overall
performance.
DO YOU CONTINUE TO HOLD BOSTON CHICKEN?
Yes. We believe that the market has overreacted to the company's problems and
anticipate receiving higher values if a restructuring plan is put in place.
WHICH SECURITIES DID THE PORTFOLIO PURCHASE DURING THE REPORTING PERIOD?
World Color Press was one of the Portfolio's biggest purchases and a strong
performer. We liked the company's management, the quality of its printing, and
its reputation in the industry. We had bought and sold the convertibles last
year in profitable transactions. When KKR, a major investor in World Color
Press, elected to sell a portion of its holding, it put pressure on the
convertibles and we were able to make significant purchases over the second
quarter of 1998 at attractive prices. The Portfolio purchased the bonds around
par value and at the end of the reporting period they were trading at a premium,
so they had a significant positive impact on the Portfolio's performance.
14
<PAGE> 15
The Portfolio also bought 6.00% convertible bonds maturing in 2005 from Advanced
Micro Devices (AMD). AMD is the second largest chip manufacturer behind Intel
and had, we believe, an attractive offering in their K6 chip, the company's
answer to Intel's Pentium chip. Unfortunately, as demand in Asian markets
declined, the price of AMD stock went from the mid-20s into the teens. That took
a substantial toll on the Portfolio's performance. The Portfolio continues to
hold the convertibles because they offer a yield to maturity of over 9% and we
believe that they have good price appreciation potential.
DID THE PORTFOLIO HAVE OTHER MAJOR PURCHASES DURING THE FIRST HALF OF 1998?
As prices of Real Estate Investment Trust (REIT) securities declined through the
second quarter, we felt that they were an attractive investment for the
Portfolio based on both yield and valuation. In particular, we believed there
was fundamental value in the retail REIT sector, which was benefiting from
positive trends among major retailers.
In June, the Portfolio purchased a convertible preferred issued by General
Growth Properties, one of the largest owners of shopping malls in the United
States. The preferred issue offered a yield of 7.25%, and a very modest
conversion premium, thus allowing the Portfolio to participate in much of the
positive movement in the stock, with significant downside protection provided
through the yield.
CAN YOU GIVE AN EXAMPLE OF A SECURITY THAT WAS SOLD DURING THE REPORTING PERIOD?
Certainly. A company the Portfolio sold was Cendant, a company that resulted
from the merger of CUC International and HFS. We liked the mandatory convertible
preferreds when the Portfolio purchased them, but during the first half of the
year, questions about accounting irregularities at CUC International resulted in
both the stock and mandatory convertible preferreds being severely punished.
When the stock rebounded, the Portfolio sold the mandatory convertible
preferreds and moved into the convertible bonds, which should provide
significantly greater downside protection if the stock decreases from current
levels.
WHICH SECURITY PROVIDED THE BEST PERFORMANCE FOR THE PORTFOLIO DURING THE FIRST
HALF OF 1998?
The Portfolio did well with Time Warner convertible bonds and preferreds. In the
strong cable and media market, the stock did very well and the convertibles
followed suit. When they rose to the level where they took on the downside
characteristics of equities, we sold the Portfolio's position to reduce the
Portfolio's risk profile and take profits.
WERE THERE OTHER SUCCESS STORIES?
Yes. Newell Financial Trust convertibles moved from around 50 when the Portfolio
bought them last year to around 60 at the end of June 1998. So we pared back on
the Portfolio's position to take profits. Newell is a little-known integrator of
major brand names, from Rolodex and ball point pens to household products. Their
success has come from their ability to streamline manufacturing processes, and
their securities have been positive for the Portfolio.
WERE THERE PORTFOLIO HOLDINGS THAT DID POORLY DURING THE FIRST HALF OF THE YEAR?
Commodity prices, including precious metals, declined substantially during the
reporting period. The Portfolio held Coeur d'Alene Mines, a major name in silver
and gold mining that did poorly as precious metal prices declined.
IS THE PORTFOLIO OVERWEIGHTED OR UNDERWEIGHTED IN ANY SECTORS OF THE MARKET?
Generally speaking, we are bottom-up investors, which means we select securities
for the Portfolio based on their individual merits, rather than on sector
characteristics. Nevertheless, we believe that there is likely to be an upsurge
in real estate companies that service the retail sector. The Portfolio has taken
positions in a number of these real estate companies, and closed the first half
of 1998 overweighted in REIT securities. The Portfolio was also overweighted in
energy, and we believe that the larger energy companies may provide better
performance and more resilience to market forces.
The Portfolio ended the first half underweighted in media, which we believe is
overvalued. The Portfolio is also underweighted in steel, as metals and heavy
manufacturing have both shown weakness in recent months, particularly with the
General Motors strike situation.
WHAT IS YOUR OUTLOOK GOING FORWARD?
We continue to remain cautious about the potential for credit problems. Having
seen problems in several high yield issuers, we will continue to do careful
credit research before we invest. The disjointed, sector specific
15
<PAGE> 16
behavior of the market may pose both opportunities and hazards going forward.
Going into the third quarter, we're beginning to find potential opportunities
among so-called busted converts, which trade like income securities because
their stock price has fallen significantly.
We will continue to focus on both the risk and reward characteristics of all the
securities we consider as we seek capital appreciation together with current
income.
Denis Laplaige
Neil Feinberg
Thomas Wynn
Portfolio Managers
MacKay-Shields Financial Corporation
(1) "Standard and Poor's 500 Composite Stock Price Index(R)" and "S&P 500(R)"
are registered trademarks of The McGraw-Hill Companies, Inc. The MainStay VP
Series Fund, Inc. is not sponsored, endorsed, sold or promoted by Standard &
Poor's Corporation. The S&P 500 is an unmanaged index considered generally
representative of the U.S. stock market. Results assume the reinvestment of
all income and capital gains distributions.
(2) The Lipper Variable Insurance Products Performance Analysis Service
(L-VIPPAS) ranks the portfolios that invest in the separate accounts of
insurance companies. Its rankings are based on total returns with capital
gains and dividends reinvested. Results do not reflect any deduction of
sales charges.
Total returns for the Portfolio shown indicate past performance and are not
indicative of future results. Investment return and principal value will
fluctuate so that shares, upon redemption, may be worth more or less than their
original cost. These results do not reflect any deduction of sales charges,
mortality and expense charges, contract charges, or administrative charges.
Please refer to the Performance Summary for returns reflective of these charges.
Certain of the Portfolio's investments have speculative characteristics.
16
<PAGE> 17
MAINSTAY VP GOVERNMENT PORTFOLIO
MARKET RECAP FOR THE SIX MONTH PERIOD ENDED 6/30/98
- - Domestic bond markets were influenced by Asian economic contractions, a solid
U.S. economy, and relatively tame inflation during the first six months of
1998.
- - During the reporting period, the market experienced low volatility and a
flattening yield curve in the second quarter.
- - Although 30-year Treasury bond yields declined to record levels in June,
overall, yields tended to remain in a relatively narrow range.
- - Mortgage prepayments came in waves with minor shifts in interest rates over
the reporting period.
PORTFOLIO RECAP FOR THE SIX MONTH AND ONE YEAR PERIODS ENDED 6/30/98
- - The MainStay VP Government Portfolio returned 4.15% for the six month period
ended 6/30/98 and 11.22% for the one year period ended 6/30/98.
- - The Portfolio benefited by shifting from long to neutral duration in both the
first and second quarters of 1998.
- - In the Treasury market, moving between newer and older issues provided
opportunities to enhance returns.
- - Shifting the Portfolio's concentration in mortgage-backed securities also
benefited the Portfolio, although being overweighted at the end of the second
quarter had a negative impact on performance.
- - The Portfolio outperformed the average Lipper(1) general U.S. government
portfolio, which returned 3.68% for the six months ended 6/30/98.
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
During the first half of 1998, the domestic bond markets were largely influenced
by world events. Economic contractions in Asian markets, including Japan, caused
difficulties in markets from Latin America to Russia and China. One positive
outcome has been relatively tame inflation, which has kept the Federal Reserve
Board from adjusting domestic interest rates. As a result, interest rates in
general have remained within a relatively narrow range, with 2-year Treasuries
declining just 16 basis points over the first half of the year, and 30-year
Treasuries remaining flat in the first quarter, but declining 30 basis points in
the second quarter of 1998.
The market has begun to see a reawakening of investors to the fixed-income
market. Broad market returns exceeded 10% over the past year, returns equity
market participants would have expected before the strong bull equity market of
the past three years. Given the past two of three quarters, bond returns were in
line or exceeded stock returns and investors have responded by increasing their
allocation back to bonds.
The price rally led to a flattening yield curve, which presented some
opportunities from a technically oriented viewpoint and supply dynamics,
creating trading opportunities among newer and older issues. Higher-coupon
mortgage-backed securities saw high prepayments early in the year, creating
buying opportunities. Overall, however, Treasuries tended to outperform other
sectors over the first half of the year.
WHAT ACCOUNTED FOR THE PORTFOLIO'S STRONG PERFORMANCE?
The Portfolio's duration strategy benefited performance throughout the reporting
period. Given our strategically bullish outlook, we kept the Portfolio's
duration in the neutral to long range. Over the reporting period, the Portfolio
was neutral as rates headed higher and longer as rates were declining.
Another factor that helped the Portfolio outperform its peers was the yield
curve. In the first quarter, the yield curve was unchanged, so the Portfolio had
no opportunity to add value there. But in the second quarter, the curve
flattened about 20 basis points. Because the Portfolio was very heavily
concentrated in the back end of the market, it was able to draw substantial
benefit from the rally in 30-year Treasury bonds, compared to portfolios with
investments more evenly spread across various maturities.
WERE THERE SPECIFIC STRATEGIES YOU USED TO ADD VALUE TO THE PORTFOLIO DURING THE
REPORTING PERIOD?
Yes. We added value to the Portfolio through specific security selection in the
Treasury market. Using a variety of technical indicators, we moved between newer
and older issues to take advantage of shifting supply dynamics. The result was
an incremental increase in return. Older Treasuries added value in the beginning
part of both the first and second quarters, newer securities in the latter part
of each quarter. Over the period, the strategy had a positive impact on the
Portfolio's performance.
17
<PAGE> 18
WHAT HAPPENED IN THE MARKET FOR MORTGAGE-BACKED SECURITIES?
At the beginning of the year, the Portfolio was underweighted in higher-coupon
mortgage-backed securities. At the time, we anticipated a surge in prepayments
and believed that mortgage-related bonds would underperform. That's exactly what
happened and our decision to reduce exposure to high-coupon mortgage securities
had a positive impact on performance.
After the prepayments rose, we increased the Portfolio's exposure to mortgage
securities, feeling that at their adjusted price levels they had appreciation
potential. At that point, we focused primarily on commercial mortgages, for a
couple of reasons. First, new issuance was heavy, but demand was not, which
tended to force prices down to attractive levels. We also liked commercial
mortgages because we believed they carried less risk of prepayments if interest
rates continued to decline.
WHAT WAS THE IMPACT ON THE PORTFOLIO'S PERFORMANCE?
As the market began to rally in the second quarter of 1998, we pared back on the
Portfolio's positions to take profits. Naturally, that was positive for the
Portfolio's performance. But the Portfolio remained overweighted in
mortgage-backed securities in the latter part of the second quarter, which hurt
performance a bit when a second wave of prepayments began.
As it happens, the Portfolio had invested in coupons that were relatively
insensitive to prepayment risk, but as the mortgage market in general
underperformed, we believe we missed some of the opportunities that were
available in the Treasury market.
DID THE PORTFOLIO MAKE ANY DRAMATIC SHIFTS IN ITS SECTOR ALLOCATIONS DURING THE
REPORTING PERIOD?
Not really. Overall, the Portfolio decreased its weighting in mortgages from
14.1% of net assets at the beginning of the year to about 13.5% at the end of
the first half of 1998. The allocation to Treasuries and agencies was increased
slightly, and the Portfolio's weighting in variable rate notes increased.
HAS THE PORTFOLIO MAINTAINED ITS HIGH QUALITY RATING?
Yes, it has. The overall credit quality of the Portfolio's investment portfolio
is agency,(2) which is better than AAA.(3) As we seek opportunities for the
Portfolio, we try to keep the Portfolio in the highest-quality securities to
avoid exposing the Portfolio's shareholders to unnecessary credit risks. We're
pleased with the Portfolio's recent performance, because we believe it has
provided investors with higher-than-average returns with lower-than-average risk
in the government securities market.
WHAT IS YOUR OUTLOOK FOR THE FUTURE?
We believe that the major factors influencing our strategy over the past
year -- Asian turmoil, inflation expectations, and reactions to the reduced
Treasury financing -- have been almost fully priced into the market. While we
remain bullish on bonds for the longer term, as we start the third quarter, we
are taking a more neutral strategy for the Portfolio. We believe that the
changes in the Treasury's financing calendar, given the budget surplus, may
provide opportunities along the curve. We also see potential opportunities in
mortgages that have low probabilities of refinancing.
Whatever happens, we will continue to seek securities that offer a high level of
current income, consistent with safety of principal.
Ravi Akhoury
Edward Munshower
Portfolio Managers
MacKay-Shields Financial Corporation
(1) The Lipper Variable Insurance Products Performance Analysis Service
(L-VIPPAS) ranks the portfolios that invest in the separate accounts of
insurance companies. Its rankings are based on total returns with capital
gains and dividends reinvested. Results do not reflect any deduction of
sales charges.
(2) Agency rating is above AAA. Currently, debt rated AAA has the highest rating
assigned by Standard & Poor's. These ratings are based solely on the
creditworthiness of the bonds in the Portfolio and are not meant to
represent the stability or safety of the Portfolio.
(3) Debt rated AAA has the highest rating assigned by Standard & Poor's.
Total returns for the Portfolio shown indicate past performance and are not
indicative of future results. Investment return and principal value will
fluctuate so that shares, upon redemption, may be worth more or less than their
original cost. These results do not reflect any deduction of sales charges,
mortality and expense charges, contract charges, or administrative charges.
Please refer to the Performance Summary for returns reflective of these charges.
18
<PAGE> 19
MAINSTAY VP HIGH YIELD CORPORATE BOND PORTFOLIO
MARKET RECAP FOR THE SIX MONTH PERIOD ENDED 6/30/98
- - A robust economy, with low interest rates, modest inflation, and low
unemployment helped most bond markets provide strong performance in the first
six months of 1998.
- - In June, the yields on 30-year Treasury bonds declined to all-time lows,
moving prices higher for most income securities.
- - While yield spreads remained narrow through most of the reporting period,
spreads widened in June, expanding the return potential of lower-rated bonds.
- - Telecommunications and media continued to account for a substantial percentage
of new issuance in the high yield market.
- - Record inflows continued to strengthen the high yield market throughout the
reporting period.
PORTFOLIO RECAP FOR THE SIX MONTH AND ONE YEAR PERIODS ENDED 6/30/98
- - The MainStay VP High Yield Corporate Bond Portfolio returned 5.48% for the six
month period ended 6/30/98 and 11.53% for the one year period ended 6/30/98.
- - As of 6/30/98, the Portfolio was rated five stars overall by Morningstar,
Inc.(1)
- - The Portfolio benefited from individual security selection in higher-quality
high yield bonds and increased holdings among bonds rated B(2) as spreads
widened in June.
- - The Portfolio benefited from being overweighted in industrials, media, from
selected holdings in telecommunications and from being underweighted in
cyclicals and commodity-related issues.
- - Looking ahead, the Portfolio has maintained its exposure to Asian markets and
decreased its equity holdings.
- - The Portfolio outperformed the average Lipper(3) high current yield portfolio,
which returned 4.58% for the six months ended 6/30/98.
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
During the first six months of 1998, the high yield bond market benefited from
the strength of the economy, benign inflation, and generally low interest rates.
Given the difficulties in Asia, it appeared unlikely that inflation would become
a problem, and the Federal Reserve Board did not move to affect interest rates.
Even so, in June, 30-year Treasury yields dropped to all-time lows, which helped
raise prices in most bond sectors.
Yield spreads, which were generally tight throughout the reporting period, began
to widen in the second quarter of 1998. This increased the return potential of
lower-rated securities, which had previously been low relative to inherent risk.
While default rates increased slightly during the reporting period, they
remained low relative to historical standards.
During the reporting period, new issuance remained strong among media and
telecommunications companies, but many of the securities appeared to be
overpriced. Asian difficulties led to widening spreads, creating opportunities
among issuers with strong fundamentals and adequate cash flow to service their
debt.
WHAT WAS THE PRIMARY REASON THE PORTFOLIO OUTPERFORMED ITS PEERS?
Strategic security selection. In evaluating high yield securities, we consider a
number of factors beyond just the yield. We consider the quality of the company,
its ability to cover its debt, and the amount of risk it might face in the event
of an economic downturn. During the reporting period, we were relatively
risk-averse for the Portfolio, stressing the upper quality tiers in the high
yield universe. As it happens, many of the securities we selected for the
Portfolio performed very well during the reporting period, particularly as the
markets reacted to Asian difficulties by preferring higher-quality issues.
The Portfolio also avoided much of the new issuance in the media and
telecommunications area, which we felt was overpriced. Instead, we concentrated
the Portfolio's telecommunications holdings in a few companies that we believed
had strong potential and outperformed the telecommunications sector as a whole.
DID THE PORTFOLIO OWN ANY TELECOMMUNICATIONS COMPANIES?
A good example of one would be CD Radio, a satellite company that proposes to do
for radio what Direct TV did for the television market. It plans to introduce
national satellite radio, which is an entirely new concept and one we believed
the market would find attractive. Since the company's bonds were the Portfolio's
top performers, our security selection proved beneficial for the Portfolio.
19
<PAGE> 20
DID THE PORTFOLIO OWN OTHER SECURITIES THAT SHOWED STRONG PERFORMANCE DURING THE
FIRST HALF OF 1998?
Absolutely. The Portfolio benefited from Seven Sixty Seven Leasing paper, which
was a secured aircraft lease backed by 767s for TWA. The issuer bought back the
bonds from the Portfolio at a significant premium, which contributed positively
to performance.
During the reporting period, the Portfolio purchased bonds in UIH Australia
Pacific, which is a beneficiary of the consolidating Australian cable market,
and both securities contributed positively to performance. The Portfolio also
owned both stock and high yield bonds for Quest Diagnostics, a lab testing
company that we felt had outstanding potential and our judgment proved correct.
WHAT SECURITIES DID THE PORTFOLIO PURCHASE DURING THE REPORTING PERIOD?
The Portfolio purchased Octel Developments, a specialty chemicals company that
was spun off from Great Lakes Chemical. The company's bonds were attractive to
us, offering a combination of risk and reward -- characteristics we felt would
be positive going forward.
We were also attracted to Jafra Cosmetics International for the Portfolio, which
is a direct seller of cosmetic products in the United States, Mexico, and
Germany. The company is run by former senior managers from Mary Kay and Avon,
which we believe can help the company rapidly increase its market share.
The Portfolio purchased a convertible security from Cirrus Logic, a technology
company that makes chips and crystals and has very strong asset coverage. All of
these securities contributed positively to performance during the reporting
period.
DID THE PORTFOLIO PURCHASE ANY SECURITIES IN EMERGING MARKETS?
Yes. The Portfolio purchased bonds of Conproca and Hutchison Whampoa. Hutchison
Whampoa is a leading Hong Kong conglomerate with investments in
telecommunications, media, finance, and property. This investment is viewed as
particularly attractive given Hutchison's large U.S. cash position and the fact
that many of its assets are outside of Asia.
In late 1997, the Portfolio purchased another bond, issued by First Pacific
Capital, a successful Hong Kong conglomerate. During the first half of 1998, the
company completed an asset sale and showed strong bond performance as its debt
coverage increased. We increased the Portfolio's position in First Pacific
Capital during the reporting period, and the bonds have contributed positively
to performance.
WHICH SECURITIES DID THE PORTFOLIO SELL DURING THE REPORTING PERIOD?
The Portfolio had a number of successful sales during the first half of 1998.
The largest was Viacom, where we cut the Portfolio's position in half to take
profits. We bought and sold Columbia/HCA Healthcare during the reporting period,
which had a positive impact on performance.
In addition, we trimmed back on some of the Portfolio's higher quality holdings
as spreads began to widen and we believed there was greater opportunity in lower
quality securities.
CAN YOU EXPLAIN WHAT YOU MEAN BY A GREATER OPPORTUNITY IN LOWER QUALITY
SECURITIES?
Certainly. Last year, with relatively tight yield spreads between securities
rated BB(4) and B, we elected to invest the Portfolio primarily in the
higher-rated bonds, simply because we didn't feel that investors were being
adequately compensated for taking on additional risk. As yield spreads widened
during the reporting period, however, we decided that the compensation for
additional risk was in a more favorable range, and started to increase the
Portfolio's holdings in the single-B category.
WOULDN'T YOU HAVE BEEN BETTER OFF WITH SINGLE-B SECURITIES ALL ALONG?
During the reporting period, the yield advantage was only about 40 basis points.
But we look at more than just yield. We continue to believe that we're in the
late stages of a credit cycle and that high yield securities, by their very
nature, carry additional risks for which investors should receive adequate
compensation.
As it happens, even with the Portfolio's concentration in higher quality
securities, it was able to outperform the average Lipper high current yield
portfolio. In other words, the Portfolio was able to provide higher returns with
lower-than-average risk. We believe that's the kind of portfolio management
investors like to see.
DID THE PORTFOLIO'S SECTOR WEIGHTINGS HAVE A SIGNIFICANT IMPACT ON PERFORMANCE?
To answer that question, we need to point out that we're bottom-up investors,
evaluating securities one-by-one on their fundamental characteristics and
individual merits. Each of the Portfolio's sector weightings is a direct
20
<PAGE> 21
result of this bottom-up investment process, which seeks to identify companies
with attractive returns, well-priced securities and a catalyst or stimulus for
improvement in the future.
With that in mind, the Portfolio did benefit from being overweighted in
industrials, media and emerging markets -- and from being underweighted in
telecommunications, where most securities were overpriced; commodities, where
prices were declining; and cyclicals, which were generally out of favor.
As we head into the second half of the year, we have reallocated the Portfolio's
assets, seeking to take advantage of strong asset coverage in the energy sector.
The Portfolio continues to be overweighted in media and emerging markets, and we
have strengthened the Portfolio's exposure in shipping.
WITH LOW OIL PRICES AND CONTINUING PROBLEMS IN ASIA, ISN'T THE PORTFOLIO TAKING
ON ADDITIONAL RISK?
Perhaps, but calculating the relationship between risk and reward is what high
yield investing is all about. We have already shown that selective
emerging-market investments can be beneficial, despite problems in Asia.
Although oil prices remain low and could even go lower, we believe the energy
companies in which the Portfolio is investing have more than adequate ability to
service their debt and we have purchased securities for the Portfolio at very
attractive prices.
Perhaps the biggest risk the Portfolio may face going forward is in being
underweighted in equities. If the stock market continues to climb, the Portfolio
could underperform its peers as a result. But we believe that the Portfolio is
well positioned given the company fundamentals, security prices, and inherent
risks in the market at the end of June.
WHAT IS YOUR OUTLOOK FOR THE FUTURE?
We believe the high yield market continues to offer opportunities and that
widening spreads may make lower-rated securities increasingly attractive. We
continue to be underweighted in telecommunications in the Portfolio because we
don't see attractive values there, and as long as steel and other commodities
demonstrate weakness, we're unlikely to move the Portfolio in that direction. We
continue to evaluate the relationship between risk and reward, both at home and
abroad, measuring asset coverage and free cash flow seeking to discover value
opportunities in the high yield bond market.
No matter how the markets may move, the Portfolio will continue to seek maximum
current income through investment in a diversified portfolio of high yield debt
securities.
Denis Laplaige
Steven Tananbaum
Portfolio Managers
MacKay-Shields Financial Corporation
(1) Morningstar, Inc. is an independent fund performance monitor. Its ratings
reflect historic risk-adjusted performance, taking fees and sales charges
into account, and may change monthly. Its ratings of 1 (low) and 5 (high)
stars are based on a fund's three- and five-year average annual returns with
fee adjustments, and a risk factor that reflects fund performance relative
to 3-month Treasury bill monthly returns. The top 10% of funds in a rating
group may receive 5 stars, the next 22.5% receive 4 stars, the middle 35%
receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive
1 star. Portfolios are not rated until they have three years of performance
history.
(2) Debt rated B by Standard & Poor's is more vulnerable to nonpayment than
obligations rated BB, but the obligor currently has the capacity to meet its
financial commitment on the obligation. Adverse business, financial or
economic conditions will likely impair the obligor's capacity to meet its
financial commitment on the obligation.
(3) The Lipper Variable Insurance Products Performance Analysis Service
(L-VIPPAS) ranks the portfolios that invest in the separate accounts of
insurance companies. Its rankings are based on total returns with capital
gains and dividends reinvested. Results do not reflect any deduction of
sales charges.
(4) Debt rated BB by Standard & Poor's is less vulnerable to nonpayment than
other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial or economic conditions which could
lead to the obligor's capacity to meet its financial commitment on the
obligation.
Total returns for the Portfolio shown indicate past performance and are not
indicative of future results. Investment return and principal value will
fluctuate so that shares, upon redemption, may be worth more or less than their
original cost. These results do not reflect any deduction of sales charges,
mortality and expense charges, contract charges, or administrative charges.
Please refer to the Performance Summary for returns reflective of these charges.
Certain of the Portfolio's investments have speculative characteristics.
21
<PAGE> 22
MAINSTAY VP INTERNATIONAL EQUITY PORTFOLIO
MARKET RECAP FOR THE SIX MONTH PERIOD ENDED 6/30/98
- - International markets were divided in the first six months of 1998, with most
Asian stock markets down and most European markets providing positive returns.
- - Australia and New Zealand stock performance deteriorated along with Asian
markets, as problems intensified by declining prices in gold and other
commodities.
- - In the United Kingdom (U.K.), the central bank increased interest rates to
slow economic growth, which made it more difficult for Britain to compete in
the export market.
- - Overall, the Morgan Stanley Capital International (MSCI) EAFE Index(1) was up
15.93% for the six months ended June 30, 1998.
PORTFOLIO RECAP FOR THE SIX MONTH AND ONE YEAR PERIODS ENDED 6/30/98
- - The MainStay VP International Equity Portfolio returned 18.57% for the six
month period ended 6/30/98 and 12.54% for the one year period ended 6/30/98.
- - The Portfolio outperformed the MSCI EAFE Index, which returned 15.93% during
the six month reporting period.
- - The Portfolio benefited by shifting assets out of Asian markets and increasing
its weightings in core European markets.
- - The Portfolio outperformed the average Lipper(2) international portfolio,
which returned 16.25% for the six months ended 6/30/98.
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
International equity markets showed highly divergent performance during the
first six months of 1998, with Europe outperforming and Asian markets continuing
to deteriorate. Japan officially announced that it was in recession, and the
Hong Kong stock market fell 26% in local currency terms during the reporting
period. Asian emerging markets had even more severe setbacks. Australia and New
Zealand, whose economies are largely dependent on commodities and Asian
commerce, also fared poorly.
European stocks, on the other hand, surged ahead, with several markets posting
double digit returns in the first half of the year. Finland was up 66.8% and
Spain rose 44.5%, both in local terms, during the reporting period. Other
European markets also had excellent performance, buoyed by low interest rates,
low inflation, ongoing restructuring, and merger and acquisition activity
related to the European Monetary Union (EMU).
In an effort to slow rapid growth, the Bank of England raised interest rates,
which dampened the competitive environment for British exports and raised
concerns about U.K. equities. Although the U.K. will not be among the initial
participants in the EMU, in the future its stock market may move more
independently. Over the reporting period, the U.K. stock market advanced 14.1%
in local terms.
WHY WAS THE PORTFOLIO ABLE TO OUTPERFORM ITS PEERS?
The Portfolio came into 1998 well positioned for the market environment. Given
the continuing deterioration in Asian markets during the first six months of
1998, we decided to reduce the Portfolio's Asian exposure, which had a positive
impact on performance. The proceeds of those sales were invested primarily in
core European markets, which also had a positive effect. In this respect, our
investment approach of focusing on strict country selection served the Portfolio
very well. We also benefited from individual security selection within several
European markets and Japan.
WHICH COUNTRIES PROVIDED THE BEST RESULTS FOR THE PORTFOLIO?
In Europe, the best performing markets in which the Portfolio invested were
Spain -- up 44.5%, Belgium -- up 43.9%, France -- up 39.4%, Germany -- up 37.0%,
and Italy -- up 33.9%, all in local terms. Unfortunately, the Portfolio was not
invested in Finland, which was up 66.8% in local terms during the reporting
period. Finland's stock market performance was largely the result of a single
stock, Nokia, a telecommunications company. We felt that an overheating Finnish
economy and the rapid expansion of this single stock made Finland a high-risk
market. Concerned about its pace of economic growth, the Bank of Finland raised
interest rates to slow growth and control inflation.
22
<PAGE> 23
WHICH MARKETS WERE THE WORST PERFORMERS DURING THE REPORTING PERIOD?
Fortunately, the Portfolio was not invested in the worst of the Asian markets.
We did, however, have substantial investments in Japan, which was up 4.0% in
local terms, but down 2.6% in U.S. dollar terms.
DID YOU CHANGE THE PORTFOLIO'S WEIGHTINGS SIGNIFICANTLY DURING THE FIRST SIX
MONTHS OF 1998?
Yes. We went from a neutral weighting in Europe to a heavily overweighted
position of about 82% of the Portfolio's total net assets. At the same time, we
substantially reduced Asian and Japanese holdings to just 8.5% of the
Portfolio's total net assets. In doing so, we sold 5.6% of the Portfolio's total
net assets, and raised German investments from 10.2% to 14.7% of the Portfolio's
total net assets. We increased the Portfolio's holdings in the Netherlands from
3.2% to 8.4% of total net assets. We also increased overall weightings in
Belgium and France.
HOW DID THE PORTFOLIO'S CURRENCY EXPOSURE AFFECT PERFORMANCE?
As the dollar rose relative to many foreign currencies, the Portfolio had
opportunities and disappointments. We took advantage of some volatile periods to
increase currency exposure in selected European markets, which had a modestly
positive impact on the Portfolio's performance. During the first six months of
1998, the Portfolio also had some exposure to the Japanese yen and Australian
dollar which had a negative impact on performance. Foreign exchange parity
levels have been established in Europe Monetary Union countries, and beginning
in 1999, exchange rates will play less of a role in investment decision making
in those nations.
WHICH SECURITIES IN THE PORTFOLIO WERE AMONG THE BEST PERFORMERS?
Olivetti Group is an Italian company that manufactures office and computer
equipment and provides telecommunications services in several countries. In the
second quarter of 1998, Olivetti Computers Worldwide, a subsidiary of Olivetti
Group, announced two powerful new servers, offering advantages over existing
corporate computer systems. The stock soared 195.2% in local terms over the
first half of the year.
Another stellar performer was KBC Bancassurance Holding, a Belgian financial
services holding company that moved to create a financial service giant,
including Kredietbank, Cera Bank, and ABB, an insurance group. In the first six
months of 1998, the stock rose 114.1% in local terms.
Mannesmann, an industrial products, machinery, and equipment manufacturer rose
104.1% in local terms after completing a $1.85 billion secondary offering to
expand its telecommunications operations in France and Italy. Another
multi-industry stock that was among the Portfolio's top performers included
Vodafone Group, up 71.5% in local terms. In addition, Telefonica and British
Telecom, telecommunications stocks, were up 67.7% and 54.6%, respectively, in
local terms.
WERE THERE OTHER OUTSTANDING PERFORMERS?
Yes. News Corp. is an international media company that grew 55.6% in local
terms, benefiting from existing operations and the formation of a multimedia
distributor in the United States.
Despite setbacks in Japan, the Portfolio benefited from individual stock
selection with Kawasaki Steel, up 40.4% in local terms, as a prime example.
DID ALL OF THE PORTFOLIO'S STOCKS DO THAT WELL?
No. Japanese retailer, Daiei, posted its first-ever pretax loss last year and
reversed its long-standing policy of not closing stores that generated losses.
The stock fell 39.8% in local terms during the reporting period. Nissan Motor
decided to reorganize and restructure to improve productivity and product
development. But in the meantime, the stock lost 19.1% in local terms. Tokyu,
Tokyo's leading railway company, felt the pressure of the nation's recession and
fell 16.5% in local terms, with the impact felt across all lines of business,
including real estate leasing and hotel operations.
WHAT PROMPTED YOU TO SELL SECURITIES IN THE PORTFOLIO?
As previously noted, we reduced the Portfolio's Asian exposure and increased its
European holdings to avoid problem areas and invest where we felt prospects for
growth were more attractive. We also reduced the Portfolio's holdings in
Australia as we saw the potential impact of declining gold and commodity prices.
Both of these moves were positive for the Portfolio's performance.
Although Spain was up 44.5% over the first six months of 1998, we decreased the
Portfolio's Spanish holdings to a minimal weighting in the second quarter to
take profits and invest assets where we believed they could do more good. Since
Spain only advanced 1.6% during the second quarter, this decision was also
positive for the Portfolio's performance.
23
<PAGE> 24
WHAT IS YOUR OUTLOOK GOING FORWARD?
We continue to view Asia as a problem area, but even difficult markets can
provide opportunities for forward-thinking companies. The Japanese economy has
continued to disappoint us, but we believe that the strongest companies may be
the best performers there.
As EMU approaches, we remain relatively bullish on Europe, where we believe
restructurings, mergers, and strategic acquisitions will continue to abound. The
Portfolio will continue to seek long-term growth of capital commensurate with an
acceptable level of risk by investing in a wide array of non-U.S. equity
securities. As always, current income will remain a secondary objective.
Shigemi Takagi
Portfolio Manager
MacKay-Shields Financial Corporation
(1) Morgan Stanley Capital International EAFE Index is an unmanaged index of the
securities of over 1,000 companies traded on the markets of Europe,
Australia, New Zealand and the Far East.
(2) The Lipper Variable Insurance Products Performance Analysis Service
(L-VIPPAS) ranks the portfolios that invest in the separate accounts of
insurance companies. Its rankings are based on total returns with capital
gains and dividends reinvested. Results do not reflect any deduction of
sales charges.
Total returns for the Portfolio shown indicate past performance and are not
indicative of future results. Investment return and principal value will
fluctuate so that shares, upon redemption, may be worth more or less than their
original cost. These results do not reflect any deduction of sales charges,
mortality and expense charges, contract charges, or administrative charges.
Please refer to the Performance Summary for returns reflective of these charges.
Investments in foreign securities may be subject to greater risks than domestic
investments. These risks include fluctuations, changes in U.S. or foreign tax or
currency laws, and changes in monetary policies and economic and political
conditions in foreign countries.
24
<PAGE> 25
MAINSTAY VP TOTAL RETURN PORTFOLIO
MARKET RECAP FOR THE SIX MONTH PERIOD ENDED 6/30/98
- - A robust economy, declining interest rates, modest inflation, and low
unemployment moved both stocks and bonds higher in the first six months of
1998.
- - Weaknesses in Asian economies caused a flight to quality bonds and highly
liquid stocks that investors felt could perform relatively well in the event
of an economic downturn.
- - Merger and acquisition activity was strong, helping the S&P 500(1) advance to
record levels in June.
- - Although 30-year Treasury bond yields declined to record levels in June,
overall, yields in all domestic bond sectors tended to remain in a relatively
narrow range.
PORTFOLIO RECAP FOR THE SIX MONTH AND ONE YEAR PERIODS ENDED 6/30/98
- - The MainStay VP Total Return Portfolio returned 13.46% for the six month
period ended 6/30/98 and 22.58% for the one year period ended 6/30/98.
- - The Portfolio benefited from individual security selection among financial and
consumer retail stocks, and reduced its technology and energy holdings.
- - The Portfolio enhanced returns with a shifting duration strategy and strategic
swaps in Treasuries, mortgage-backed securities and corporate bonds.
- - The Portfolio outperformed the average Lipper(2) balanced portfolio, which
returned 9.61% for the six months ended 6/30/98.
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
With U.S. gross domestic product increasing more than anticipated in the first
half of 1998, the U.S. stock market enjoyed robust returns. Declining interest
rates, benign inflation, low unemployment, and a rallying bond market were among
the many factors that influenced investors during the reporting period.
A number of factors combined to focus investor attention on large-capitalization
growth stocks. Continuing difficulties in Asian markets spread to China, Latin
America, and Russia, causing a flight to quality in domestic issues and highly
liquid securities. Technology companies weakened on Asian setbacks, and
declining oil prices caused energy issues to underperform.
Asian problems helped keep the Federal Reserve Board from adjusting domestic
interest rates. As a result, interest rates in general have remained within a
relatively narrow range, with 2-year Treasuries declining just 16 basis points
over the first half of the year, and 30-year Treasuries remaining flat in the
first quarter, but declining 30 basis points in the second quarter of 1998. The
price rally led to a flattening yield curve, which presented some opportunities.
The budget surplus shifted supply dynamics among Treasuries. Mortgage-backed
securities saw high prepayments early in the year, creating buying
opportunities. Corporate bonds suffered from oversupply and widening yield
spreads, which made them an underperforming sector relative to the market as a
whole.
WHY WAS THE PORTFOLIO ABLE TO OUTPERFORM ITS PEERS?
The Portfolio benefited from strong security selection, strategic sales, and
strong performance among many of its core holdings in both the equity and income
components. As Asian difficulties continued, the Portfolio's domestic retail
stocks provided strong performance. We also reduced the Portfolio's technology
holdings and energy stocks, but bought stocks for the Portfolio or increased the
Portfolio's position among proprietary product providers. Reducing oil service
stock holdings helped us control the impact of lower oil prices on the
Portfolio's performance.
In the income component, the Portfolio benefited from its duration strategy,
moving from slightly long to neutral in both quarters, which had a positive
impact on performance. Among Treasuries, the Portfolio used a variety of
technical indicators for strategic trading between newer and older issues. In
the mortgage market, we successfully anticipated mortgage prepayments which
helped the Portfolio's performance. In the second quarter, the yield curve
flattened about 20 basis points. Our concentration in the back end of the market
allowed the Portfolio to benefit strongly from the rally in 30-year Treasury
bonds.
WHAT WERE SOME OF THE PORTFOLIO'S SIGNIFICANT STOCK PURCHASES DURING THE
REPORTING PERIOD?
The Portfolio bought EMC Corp. (EMC), a corporate data storage provider that has
had a consistent growth record, selling 3Com to make the purchase. The move
reduced technology holdings that concentrated on commodity-type products such as
memory chips and adapter cards and increased exposure to companies with
25
<PAGE> 26
their own proprietary products and services. EMC rose 63% in the first half of
1998 and had a positive impact on performance.
The Portfolio also purchased Pfizer, which had a slightly negative impact on
performance as the company's shareholders took profits in the stock. We believe,
however, that the stock is well positioned for the coming months. The Portfolio
bought and sold Disney on changing fundamentals, with a slightly negative impact
on performance, and had positive results from Colgate-Palmolive, which is
benefiting from cost cutting, dependable earnings, and steady revenue growth
from its new toothpaste called Total.
WERE THERE ANY SIGNIFICANT SALES DURING THE REPORTING PERIOD?
The Portfolio sold Adaptec when its fundamentals deteriorated due to Asian
difficulties and a slowdown in earnings. The stock declined 40% during the first
half of 1998.
Declining interest rates had a negative impact on mortgage insurer, MGIC
Investment, and the Portfolio sold the stock late in the second quarter of 1998
to take profits earned over the years. The Portfolio also sold Mattel at a
profit, when Barbie sales declined, Toys "R" Us cut back its inventory, and Tyco
earnings estimates were disappointing. The sale had a positive impact on the
Portfolio's performance.
The Portfolio also sold Diamond Offshore Drilling and ENSCO International, two
oil service companies, as oil prices continued to decline. These stocks had a
negative impact on the Portfolio, so we viewed the sales as a positive move.
WHICH STOCKS WERE THE PORTFOLIO'S BEST PERFORMERS?
Lucent Technologies was up 108.6% in the first half of the year and had a
positive impact on the Portfolio's performance, as the company won
telecommunications contracts and built on its already strong fundamentals.
Tyco International is a conglomerate with holdings in fire retardation, security
systems, fiber optic cable, and health care. The company bought ADT Limited and
Sherwood Davis, a medical device manufacturer, and advanced nearly 40%, with a
positive impact on the Portfolio's performance.
Schering-Plough is a premier pharmaceutical company, which had outstanding sales
growth from Claritin, a product for allergy sufferers. The Portfolio benefited
as the stock rose 48.3% during the reporting period.
WERE THERE OTHER STOCKS THAT PERFORMED WELL FOR THE PORTFOLIO?
Yes. Several of the Portfolio's stocks benefited from investors' focus on purely
domestic retailers. Kohl's rose 52% during the reporting period, Staples was up
56%, and Home Depot rose 41%. In the financial sector, the Portfolio had
positive results with SunAmerica, a retirement annuity provider that rose 35%
during the reporting period. In the communications area, the first-quarter
announcement that WorldCom would purchase MCI -- a telecommunications,
long-distance, local, and Internet provider -- caused WorldCom stock to rise 60%
during the first half of the year.
WERE THERE NAMES THAT DETRACTED FROM THE PORTFOLIO'S PERFORMANCE?
Cendant was a stock the Portfolio owned that suffered a major setback when
accounting practices at one of its component companies came into question in
April. The stock price was cut in half and had a negative impact on performance.
We believe the business units have robust trends and are in vibrant sectors such
as housing and travel, so as of the end of June, the Portfolio continues to hold
the stock. We already mentioned Adaptec and MGIC Investment, which were negative
performers. Eli Lilly also underperformed expectations, when its osteoporosis
drug, Evista, failed to provide anticipated benefits for breast cancer patients.
WHAT WERE THE BEST DECISIONS MADE IN THE EQUITY PORTION OF THE PORTFOLIO DURING
THE FIRST HALF OF 1998?
The best decision made during the reporting period was sticking to our
disciplines and proactively reviewing every stock in the Portfolio's investment
portfolio. We decided to increase the Portfolio's weighting in the securities we
felt had the best potential -- companies like Lucent Technologies, which were
strongly positive.
We also believe our decision to reduce the Portfolio's technology and energy
stocks as well as overweight the Portfolio's exposure to domestic retailers and
financial stocks helped performance and positioned the Portfolio for the future.
WHICH SECTORS DID THE PORTFOLIO EMPHASIZE DURING THE FIRST HALF OF THE YEAR?
We're bottom-up investors and select stocks on their individual merits. As a
result of that approach, however, the Portfolio's equity component was
overweighted in communications, which underperformed as a sector, even
26
<PAGE> 27
though the Portfolio's stock holdings were up significantly in the first half of
the year. The Portfolio was also heavy in consumer cyclicals, such as retailers
and housing, which were generally positive, with the exception of Cendant.
Being overweighted in technology stocks was beneficial, but mostly as a result
of our proprietary security selection, which emphasized companies with
proprietary product, for the Portfolio. Over the reporting period, we decreased
the Portfolio's technology exposure, by selling Adaptec, 3Com, and Compaq
Computer. The Portfolio was also overweighted in financial stocks, although the
companies held in the Portfolio underperformed the market in general. Several
were tied up in merger transactions, and may perform well when the deals are
completed.
WERE THERE SECTORS WHERE THE PORTFOLIO WAS UNDERWEIGHTED?
During the reporting period, the Portfolio was underweighted in basic materials
and capital goods, which was beneficial for performance. The Portfolio also was
underweighted in consumer staples, since many of the companies didn't meet our
growth criteria. While the group underperformed, the Portfolio's holdings
outperformed the market. Our decision to underweight energy, utilities, and
transportation stocks generally had a positive impact on performance.
WHAT ACCOUNTED FOR THE SOLID PERFORMANCE OF THE PORTFOLIO'S INCOME COMPONENT?
Our duration strategy benefited performance throughout the period. Given our
strategically bullish outlook, we kept the Portfolio's duration in the neutral
to long range. Over the period, we were neutral as rates headed higher and
longer as rates were declining.
WHAT OTHER STRATEGIES WERE USED IN THE PORTFOLIO'S INCOME COMPONENT?
With interest rates remaining in a relatively narrow range, we used a variety of
technical indicators to guide the Portfolio between newer and older issues in
the Treasury market. The result was an incremental increase in return. Older
Treasuries added value in the beginning part of both the first and second
quarters, newer securities in the latter part of each quarter. On the whole, the
strategy had a positive impact on the Portfolio's performance.
WHAT HAPPENED IN THE MARKET FOR MORTGAGE-BACKED SECURITIES?
At the beginning of the year, the Portfolio was underweighted in higher-coupon
mortgage-backed securities. Anticipating prepayments and believing that
mortgage-related bonds would underperform, we reduced the Portfolio's exposure
to high-coupon mortgage securities, which had a positive impact on performance.
After the prepayments rose, we increased the Portfolio's exposure to mortgage
securities in general, focusing primarily on commercial mortgages, for a couple
of reasons. First, new issuance was heavy, but demand was not, which tended to
force prices down to attractive levels. We also liked commercial mortgages
because we believed they carried less risk of prepayments if interest rates
continued to decline.
WHAT WAS THE IMPACT ON THE PORTFOLIO'S INVESTMENT PORTFOLIO?
As the market began to rally in the second quarter of 1998, we pared back on the
Portfolio's positions to take profits. But the Portfolio remained overweighted
in mortgage-backed securities in the latter part of the second quarter, which
hurt performance a bit when a second wave of prepayments began. Despite
selecting coupons that were relatively insensitive to prepayment risk, mortgages
in general underperformed.
HOW DID THE PORTFOLIO'S CORPORATE BONDS PERFORM?
As rates rallied at the beginning of the year, the prospect of low capital
attracted a number of corporations to the bond market. The oversupply of
corporates caused spreads to widen, causing the Portfolio's corporate bond
position to underperform in the first part of the first quarter. We increased
the Portfolio's exposure to strong, world-class companies whose bonds were
highly liquid, selecting companies like Coca-Cola Enterprises and Wal-Mart
Stores, which have strong domestic markets and do not depend on business in
Asia.
DID YOU CHANGE THE PORTFOLIO'S ASSET ALLOCATION MUCH DURING THE FIRST HALF OF
1998?
Not really. The Portfolio sold agencies at a profit and invested a bit more in
corporates and mortgage-backed securities. But overall, the allocation remained
relatively unchanged.
In addition to Treasuries and corporate bonds, the Portfolio continues to invest
in a wide range of mortgage-backed and asset-backed securities, including Ginnie
Maes, Fannie Maes, collateralized mortgage obligations,
27
<PAGE> 28
low-balance loans, and manufactured-housing loans, and others. We believe that
this diversification may add value by reducing the risks associated with any
single sector of the market.
HAS THE PORTFOLIO MAINTAINED HIGH QUALITY INVESTMENTS THROUGHOUT THE REPORTING
PERIOD?
Yes, it has. The MainStay VP Total Return Portfolio's income component holds
securities that are generally of very high quality. As we seek opportunities for
the Portfolio, we try to remain in high-quality securities to avoid exposing the
Portfolio's shareholders to unnecessary risks. We're pleased with the
Portfolio's recent performance, because we believe it has provided investors
with higher-than-average returns with lower-than-average risk in the market.
WHAT IS YOUR OUTLOOK FOR THE FUTURE OF THE STOCK AND BOND MARKETS?
Looking ahead, we believe that Asian difficulties may have further impact on the
U.S. economy, which may create both challenges and opportunities. While we
anticipate low inflation and lower interest rates, we believe the wide gap
between stock prices and corporate profits and earnings may eventually cause
investors to rethink the types of stocks investors want to own. Meanwhile, we
will utilize our proprietary research and careful security selection process
seeking to identify opportunities for the Portfolio's shareholders. No matter
how the markets and the economy may move, the Portfolio will continue to seek to
realize current income consistent with reasonable opportunity for future growth
of capital and income.
Ravi Akhoury
Edmund Spelman
Rudolph Carryl
Portfolio Managers
MacKay-Shields Financial Corporation
(1) "Standard and Poor's 500 Composite Stock Price Index(R)" and "S&P 500(R)"
are registered trademarks of The McGraw-Hill Companies, Inc. The MainStay VP
Series Fund, Inc. is not sponsored, endorsed, sold or promoted by Standard &
Poor's Corporation. The S&P 500 is an unmanaged index considered generally
representative of the U.S. stock market. Results assume the reinvestment of
all income and capital gains distributions.
(2) The Lipper Variable Insurance Products Performance Analysis Service
(L-VIPPAS) ranks the portfolios that invest in the separate accounts of
insurance companies. Its rankings are based on total returns with capital
gains and dividends reinvested. Results do not reflect any deduction of
sales charges.
Total returns for the Portfolio shown indicate past performance and are not
indicative of future results. Investment return and principal value will
fluctuate so that shares, upon redemption, may be worth more or less than their
original cost. These results do not reflect any deduction of sales charges,
mortality and expense charges, contract charges, or administrative charges.
Please refer to the Performance Summary for returns reflective of these charges.
28
<PAGE> 29
MAINSTAY VP VALUE PORTFOLIO
MARKET RECAP FOR THE SIX MONTH PERIOD ENDED 6/30/98
- - A robust economy, with low interest rates, modest inflation, and low
unemployment moved stocks higher in the first six months of 1998.
- - Weakness in Asian economies caused a flight to quality companies with
predictable earnings growth.
- - Merger and acquisition activity was high, with several large transactions that
occurred mostly outside of traditional value sectors.
- - With investors primarily focused on large-cap growth stocks, the S&P 500(1)
advanced to record levels in June.
PORTFOLIO RECAP FOR THE SIX MONTH AND ONE YEAR PERIODS ENDED 6/30/98
- - The MainStay VP Value Portfolio returned 4.25% for the six month period ended
6/30/98 and 14.93% for the one year period ended 6/30/98.
- - The Portfolio used the underperformance of value stocks to add to its holdings
in several sectors at low prices.
- - The Portfolio benefited from individual security selection among automotive
and financial stocks and selected retailers.
- - The Portfolio underperformed the average Lipper(2) growth and income
portfolio, which returned 12.26% for the six months ended 6/30/98.
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
With U.S. gross domestic product increasing more than investors anticipated in
the first half of 1998, the stock market enjoyed robust returns. Low interest
rates, benign inflation, low unemployment, and a rallying bond market all added
positively to investor psychology during the reporting period.
A number of factors combined to focus investor attention on large-capitalization
growth stocks and away from value issues. Continuing difficulties in Asian
markets spread to China, Latin America, and Russia, causing a flight to quality
which attracted investors to domestic names and highly liquid securities.
Declining oil, gold, and copper prices caused weakness among energy and
commodity-related issues, which are traditionally deep value sectors.
Financial stocks did well in a declining rate environment, with low inflation
keeping the Federal Reserve Board from taking any action. With strong consumer
confidence, higher employment and wage increases during the first half of the
year, retailers and selected automotive and auto-related stocks showed strength.
Transportation issues and tobacco stocks, on the other hand, showed relatively
weak performance. During the period, the top 30 stocks in the S&P 500 accounted
for half of the total return of the Index. This is an unusual concentration, the
magnitude of which was last seen in late 1972.
WHAT FACTORS CAUSED THE PORTFOLIO TO UNDERPERFORM ITS PEERS?
Value stocks in general were out of favor throughout the first half of 1998. Due
to our strict deep value investment disciplines, most of the best performing
stocks fell outside of our valuation tolerance.
The Portfolio did not compromise its value disciplines to seek higher returns in
a period when growth stocks were in favor. Instead, we utilized the weakness in
value stocks to reposition the Portfolio and seek issues at attractive
prices -- often in declining market sectors -- during the reporting period.
While the results were not always positive during the first six months of the
year, we believe we have positioned the Portfolio for stronger performance in
the future.
WHICH STOCKS DID THE PORTFOLIO PURCHASE DURING THE FIRST HALF OF THE YEAR?
The most significant allocation change in the Portfolio was in the energy
related sector, which represents about 8% of the S&P 500, but as of June 30
represented 13% of the Portfolio. In particular, we bought or added to our
positions in a number of exploration and production companies including Union
Pacific Resources Group, Oryx Energy, Apache Corp., Noble Affiliates and Texaco.
We found the stocks compelling on the basis of their price to cash flow
valuations. While these stocks were punished during the first six months because
of falling oil prices and reduced demand in Asia, we believe that if supply and
demand fundamentals improve, they may have strong potential going forward.
Late in the second quarter, cyclical stocks returned to our screens as strong
value candidates. Browning Ferris Industries is a waste management company we
found attractive, and purchased for the Portfolio during the
29
<PAGE> 30
reporting period. We also found value for the Portfolio in Continental Airlines
and Northwest Airlines, which were trading at attractive prices because of
declining international and Asian air traffic.
Finally, Goodyear Tire & Rubber is a company that has gone through cost
restructuring and earnings development, but is still going through a period of
uncertainty related to economic difficulties in Asia and Brazil. We believe the
stock is undervalued and added it to the Portfolio.
WERE THERE OTHER MAJOR PURCHASES DURING THE REPORTING PERIOD?
Yes. We increased the Portfolio's tobacco holdings, largely because the
litigation controversy has depressed their prices well below the companies'
underlying asset values. Even taking the litigation risk into account, names
like RJR Nabisco Holdings and Philip Morris have been trading at values well
below the price of their assets, yet the stocks continue to provide yields that
are close to or above those available from Treasury securities.
We also added to the Portfolio's telecommunications holdings with US West. In
addition, we added to the Portfolio's utility holdings with Texas Utilities,
Illinova, OGE Energy, Niagara Mohawk Power and Energy East. Overall, utilities
were positive contributors to the Portfolio's performance, but as a group,
utilities underperformed the market.
WHAT POSITIONS DID THE PORTFOLIO SELL IN ORDER TO MAKE THESE PURCHASES?
In the utility area, the Portfolio redeployed capital from issues we felt had
reached their target valuations. The Portfolio sold PG&E and Long Island
Lighting, both of which outperformed the S&P 500 during the reporting period.
The Portfolio also sold a number of cyclical stocks in the first quarter of the
year, trimming back on paper and forest products companies that we thought might
underperform if Asian production slowed down. We sold Tenneco, Georgia-Pacific,
and Chesapeake to avoid short-term risk, even though we saw long-term merit in
the stocks. We may revisit these companies later in the year if valuations are
favorable.
We also had significant sales in the Portfolio's financial stocks, largely
because they rose so high they triggered our sell disciplines. The Portfolio
sold Bankers Trust New York and Chase Manhattan Bank, and substantially trimmed
its positions in Equitable, NationsBank, and Transamerica. All of these stocks
had a significantly positive impact on the Portfolio's performance.
WERE THERE OTHER SIGNIFICANT SALES DURING THE REPORTING PERIODS?
Yes. IBP is a meat packing company that didn't perform up to our expectations so
we sold some of the Portfolio's position. We also found that offshore drilling
companies were selling at a premium to exploration and production companies, so
the Portfolio sold Noble Affiliates in order to purchase the exploration and
production companies we mentioned a moment ago.
WHICH STOCKS WERE THE BEST PERFORMERS IN THE PORTFOLIO DURING THE FIRST HALF OF
1998?
About a third of the portfolio outperformed the market. Ford Motor was up 85% in
the first six months of 1998. Lexmark International Group, a printer company,
was up 60%. Equitable, which benefited from low interest rates, was up 50%, and
we pared back on the Portfolio's position to take some profits, while Xerox was
up 39%. And following the announcement of an acquisition by Dana Corporation,
Echlin, an automotive afterparts company, was up 38%. All of these stocks
reflected the potential in our value strategy, even in a market that showed a
strong preference for growth disciplines.
With low inflation and low interest rates, financial stocks did particularly
well, with NationsBank up 27%, CIGNA up 21%, and Bank One and Travelers Group
both up 15% for the reporting period. The strength of the economy, increasing
consumer confidence, and rising personal income also rewarded retail companies
like Federated Department Stores, which was up 25% for the first half of 1998.
The optimistic outlook also helped the gaming industry, sending Harrah's
Entertainment up 23% for the reporting period.
WHICH STOCKS UNDERPERFORMED?
As noted, the tobacco industry has been hard hit by sensational news reports
about ongoing litigation. RJR Nabisco Holdings was down 34% over the first six
months and Philip Morris declined 11%. However, their strong fundamentals and
attractive prices were consistent with our value discipline and we added to the
Portfolio's positions.
30
<PAGE> 31
With declining oil prices, Union Pacific Resources Group dropped 27%, Seagull
Energy fell 20%, Oryx Energy declined 13%, and Apache Oil was down 10%.
During the reporting period, CSX, a railroad company, declined 15%, and
Northwest Airlines suffered from low Asian air traffic and lost 20% in the first
half of the year.
WHAT DO YOU FEEL WERE THE BEST DECISIONS YOU MADE FOR THE PORTFOLIO DURING THE
REPORTING PERIOD?
Our best decision for the Portfolio was to not allow any style drift during the
first half of 1998. We stuck to our value disciplines, and invested the
Portfolio's assets where we found value. In a period when growth stocks are
popular, it's tempting to go for their strong returns. It's tough to stick to
your discipline. But going against the grain when the market is rising may
position the Portfolio very favorably when market conditions change. We also
exercised good judgment in cutting back on companies with Asian exposure.
IN WHICH SECTORS IS THE PORTFOLIO CURRENTLY OVERWEIGHTED?
At the end of the first half of the year, the Portfolio was heavily overweighted
in materials processing, energy, transportation, and utilities, relative to the
S&P 500. In other areas, the Portfolio was generally in line with the Index.
WHAT IS YOUR OUTLOOK GOING FORWARD?
We believe that value stocks are at historically low valuation levels. With the
stock market selling at all time highs and a segment of the market --"deep
value"-- selling at a deep discount, we believe the time is right to take a
contrarian view and buy into a well-proven and low-risk value investment
approach.
The Portfolio will continue to seek maximum long-term total return from a
combination of capital growth and income, with a focus squarely on stocks that
we believe the market has undervalued.
Denis Laplaige
Jeffrey A. Simon
Portfolio Managers
MacKay-Shields Financial Corporation
(1) "Standard and Poor's 500 Composite Stock Price Index(R) and "S&P 500(R)" are
registered trademarks of The McGraw-Hill Companies, Inc. The MainStay VP
Series Fund, Inc. is not sponsored, endorsed, sold or promoted by nor
affiliated with Standard & Poor's Corporation. The S&P 500 is an unmanaged
index considered generally representative of the U.S. stock market. Results
assume the reinvestment of all income and capital gains distributions.
(2) The Lipper Variable Insurance Products Performance Analysis Service
(L-VIPPAS) ranks the portfolios that invest in the separate accounts of
insurance companies. Its rankings are based on total returns with capital
gains and dividends reinvested. Results do not reflect any deduction of
sales charges.
Total returns for the Portfolio shown indicate past performance and are not
indicative of future results. Investment return and principal value will
fluctuate so that shares, upon redemption, may be worth more or less than their
original cost. These results do not reflect any deduction of sales charges,
mortality and expense charges, contract charges, or administrative charges.
Please refer to the Performance Summary for returns reflective of these charges.
31
<PAGE> 32
MAINSTAY VP BOND PORTFOLIO
MARKET HIGHLIGHTS FOR THE SIX MONTH PERIOD ENDED 6/30/98
- - Global concerns continued to be a dominant influence in the fixed income
markets.
- - The flight to quality trade contributed to the market's rally during the first
half of 1998. The 30-year U.S. Treasury bond yield declined 29 basis points
during the period.
- - The low interest rate environment contributed to prepayment concerns in the
mortgage-backed security sector and significant corporate bond issuance. These
factors caused spread product to widen during the first six months of 1998.
- - The Federal Reserve Board (the "Fed") maintained a stable monetary policy for
the first half of 1998.
PORTFOLIO HIGHLIGHTS FOR THE SIX MONTH PERIOD ENDED 6/30/98
- - For the six months ended June 30, 1998, the MainStay VP Bond Portfolio
returned 4.35%.
- - The Portfolio outperformed the average A rated corporate bond fund in its
Lipper(1) universe by 38 basis points.
- - The Portfolio ranked fourth out of 33 bond funds (top 12.1%) for its Lipper
category.
- - An average portfolio quality of at least AA- was maintained throughout the
first half of 1998, limiting credit risk.
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
The year began amid investor concern regarding the Asian crisis and its impact
on the domestic economy. Market sentiment seemed to point toward a neutral to
accommodating Fed, along with declining corporate earnings. As the first quarter
progressed, it became apparent that an Asian induced slowdown would not have its
anticipated near-term effect on the U.S. economy. Statistical reports continued
to show resilient economic growth. The decline in oil prices along with
continued benign inflation numbers allowed the market to rally slightly in the
first quarter. The market continued to rally in the second quarter as
participants renewed their focus on the improving Federal Budget and its impact
on the supply of U.S. Treasury bonds. As the second quarter progressed, fears
about Asia re-emerged with a focus on Japan. These concerns refueled the flight
to quality trade.
TO WHAT DO YOU ATTRIBUTE THE PORTFOLIO'S POSITIVE PERFORMANCE?
The Portfolio limited its exposure to long duration spread assets. These longer
duration assets were the most adversely effected by spread widening in the first
half of 1998. The Portfolio also had a concentration in lower quality investment
grade corporate bonds in the one to five year maturity range. This asset
allocation worked well as these securities outperformed in their sector.
Additionally, our high quality assets benefited from the flight to quality
trade.
WHAT WAS YOUR PRIMARY STRATEGY IN THE FIRST HALF OF 1998?
The Portfolio shifted assets from the corporate and mortgage sectors to the U.S.
Treasury sector. We took these actions to take advantage of the flight to
quality trade and to reduce the Portfolio's credit and call risk.
WHERE DO YOUR PERCEIVE RISK IN THE PORTFOLIO?
The Portfolio's current mortgage-backed security holdings could present
prepayment risk if interest rates continue to trend lower. However, this
prepayment risk is actively managed based on our prevailing interest rate
forecast. The Portfolio's overall credit quality and structure continues to be
consistent with our long-term conservative management approach.
32
<PAGE> 33
WHAT IS YOUR OUTLOOK FOR THE FIXED INCOME MARKET IN THE SECOND HALF OF 1998?
We expect continued weakness in the Asian markets and a rise in the dollar to
bring about a decline in U.S. exports and a rise in imports that could dampen
domestic growth over the rest of the year. We believe the Fed will retain its
wait and see attitude toward monetary policy until the full effects of the Asian
crisis unfold. We expect the market to retain its focus on the problems in
Japan. Therefore, we believe U.S. Treasury security price movements should
continue to react to the dollar/yen relationship.
Albert R. Corapi, Jr.
Celia M. Holtzberg
Joseph DePasquale
Portfolio Managers
New York Life Insurance Company
(1) The Lipper Variable Insurance Products Performance Analysis Service
(L-VIPPAS) ranks the portfolios that invest in the separate accounts of
insurance companies. Its rankings are based on total returns with capital
gains and dividends reinvested. Results do not reflect any deduction of
sales charges.
Total returns for the Portfolio shown indicate past performance and are not
indicative of future results. Investment return and principal value will
fluctuate so that shares, upon redemption, may be worth more or less than their
original cost. These results do not reflect any deduction of sales charges,
mortality and expense charges, contract charges, or administrative charges.
Please refer to the Performance Summary for returns reflective of these charges.
33
<PAGE> 34
MAINSTAY VP GROWTH EQUITY PORTFOLIO
MARKET HIGHLIGHTS FOR THE SIX MONTH PERIOD ENDED 6/30/98
- - Low inflation and interest rates have enabled the stock markets price/earnings
valuation to expand.
- - Asia's problems have had a limited effect on U.S. corporate earnings.
- - Continued strong inflows into equities continue to boost liquidity and market
performance.
- - Merger and acquisition activity is extremely robust and poised to surpass
1997's record level by a wide margin.
PORTFOLIO HIGHLIGHTS FOR THE SIX MONTH PERIOD ENDED 6/30/98
- - For the six month period ended June 30, 1998, the Portfolio had a return of
16.20%.
- - We increased the Portfolio's exposure in technology stocks which were our best
performers in the first half of the year.
- - The Portfolio's consumer staples holdings, which we continue to overweight,
registered above average gains in the first six months of the year.
- - The Portfolio is in line with the Lipper(1) growth fund average return of
16.23%.
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
The U.S. equity market continued to register impressive gains for investors in
the first half of 1998. The majority of the market's gains can be attributed to
investors' increased comfort level with low inflation which has increased equity
valuations. Simply stated, with interest rates at their current low levels, the
attraction of equities remains favorable.
Another ingredient causing the equity markets to move higher has been based on
positive corporate earnings growth. Economic growth should remain positive as
the domestic economy remains strong despite Asia's woes weighing down some
cyclical industries. Actually some industries, such as retailing, are benefiting
from low cost goods from Asia.
The current market environment supports our view of investing primarily in
companies with consistent earnings growth profiles. We believe that companies
which report earnings in line with expectations will receive premium valuations
to the market. We are avoiding industries which are negatively affected by Asia,
as we believe that the economic contraction in that region of the world will
persist longer than the market is currently discounting.
DURING THE REPORTING PERIOD, WHAT WERE THE MOST SIGNIFICANT FACTORS THAT
INFLUENCED THE EQUITY MARKET?
The most significant factor influencing the equity market throughout the first
half of the year was the effect Asia's problems were having on our economy. Most
commodity and export related industries have been adversely affected by the
slackening demand out of Asia and the excess industrial capacity that has been
built up in that region of the world in the last few years. However, most
consumer companies prospered as the domestic economy boomed due to continued low
interest rates and strong wage growth. These factors combined to create an
extremely favorable environment for domestically oriented companies.
HOW WAS THE MAINSTAY VP GROWTH EQUITY PORTFOLIO AFFECTED BY THE SIGNIFICANT
FACTORS JUST MENTIONED? WHAT ACTIONS DID YOU TAKE AND WHAT WAS THE FINAL RESULT?
The MainStay VP Growth Equity Portfolio is currently structured with a growth
stock orientation due to our expectation for moderate overall growth in the
economy. We determined that the more cyclical sectors of the economy would
suffer depressed earnings growth as commodity prices remained under pressure.
Thus, the Portfolio has favored domestic issues with a consistent earnings
growth profile. The results were favorable as the MainStay VP Growth Equity
Portfolio generated a return of 16.20% for the six months ended June 30, 1998.
WHAT WERE THE MOST SIGNIFICANT PURCHASES DURING THE REPORTING PERIOD? WHY DID
YOU MAKE THEM? HOW DID THEY AFFECT THE PORTFOLIO'S PERFORMANCE?
Our best purchases in the first half of the year were Dell Computer (up 94%),
Lucent Technologies (up 78%), EMC (up 67%) and Network Associates (up 31%).
These companies are located in the technology sector and conduct the majority of
their business domestically. Lucent Technologies, EMC and Network Associates
each rely on proprietary products which give them an advantage over their
competition. Dell Computer which
34
<PAGE> 35
operates in the highly competitive personal computer market has prospered due to
its low cost distribution model.
WERE THERE ANY SALES DURING THE REPORTING PERIOD? WHY DID YOU MAKE THEM? HOW DID
THE SALES AFFECT PORTFOLIO PERFORMANCE?
The Portfolio sold out of its lodging holdings (Marriott International and
Hilton Hotels) because we felt that this highly cyclical industry had approached
its peak earnings potential. When Computer Associates made a hostile bid for
Computer Sciences earlier in the year we disposed of both stocks. We did not
believe that a combination of these two companies would be beneficial to
shareholders. After we sold both stocks, the merger was dissolved and both
company's stock prices moved upward.
DURING THE REPORTING PERIOD, WHICH SECURITIES CONTRIBUTED MOST POSITIVELY TO THE
PORTFOLIO'S PERFORMANCE? WHAT WAS THEIR RETURN? WHY DID THEY DO SO WELL?
America Online was the Portfolio's best performer in the first half of the year
with a return of 132.3%. The company continued to exhibit strong revenue
generation and operating performance with its online services. In addition,
speculation that a large communication or media company would merge with America
Online caused the valuation of the stock to appreciate. Cisco Systems was also a
strong performer in the first half of the year with a return of 65.1%. Cisco
Systems is the premier company in the dynamic networking and telecommunications
equipment industries. We believe the company and the industry will continue to
benefit as the explosive growth of the internet creates strong demand for their
products. Worldcom had a return of 60.1% in the first half of the year as the
stock rebounded from a sell-off late last year after it announced a merger with
MCI. As the year progressed, the market began to more fully appreciate the
growth potential of the telecommunications giant.
DURING THE REPORTING PERIOD, WHICH SECURITIES IN THE PORTFOLIO WERE THE WORST
PERFORMERS? WHAT WAS THEIR RETURN? WHAT WERE THE REASONS FOR THEIR
UNDERPERFORMANCE? DO WE STILL OWN THE SECURITIES? WHY?
Our worst performing stocks in the first half of the year were Cendant (down
40%) and Sunbeam (down 74%). Cendant's problems were the result of some
accounting irregularities in one of the company's subsidiaries. We continue to
hold the stock because we believe that these problems were an isolated incident
and that the market overreacted to this situation. The company acted quickly to
reassure the investment community that the accounting problems were being
resolved and the overall growth prospects of the company remain strong. We are
closely monitoring the situation and will sell our holdings if the company
discloses any more irregularities. Sunbeam's problems were of a similar nature
as the company appears to have overstated earnings during the last few quarters.
We have sold that stock because we believe that the company has a long road to
travel as it repairs its image to both its customers and investors.
WHAT WERE THE BEST AND WORST DECISIONS YOU MADE FOR THE PORTFOLIO DURING THE
REPORTING PERIOD? WHY DID YOU MAKE THEM AND HOW DID THEY AFFECT THE PORTFOLIO?
The best decision the Portfolio made in the quarter was increasing our weighting
in technology stocks as this group was the best performing market sector in the
first half. In particular, our concentration in the software and services side
of technology was very important as they outperformed the more commodity
oriented companies. The worst decision the Portfolio made was not underweighting
our energy holdings to a greater extent. Unfortunately, we underestimated the
impact Asia was going to have on the overall demand for oil.
IN WHAT SECTORS WAS THE PORTFOLIO OVERWEIGHTED OR UNDERWEIGHTED DURING THE
PERIOD? WHY? HOW DID THIS AFFECT PERFORMANCE? HOW IS THE PORTFOLIO CURRENTLY
POSITIONED?
The Portfolio is currently overweighted in technology and consumer staples. Our
overweighting in technology is focused in the less cyclical software and
computer services sector which is benefiting from the increased spending by
corporations on year 2000 computer compliance. The Portfolio's technology
holdings outperformed the market by a wide margin in the first half of the year.
The Portfolio's consumer staples holdings exceeded the market due primarily to
our media holdings. The Portfolio is currently underweighted in basic materials,
energy and capital goods. Our underweighting of basic materials and energy was
timely as both sectors underperformed the market in the first half of the year.
35
<PAGE> 36
WHAT IS YOUR OUTLOOK GOING FORWARD? WHAT SECURITIES/SECTORS ARE YOU FOCUSING ON?
Our outlook going forward could be best described as cautiously optimistic. With
inflation and interest rates remaining subdued and corporate earnings growth
continuing, we believe that the stock market can progress upward. Our main
concern is focused on corporate earnings, as Asia's woes will probably have a
longer tail duration than the market is currently discounting. Thus, we will
continue to position the Portfolio in domestically oriented companies in sectors
such as financials, consumer staples and technology.
James Agostisi
Patricia Rossi
Portfolio Managers
New York Life Insurance Company
(1) The Lipper Variable Insurance Products Performance Analysis Service
(L-VIPPAS) ranks the portfolios that invest in the separate accounts of
insurance companies. Its rankings are based on total returns with capital
gains and dividends reinvested. Results do not reflect any deduction of
sales charges.
Total returns for the Portfolio shown indicate past performance and are not
indicative of future results. Investment return and principal value will
fluctuate so that shares, upon redemption, may be worth more or less than their
original cost. These results do not reflect any deduction of sales charges,
mortality and expense charges, contract charges, or administrative charges.
Please refer to the Performance Summary for returns reflective of these charges.
36
<PAGE> 37
MAINSTAY VP INDEXED EQUITY PORTFOLIO
MARKET RECAP FOR THE SIX MONTH PERIOD ENDED 6/30/98
- - The S&P 500(1) returned 17.71% in the first half of 1998, well above the stock
market's historical averages for an entire year.(2)
- - The U.S. economy continued to expand with strong growth, increasing Gross
Domestic Product (GDP), low inflation, low unemployment, and soaring consumer
confidence.
- - The Federal Reserve Board refrained from raising interest rates and the
30-year Treasury bond traded at its lowest yield since the bond was first
offered over 20 years ago.
- - International stocks provided mixed performance, with continental European
markets enjoying double-digit gains (some in excess of 40% in both local and
U.S. dollar terms), while Asian markets languished amid currency devaluations,
economic turmoil, and political upheaval.
- - Investors appeared to be adopting more defensive positions as evidenced by
widening credit spreads and a willingness to pay a premium for more liquid
issues.
PORTFOLIO RECAP FOR THE SIX MONTH PERIOD ENDED 6/30/98
- - For the six months ended 6/30/98, the MainStay VP Indexed Equity Portfolio
returned 17.49%.
- - The Portfolio closely tracked the performance of the S&P 500 and exceeded the
11.75% return of the average Lipper(3) U.S. equity portfolio.
- - The large-capitalization stocks of which the Portfolio is composed retained
their leadership in the first half of the year, surpassing their mid- and
small-capitalization counterparts by an extraordinary margin of 9.1% and 11.6%
respectively (based on the performance of the S&P Mid Cap 400 and S&P Small
Cap 600).
- - The Portfolio underperformed the average Lipper S&P 500 Index objective
portfolio, which returned 17.42% for the six months ended 6/30/98.
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
A number of factors clearly influenced stock market returns over the first half
of 1998. Primary among these was the persistence of strong economic growth and
low inflation in the United States. As of the last reading, GDP was increasing
at a rate in excess of 5% a year, well above what most economists consider
sustainable. At the same time, consumer confidence soared, capital expenditures
continued unabated, and unemployment fell to its lowest level in 20 years.
The typical reaction of the Federal Reserve to such rapid growth is to raise
short-term interest rates -- the rates at which corporations borrow money to
fund the growth of their business. In so doing, they hope to head off inflation
by slowing the economy before price pressure has an opportunity to mount. In
1998, however, there have been few signs of inflationary pressure. Consumer and
producer prices have remained in check, wage growth has been less than that of
the economy, and the price of raw materials has plummeted. Absent the threat of
inflation and concerned that a hike in rates might strengthen the dollar and
compound Asia's economic problems, the Federal Reserve Board has refrained from
raising rates.
The impact of the global economy on U.S. stock prices is less easily
discernible. Continental Europe has enjoyed double digit gains -- over 40% in
many cases, both in local currency and U.S. dollar terms. Asia on the other hand
has languished amid currency devaluations, economic turmoil, and political
upheaval. For those companies that export goods to the region, maintain
facilities there, or compete with Asia's now less expensive products, this is
certainly a negative development and will likely become more so in the second
half of 1998. But for manufacturers that import raw materials and for the
consumers of these goods, it has been a windfall.
The S&P 500 is a broad index, and its performance was affected by a variety of
other factors. In this overall market environment, however, the S&P 500 climbed
17.71% in the first six months of 1998, a rate well above historic norms for an
entire year.
WHAT WAS THE PRIMARY REASON WHY THE PORTFOLIO UNDERPERFORMED THE INDEX AND ITS
PEERS?
The Portfolio performed precisely as anticipated, closely mirroring the S&P 500
Index but trailing by a slight margin due to Portfolio expenses. The Index
itself is a hypothetical investment and does not face the day-to-day expenses
associated with Portfolio investing. In addition, the Portfolio cannot fully
replicate the Index at all times, since it must make ongoing accommodations for
new investments and withdrawals. With the Portfolio underperforming its average
peer portfolio by just 20 basis points, the impact of these factors was minor.
37
<PAGE> 38
DURING THE REPORTING PERIOD, WHICH INDUSTRIES CONTRIBUTED MOST POSITIVELY TO THE
PORTFOLIO'S PERFORMANCE?
Makers of communications equipment (computer networking) posted the highest
industry-group return of 61.8%. With a growing domestic economy, high
employment, rising personal income, and strong consumer confidence, companies
producing goods and services also generated strong performance. Apparel
retailers were up 55.8%, with retail in general rising 50.7%, automobiles were
up 50.9%, personal loans rose 37.3%, and restaurants advanced 36.5%.
WHICH INDIVIDUAL HOLDINGS SHOWED THE STRONGEST PERFORMANCE?
Capital One Financial generated the single highest gain for the period of
129.2%. Other strong performers were Dell Computer, up 121.0%; Apple Computer,
up 118.6%; Lucent Technologies, up 108.3%; and Unisys, which rose 103.6% during
the first six months of 1998.
WHICH INDUSTRIES PROVIDED THE WORST PERFORMANCE DURING THE REPORTING PERIOD?
Oversupply problems and shrinking global demand proved costly for oil and gas
companies in the first half of 1998. Those specializing in drilling declined
35.6%, well equipment and services stocks dropped 11.7%, and exploration and
production companies fell 9.7%. At the same time, declining commodity prices
drove mining companies in the S&P metals group down 9.9%. Other industries also
had disappointing results. Tobacco lost 13.9%, specialty chemicals dropped
13.0%, and railroads were down 11.1%.
WHICH INDIVIDUAL HOLDINGS RECORDED MAJOR LOSSES IN THE FIRST HALF OF THE YEAR?
With a decline of 49.2%, National Semiconductor was the worst performing holding
in the Portfolio during the reporting period. Semiconductor manufacturers
suffered from declining demand and write-offs on Asian operations. IKON Office
Solutions fell 48.2% when it preannounced a quarterly earnings shortfall and
Cendant dropped 39.3% when accounting practices at its CUC International
subsidiary came into question. Rounding out the five worst-performing issues
were Rowan Companies, down 36.3%, and Helmerich and Payne, which lost 34.4% in
the first half of 1998.
WHAT IS YOUR OUTLOOK FOR THE SECOND HALF OF 1998 AND BEYOND?
Securities markets are inherently unpredictable, particularly in the short term.
But taking a longer-term perspective, the bull market we have enjoyed the last
fifteen years is without precedent. By most traditional yardsticks
(price-to-earnings, price to book, dividend yield, capitalization to GDP),
current stock valuations are extremely high in historical terms. It is therefore
unlikely that stock returns in the coming decade will bear much resemblance to
those investors have enjoyed in recent years.
The past six months have even provided some indications that the good times
could be coming to an end sooner than we might wish. The credit spread between
Treasury bonds and comparable duration investment-grade debt widened noticeably,
suggesting a flight to quality. Likewise, the pattern of large companies doing
well and small companies struggling reflects a focus on highly liquid stocks
that are easy to sell in the event of a downturn.
The Portfolio will seek to track the total return performance of the S&P 500,
with dividends reinvested, whether the market moves up or down.
James A. Mehling
Portfolio Manager
Monitor Capital Advisors, Inc.
(1) "Standard & Poor's(R)", "S&P", "S&P 500(R)", and "Standard and Poor's
500(R)" are trademarks of The McGraw-Hill Companies, Inc. and have been
licensed for use by Monitor Capital Advisors, Inc. The product is not
sponsored, endorsed, sold or promoted by Standard & Poor's and Standard &
Poor's makes no representation regarding the advisability of purchasing the
product.
(2) From 1926 through 1997, the average annual total return of common stocks of
the S&P 500 was 10.7%. Source: Ibbotson Associates, Chicago. Used with
permission. All rights reserved.
(3) The Lipper Variable Insurance Products Performance Analysis Service
(L-VIPPAS) ranks the portfolios that invest in the separate accounts of
insurance companies. Its rankings are based on total returns with capital
gains and dividends reinvested. Results do not reflect any deduction of
sales charges.
Total returns for the Portfolio shown indicate past performance and are not
indicative of future results. Investment return and principal value will
fluctuate so that shares, upon redemption, may be worth more or less than their
original cost. These results do not reflect any deduction of sales charges,
mortality and expense charges, contract charges, or administrative charges.
Please refer to the Performance Summary for returns reflective of these charges.
Unlike other portfolios that generally seek to beat market averages, often with
unpredictable results, index portfolios seek to match the return of their
respective indexes.
38
<PAGE> 39
GLOSSARY
ASSET-BACKED SECURITIES: Securities backed by loan paper, receivables, or an
anticipated income stream from the sale of merchandise or services. The
securities are generally originated by banks, credit card companies, or other
providers of credit and often "enhanced" by a bank letter of credit or by
insurance from an institution other than the issuer.
AVERAGE MATURITY: Maturity is the termination date of an obligation or the
length of time an income security is required to pay interest. Average maturity
reflects the average of the maturities of all fixed-income securities in a
portfolio.
BACK END OF THE MARKET: Bonds are issued in a variety of maturities from very
short to as long as 30 years or more. The back end of the market refers to bonds
with longer maturities, such as 30-year issues.
BASIS POINT: One hundredth of one percent in the yield of an investment, i.e.,
100 basis points equals 1%.
BOTTOM-UP INVESTING: Security selection based on the specific portfolio
fundamental merits of individual issues. The opposite of "top-down" investing,
which starts with general economic trends, compares market sectors, and uses
relative security values to narrow the range of issues to examine.
BULLISH/BEARISH: A bull market occurs when security prices are rising; a bear
market occurs when security prices decline. A bullish attitude therefore
suggests a positive outlook, while a bearish attitude represents a negative view
of the market or the opportunities it may present.
CASH FLOW: The amount of income or earnings available to cover outstanding
liabilities and other obligations, including debt service.
CONVERSION PREMIUM: The amount by which the price of a convertible security
exceeds the market price of the underlying stock. If a stock is trading at $50
and the convertible bond at $45, the premium is $5. When the premium is high,
the bond trades like an income security; when it is low, it trades like a stock.
CREDIT SPREAD: The yield differential between debt securities of issuers with
varying credit ratings. Credit spread refers to the extra yield investors demand
for holding investment grade corporate bonds rather than the debt of the United
States Treasury (considered to be free of default risk).
CYCLICALS (CYCLICAL STOCK): A security or stock that tends to rise quickly with
economic upturns and fall quickly when the economy slows. Noncyclical
industries, such as food, insurance, and pharmaceuticals, are likely to have
more consistent performance regardless of economic changes.
DEFAULT: Failure of a debtor to repay principal or interest on an obligation or
to meet some other provision of a debt instrument. If an issuer defaults,
bondholders may make claims against the assets of the issuer to recoup their
principal.
DEFENSIVE ISSUES: Stocks chosen for their reliability of earnings, growth, and
positive performance.
DEVALUATION: A lowering of the value of a country's currency relative to gold
and/or the currencies of other nations. Devaluation can also result from a rise
in the value of other currencies relative to the currency of a particular
country.
DURATION: A measure of price sensitivity, which adjusts for the time value of
the payments investors will receive and which takes into account interest
payments as well as principal payments. Duration is a better gauge of
interest-rate sensitivity than average maturity alone.
EARNINGS PER SHARE: The portion of a company's profit allocated to each share
of outstanding common stock.
EMERGING MARKETS: Countries with smaller or more recently established capital
markets.
EUROPEAN MONETARY UNION: A proposed system that would allow participating
European countries to operate with a common currency or monetary unit.
FLIGHT TO QUALITY: When investors in general move to improve the quality or
liquidity of the securities they own, because of economic, industry, market or
credit concerns that suggest lower quality securities or those that are less
liquid are likely to be more vulnerable to negative market events.
GROSS DOMESTIC PRODUCT (GDP): The total value of goods and services produced in
the U.S. economy over a particular period of time, usually one year. The GDP
growth rate measures strictly domestic output and is a primary indicator of the
status of the economy.
39
<PAGE> 40
GROWTH VERSUS VALUE: Growth investments typically include stocks with rising
prices and positive earnings trends. Value investments typically include
equities that are currently trading below their fair market value, even if they
have the potential to increase in value over time.
INFLATION: An increase in the cost of goods and services over time. As prices
rise, the purchasing power of the dollar declines.
LIQUIDITY: Securities are said to be liquid when they can be easily bought or
sold in large volume without substantially affecting their price. Some
securities, such as private placements or stocks that have few shares
outstanding are considered illiquid either because there are few market
participants interested in buying or selling the securities or because purchases
and sales may cause wide price swings.
LOCAL CURRENCY TERMS: Returns expressed in local currency terms show what
investors using that currency would have earned, without any adjustment for
differences in currency values. Returns expressed in U.S. dollar terms reflect
any differences in the relative value of the local currency and the U.S. dollar.
MANDATORY CONVERTIBLE PREFERRED: A security that is similar to a common stock
with an enhanced yield feature. Generally, they perform more like modified
equities rather than true convertibles.
MERGERS AND ACQUISITIONS: A merger is a combination of two companies. An
acquisition is the purchase of a company, division, or business unit. Companies
that are the subject of a merger or acquisition often pay shareholders a
premium, or an amount over the current share price, to complete the transaction
quickly and under favorable terms.
MORTGAGE-BACKED SECURITIES: Securities representing interests in "pools" of
mortgages in which principal and interest payments by the holders of underlying
fixed- or adjustable-rate mortgages are, in effect, "passed through" to
investors (net of fees paid to the issuer or guarantor of the securities).
PAR VALUE: The nominal or face value of a security. A bond selling at par, for
example, is worth the same dollar value it was issued for or at which will be
redeemed at maturity. In price comparisons, 100 may be used to represent par
value, with higher or lower values representing premiums or discounts,
respectively.
PREMIUM: The amount by which a bond sells above its face or par value. For
example, a bond with a face value of $1,000 would sell for a $100 premium when
it cost $1,100.
PRICE-TO-EARNINGS RATIO: The price of a stock divided by its earnings per
share.
REAL ESTATE INVESTMENT TRUST (REIT): A publicly traded company that manages a
portfolio of real estate properties for shareholders.
RECESSION: A downturn in economic activity, typically defined by at least two
consecutive quarters of decline in a country's gross domestic product.
SPLIT ISSUES (SPLIT-RATED ISSUES): Securities rated top tier by one credit
rating agency and second tier by another.
SUPPLY AND DEMAND: In the bond market, supply is influenced by the amount of
new securities issued and the amount of bonds investors wish to sell. Demand
reflects the amount of bonds investors wish to buy, which may decrease when
other markets offer greater opportunities.
In the stock market, an oversupply of a product or service can reduce demand and
lower stock prices. When demand increases relative to supply, stock prices may
recover.
WEIGHTING: The proportion of a portfolio allocated to a specific security,
market sector or country, i.e., a portfolio is said to be overweighted in a
sector or country when that portion of the portfolio is greater than the
sector's general relationship to the market as a whole or the country's total
equities relative to the international equity markets as a whole.
YANKEE ISSUES: Dollar-denominated income securities issued in the United States
by foreign banks and corporations, usually when conditions in the U.S. are more
favorable than in other markets, including the issuer's domestic market
overseas.
YIELD: The income per share (or current value of a security) paid to investors
over a specified period of time as a percentage of the cost of the security.
Mutual fund yields are expressed as a percentage of the fund's current price per
share.
40
<PAGE> 41
YIELD CURVE: When interest rates available from various short-, intermediate-,
and long-term securities are plotted on a graph, the resulting line is known as
a yield curve.
YIELD SPREAD: The difference in yield between securities in different market
sectors, such as high yield securities and Treasury issues -- or between
different securities in a single sector, such as high yield bonds with different
credit ratings.
YIELD TO MATURITY: A concept that reflects the rate of return an investor would
receive if an interest-bearing security were held to its maturity date.
41
<PAGE> 42
MAINSTAY VP SERIES FUND, INC.
OFFICERS AND DIRECTORS
Richard M. Kernan, Jr., Chairman,
Chief Executive Officer and Director
Anne F. Pollack, President,
Chief Administrative Officer and Director
Michael J. Drabb, Director
Jill Feinberg, Director
Daniel Herrick, Director
Robert D. Rock, Director and Vice President
Roman L. Weil, Director
John Weisser, Director
Anthony W. Polis, Treasurer
Sara L. Badler, Secretary
Richard D. Levy, Controller
INVESTMENT ADVISERS
MacKay-Shields Financial Corporation
Monitor Capital Advisors, Inc.
New York Life Insurance Company
ADMINISTRATOR
New York Life Insurance and Annuity Corporation
CUSTODIANS
The Bank of New York
The Chase Manhattan Bank, N.A.
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
The financial information included herein is taken from the records of the Funds
without examination by the Funds' independent accountants, who do not express an
opinion thereon.
42
<PAGE> 43
(THIS PAGE INTENTIONALLY LEFT BLANK)
43
<PAGE> 44
STATEMENT OF ASSETS AND LIABILITIES
As of June 30, 1998
(unaudited)
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP
CAPITAL CASH MAINSTAY VP
APPRECIATION MANAGEMENT GOVERNMENT
------------------------------------------------
<S> <C> <C> <C>
ASSETS:
Investment at net asset value (Identified Cost:
$106,364; $22,877; $6,203; $4,721; $265,669; $154;
$98,896; $402,797, respectively).................... $110,442 $ 22,877 $ 6,372
LIABILITIES:
Liability for mortality and expense risk charges...... 166 31 7
-------- -------- --------
Total equity...................................... $110,276 $ 22,846 $ 6,365
======== ======== ========
TOTAL EQUITY REPRESENTED BY:
Equity of Policyowners:
Variable accumulation units outstanding: 10,669;
22,583; 619; 470; 25,988; 16; 9,798; 40,279,
respectively...................................... $110,276 $ 22,846 $ 6,365
======== ======== ========
Variable accumulation unit value.................... $ 10.34 $ 1.01 $ 10.29
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
ALGER
MAINSTAY VP AMERICAN CALVERT
INDEXED SMALL SOCIAL
EQUITY CAPITALIZATION BALANCED
------------------------------------------------
<S> <C> <C> <C>
ASSETS:
Investment at net asset value (Identified Cost:
$537,803; $2,354; $819; $6,767; $407,292; $251,040;
$113, respectively)................................. $547,451 $ 2,229 $ 831
LIABILITIES:
Liability for mortality and expense risk charges...... 817 2 1
-------- -------- --------
Total equity...................................... $546,634 $ 2,227 $ 830
======== ======== ========
TOTAL EQUITY REPRESENTED BY:
Equity of Policyowners:
Variable accumulation units outstanding: 53,007;
211; 81; 663; 40,742; 24,332; 10, respectively.... $546,634 $ 2,227 $ 830
======== ======== ========
Variable accumulation unit value.................... $ 10.31 $ 10.53 $ 10.22
======== ======== ========
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
44
<PAGE> 45
NYLIAC CSVUL SEPARATE ACCOUNT-I
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP MAINSTAY VP
HIGH YIELD INTERNATIONAL MAINSTAY VP MAINSTAY VP GROWTH
CORPORATE BOND EQUITY VALUE BOND EQUITY
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 4,712 $267,712 $ 153 $100,579 $407,519
6 408 -- 155 616
-------- -------- -------- -------- --------
$ 4,706 $267,304 $ 153 $100,424 $406,903
======== ======== ======== ======== ========
$ 4,706 $267,304 $ 153 $100,424 $406,903
======== ======== ======== ======== ========
$ 10.01 $ 10.29 $ 9.69 $ 10.25 $ 10.10
======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
JANUS ASPEN
FIDELITY FIDELITY JANUS ASPEN SERIES
VIP II VIP SERIES WORLDWIDE
CONTRAFUND EQUITY-INCOME BALANCED GROWTH
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 7,034 $400,889 $256,562 $ 113
5 604 386 --
-------- -------- -------- --------
$ 7,029 $400,285 $256,176 $ 113
======== ======== ======== ========
$ 7,029 $400,285 $256,176 $ 113
======== ======== ======== ========
$ 10.60 $ 9.82 $ 10.53 $ 10.73
======== ======== ======== ========
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
45
<PAGE> 46
STATEMENT OF OPERATIONS
For the six months ended June 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP
CAPITAL CASH MAINSTAY VP
APPRECIATION MANAGEMENT GOVERNMENT
------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME (LOSS):
Dividend income......................................... $ 3 $ 234 $ --
Mortality and expense risk charges...................... (162) (32) (7)
-------- -------- --------
Net investment income (loss)........................ (159) 202 (7)
-------- -------- --------
REALIZED AND UNREALIZED GAIN (LOSS):
Proceeds from sale of investments....................... 19,168 2,611 120
Cost of investments sold................................ (19,137) (2,611) (117)
-------- -------- --------
Net realized gain (loss) on investments............. 31 -- 3
Realized gain distribution received..................... 3 -- --
Change in unrealized appreciation (depreciation)
on investments........................................ 4,077 -- 169
-------- -------- --------
Net gain (loss) on investments...................... 4,111 -- 172
-------- -------- --------
Decrease attributable to funds of New
York Life Insurance and Annuity Corporation
retained by Separate Account.......................... (6) -- --
-------- -------- --------
Net increase (decrease) in total equity resulting
from operations................................... $ 3,946 $ 202 $ 165
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
ALGER
MAINSTAY VP AMERICAN CALVERT
INDEXED SMALL SOCIAL
EQUITY CAPITALIZATION BALANCED
------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME (LOSS):
Dividend income......................................... $ 24 $ -- $ --
Mortality and expense risk charges...................... (800) (2) (1)
-------- -------- --------
Net investment income (loss)........................ (776) (2) (1)
-------- -------- --------
REALIZED AND UNREALIZED GAIN (LOSS):
Proceeds from sale of investments....................... 28,998 47 59
Cost of investments sold................................ (28,910) (52) (58)
-------- -------- --------
Net realized gain (loss) on investments............. 88 (5) 1
Realized gain distribution received..................... 4,141 220 --
Change in unrealized appreciation (depreciation)
on investments........................................ 9,648 (125) 12
-------- -------- --------
Net gain (loss) on investments...................... 13,877 90 13
-------- -------- --------
Decrease attributable to funds of New
York Life Insurance and Annuity Corporation
retained by Separate Account.......................... (20) -- --
-------- -------- --------
Net increase (decrease) in total equity resulting
from operations................................... $ 13,081 $ 88 $ 12
======== ======== ========
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
46
<PAGE> 47
NYLIAC CSVUL SEPARATE ACCOUNT-I
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP MAINSTAY VP
HIGH YIELD INTERNATIONAL MAINSTAY VP MAINSTAY VP GROWTH
CORPORATE BOND EQUITY VALUE BOND EQUITY
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 6 $ 2,124 $ -- $ -- $ --
(6) (403) -- (155) (598)
-------- -------- -------- -------- --------
-- 1,721 -- (155) (598)
-------- -------- -------- -------- --------
44 22,208 29 18,457 8,004
(44) (22,027) (30) (18,080) (8,151)
-------- -------- -------- -------- --------
-- 181 (1) 377 (147)
14 -- 1 -- --
(10) 2,043 (2) 1,683 4,723
-------- -------- -------- -------- --------
4 2,224 (2) 2,060 4,576
-------- -------- -------- -------- --------
-- (7) -- (2) (18)
-------- -------- -------- -------- --------
$ 4 $ 3,938 $ (2) $ 1,903 $ 3,960
======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
JANUS ASPEN
FIDELITY FIDELITY JANUS ASPEN SERIES
VIP II VIP SERIES WORLDWIDE
CONTRAFUND EQUITY-INCOME BALANCED GROWTH
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
$ -- $ -- $ 6,057 $ 3
(4) (603) (371) --
-------- -------- -------- --------
(4) (603) 5,686 3
-------- -------- -------- --------
139 8,045 4,862 24
(133) (8,154) (4,782) (23)
-------- -------- -------- --------
6 (109) 80 1
-- -- 1,641 1
266 (6,402) 5,522 --
-------- -------- -------- --------
272 (6,511) 7,243 2
-------- -------- -------- --------
-- (1) (15) --
-------- -------- -------- --------
$ 268 $ (7,115) $ 12,914 $ 5
======== ======== ======== ========
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
47
<PAGE> 48
STATEMENT OF CHANGES IN TOTAL EQUITY
For the six months ended June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP
CAPITAL CASH MAINSTAY VP
APPRECIATION MANAGEMENT GOVERNMENT
--------------------------------------------------
<S> <C> <C> <C>
INCREASE IN TOTAL EQUITY:
Operations:
Net investment income (loss)............................ $ (159) $ 202 $ (7)
Net realized gain (loss) on investments................. 31 -- 3
Realized gain distribution received..................... 3 -- --
Change in unrealized appreciation (depreciation) on
investments........................................... 4,077 -- 169
Decrease attributable to funds of
New York Life Insurance and Annuity
Corporation retained by Separate Account.............. (6) -- --
-------- -------- --------
Net increase (decrease) in total equity resulting
from operations..................................... 3,946 202 165
-------- -------- --------
Contributions and withdrawals:
Policyowners' premium payments.......................... 53,119 6,898 844
Cost of insurance....................................... (1,488) (378) (120)
Net transfers from Fixed Account........................ 54,699 16,124 5,476
-------- -------- --------
Net contributions and withdrawals..................... 106,330 22,644 6,200
-------- -------- --------
Increase in total equity............................ 110,276 22,846 6,365
TOTAL EQUITY:
Beginning of period..................................... -- -- --
-------- -------- --------
End of period........................................... $110,276 $ 22,846 $ 6,365
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
ALGER
MAINSTAY VP AMERICAN CALVERT
INDEXED SMALL SOCIAL
EQUITY CAPITALIZATION BALANCED
--------------------------------------------------
<S> <C> <C> <C>
INCREASE IN TOTAL EQUITY:
Operations:
Net investment income (loss)............................ $ (776) $ (2) $ (1)
Net realized gain (loss) on investments................. 88 (5) 1
Realized gain distribution received..................... 4,141 220 --
Change in unrealized appreciation (depreciation) on
investments........................................... 9,648 (125) 12
Decrease attributable to funds of
New York Life Insurance and Annuity
Corporation retained by Separate Account.............. (20) -- --
-------- -------- --------
Net increase (decrease) in total equity resulting
from operations..................................... 13,081 88 12
-------- -------- --------
Contributions and withdrawals:
Policyowners' premium payments.......................... 63,750 610 408
Cost of insurance....................................... (10,865) (93) (59)
Net transfers from Fixed Account........................ 480,668 1,622 469
-------- -------- --------
Net contributions and withdrawals..................... 533,553 2,139 818
-------- -------- --------
Increase in total equity............................ 546,634 2,227 830
TOTAL EQUITY:
Beginning of period..................................... -- -- --
-------- -------- --------
End of period........................................... $546,634 $ 2,227 $ 830
======== ======== ========
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
48
<PAGE> 49
NYLIAC CSVUL SEPARATE ACCOUNT-I
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP
HIGH YIELD INTERNATIONAL MAINSTAY VP MAINSTAY VP MAINSTAY VP
CORPORATE BOND EQUITY VALUE BOND GROWTH EQUITY
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ -- $ 1,721 $ -- $ (155) $ (598)
-- 181 (1) 377 (147)
14 -- 1 -- --
(10) 2,043 (2) 1,683 4,723
-- (7) -- (2) (18)
-------- -------- -------- -------- --------
4 3,938 (2) 1,903 3,960
-------- -------- -------- -------- --------
141 51,976 107 49,960 106
(44) (4,515) (29) (1,322) (8,004)
4,605 215,905 77 49,883 410,841
-------- -------- -------- -------- --------
4,702 263,366 155 98,521 402,943
-------- -------- -------- -------- --------
4,706 267,304 153 100,424 406,903
-- -- -- -- --
-------- -------- -------- -------- --------
$ 4,706 $267,304 $ 153 $100,424 $406,903
======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
JANUS ASPEN
FIDELITY FIDELITY JANUS ASPEN SERIES
VIP II VIP SERIES WORLDWIDE
CONTRAFUND EQUITY-INCOME BALANCED GROWTH
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ (4) $ (603) $ 5,686 $ 3
6 (109) 80 1
-- -- 1,641 1
266 (6,402) 5,522 --
-- (1) (15) --
-------- -------- -------- --------
268 (7,115) 12,914 5
-------- -------- -------- --------
1,494 1,283 676 78
(258) (8,117) (4,941) (24)
5,525 414,234 247,527 54
-------- -------- -------- --------
6,761 407,400 243,262 108
-------- -------- -------- --------
7,029 400,285 256,176 113
-- -- -- --
-------- -------- -------- --------
$ 7,029 $400,285 $256,176 $ 113
======== ======== ======== ========
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
49
<PAGE> 50
(THIS PAGE INTENTIONALLY LEFT BLANK)
50
<PAGE> 51
NYLIAC CSVUL SEPARATE ACCOUNT-I
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1-- Organization and Accounting Policies:
- --------------------------------------------------------------------------------
NYLIAC Corporate Sponsored Variable Universal Life Separate Account-I ("CSVUL
Separate Account-I") was established on May 24, 1996, under Delaware law by New
York Life Insurance and Annuity Corporation, a wholly-owned subsidiary of New
York Life Insurance Company. The CSVUL Separate Account-I policies are designed
for Group or Sponsored arrangements who seek lifetime insurance protection and
flexibility with respect to premium payments and death benefits. The policies
are distributed by NYLIFE Distributors Inc. and sold by registered
representatives of broker-dealers who have entered into dealer agreements with
NYLIFE Distributors Inc. NYLIFE Distributors Inc. is a wholly-owned subsidiary
of NYLIFE Inc., which is a wholly-owned subsidiary of New York Life Insurance
Company. CSVUL Separate Account-I is registered under the Investment Company
Act of 1940, as amended, as a unit investment trust.
The assets of CSVUL Separate Account-I are invested in the shares of the
MainStay VP Series Fund, Inc., the Alger American Fund, the Calvert Variable
Series, Inc. (formerly, "Acacia Capital Corporation"), the Fidelity Variable
Insurance Products Fund II, the Fidelity Variable Insurance Products Fund, the
Janus Aspen Series and the Morgan Stanley Universal Funds, Inc. (collectively,
"Funds"). These assets are clearly identified and distinguished from the other
assets and liabilities of New York Life Insurance and Annuity Corporation.
CSVUL Separate Account-I offers the following eighteen variable Investment
Divisions, with their respective fund portfolios, for Policyowners to invest
premium payments: MainStay VP Capital Appreciation, MainStay VP Cash Management,
MainStay VP Convertible, MainStay VP Government, MainStay VP High Yield
Corporate Bond, MainStay VP International Equity, MainStay VP Total Return,
MainStay VP Value, MainStay VP Bond, MainStay VP Growth Equity, MainStay VP
Indexed Equity, Alger American Small Capitalization, Calvert Social Balanced
(formerly "Calvert Socially Responsible"), Fidelity VIP II Contrafund, Fidelity
VIP Equity-Income, Janus Aspen Series Balanced, Janus Aspen Series Worldwide
Growth and Morgan Stanley Emerging Markets Equity. As of June 30, 1998 no
investments have been made in the following investment divisions: Mainstay VP
Convertible, Mainstay VP Total Return, and Morgan Stanley Emerging Markets
Equity. Each Investment Division of CSVUL Separate Account-I will invest
exclusively in the corresponding Eligible Portfolio.
Initial premium payments received are allocated to NYLIAC's General Account
until 20 days after the policy delivery date. Thereafter, premium payments will
be allocated to the Investment Divisions of CSVUL Separate Account-I in
accordance with the Policyowner's instructions. In addition, the Policyowner has
the option to transfer amounts between the Investment Divisions of CSVUL
Separate Account-I and the Fixed Account of New York Life Insurance and Annuity
Corporation.
No Federal income tax is payable on investment income or capital gains of
CSVUL Separate Account-I under current Federal income tax law.
Security Valuation--The investments are valued at the net asset value of
shares of the respective Fund portfolios.
Security Transactions--Realized gains and losses from security transactions
are reported on the identified cost basis. Security transactions are accounted
for as of the date the securities are purchased or sold (trade date).
Distributions Received--Dividend income and capital gain distributions are
recorded on the ex-dividend date and reinvested in the corresponding portfolio.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates.
51
<PAGE> 52
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
NOTE 2--Investments (in 000's):
- --------------------------------------------------------------------------------
At June 30, 1998, the investments of CSVUL Separate Account-I are as follows:
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP
CAPITAL CASH MAINSTAY VP
APPRECIATION MANAGEMENT GOVERNMENT
------------------------------------------------------
<S> <C> <C> <C>
Number of shares......................................... 4 23 1
Identified cost*......................................... $106 $ 23 $ 6
</TABLE>
<TABLE>
<CAPTION>
ALGER
MAINSTAY VP AMERICAN CALVERT
INDEXED SMALL SOCIAL
EQUITY CAPITALIZATION BALANCED
------------------------------------------------------
<S> <C> <C> <C>
Number of shares......................................... 23 -- --
Identified cost*......................................... $538 $ 2 $ 1
</TABLE>
* The cost stated also represents the aggregate cost for Federal income tax
purposes.
Investment activity for the six months ended June 30, 1998, was as follows:
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP
CAPITAL CASH MAINSTAY VP
APPRECIATION MANAGEMENT GOVERNMENT
------------------------------------------------------
<S> <C> <C> <C>
Purchases................................................ $126 $ 25 $ 6
Proceeds from sales...................................... 19 3 --
</TABLE>
<TABLE>
<CAPTION>
ALGER
MAINSTAY VP AMERICAN CALVERT
INDEXED SMALL SOCIAL
EQUITY CAPITALIZATION BALANCED
------------------------------------------------------
<S> <C> <C> <C>
Purchases................................................ $567 $ 2 $ 1
Proceeds from sales...................................... 29 -- --
</TABLE>
52
<PAGE> 53
NYLIAC CSVUL SEPARATE ACCOUNT-I
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP MAINSTAY VP
HIGH YIELD INTERNATIONAL MAINSTAY VP MAINSTAY VP GROWTH
CORPORATE BOND EQUITY VALUE BOND EQUITY
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
-- 22 -- 7 17
$ 5 $266 $ -- $ 99 $403
</TABLE>
<TABLE>
<CAPTION>
JANUS ASPEN
FIDELITY FIDELITY JANUS ASPEN SERIES
VIP II VIP SERIES WORLDWIDE
CONTRAFUND EQUITY-INCOME BALANCED GROWTH
----------------------------------------------------------------------------
<S> <C> <C> <C>
-- 16 13 --
$ 7 $407 $251 $ --
</TABLE>
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP MAINSTAY VP
HIGH YIELD INTERNATIONAL MAINSTAY VP MAINSTAY VP GROWTH
CORPORATE BOND EQUITY VALUE BOND EQUITY
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 5 $288 $ -- $117 $411
-- 22 -- 18 8
</TABLE>
<TABLE>
<CAPTION>
JANUS ASPEN
FIDELITY FIDELITY JANUS ASPEN SERIES
VIP II VIP SERIES WORLDWIDE
CONTRAFUND EQUITY-INCOME BALANCED GROWTH
----------------------------------------------------------------------------
<S> <C> <C> <C>
$ 7 $415 $256 $ --
-- 8 5 --
</TABLE>
53
<PAGE> 54
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
NOTE 3--Mortality and Expense Risk Charges:
- --------------------------------------------------------------------------------
CSVUL Separate Account-I is charged for the mortality and expense risks assumed
by New York Life Insurance and Annuity Corporation. These charges are made
daily at an annual rate of .70% of the daily net asset value of each Investment
Division for policy years one through ten. For policy years eleven and later,
we deduct an annual rate of .30%. New York Life Insurance and Annuity
Corporation may increase these charges in the future up to a maximum annual
rate of .90%. The amounts of these charges retained in the Investment Divisions
represent funds of New York Life Insurance and Annuity Corporation.
Accordingly, New York Life Insurance and Annuity Corporation participates in
the results of each Investment Division ratably with the Policyowners.
- --------------------------------------------------------------------------------
NOTE 4 --Distribution of Net Income:
- --------------------------------------------------------------------------------
CSVUL Separate Account-I does not expect to declare dividends to Policyowners
from accumulated net investment income and realized gains. The income and gains
are distributed to Policyowners as part of withdrawals of amounts (in the form
of surrenders, death benefits or transfers) in excess of the net premium
payments.
54
<PAGE> 55
NYLIAC CSVUL SEPARATE ACCOUNT-I
(THIS PAGE INTENTIONALLY LEFT BLANK)
55
<PAGE> 56
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
NOTE 5--Cost to Policyowners (in 000's):
- --------------------------------------------------------------------------------
At June 30, 1998, the cost to Policyowners for accumulation units outstanding,
with adjustments for net investment income, market appreciation (depreciation)
and deduction for expenses is as follows:
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP
CAPITAL CASH MAINSTAY VP
APPRECIATION MANAGEMENT GOVERNMENT
--------------------------------------------------------
<S> <C> <C> <C>
Cost to Policyowners (net of withdrawals)............. $110 $ 23 $ 6
Sales charges......................................... (3) -- --
Cost of insurance..................................... (1) -- --
Accumulated net investment income..................... -- -- --
Unrealized appreciation (depreciation) on
investments......................................... 4 -- --
---- ---- ----
Net amount applicable to Policyowners................. $110 $ 23 $ 6
==== ==== ====
</TABLE>
<TABLE>
<CAPTION>
ALGER
MAINSTAY VP AMERICAN CALVERT
INDEXED SMALL SOCIAL
EQUITY CAPITALIZATION BALANCED
--------------------------------------------------------
<S> <C> <C> <C>
Cost to Policyowners (net of withdrawals)............. $549 $ 2 $ 1
Sales charges......................................... (4) -- --
Cost of insurance..................................... (11) -- --
Accumulated net investment income (loss).............. (1) -- --
Accumulated net realized gain on investments and
realized gain distributions received................ 4 -- --
Unrealized appreciation (depreciation) on
investments......................................... 10 -- --
---- ---- ----
Net amount applicable to Policyowners................. $547 $ 2 $ 1
==== ==== ====
</TABLE>
56
<PAGE> 57
NYLIAC CSVUL SEPARATE ACCOUNT-I
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP MAINSTAY VP
HIGH YIELD INTERNATIONAL MAINSTAY VP MAINSTAY VP GROWTH
CORPORATE BOND EQUITY VALUE BOND EQUITY
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 5 $271 $ -- $102 $411
-- (3) -- (3) --
-- (5) -- (1) (8)
-- 2 -- -- (1)
-- 2 -- 2 5
---- ---- ---- ---- ----
$ 5 $267 $ -- $100 $407
==== ==== ==== ==== ====
</TABLE>
<TABLE>
<CAPTION>
JANUS ASPEN
FIDELITY FIDELITY JANUS ASPEN SERIES
VIP II VIP SERIES WORLDWIDE
CONTRAFUND EQUITY-INCOME BALANCED GROWTH
-----------------------------------------------------------------
<S> <C> <C> <C>
$ 7 $415 $247 $ --
-- -- -- --
-- (8) (5) --
-- (1) 6 --
-- -- 2 --
-- (6) 6 --
---- ---- ---- ----
$ 7 $400 $256 $ --
==== ==== ==== ====
</TABLE>
57
<PAGE> 58
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
NOTE 6--Unit Transactions (in 000's):
- --------------------------------------------------------------------------------
Transactions in accumulation units for the six months ended June 30, 1998,
were as follows:
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP
CAPITAL CASH MAINSTAY VP
APPRECIATION MANAGEMENT GOVERNMENT
--------------------------------------------------
<S> <C> <C> <C>
Units issued on premium payments............................ 6 7 --
Units redeemed on cost of insurance......................... -- -- --
Units issued on net transfers from
Fixed Account............................................. 5 16 1
--- --- ---
Net increase.............................................. 11 23 1
Units outstanding, beginning of period...................... -- -- --
--- --- ---
Units outstanding, end of period............................ 11 23 1
=== === ===
</TABLE>
<TABLE>
<CAPTION>
ALGER
MAINSTAY VP AMERICAN CALVERT
INDEXED SMALL SOCIAL
EQUITY CAPITALIZATION BALANCED
--------------------------------------------------
<S> <C> <C> <C>
Units issued on premium payments............................ 6 -- --
Units redeemed on cost of insurance......................... (1) -- --
Units issued on net transfers from
Fixed Account............................................. 48 -- --
--- --- ---
Net increase.............................................. 53 -- --
Units outstanding, beginning of period...................... -- -- --
--- --- ---
Units outstanding, end of period............................ 53 -- --
=== === ===
</TABLE>
58
<PAGE> 59
NYLIAC CSVUL SEPARATE ACCOUNT-I
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP
HIGH YIELD INTERNATIONAL MAINSTAY VP MAINSTAY VP MAINSTAY VP
CORPORATE BOND EQUITY VALUE BOND GROWTH EQUITY
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
-- 5 -- 5 --
-- -- -- -- (1)
-- 21 -- 5 41
--- --- --- --- ---
-- 26 -- 10 40
-- -- -- -- --
--- --- --- --- ---
-- 26 -- 10 40
=== === === === ===
</TABLE>
<TABLE>
<CAPTION>
JANUS ASPEN
FIDELITY FIDELITY JANUS ASPEN SERIES
VIP II VIP SERIES WORLDWIDE
CONTRAFUND EQUITY-INCOME BALANCED GROWTH
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
-- -- -- --
-- (1) -- --
1 42 24 --
--- --- --- ---
1 41 24 --
-- -- -- --
--- --- --- ---
1 41 24 --
=== === === ===
</TABLE>
59
<PAGE> 60
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
NOTE 7--Selected Per Unit Data+:
- --------------------------------------------------------------------------------
The following table presents selected per accumulation unit income and capital
changes (for an accumulation unit outstanding throughout the six month period
ended June 30, 1998) with respect to each Investment Division of CSVUL Separate
Account-I:
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP
CAPITAL CASH MAINSTAY VP
APPRECIATION MANAGEMENT GOVERNMENT
--------------------------------------------------
<S> <C> <C> <C>
Unit value, beginning of period............................. $10.00 $ 1.00 $10.00
Net investment income (loss)................................ (0.02) 0.01 (0.01)
Net realized and unrealized gains on security transactions
and realized capital gain distributions received (includes
the effect of capital share transactions)................. 0.36 -- 0.30
------ ------ ------
Unit value, end of period................................... $10.34 $ 1.01 $10.29
====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
ALGER
MAINSTAY VP AMERICAN CALVERT
INDEXED SMALL SOCIAL
EQUITY CAPITALIZATION BALANCED
--------------------------------------------------
<S> <C> <C> <C>
Unit value, beginning of period............................. $10.00 $10.00 $10.00
Net investment income (loss)................................ (0.02) (0.01) (0.02)
Net realized and unrealized gains (losses) on security
transactions and realized capital gain distributions
received (includes the effect of capital share
transactions)............................................. 0.33 0.54 0.24
------ ------ ------
Unit value, end of period................................... $10.31 $10.53 $10.22
====== ====== ======
</TABLE>
+ Per unit data based on average monthly units outstanding during the six month
period.
60
<PAGE> 61
NYLIAC CSVUL SEPARATE ACCOUNT-I
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP MAINSTAY VP
HIGH YIELD INTERNATIONAL MAINSTAY VP MAINSTAY VP GROWTH
CORPORATE BOND EQUITY VALUE BOND EQUITY
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$10.00 $10.00 $10.00 $10.00 $10.00
-- 0.08 -- (0.02) (0.01)
0.01 0.21 (0.31) 0.27 0.11
------ ------ ------ ------ ------
$10.01 $10.29 $ 9.69 $10.25 $10.10
====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
JANUS ASPEN
FIDELITY FIDELITY JANUS ASPEN SERIES
VIP II VIP SERIES WORLDWIDE
CONTRAFUND EQUITY-INCOME BALANCED GROWTH
--------------------------------------------------------------------
<S> <C> <C> <C>
$10.00 $10.00 $10.00 $10.00
(0.01) (0.01) 0.23 0.45
0.61 (0.17) 0.30 0.28
------ ------ ------ ------
$10.60 $ 9.82 $10.53 $10.73
====== ====== ====== ======
</TABLE>
61
<PAGE> 62
- --------------------------------------------------------------------------------
To Policyowners:
The assets of NYLIAC Variable Annuity Separate Account-I, NYLIAC Variable
Annuity Separate Account-II, NYLIAC Variable Annuity Separate Account-III
(formerly NYLIAC LifeStages(SM) Separate Account), NYLIAC Corporate Sponsored
Variable Universal Life Separate Account-I, NYLIAC Variable Universal Life
Separate Account-I, New York Life Insurance and Annuity Corporation MFA Separate
Account-I, New York Life Insurance and Annuity Corporation MFA Separate
Account-II and New York Life Insurance and Annuity Corporation VLI Separate
Account are invested in shares of MainStay VP Series Fund, Inc. (formerly New
York Life MFA Series Fund, Inc.). In addition, the assets of NYLIAC Variable
Annuity Separate Account-I, NYLIAC Variable Annuity Separate Account-II, NYLIAC
Variable Annuity Separate Account-III, NYLIAC Corporate Sponsored Variable
Universal Life Separate Account-I, and NYLIAC Variable Universal Life Separate
Account-I may be invested in the Calvert Variable Series, Inc. (formerly "Acacia
Capital Corporation"), the Alger American Fund, Fidelity Variable Insurance
Products Fund, Fidelity Variable Insurance Products Fund II, the Janus Aspen
Series and the Morgan Stanley Universal Funds Inc., which are not affiliated
with MainStay VP Series Fund, Inc. or NYLIAC and any of its subsidiaries.
At the Annual Meeting of the Board of Directors of the Fund held on November 11,
1997, executive officers of the Fund were elected. On May 20, 1998, a dividend
distribution was paid to NYLIAC Variable Annuity Separate Account-I, NYLIAC
Variable Annuity Separate Account-II, NYLIAC Variable Annuity Separate
Account-III, NYLIAC Corporate Sponsored Variable Universal Life Separate
Account-I, NYLIAC Variable Universal Life Separate Account-I, New York Life
Insurance and Annuity Corporation MFA Separate Account-I, New York Life
Insurance and Annuity Corporation MFA Separate Account-II and New York Life
Insurance and Annuity Corporation VLI Separate Account as the sole shareholders
of record of MainStay VP Series Fund, Inc.
The financial information included herein as of June 30, 1998, and for the
period then ended, is taken from the records of the Fund without examination by
independent accountants who do not express an opinion thereon.
/s/ RICHARD M. KERNAN JR.
Chairman of the Board
and Chief Executive Officer
MAINSTAY VP SERIES FUND, INC.
62
<PAGE> 63
MAINSTAY VP SERIES FUND, INC.
CAPITAL APPRECIATION PORTFOLIO
PORTFOLIO OF INVESTMENTS
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
COMMON STOCKS (95.1%)+
SHARES VALUE
-----------------------
<S> <C> <C>
BANKS (5.3%)
NationsBank Corp. ............... 180,000 $ 13,770,000
Norwest Corp. ................... 331,000 12,371,125
SouthTrust Corp. ................ 217,500 9,461,250
Summit Bancorp................... 191,000 9,072,500
Washington Mutual, Inc. ......... 177,000 7,688,438
------------
52,363,313
------------
BROADCASTING (1.9%)
Chancellor Media Corp. (a)....... 195,500 9,707,807
Clear Channel Communications,
Inc. (a)........................ 88,500 9,657,562
------------
19,365,369
------------
BUILDINGS (0.5%)
Oakwood Homes Corp. ............. 158,000 4,740,000
------------
COMPUTER SOFTWARE (7.4%)
Computer Associates
International, Inc. ............ 310,612 17,258,379
Compuware Corp. (a).............. 455,200 23,272,100
Microsoft Corp. (a).............. 214,800 23,278,950
Oracle Corp. (a)................. 393,000 9,653,062
------------
73,462,491
------------
COMPUTERS & OFFICE EQUIPMENT
(4.5%)
EMC Corp. (a).................... 431,500 19,336,594
Hewlett-Packard Co. ............. 130,400 7,807,700
Sun Microsystems, Inc. (a)....... 401,000 17,418,438
------------
44,562,732
------------
CONSUMER DURABLES (1.7%)
Harley-Davidson, Inc. ........... 442,000 17,127,500
------------
CONSUMER SERVICES (3.1%)
Cendant Corp. (a)................ 793,030 16,554,501
Service Corp. International...... 324,500 13,912,937
------------
30,467,438
------------
COSMETICS (3.1%)
Colgate-Palmolive Co. ........... 179,300 15,778,400
Gillette Co. (The) .............. 266,000 15,078,875
------------
30,857,275
------------
DRUGS (9.6%)
Elan Corp. PLC ADR (a)(b)........ 219,000 14,084,438
Lilly (Eli) & Co. ............... 372,000 24,575,250
Merck & Co., Inc. ............... 133,000 17,788,750
Pfizer Inc. ..................... 96,500 10,488,344
Schering-Plough Corp. ........... 306,500 28,083,063
------------
95,019,845
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
-----------------------
<S> <C> <C>
FINANCIAL SERVICES (11.7%)
Associates First Capital Corp.
Class A......................... 188,000 $ 14,452,500
CIT Group, Inc. (The) Class A.... 360,000 13,500,000
Equifax Inc. .................... 258,000 9,368,625
Fannie Mae....................... 197,800 12,016,350
Household International, Inc. ... 341,100 16,969,725
MGIC Investment Corp. ........... 13,400 764,637
SunAmerica Inc. ................. 381,300 21,900,919
Travelers Group Inc. ............ 457,048 27,708,535
------------
116,681,291
------------
HEALTH CARE (4.8%)
Cardinal Health, Inc. ........... 127,000 11,906,250
HEALTHSOUTH Corp. (a)............ 509,200 13,589,275
Tenet Healthcare Corp. (a)....... 369,925 11,560,156
United Healthcare Corp. ......... 171,900 10,915,650
------------
47,971,331
------------
INDUSTRIAL (5.0%)
Illinois Tool Works Inc. ........ 220,100 14,677,919
Tyco International Ltd. ......... 556,300 35,046,900
------------
49,724,819
------------
INSURANCE (3.8%)
American International Group,
Inc. ........................... 127,375 18,596,750
Conseco, Inc. ................... 325,000 15,193,750
Frontier Insurance Group,
Inc. ........................... 187,000 4,219,187
------------
38,009,687
------------
LEISURE (0.6%)
Mirage Resorts, Inc. (a)......... 268,000 5,711,750
------------
MATERIALS/PROCESSING (1.4%)
Monsanto Co. .................... 245,000 13,689,375
------------
MEDICAL EQUIPMENT (6.2%)
Guidant Corp. ................... 228,200 16,273,512
Johnson & Johnson................ 257,462 18,987,822
Medtronic, Inc. ................. 418,800 26,698,500
------------
61,959,834
------------
OIL SERVICES (0.3%)
Halliburton Co. ................. 72,000 3,208,500
------------
POLLUTION CONTROL (1.5%)
USA Waste Services, Inc. (a)..... 307,600 15,187,750
------------
RETAIL (13.3%)
Bed Bath & Beyond, Inc. (a)...... 204,800 10,611,200
CVS Corp. ....................... 391,200 15,232,350
Dollar General Corp. ............ 307,187 12,153,086
</TABLE>
- ------------
+ Percentages indicated are based on Portfolio net assets.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
63
<PAGE> 64
CAPITAL APPRECIATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
COMMON STOCKS (CONTINUED)
SHARES VALUE
--------------------------
<S> <C> <C>
RETAIL (Continued)
Home Depot, Inc. (The)........... 243,900 $ 20,258,944
Kohl's Corp. (a)................. 383,800 19,909,625
Kroger Co. (The) (a)............. 341,000 14,620,375
Safeway Inc. (a)................. 526,000 21,401,625
Staples, Inc. (a)................ 602,000 17,420,375
------------
131,607,580
------------
TECHNOLOGY (3.7%)
Cisco Systems, Inc. (a).......... 281,050 25,874,166
Intel Corp. ..................... 144,700 10,725,888
------------
36,600,054
------------
TELECOMMUNICATION EQUIPMENT
(3.5%)
Lucent Technologies Inc. ........ 419,700 34,913,794
------------
TELECOMMUNICATION SERVICES (2.2%)
WorldCom, Inc. (a)............... 441,388 21,379,731
------------
Total Common Stocks (Cost
$570,574,806)................... 944,611,459
------------
SHORT-TERM
INVESTMENTS (4.6%)
PRINCIPAL
AMOUNT VALUE
--------------------------
COMMERCIAL PAPER (4.6%)
Morgan Stanley, Dean Witter,
Discover & Co. 6.25%, due
7/1/98.......................... $26,375,000 26,375,000
Salomon Smith Barney Holdings
Inc. 5.56%, due 7/1/98.......... 20,000,000 20,000,000
------------
Total Short-Term Investments
(Cost $46,375,000).............. 46,375,000
------------
Total Investments (Cost
$616,949,806) (c)............... 99.7% 990,986,459(d)
Cash and Other Assets, Less
Liabilities..................... 0.3 2,571,380
----------- ------------
Net Assets....................... 100.0% $993,557,839
=========== ============
</TABLE>
- ------------
(a) Non-income producing security.
(b) ADR-American Depository Receipt.
(c) The cost stated also represents the aggregate cost for Federal income tax
purposes.
(d) At June 30, 1998 net unrealized appreciation was $374,036,653, based on cost
for Federal income tax purposes. This consisted of aggregate gross
unrealized appreciation for all investments on which there was an excess of
market value over cost of $378,288,858 and aggregate gross unrealized
depreciation for all investments on which there was an excess of cost over
market value of $4,252,205.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
64
<PAGE> 65
MAINSTAY VP SERIES FUND, INC.
CAPITAL APPRECIATION PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
As of June 30, 1998 (Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investment in securities, at value
(identified cost $616,949,806)....... $ 990,986,459
Cash................................... 289
Receivables:
Investment securities sold........... 31,615,503
Fund shares sold..................... 1,140,237
Dividends............................ 298,105
--------------
Total assets................... 1,024,040,593
--------------
LIABILITIES:
Payables:
Investment securities purchased...... 29,684,101
Adviser.............................. 280,740
Administrator........................ 155,966
Custodian............................ 27,948
Directors............................ 199
Accrued expenses....................... 333,800
--------------
Total liabilities.............. 30,482,754
--------------
Net assets applicable to outstanding
shares............................... $ 993,557,839
==============
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.01 per
share)
50 million shares authorized......... $ 373,032
Additional paid-in capital............. 611,863,866
Accumulated undistributed net
investment income.................... 462,904
Accumulated undistributed net realized
gain on investments.................. 6,821,384
Net unrealized appreciation
on investments....................... 374,036,653
--------------
Net assets applicable to outstanding
shares............................... $ 993,557,839
==============
Shares of capital stock outstanding.... 37,303,195
==============
Net asset value per share
outstanding.......................... $ 26.63
==============
</TABLE>
STATEMENT OF OPERATIONS
For the six months ended June 30, 1998 (Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Income:
Dividends (a)........................ $ 2,114,570
Interest............................. 1,076,100
--------------
Total income................... 3,190,670
--------------
Expenses:
Advisory............................. 1,558,032
Administration....................... 865,573
Shareholder communication............ 184,107
Professional......................... 39,659
Custodian............................ 33,014
Directors............................ 25,952
Miscellaneous........................ 21,429
--------------
Total expenses................. 2,727,766
--------------
Net investment income.................. 462,904
--------------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain on investments....... 6,821,414
Net change in unrealized appreciation
on investments....................... 142,495,323
--------------
Net realized and unrealized gain
on investments....................... 149,316,737
--------------
Net increase in net assets resulting
from operations...................... $ 149,779,641
==============
</TABLE>
- ------------
(a) Dividends recorded net of foreign withholding taxes in the amount of $3,009.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
65
<PAGE> 66
CAPITAL APPRECIATION PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 1998 (Unaudited)
and the year ended December 31, 1997
<TABLE>
<CAPTION>
1998 1997
----------------------------
<S> <C> <C>
INCREASE IN NET ASSETS:
Operations:
Net investment income..................................... $ 462,904 $ 30,234
Net realized gain on investments.......................... 6,821,414 17,402,879
Net change in unrealized appreciation on investments...... 142,495,323 113,288,532
------------ ------------
Net increase in net assets resulting from operations...... 149,779,641 130,721,645
------------ ------------
Dividends and distributions to shareholders:
From net investment income................................ (29,913) (1,000)
From net realized gain on investments..................... (35,255) (10,215,853)
------------ ------------
Total dividends and distributions to shareholders....... (65,168) (10,216,853)
------------ ------------
Capital share transactions:
Net proceeds from sale of shares.......................... 104,257,081 151,573,522
Net asset value of shares issued to shareholders in
reinvestment of dividends and distributions............. 65,168 10,216,853
------------ ------------
104,322,249 161,790,375
Cost of shares redeemed................................... (23,557,639) (22,838,323)
------------ ------------
Increase in net assets derived from capital share
transactions............................................ 80,764,610 138,952,052
------------ ------------
Net increase in net assets.................................. 230,479,083 259,456,844
NET ASSETS:
Beginning of period......................................... 763,078,756 503,621,912
------------ ------------
End of period............................................... $993,557,839 $763,078,756
============ ============
Accumulated undistributed net investment income at end of
period.................................................... $ 462,904 $ 29,913
============ ============
</TABLE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(Selected Per Share Data and Ratios)
<TABLE>
<CAPTION>
JANUARY 29,
SIX MONTHS 1993 (a)
ENDED THROUGH
JUNE 30, YEAR ENDED DECEMBER 31 DECEMBER 31,
1998* 1997 1996 1995 1994 1993
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of
period.............................. $ 22.39 $ 18.39 $ 15.49 $ 11.45 $ 12.03 $ 10.00
---------- ---------- ---------- ---------- ---------- -----------
Net investment income................. 0.01 0.00(b) 0.01 0.06 0.05 0.02
Net realized and unrealized gain
(loss) on investments............... 4.23 4.31 2.90 4.04 (0.58) 2.03
---------- ---------- ---------- ---------- ---------- -----------
Total from investment operations...... 4.24 4.31 2.91 4.10 (0.53) 2.05
---------- ---------- ---------- ---------- ---------- -----------
Less dividends and distributions:
From net investment income.......... (0.00)(b) (0.00)(b) (0.01) (0.06) (0.05) (0.02)
From net realized gain
on investments.................... (0.00)(b) (0.31) -- -- -- --
---------- ---------- ---------- ---------- ---------- -----------
Total dividends and distributions..... (0.00)(b) (0.31) (0.01) (0.06) (0.05) (0.02)
---------- ---------- ---------- ---------- ---------- -----------
Net asset value at end of period...... $ 26.63 $ 22.39 $ 18.39 $ 15.49 $ 11.45 $ 12.03
========== ========== ========== ========== ========== ===========
Total investment return (d)........... 18.97% 23.49% 18.75% 35.78% (4.38%) 20.54%
Ratios (to average net assets)/
Supplemental Data:
Net investment income............... 0.11%+ 0.00%(c) 0.09% 0.57% 0.63% 0.46%+
Net expenses........................ 0.63%+ 0.65% 0.73% 0.73% 0.73% 0.73%+
Expenses (before reimbursement)..... 0.63%+ 0.65% 0.75% 0.90% 0.91% 1.15%+
Portfolio turnover rate............... 11% 34% 16% 35% 39% 28%
Net assets at end of period (in
000's).............................. $ 993,558 $ 763,079 $ 503,622 $ 244,536 $ 113,999 $ 43,485
</TABLE>
- ------------
(a) Commencement of Operations.
(b) Less than one cent per share.
(c) Less than one-hundredth of a percent.
(d) Total return is not annualized.
+ Annualized.
* Unaudited.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
66
<PAGE> 67
MAINSTAY VP SERIES FUND, INC.
CASH MANAGEMENT PORTFOLIO
PORTFOLIO OF INVESTMENTS
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
SHORT-TERM
INVESTMENTS (100.3%)+
PRINCIPAL AMORTIZED
AMOUNT COST
-------------------------
<S> <C> <C>
ASSET-BACKED SECURITY (1.2%)
Green Tree Financial Corp.
Series 98-2 Class A1
5.67%, due 4/1/99 (c)............ $2,374,817 $ 2,374,817
------------
BANK NOTE (1.4%)
Morgan Guaranty Trust Co.
5.93%, due 8/31/98 (c)........... 2,600,000 2,600,751
------------
CERTIFICATES OF DEPOSIT (2.6%)
Bayerische Landesbank Girozentrale
5.53%, due 3/23/99 (b)(c)........ 3,000,000 2,998,308
Bayerische Vereinsbank AG
5.81%, due 9/4/98 (b)(c)......... 2,000,000 2,000,000
------------
4,998,308
------------
COMMERCIAL PAPER (88.2%)
Abbey National North America
5.52%, due 7/2/98................ 3,500,000 3,499,463
American General Corp.
5.51%, due 8/25/98............... 4,000,000 3,966,328
Banca CRT Financial Corp.
5.54%, due 9/1/98................ 4,000,000 3,961,836
5.55%, due 8/28/98............... 4,150,000 4,112,892
Banco Bradesco S.A., Grand Cayman
Series A
5.54%, due 11/19/98.............. 5,315,000 5,199,673
Banco Santander Puerto Rico
5.50%, due 7/13/98............... 1,575,000 1,572,112
5.62%, due 7/27/98............... 2,195,000 2,186,091
BankAmerica Corp.
5.33%, due 10/5/98............... 2,500,000 2,464,467
BIL North America Inc.
5.55%, due 7/10/98............... 4,000,000 3,994,450
BTR Dunlop Finance Inc.
5.40%, due 7/8/98 (a)............ 4,000,000 3,995,800
Caisse Centrale des Banques
Populaires International Inc.
5.52%, due 8/18/98 (a)........... 3,500,000 3,474,240
Caisse Centrale Desjardins du
Quebec
5.49%, due 7/8/98................ 3,000,000 2,996,797
Credit Suisse First Boston
5.51%, due 9/10/98 (a)........... 3,480,000 3,442,183
Deutsche Bank Financial Inc.
5.49%, due 7/6/98................ 3,500,000 3,497,331
Ford Motor Credit Co.
5.53%, due 7/10/98............... 4,580,000 4,573,668
5.57%, due 7/10/98............... 2,400,000 2,396,658
Formosa Plastics Corp. U.S.A.
5.55%, due 7/6/98................ 3,000,000 2,997,687
5.58%, due 7/8/98................ 4,850,000 4,844,738
Franklin Resources Inc.
5.48%, due 7/6/98 (a)............ 3,000,000 2,997,717
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL AMORTIZED
AMOUNT COST
-------------------------
<S> <C> <C>
COMMERCIAL PAPER (Continued)
General Electric Capital Corp.
5.36%, due 7/28/98............... $2,000,000 $ 1,991,960
5.41%, due 10/15/98.............. 2,450,000 2,410,973
5.50%, due 10/21/98.............. 3,000,000 2,948,667
Goldman Sachs Group L.P. (The)
5.53%, due 8/26/98............... 4,000,000 3,965,591
ING America Insurance Holdings
Inc. 5.54%, due 7/21/98.......... 4,000,000 3,987,689
KFW International Finance Inc.
5.53%, due 7/15/98............... 4,120,000 4,111,140
5.65%, due 7/13/98............... 4,000,000 3,992,467
Lloyds Bank PLC
5.50%, due 8/26/98............... 3,500,000 3,470,055
Merrill Lynch & Co. Inc.
5.50%, due 10/30/98.............. 4,000,000 3,926,056
Minmetals Capital & Securities
Inc.
5.39%, due 8/24/98............... 5,000,000 4,959,575
Morgan Stanley, Dean Witter,
Discover & Co.
5.54%, due 7/17/98............... 4,000,000 3,990,151
5.61%, due 7/28/98 (b)(c)........ 3,000,000 3,000,000
National Rural Utilities
Cooperative Finance Corp.
5.53%, due 7/30/98............... 4,900,000 4,878,172
Pemex Capital Inc.
5.53%, due 7/17/98............... 3,500,000 3,491,398
Prudential Finance (Jersey) Ltd.
5.49%, due 7/7/98................ 3,500,000 3,496,797
5.54%, due 7/6/98................ 4,050,000 4,046,884
Prudential Funding Corp.
5.51%, due 9/4/98................ 4,000,000 3,960,206
5.52%, due 11/16/98.............. 4,000,000 3,915,360
Salomon Smith Barney Holdings Inc.
5.53%, due 8/12/98............... 3,825,000 3,800,322
5.54%, due 8/7/98................ 2,135,000 2,122,843
San Paolo U.S. Financial Co.
5.37%, due 7/21/98............... 1,900,000 1,894,332
6.20%, due 7/1/98................ 6,295,000 6,295,000
Songs Fuel Co.
5.40%, due 8/10/98............... 4,152,000 4,127,088
Svenska Handelsbanken Inc.
5.48%, due 7/9/98................ 3,400,000 3,395,859
5.49%, due 7/14/98............... 3,500,000 3,493,061
Transportadora de Gas del Sur S.A.
5.50%, due 7/21/98............... 2,000,000 1,993,889
5.60%, due 9/24/98............... 1,500,000 1,480,167
UNIfunding Inc.
5.50%, due 8/4/98................ 4,000,000 3,979,222
Wood Street Funding Corp.
5.55%, due 9/17/98 (a)........... 2,400,000 2,371,140
------------
167,670,195
------------
CORPORATE NOTE (0.8%)
American General Finance Corp.
8.50%, due 8/15/98 (c)........... 1,500,000 1,504,580
------------
</TABLE>
- ------------
+ Percentages indicated are based on Portfolio net assets.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
67
<PAGE> 68
CASH MANAGEMENT PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
SHORT-TERM
INVESTMENTS (CONTINUED)
PRINCIPAL AMORTIZED
AMOUNT COST
-------------------------
<S> <C> <C>
MEDIUM-TERM NOTES (6.1%)
Goldman Sachs Group L.P. (The)
5.69%, due 3/26/99 (a)(b)(c)..... $2,500,000 $ 2,500,000
International Business Machines
Corp.
5.52%, due 4/1/99 (b)(c)......... 3,000,000 2,998,446
Merrill Lynch & Co. Inc. Series B
5.67%, due 3/17/99 (b)(c)........ 3,600,000 3,601,300
New England Education Loan
Marketing Corp.
5.86%, due 7/17/98 (b)(c)........ 2,500,000 2,500,140
------------
11,599,886
------------
Total Short-Term Investments
(Amortized Cost $190,748,537)
(d).............................. 100.3% 190,748,537
Liabilities in Excess of
Cash and Other Assets............ (0.3) (599,519)
---------- ------------
Net Assets........................ 100.0% $190,149,018
========== ============
</TABLE>
- ------------
(a) May be sold to institutional investors only.
(b) Floating rate. Rate shown is the rate in effect at June 30, 1998.
(c) Coupon interest bearing security.
(d) The cost stated also represents the aggregate cost for Federal income tax
purposes.
The table below sets forth the diversification of Cash
Management Portfolio investments by industry.
INDUSTRY
DIVERSIFICATION
<TABLE>
<CAPTION>
AMORTIZED
COST PERCENT +
-------------------------
<S> <C> <C>
Banks #..................... $ 88,401,246 46.5%
Brokerage................... 35,009,870 18.4
Computers & Office
Equipment................. 2,998,446 1.6
Conglomerates............... 4,402,933 2.3
Consumer Financial
Services.................. 6,970,326 3.6
Finance..................... 33,631,622 17.7
Insurance................... 7,954,017 4.2
Real Estate................. 2,374,817 1.2
Utilities................... 4,878,172 2.6
Utilities-Gas............... 4,127,088 2.2
------------ --------
190,748,537 100.3
Liabilities in Excess of
Cash and Other Assets..... (599,519) (0.3)
------------ --------
Net Assets.................. $190,149,018 100.0%
============ ========
</TABLE>
- ------------
+ Percentages indicated are based on Portfolio net assets.
# The Portfolio will invest more than 25% of the market value of its total
assets in the securities of banks and bank holding companies, including
certificates of deposit, bankers' acceptances and securities guaranteed by
banks and bank holding companies.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
68
<PAGE> 69
MAINSTAY VP SERIES FUND, INC.
CASH MANAGEMENT PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
As of June 30, 1998 (Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investment in securities, at value
(amortized cost $190,748,537).......... $190,748,537
Cash..................................... 3,316
Interest receivable...................... 315,780
------------
Total assets..................... 191,067,633
------------
LIABILITIES:
Payables:
Adviser................................ 35,851
Administrator.......................... 28,681
Custodian.............................. 6,740
Directors.............................. 37
Accrued expenses......................... 64,377
Dividend payable......................... 782,929
------------
Total liabilities................ 918,615
------------
Net assets applicable to outstanding
shares................................. $190,149,018
============
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.01 per
share) 600 million shares authorized... $ 1,901,503
Additional paid-in capital............... 188,247,369
Accumulated undistributed net realized
gain on investments.................... 146
------------
Net assets applicable to outstanding
shares................................. $190,149,018
============
Shares of capital stock outstanding...... 190,150,293
============
Net asset value per share outstanding.... $ 1.00
============
</TABLE>
STATEMENT OF OPERATIONS
For the six months ended June 30, 1998 (Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Income:
Interest............................... $ 4,266,767
------------
Expenses:
Advisory............................... 187,538
Administration......................... 150,030
Shareholder communication.............. 26,265
Professional........................... 18,108
Custodian.............................. 9,602
Directors.............................. 4,646
Miscellaneous.......................... 7,345
------------
Total expenses................... 403,534
------------
Net investment income.................... 3,863,233
------------
REALIZED GAIN ON INVESTMENTS:
Net realized gain on investments......... 663
------------
Net increase in net assets resulting from
operations............................. $ 3,863,896
============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
69
<PAGE> 70
CASH MANAGEMENT PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 1998 (Unaudited)
and the year ended December 31, 1997
<TABLE>
<CAPTION>
1998 1997
-----------------------------
<S> <C> <C>
INCREASE IN NET ASSETS:
Operations:
Net investment income..................................... $ 3,863,233 $ 6,478,968
Net realized gain on investments.......................... 663 1,549
------------- -------------
Net increase in net assets resulting from operations...... 3,863,896 6,480,517
------------- -------------
Dividends to shareholders:
From net investment income................................ (3,863,233) (6,478,968)
------------- -------------
Capital share transactions:
Net proceeds from sale of shares.......................... 230,735,537 285,479,612
Net asset value of shares issued to shareholders in
reinvestment of dividends............................... 3,715,104 6,345,913
------------- -------------
234,450,641 291,825,525
Cost of shares redeemed................................... (185,083,796) (269,392,486)
------------- -------------
Increase in net assets derived from capital share
transactions............................................ 49,366,845 22,433,039
------------- -------------
Net increase in net assets.................................. 49,367,508 22,434,588
NET ASSETS:
Beginning of period......................................... 140,781,510 118,346,922
------------- -------------
End of period............................................... $ 190,149,018 $ 140,781,510
============= =============
</TABLE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(Selected Per Share Data and Ratios)
<TABLE>
<CAPTION>
JANUARY 29,
SIX MONTHS 1993 (a)
ENDED THROUGH
JUNE 30, YEAR ENDED DECEMBER 31 DECEMBER 31,
1998* 1997 1996 1995 1994 1993
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of
period....................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------------ ------------ ------------ ------------ ------------ ------------
Net investment income.......... 0.05 0.05 0.05 0.05 0.04 0.02
------------ ------------ ------------ ------------ ------------ ------------
Less dividends:
From net investment income... (0.05) (0.05) (0.05) (0.05) (0.04) (0.02)
------------ ------------ ------------ ------------ ------------ ------------
Net asset value at end of
period....................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
============ ============ ============ ============ ============ ============
Total investment return (b).... 2.58% 5.25% 4.95% 5.59% 3.82% 2.40%
Ratios (to average net assets)/
Supplemental Data:
Net investment income........ 5.15%+ 5.13% 4.92% 5.44% 3.97% 2.65%+
Net expenses................. 0.54%+ 0.54% 0.62% 0.62% 0.62% 0.62%+
Expenses (before
reimbursement)............. 0.54%+ 0.54% 0.64% 0.94% 0.89% 1.10%+
Net assets at end of period
(in 000's)................... $ 190,149 $ 140,782 $ 118,347 $ 87,839 $ 71,116 $ 26,733
</TABLE>
- ------------
(a) Commencement of Operations.
(b) Total return is not annualized.
+ Annualized.
* Unaudited.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
70
<PAGE> 71
MAINSTAY VP SERIES FUND, INC.
CONVERTIBLE PORTFOLIO
PORTFOLIO OF INVESTMENTS
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
CONVERTIBLE SECURITIES (75.2%)+
BONDS (51.7%)
PRINCIPAL
AMOUNT VALUE
------------------------
<S> <C> <C>
AUTO PARTS (6.1%)
Magna International, Inc.
4.875%, due 2/15/05 (b).......... $ 500,000 $ 552,815
Mark IV Industries, Inc.
4.75%, due 11/1/04 (b)........... 1,100,000 1,018,875
MascoTech, Inc.
4.50%, due 12/15/03.............. 1,800,000 1,728,000
-----------
3,299,690
-----------
CELLULAR TELEPHONE (3.0%)
United States Cellular Corp.
(zero coupon), due 6/15/15 (c)... 4,250,000 1,604,375
-----------
COMPUTER NETWORKING (1.9%)
Synoptics Communications, Inc.
5.25%, due 5/15/03............... 1,000,000 1,011,250
-----------
COMPUTERS & OFFICE EQUIPMENT
(3.1%)
Plasma & Materials Technologies,
Inc.
(zero coupon), due 10/15/01...... 1,000,000 560,000
(zero coupon), due 10/15/01 (b).. 2,000,000 1,120,000
-----------
1,680,000
-----------
HEALTH CARE (4.7%)
Veterinary Centers Of America,
Inc.
5.25%, due 5/1/06................ 2,880,000 2,527,200
-----------
INSURANCE (2.0%)
Stateman Group, Inc.
6.25%, due 5/1/03................ 1,000,000 1,080,000
-----------
OIL SERVICES (2.2%)
Baker Hughes, Inc.
(zero coupon), due 5/5/08........ 1,600,000 1,167,008
-----------
PERSONAL SERVICES (2.0%)
Equity Corp.
4.50%, due 12/31/04 (b).......... 1,000,000 1,100,000
-----------
PERSONNEL SERVICES (2.0%)
Interim Services, Inc.
4.50%, due 6/1/05................ 1,000,000 1,082,500
-----------
PUBLISHING (4.8%)
Hollinger, Inc., Series U.S.
(zero coupon), due 10/5/13 (d)... 1,500,000 622,500
World Color Press, Inc.
6.00%, due 10/1/07............... 1,775,000 1,979,125
-----------
2,601,625
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
------------------------
<S> <C> <C>
RESTAURANTS & LODGING (1.0%)
Boston Chicken, Inc.
(zero coupon), due 6/1/15........ $6,643,000 $ 431,795
4.50%, due 2/1/04................ 500,000 100,000
-----------
531,795
-----------
RETAIL (1.0%)
Loews Corp.
3.125%, due 9/15/07.............. 600,000 546,000
-----------
SEMICONDUCTOR EQUIPMENT (2.1%)
Integrated Process Equipment Corp.
6.25%, due 9/15/04............... 1,500,000 1,132,500
-----------
SEMICONDUCTORS (3.8%)
Advanced Micro Devices, Inc.
6.00%, due 5/15/05............... 2,500,000 2,050,000
-----------
SOFTWARE (3.5%)
BEA Systems, Inc.
4.00%, due 6/15/05 (b)........... 1,400,000 1,491,000
System Software Associates, Inc.
7.00%, due 9/15/02............... 500,000 397,500
-----------
1,888,500
-----------
SPECIALIZED SERVICES (1.8%)
CUC International, Inc.
3.00%, due 2/15/02 (b)........... 1,000,000 990,000
-----------
STEEL, ALUMINUM & OTHER METALS
(1.4%)
Coeur d'Alene Mines Corp.
7.25%, due 10/31/05.............. 700,000 511,000
Inco Ltd.
5.75%, due 7/1/04 (d)............ 250,000 233,750
-----------
744,750
-----------
TECHNOLOGY (2.1%)
Adaptec, Inc.
4.75%, due 2/1/04................ 400,000 316,000
4.75%, due 2/1/04 (b)............ 1,000,000 790,000
-----------
1,106,000
-----------
TELECOMMUNICATION EQUIPMENT (1.0%)
World Access, Inc.
4.50%, due 10/1/02............... 500,000 512,500
-----------
</TABLE>
- ------------
+ Percentages indicated are based on Portfolio net assets.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
71
<PAGE> 72
CONVERTIBLE PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
BONDS (CONTINUED)
PRINCIPAL
AMOUNT VALUE
------------------------
<S> <C> <C>
TELECOMMUNICATION SERVICES (2.2%)
SmarTalk Teleservices, Inc.
5.75%, due 9/15/04 (b)........... $ 500,000 $ 416,250
Tel-Save Holding, Inc.
5.00%, due 12/15/04 (b).......... 1,000,000 782,500
-----------
1,198,750
-----------
Total Bonds
(Cost $29,731,995)............... 27,854,443
-----------
PREFERRED STOCKS (23.5%)
SHARES
----------
AUTO PARTS (2.1%)
Tower Auto Capital Trust
6.75% (b)........................ 24,000 1,155,000
-----------
BIOTECHNOLOGY (1.0%)
Alkermes, Inc.
6.50%............................ 12,500 520,312
-----------
CABLE (3.1%)
United International Holdings,
Inc.
4.00%, Series A (a)(e)........... 10,400 1,674,400
-----------
CONSUMER STAPLES (0.4%)
Newell Financial Trust I
5.25%............................ 4,000 238,000
-----------
DOMESTIC OIL & GAS (0.6%)
Enron Corp.
6.25%............................ 15,000 300,000
-----------
HOME BUILDING (1.0%)
Fleetwood Capital Trust
6.00% (b)........................ 10,000 533,750
-----------
INSURANCE (4.3%)
Conseco Finance Trust IV
7.00%, Series F.................. 15,000 795,000
Life RE Capital Trust II
6.00%............................ 20,000 1,525,000
-----------
2,320,000
-----------
REAL ESTATE (5.3%)
General Growth Properties, Inc.
7.25%............................ 50,000 1,262,500
Glenborough Realty Trust, Inc.
7.75%, Series A.................. 65,000 1,584,375
-----------
2,846,875
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------------------------
<S> <C> <C>
RESTAURANTS & LODGING (1.8%)
Suiza Capital Trust II
5.50% (b)........................ 20,000 $ 990,000
-----------
SOFTWARE (3.9%)
Microsoft Corp.
$2.196, Series A (a)............. 22,000 2,090,000
-----------
Total Preferred Stocks
(Cost $12,136,793)............... 12,668,337
-----------
Total Convertible Securities
(Cost $41,868,788)............... 40,522,780
-----------
COMMON STOCKS (7.1%)
CHEMICALS (0.4%)
IMC Global, Inc................... 2,000 60,250
Monsanto Co. ..................... 3,000 167,625
-----------
227,875
-----------
COMPUTERS & OFFICE EQUIPMENT
(1.5%)
Unisys Corp. (a).................. 29,304 827,838
-----------
ELECTRIC UTILITIES (0.1%)
Potomac Electric Power Co......... 2,000 50,125
-----------
HEALTH CARE (3.5%)
Integrated Health Services,
Inc.............................. 49,805 1,867,688
-----------
MACHINERY (0.5%)
American Standard Cos. (a)........ 6,000 268,125
-----------
MEDIA (0.6%)
Time Warner Inc. ................. 3,879 331,412
-----------
TELECOMMUNICATION EQUIPMENT (0.5%)
RF Micro Devices, Inc. (a)........ 25,000 271,875
-----------
Total Common Stocks
(Cost $3,202,241)................ 3,844,938
-----------
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
72
<PAGE> 73
MAINSTAY VP SERIES FUND, INC.
<TABLE>
<CAPTION>
PREFERRED STOCK (0.5%)
SHARES VALUE
----------------------
<S> <C> <C>
MINING (0.5%)
Freeport-McMoRan Copper & Gold,
Inc. Series Silver (f)(g)........ 15,000 $ 253,125
-----------
Total Preferred Stock
(Cost $255,750).................. 253,125
-----------
Total Long-Term Investments
(Cost $45,326,779)............... 44,620,843
-----------
SHORT-TERM
INVESTMENTS (16.0%)
PRINCIPAL
AMOUNT
----------
COMMERCIAL PAPER (16.0%)
General Electric Capital Corp.
5.62%, due 7/6/98................ $2,540,000 2,538,017
Goldman Sachs Group L.P. (The)
6.25%, due 7/1/98................ 2,195,000 2,195,000
KFW International Finance Inc.
5.75%, due 7/7/98................ 2,300,000 2,297,796
Morgan Stanley, Dean Witter,
Discover & Co.
6.25%, due 7/1/98................ 1,600,000 1,600,000
-----------
Total Short-Term Investments
(Cost $8,630,813)................ 8,630,813
-----------
Total Investments
(Cost $53,957,592) (h)........... 98.8% 53,251,656(i)
Cash and Other Assets,
Less Liabilities................. 1.2 672,630
---------- -----------
Net Assets........................ 100.0% $53,924,286
========== ===========
</TABLE>
- ------------
(a) Non-income producing security.
(b) May be sold to institutional investors only.
(c) LYON--Liquid Yield Option Note: Callable, zero coupon securities priced at
a deep discount from par. They include a "put" feature that enables holders
to redeem them at a specific date, at a specific price. Put prices reflect
fixed interest rates, and therefore increase over time.
(d) Yankee bond.
(e) Restricted security.
(f) Depository Shares--each share represents 0.025 shares of silver denominated
preferred stock.
(g) Dividend equals U.S. dollar equivalent of 0.04125 oz. of silver per share.
(h) The cost stated also represents the aggregate cost for Federal income tax
purposes.
(i) At June 30, 1998 net unrealized depreciation was $705,936, based on cost
for Federal income tax purposes. This consisted of aggregate gross
unrealized appreciation for all investments on which there was an excess of
market value over cost of $2,241,243 and aggregate gross unrealized
depreciation for all investments on which there was an excess of cost over
market value of $2,947,179.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
73
<PAGE> 74
CONVERTIBLE PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
As of June 30, 1998 (Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investment in securities, at value
(identified cost $53,957,592).......... $ 53,251,656
Cash..................................... 2,433
Receivables:
Investment securities sold............. 5,829,987
Dividends and interest................. 331,619
Fund shares sold....................... 82,061
------------
Total assets..................... 59,497,756
------------
LIABILITIES:
Payables:
Investment securities purchased........ 5,504,966
Adviser................................ 15,415
Administrator.......................... 8,563
Custodian.............................. 5,777
Directors.............................. 11
Accrued expenses......................... 38,738
------------
Total liabilities................ 5,573,470
------------
Net assets applicable to outstanding
shares................................. $ 53,924,286
============
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.01 per
share) 100 million shares authorized... $ 47,506
Additional paid-in capital............... 50,895,561
Accumulated undistributed net investment
income................................. 1,138,919
Accumulated undistributed net realized
gain on investments.................... 2,548,236
Net unrealized depreciation on
investments............................ (705,936)
------------
Net assets applicable to outstanding
shares................................. $ 53,924,286
============
Shares of capital stock outstanding...... 4,750,568
============
Net asset value per share outstanding.... $ 11.35
============
</TABLE>
STATEMENT OF OPERATIONS
For the six months ended June 30, 1998 (Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Income:
Interest............................... $ 981,588
Dividends.............................. 325,725
------------
Total income..................... 1,307,313
------------
Expenses:
Advisory............................... 85,431
Administration......................... 47,461
Professional........................... 13,649
Shareholder communication.............. 6,891
Custodian.............................. 5,839
Directors.............................. 1,373
Miscellaneous.......................... 7,750
------------
Total expenses................... 168,394
------------
Net investment income.................... 1,138,919
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized gain on investments......... 2,548,236
Net change in unrealized depreciation on
investments............................ (235,776)
------------
Net realized and unrealized gain on
investments............................ 2,312,460
------------
Net increase in net assets resulting from
operations............................. $ 3,451,379
============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
74
<PAGE> 75
MAINSTAY VP SERIES FUND, INC.
CONVERTIBLE PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 1998 (Unaudited)
and the year ended December 31, 1997
<TABLE>
<CAPTION>
1998 1997
--------------------------
<S> <C> <C>
INCREASE IN NET ASSETS:
Operations:
Net investment income..................................... $ 1,138,919 $ 1,491,304
Net realized gain on investments.......................... 2,548,236 3,443,999
Net change in unrealized appreciation (depreciation) on
investments............................................. (235,776) (722,378)
----------- -----------
Net increase in net assets resulting from operations...... 3,451,379 4,212,925
----------- -----------
Dividends and distributions to shareholders:
From net investment income................................ (22,890) (1,479,858)
From net realized gain on investments..................... (1,348,304) (2,100,589)
----------- -----------
Total dividends and distributions to shareholders....... (1,371,194) (3,580,447)
----------- -----------
Capital share transactions:
Net proceeds from sale of shares.......................... 13,611,339 21,744,883
Net asset value of shares issued to shareholders in
reinvestment of dividends and distributions............. 1,371,194 3,580,447
----------- -----------
14,982,533 25,325,330
Cost of shares redeemed................................... (2,906,715) (1,653,885)
----------- -----------
Increase in net assets derived from capital share
transactions............................................ 12,075,818 23,671,445
----------- -----------
Net increase in net assets.................................. 14,156,003 24,303,923
NET ASSETS:
Beginning of period......................................... 39,768,283 15,464,360
----------- -----------
End of period............................................... $53,924,286 $39,768,283
=========== ===========
Accumulated undistributed net investment income at end of
period.................................................... $ 1,138,919 $ 22,890
=========== ===========
</TABLE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(Selected Per Share Data and Ratios)
<TABLE>
<CAPTION>
OCTOBER 1,
SIX MONTHS YEAR 1996 (a)
ENDED ENDED THROUGH
JUNE 30, DECEMBER 31, DECEMBER 31,
1998* 1997 1996
------------------------------------------
<S> <C> <C> <C>
Net asset value at beginning of period...................... $ 10.76 $ 10.27 $ 10.00
----------- ----------- -----------
Net investment income....................................... 0.24 0.44 0.10
Net realized and unrealized gain on investments............. 0.66 1.12 0.29
----------- ----------- -----------
Total from investment operations............................ 0.90 1.56 0.39
----------- ----------- -----------
Less dividends and distributions:
From net investment income................................ (0.01) (0.44) (0.10)
From net realized gain on investments..................... (0.30) (0.63) (0.02)
----------- ----------- -----------
Total dividends and distributions........................... (0.31) (1.07) (0.12)
----------- ----------- -----------
Net asset value at end of period............................ $ 11.35 $ 10.76 $ 10.27
=========== =========== ===========
Total investment return (b)................................. 8.29% 15.43% 3.89%
Ratios (to average net assets)/Supplemental Data:
Net investment income..................................... 4.80%+ 5.13% 5.14%+
Net expenses.............................................. 0.71%+ 0.73% 0.73%+
Expenses (before reimbursement)........................... 0.71%+ 0.78% 1.46%+
Portfolio turnover rate..................................... 141% 217% 15%
Net assets at end of period (in 000's)...................... $ 53,924 $ 39,768 $ 15,464
</TABLE>
- ------------
(a) Commencement of Operations.
(b) Total return is not annualized.
+ Annualized.
* Unaudited.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
75
<PAGE> 76
GOVERNMENT PORTFOLIO
PORTFOLIO OF INVESTMENTS
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
LONG-TERM BONDS (98.6%)+
ASSET-BACKED SECURITIES (8.5%)
PRINCIPAL
AMOUNT VALUE
--------------------------
<S> <C> <C>
AIRPLANE LEASES (2.6%)
AerCo Ltd.
Series 1A Class A1
5.8463%, due 7/15/23 (a)(d)..... $ 575,000 $ 575,000
Airplanes Pass-Through Trust
Series 1 Class C
8.15%, due 3/15/19 (c).......... 701,616 738,275
Morgan Stanley Aircraft Finance
Series 1A Class A1
5.8663%, due 3/15/23 (a)(d)..... 825,000 824,711
------------
2,137,986
------------
CONSUMER LOANS (1.6%)
Chase Manhattan Recreational
Vehicles Owner Trust
Series 1997-A Class A5
6.05%, due 11/15/04 (c)......... 780,000 780,850
Green Tree Recreational Equipment
& Consumer Trust
Series 1996-C Class A1
5.8963%, due 10/15/17 (c)(d).... 195,525 195,617
NationsCredit Grantor Trust
Series 1997-2 Class A2
6.25%, due 11/15/13 (c)......... 385,876 386,972
------------
1,363,439
------------
EQUIPMENT LOANS (2.0%)
Case Equipment Loan Trust
Series 1997-A Class A3
6.45%, due 3/15/04 (c).......... 1,680,000 1,690,450
------------
HOME EQUITY LOANS (2.3%)
Saxon Asset Securities Trust
Series 1997-3 Class AF1
5.8163%, due 10/25/20 (c)(d).... 383,230 383,349
Southern Pacific Secured Assets
Corp.
Series 1997-1 Class A1
5.8563%, due 4/25/27 (c)(d)..... 1,585,562 1,585,816
------------
1,969,165
------------
Total Asset-Backed Securities
(Cost $7,150,227)............... 7,161,040
------------
MORTGAGE-BACKED SECURITIES (5.0%)
COMMERCIAL MORTGAGE LOANS (COLLATERALIZED
MORTGAGE OBLIGATIONS) (4.4%)
First Union-Lehman Brothers Bank
of America Commercial Mortgage
Trust
Series 1998-C2 Class A1
6.28%, due 6/18/07 (c).......... 597,697 601,695
FMAC Loan Receivables Trust
Series 1998-BA Class A2
6.74%, due 11/15/20 (a)......... 595,000 603,562
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
--------------------------
<S> <C> <C>
COMMERCIAL MORTGAGE LOANS (COLLATERALIZED
MORTGAGE OBLIGATIONS) (Continued)
General Motors Acceptance Corp.
Commercial Mortgage Securities
Inc.
Series 1998-C1 Class A1
6.411%, due 11/15/07 (c)........ $ 635,000 $ 643,096
Merrill Lynch Mortgage Investors,
Inc.
Series 1998-C2 Class A2
6.39%, due 2/15/30 (c).......... 410,000 414,022
Series 1998-C1 Class A2
6.48%, due 11/15/26 (c)(d)...... 410,000 414,236
Series 1995-C2 Class A1
7.0875%, due 6/15/21 (c)(d)..... 698,029 710,147
Mortgage Capital Funding, Inc.
Series 1998-MC1 Class A1
6.417%, due 6/18/07 (c)......... 272,286 275,673
------------
3,662,431
------------
RESIDENTIAL MORTGAGE LOANS
(COLLATERALIZED MORTGAGE OBLIGATIONS) (0.6%)
Residential Asset Securitization
Trust
Series 1997-A5 Class A4
10.00%, due 7/25/27 (c)......... 241,292 246,721
Series 1997-A8 Class A2
10.00%, due 10/25/27 (c)........ 21,794 23,646
Structured Asset Securities Corp.
Series 1996-2 Class A1
7.00%, due 8/25/26 (c).......... 259,940 261,030
------------
531,397
------------
Total Mortgage-Backed Securities
(Cost $4,179,682)............... 4,193,828
------------
U.S. GOVERNMENT & FEDERAL AGENCIES (85.1%)
FEDERAL NATIONAL MORTGAGE
ASSOCIATION (2.8%)
5.25%, due 1/15/03.............. 2,430,000 2,384,049
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(MORTGAGE PASS-THROUGH SECURITIES) (12.3%)
6.00%, due 7/20/13 TBA (b)...... 2,285,000 2,261,442
6.45%, due 1/1/05 (c)........... 582,690 595,306
6.50%, due 12/1/27 (c).......... 940,516 937,140
6.50%, due 8/13/28 TBA (b)...... 1,745,000 1,736,816
6.54%, due 1/1/05 (c)........... 548,273 562,874
7.00%, due 8/18/13-8/13/28 TBA
(b)............................. 4,240,000 4,300,410
------------
10,393,988
------------
</TABLE>
- ------------
+ Percentages indicated are based on Portfolio net assets.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
76
<PAGE> 77
MAINSTAY VP SERIES FUND, INC.
<TABLE>
<CAPTION>
U.S. GOVERNMENT &
FEDERAL AGENCIES (CONTINUED)
PRINCIPAL
AMOUNT VALUE
--------------------------
<S> <C> <C>
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION I
(MORTGAGE PASS-THROUGH SECURITIES) (15.4%)
7.00%, due 8/19/28 TBA (b)...... $ 4,880,000 $ 4,953,200
7.50%, due 12/15/23 (c)......... 568,257 584,594
8.00%, due 8/19/28 TBA (b)...... 5,530,000 5,729,914
9.50%, due 5/15/22 (c).......... 1,522,679 1,667,334
------------
12,935,042
------------
UNITED STATES TREASURY BONDS
(21.8%)
6.125%, due 11/15/27 (e)........ 3,440,000 3,686,166
7.625%, due 2/15/25 (e)......... 7,595,000 9,562,561
8.875%, due 8/15/17 (e)......... 3,740,000 5,098,667
------------
18,347,394
------------
UNITED STATES TREASURY NOTES
(32.8%)
5.50%, due 11/15/98 (e)......... 4,480,000 4,481,389
5.625%, due 11/30/00............ 3,000,000 3,006,570
5.75%, due 4/30/03 (e).......... 4,005,000 4,044,409
6.25%, due 2/15/03.............. 7,150,000 7,357,779
6.625%, due 5/15/07 (e)......... 6,195,000 6,653,802
7.75%, due 11/30/99............. 210,000 216,266
7.875%, due 11/15/04............ 1,600,000 1,796,992
------------
27,557,207
------------
Total U.S. Government & Federal
Agencies
(Cost $71,042,637).............. 71,617,680
------------
Total Long-Term Bonds
(Cost $82,372,546).............. 82,972,548
------------
</TABLE>
<TABLE>
<CAPTION>
SHORT-TERM
INVESTMENTS (24.9%)
PRINCIPAL
AMOUNT VALUE
--------------------------
<S> <C> <C>
COMMERCIAL PAPER (10.0%)
Merrill Lynch & Co. Inc.
5.63%, due 7/6/98 (c)........... $ 4,200,000 $ 4,196,716
Salomon Smith Barney Holdings
Inc.
5.56%, due 7/1/98............... 4,200,000 4,200,000
------------
Total Commercial Paper
(Cost $8,396,716)............... 8,396,716
------------
FEDERAL AGENCIES (14.9%)
Federal Home Loan Bank Discount
Corp. 5.55%, due 7/1/98......... $11,500,000 $ 11,500,000
Federal National Mortgage
Association 5.55%, due 7/2/98... 1,010,000 1,009,844
------------
Total Federal Agencies
(Cost $12,509,844).............. 12,509,844
------------
Total Short-Term Investments
(Cost $20,906,560).............. 20,906,560
------------
Total Investments
(Cost $103,279,106) (f)......... 123.5% 103,879,108(g)
Liabilities in Excess of
Cash and Other Assets........... (23.5) (19,754,226)
---------- ------------
Net Assets....................... 100.0% $ 84,124,882
=========== ============
</TABLE>
- ------------
(a) May be sold to institutional investors only.
(b) TBA: Securities purchased on a forward commitment basis with an approximate
principal amount and maturity date. The actual principal amount and maturity
date will be determined upon settlement.
(c) Segregated as collateral for TBA.
(d) Floating rate. Rate shown is the rate in effect at June 30, 1998.
(e) Represents securities out on loan or a portion which is out on loan.
(f) The cost for Federal income tax purposes is $103,281,406.
(g) At June 30, 1998 net unrealized appreciation was $597,702, based on cost for
Federal income tax purposes. This consisted of aggregate gross unrealized
appreciation for all investments on which there was an excess of market
value over cost of $672,328 and aggregate gross unrealized depreciation for
all investments on which there was an excess of cost over market value of
$74,626.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
77
<PAGE> 78
GOVERNMENT PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
As of June 30, 1998 (Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investment in securities, at value
(identified cost $103,279,106)......... $103,879,108
Cash..................................... 4,453
Collateral held for securities loaned, at
value.................................. 19,947,031
Receivables:
Investment securities sold............. 20,248,353
Interest............................... 830,248
Fund shares sold....................... 126,134
------------
Total assets..................... 145,035,327
------------
LIABILITIES:
Securities lending collateral, at
value.................................. 19,947,031
Payables:
Investment securities purchased........ 40,739,793
Fund shares redeemed................... 136,887
Adviser................................ 20,522
Administrator.......................... 13,681
Custodian.............................. 6,069
Directors.............................. 17
Accrued expenses......................... 46,445
------------
Total liabilities................ 60,910,445
------------
Net assets applicable to outstanding
shares................................. $ 84,124,882
============
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.01 per
share) 50 million shares authorized.... $ 82,159
Additional paid-in capital............... 83,941,242
Accumulated undistributed net investment
income................................. 2,243,074
Accumulated net realized loss on
investments............................ (2,741,595)
Net unrealized appreciation on
investments............................ 600,002
------------
Net assets applicable to outstanding
shares................................. $ 84,124,882
============
Shares of capital stock outstanding...... 8,215,908
============
Net asset value per share outstanding.... $ 10.24
============
</TABLE>
STATEMENT OF OPERATIONS
For the six months ended June 30, 1998 (Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Income:
Interest............................... $ 2,488,303
------------
Expenses:
Advisory............................... 116,680
Administration......................... 77,786
Professional........................... 18,143
Shareholder communication.............. 12,405
Custodian.............................. 11,637
Directors.............................. 2,368
Portfolio pricing...................... 1,390
Miscellaneous.......................... 4,820
------------
Total expenses................... 245,229
------------
Net investment income.................... 2,243,074
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized gain on investments......... 2,076,229
Net change in unrealized appreciation on
investments............................ (1,090,997)
------------
Net realized and unrealized gain on
investments............................ 985,232
------------
Net increase in net assets resulting from
operations............................. $ 3,228,306
============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
78
<PAGE> 79
MAINSTAY VP SERIES FUND, INC.
GOVERNMENT PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 1998 (Unaudited)
and the year ended December 31, 1997
<TABLE>
<CAPTION>
1998 1997
---------------------------
<S> <C> <C>
INCREASE IN NET ASSETS:
Operations:
Net investment income..................................... $ 2,243,074 $ 4,772,472
Net realized gain on investments.......................... 2,076,229 205,612
Net change in unrealized appreciation on investments...... (1,090,997) 1,417,840
------------ ------------
Net increase in net assets resulting from operations...... 3,228,306 6,395,924
------------ ------------
Dividends to shareholders:
From net investment income................................ -- (4,698,251)
------------ ------------
Capital share transactions:
Net proceeds from sale of shares.......................... 14,458,117 9,479,059
Net asset value of shares issued to shareholders in
reinvestment of dividends............................... -- 4,698,251
------------ ------------
14,458,117 14,177,310
Cost of shares redeemed................................... (7,316,052) (15,243,012)
------------ ------------
Increase (decrease) in net assets derived from capital
share transactions...................................... 7,142,065 (1,065,702)
------------ ------------
Net increase in net assets.................................. 10,370,371 631,971
NET ASSETS:
Beginning of period......................................... 73,754,511 73,122,540
------------ ------------
End of period............................................... $ 84,124,882 $ 73,754,511
============ ============
Accumulated undistributed net investment income at end of
period.................................................... $ 2,243,074 $ --
============ ============
</TABLE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(Selected Per Share Data and Ratios)
<TABLE>
<CAPTION>
JANUARY 29,
SIX MONTHS 1993 (a)
ENDED THROUGH
JUNE 30, YEAR ENDED DECEMBER 31 DECEMBER 31,
1998* 1997 1996 1995 1994 1993
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of
period......................... $ 9.83 $ 9.59 $ 10.01 $ 9.21 $ 10.15 $ 10.00
----------- ----------- ----------- ----------- ----------- -----------
Net investment income............ 0.27 0.67 0.65 0.75 0.75 0.82
Net realized and unrealized gain
(loss) on investments.......... 0.14 0.24 (0.42) 0.80 (0.94) (0.25)
----------- ----------- ----------- ----------- ----------- -----------
Total from investment
operations..................... 0.41 0.91 0.23 1.55 (0.19) 0.57
----------- ----------- ----------- ----------- ----------- -----------
Less dividends:
From net investment income..... -- (0.67) (0.65) (0.75) (0.75) (0.42)
----------- ----------- ----------- ----------- ----------- -----------
Net asset value at end of
period......................... $ 10.24 $ 9.83 $ 9.59 $ 10.01 $ 9.21 $ 10.15
=========== =========== =========== =========== =========== ===========
Total investment return (b)...... 4.15% 9.48% 2.28% 16.72% (1.84%) 5.63%
Ratios (to average net assets)/
Supplemental Data:
Net investment income.......... 5.77%+ 6.71% 6.66% 7.80% 8.16% 8.46%+
Net expenses................... 0.63%+ 0.63% 0.67% 0.67% 0.67% 0.67%+
Expenses (before
reimbursement)............... 0.63%+ 0.63% 0.71% 0.82% 0.87% 1.02%+
Portfolio turnover rate.......... 229% 345% 304% 592% 483% 501%
Net assets at end of period (in
000's)......................... $ 84,125 $ 73,755 $ 73,123 $ 64,812 $ 61,641 $ 46,766
</TABLE>
- ------------
(a) Commencement of Operations.
(b) Total return is not annualized.
+ Annualized.
* Unaudited.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
79
<PAGE> 80
HIGH YIELD CORPORATE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
LONG-TERM BONDS (85.7%)+
CONVERTIBLE BONDS (7.5%)
PRINCIPAL
AMOUNT VALUE
-------------------------
<S> <C> <C>
BANKS (0.3%)
MBI Finance Ltd.
(zero coupon), due
12/18/01 (e).................... $3,090,000 $ 1,854,000
------------
CELLULAR TELEPHONE (1.1%)
Metro Pacific Capital Ltd.
2.50%, due 4/11/03 (e).......... 7,200,000 5,796,000
------------
CONGLOMERATES (2.2%)
First Pacific Capital Ltd.
2.00%, due 3/27/02 (e).......... 8,332,000 7,352,990
Hutchison Delta Finance Ltd.
7.00%, due 11/8/02 (e).......... 2,000,000 2,076,892
Loxley Public Co.
2.50%, due 4/4/01 (e)........... 3,250,000 1,121,250
3.50%, due 4/20/05 (e).......... 3,103,000 1,691,135
------------
12,242,267
------------
DRUGS (0.5%)
Ivax Corp.
6.50%, due 11/15/01............. 2,800,000 2,506,000
------------
ELECTRICAL EQUIPMENT (0.6%)
Credence Systems Corp.
5.25%, due 9/15/02.............. 4,545,000 3,533,738
------------
PAPER & FOREST PRODUCTS (0.7%)
Sappi BVI Finance Ltd.
7.50%, due 8/1/02 (e)........... 4,000,000 3,600,000
------------
RETAIL (0.2%)
Sports Authority, Inc. (The)
5.25%, due 9/15/01.............. 1,332,000 1,275,390
------------
TECHNOLOGY (1.6%)
Cirrus Logic, Inc.
6.00%, due 12/15/03............. 10,000,000 8,100,000
Samsung Electronics Co., Ltd.
(zero coupon), due
12/31/07 (e).................... 1,000,000 800,000
------------
8,900,000
------------
TELECOMMUNICATION SERVICES (0.3%)
Technology Resources Industries
Berhad
(zero coupon), due 10/31/04..... 1,200,000 1,380,000
------------
Total Convertible Bonds
(Cost $43,552,628).............. 41,087,395
------------
CORPORATE BONDS (70.1%)
PRINCIPAL
AMOUNT VALUE
-------------------------
AEROSPACE (1.4%)
Newport News Shipbuilding, Inc.
9.25%, due 12/1/06.............. $4,800,000 $ 5,100,000
Sequa Corp.
9.375%, due 12/15/03............ 2,000,000 2,080,000
9.625%, due 10/15/99............ 400,000 411,000
------------
7,591,000
------------
AIRLINES (1.9%)
USAir, Inc.
10.00%, due 7/1/03.............. 8,840,000 9,282,265
Valujet, Inc.
10.25%, due 4/15/01............. 1,300,000 1,257,750
------------
10,540,015
------------
AUTO MANUFACTURING (1.1%)
Titan Tire Corp.
7.00%, due 2/11/00 (j).......... 6,000,000 5,895,000
------------
BANKS (3.7%)
B.F. Saul Real Estate Investment
Trust
Series B
9.75%, due 4/1/08............... 4,650,000 4,591,875
First Nationwide Holdings, Inc.
12.25%, due 5/15/01............. 3,500,000 3,823,750
Local Financial Corp.
11.00%, due 9/8/04.............. 2,400,000 2,616,000
Tokai Preferred Capital Co.
L.L.C.
9.98%, due 12/29/49
11.0914%, beginning 6/30/08
(c)(o).......................... 10,200,000 9,498,750
------------
20,530,375
------------
CABLE (6.3%)
American Telecasting, Inc.
(zero coupon), due 6/15/04
14.50%, beginning 6/15/99....... 13,850,000 3,462,500
Continental Cablevision, Inc.
11.00%, due 6/1/07.............. 1,000,000 1,087,287
Marcus Cable Operating Co. L.P.
(zero coupon), due 8/1/04
13.50%, beginning 8/1/99........ 10,158,000 9,853,260
Primestar, Inc.
10.9375%, due 4/1/99 (d)(j)..... 9,600,000 9,600,000
UIH Australia/Pacific, Inc.
Series B
(zero coupon), due 5/15/06
14.00%, beginning 5/15/01....... 17,290,000 10,568,513
------------
34,571,560
------------
CASINOS (4.3%)
Casino America, Inc.
12.50%, due 8/1/03.............. 4,700,000 5,311,000
El Comandante Capital Corp.
11.75%, due 12/15/03............ 939,000 948,390
Empress River Casino Finance
Corp.
10.75%, due 4/1/02.............. 675,000 729,000
</TABLE>
- ------------
+ Percentages indicated are based on Portfolio net assets.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
80
<PAGE> 81
MAINSTAY VP SERIES FUND, INC.
<TABLE>
<CAPTION>
CORPORATE BONDS (CONTINUED)
PRINCIPAL
AMOUNT VALUE
-------------------------
<S> <C> <C>
CASINOS (Continued)
Horseshoe Gaming L.L.C.
Series B 12.75%, due 9/30/00.... $8,200,000 $ 8,999,500
Penn National Gaming, Inc.
10.625%, due 12/15/04........... 4,200,000 4,410,000
President Riverboat Casinos, Inc.
13.00%, due 9/15/01............. 3,500,000 3,237,500
------------
23,635,390
------------
CELLULAR TELEPHONE (1.6%)
Centennial Cellular Corp.
8.875%, due 11/1/01............. 5,540,000 5,754,675
10.125%, due 5/15/05............ 1,500,000 1,687,500
International Wireless
Communications Holdings, Inc.
(zero coupon), due 8/15/01...... 7,775,000 1,399,500
------------
8,841,675
------------
CHEMICALS (0.8%)
Octel Developments, PLC
10.00%, due 5/1/06 (c).......... 3,500,000 3,570,000
Uniroyal Chemical Co., Inc.
9.00%, due 9/1/00............... 800,000 832,000
------------
4,402,000
------------
CHILD CARE SERVICES (0.2%)
La Petite Holdings Corp.
9.625%, due 8/1/01.............. 1,100,000 1,127,500
------------
COMPUTERS & OFFICE EQUIPMENT
(1.1%)
American Business Information,
Inc.
9.50%, due 6/15/08 (c).......... 5,400,000 5,427,000
Unisys Corp.
10.625%, due 10/1/99............ 620,000 628,525
------------
6,055,525
------------
CONGLOMERATES (1.0%)
Hutchison Whampoa Ltd.
7.45%, due 8/1/17 (c)........... 6,700,000 5,332,536
------------
CONSUMER DURABLES (1.3%)
Samsonite Corp.
10.75%, due 6/15/08 (c)......... 5,400,000 5,359,500
Selmer Co., Inc.
11.00%, due 5/15/05............. 1,770,000 1,938,150
------------
7,297,650
------------
COSMETICS (0.8%)
Jafra Cosmetics International,
Inc.
11.75%, due 5/1/08 (c).......... 4,300,000 4,300,000
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
-------------------------
<S> <C> <C>
DEFENSE ELECTRONICS (0.2%)
Alliant Techsystems, Inc.
11.75%, due 3/1/03.............. $1,000,000 $ 1,083,750
------------
DOMESTIC OIL & GAS (3.0%)
Houston Exploration Co. (The)
Series B
8.625%, due 1/1/08.............. 2,250,000 2,250,000
Northern Offshore ASA
10.00%, due 5/15/05 (c)......... 7,500,000 7,162,500
Parker Drilling Co.
Series C
9.75%, due 11/15/06 (c)......... 3,675,000 3,757,687
Snyder Oil Corp.
8.75%, due 6/15/07.............. 3,000,000 3,045,000
------------
16,215,187
------------
ELECTRIC UTILITIES (1.9%)
CMS Energy Corp.
7.00%, due 1/15/05.............. 1,800,000 1,746,079
Empresa Electrica del Norte
Grande S.A.
10.50%, due 6/15/05 (c)......... 1,365,000 1,392,300
ESI Tractebel Acquisition Corp.
7.99%, due 12/30/11 (c)......... 5,100,000 5,100,000
Midland Funding Corp. I
Series C-94
10.33%, due 7/23/02 (l)......... 2,329,244 2,520,228
------------
10,758,607
------------
ENERGY (1.9%)
Conproca, S.A.
12.00%, due 6/16/10 (c)(e)...... 5,400,000 5,481,000
Mariner Energy, Inc.
Series B
10.50%, due 8/1/06.............. 1,650,000 1,674,750
Nuevo Energy Co.
8.875%, due 6/1/08 (c).......... 3,255,000 3,311,962
------------
10,467,712
------------
EQUIPMENT FINANCING (0.7%)
Atlas Air, Inc.
Series 1998-1C
8.01%, due 1/2/10 (c)(l)........ 3,300,000 3,313,002
12.25%, due 12/1/02 (l)......... 650,000 711,717
------------
4,024,719
------------
FINANCE (2.5%)
CB Richard Ellis Services, Inc.
8.875%, due 6/1/06.............. 5,200,000 5,161,000
Cityscape Financial Corp.
Series A
12.75%, due 6/1/04 (g).......... 8,000,000 3,200,000
Resource America, Inc.
12.00%, due 8/1/04.............. 2,200,000 2,354,000
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
81
<PAGE> 82
HIGH YIELD CORPORATE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
CORPORATE BONDS (CONTINUED)
PRINCIPAL
AMOUNT VALUE
-------------------------
<S> <C> <C>
FINANCE (Continued)
Traffic Stream (BVI)
Infrastructure Ltd.
14.25%, due 5/1/06 (c).......... $3,350,000 $ 2,680,000
------------
13,395,000
------------
FOOD, BEVERAGE & TOBACCO (3.4%)
Colorado Prime Corp.
12.50%, due 5/1/04.............. 5,210,000 5,131,850
Fresh Foods, Inc.
10.75%, due 6/1/06 (c).......... 2,600,000 2,600,000
Global Health Sciences, Inc.
11.00%, due 5/1/08 (c).......... 5,100,000 5,036,250
Standard Commercial Corp.
8.875%, due 8/1/05.............. 6,065,000 5,943,700
------------
18,711,800
------------
HEALTH CARE (5.2%)
Fountain View, Inc.
11.25%, due 4/15/08 (c)......... 4,900,000 4,985,750
Magellan Health Services, Inc.
9.00%, due 2/15/08 (c).......... 2,400,000 2,382,000
Medaphis Corp.
9.50%, due 2/15/05 (c).......... 3,425,000 3,356,500
Quest Diagnostics, Inc.
10.75%, due 12/15/06............ 9,310,000 10,403,925
Sun Healthcare Group, Inc.
9.375%, due 5/1/08 (c).......... 5,360,000 5,413,600
Vencor, Inc.
9.875%, due 5/1/05 (c).......... 1,745,000 1,716,644
------------
28,258,419
------------
HOUSING (0.9%)
Greystone Homes, Inc.
10.75%, due 3/1/04.............. 4,700,000 5,076,000
------------
INDUSTRIAL (0.8%)
Thermadyne Holdings Corp.
(zero coupon), due 6/1/08
12.50%, beginning 6/1/03 (c).... 8,125,000 4,428,125
------------
MEDIA (3.2%)
Affiliated Newspapers
Investments, Inc.
(zero coupon), due 7/1/06
13.25%, beginning 7/1/99........ 4,600,000 4,531,000
CD Radio, Inc.
(zero coupon), due 12/1/07
15.00%, beginning 12/1/02....... 10,345,000 6,051,825
Garden State Newspapers, Inc.
12.00%, due 7/1/04.............. 300,000 334,125
General Media, Inc.
10.625%, due 12/31/00........... 2,700,000 2,511,000
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
-------------------------
<S> <C> <C>
MEDIA (Continued)
Heritage Media Corp.
11.00%, due 10/1/02............. $2,000,000 $ 2,080,000
Paxson Communications Corp.
11.625%, due 10/1/02............ 1,960,000 2,102,100
------------
17,610,050
------------
MINING (0.4%)
Great Central Mines Ltd.
8.875%, due 4/1/08 (c)(e)....... 2,400,000 2,358,000
------------
OIL SERVICES (0.4%)
Pool Energy Services Co.
8.625%, due 4/1/08 (c).......... 2,400,000 2,340,000
------------
OTHER TRANSPORTATION (0.3%)
Ultrapetrol (Bahamas) Ltd.
10.50%, due 4/1/08 (c).......... 1,500,000 1,466,250
------------
PAPER & FOREST PRODUCTS (1.3%)
P.T. Polysindo Eka Perkasa
10.00%, due 4/3/00.............. 4,000,000 840,000
SD Warren Co.
Series B
12.00%, due 12/15/04............ 4,200,000 4,646,250
Stone Container Corp.
11.875%, due 12/1/98............ 1,522,000 1,533,415
------------
7,019,665
------------
PERSONAL SERVICES (1.3%)
Loewen Group, Inc. (The)
6.70%, due 10/1/99 (c).......... 7,000,000 6,974,534
------------
PUBLISHING (0.9%)
Regional Independent Media Group
10.50%, due 7/1/08 (c).......... 4,725,000 4,795,875
------------
REAL ESTATE (0.8%)
LNR Property Corp.
9.375%, due 3/15/08 (c)......... 4,585,000 4,596,462
------------
RECREATION & ENTERTAINMENT (0.9%)
Affinity Group, Inc.
11.50%, due 10/15/03............ 2,000,000 2,110,000
Alliance Entertainment Corp.
Series B
11.25%, due 7/15/05 (f)(g)...... 5,835,000 204,225
Hollywood Entertainment Corp.
Series B
10.625%, due 8/15/04............ 2,500,000 2,550,000
------------
4,864,225
------------
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
82
<PAGE> 83
MAINSTAY VP SERIES FUND, INC.
<TABLE>
<CAPTION>
CORPORATE BONDS (CONTINUED)
PRINCIPAL
AMOUNT VALUE
-------------------------
<S> <C> <C>
RESTAURANTS & LODGING (2.9%)
Advantica Restaurant Group, Inc.
11.25%, due 1/15/08............. $5,000,000 $ 5,312,500
Booth Creek Ski Holdings, Inc.
Series C
12.50%, due 3/15/07 (c)......... 1,000,000 1,070,000
Extended Stay America, Inc.
9.15%, due 3/15/08 (c).......... 4,340,000 4,274,900
FRI-MRD Corp.
(zero coupon), due 1/24/02
15.00%, beginning 6/30/99
(c)(j).......................... 5,400,000 4,981,500
------------
15,638,900
------------
RETAIL (0.3%)
TM Group Holdings, PLC
11.00%, due 5/15/08 (c)......... 1,750,000 1,791,563
------------
STEEL, ALUMINUM & OTHER METALS
(3.5%)
Easco Corp.
Series B
10.00%, due 3/15/01............. 3,200,000 3,264,000
Kaiser Aluminum & Chemical Corp.
12.75%, due 2/1/03.............. 4,800,000 5,100,000
UCAR Global Enterprises, Inc.
Series B 12.00%, due 1/15/05.... 10,075,000 10,805,438
------------
19,169,438
------------
SUPERMARKETS (0.2%)
Penn Traffic Co. (The)
10.25%, due 2/15/02............. 1,670,000 1,327,650
------------
TECHNOLOGY (1.4%)
Electronic Retailing Systems
International, Inc.
(zero coupon), due 2/1/04
13.25%, beginning 2/1/00........ 7,170,000 3,011,400
Metawave Communications Corp.
13.75%, due 4/28/00 (d)(j)(m)... 2,500,000 2,575,000
Samsung Electronics America, Inc.
9.75%, due 5/1/03 (c)........... 2,010,000 1,879,350
------------
7,465,750
------------
TELECOMMUNICATION SERVICES (3.0%)
Globalstar L.P. Capital Corp.
11.50%, due 6/1/05 (c).......... 5,480,000 5,336,150
IDT Corp.
8.75%, due 2/15/06 (c).......... 2,200,000 2,112,000
Impsat Corp.
12.375%, due 6/15/08 (c)........ 2,700,000 2,727,000
Orion Network System, Inc.
(zero coupon), due 1/15/07
12.50%, beginning 1/15/02....... 3,500,000 2,660,000
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
-------------------------
<S> <C> <C>
TELECOMMUNICATION SERVICES
(Continued)
T/SF Communications Corp.
Series B
10.375%, due 11/1/07............ $3,290,000 $ 3,347,575
------------
16,182,725
------------
TEXTILE & APPAREL (1.0%)
Delta Mills, Inc.
Series B
9.625%, due 9/1/07.............. 2,000,000 1,965,000
Norton McNaughton, Inc.
12.50%, due 6/1/05 (c).......... 3,400,000 3,400,000
------------
5,365,000
------------
TRANSPORTATION (2.3%)
Cathay International Holdings,
Inc.
13.00%, due 4/15/08 (c)......... 4,800,000 4,224,000
Pacific & Atlantic (Holdings)
Inc.
11.50%, due 5/30/08 (c)......... 4,300,000 4,042,000
Pegasus Shipping Hellas Ltd.
11.875%, due 11/15/04........... 4,525,000 4,581,563
------------
12,847,563
------------
Total Corporate Bonds
(Cost $392,111,724)............. 384,353,195
------------
FOREIGN BONDS (1.8%)
PUBLISHING (1.8%)
IPC Magazines Group, PLC
(zero coupon), due 3/15/08
10.75%, beginning 3/15/03 (c)... pound sterling 7,710,000 7,332,566
Regional Independent Media Group
(zero coupon), due 7/1/08
12.875%, beginning 7/1/03 (c)... 3,000,000 2,734,258
------------
Total Foreign Bonds
(Cost $10,145,421).............. 10,066,824
------------
LOAN PARTICIPATIONS (0.0%) (b)
CHEMICALS (0.0%) (b)
Kronos International, Inc.
Bank debt
6.34375%, due 9/15/00
(d)(h)(j)....................... DM 186,005 102,277
Bank debt
6.4375%, due 9/15/99
(d)(h)(j)....................... 166,135 91,351
------------
Total Loan Participations
(Cost $192,034)................. 193,628
------------
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
83
<PAGE> 84
HIGH YIELD CORPORATE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
YANKEE BONDS (6.3%)
PRINCIPAL
AMOUNT VALUE
-------------------------
<S> <C> <C>
CABLE (0.6%)
Kabelmedia Holdings GmbH
(zero coupon), due 8/1/06
13.625%, beginning 8/1/01....... $3,910,000 $ 3,030,250
------------
CELLULAR TELEPHONE (2.0%)
Millicom International Cellular,
S.A.
(zero coupon), due 6/1/06
13.50%, beginning 6/1/01........ 10,039,000 7,755,128
Rogers Cantel, Inc.
8.30%, due 10/1/07.............. 985,000 965,300
9.375%, due 6/1/08.............. 2,000,000 2,080,000
------------
10,800,428
------------
MEDIA (2.6%)
Le Groupe Videotron Ltee
10.625%, due 2/15/05............ 10,900,000 11,969,290
Rogers Communications, Inc.
8.875%, due 7/15/07............. 2,300,000 2,317,250
------------
14,286,540
------------
STEEL, ALUMINUM & OTHER METALS
(0.7%)
Ivaco, Inc.
11.50%, due 9/15/05............. 3,600,000 3,942,000
------------
TELECOMMUNICATION SERVICES (0.4%)
Call-Net Enterprises, Inc.
(zero coupon), due 12/1/04
13.25%, beginning 12/1/99....... 2,460,000 2,349,300
------------
Total Yankee Bonds
(Cost $33,727,554).............. 34,408,518
------------
Total Long-Term Bonds
(Cost $479,729,361)............. 470,109,560
------------
COMMON STOCKS (3.7%)
SHARES
----------
BANKS (0.0%) (b)
Kookmin Bank GDR (n)............. 61,600 241,472
------------
CABLE (0.4%)
United International Holdings,
Inc. Class A (a)................ 125,000 2,000,000
------------
CASINOS (0.1%)
Casino America, Inc. (a)......... 7,053 24,685
Colorado Gaming & Entertainment
Co. (a)......................... 12,488 68,684
Grand Casinos, Inc. (a).......... 16,100 269,675
Harrah's Entertainment, Inc.
(a)............................. 16,100 374,325
------------
737,369
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
-------------------------
<S> <C> <C>
DOMESTIC OIL & GAS (0.7%)
Pioneer Natural Resources Co..... 11,250 $ 268,594
R&B Falcon Corp. (a)............. 82,825 1,873,916
Union Pacific Resources Group,
Inc............................. 100,000 1,756,250
------------
3,898,760
------------
DRUGS (0.0%) (b)
ICN Pharmaceuticals, Inc......... 2,307 105,401
------------
FOOD, BEVERAGE & TOBACCO (0.2%)
Philip Morris Cos. Inc........... 35,000 1,378,125
------------
HEALTH CARE (0.3%)
Beverly Enterprises, Inc. (a).... 10,000 140,000
Quest Diagnostics, Inc. (a)...... 62,650 1,370,469
------------
1,510,469
------------
MEDIA (0.1%)
Rogers Communications, Inc.
Class B (a)(p).................. 50,000 445,396
------------
PAPER & FOREST PRODUCTS (0.7%)
TimberWest Timber Trust (The)
(p)............................. 635,200 3,757,813
------------
RECREATION & ENTERTAINMENT (0.0%)
(b)
Steinway Musical Instruments,
Inc. (a)........................ 4,100 132,225
------------
SPECIALIZED SERVICES (0.3%)
Cendant Corp. (a)................ 77,000 1,578,500
------------
TECHNOLOGY (0.3%)
Samsung Electronics Co., Ltd. GDR
(n)............................. 45,800 731,884
Seagate Technology, Inc. (a)..... 32,500 777,969
------------
1,509,853
------------
TELECOMMUNICATION SERVICES (0.6%)
Telecomunicacoes Brasileiras S.A.
ADR (i)......................... 30,000 3,266,250
------------
TEXTILE & APPAREL (0.0%) (b)
Hosiery Corp. of America, Inc.
(a)............................. 500 3,750
------------
Total Common Stocks
(Cost $20,670,431).............. 20,565,383
------------
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
84
<PAGE> 85
MAINSTAY VP SERIES FUND, INC.
<TABLE>
<CAPTION>
PREFERRED STOCKS (4.1%)
SHARES VALUE
-------------------------
<S> <C> <C>
CABLE (1.3%)
United International Holdings,
Inc.
4.00%, Series A (a)(j)(k)....... 44,600 $ 7,180,600
------------
CASINOS (0.1%)
Station Casinos, Inc.
7.00% (k)....................... 8,250 408,891
------------
EQUIPMENT FINANCING (0.5%)
GPA Group, PLC (a)(j)............ 4,750,000 2,707,500
------------
MEDIA (1.5%)
Cumulus Media, Inc.
13.75%, Series A................ 585 595,238
Paxson Communications Corp.
12.50% (o)...................... 957 990,006
Spanish Broadcasting System, Inc.
14.25% (c)(o)................... 2,223 2,339,707
14.25% (o)...................... 4,049 4,261,572
------------
8,186,523
------------
PAPER & FOREST PRODUCTS (0.4%)
Paperboard Industries
International, Inc.
5.00%, Class A (c)(j)(p)........ 145,000 2,372,544
------------
REAL ESTATE (0.3%)
Crown American Realty Trust
11.00%, Series A................ 26,120 1,400,685
------------
Total Preferred Stocks
(Cost $20,599,725).............. 22,256,743
------------
WARRANTS (0.4%)
CABLE (0.0%) (b)
People's Choice TV Corp.
expire 6/1/00 (a)............... 380 4
Supercanal Holding, S.A.
Series A
expire 11/14/99 (a)(c)(j)....... 492,587 68,962
------------
68,966
------------
CASINOS (0.0%) (b)
Casino America, Inc.
expire 5/3/01 (a)............... 1,249 1,249
------------
CELLULAR TELEPHONE (0.0%) (b)
Occidente y Caribe Celular, S.A.
expire 3/15/04 (a)(c)........... 10,680 106,800
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
-------------------------
<S> <C> <C>
FOOD, BEVERAGE & TOBACCO (0.0%)
(b)
Colorado Prime Corp.
expire 12/31/03 (a)(c).......... 5,210 $ 52,100
------------
MEDIA (0.3%)
General Media, Inc.
expire 12/21/03 (a)(c).......... 900 9
Spanish Broadcasting System, Inc.
expire 6/30/99 (a)(q)........... 2,500 1,225,000
expire 6/30/99 (a)(c)(r)........ 2,500 525,000
------------
1,750,009
------------
POLLUTION & RELATED (0.0%) (b)
ICF Kaiser International, Inc.
expire 12/31/98 (a)(s).......... 960 240
------------
TECHNOLOGY (0.0%) (b)
Metawave Communications Corp.
expire 4/28/00 (a)(j)........... 46,336 463
------------
TELECOMMUNICATION SERVICES (0.1%)
Rocky Mountain Internet, Inc.
expire 7/29/03 (a)(j)........... 23,833 139,425
------------
Total Warrants
(Cost $857,910)................. 2,119,252
------------
SHORT-TERM
INVESTMENTS (4.0%)
PRINCIPAL
AMOUNT
----------
COMMERCIAL PAPER (3.3%)
Goldman Sachs Group L.P. (The)
6.25%, due 7/1/98............... $2,110,000 2,110,000
Morgan Stanley, Dean Witter,
Discover & Co.
6.25%, due 7/1/98............... 16,345,000 16,345,000
------------
Total Commercial Paper
(Cost $18,455,000).............. 18,455,000
------------
SHORT-TERM BONDS (0.7%)
FOOD, BEVERAGE & TOBACCO (0.6%)
Buenos Aires Embotelladora
Sociedad Anonima
Bank debt
9.479%, due 8/1/98 (g)(j)....... 5,000,000 3,100,000
------------
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
85
<PAGE> 86
HIGH YIELD CORPORATE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
SHORT-TERM
INVESTMENTS (CONTINUED)
PRINCIPAL
AMOUNT VALUE
-------------------------
<S> <C> <C>
PAPER & FOREST PRODUCTS (0.1%)
P.T. Polysindo Eka Perkasa
(zero coupon), due 7/28/98...... $3,000,000 $ 630,000
(zero coupon), due 8/7/98....... 1,000,000 210,000
------------
840,000
------------
Total Short-Term Bonds
(Cost $7,780,942)............... 3,940,000
------------
Total Short-Term Investments
(Cost $26,235,942).............. 22,395,000
------------
Total Investments
(Cost $548,093,369)(t).......... 97.9% 537,445,938(u)
Cash and Other Assets,
Less Liabilities................ 2.1 11,295,954
---------- ----------
Net Assets....................... 100.0% $548,741,892
========== ===========
</TABLE>
- ------------
(a) Non-income producing security.
(b) Less than one tenth of a percent.
(c) May be sold to institutional investors only.
(d) Floating rate. Rate shown is the rate in effect at June 30,
1998.
(e) Euro-Dollar bond.
(f) Issuer in bankruptcy.
(g) Issue in default.
(h) Multiple tranche facility.
(i) ADR--American Depository Receipt.
(j) Restricted security.
(k) Convertible preferred stock.
(l) Asset-backed security.
(m) CIK ("Cash in Kind")--interest payment is made with cash or additional
securities.
(n) GDR--Global Depository Receipt.
(o) PIK ("Payment in Kind")--interest or dividend payment is made with
additional securities.
(p) Canadian security.
(q) Each warrant entitles the holder thereof to purchase one share of the
Company's Class A common stock at $0.01 per share, subject to adjustment
under certain circumstances on or after the Exercisability Date and prior
to June 30, 1999.
(r) Each warrant entitles the holder thereof to purchase 0.428 shares of the
Company's Class A common stock, par value $0.01 per share.
(s) 4.8 warrants will entitle the holder thereof to purchase one share of
common stock at a price equal to $5.00 per share, subject to adjustment
under certain circumstances.
(t) The cost for Federal income tax purposes is $548,189,510.
(u) At June 30, 1998 net unrealized depreciation was $10,743,572, based on cost
for Federal income tax purposes. This consisted of aggregate gross
unrealized appreciation for all investments on which there was an excess of
market value over cost of $12,110,578 and aggregate gross unrealized
depreciation for all investments on which there was an excess of cost over
market value of $22,854,150.
(v) The following abbreviations are used in the above portfolio:
DM--Deutsche Mark
Pound Sterling--Pound Sterling
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
86
<PAGE> 87
MAINSTAY VP SERIES FUND, INC.
HIGH YIELD CORPORATE BOND PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
As of June 30, 1998 (Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investment in securities, at value
(identified cost $548,093,369)......... $537,445,938
Deposit with broker...................... 94,342
Receivables:
Investment securities sold............. 30,080,699
Dividends and interest................. 9,633,782
Fund shares sold....................... 1,619,369
Unrealized appreciation on forward
foreign currency contracts............. 103
------------
Total assets..................... 578,874,233
------------
LIABILITIES:
Payables:
Investment securities purchased........ 28,652,143
Custodian.............................. 979,240
Adviser................................ 132,859
Administrator.......................... 88,572
Directors.............................. 109
Accrued expenses......................... 155,659
Unrealized depreciation on forward
foreign currency contracts............. 123,759
------------
Total liabilities................ 30,132,341
------------
Net assets applicable to outstanding
shares................................. $548,741,892
============
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.01 per
share) 100 million shares authorized... $ 445,301
Additional paid-in capital............... 527,206,506
Accumulated undistributed net investment
income................................. 21,004,267
Accumulated undistributed net realized
gain on investments.................... 10,988,832
Accumulated net realized loss on foreign
currency transactions.................. (117,730)
Net unrealized depreciation on
investments............................ (10,647,431)
Net unrealized depreciation on
translation of other assets and
liabilities in
foreign currencies and forward foreign
currency contracts..................... (137,853)
------------
Net assets applicable to outstanding
shares................................. $548,741,892
============
Shares of capital stock outstanding...... 44,530,128
============
Net asset value per share outstanding.... $ 12.32
============
</TABLE>
STATEMENT OF OPERATIONS
For the six months ended June 30, 1998 (Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Income:
Interest............................... $ 21,483,007
Dividends (a).......................... 1,079,018
------------
Total income..................... 22,562,025
------------
Expenses:
Advisory............................... 722,920
Administration......................... 481,947
Shareholder communication.............. 70,078
Professional........................... 50,267
Directors.............................. 14,194
Custodian.............................. 11,799
Portfolio pricing...................... 2,107
Miscellaneous.......................... 4,209
------------
Total expenses................... 1,357,521
------------
Net investment income.................... 21,204,504
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY
TRANSACTIONS:
Net realized gain (loss) from:
Security transactions.................. 11,085,873
Foreign currency transactions.......... (117,730)
------------
Net realized gain on investments and
foreign currency transactions.......... 10,968,143
------------
Net change in unrealized depreciation on
investments:
Security transactions.................. (7,563,460)
Translation of other assets and
liabilities in
foreign currencies and forward
foreign
currency contracts................... (126,868)
------------
Net unrealized loss on investments and
foreign currency transactions.......... (7,690,328)
------------
Net realized and unrealized gain on
investments and foreign currency
transactions........................... 3,277,815
------------
Net increase in net assets resulting from
operations............................. $ 24,482,319
============
</TABLE>
- ------------
(a) Dividends recorded net of foreign withholding taxes in the amount of
$34,974.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
87
<PAGE> 88
HIGH YIELD CORPORATE BOND PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 1998 (Unaudited)
and the year ended December 31, 1997
<TABLE>
<CAPTION>
1998 1997
---------------------------
<S> <C> <C>
INCREASE IN NET ASSETS:
Operations:
Net investment income..................................... $21,204,504 $ 27,376,462
Net realized gain on investments.......................... 11,085,873 16,889,043
Net realized gain (loss) on foreign currency
transactions............................................ (117,730) 41,314
Net change in unrealized appreciation (depreciation) on
investments............................................. (7,563,460) (7,548,249)
Net change in unrealized appreciation (depreciation) on
translation of other assets and liabilities in foreign
currencies and forward foreign currency contracts....... (126,868) (10,985)
------------ ------------
Net increase in net assets resulting from operations...... 24,482,319 36,747,585
------------ ------------
Dividends and distributions to shareholders:
From net investment income................................ (661,909) (27,008,388)
From net realized gain on investments..................... (1,567,336) (16,799,012)
------------ ------------
Total dividends and distributions to shareholders....... (2,229,245) (43,807,400)
------------ ------------
Capital share transactions:
Net proceeds from sale of shares.......................... 107,718,514 202,492,429
Net asset value of shares issued to shareholders in
reinvestment of dividends and distributions............... 2,229,245 43,807,400
------------ ------------
109,947,759 246,299,829
Cost of shares redeemed................................... (8,025,464) (19,674,526)
------------ ------------
Increase in net assets derived from capital share
transactions............................................ 101,922,295 226,625,303
------------ ------------
Net increase in net assets.................................. 124,175,369 219,565,488
NET ASSETS:
Beginning of period......................................... 424,566,523 205,001,035
------------ ------------
End of period............................................... $548,741,892 $424,566,523
============ ============
Accumulated undistributed net investment income at end of
period.................................................... $21,004,267 $ 461,672
============ ============
</TABLE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(Selected Per Share Data and Ratios)
<TABLE>
<CAPTION>
MAY 1,
SIX MONTHS 1995 (a)
ENDED THROUGH
JUNE 30, YEAR ENDED DECEMBER 31 DECEMBER 31,
1998* 1997 1996 1995
-------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value at beginning of period.................. $ 11.73 $ 11.61 $ 10.55 $ 10.00
------------ ------------ ------------ ------------
Net investment income................................... 0.48 0.85 0.59 0.37
Net realized and unrealized gain on investments......... 0.18 0.65 1.22 0.61
Net realized and unrealized loss on foreign currency
transactions.......................................... (0.01) -- -- --
------------ ------------ ------------ ------------
Total from investment operations........................ 0.65 1.50 1.81 0.98
------------ ------------ ------------ ------------
Less dividends and distributions:
From net investment income............................ (0.02) (0.84) (0.59) (0.37)
From net realized gain on investments................. (0.04) (0.54) (0.16) (0.04)
In excess of net realized gain on investments......... -- -- -- (0.02)
------------ ------------ ------------ ------------
Total dividends and distributions....................... (0.06) (1.38) (0.75) (0.43)
------------ ------------ ------------ ------------
Net asset value at end of period........................ $ 12.32 $ 11.73 $ 11.61 $ 10.55
============ ============ ============ ============
Total investment return (b)............................. 5.48% 13.03% 17.16% 10.06%
Ratios (to average net assets)/Supplemental Data:
Net investment income................................. 8.80%+ 8.84% 8.59% 10.02%+
Net expenses.......................................... 0.56%+ 0.59% 0.67% 0.67%+
Expenses (before reimbursement)....................... 0.56%+ 0.59% 0.71% 1.25%+
Portfolio turnover rate................................. 77% 153% 149% 95%
Net assets at end of period (in 000's).................. $ 548,742 $ 424,567 $ 205,001 $ 43,314
</TABLE>
- ------------
(a) Commencement of Operations.
(b) Total return is not annualized.
+ Annualized.
* Unaudited.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
88
<PAGE> 89
MAINSTAY VP SERIES FUND, INC.
INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
COMMON STOCKS (91.2%)+
SHARES VALUE
------------------------
<S> <C> <C>
AUSTRALIA (1.3%)
Broken Hill Proprietary Co., Ltd.
(energy sources).................. 3,500 $ 29,584
Coles Myer, Ltd. (merchandising)... 2,570 10,026
Foster's Brewing Group, Ltd.
(beverages & tobacco)............. 5,520 12,989
National Australia Bank, Ltd.
(banking)......................... 2,520 33,239
News Corp., Ltd. (broadcasting &
publishing)....................... 2,939 23,987
Pacific Dunlop, Ltd.
(multi-industry).................. 3,200 5,172
Telstra Corp., Ltd.
(telecommunications).............. 137,400 352,251
WMC, Ltd. (metals-nonferrous)...... 3,100 9,330
-----------
476,578
-----------
BELGIUM (4.2%)
Delhaize-Le Lion, S.A.
(merchandising)................... 1,640 114,591
Electrabel, S.A.
(utilities-electrical & gas)...... 950 269,345
Fortis AG (insurance).............. 950 242,538
Generale de Banque, S.A.
(banking)......................... 250 185,599
KBC Bancassurance Holding N.V.
(banking)......................... 1,000 89,490
PetroFina, S.A. (energy sources)... 340 139,570
Reunies Electrobel & Tractebel,
S.A. (multi-industry)............. 1,920 281,209
Solvay, S.A. Class A (chemicals)... 2,810 222,772
-----------
1,545,114
-----------
FRANCE (12.0%)
Alcatel Alsthom, S.A. (electrical &
electronics)...................... 678 138,044
AXA-UAP, S.A. (insurance).......... 2,674 300,747
Carrefour, S.A. (merchandising).... 418 264,447
Compagnie de Saint Gobain, S.A.
(miscellaneous-materials &
commodities)...................... 966 179,107
Compagnie de Suez, S.A.
(banking)......................... 10 40
Elf Aquitaine, S.A. (energy
sources).......................... 2,162 303,952
Eridania Beghin-Say, S.A. (food &
household products)............... 550 121,443
France Telecom, S.A.
(telecommunications).............. 6,975 481,073
Groupe Danone, S.A. (food &
household products)............... 706 194,657
Havas, S.A. (business & public
services)......................... 1,311 111,237
Lafarge, S.A. (building materials &
components)....................... 860 88,901
L'Air Liquide, S.A. (chemicals).... 1,882 311,279
L'Oreal, S.A. (health & personal
care)............................. 653 363,220
LVMH (Moet Hennessy Louis Vuitton),
S.A. (beverages & tobacco)........ 410 82,054
Michelin (CGDE), S.A. Class B (tire
& rubber)......................... 1,253 72,328
Paribas, S.A. (banking)............ 1,451 155,275
Pernod-Ricard, S.A. (beverages &
tobacco).......................... 430 29,800
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------------------------
<S> <C> <C>
FRANCE (Continued)
Pinault-Printemps-Redoute, S.A.
(building materials &
components)....................... 150 $ 125,537
PSA Peugeot, S.A. (automobiles).... 150 32,253
Rhone-Poulenc, S.A. Class A
(chemicals)....................... 2,508 141,453
Schneider, S.A. (machinery &
engineering)...................... 1,567 124,950
Societe Generale, S.A. Class A
(banking)......................... 624 129,733
Suez Lyonnaise des Eaux, S.A.
(multi-industry).................. 530 87,223
Thomson CSF, S.A. (aerospace &
military technology).............. 3,047 115,913
Total, S.A. Class B (energy
sources).......................... 1,494 194,224
Vivendi, S.A. (business & public
services)......................... 1,337 285,488
-----------
4,434,378
-----------
GERMANY (14.7%)
Allianz AG Registered
(insurance)....................... 1,800 599,822
BASF AG (chemicals)................ 3,700 175,772
Bayer AG (chemicals)............... 6,250 323,401
Daimler-Benz AG (automobiles)...... 8,050 791,605
Daimler-Benz AG Rights
(automobiles) (a)................. 4,200 4,654
Deutsche Bank AG (banking)......... 4,800 405,798
Deutsche Telekom AG
(telecommunications).............. 11,250 307,889
Dresdner Bank AG (banking)......... 3,300 178,252
Karstadt AG (merchandising)........ 200 97,228
Linde AG (machinery &
engineering)...................... 150 103,045
Mannesmann AG (machinery &
engineering)...................... 5,000 513,841
Muenchener Rueckversicherungs-
Gesellschaft AG Registered
(insurance)....................... 500 248,195
Preussag AG (multi-industry)....... 50 17,894
RWE AG (utilities-electrical &
gas).............................. 8,850 523,635
Siemens AG (electrical &
electronics)...................... 4,800 292,914
Thyssen AG (metals-steel).......... 300 76,287
VEBA AG (utilities-electrical &
gas).............................. 2,600 174,794
Viag AG (multi-industry)........... 600 412,845
Volkswagen AG (automobiles)........ 200 193,127
-----------
5,440,998
-----------
ITALY (4.6%)
Assicurazioni Generali S.p.A.
(insurance)....................... 4,000 130,166
Banca Commerciale Italiana S.p.A.
(banking)......................... 16,000 95,755
Benetton Group S.p.A. (textile &
apparel).......................... 41,600 86,423
Credito Italiano S.p.A.
(banking)......................... 22,000 115,252
Edison S.p.A. (energy sources)..... 4,000 32,125
</TABLE>
- ------------
+ Percentages indicated are based on Portfolio net assets.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
89
<PAGE> 90
INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
COMMON STOCKS (CONTINUED)
SHARES VALUE
------------------------
<S> <C> <C>
ITALY (Continued)
Ente Nazionale Idrocarburi S.p.A.
(energy sources).................. 38,000 $ 249,240
Fiat S.p.A. (automobiles).......... 13,500 59,132
Fiat S.p.A. di Risp
(automobiles)..................... 16,500 40,874
Istituto Bancario San Paolo di
Torino S.p.A. (banking)........... 2,000 28,882
Istituto Nazionale delle
Assicurazioni S.p.A.
(insurance)....................... 26,000 73,922
Italgas S.p.A.
(utilities-electrical & gas)...... 10,000 40,761
Mediobanca S.p.A. (financial
services)......................... 6,000 76,174
Montedison S.p.A.
(multi-industry).................. 40,940 50,823
Olivetti Group S.p.A. (data
processing & reproduction) (a).... 16,200 24,124
Parmalat Finanziaria S.p.A. (food &
household products)............... 4,000 8,163
Pirelli S.p.A. (industrial
components)....................... 6,000 18,748
Riunione Adriatica di Sicurta
S.p.A. (insurance)................ 2,200 28,673
Sirti S.p.A.
(telecommunications).............. 7,000 38,109
Telecom Italia S.p.A.
(telecommunications).............. 24,000 176,804
Telecom Italia S.p.A. di Risp
(telecommunications).............. 12,790 61,963
Telecom Italia Mobile S.p.A.
(telecommunications).............. 28,000 171,355
Telecom Italia Mobile S.p.A. di
Risp (telecommunications)......... 23,000 77,694
-----------
1,685,162
-----------
JAPAN (8.5%)
Ajinomoto Co., Inc. (food &
household products)............... 3,000 26,262
Asahi Chemical Industry Co., Ltd.
(chemicals) (c)................... 4,000 14,410
Asahi Glass Co., Ltd.
(miscellaneous-materials &
components) (c)................... 7,000 37,826
Bank of Tokyo-Mitsubishi, Ltd.
(banking) (c)..................... 8,000 84,673
Bridgestone Corp. (industrial
components)....................... 3,000 70,897
Canon, Inc. (recreation & other
consumer goods)................... 4,000 90,783
Dai Nippon Printing Co., Ltd.
(business & public services)...... 2,000 31,918
Daiei, Inc. (merchandising) (c).... 10,000 23,416
Denso Corp. (industrial
components)....................... 3,000 49,714
Fanuc, Ltd. (electronic components
& instruments).................... 2,000 69,168
Fuji Bank, Ltd. (banking) (c)...... 14,000 62,439
Fuji Photo Film, Ltd. (recreation &
other consumer goods)............. 1,000 34,800
Fujitsu, Ltd. (data processing &
reproduction) (c)................. 1,000 10,519
Furukawa Electric Co., Ltd.
(industrial components) (c)....... 15,000 50,471
Hankyu Corp. (transportation-road &
rail)............................. 3,000 12,299
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------------------------
<S> <C> <C>
JAPAN (Continued)
Hitachi Corp., Ltd. (electrical &
electronics) (c).................. 14,000 $ 91,287
Honda Motor Co., Ltd.
(automobiles)..................... 2,000 71,185
Industrial Bank of Japan, Ltd.
(banking) (c)..................... 8,000 50,147
Ito-Yokado Co., Ltd.
(merchandising)................... 1,000 47,049
Itochu Corp. (wholesale &
international trade) (c).......... 30,000 64,845
Japan Airlines Co. (transportation-
airlines) (a)..................... 1,000 2,781
Japan Energy Corp. (energy sources)
(c)............................... 28,000 29,656
Kajima Corp. (construction &
housing).......................... 2,000 5,476
Kansai Electric Power Co., Inc.
(utilities-electrical & gas)...... 3,000 52,092
Kao Corp. (food & household
products)......................... 1,000 15,419
Kawasaki Steel Corp.
(metals-steel).................... 6,000 10,807
Kirin Brewery Co., Ltd. (beverages
& tobacco)........................ 1,000 9,439
Komatsu, Ltd. (machinery &
engineering)...................... 10,000 48,562
Kubota Corp. (machinery &
engineering)...................... 6,000 13,834
Marubeni Corp. (wholesale &
international trade).............. 17,000 33,928
Marui Co., Ltd. (merchandising).... 2,000 29,829
Matsushita Electric Industrial Co.,
Ltd. (appliances & household
durables)......................... 6,000 96,403
Mitsubishi Chemical Corp.
(chemicals)....................... 1,967 3,557
Mitsubishi Corp.
(multi-industry).................. 5,000 30,981
Mitsubishi Electric Corp.
(electrical & electronics) (a).... 9,000 20,686
Mitsubishi Estate Co., Ltd.
(construction & housing).......... 3,000 26,370
Mitsubishi Heavy Industries, Ltd.
(machinery & engineering)......... 8,000 30,203
Mitsubishi Trust & Banking Corp.
(financial services).............. 1,000 8,495
Mitsui Engineering & Shipbuilding
Co., Ltd. (machinery &
engineering) (a).................. 21,000 15,887
Mitsui Fudosan Co., Ltd.
(construction & housing).......... 6,000 47,380
Mitsui Marine & Fire Insurance Co.,
Ltd. (insurance).................. 3,000 15,066
Mitsui Trust & Banking Co., Ltd.
(financial services).............. 3,000 7,068
Mitsukoshi, Ltd. (merchandising)... 3,000 8,624
NEC Corp. (electrical &
electronics)...................... 5,000 46,580
Nippon Express Co., Ltd.
(transportation-road & rail)...... 13,000 69,687
Nippon Oil Co., Ltd. (energy
sources).......................... 8,000 25,823
Nippon Paper Industries Co. (forest
products & paper)................. 3,000 12,493
Nippon Steel Corp.
(metals-steel).................... 11,000 19,338
Nippon Telegraph & Telephone Corp.
(telecommunications).............. 20 165,724
Nippon Yusen Kabushiki Kaisha
(transportation-shipping)......... 3,000 10,159
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
90
<PAGE> 91
MAINSTAY VP SERIES FUND, INC.
<TABLE>
<CAPTION>
COMMON STOCKS (CONTINUED)
SHARES VALUE
------------------------
<S> <C> <C>
JAPAN (Continued)
Nissan Motor Co., Ltd.
(automobiles)..................... 4,000 $ 12,594
NKK Corp. (metals-steel)........... 58,000 55,579
Nomura Securities Co., Ltd.
(financial services).............. 3,000 34,908
Obayashi Corp. (construction &
housing).......................... 5,000 21,183
Oji Paper Co., Ltd. (forest
products & paper)................. 10,000 43,518
Osaka Gas Co., Ltd. (utilities-
electrical & gas)................. 6,000 15,390
Sankyo Co., Ltd. (health & personal
care)............................. 2,000 45,536
Sanyo Electric Co., Ltd.
(appliances & household
durables)......................... 9,000 27,235
Sekisui Chemical Co., Ltd.
(chemicals)....................... 1,000 5,116
Sekisui House, Ltd. (construction &
housing).......................... 2,000 15,491
Sharp Corp. (appliances & household
durables)......................... 5,000 40,492
Shimizu Corp. (construction &
housing).......................... 4,000 11,528
Sony Corp. (appliances & household
durables)......................... 1,000 86,100
Sumitomo Bank, Ltd. (banking)...... 9,000 87,541
Sumitomo Chemical Co., Ltd.
(chemicals)....................... 5,000 15,419
Sumitomo Electric Industries
(industrial components)........... 5,000 50,543
Sumitomo Marine & Fire Insurance
Co. (insurance)................... 9,000 50,320
Sumitomo Metal Mining Co. (metals-
nonferrous)....................... 4,000 16,226
Takeda Chemical Industries, Ltd.
(health & personal care).......... 4,000 106,346
Tobu Railway Co., Ltd.
(transportation-road & rail)...... 14,000 37,019
Tohoku Electric Power Co., Inc.
(utilities-electrical & gas)...... 1,000 14,734
Tokio Marine & Fire Insurance Co.
(insurance)....................... 3,000 30,823
Tokyo Dome Corp. (leisure &
tourism).......................... 2,000 10,807
Tokyo Electric Power Co., Inc.
(utilities-electrical & gas)...... 3,000 58,793
Tokyo Gas Co., Ltd. (utilities-
electrical & gas)................. 1,000 2,226
Tokyu Corp. (transportation-road &
rail)............................. 5,000 15,167
Toppan Printing Co., Ltd. (business
& public services)................ 3,000 32,077
Tostem Corp. (building materials &
components)....................... 1,000 12,955
Toto, Ltd. (building materials &
components)....................... 1,000 6,074
Toyoda Automatic Loom Works, Ltd.
(machinery & engineering)......... 1,000 17,652
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------------------------
<S> <C> <C>
JAPAN (Continued)
Toyota Motor Corp. (automobiles)... 8,000 $ 206,928
Yamanouchi Pharmaceutical Co., Ltd.
(health & personal care).......... 3,000 62,467
-----------
3,155,242
-----------
NETHERLANDS (8.4%)
ABN AMRO Holding N.V. (banking).... 9,600 224,636
Akzo Nobel N.V. (health & personal
care)............................. 600 133,378
Elsevier N.V. (broadcasting &
publishing)....................... 1,500 22,638
Heineken N.V. (beverages &
tobacco).......................... 2,700 106,050
ING Groep N.V. (insurance)......... 8,070 528,420
Koninklijke KPN N.V. (forest
products & paper)................. 5,026 193,457
Philips Electronics N.V.
(appliances & household
durables)......................... 3,000 252,185
Royal Dutch Petroleum Co. (energy
sources).......................... 18,100 1,003,665
TNT Post Group N.V.
(transportation-shipping) (a)..... 5,026 128,478
Unilever CVA N.V. (food & household
products)......................... 5,300 420,514
Wolters Kluwer CVA N.V.
(broadcasting & publishing)....... 601 82,488
-----------
3,095,909
-----------
NEW ZEALAND (0.1%)
Telecom Corp. of New Zealand Ltd.
(telecommunications).............. 19,600 41,917
-----------
PORTUGAL (1.3%)
Banco Comercial Portugues, S.A.
Registered (banking).............. 2,700 76,670
Banco Espirito Santo e Comercial de
Lisboa, S.A. Registered
(banking)......................... 1,600 48,050
Electricidade de Portugal, S.A.
(utilities-electrical & gas)...... 6,300 146,461
Jeronimo Martins & Filho SGPS, S.A.
(food & household products)....... 1,100 52,848
Portugal Telecom, S.A. Registered
(telecommunications).............. 3,100 164,310
-----------
488,339
-----------
SPAIN (4.6%)
Acerinox, S.A. (metals-steel)...... 140 18,674
Autopistas Concesionares Espanola,
S.A. (business & public services)
(a)............................... 7,126 110,549
Banco de Bilbao Vizcaya, S.A.
Registered (banking).............. 5,210 267,830
Banco de Central Hispanoamericano,
S.A. (banking).................... 2,860 90,045
Banco de Santander, S.A.
(banking)......................... 7,360 188,696
Corporacion Bancaria de Espana,
S.A. (banking).................... 4,560 102,464
Corporacion Mapfre, S.A.
(insurance)....................... 620 21,788
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
91
<PAGE> 92
INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
COMMON STOCKS (CONTINUED)
SHARES VALUE
------------------------
<S> <C> <C>
SPAIN (Continued)
Endesa, S.A. (utilities-electrical
& gas)............................ 7,770 $ 170,278
Fomento de Construcciones y
Contratas, S.A. (construction &
housing).......................... 660 34,101
Gas Natural SDG, S.A. (utilities-
electrical & gas)................. 1,110 80,336
Iberdrola, S.A.
(utilities-electrical & gas)...... 7,730 125,726
Repsol, S.A. (energy sources)...... 2,660 146,820
Telefonica de Espana, S.A.
(telecommunications).............. 7,090 328,351
-----------
1,685,658
-----------
SWITZERLAND (8.6%)
Credit Suisse Group Registered
(banking)......................... 1,540 342,660
Nestle S.A. Registered (food &
household products)............... 270 577,805
Novartis S.A. Registered (health &
personal care).................... 400 665,607
Roche Holdings AG Genusscheine
(health & personal care).......... 50 490,997
Schweizerische Rueckversicherungs
Gesellschaft Registered
(insurance)....................... 100 252,899
UBS AG Registered (banking)........ 1,753 651,828
Zurich Versicherungs Gesellschaft
Registered (insurance)............ 300 191,454
-----------
3,173,250
-----------
UNITED KINGDOM (22.9%)
Abbey National PLC (banking)....... 16,920 301,508
Barclays PLC (banking)............. 14,425 416,620
Bass PLC (beverages & tobacco)..... 4,017 75,067
B.A.T Industries PLC (beverages &
tobacco).......................... 26,651 266,136
BG PLC (energy sources)............ 35,364 204,747
BOC Group PLC (chemicals).......... 20,623 281,470
Boots Co. PLC (merchandising)...... 6,770 112,619
British Airways PLC
(transportation-airlines)......... 7,718 83,124
British Petroleum Co. PLC (energy
sources).......................... 45,504 662,433
British Telecommunications PLC
(telecommunications).............. 44,820 551,519
BTR PLC (multi-industry)........... 35,148 99,696
BTR PLC Class B (multi-
industry) (a)..................... 43,261 24,902
Cable & Wireless PLC
(telecommunications).............. 9,093 110,678
Centrica PLC (energy
sources) (a)...................... 11,990 20,305
CGU PLC (insurance)................ 7,693 143,632
Diageo PLC (beverages & tobacco)... 32,810 390,595
EMI Group PLC (recreation & other
consumer goods)................... 1,974 17,308
General Electric Co. PLC
(electrical & electronics)........ 18,990 163,652
GKN PLC (machinery &
engineering)...................... 7,394 94,192
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------------------------
<S> <C> <C>
UNITED KINGDOM (Continued)
Glaxo Wellcome PLC (health &
personal care).................... 22,129 $ 666,078
Granada Group PLC (leisure &
tourism).......................... 9,080 167,256
Great Universal Stores PLC (The)
(merchandising)................... 12,990 171,332
Hanson PLC (multi-industry)........ 7,969 48,365
HSBC Holdings PLC (financial
services)......................... 3,110 78,925
Imperial Chemical Industries PLC
(chemicals)....................... 4,700 75,753
Imperial Tobacco Group PLC
(beverages & tobacco)............. 3,239 23,806
Kingfisher PLC (merchandising)..... 10,131 164,134
Lloyds TSB Group PLC (banking)..... 38,344 535,488
Marks & Spencer PLC (merchandising) 16,242 148,236
MEPC PLC (real estate)............. 8,010 70,699
National Power PLC (utilities-
electrical & gas)................. 12,540 118,006
Peninsular & Oriental Steam
Navigation Co. Deferred Stock
(The) (transportation-shipping)... 4,355 62,817
Prudential Corp. PLC (insurance)... 25,750 339,415
Rank Group PLC (leisure &
tourism).......................... 5,210 28,361
Reed International PLC
(broadcasting & publishing)....... 26,300 237,619
Reuters Group PLC (broadcasting &
publishing)....................... 5,044 57,733
Rio Tinto PLC Registered (metals-
nonferrous)....................... 6,773 76,337
RMC Group PLC (building materials &
components)....................... 8,270 143,643
Sainsbury (J.) PLC
(merchandising)................... 11,780 104,564
Scottish Power PLC (utilities-
electrical & gas)................. 7,100 62,667
SmithKline Beecham PLC (health &
personal care).................... 40,460 493,818
Thorn PLC (appliances & household
durables)......................... 989 3,797
Unilever PLC (food & household
products)......................... 27,720 297,624
Vodafone Group PLC
(multi-industry).................. 20,215 256,676
-----------
8,453,352
-----------
Total Common Stocks
(Cost $27,557,474)................ 33,675,897
-----------
WARRANTS (0.0%) (b)
FRANCE (0.0%) (b)
Vivendi, S.A.
Call Warrants
Strike price FF 900
Expire 5/2/01
(business & public services)
(a)(f)............................ 1,337 2,632
-----------
Total Warrants..................... 2,632
-----------
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
92
<PAGE> 93
MAINSTAY VP SERIES FUND, INC.
<TABLE>
<CAPTION>
SHORT-TERM
INVESTMENTS (5.7%)
PRINCIPAL
AMOUNT VALUE
------------------------
<S> <C> <C>
COMMERCIAL PAPER (5.7%)
UNITED STATES (5.7%)
Goldman Sachs Group L.P. (The)
6.25%, due 7/1/98
(financial services).............. $1,230,000 $ 1,230,000
Merrill Lynch & Co. Inc.
6.14%, due 7/1/98
(financial services).............. 870,000 870,000
-----------
Total Short-Term Investments
(Cost $2,100,000)................. 2,100,000
-----------
Total Investments
(Cost $29,657,474) (d)............ 96.9% 35,778,529(e)
Cash and Other Assets,
Less Liabilities.................. 3.1 1,130,114
---------- -----------
Net Assets......................... 100.0% $36,908,643
========== ===========
</TABLE>
- ------------
(a) Non-income producing security.
(b) Less than one tenth of a percent.
(c) Segregated or partially segregated as collateral for forward foreign
currency contracts.
(d) The cost for Federal income tax purposes is $29,849,232.
(e) At June 30, 1998 net unrealized appreciation for securities was $5,929,297,
based on cost for Federal income tax purposes. This consisted of aggregate
gross unrealized appreciation for all investments on which there was an
excess of market value over cost of $7,776,785 and aggregate gross
unrealized depreciation for all investments on which there was an excess of
cost over market value of $1,847,488.
(f) FF--French Franc.
The table below sets forth the diversification of
International Equity Portfolio investments by industry.
INDUSTRY
DIVERSIFICATION
<TABLE>
<CAPTION>
VALUE PERCENT +
------------------------
<S> <C> <C>
Aerospace & Military
Technology................. $ 115,913 0.3%
Appliances & Household
Durables................... 506,211 1.4
Automobiles.................. 1,412,351 3.8
Banking...................... 4,948,607 13.4
Beverages & Tobacco.......... 995,936 2.7
Broadcasting & Publishing.... 424,465 1.1
Building Materials &
Components................. 377,110 1.0
Business & Public Services... 573,901 1.6
Chemicals.................... 1,570,402 4.3
Construction & Housing....... 161,529 0.4
Data Processing &
Reproduction............... 34,643 0.1
Electrical & Electronics..... 753,164 2.0
Electronic Components &
Instruments................ 69,168 0.2
Energy Sources............... 3,042,145 8.2
Financial Services........... 2,305,570 6.2
Food & Household Products.... 1,714,736 4.6
Forest Products & Paper...... 249,469 0.7
Health & Personal Care....... 3,027,447 8.2
Industrial Components........ 240,374 0.7
Insurance.................... 3,197,880 8.7
Leisure & Tourism............ 206,424 0.6
Machinery & Engineering...... 962,166 2.6
Merchandising................ 1,296,094 3.5
Metals-Nonferrous............ 101,892 0.3
Metals-Steel................. 180,685 0.5
Miscellaneous-Materials &
Commodities................ 179,107 0.5
Miscellaneous-Materials &
Components................. 37,826 0.1
Multi-Industry............... 1,315,788 3.6
Real Estate.................. 70,699 0.2
Recreation & Other Consumer
Goods...................... 142,891 0.4
Telecommunications........... 3,029,636 8.2
Textile & Apparel............ 86,423 0.2
Tire & Rubber................ 72,328 0.2
Transportation-Airlines...... 85,905 0.2
Transportation-Road & Rail... 134,172 0.4
Transportation-Shipping...... 201,454 0.5
Utilities-Electrical & Gas... 1,855,245 5.0
Wholesale & International
Trade...................... 98,773 0.3
----------- ------
35,778,529 96.9
Cash and Other Assets, Less
Liabilities................ 1,130,114 3.1
----------- ------
Net Assets................... $36,908,643 100.0%
=========== ======
</TABLE>
- ------------
+ Percentages indicated are based on Portfolio net assets.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
93
<PAGE> 94
INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
As of June 30, 1998 (Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investment in securities, at value
(identified cost $29,657,474).......... $ 35,778,529
Cash denominated in foreign currencies
(identified cost $4,492,082)........... 4,483,612
Cash..................................... 532,486
Receivables:
Investment securities sold............. 2,949,746
Dividends and interest................. 149,768
Fund shares sold....................... 82,855
Unrealized appreciation on forward
foreign currency contracts............. 101,465
------------
Total assets..................... 44,078,461
------------
LIABILITIES:
Payables:
Investment securities purchased........ 6,995,223
Custodian.............................. 38,224
Adviser................................ 17,763
Administrator.......................... 4,310
Directors.............................. 33
Accrued expenses......................... 34,434
Unrealized depreciation on forward
foreign currency contracts............. 79,831
------------
Total liabilities................ 7,169,818
------------
Net assets applicable to outstanding
shares................................. $ 36,908,643
============
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.01 per
share) 100 million shares authorized... $ 30,438
Additional paid-in capital............... 31,660,428
Accumulated undistributed net
investment income...................... 42,136
Accumulated net realized loss on
investments............................ (998,461)
Accumulated undistributed net realized
gain on foreign currency
transactions........................... 19,602
Net unrealized appreciation on
investments............................ 6,121,055
Net unrealized appreciation on
translation of other assets and
liabilities in foreign currencies and
forward foreign currency contracts..... 33,445
------------
Net assets applicable to outstanding
shares................................. $ 36,908,643
============
Shares of capital stock outstanding...... 3,043,781
============
Net asset value per share outstanding.... $ 12.13
============
</TABLE>
STATEMENT OF OPERATIONS
For the six months ended June 30, 1998 (Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Income:
Dividends (a).......................... $ 388,915
Interest............................... 101,879
------------
Total income..................... 490,794
------------
Expenses:
Advisory............................... 101,472
Custodian.............................. 37,873
Administration......................... 33,824
Professional........................... 19,269
Portfolio pricing...................... 10,001
Shareholder communication.............. 6,876
Directors.............................. 1,019
Miscellaneous.......................... 2,155
------------
Total expenses before
reimbursement.................. 212,489
Expense reimbursement from
Administrator.......................... (48,443)
------------
Net expenses..................... 164,046
------------
Net investment income.................... 326,748
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY
TRANSACTIONS:
Net realized gain from:
Security transactions.................. 75,340
Foreign currency transactions.......... 19,602
------------
Net realized gain on investments and
foreign currency transactions.......... 94,942
------------
Net change in unrealized appreciation on
investments:
Security transactions.................. 5,286,975
Translation of other assets and
liabilities in foreign currencies and
forward foreign currency contracts... (58,956)
------------
Net unrealized gain on investments and
foreign currency transactions.......... 5,228,019
------------
Net realized and unrealized gain on
investments and foreign currency
transactions........................... 5,322,961
------------
Net increase in net assets resulting from
operations............................. $ 5,649,709
============
</TABLE>
- ------------
(a) Dividends recorded net of foreign withholding taxes in the amount of
$53,596.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
94
<PAGE> 95
MAINSTAY VP SERIES FUND, INC.
INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 1998 (Unaudited)
and the year ended December 31, 1997
<TABLE>
<CAPTION>
1998 1997
---------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income..................................... $ 326,748 $ 399,616
Net realized gain (loss) on investments................... 75,340 (849,274)
Net realized gain on foreign currency transactions........ 19,602 2,485,547
Net change in unrealized appreciation on investments...... 5,286,975 370,622
Net change in unrealized appreciation on translation of
other assets and liabilities in foreign currencies and
forward foreign currency contracts...................... (58,956) (1,103,190)
------------ ------------
Net increase in net assets resulting from operations...... 5,649,709 1,303,321
------------ ------------
Dividends to shareholders:
From net investment income................................ (299,328) (2,375,801)
------------ ------------
Total dividends to shareholders......................... (299,328) (2,375,801)
------------ ------------
Capital share transactions:
Net proceeds from sale of shares.......................... 11,082,568 10,523,926
Net asset value of shares issued to shareholders in
reinvestment of dividends............................... 299,328 2,375,801
------------ ------------
11,381,896 12,899,727
Cost of shares redeemed................................... (10,095,798) (16,064,303)
------------ ------------
Increase (decrease) in net assets derived from capital
share transactions...................................... 1,286,098 (3,164,576)
------------ ------------
Net increase (decrease) in net assets....................... 6,636,479 (4,237,056)
NET ASSETS:
Beginning of period......................................... 30,272,164 34,509,220
------------ ------------
End of period............................................... $36,908,643 $ 30,272,164
============ ============
Accumulated undistributed net investment income at end of
period.................................................... $ 42,136 $ 14,716
============ ============
</TABLE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(Selected Per Share Data and Ratios)
<TABLE>
<CAPTION>
MAY 1,
SIX MONTHS 1995 (a)
ENDED THROUGH
JUNE 30, YEAR ENDED DECEMBER 31 DECEMBER 31,
1998* 1997 1996 1995
---------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value at beginning of period................... $ 10.31 $ 10.65 $ 10.20 $ 10.00
------------ ------------ ------------ ------------
Net investment income.................................... 0.10 1.06 0.44 0.64
Net realized and unrealized gain on investments.......... 1.83 0.27 0.06 0.01
Net realized and unrealized gain (loss) on foreign
currency transactions.................................. (0.01) (0.78) 0.56 0.05
------------ ------------ ------------ ------------
Total from investment operations......................... 1.92 0.55 1.06 0.70
------------ ------------ ------------ ------------
Less dividends and distributions:
From net investment income............................. (0.10) (0.89) (0.60) (0.06)
From net realized gain on investments and foreign
currency transactions................................ -- -- (0.01) (0.44)
------------ ------------ ------------ ------------
Total dividends and distributions........................ (0.10) (0.89) (0.61) (0.50)
------------ ------------ ------------ ------------
Net asset value at end of period......................... $ 12.13 $ 10.31 $ 10.65 $ 10.20
============ ============ ============ ============
Total investment return (b).............................. 18.57% 5.17% 10.54% 6.96%
Ratios (to average net assets)/Supplemental Data:
Net investment income.................................. 1.93%+ 1.25% 1.01% 1.07%+
Net expenses........................................... 0.97%+ 0.97% 0.97% 0.97%+
Expenses (before reimbursement)........................ 1.26%+ 1.25% 1.51% 2.51%+
Portfolio turnover rate.................................. 19% 61% 16% 14%
Net assets at end of period (in 000's)................... $ 36,909 $ 30,272 $ 34,509 $ 14,631
</TABLE>
- ------------
(a) Commencement of Operations.
(b) Total return is not annualized.
+ Annualized.
* Unaudited.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
95
<PAGE> 96
TOTAL RETURN PORTFOLIO
PORTFOLIO OF INVESTMENTS
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
LONG-TERM BONDS (32.4%)+
ASSET-BACKED SECURITIES (3.2%)
PRINCIPAL
AMOUNT VALUE
--------------------------
<S> <C> <C>
AIRLINE LEASES (0.3%)
Continental Airlines Pass-Through
Certificates Series 1998-1A
6.648%, due 3/15/19............. $ 1,585,000 $ 1,592,418
------------
AIRPLANE LEASES (1.0%)
AerCo Ltd. Series 1A Class A1
5.8463%, due 7/15/23 (c)(f)..... 1,245,000 1,245,000
Aircraft Lease Portfolio
Securitization Ltd. Series
1996-1 Class CX 7.0375%, due
6/15/06 (e)(f).................. 1,077,556 1,077,556
Airplanes Pass-Through Trust
Series 1 Class C 8.15%, due
3/15/19 (e)..................... 1,492,800 1,570,799
Morgan Stanley Aircraft Finance
Series 1A Class A1 5.8663%, due
3/15/23 (c)(e)(f)............... 1,770,000 1,769,381
------------
5,662,736
------------
CONSUMER LOANS (1.3%)
Chase Manhattan Recreational
Vehicle Owner Trust Series
1997-A Class A5 6.05%, due
11/15/04 (e).................... 1,665,000 1,666,815
CIT Recreational Vehicle Trust
Series 1998-A Class A2 5.92%,
due 3/15/07 (e)................. 865,000 866,116
Green Tree Recreational Equipment
& Consumer Trust Series 1997-C
Class A1 6.49%, due 2/15/18
(e)............................. 3,725,649 3,745,693
NationsCredit Grantor Trust
Series 1997-2 Class A2 6.25%,
due 11/15/13 (e)................ 836,742 839,118
------------
7,117,742
------------
CREDIT CARD RECEIVABLES (0.3%)
Chase Credit Card Master Trust
Series 1997-2 Class A 6.30%, due
4/15/03 (e)..................... 1,635,000 1,648,407
------------
EQUIPMENT FINANCING (0.0%)(b)
Atlas Air Inc. Series 1998-1C
8.01%, due 1/2/10 (c)........... 270,000 271,064
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
-----------------------
<S> <C> <C>
UTILITY LOANS (0.3%)
California Infrastructure &
Economic Development Bank
Special Purpose Trust PG&E-1
Rate Reduction Certificates
Series 1997-1 Class A3 6.15%,
due 6/25/02 (e)................. $ 1,400,000 $ 1,406,510
------------
Total Asset-Backed Securities
(Cost $17,689,206).............. 17,698,877
------------
CERTIFICATE OF DEPOSIT (0.2%)
BANKS (0.2%)
Mercantile Safe Deposit & Trust
Co. Baltimore, MD 6.30%, due
8/16/99......................... 1,000,000 1,004,700
------------
Total Certificate of Deposit
(Cost $1,000,000)............... 1,004,700
------------
CORPORATE BONDS (7.4%)
AEROSPACE (0.1%)
Newport News Shipbuilding Inc.
8.625%, due 12/1/06............. 350,000 368,375
------------
BANKS (0.6%)
Bank One Corp. 7.60%, due
5/1/07.......................... 610,000 664,674
Capital One Bank Series BKNT
6.375%, due 2/15/03............. 1,440,000 1,437,898
First Nationwide Holdings Inc.
12.25%, due 5/15/01............. 560,000 611,800
SB Treasury Company L.L.C. Series
A 9.40%, due 12/29/49 (c)(f).... 250,000 248,125
Tokai Preferred Capital Co.
L.L.C. Series A 9.98%, due
12/29/49 11.0914%, beginning
6/30/08 (c)(i).................. 200,000 186,250
------------
3,148,747
------------
BROKERAGE (0.5%)
Bear Stearns Companies Inc. (The)
6.20%, due 3/30/03.............. 620,000 620,930
Lehman Brothers Holdings, Inc.
6.25%, due 4/1/03............... 620,000 620,428
Lehman Brothers, Inc. 6.50%, due
4/15/08......................... 825,000 826,072
Merrill Lynch & Co., Inc. 6.00%,
due 2/12/03..................... 970,000 969,350
------------
3,036,780
------------
</TABLE>
- ------------
+ Percentages indicated are based on Portfolio net assets.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
96
<PAGE> 97
w MAINSTAY VP SERIES FUND, INC.
<TABLE>
<CAPTION>
CORPORATE BONDS (CONTINUED)
PRINCIPAL
AMOUNT VALUE
--------------------------
<S> <C> <C>
BUILDING MATERIALS (0.1%)
Triangle Pacific Corp. 10.50%,
due 8/1/03...................... $ 500,000 $ 520,000
------------
CASINOS (0.0%)(b)
Grand Casinos Inc. 10.125%, due
12/1/03......................... 150,000 164,250
------------
CHEMICALS (0.1%)
ISP Holdings Inc. Series B 9.00%,
due 10/15/03.................... 160,000 166,000
Terra Industries Inc. Series B
10.50%, due 6/15/05............. 150,000 161,625
------------
327,625
------------
COMPUTERS & OFFICE EQUIPMENT (0.2%)
International Business Machines
Corp. 6.50%, due 1/15/28........ 840,000 842,176
------------
ELECTRIC UTILITIES (0.8%)
CMS Energy Corp. 7.00%, due
1/15/05......................... 325,000 315,264
ESI Tractebel Acquisition Corp.
7.99%, due 12/30/11 (c)......... 300,000 300,000
Niagara Mohawk Power Corp. Series
H (zero coupon), due 7/1/10
8.50%, beginning 7/1/03 (f)..... 300,000 205,500
Series B 7.00%, due 10/1/00..... 2,340,000 2,341,568
Public Service Electric & Gas Co.
Series UU 6.75%, due 3/1/06..... 955,000 983,593
------------
4,145,925
------------
ENERGY (0.0%)(b)
Conproca, S.A. 12.00%, due
6/16/10 (c)(j).................. 200,000 203,000
------------
FINANCE (0.6%)
CB Richard Ellis Services, Inc.
8.875%, due 6/1/06.............. 350,000 347,375
EOP Operating LP 6.50%, due
6/15/04 (c)..................... 2,230,000 2,225,005
Forest City Enterprises, Inc.
8.50%, due 3/15/08.............. 500,000 498,750
------------
3,071,130
------------
FINANCIAL SERVICES (0.7%)
Conseco, Inc. 6.40%, due 6/15/11
(f)............................. 1,750,000 1,747,130
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
--------------------------
<S> <C> <C>
FINANCIAL SERVICES (Continued)
Equitable Companies, Inc. (The)
7.00%, due 4/1/28............... $ 835,000 $ 864,801
Travelers Group Inc. 6.625%, due
1/15/28......................... 1,130,000 1,138,023
------------
3,749,954
------------
FOOD, BEVERAGE & TOBACCO (0.6%)
Coca-Cola Enterprises, Inc.
6.95%, due 11/15/26............. 680,000 711,164
Philip Morris Cos. Inc. 6.15%,
due 3/15/10 (f)................. 2,435,000 2,432,809
Standard Commercial Corp.
8.875%, due 8/1/05.............. 365,000 357,700
------------
3,501,673
------------
HOUSING (0.1%)
Greystone Homes, Inc. 10.75%, due
3/1/04.......................... 310,000 334,800
------------
INDUSTRIAL (0.0%)(b)
Price Communications Wire, Inc.
9.125%, due 12/15/06 (c)........ 180,000 179,775
------------
MEDIA (0.3%)
Time Warner Inc. 8.375%, due
7/1/13.......................... 1,370,000 1,576,418
Viacom Inc. 8.00%, due 7/7/06.... 250,000 257,500
------------
1,833,918
------------
MINING (0.1%)
Great Central Mines, Ltd. 8.875%,
due 4/1/08 (c)(j)............... 310,000 304,575
------------
OTHER
TRANSPORTATION (0.1%)
Ultrapetrol (Bahamas) Ltd.
10.50%, due 4/1/08 (c).......... 290,000 283,475
------------
PAPER & FOREST PRODUCTS (0.4%)
Georgia-Pacific Corp. 7.25%, due
6/1/28.......................... 1,505,000 1,532,707
Pope & Talbot, Inc. 8.375%, due
6/1/13.......................... 475,000 474,335
------------
2,007,042
------------
RETAIL (1.1%)
Albertson's, Inc. Medium-Term
Note Series C 6.625%, due
6/1/28.......................... 1,445,000 1,443,945
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
97
<PAGE> 98
TOTAL RETURN PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
CORPORATE BONDS (CONTINUED)
PRINCIPAL
AMOUNT VALUE
--------------------------
<S> <C> <C>
RETAIL (Continued)
Federated Department Stores, Inc.
7.00%, due 2/15/28.............. $ 1,705,000 $ 1,743,653
K Mart Corp. 8.25%, due 1/1/22... 200,000 187,200
8.375%, due 7/1/22.............. 180,000 204,500
Sears Roebuck Acceptance Corp.
Medium-Term Note Series IV
6.36%, due 12/4/01.............. 1,165,000 1,175,194
Wal-Mart Stores, Inc. 5.65%, due
2/1/10 (f)...................... 1,310,000 1,305,873
------------
6,060,365
------------
SOFTWARE (0.3%)
Computer Associates
International, Inc. 6.375%, due
4/15/05 (c)..................... 1,905,000 1,888,807
------------
STEEL, ALUMINUM & OTHER METALS (0.1%)
Carpenter Technology Corp.
Medium-Term Note Series B
6.275%, due 4/7/03.............. 635,000 636,340
------------
TELECOMMUNICATION SERVICES (0.6%)
BellSouth Telecommunications,
Inc. 6.375%, due 6/1/28......... 1,680,000 1,674,305
GTE Corp. 6.94%, due 4/15/28..... 1,700,000 1,721,250
------------
3,395,555
------------
TRANSPORTATION (0.0%)(b)
Cenargo International PLC 9.75%,
due 6/15/08 (c)(j).............. 200,000 195,750
------------
Total Corporate Bonds (Cost
$40,064,836).................... 40,200,037
------------
MORTGAGE-BACKED SECURITIES (3.1%)
COMMERCIAL MORTGAGE LOANS (COLLATERALIZED
MORTGAGE OBLIGATIONS) (2.0%)
First Union-Lehman Brothers Bank
of America Commercial Mortgage
Trust Series 1998-C2 Class A-1
6.28%, due 6/18/07 (e).......... 1,309,952 1,318,715
FMAC Loan Receivables Trust
Series 1998-BA Class A2 6.74%,
due 11/15/20 (c)(e)............. 1,290,000 1,308,563
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
--------------------------
<S> <C> <C>
COMMERCIAL MORTGAGE LOANS
(COLLATERALIZED MORTGAGE
OBLIGATIONS) (Continued)
General Motors Acceptance Corp.
Commercial Mortgage Securities,
Inc. Series 1998-C1 Class A1
6.411%, due 11/15/07 (e)........ $ 1,410,000 $ 1,427,977
GS Mortgage Securities Corp. II
Series 1998-GL II Class A1
6.312%, due 4/13/31 (e)......... 1,648,808 1,661,471
Merrill Lynch Mortgage Investors,
Inc. Series 1998-C2 Class A2
6.39%, due 2/15/30 (e).......... 895,000 903,780
Series 1998-C1 Class A2 6.48%,
due 11/15/26 (e)................ 1,120,000 1,131,570
Series 1995-C2 Class A1 7.0875%,
due 6/15/21 (e)(f).............. 1,578,516 1,605,920
Morgan Stanley Capital I Series
1998-WF1 Class A1 6.25%, due
7/15/07 (e)..................... 1,182,182 1,188,353
Mortgage Capital Funding, Inc.
Series 1998-MC1 Class A1 6.417%,
due 6/18/07 (e)................. 603,979 611,492
------------
11,157,841
------------
RESIDENTIAL MORTGAGE LOANS (COLLATERALIZED
MORTGAGE OBLIGATIONS) (1.1%)
Bear Stearns Mortgage Securities
Inc. Series 1996-4 Class AI2
10.50%, due 9/25/27 (e)......... 219,041 222,121
Financial Asset Securitization,
Inc. Series 1997-NAMC 2 Class
FXA8 10.00%, due 7/25/27 (e).... 1,210,200 1,258,983
Norwest Asset Securities Corp.
Series 1997-10 Class A2 6.50%,
due 8/25/27 (e)................. 1,390,000 1,392,572
Residential Asset Securitization
Trust Series 1997-A3 Class A7
10.00%, due 5/25/27 (e)......... 646,669 665,261
Series 1997-A5 Class A4 10.00%,
due 7/25/27 (e)................. 493,075 504,169
Series 1997-A8 Class A2 10.00%,
due 10/25/27 (e)................ 504,898 547,815
Series 1997-A9 Class A8 10.00%,
due 11/26/27 (e)................ 506,741 526,534
Structured Asset Securities Corp.
Series 1996-2 Class A1 7.00%,
due 8/25/26 (e)................. 603,433 605,961
------------
5,723,416
------------
Total Mortgage-Backed Securities
(Cost $16,893,379).............. 16,881,257
------------
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
98
<PAGE> 99
MAINSTAY VP SERIES FUND, INC.
U.S. GOVERNMENT &
FEDERAL AGENCIES (16.7%)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
--------------------------
FEDERAL AGENCY (COLLATERALIZED MORTGAGE
OBLIGATION) (0.2%)
<S> <C> <C>
Fannie Mae Series 1998-M1 Class
A1 5.96%, due 5/25/07 (e)....... $ 964,962 $ 960,870
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(MORTGAGE PASS-THROUGH SECURITIES) (3.2%)
6.00%, due 7/20/13 TBA (d)...... 4,010,000 3,968,657
6.50%, due 12/1/27 (e).......... 2,675,355 2,665,751
6.50%, due 8/13/28 TBA (d)...... 5,465,000 5,439,369
7.00%, due 7/20/13 TBA (d)...... 5,485,000 5,588,721
------------
17,662,498
------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION I
(MORTGAGE PASS-THROUGH SECURITIES) (4.5%)
7.00%, due 8/19/28 TBA (d)...... 9,635,000 9,779,525
7.50%, due 12/15/23 (e)......... 1,709,043 1,758,178
8.00%, due 7/21/28 - 8/19/28 TBA
(d)............................. 10,835,000 11,225,951
9.50%, due 12/15/17 - 5/15/22
(e)........................... 1,507,486 1,650,697
------------
24,414,351
------------
UNITED STATES TREASURY BONDS (2.5%)
6.125%, due 11/15/27............ 1,300,000 1,393,028
7.625%, due 2/15/25 (g)......... 5,265,000 6,628,951
8.875%, due 8/15/17 (g)......... 4,275,000 5,828,022
------------
13,850,001
------------
UNITED STATES TREASURY NOTES (6.3%)
5.50%, due 11/15/98 (g)......... 3,670,000 3,671,138
5.625%, due 11/30/00 (g)........ 6,560,000 6,574,366
5.75%, due 4/30/03 (g).......... 10,170,000 10,270,073
6.25%, due 2/15/03 (g).......... 2,685,000 2,763,026
6.625%, due 5/15/07............. 5,425,000 5,826,775
7.875%, due 11/15/99-11/15/04... 4,961,000 5,376,536
------------
34,481,914
------------
Total U.S. Government & Federal
Agencies (Cost $90,862,547)..... 91,369,634
------------
</TABLE>
<TABLE>
<CAPTION>
YANKEE BONDS (18%)
PRINCIPAL
AMOUNT VALUE
--------------------------
<S> <C> <C>
CABLE (0.0%)(b)
Rogers Cablesystem Ltd. 10.125%,
due 9/1/12...................... $ 90,000 $ 98,100
------------
CONSUMER FINANCIAL
SERVICES (0.3%)
Ford Capital Co. B.V. 9.50%, due
6/1/10.......................... $ 1,735,000 2,173,157
------------
ELECTRIC UTILITIES (0.3%)
Empresa Electrica del Norte
Grande S.A. 10.50%, due 6/15/05
(c)............................. 375,000 382,500
United Utilities, PLC 6.45%, due
4/1/08.......................... 1,475,000 1,477,979
------------
1,860,479
------------
FINANCE (0.2%)
Fairfax Financial Holdings Ltd.
6.875%, due 4/15/08............. 1,250,000 1,247,188
------------
GAS UTILITIES (0.1%)
Camuzzi Gas Pampeana S.A. 9.25%,
due 12/15/01 (c)................ 695,000 706,148
------------
INDUSTRIAL (0.1%)
Stena Line AB 10.50%, due
12/15/05........................ 280,000 304,500
------------
MEDIA (0.1%)
Rogers Communications, Inc.
8.875%, due 7/15/07............. 360,000 362,700
------------
MULTI--INDUSTRIAL (0.3%)
Tyco International Group S.A.
6.125%, due 6/15/01............. 1,455,000 1,455,902
------------
OIL SERVICES (0.4%)
Petroleum-Geo Services ASA
7.125%, due 3/30/28............. 1,920,000 1,945,939
------------
Total Yankee Bonds (Cost
$10,105,429).................... 10,154,113
------------
Total Long-Term Bonds (Cost
$176,615,397)................... 177,308,618
------------
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
99
<PAGE> 100
TOTAL RETURN PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
COMMON STOCKS (61.4%)
SHARES VALUE
--------------------------
<S> <C> <C>
BANKS (3.4%)
NationsBank Corp................. 68,200 $ 5,217,300
Norwest Corp..................... 123,000 4,597,125
SouthTrust Corp.................. 58,200 2,531,700
Summit Bancorp................... 69,000 3,277,500
Washington Mutual, Inc........... 64,050 2,782,172
------------
18,405,797
------------
BUILDINGS (0.4%)
Oakwood Homes Corp............... 68,400 2,052,000
------------
CHEMICALS (0.7%)
Monsanto Co. .................... 70,200 3,922,425
------------
COMMERCIAL SERVICES (0.7%)
Young & Rubicam, Inc. (a)........ 125,500 4,016,000
------------
COMPUTERS & OFFICE EQUIPMENT (2.7%)
EMC Corp. (a).................... 129,500 5,803,219
Hewlett-Packard Co. ............. 46,600 2,790,175
Sun Microsystems, Inc. (a)....... 145,000 6,298,437
------------
14,891,831
------------
CONSUMER DURABLES (1.1%)
Harley-Davidson, Inc. ........... 159,400 6,176,750
------------
CONSUMER SERVICES (1.9%)
Cendant Corp. (a)................ 283,203 5,911,863
Service Corp. International...... 101,000 4,330,375
------------
10,242,238
------------
COSMETICS (1.9%)
Colgate-Palmolive Co. ........... 55,700 4,901,600
Gillette Co. (The)............... 97,000 5,498,687
------------
10,400,287
------------
DRUGS (6.2%)
Elan Corp. PLC ADR (a)(g)(h)..... 79,800 5,132,138
Lilly (Eli) & Co. ............... 132,000 8,720,250
Merck & Co., Inc. ............... 48,000 6,420,000
Pfizer, Inc. .................... 35,000 3,804,062
Schering-Plough Corp. ........... 108,600 9,950,475
------------
34,026,925
------------
ENERGY (0.2%)
Halliburton Co. ................. 26,500 1,180,906
------------
FINANCIAL SERVICES (7.5%)
Associates First Capital Corp.
Class A......................... 68,100 5,235,187
CIT Group, Inc. (The) Class A.... 61,000 2,287,500
Equifax Inc. .................... 94,900 3,446,056
Fannie Mae....................... 69,800 4,240,350
Heller Financial, Inc. (a)....... 15,000 450,000
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
--------------------------
<S> <C> <C>
FINANCIAL SERVICES (Continued)
Household International, Inc. ... 123,000 $ 6,119,250
MGIC Investment Corp. ........... 4,800 273,900
SunAmerica Inc. (g).............. 162,750 9,347,953
Travelers Group Inc. (g)......... 161,600 9,797,000
------------
41,197,196
------------
HEALTH CARE (3.2%)
Cardinal Health, Inc. ........... 43,500 4,078,125
HEALTHSOUTH Corp. (a)............ 185,000 4,937,187
Tenet Healthcare Corp. (a)....... 136,475 4,264,844
United Healthcare Corp. ......... 62,800 3,987,800
------------
17,267,956
------------
INDUSTRIAL (1.0%)
Illinois Tool Works Inc. ........ 77,900 5,194,956
------------
INSURANCE (2.4%)
American International Group,
Inc. ........................... 50,625 7,391,250
Conseco, Inc. ................... 119,800 5,600,650
------------
12,991,900
------------
LEISURE (0.4%)
Mirage Resorts, Inc. (a)......... 92,400 1,969,275
------------
MEDIA (1.0%)
Chancellor Media Corp. (a)....... 53,000 2,631,784
Clear Channel Communications,
Inc. (a)........................ 25,500 2,782,688
------------
5,414,472
------------
MEDICAL EQUIPMENT (4.1%)
Guidant Corp. ................... 83,000 5,918,938
Johnson & Johnson................ 92,552 6,825,710
Medtronic, Inc. ................. 150,200 9,575,250
------------
22,319,898
------------
MULTI-INDUSTRIAL (2.3%)
Tyco International Ltd. ......... 199,200 12,549,600
------------
POLLUTION & RELATED (1.0%)
USA Waste Services, Inc. (a)..... 111,500 5,505,313
------------
RETAIL (8.4%)
Bed Bath & Beyond, Inc. (a)...... 77,900 4,036,194
CVS Corp. ....................... 132,600 5,163,113
Dollar General Corp. ............ 102,187 4,042,773
Home Depot, Inc. (The)........... 88,900 7,384,256
Kohl's Corp. (a)................. 142,800 7,407,750
Kroger Co. (The) (a)............. 108,600 4,656,225
Safeway Inc. (a)................. 170,000 6,916,875
Staples, Inc. (a)................ 219,000 6,337,312
------------
45,944,498
------------
SOFTWARE (4.8%)
Computer Associates
International, Inc. ............ 113,325 6,296,620
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
100
<PAGE> 101
MAINSTAY VP SERIES FUND, INC.
<TABLE>
<CAPTION>
COMMON STOCKS (CONTINUED)
SHARES VALUE
--------------------------
<S> <C> <C>
SOFTWARE (Continued)
Compuware Corp. (a).............. 156,200 $ 7,985,725
Microsoft Corp. (a).............. 78,200 8,474,925
Oracle Corp. (a)................. 153,037 3,758,972
------------
26,516,242
------------
TECHNOLOGY (2.4%)
Cisco Systems, Inc. (a).......... 101,950 9,385,772
Intel Corp....................... 52,500 3,891,562
------------
13,277,334
------------
TELECOMMUNICATION EQUIPMENT (2.3%)
Lucent Technologies Inc.......... 150,200 12,494,763
------------
TELECOMMUNICATION SERVICES (1.4%)
WorldCom, Inc. (a)(g)............ 160,432 7,770,925
------------
Total Common Stocks (Cost
$191,825,214)................... 335,729,487
------------
PREFERRED STOCKS (0.1%)
MEDIA & ENTERTAINMENT (0.0%)(b)
Time Warner Capital I 8.875%,
12/31/25........................ 7,700 197,313
------------
PAPER & FOREST PRODUCTS (0.1%)
Paperboard Industries
International, Inc. 5.00%, Class
A (c)(i)(k)..................... 15,000 245,435
------------
Total Preferred Stocks (Cost
$448,227)....................... 442,748
------------
<CAPTION>
SHORT-TERM
INVESTMENTS (12.9%)
PRINCIPAL
AMOUNT
-----------
<S> <C> <C>
COMMERCIAL PAPER (11.6%)
Deutsche Bank Financial Inc.
5.57%, due 7/10/98 (e).......... $11,570,000 11,553,889
Ford Motor Credit Co. 5.63%, due
7/2/98.......................... 8,805,000 8,803,623
General Electric Capital Corp.
5.62%, due 7/6/98............... 9,250,000 9,242,780
Goldman Sachs Group L.P. (The)
5.52%, due 7/6/98............... 4,695,000 4,691,400
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
--------------------------
<S> <C> <C>
COMMERCIAL PAPER (Continued)
Merrill Lynch & Co. Inc. 5.63%,
due 7/6/98...................... $ 9,100,000 $ 9,092,884
Morgan Stanley, Dean Witter,
Discover & Co. 6.25%, due
7/1/98.......................... 6,050,000 6,050,000
Prudential Funding Corp. 6.30%,
due 7/1/98...................... 14,185,000 14,185,000
------------
Total Commercial Paper (Cost
$63,619,576).................... 63,619,576
------------
U.S. GOVERNMENT (1.3%)
United States Treasury Note
5.50%, due 11/15/98 (g)......... 7,245,000 7,247,246
------------
Total U. S. Government (Cost
$7,242,736)..................... 7,247,246
------------
Total Short-Term Investments
(Cost $70,862,312).............. 70,866,822
------------
Total Investments (Cost
$439,751,150) (l)............... 106.8% 584,347,675(m)
Liabilities in Excess of Cash and
Other Assets.................... (6.8) (37,006,732)
---------- ------------
Net Assets....................... 100.0% $547,340,943
========== ============
</TABLE>
- ------------
(a) Non-income producing security.
(b) Less than one tenth of a percent.
(c) May be sold to institutional investors only.
(d) TBA: Securities purchased on a forward commitment basis with an approximate
principal amount and maturity date. The actual principal amount and
maturity date will be determined upon settlement.
(e) Segregated or partially segregated as collateral for TBA.
(f) Floating rate. Rate shown is the rate in effect at June 30, 1998.
(g) Represents securities out on loan or a portion which is out on loan.
(h) ADR--American Depository Receipt.
(i) Restricted security.
(j) Euro-Dollar bond.
(k) Canadian security.
(l) The cost for Federal income tax purposes is $439,791,649.
(m) At June 30, 1998 net unrealized appreciation was $144,556,026, based on
cost for Federal income tax purposes. This consisted of aggregate gross
unrealized appreciation for all investments on which there was an excess of
market value over cost of $145,861,041 and aggregate gross unrealized
depreciation for all investments on which there was an excess of cost over
market value of $1,305,015.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
101
<PAGE> 102
TOTAL RETURN PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
As of June 30, 1998 (Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investment in securities, at value
(identified cost $439,751,150)......... $584,347,675
Collateral held for securities loaned, at
value.................................. 63,082,600
Receivables:
Investment securities sold............. 37,890,215
Dividends and interest................. 1,825,212
Fund shares sold....................... 312,971
------------
Total assets..................... 687,458,673
------------
LIABILITIES:
Securities lending collateral, at
value.................................. 63,082,600
Payables:
Investment securities purchased........ 76,530,049
Adviser................................ 139,450
Administrator.......................... 87,157
Custodian.............................. 60,831
Fund shares redeemed................... 48,004
Directors.............................. 114
Accrued expenses......................... 169,525
------------
Total liabilities................ 140,117,730
------------
Net assets applicable to outstanding
shares................................. $547,340,943
============
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.01 per
share) 50 million shares authorized.... $ 294,125
Additional paid-in capital............... 388,565,924
Accumulated undistributed net investment
income................................. 5,521,666
Accumulated undistributed net realized
gain on investments.................... 8,362,703
Net unrealized appreciation on
investments............................ 144,596,525
------------
Net assets applicable to outstanding
shares................................. $547,340,943
============
Shares of capital stock outstanding...... 29,412,528
============
Net asset value per share outstanding.... $ 18.61
============
</TABLE>
STATEMENT OF OPERATIONS
For the six months ended June 30, 1998 (Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Income:
Interest............................... $ 6,198,587
Dividends (a).......................... 765,414
------------
Total income..................... 6,964,001
------------
Expenses:
Administration......................... 785,905
Advisory............................... 491,190
Shareholder communication.............. 82,031
Professional........................... 30,252
Custodian.............................. 26,244
Directors.............................. 14,812
Miscellaneous.......................... 11,901
------------
Total expenses................... 1,442,335
------------
Net investment income.................... 5,521,666
------------
REALIZED AND UNREALIZED GAIN ON
INVESTMENTS:
Net realized gain on investments......... 8,414,045
Net change in unrealized appreciation on
investments............................ 48,203,006
------------
Net realized and unrealized gain on
investments............................ 56,617,051
------------
Net increase in net assets resulting from
operations............................. $ 62,138,717
============
</TABLE>
- ------------
(a) Dividends recorded net of foreign withholding taxes in the amount of $1,138.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
102
<PAGE> 103
MAINSTAY VP SERIES FUND, INC.
TOTAL RETURN PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 1998 (Unaudited)
and the year ended December 31, 1997
<TABLE>
<CAPTION>
1998 1997
-------------------------
<S> <C> <C>
INCREASE IN NET ASSETS:
Operations:
Net investment income..................................... $ 5,521,666 $ 9,613,404
Net realized gain on investments.......................... 8,414,045 13,159,109
Net change in unrealized appreciation on investments...... 48,203,006 40,611,907
------------ ------------
Net increase in net assets resulting from operations...... 62,138,717 63,384,420
------------ ------------
Dividends and distributions to shareholders:
From net investment income................................ (115,108) (9,410,905)
From net realized gain on investments..................... (1,983,937) (8,039,987)
------------ ------------
Total dividends and distributions to shareholders....... (2,099,045) (17,450,892)
------------ ------------
Capital share transactions:
Net proceeds from sale of shares.......................... 46,915,762 67,934,966
Net asset value of shares issued to shareholders in
reinvestment of dividends and distributions............. 2,099,045 17,450,892
------------ ------------
49,014,807 85,385,858
Cost of shares redeemed................................... (8,337,121) (17,593,189)
------------ ------------
Increase in net assets derived from capital share
transactions............................................ 40,677,686 67,792,669
------------ ------------
Net increase in net assets.................................. 100,717,358 113,726,197
NET ASSETS:
Beginning of period......................................... 446,623,585 332,897,388
------------ ------------
End of period............................................... $547,340,943 $446,623,585
============ ============
Accumulated undistributed net investment income at end of
period.................................................... $ 5,521,666 $ 115,108
============ ============
</TABLE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(Selected Per Share Data and Ratios)
<TABLE>
<CAPTION>
JANUARY 29,
SIX MONTHS 1993 (a)
ENDED THROUGH
JUNE 30, YEAR ENDED DECEMBER 31 DECEMBER 31,
1998* 1997 1996 1995 1994 1993
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of
period........................... $ 16.47 $ 14.56 $ 13.26 $ 10.58 $ 11.32 $ 10.00
---------- ---------- ---------- ---------- ---------- -----------
Net investment income.............. 0.19 0.37 0.30 0.31 0.27 0.16
Net realized and unrealized gain
(loss) on investments............ 2.02 2.21 1.30 2.69 (0.72) 1.34
---------- ---------- ---------- ---------- ---------- -----------
Total from investment operations... 2.21 2.58 1.60 3.00 (0.45) 1.50
---------- ---------- ---------- ---------- ---------- -----------
Less dividends and distributions:
From net investment income....... (0.00)(b) (0.36) (0.30) (0.32) (0.29) (0.16)
From net realized gain
on investments................. (0.07) (0.31) -- -- -- --
In excess of net realized gain on
investments.................... -- -- -- -- -- (0.02)
---------- ---------- ---------- ---------- ---------- -----------
Total dividends and
distributions.................... (0.07) (0.67) (0.30) (0.32) (0.29) (0.18)
---------- ---------- ---------- ---------- ---------- -----------
Net asset value at end of period... $ 18.61 $ 16.47 $ 14.56 $ 13.26 $ 10.58 $ 11.32
========== ========== ========== ========== ========== ===========
Total investment return (c)........ 13.46% 17.79% 12.08% 28.33% (3.99%) 15.04%
Ratios (to average net assets)/
Supplemental Data:
Net investment income............ 2.25%+ 2.46% 2.52% 3.06% 3.50% 3.48%+
Net expenses..................... 0.59%+ 0.60% 0.69% 0.69% 0.69% 0.69%+
Expenses (before
reimbursement)................. 0.59%+ 0.60% 0.71% 0.81% 0.88% 1.07%+
Portfolio turnover rate............ 89% 125% 175% 253% 297% 197%
Net assets at end of period (in
000's)........................... $ 547,341 $ 446,624 $ 332,897 $ 194,893 $ 122,333 $ 55,548
</TABLE>
- ------------
(a) Commencement of Operations.
(b) Less than one cent per share.
(c) Total return is not annualized.
+ Annualized.
* Unaudited.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
103
<PAGE> 104
VALUE PORTFOLIO
PORTFOLIO OF INVESTMENTS
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
COMMON STOCKS (91.4%)+
SHARES VALUE
--------------------------
<S> <C> <C>
AEROSPACE/DEFENSE ELECTRONICS
(0.9%)
Coltec Industries, Inc. (a)...... 151,600 $ 3,013,050
------------
AIRLINES (2.1%)
Continental Airlines, Inc. Class
B (a)........................... 56,600 3,445,525
Northwest Airlines Corp. Class A
(a)............................. 91,100 3,513,044
------------
6,958,569
------------
AUTO MANUFACTURING (1.2%)
Ford Motor Co. .................. 69,100 4,076,900
------------
AUTO PARTS (4.0%)
Echlin Inc. ..................... 99,300 4,871,906
LucasVarity PLC ADR (b).......... 119,600 4,761,575
Mark IV Industries, Inc. ........ 181,465 3,924,181
------------
13,557,662
------------
BANKS (5.8%)
Banc One Corp. .................. 71,830 4,009,012
KeyCorp.......................... 95,000 3,384,375
NationsBank Corp. ............... 87,734 6,711,651
PNC Bank Corp. .................. 38,000 2,044,875
Wells Fargo & Co. ............... 9,300 3,431,700
------------
19,581,613
------------
CHEMICALS (2.2%)
Agrium Inc. ..................... 168,100 2,122,263
Geon Co. (The)................... 49,600 1,137,700
Georgia Gulf Corp. .............. 66,800 1,523,875
IMC Global Inc. ................. 89,000 2,681,125
------------
7,464,963
------------
COMPUTER PERIPHERALS (0.9%)
Adaptec Inc. (a)................. 211,700 3,029,956
------------
COMPUTERS & OFFICE EQUIPMENT
(3.7%)
International Business Machines
Corp. .......................... 27,200 3,122,900
Lexmark International Group, Inc.
Class A (a)..................... 90,200 5,502,200
Xerox Corp. ..................... 36,700 3,729,638
------------
12,354,738
------------
CONGLOMERATES (1.8%)
American Standard Cos. Inc.
(a)............................. 135,800 6,068,563
------------
CONTAINERS (2.3%)
Crown Cork & Seal Co., Inc. ..... 49,200 2,337,000
Owens-Illinois Inc. (a).......... 118,400 5,298,400
------------
7,635,400
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
--------------------------
<S> <C> <C>
ELECTRIC UTILITIES (13.7%)
BEC Energy....................... 138,000 $ 5,727,000
Central & South West Corp. ...... 177,000 4,756,875
Energy East Corp. ............... 80,600 3,354,975
FPL Group, Inc. ................. 78,800 4,964,400
Illinova Corp. .................. 147,300 4,419,000
MarketSpan Corp. ................ 81,312 2,434,278
Niagara Mohawk Power Corp. (a)... 82,700 1,235,331
Northeast Utilities (a).......... 104,700 1,773,356
OGE Energy Corp. ................ 145,000 3,915,000
Pinnacle West Capital Corp. ..... 42,700 1,921,500
Public Service Enterprise Group
Inc. ........................... 87,200 3,002,950
Texas Utilities Co. ............. 206,600 8,599,725
------------
46,104,390
------------
ELECTRONIC COMPONENTS (1.6%)
Raychem Corp. ................... 84,000 2,483,250
UCAR International Inc. (a)...... 97,100 2,834,106
------------
5,317,356
------------
ENERGY (3.6%)
Coastal Corp. (The).............. 39,400 2,750,613
Seagull Energy Corp. (a)......... 214,400 3,551,000
Tosco Corp. ..................... 70,800 2,079,750
Williams Cos. Inc. .............. 114,219 3,854,891
------------
12,236,254
------------
FOOD (0.5%)
IBP, Inc. ....................... 94,900 1,720,062
------------
HEALTH CARE (6.6%)
Aetna Inc. ...................... 79,500 6,051,937
Allegiance Corp. ................ 92,600 4,745,750
Columbia/HCA Healthcare Corp. ... 182,800 5,324,050
Foundation Health Systems, Inc.
Class A (a)..................... 232,000 6,119,000
------------
22,240,737
------------
HOSPITAL MANAGEMENT (0.8%)
Tenet Healthcare Corp. (a)....... 90,000 2,812,500
------------
INSURANCE (8.8%)
Allstate Corp. (The)............. 34,000 3,113,125
Chubb Corp. (The) ............... 69,900 5,618,213
CIGNA Corp. ..................... 97,800 6,748,200
Equitable Cos., Inc. (The)....... 70,300 5,268,106
Transamerica Corp. .............. 26,300 3,027,788
Travelers Group Inc. ............ 95,449 5,786,596
------------
29,562,028
------------
INTERNATIONAL OIL (0.8%)
British Petroleum Co., PLC ADR
(b)............................. 30,241 2,668,768
------------
LEISURE (0.4%)
Callaway Golf Co. ............... 72,700 1,431,281
------------
</TABLE>
- ------------
+ Percentages indicated are based on Portfolio net assets.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
104
<PAGE> 105
MAINSTAY VP SERIES FUND, INC.
<TABLE>
<CAPTION>
COMMON STOCKS (CONTINUED)
SHARES VALUE
--------------------------
<S> <C> <C>
OIL SERVICES (1.9%)
Union Pacific Resources Group
Inc. ........................... 369,400 $ 6,487,588
------------
OILS (6.3% )
Apache Corp. .................... 110,100 3,468,150
Noble Affiliates, Inc. .......... 118,100 4,487,800
Occidental Petroleum Corp. ...... 84,400 2,278,800
Oryx Energy Co. (a).............. 211,200 4,672,800
Texaco Inc. ..................... 25,500 1,522,031
Unocal Corp. .................... 133,100 4,758,325
------------
21,187,906
------------
PAPER & FOREST PRODUCTS (1.9%)
Bowater Inc. .................... 82,400 3,893,400
Georgia-Pacific (Timber Group)... 117,000 2,691,000
------------
6,584,400
------------
POLLUTION & RELATED (1.9%)
Browning-Ferris Industries,
Inc. ........................... 188,100 6,536,475
------------
RAILROADS (1.4%)
CSX Corp. ....................... 68,000 3,094,000
Union Pacific Corp. ............. 36,100 1,592,912
------------
4,686,912
------------
RECREATION & ENTERTAINMENT (1.2%)
Harrah's Entertainment, Inc.
(a)............................. 181,800 4,226,850
------------
RETAIL (3.7%)
Federated Department Stores, Inc.
(a)............................. 90,200 4,853,887
Toys "R" Us, Inc. (a)............ 190,200 4,481,587
Venator Group, Inc. (a).......... 163,400 3,125,025
------------
12,460,499
------------
STEEL, ALUMINUM & OTHER
METALS (1.3%)
Reynolds Metals Co. ............. 76,800 4,296,000
------------
TELECOMMUNICATION (3.9%)
AT & T Corp. .................... 120,200 6,866,425
US West Inc. .................... 134,000 6,298,000
------------
13,164,425
------------
TELECOMMUNICATION SERVICES (1.0%)
GTE Corp. ....................... 57,800 3,215,125
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
--------------------------
<S> <C> <C>
TEXTILE/HOME FURNISHING &
APPAREL (0.7%)
Burlington Industries, Inc.
(a)............................. 151,000 $ 2,123,438
Shaw Industries, Inc. ........... 19,300 340,162
------------
2,463,600
------------
TIRE & RUBBER (1.3%)
Goodyear Tire & Rubber Co.
(The)........................... 69,900 4,504,181
------------
TOBACCO (3.2%)
Philip Morris Cos. Inc. ......... 188,800 7,434,000
RJR Nabisco Holdings Corp. ...... 139,800 3,320,250
------------
10,754,250
------------
Total Common Stocks (Cost
$279,100,456)................... 308,403,001
------------
SHORT-TERM
INVESTMENTS (9.9%)
PRINCIPAL
AMOUNT
-----------
COMMERCIAL PAPER (9.9%)
General Electric Co. 5.62%, due
7/6/98.......................... $14,215,000 14,203,905
Morgan Stanley, Dean Witter,
Discover & Co. 6.25%, due
7/1/98.......................... 8,955,000 8,955,000
Prudential Funding Corp. 6.30%,
due 7/1/98...................... 10,140,000 10,140,000
------------
Total Short-Term Investments
(Cost $33,298,905).............. 33,298,905
------------
Total Investments (Cost
$312,399,361) (c)............... 101.3% 341,701,906(d)
Liabilities in Excess of Cash and
Other Assets.................... (1.3) (4,255,197)
----------- ------------
Net Assets....................... 100.0% $337,446,709
=========== ============
</TABLE>
- ------------
(a) Non-income producing security.
(b) ADR -- American Depository Receipt.
(c) The cost for Federal income tax purposes is $312,531,302.
(d) At June 30, 1998 net unrealized appreciation was $29,170,604, based on cost
for Federal income tax purposes. This consisted of aggregate gross
unrealized appreciation for all investments on which there was an excess of
market value over cost of $44,695,592 and aggregate gross unrealized
depreciation for all investments on which there was an excess of cost over
market value of $15,524,988.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
105
<PAGE> 106
VALUE PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
As of June 30, 1998 (Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investment in securities, at value
(identified cost $312,399,361)......... $341,701,906
Cash..................................... 690
Receivables:
Investment securities sold............. 19,655,000
Dividends.............................. 722,262
Fund shares sold....................... 521,219
------------
Total assets..................... 362,601,077
------------
LIABILITIES:
Payables:
Investment securities purchased........ 24,894,516
Adviser................................ 98,844
Administrator.......................... 54,913
Custodian.............................. 12,725
Directors.............................. 66
Accrued expenses......................... 93,304
------------
Total liabilities................ 25,154,368
------------
Net assets applicable to outstanding
shares................................. $337,446,709
============
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.01 per
share) 100 million shares authorized... $ 202,866
Additional paid-in capital............... 292,473,395
Accumulated undistributed net investment
income................................. 2,452,746
Accumulated undistributed net realized
gain on investments.................... 13,015,157
Net unrealized appreciation on
investments............................ 29,302,545
------------
Net assets applicable to outstanding
shares................................. $337,446,709
============
Shares of capital stock outstanding...... 20,286,581
============
Net asset value per share outstanding.... $ 16.63
============
</TABLE>
STATEMENT OF OPERATIONS
For the six months ended June 30, 1998 (Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Income:
Dividends (a).......................... $ 2,634,265
Interest............................... 793,537
------------
Total income..................... 3,427,802
------------
Expenses:
Advisory............................... 550,035
Administration......................... 305,575
Shareholder communication.............. 60,729
Professional........................... 23,336
Custodian.............................. 16,121
Directors.............................. 9,085
Miscellaneous.......................... 10,175
------------
Total expenses................... 975,056
------------
Net investment income.................... 2,452,746
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized gain on investments......... 13,147,099
Net change in unrealized appreciation on
investments............................ (5,456,041)
------------
Net realized and unrealized gain on
investments............................ 7,691,058
------------
Net increase in net assets resulting from
operations............................. $ 10,143,804
============
</TABLE>
- ------------
(a) Dividends recorded net of foreign withholding taxes in the amount of $9,323.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
106
<PAGE> 107
MAINSTAY VP SERIES FUND, INC.
VALUE PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 1998 (Unaudited)
and the year ended December 31, 1997
<TABLE>
<CAPTION>
1998 1997
---------------------------
<S> <C> <C>
INCREASE IN NET ASSETS:
Operations:
Net investment income..................................... $ 2,452,746 $ 3,314,456
Net realized gain on investments.......................... 13,147,099 13,030,231
Net change in unrealized appreciation on investments...... (5,456,041) 21,662,906
----------- ------------
Net increase in net assets resulting from operations...... 10,143,804 38,007,593
----------- ------------
Dividends and distributions to shareholders:
From net investment income................................ (696) (3,316,396)
From net realized gain on investments..................... (2,860,725) (11,200,731)
----------- ------------
Total dividends and distributions to shareholders....... (2,861,421) (14,517,127)
----------- ------------
Capital share transactions:
Net proceeds from sale of shares.......................... 65,169,229 114,898,296
Net asset value of shares issued to shareholders in
reinvestment of dividends and distributions............. 2,861,421 14,517,127
----------- ------------
68,030,650 129,415,423
Cost of shares redeemed................................... (2,045,756) (9,141,345)
----------- ------------
Increase in net assets derived from capital share
transactions............................................ 65,984,894 120,274,078
----------- ------------
Net increase in net assets.................................. 73,267,277 143,764,544
NET ASSETS:
Beginning of period......................................... 264,179,432 120,414,888
----------- ------------
End of period............................................... $337,446,709 $264,179,432
============ ============
Accumulated undistributed net investment income at end of
period.................................................... $ 2,452,746 $ 696
=========== ============
</TABLE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(Selected Per Share Data and Ratios)
<TABLE>
<CAPTION>
MAY 1,
SIX MONTHS 1995 (a)
ENDED THROUGH
JUNE 30, YEAR ENDED DECEMBER 31 DECEMBER 31,
1998* 1997 1996 1995
---------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value at beginning of period.................. $ 16.09 $ 13.90 $ 11.58 $ 10.00
------------ ------------ ------------ ------------
Net investment income................................... 0.12 0.21 0.17 0.10
Net realized and unrealized gain on investments......... 0.57 2.94 2.52 1.58
------------ ------------ ------------ ------------
Total from investment operations........................ 0.69 3.15 2.69 1.68
------------ ------------ ------------ ------------
Less dividends and distributions:
From net investment income............................ (0.00)(b) (0.21) (0.17) (0.10)
From net realized gain on investments................. (0.15) (0.75) (0.20) --
------------ ------------ ------------ ------------
Total dividends and distributions....................... (0.15) (0.96) (0.37) (0.10)
------------ ------------ ------------ ------------
Net asset value at end of period........................ $ 16.63 $ 16.09 $ 13.90 $ 11.58
============ ============ ============ ============
Total investment return (c)............................. 4.25% 22.89% 23.22% 16.76%
Ratios (to average net assets)/Supplemental Data:
Net investment income................................. 1.61%+ 1.78% 2.10% 2.57%+
Net expenses.......................................... 0.64%+ 0.65% 0.73% 0.73%+
Expenses (before reimbursement)....................... 0.64%+ 0.65% 0.79% 1.45%+
Portfolio turnover rate................................. 25% 48% 41% 20%
Net assets at end of period (in 000's).................. $ 337,447 $ 264,179 $ 120,415 $ 24,429
</TABLE>
- ------------
(a) Commencement of Operations.
(b) Less than one cent per share.
(c) Total return is not annualized.
+ Annualized.
* Unaudited.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
107
<PAGE> 108
BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
LONG-TERM BONDS (96.2%)+
CORPORATE BONDS (50.6%)
PRINCIPAL
AMOUNT VALUE
--------------------------
<S> <C> <C>
AUTO PARTS/EQUIPMENT (2.1%)
Borg-Warner Automotive, Inc.
7.00%, due 11/1/06.............. $ 5,000,000 $ 5,212,500
------------
BANKS (6.7%)
BankAmerica Corp.
7.75%, due 7/15/02.............. 4,000,000 4,240,000
First Union Capital Corp.
7.935%, due 1/15/27............. 5,000,000 5,400,000
Golden West Financial Corp.
10.25%, due 12/1/00............. 1,000,000 1,093,750
Republic New York Corp.
7.75%, due 5/15/09.............. 5,000,000 5,568,750
------------
16,302,500
------------
CHEMICALS (1.2%)
Praxair, Inc.
6.15%, due 4/15/03.............. 3,000,000 2,992,500
------------
CONGLOMERATES--DIVERSIFIED (0.8%)
Harcourt General, Inc.
9.50%, due 3/15/00.............. 2,000,000 2,110,000
------------
DIVERSIFIED UTILITIES (3.3%)
Niagara Mohawk Power Corp.
7.125%, due 7/1/01.............. 5,000,000 5,012,500
Public Service Co. of Colorado
6.00%, due 1/1/01............... 3,000,000 3,011,250
------------
8,023,750
------------
ELECTRIC UTILITIES (2.2%)
Cleveland Electric Illuminating
Co.
7.88%, due 11/1/17.............. 5,000,000 5,412,500
------------
ELECTRONICS (3.7%)
Raytheon Co.
5.95%, due 3/15/01.............. 5,000,000 4,993,750
6.75%, due 3/15/18.............. 4,000,000 4,100,000
------------
9,093,750
------------
FINANCE (11.3%)
Chrysler Financial Corp.
5.875%, due 2/7/01.............. 5,000,000 4,993,750
Fleet Financial Group
6.875%, due 1/15/28............. 6,000,000 6,187,500
General Motors Acceptance Corp.
5.625%, due 2/15/01............. 6,000,000 5,962,500
Mellon Financial Co.
7.625%, due 11/15/99............ 3,000,000 3,068,610
Norwest Financial, Inc.
6.85%, due 7/15/09.............. 7,000,000 7,332,500
------------
27,544,860
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
--------------------------
<S> <C> <C>
GAS UTILITIES (3.3%)
KN Energy, Inc.
6.45%, due 3/1/03............... $ 5,000,000 $ 5,037,500
Williams Companies, Inc.
6.125%, due 2/1/01.............. 3,000,000 3,003,750
------------
8,041,250
------------
OIL & GAS (1.8%)
Oryx Energy Co.
9.50%, due 11/1/99.............. 4,235,000 4,388,519
------------
PAPER PRODUCTS (3.0%)
Champion International Corp.
7.15%, due 12/15/27............. 2,500,000 2,537,500
9.875%, due 6/1/00.............. 4,500,000 4,809,375
------------
7,346,875
------------
POLLUTION CONTROL (1.7%)
USA Waste Services, Inc.
7.00%, due 10/1/04.............. 4,000,000 4,155,000
------------
RAILROADS (2.4%)
Norfolk Southern Corp.
7.80%, due 5/15/27.............. 5,000,000 5,787,500
------------
RETAIL STORES (7.1%)
Penney (J.C.) Co., Inc.
6.95%, due 4/1/00............... 5,000,000 5,087,500
Price/Costco, Inc.
7.125%, due 6/15/05............. 5,000,000 5,300,000
Sears Roebuck & Co.
8.45%, due 11/1/98 (a).......... 7,000,000 7,052,640
------------
17,440,140
------------
Total Corporate Bonds (Cost
$119,462,209)................... 123,851,644
------------
U.S. GOVERNMENT & FEDERAL AGENCIES (40.5%)
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(MORTGAGE PASS-THROUGH SECURITIES) (12.2%)
6.00%, due 12/1/27.............. 3,934,008 3,829,512
6.50%, due 11/1/09.............. 6,440,339 6,510,783
7.00%, due 2/1/27............... 9,663,379 9,814,370
8.00%, due 5/1/25............... 9,373,938 9,745,971
------------
29,900,636
------------
</TABLE>
- ------------
+ Percentages indicated are based on Portfolio net assets.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
108
<PAGE> 109
MAINSTAY VP SERIES FUND, INC.
<TABLE>
<CAPTION>
U.S. GOVERNMENT &
FEDERAL AGENCIES (CONTINUED)
PRINCIPAL
AMOUNT VALUE
--------------------------
<S> <C> <C>
GOVERNMENT NATIONAL
MORTGAGE ASSOCIATION I (MORTGAGE
PASS-THROUGH SECURITY) (1.5%)
9.00%, due 4/15/26.............. $ 3,342,590 $ 3,590,153
------------
UNITED STATES TREASURY BONDS
(6.3%)
6.125%, due 11/15/27............ 10,000,000 10,715,100
7.125%, due 2/15/23............. 4,000,000 4,728,640
------------
15,443,740
------------
UNITED STATES TREASURY NOTES
(20.5%)
5.375%, due 1/31/00............. 5,000,000 4,988,100
5.50%, due 3/31 - 5/31/03....... 19,000,000 18,980,590
5.625%, due 5/15/08............. 5,000,000 5,066,400
6.125%, due 8/15/07............. 5,000,000 5,200,100
6.50%, due 8/15/05.............. 15,000,000 15,818,250
------------
50,053,440
------------
Total U.S. Government & Federal
Agencies (Cost $97,348,986)..... 98,987,969
------------
YANKEE BONDS (5.1%)
BANKS (0.8%)
Banco Nacional de Comercio
Exterior
7.50%, due 7/1/00............... 2,000,000 1,995,000
------------
COMMERCIAL PRINTING (2.2%)
Quebecor Printing Capital Corp.
7.25%, due 1/15/07.............. 5,000,000 5,243,750
------------
CRUDE PETROLEUM & NATURAL GAS
(2.1%)
Gulf Canada Resources Ltd.
9.00%, due 8/15/99.............. 5,000,000 5,137,500
------------
Total Yankee Bonds (Cost
$12,103,601).................... 12,376,250
------------
Total Long-Term Bonds (Cost
$228,914,796)................... 235,215,863
------------
<CAPTION>
SHORT-TERM INVESTMENTS (2.6%)
PRINCIPAL
AMOUNT VALUE
--------------------------
<S> <C> <C>
COMMERCIAL PAPER (2.6%)
Associates Corp. of North America
5.50%, due on demand (b)........ $ 5,565,000 $ 5,565,000
Principal Mutual Life
5.850%, due 7/7/98.............. 765,000 764,254
------------
Total Commercial Paper (Cost
$6,329,254)..................... 6,329,254
------------
FEDERAL AGENCY (0.0%) (c)
Federal National Mortgage
Association Discount
5.50%, due 7/20/98.............. 52,000 51,849
------------
Total Federal Agency (Cost
$51,849)........................ 51,849
------------
Total Short-Term Investments
(Cost $6,381,103)............... 6,381,103
------------
Total Investments (Cost
$235,295,899) (d)............... 98.8% 241,596,966(e)
Cash and Other Assets, Less
Liabilities..................... 1.2 2,835,631
----------- ------------
Net Assets....................... 100.0% $244,432,597
=========== ============
</TABLE>
- ------------
(a) Long-term security maturing within the subsequent twelve month period.
(b) Adjustable rate. Rate shown is the rate in effect at June 30, 1998.
(c) Less than one tenth of a percent.
(d) The cost stated also represents the aggregate cost for Federal income tax
purposes.
(e) At June 30, 1998 net unrealized appreciation was $6,301,067, based on cost
for Federal income tax purposes. This consisted of aggregate gross
unrealized appreciation for all investments on which there was an excess of
market value over cost of $6,359,490 and aggregate gross unrealized
depreciation for all investments on which there was an excess of cost over
market value of $58,423.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
109
<PAGE> 110
BOND PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
As of June 30, 1998 (Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investment in securities, at value
(identified cost $235,295,899)......... $241,596,966
Cash..................................... 2,788
Receivables:
Investment securities sold............. 29,749,078
Interest............................... 3,834,484
Fund shares sold....................... 352,991
------------
Total assets..................... 275,536,307
------------
LIABILITIES:
Payables:
Investment securities purchased........ 30,697,468
Adviser................................ 148,639
Fund shares redeemed................... 124,526
Administrator.......................... 39,882
Directors.............................. 68
Accrued expenses......................... 93,127
------------
Total liabilities................ 31,103,710
------------
Net assets applicable to outstanding
shares................................. $244,432,597
============
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.01 per
share) 100 million shares authorized... $ 178,218
Additional paid-in capital............... 226,843,558
Accumulated undistributed net investment
income................................. 7,132,900
Accumulated undistributed net realized
gain on investments.................... 3,976,854
Net unrealized appreciation on
investments............................ 6,301,067
------------
Net assets applicable to outstanding
shares................................. $244,432,597
============
Shares of capital stock outstanding...... 17,821,774
============
Net asset value per share outstanding.... $ 13.72
============
</TABLE>
STATEMENT OF OPERATIONS
For the six months ended June 30, 1998 (Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Income:
Interest............................... $ 7,742,148
------------
Expenses:
Advisory............................... 292,210
Administration......................... 233,768
Shareholder communication.............. 42,945
Professional........................... 22,281
Directors.............................. 7,219
Portfolio pricing...................... 3,059
Miscellaneous.......................... 7,766
------------
Total expenses................... 609,248
------------
Net investment income.................... 7,132,900
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized gain on investments......... 3,976,854
Net change in unrealized appreciation on
investments............................ (1,071,759)
------------
Net realized and unrealized gain on
investments............................ 2,905,095
------------
Net increase in net assets resulting from
operations............................. $ 10,037,995
============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
110
<PAGE> 111
MAINSTAY VP SERIES FUND, INC.
BOND PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 1998 (Unaudited)
and the year ended December 31, 1997
<TABLE>
<CAPTION>
1998 1997
---------------------------
<S> <C> <C>
INCREASE IN NET ASSETS:
Operations:
Net investment income..................................... $ 7,132,900 $ 14,358,879
Net realized gain on investments.......................... 3,976,854 2,351,172
Net change in unrealized appreciation on investments...... (1,071,759) 3,848,534
------------ ------------
Net increase in net assets resulting from operations...... 10,037,995 20,558,585
------------ ------------
Dividends and distributions to shareholders:
From net investment income................................ -- (14,330,709)
From net realized gain on investments..................... -- (640,312)
------------ ------------
Total dividends and distributions to shareholders....... -- (14,971,021)
------------ ------------
Capital share transactions:
Net proceeds from sale of shares.......................... 24,599,643 21,412,921
Net asset value of shares issued to shareholders in
reinvestment of dividends and distributions............. -- 14,971,021
------------ ------------
24,599,643 36,383,942
Cost of shares redeemed................................... (19,154,078) (39,397,355)
------------ ------------
Increase (decrease) in net assets derived from capital
share transactions...................................... 5,445,565 (3,013,413)
------------ ------------
Net increase in net assets.................................. 15,483,560 2,574,151
NET ASSETS:
Beginning of period......................................... 228,949,037 226,374,886
------------ ------------
End of period............................................... $244,432,597 $228,949,037
============ ============
Accumulated undistributed net investment income at end of
period.................................................... $ 7,132,900 $ --
============ ============
</TABLE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(Selected Per Share Data and Ratios)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED DECEMBER 31
1998* 1997 1996 1995 1994 1993
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning
of period................... $ 13.14 $ 12.83 $ 13.42 $ 12.09 $ 13.43 $ 12.91
------------ ------------ ------------ ------------ ------------ ------------
Net investment income......... 0.40 0.88 0.87 0.88 0.88 0.95
Net realized and unrealized
gain (loss) on
investments................. 0.18 0.35 (0.59) 1.33 (1.34) 0.53
------------ ------------ ------------ ------------ ------------ ------------
Total from investment
operations.................. 0.58 1.23 0.28 2.21 (0.46) 1.48
------------ ------------ ------------ ------------ ------------ ------------
Less dividends and
distributions:
From net investment
income.................... -- (0.88) (0.87) (0.88) (0.88) (0.96)
From net realized gain
on investments............ -- (0.04) -- -- -- --
------------ ------------ ------------ ------------ ------------ ------------
Total dividends and
distributions............... -- (0.92) (0.87) (0.88) (0.88) (0.96)
------------ ------------ ------------ ------------ ------------ ------------
Net asset value at end of
period...................... $ 13.72 $ 13.14 $ 12.83 $ 13.42 $ 12.09 $ 13.43
============ ============ ============ ============ ============ ============
Total investment return (a)... 4.35% 9.65% 2.05% 18.31% (3.39%) 11.40%
Ratios (to average net
assets)/ Supplemental Data:
Net investment income....... 6.10%+ 6.42% 6.31% 6.55% 6.53% 6.79%
Net expenses................ 0.52%+ 0.50% 0.58% 0.62% 0.62%# 0.27%#
Expenses (before
reimbursement)............ 0.52%+ 0.50% 0.58% 0.91% 0.67%# 0.27%#
Portfolio turnover rate....... 125% 187% 103% 81% 88% 41%
Net assets at end of period
(in 000's).................. $ 244,433 $ 228,949 $ 226,375 $ 235,030 $ 206,686 $ 228,683
</TABLE>
- ------------
(a) Total return is not annualized.
# At the MainStay VP Series Fund, Inc.'s shareholders meeting on December 14,
1993, the shareholders voted to have the Bond Portfolio assume certain
administrative and operating expenses of the Fund previously borne by New
York Life.
+ Annualized.
* Unaudited.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
111
<PAGE> 112
GROWTH EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
COMMON STOCKS (95.4%)+
SHARES VALUE
--------------------------
<S> <C> <C>
ADVERTISING (0.6%)
Young & Rubicam Inc. (a)......... 175,000 $ 5,600,000
------------
AEROSPACE/DEFENSE (1.5%)
Coltec Industries Inc. (a)....... 200,000 3,975,000
Raytheon Co. Class A............. 175,000 10,084,375
------------
14,059,375
------------
BANKS (8.6%)
Bank of New York Co., Inc.
(The)........................... 150,000 9,103,125
BankBoston Corp. ................ 200,000 11,125,000
Chase Manhattan Bank (The)....... 140,000 10,570,000
First Union Corp. ............... 150,000 8,737,500
Fleet Financial Group, Inc. ..... 96,300 8,041,050
NationsBank Corp. ............... 160,000 12,240,000
Norwest Corp. ................... 250,000 9,343,750
Republic New York Corp. ......... 150,000 9,440,625
------------
78,601,050
------------
BUSINESS SERVICES (3.1%)
Ceridian Corp. (a)............... 140,000 8,225,000
Comdisco Inc. ................... 600,000 11,400,000
Keane, Inc. (a).................. 150,000 8,400,000
MicroStrategy Inc. (a)........... 10,000 282,500
------------
28,307,500
------------
CAPITAL GOODS (0.3%)
Checkpoint Systems, Inc. (a)..... 214,400 3,028,400
------------
CHEMICALS (1.1%)
Monsanto Co. .................... 175,000 9,778,125
------------
COMMERCIAL SERVICES (3.7%)
Cendant Corp. (a)................ 300,000 6,262,500
Equifax Inc. .................... 190,000 6,899,375
Service Corp. International...... 250,000 10,718,750
ServiceMaster Co. (The).......... 250,000 9,515,625
------------
33,396,250
------------
COMMUNICATIONS (2.3%)
Lucent Technologies Inc. ........ 140,000 11,646,250
Tellabs Inc. (a)................. 125,000 8,953,125
------------
20,599,375
------------
COMPUTERS & BUSINESS EQUIPMENT
(8.4%)
Ascend Communications, Inc.
(a)............................. 150,000 7,434,375
Cisco Systems, Inc. (a).......... 150,000 13,809,375
Compuware Corp. (a).............. 200,000 10,225,000
Dell Computer Corp. (a).......... 100,000 9,281,250
EMC Corp. (a).................... 200,000 8,962,500
Fiserv, Inc. (a)................. 232,500 9,873,996
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
--------------------------
<S> <C> <C>
COMPUTERS & BUSINESS EQUIPMENT
(Continued)
Network Associates, Inc. (a)..... 117,000 $ 5,601,375
SunGard Data Systems Inc. (a).... 300,000 11,512,500
------------
76,700,371
------------
CONGLOMERATES (1.4%)
Tyco International Ltd. ......... 200,000 12,600,000
------------
DRUGS (8.7%)
American Home Products Corp. .... 200,000 10,350,000
Bristol-Myers Squibb Co. ........ 95,000 10,919,063
Elan Corp. PLC ADR (a)(b)........ 146,900 9,447,506
Genzyme Corp. (a)................ 125,000 3,195,312
Glaxo Wellcome PLC ADR (b)....... 100,000 5,981,250
Johnson & Johnson................ 120,000 8,850,000
Lilly (Eli) & Co. ............... 160,000 10,570,000
SmithKline Beecham PLC ADR (b)... 157,300 9,516,650
Warner-Lambert Co. .............. 150,000 10,406,250
------------
79,236,031
------------
ELECTRICAL (2.0%)
General Electric Co. ............ 200,000 18,200,000
------------
FINANCE (4.5%)
American Express Co. ............ 90,000 10,260,000
American General Corp. .......... 120,000 8,542,500
Associates First Capital Corp.
Class A......................... 39,312 3,022,110
Fannie Mae....................... 160,000 9,720,000
Freddie Mac...................... 200,000 9,412,500
------------
40,957,110
------------
FOODS (3.7%)
Aurora Foods Inc. (a)............ 238,000 5,027,750
Bestfoods........................ 160,000 9,290,000
Hershey Foods Corp. ............. 126,700 8,742,300
International Home Foods, Inc.
(a)............................. 196,800 4,477,200
Sara Lee Corp. .................. 360,000 6,544,688
------------
34,081,938
------------
HOSPITAL & MEDICAL SERVICES
(3.4%)
Cardinal Health, Inc. ........... 100,000 9,375,000
McKesson Corp. .................. 123,500 10,034,375
Medtronic, Inc. ................. 175,000 11,156,250
------------
30,565,625
------------
HOUSEHOLD PRODUCTS (3.0%)
Gillette Co. (The)............... 150,000 8,503,125
Newell Co. ...................... 195,000 9,713,437
Procter & Gamble Co. (The)....... 100,000 9,106,250
------------
27,322,812
------------
</TABLE>
- ------------
+ Percentages indicated are based on Portfolio net assets.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
112
<PAGE> 113
MAINSTAY VP SERIES FUND, INC.
<TABLE>
<CAPTION>
COMMON STOCKS (CONTINUED)
SHARES VALUE
--------------------------
<S> <C> <C>
INSURANCE--PROPERTY & CASUALTY
(4.9%)
Allstate Corp. (The)............. 100,000 $ 9,156,250
Conseco, Inc. ................... 175,000 8,181,250
EXEL Ltd. ....................... 119,600 9,306,375
Provident Cos., Inc.............. 260,000 8,970,000
Travelers Group Inc. ............ 154,500 9,366,563
------------
44,980,438
------------
INTERNET SOFTWARE (2.1%)
America Online, Inc. (a)......... 125,000 13,250,000
EarthLink Network, Inc. (a)...... 80,000 6,140,000
------------
19,390,000
------------
LEISURE/AMUSEMENT (0.9%)
Premier Parks Inc. .............. 129,600 8,586,000
------------
LODGING & RESTAURANTS (1.1%)
Sodexho Marriott Services Inc.
(a)............................. 27,500 797,500
SYSCO Corp. ..................... 360,000 9,225,000
------------
10,022,500
------------
MANUFACTURING (0.9%)
Dana Corp. ...................... 148,000 7,918,000
------------
MEDIA & INFORMATION SERVICES
(7.6%)
Capstar Broadcasting Corp. Class
A (a)........................... 375,000 9,421,875
CBS Corp. (a).................... 280,000 8,890,000
Clear Channel Communications,
Inc. (a)........................ 75,000 8,184,375
Comcast Corp. Special Class A.... 300,000 12,178,140
MediaOne Group Inc. (a).......... 230,000 10,105,625
News Corp. Ltd. (The) ADR (b).... 310,000 9,958,750
Viacom Inc. Class B (a).......... 180,000 10,485,000
------------
69,223,765
------------
MEDICAL (0.7%)
Centocor, Inc. (a)............... 171,100 6,202,375
------------
METALS (0.2%)
Ispat International NV-NY (a).... 120,000 2,250,000
------------
NETWORKING PRODUCTS (0.6%)
Xylan Corp. (a).................. 175,000 5,217,187
------------
OIL & ENERGY
SERVICES (5.2%)
Burlington Resources Inc. ....... 140,000 6,028,750
Enron Corp. ..................... 85,000 4,595,313
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
--------------------------
<S> <C> <C>
OIL & ENERGY
SERVICES (Continued)
Halliburton Co. ................. 200,000 $ 8,912,500
Mobil Corp. ..................... 80,000 6,130,000
Schlumberger Ltd. ............... 100,000 6,831,250
Texaco Inc. ..................... 133,100 7,944,406
USX-Marathon Group............... 200,000 6,862,500
XCL Ltd. (a)..................... 10,786 41,796
------------
47,346,515
------------
PAPER & FOREST PRODUCTS (1.6%)
Boise Cascade Corp. ............. 175,000 5,731,250
Fort James Corp. ................ 204,800 9,113,600
------------
14,844,850
------------
REAL ESTATE (1.9%)
Chelsea GCA Realty, Inc. ........ 96,300 3,852,000
First Industrial Realty Trust,
Inc. ........................... 175,000 5,556,250
Healthcare Realty Trust, Inc. ... 125,000 3,406,250
Liberty Property Trust........... 166,500 4,256,156
------------
17,070,656
------------
RETAIL TRADE & MERCHANDISING
(4.9%)
American Stores Co. ............. 302,000 7,304,625
Costco Cos., Inc. (a)............ 200,000 12,612,500
Kroger Co. (The) (a)............. 270,000 11,576,250
Smart & Final Inc. .............. 163,000 2,791,375
Wal-Mart Stores, Inc. ........... 170,000 10,327,500
------------
44,612,250
------------
SCHOOLS (0.5%)
Sylvan Learning Systems, Inc.
(a)............................. 150,000 4,912,500
------------
TELECOMMUNICATIONS (2.1%)
Bell Atlantic Corp. ............. 200,000 9,125,000
Teleport Communications Group
Inc. Class A (a)................ 184,500 10,009,125
US West Communications Group..... 6,281 295,221
------------
19,429,346
------------
TRANSPORTATION (1.1%)
Carnival Corp. .................. 250,000 9,906,250
------------
UTILITIES--ELECTRIC (0.7%)
CMS Energy Corp. ................ 135,000 5,940,000
------------
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
113
<PAGE> 114
GROWTH EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
COMMON STOCKS (CONTINUED)
SHARES VALUE
--------------------------
<S> <C> <C>
UTILITIES--TELEPHONE (2.1%)
Ameritech Corp................... 206,000 $ 9,244,250
WorldCom, Inc. (a)............... 205,000 9,929,688
------------
19,173,938
------------
Total Common Stocks
(Cost $638,663,085)............. 870,060,532
------------
SHORT-TERM
INVESTMENTS (5.6%)
PRINCIPAL
AMOUNT
-----------
COMMERCIAL PAPER (5.6%)
Associates Corp. of North America
5.50%, due on demand (c)........ $13,010,000 13,010,000
Du Pont (E.I.) De Nemours & Co.
Inc. 5.55%, due 7/10/98......... 563,000 562,219
Principal Mutual Life Insurance
Co. 5.85%, due 7/7/98........... 7,205,000 7,197,975
Repsol International Finance B.V.
5.62%, due 7/2/98............... 6,000,000 5,999,063
San Paolo US Financial Co. 6.30%,
due 7/1/98...................... 10,000,000 10,000,000
Xerox Capital (Europe) PLC 6.30%,
due 7/1/98...................... 14,525,000 14,525,000
------------
Total Short-Term Investments
(Cost $51,294,257).............. 51,294,257
------------
Total Investments
(Cost $689,957,342) (d)......... 101.0% 921,354,789(e)
Liabilities In Excess of
Cash and Other Assets........... (1.0) (9,017,583)
----------- ------------
Net Assets....................... 100.0% $912,337,206
=========== ============
</TABLE>
- ------------
(a) Non-income producing security.
(b) ADR--American Depository Receipt.
(c) Adjustable rate. Rate shown is the rate in effect at June 30, 1998.
(d) The cost stated also represents the aggregate cost for Federal income tax
purposes.
(e) At June 30, 1998 net unrealized appreciation was $231,397,447, based on cost
for Federal income tax purposes. This consisted of aggregate gross
unrealized appreciation for all investments on which there was an excess of
market value over cost of $239,508,617 and aggregate gross unrealized
depreciation for all investments on which there was an excess of cost over
market value of $8,111,170.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
114
<PAGE> 115
MAINSTAY VP SERIES FUND, INC.
GROWTH EQUITY PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
As of June 30, 1998 (Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investment in securities, at value
(identified cost $689,957,342)......... $921,354,789
Cash..................................... 11,447
Receivables:
Investment securities sold............. 24,056,481
Dividends and interest................. 987,839
Fund shares sold....................... 713,569
------------
Total assets..................... 947,124,125
------------
LIABILITIES:
Payables:
Investment securities purchased........ 33,515,958
Adviser................................ 547,600
Fund shares redeemed................... 306,735
Administrator.......................... 144,033
Directors.............................. 194
Accrued expenses......................... 272,399
------------
Total liabilities................ 34,786,919
------------
Net assets applicable to outstanding
shares................................. $912,337,206
============
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.01 per
share) 100 million shares authorized... $ 386,572
Additional paid-in capital............... 628,538,539
Accumulated undistributed net investment
income................................. 3,408,239
Accumulated undistributed net realized
gain on investments.................... 48,606,409
Net unrealized appreciation on
investments............................ 231,397,447
------------
Net assets applicable to outstanding
shares................................. $912,337,206
============
Shares of capital stock outstanding...... 38,657,179
============
Net asset value per share outstanding.... $ 23.60
============
</TABLE>
STATEMENT OF OPERATIONS
For the six months ended June 30, 1998 (Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Income:
Dividends (a).......................... $ 4,389,145
Interest............................... 1,137,204
------------
Total income..................... 5,526,349
------------
Expenses:
Advisory............................... 1,039,714
Administration......................... 831,771
Shareholder communication.............. 158,188
Professional........................... 40,617
Directors.............................. 25,453
Miscellaneous.......................... 22,367
------------
Total expenses................... 2,118,110
------------
Net investment income.................... 3,408,239
------------
REALIZED AND UNREALIZED GAIN ON
INVESTMENTS:
Net realized gain on investments......... 48,606,409
Net change in unrealized appreciation on
investments............................ 71,852,891
------------
Net realized and unrealized gain on
investments............................ 120,459,300
------------
Net increase in net assets resulting from
operations............................. $123,867,539
============
</TABLE>
- ------------
(a) Dividends recorded net of foreign withholding taxes
in the amount of $13,875.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
115
<PAGE> 116
GROWTH EQUITY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 1998 (Unaudited)
and the year ended December 31, 1997
<TABLE>
<CAPTION>
1998 1997
-----------------------------
<S> <C> <C>
INCREASE IN NET ASSETS:
Operations:
Net investment income..................................... $ 3,408,239 $ 5,317,657
Net realized gain on investments.......................... 48,606,409 97,560,028
Net change in unrealized appreciation on investments...... 71,852,891 52,771,507
------------- -------------
Net increase in net assets resulting from operations...... 123,867,539 155,649,192
------------- -------------
Dividends and distributions to shareholders:
From net investment income................................ -- (5,271,609)
From net realized gain on investments..................... -- (98,150,349)
------------- -------------
Total dividends and distributions to shareholders....... -- (103,421,958)
------------- -------------
Capital share transactions:
Net proceeds from sale of shares.......................... 70,031,144 99,117,945
Net asset value of shares issued to shareholders in
reinvestment of dividends and distributions............. -- 103,421,958
------------- -------------
70,031,144 202,539,903
Cost of shares redeemed................................... (40,615,764) (60,398,261)
------------- -------------
Increase in net assets derived from capital share
transactions............................................ 29,415,380 142,141,642
------------- -------------
Net increase in net assets.................................. 153,282,919 194,368,876
NET ASSETS:
Beginning of period......................................... 759,054,287 564,685,411
------------- -------------
End of period............................................... $ 912,337,206 $ 759,054,287
============= =============
Accumulated undistributed net investment income at end of
period.................................................... $ 3,408,239 $ --
============= =============
</TABLE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(Selected Per Share Data and Ratios)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED DECEMBER 31
1998* 1997 1996 1995 1994 1993
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning
of period................... $ 20.31 $ 18.63 $ 17.22 $ 14.69 $ 15.64 $ 15.53
------------ ------------ ------------ ------------ ------------ ------------
Net investment income......... 0.09 0.16 0.18 0.22 0.22 0.24
Net realized and unrealized
gain (loss) on
investments................. 3.20 4.74 4.06 4.06 (0.03) 1.88
------------ ------------ ------------ ------------ ------------ ------------
Total from investment
operations.................. 3.29 4.90 4.24 4.28 0.19 2.12
------------ ------------ ------------ ------------ ------------ ------------
Less dividends and
distributions:
From net investment
income.................... -- (0.16) (0.18) (0.22) (0.22) (0.25)
From net realized gain
on investments............ -- (3.06) (2.65) (1.53) (0.92) (1.76)
------------ ------------ ------------ ------------ ------------ ------------
Total dividends and
distributions............... -- (3.22) (2.83) (1.75) (1.14) (2.01)
------------ ------------ ------------ ------------ ------------ ------------
Net asset value at end of
period...................... $ 23.60 $ 20.31 $ 18.63 $ 17.22 $ 14.69 $ 15.64
============ ============ ============ ============ ============ ============
Total investment return (a)... 16.20% 26.75% 24.50% 29.16% 1.20% 13.71%
Ratios (to average net
assets)/ Supplemental Data:
Net investment income....... 0.82%+ 0.80% 0.98% 1.29% 1.41% 1.42%
Net expenses................ 0.51%+ 0.50% 0.58% 0.62% 0.62%# 0.27%#
Expenses (before
reimbursement)............ 0.51%+ 0.50% 0.58% 0.91% 0.65%# 0.27%#
Portfolio turnover rate....... 37% 103% 104% 104% 108% 121%
Net assets at end of period
(in 000's).................. $ 912,337 $ 759,054 $ 564,685 $ 427,507 $ 330,161 $ 319,196
</TABLE>
- ------------
(a) Total return is not annualized.
# At the MainStay VP Series Fund, Inc.'s shareholders meeting on December 14,
1993, the shareholders voted to have the Growth Equity Portfolio assume
certain administrative and operating expenses of the Fund previously borne
by New York Life.
+ Annualized.
* Unaudited.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
116
<PAGE> 117
MAINSTAY VP SERIES FUND, INC.
INDEXED EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
COMMON STOCKS (98.6%)+
SHARES VALUE
-------------------------
<S> <C> <C>
AEROSPACE/DEFENSE (1.4%)
Boeing Co. (The)................ 83,445 $ 3,718,518
General Dynamics Corp........... 10,371 482,252
Lockheed Martin Corp............ 16,150 1,709,881
Northrop Grumman Corp........... 5,535 570,797
Raytheon Co. Class B............ 27,892 1,649,114
Rockwell International Corp..... 16,238 780,439
United Technologies Corp........ 18,946 1,752,505
------------
10,663,506
------------
AIRLINES (0.4%)
AMR Corp. (a)................... 14,955 1,245,004
Delta Air Lines, Inc............ 6,208 802,384
Southwest Airlines Co. ......... 18,383 544,596
US Airways Group, Inc. (a)...... 8,390 664,908
------------
3,256,892
------------
ALUMINUM (0.2%)
Alcan Aluminum Ltd.............. 18,722 517,195
Aluminum Co. of America......... 13,891 915,938
Reynolds Metals Co.............. 5,983 334,674
------------
1,767,807
------------
AUTO PARTS & EQUIPMENT (0.2%)
Cooper Tire & Rubber Co......... 6,469 133,423
Echlin Inc...................... 5,256 257,873
Genuine Parts Co................ 14,715 508,587
Goodyear Tire & Rubber Co.
(The).......................... 13,017 838,783
------------
1,738,666
------------
AUTOMOBILES (1.7%)
Chrysler Corp. ................. 53,432 3,012,229
Ford Motor Co. ................. 100,221 5,913,039
General Motors Corp. ........... 55,223 3,689,587
------------
12,614,855
------------
BEVERAGES--ALCOHOLIC (0.5%)
Anheuser-Busch Cos., Inc........ 40,080 1,891,275
Brown-Forman Corp. Class B...... 5,692 365,711
Coors (Adolph) Co. Class B...... 3,001 102,034
Seagram Co. Ltd. (The).......... 28,588 1,170,321
------------
3,529,341
------------
BEVERAGES--SOFT DRINKS (3.0%)
Coca-Cola Co. (The) (d)......... 203,875 17,431,312
PepsiCo, Inc.................... 123,151 5,072,282
------------
22,503,594
------------
BROADCAST/MEDIA (1.1%)
CBS Corp. (a)................... 59,329 1,883,696
Clear Channel Communications,
Inc. (a)....................... 10,204 1,113,512
Comcast Corp. Special Class A... 30,484 1,237,461
MediaOne Group Inc. (a)......... 50,291 2,209,661
Tele-Communications, Inc. Series
A TCI Group (a)................ 41,893 1,610,262
------------
8,054,592
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
-------------------------
<S> <C> <C>
BUILDING MATERIALS (0.2%)
Masco Corp...................... 13,995 $ 846,697
Owens Corning................... 4,439 181,167
Sherwin-Williams Co. (The)...... 14,361 475,708
------------
1,503,572
------------
CHEMICALS (2.0%)
Air Products & Chemicals,
Inc............................ 19,406 776,240
Dow Chemical Co. (The).......... 18,593 1,797,711
Du Pont (E.I.) De Nemours &
Co............................. 93,275 6,960,647
Eastman Chemical Co............. 6,465 402,446
Goodrich (B.F.) Co. (The)....... 5,965 296,013
Hercules Inc.................... 7,918 325,628
Monsanto Co..................... 49,438 2,762,348
Praxair, Inc.................... 13,022 609,592
Rohm & Haas Co.................. 4,997 519,376
Union Carbide Corp.............. 11,227 599,241
------------
15,049,242
------------
CHEMICALS--DIVERSIFIED (0.3%)
Avery Dennison Corp............. 9,722 522,557
Engelhard Corp.................. 11,947 241,927
FMC Corp. (a)................... 2,854 194,607
PPG Industries, Inc............. 14,643 1,018,604
------------
1,977,695
------------
CHEMICALS--SPECIALTY (0.1%)
Grace (W.R.) & Co. (a).......... 6,268 106,948
Great Lakes Chemical Corp....... 4,926 194,269
Morton International, Inc....... 10,740 268,500
Nalco Chemical Co............... 5,460 191,783
Sigma-Aldrich Corp.............. 8,306 291,748
------------
1,053,248
------------
COMMUNICATION--EQUIPMENT
MANUFACTURERS (3.1%)
Andrew Corp. (a)................ 7,275 131,405
Ascend Communications, Inc.
(a)............................ 15,912 788,639
Bay Networks, Inc. (a).......... 18,279 589,498
Cabletron Systems, Inc. (a)..... 13,061 175,507
Cisco Systems, Inc. (a)......... 84,438 7,773,573
DSC Communications Corp. (a).... 9,694 290,820
General Instrument Corp. (a).... 12,409 337,370
Lucent Technologies Inc......... 108,318 9,010,704
Northern Telecom Ltd............ 42,880 2,433,440
Scientific-Atlanta, Inc......... 6,491 164,709
Tellabs, Inc. (a)............... 14,986 1,073,372
3Com Corp. (a).................. 29,345 900,525
------------
23,669,562
------------
COMPUTER SOFTWARE & SERVICES
(4.5%)
Adobe Systems Inc............... 5,508 233,746
Autodesk, Inc................... 3,806 147,007
Automatic Data Processing,
Inc............................ 24,850 1,810,944
Ceridian Corp. (a).............. 5,935 348,681
Computer Associates
International, Inc............. 45,070 2,504,202
Computer Sciences Corp. (a)..... 12,876 824,064
Equifax Inc..................... 12,198 442,940
First Data Corp................. 36,856 1,227,765
HBO & Co........................ 35,495 1,251,199
Microsoft Corp. (a)(d).......... 203,456 22,049,544
Novell, Inc. (a)................ 29,021 370,018
</TABLE>
- ------------
+ Percentages indicated are based on Portfolio net assets.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
117
<PAGE> 118
INDEXED EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
COMMON STOCKS (CONTINUED)
SHARES VALUE
-------------------------
<S> <C> <C>
COMPUTER SOFTWARE & SERVICES
(Continued)
Oracle Corp. (a)................ 80,401 $ 1,974,850
Parametric Technology Corp.
(a)............................ 22,389 607,301
Shared Medical Systems Corp..... 2,119 155,614
------------
33,947,875
------------
COMPUTER SYSTEMS (3.8%)
Apple Computer, Inc. (a)........ 10,951 314,157
Compaq Computer Corp............ 136,448 3,871,712
Data General Corp. (a).......... 4,008 59,870
Dell Computer Corp. (a)......... 53,187 4,936,418
EMC Corp. (a)................... 41,051 1,839,598
Gateway 2000, Inc. (a).......... 12,884 652,252
Hewlett-Packard Co. ............ 85,567 5,123,324
International Business Machines
Corp........................... 77,819 8,934,594
Seagate Technology, Inc. (a).... 19,954 475,155
Silicon Graphics, Inc. (a)...... 15,585 188,968
Sun Microsystems, Inc. (a)...... 31,295 1,359,377
Unisys Corp. (a)................ 20,782 587,092
------------
28,342,517
------------
CONGLOMERATES (0.2%)
Tenneco Inc..................... 14,059 535,121
Textron Inc..................... 13,545 971,007
------------
1,506,128
------------
CONTAINERS--METAL & GLASS (0.2%)
Ball Corp....................... 2,469 99,223
Crown Cork & Seal Co., Inc...... 10,322 490,295
Owens-Illinois, Inc. (a)........ 12,748 570,473
------------
1,159,991
------------
CONTAINERS--PAPER (0.1%)
Bemis Co., Inc.................. 4,364 178,378
Stone Container Corp. (a)....... 8,182 127,844
Temple-Inland Inc. ............. 4,664 251,273
------------
557,495
------------
COSMETICS (0.9%)
Alberto-Culver Co. Class B...... 4,672 135,488
Avon Products, Inc.............. 10,865 842,037
Gillette Co. (The).............. 92,779 5,259,410
International Flavors &
Fragrances Inc................. 8,873 385,421
------------
6,622,356
------------
DRUGS (5.1%)
Lilly (Eli) & Co................ 91,500 6,044,719
Merck & Co., Inc................ 98,783 13,212,226
Pfizer Inc...................... 107,820 11,718,686
Pharmacia & Upjohn, Inc......... 41,987 1,936,650
Schering-Plough Corp............ 60,621 5,554,399
------------
38,466,680
------------
ELECTRIC POWER COMPANIES (2.4%)
Ameren Corp..................... 11,279 448,340
American Electric Power Co.,
Inc............................ 15,757 714,974
Baltimore Gas & Electric Co..... 12,127 376,695
Carolina Power & Light Co....... 12,400 537,850
Central & South West Corp....... 17,490 470,044
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
-------------------------
<S> <C> <C>
ELECTRIC POWER COMPANIES
(Continued)
Cinergy Corp.................... 13,003 $ 455,105
Consolidated Edison, Inc........ 19,436 895,271
Dominion Resources, Inc......... 16,200 660,150
DTE Energy Co................... 11,986 483,935
Duke Energy Corp................ 29,703 1,759,903
Edison International............ 29,960 885,693
Entergy Corp.................... 20,363 585,436
FirstEnergy Corp................ 18,949 582,682
FPL Group, Inc.................. 14,992 944,496
GPU, Inc........................ 10,415 393,817
Houston Industries Inc.......... 24,406 753,535
Niagara Mohawk Power Corp.
(a)............................ 13,732 205,122
Northern States Power Co........ 12,549 359,215
PacifiCorp...................... 24,416 552,412
PECO Energy Co.................. 18,366 536,058
PG&E Corp....................... 31,510 994,534
PP&L Resources, Inc............. 13,874 314,766
Public Service Enterprise Group
Inc............................ 19,101 657,791
Southern Co. (The).............. 57,567 1,593,886
Texas Utilities Co.............. 23,085 960,913
Unicom Corp..................... 17,856 626,076
------------
17,748,699
------------
ELECTRICAL EQUIPMENT (3.9%)
AMP Inc......................... 18,134 623,356
Emerson Electric Co............. 36,562 2,205,146
General Electric Co. (d)........ 269,024 24,481,184
General Signal Corp............. 3,609 129,924
Grainger (W.W.), Inc............ 8,097 403,332
Honeywell Inc................... 10,475 875,317
Raychem Corp.................... 6,880 203,390
Thomas & Betts Corp............. 4,516 222,413
------------
29,144,062
------------
ELECTRONIC--DEFENSE (0.0%) (b)
EG&G, Inc. ..................... 3,703 111,090
------------
ELECTRONIC--INSTRUMENTATION
(0.1%)
Perkin-Elmer Corp. (The)........ 4,000 248,750
Tektronix, Inc.................. 4,115 145,568
------------
394,318
------------
ELECTRONIC--SEMICONDUCTORS
(2.3%)
Advanced Micro Devices, Inc.
(a)............................ 11,830 201,849
Applied Materials, Inc. (a)..... 30,210 891,195
Intel Corp...................... 140,019 10,378,908
KLA-Tencor Corp. (a)............ 7,180 198,796
LSI Logic Corp. (a)............. 11,613 267,825
Micron Technology, Inc. (a)..... 17,545 435,335
Motorola, Inc................... 49,355 2,594,222
National Semiconductor Corp.
(a)............................ 13,535 178,493
Texas Instruments Inc........... 32,157 1,875,155
------------
17,021,778
------------
ENGINEERING & CONSTRUCTION
(0.1%)
Fluor Corp...................... 6,757 344,607
Foster Wheeler Corp............. 3,385 72,566
------------
417,173
------------
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
118
<PAGE> 119
MAINSTAY VP SERIES FUND, INC.
<TABLE>
<CAPTION>
COMMON STOCKS (CONTINUED)
SHARES VALUE
-------------------------
<S> <C> <C>
ENTERTAINMENT (1.6%)
King World Productions, Inc.
(a)............................ 6,066 $ 154,683
Time Warner Inc................. 48,831 4,171,999
Viacom Inc. Class B (a)......... 29,496 1,718,142
Walt Disney Co. (The)........... 56,305 5,915,544
------------
11,960,368
------------
FINANCIAL--MISCELLANEOUS (3.6%)
American Express Co............. 38,057 4,338,498
American General Corp........... 20,959 1,492,019
Associates First Capital Corp.
Class A........................ 28,506 2,191,399
Capital One Financial Corp...... 5,300 658,194
Fannie Mae...................... 85,601 5,200,261
Franklin Resources Inc.......... 20,801 1,123,254
Freddie Mac..................... 55,995 2,635,265
Green Tree Financial Corp....... 11,060 473,506
MBIA Inc........................ 8,024 600,797
MBNA Corp....................... 41,423 1,366,959
Morgan Stanley, Dean Witter,
Discover & Co.................. 49,588 4,531,104
SLM Holding Corp. .............. 13,800 676,200
SunAmerica Inc.................. 16,039 921,240
Transamerica Corp............... 5,152 593,124
------------
26,801,820
------------
FOOD DISTRIBUTORS (0.2%)
Cardinal Health, Inc............ 9,006 844,312
SUPERVALU Inc................... 4,957 219,967
SYSCO Corp...................... 28,001 717,526
------------
1,781,805
------------
FOODS (2.4%)
Bestfoods....................... 23,864 1,385,604
Campbell Soup Co. .............. 37,545 1,994,578
ConAgra, Inc.................... 39,705 1,258,152
General Mills, Inc.............. 13,062 893,114
Heinz (H.J.) Co................. 30,081 1,688,296
Hershey Foods Corp.............. 11,743 810,267
Kellogg Co...................... 33,849 1,271,453
Quaker Oats Co. (The)........... 11,392 625,848
Ralston-Ralston Purina Group.... 8,857 1,034,608
Sara Lee Corp................... 38,602 2,159,299
Unilever, N.V................... 52,716 4,161,269
Wrigley (Wm.) Jr. Co............ 9,582 939,036
------------
18,221,524
------------
GOLD (0.2%)
Barrick Gold Corp............... 30,701 589,075
Battle Mountain Gold Co......... 18,895 112,189
Homestake Mining Co............. 17,374 180,255
Newmont Mining Corp............. 12,926 305,377
Placer Dome Inc................. 20,639 242,508
------------
1,429,404
------------
HARDWARE & TOOLS (0.1%)
Black & Decker Corp. (The)...... 7,858 479,338
Snap-on Inc..................... 4,883 177,009
Stanley Works (The)............. 7,322 304,320
------------
960,667
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
-------------------------
<S> <C> <C>
HEALTH CARE--DIVERSIFIED (4.5%)
Abbott Laboratories............. 127,444 $ 5,209,273
Allergan, Inc................... 5,424 251,538
American Home Products Corp..... 108,373 5,608,303
Bristol-Myers Squibb Co......... 82,197 9,447,518
Johnson & Johnson............... 111,070 8,191,413
Mallinckrodt Inc................ 5,970 177,234
Warner-Lambert Co............... 67,705 4,697,034
------------
33,582,313
------------
HEALTH CARE--
HMOs (0.2%)
Humana Inc. (a)................. 13,753 428,922
United Healthcare Corp.......... 15,872 1,007,872
------------
1,436,794
------------
HEALTH CARE--MISCELLANEOUS
(0.4%)
ALZA Corp. (a).................. 7,042 304,566
Amgen Inc. (a).................. 20,972 1,371,045
HEALTHSOUTH Corp. (a)........... 33,060 882,289
Manor Care, Inc................. 5,194 199,644
------------
2,757,544
------------
HEAVY DUTY TRUCKS & PARTS (0.3%)
Cummins Engine Co., Inc......... 3,119 159,849
Dana Corp....................... 8,786 470,051
Eaton Corp...................... 5,890 457,948
ITT Industries, Inc............. 9,804 366,424
Navistar International Corp.
(a)............................ 5,627 162,480
PACCAR Inc...................... 6,410 334,923
------------
1,951,675
------------
HOMEBUILDING (0.1%)
Centex Corp..................... 4,906 185,201
Kaufman & Broad Home Corp. ..... 3,181 100,997
Pulte Corp...................... 3,401 101,605
------------
387,803
------------
HOSPITAL MANAGEMENT (0.3%)
Columbia/HCA Healthcare Corp.... 53,118 1,547,062
Tenet Healthcare Corp. (a)...... 25,466 795,812
------------
2,342,874
------------
HOTEL/MOTEL (0.2%)
Harrah's Entertainment, Inc.
(a)............................ 8,331 193,696
Hilton Hotels Corp.............. 20,427 582,169
Marriott International, Inc.
Class A........................ 21,012 680,264
------------
1,456,129
------------
HOUSEHOLD--FURNISHINGS &
APPLIANCES (0.1%)
Armstrong World Industries,
Inc............................ 3,372 227,188
Maytag Corp. ................... 7,828 386,508
Whirlpool Corp.................. 6,208 426,800
------------
1,040,496
------------
HOUSEHOLD PRODUCTS (2.1%)
Clorox Co. (The)................ 8,523 812,881
Colgate-Palmolive Co............ 24,406 2,147,728
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
119
<PAGE> 120
INDEXED EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
COMMON STOCKS (CONTINUED)
SHARES VALUE
-------------------------
<S> <C> <C>
HOUSEHOLD PRODUCTS (Continued)
Fort James Corp................. 18,168 $ 808,476
Kimberly-Clark Corp............. 45,985 2,109,562
Procter & Gamble Co. (The)...... 110,692 10,079,890
------------
15,958,537
------------
HOUSEWARES (0.2%)
Fortune Brands, Inc............. 14,254 547,888
Newell Co....................... 13,137 654,387
Rubbermaid Inc.................. 12,329 409,169
Tupperware Corp................. 5,120 144,000
------------
1,755,444
------------
INSURANCE BROKERS (0.3%)
Aon Corp........................ 13,902 976,616
Marsh & McLennan Cos., Inc...... 21,087 1,274,415
------------
2,251,031
------------
INVESTMENT BANK/ BROKERAGE
(0.6%)
Bear Stearns Cos., Inc. (The)... 9,200 523,250
Lehman Brothers Holdings
Inc. .......................... 9,792 759,492
Merrill Lynch & Co., Inc........ 28,613 2,639,549
Schwab (Charles) Corp. (The).... 22,046 716,495
------------
4,638,786
------------
LEISURE TIME (0.0%) (b)
Brunswick Corp.................. 8,205 203,074
Mirage Resorts, Inc. (a)........ 14,761 314,594
------------
517,668
------------
LIFE INSURANCE (0.5%)
Aetna Inc....................... 12,010 914,261
Conseco, Inc.................... 15,521 725,607
Jefferson-Pilot Corp............ 8,789 509,213
Lincoln National Corp........... 8,431 770,383
Torchmark Corp.................. 11,524 527,223
UNUM Corp....................... 11,437 634,753
------------
4,081,440
------------
MACHINE TOOLS (0.0%) (b)
Cincinnati Milacron Inc......... 3,328 80,912
------------
MACHINERY--DIVERSIFIED (0.7%)
Briggs & Stratton Corp.......... 1,949 72,966
Case Corp. ..................... 6,173 297,847
Caterpillar Inc................. 30,280 1,601,055
Cooper Industries, Inc.......... 9,992 548,936
Deere & Co...................... 20,477 1,082,721
Harnischfeger Industries,
Inc............................ 3,928 111,212
Ingersoll-Rand Co............... 13,674 602,511
NACCO Industries, Inc. Class
A.............................. 708 91,509
Thermo Electron Corp. (a)....... 13,114 448,335
Timken Co. (The)................ 5,163 159,085
------------
5,016,177
------------
MAJOR REGIONAL BANKS (4.3%)
Banc One Corp................... 58,004 3,237,348
Bank of New York Co., Inc.
(The).......................... 31,032 1,883,255
BankBoston Corp................. 24,204 1,346,347
BB&T Corp....................... 11,726 792,971
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
-------------------------
<S> <C> <C>
MAJOR REGIONAL BANKS (Continued)
Comerica Inc.................... 12,981 $ 859,991
Fifth Third Bancorp............. 21,729 1,368,927
Fleet Financial Group, Inc...... 23,454 1,958,409
Huntington Bancshares Inc....... 15,818 529,903
KeyCorp......................... 36,362 1,295,396
Mellon Bank Corp................ 21,519 1,498,260
Mercantile Bancorp Inc.......... 11,039 556,090
National City Corp.............. 27,058 1,921,118
Northern Trust Corp............. 9,183 700,204
Norwest Corp.................... 62,539 2,337,395
PNC Bank Corp................... 24,907 1,340,308
Republic New York Corp.......... 8,885 559,200
State Street Corp............... 13,267 922,057
Summit Bancorp.................. 14,703 698,393
SunTrust Banks, Inc............. 17,353 1,411,016
Synovus Financial Corp.......... 21,772 517,085
U.S. Bancorp.................... 61,389 2,639,727
Wachovia Corp................... 16,932 1,430,754
Wells Fargo & Co................ 7,131 2,631,339
------------
32,435,493
------------
MANUFACTURED HOUSING (0.0%) (b)
Fleetwood Enterprises, Inc...... 2,971 118,840
------------
MANUFACTURING--DIVERSIFIED
(1.2%)
Aeroquip-Vickers, Inc........... 2,340 136,598
AlliedSignal Inc................ 46,686 2,071,691
Crane Co........................ 3,826 185,800
Dover Corp...................... 18,365 629,001
Illinois Tool Works Inc......... 20,522 1,368,561
Johnson Controls, Inc........... 6,954 396,813
Millipore Corp.................. 3,547 96,656
Pall Corp....................... 10,286 210,863
Parker-Hannifin Corp............ 9,087 346,442
Sealed Air Corp. (a)............ 6,844 251,517
Tyco International Ltd.......... 48,121 3,031,623
------------
8,725,565
------------
MEDICAL PRODUCTS (1.0%)
Bard (C.R.), Inc................ 4,711 179,312
Bausch & Lomb Inc............... 4,550 228,069
Baxter International Inc........ 23,144 1,245,437
Becton, Dickinson & Co.......... 10,056 780,597
Biomet, Inc..................... 9,198 304,109
Boston Scientific Corp. (a)..... 16,076 1,151,444
Guidant Corp.................... 12,425 886,058
Medtronic, Inc.................. 38,771 2,471,651
St. Jude Medical, Inc. (a)...... 6,919 254,706
United States Surgical Corp..... 6,290 286,981
------------
7,788,364
------------
METALS--MISCELLANEOUS (0.1%)
ASARCO Inc...................... 3,276 72,891
Cyprus Amax Minerals Co......... 7,727 102,383
Freeport-McMoRan Copper & Gold
Inc. Class B................... 14,906 226,385
Inco Ltd........................ 13,795 187,957
Phelps Dodge Corp............... 4,882 279,189
------------
868,805
------------
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
120
<PAGE> 121
MAINSTAY VP SERIES FUND, INC.
<TABLE>
<CAPTION>
COMMON STOCKS (CONTINUED)
SHARES VALUE
-------------------------
<S> <C> <C>
MISCELLANEOUS (1.3%)
AirTouch Communications, Inc.
(a)............................ 47,294 $ 2,763,743
American Greetings Corp. Class
A.............................. 5,991 305,167
Archer-Daniels-Midland Co....... 47,070 911,981
Corning Inc..................... 19,178 666,436
Harcourt General, Inc........... 5,818 346,171
Harris Corp..................... 6,591 294,535
Jostens, Inc.................... 3,018 72,809
Minnesota Mining & Manufacturing
Co............................. 33,457 2,749,747
Nextel Communication, Inc.
Class A (a).................... 22,634 563,021
Pioneer Hi-Bred International,
Inc............................ 20,141 833,334
TRW Inc......................... 10,167 555,372
------------
10,062,316
------------
MONEY CENTER BANKS (4.2%)
BankAmerica Corp................ 56,357 4,871,358
Bankers Trust Corp.............. 8,089 938,830
Chase Manhattan Bank (The)...... 70,501 5,322,825
Citicorp........................ 37,266 5,561,951
First Chicago NBD Corp.......... 23,743 2,104,223
First Union Corp................ 80,033 4,661,922
Morgan (J.P.) & Co., Inc........ 14,697 1,721,386
NationsBank Corp................ 79,082 6,049,773
------------
31,232,268
------------
MULTI-LINE INSURANCE (2.2%)
American International Group,
Inc............................ 57,770 8,434,420
CIGNA Corp...................... 17,780 1,226,820
Hartford Financial Services
Group, Inc. (The).............. 9,771 1,117,558
Travelers Group Inc............. 94,952 5,756,465
------------
16,535,263
------------
NATURAL GAS DISTRIBUTORS &
PIPELINES (0.7%)
Coastal Corp. (The)............. 8,740 610,161
Columbia Energy Group........... 6,908 384,285
Consolidated Natural Gas Co..... 7,873 463,523
Eastern Enterprises............. 1,670 71,601
Enron Corp...................... 27,086 1,464,337
NICOR Inc....................... 3,954 158,654
ONEOK, Inc...................... 2,512 100,166
Peoples Energy Corp............. 2,860 110,468
Sempra Energy (a)............... 20,540 569,988
Sonat Inc....................... 9,083 350,831
Williams Cos., Inc. (The)....... 34,980 1,180,575
------------
5,464,589
------------
OFFICE EQUIPMENT & SUPPLIES
(0.5%)
Moore Corp. Ltd................. 7,333 97,162
Pitney Bowes Inc................ 22,535 1,084,497
Xerox Corp...................... 27,149 2,759,017
------------
3,940,676
------------
OIL & GAS DRILLING (0.0%) (b)
Helmerich & Payne, Inc.......... 4,094 91,091
Rowan Cos., Inc. (a)............ 7,213 140,203
------------
231,294
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
-------------------------
<S> <C> <C>
OIL--EXPLORATION & PRODUCTION
(0.2%)
Anadarko Petroleum Corp......... 4,958 $ 333,116
Apache Corp..................... 8,087 254,740
Burlington Resources Inc........ 14,559 626,947
Oryx Energy Co. (a)............. 8,677 191,979
Union Pacific Resources Group,
Inc............................ 20,687 363,315
------------
1,770,097
------------
OIL--INTEGRATED DOMESTIC (0.9%)
Amerada Hess Corp............... 7,513 408,050
Ashland Inc..................... 6,170 318,526
Atlantic Richfield Co........... 26,474 2,068,281
Kerr-McGee Corp................. 3,894 225,365
Occidental Petroleum Corp....... 30,340 819,180
Pennzoil Co..................... 3,890 196,931
Phillips Petroleum Co........... 21,539 1,037,911
Sun Co., Inc.................... 7,772 301,651
Unocal Corp..................... 19,958 713,499
USX-Marathon Group.............. 23,920 820,755
------------
6,910,149
------------
OIL--INTEGRATED INTERNATIONAL
(5.3%)
Amoco Corp...................... 79,291 3,300,488
Chevron Corp.................... 54,043 4,488,947
Exxon Corp...................... 202,073 14,410,331
Mobil Corp...................... 64,640 4,953,040
Royal Dutch Petroleum Co........ 177,060 9,705,101
Texaco Inc...................... 44,728 2,669,702
------------
39,527,609
------------
OIL--WELL EQUIPMENT & SERVICES
(0.7%)
Baker Hughes Inc................ 14,013 484,324
Dresser Industries, Inc......... 14,442 636,351
Halliburton Co.................. 21,721 967,942
McDermott International, Inc.... 4,963 170,913
Schlumberger Ltd................ 41,231 2,816,593
Western Atlas Inc. (a).......... 4,510 382,786
------------
5,458,909
------------
PAPER & FOREST PRODUCTS (0.6%)
Boise Cascade Corp.............. 4,600 150,650
Champion International Corp..... 7,915 389,319
Georgia-Pacific Corp............ 7,664 451,697
International Paper Co.......... 25,362 1,090,566
Louisiana-Pacific Corp.......... 9,051 165,181
Mead Corp. (The)................ 8,614 273,495
Potlatch Corp................... 2,389 100,338
Union Camp Corp................. 5,695 282,614
Westvaco Corp. ................. 8,441 238,458
Weyerhaeuser Co................. 16,430 758,861
Willamette Industries, Inc...... 9,152 292,864
------------
4,194,043
------------
PERSONAL LOANS (0.4%)
Beneficial Corp................. 4,420 677,088
Countrywide Credit Industries,
Inc............................ 8,925 452,944
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
121
<PAGE> 122
INDEXED EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
COMMON STOCKS (CONTINUED)
SHARES VALUE
-------------------------
<S> <C> <C>
PERSONAL LOANS (Continued)
Household International, Inc.... 26,572 $ 1,321,957
Providian Financial Corp........ 7,838 615,773
------------
3,067,762
------------
PHOTOGRAPHY/IMAGING (0.3%)
Eastman Kodak Co................ 26,614 1,944,485
IKON Office Solutions, Inc...... 11,202 163,129
Polaroid Corp................... 3,709 131,901
------------
2,239,515
------------
POLLUTION CONTROL (0.3%)
Browning-Ferris Industries,
Inc............................ 15,212 528,617
Waste Management, Inc........... 39,208 1,372,280
------------
1,900,897
------------
PROPERTY--CASUALTY INSURANCE
(1.3%)
Allstate Corp. (The)............ 34,686 3,175,937
Chubb Corp. (The)............... 13,955 1,121,633
Cincinnati Financial Corp....... 13,797 529,460
General Re Corp................. 6,258 1,586,403
Loews Corp. .................... 9,507 828,297
MGIC Investment Corp............ 9,361 534,162
Progressive Corp. (The)......... 5,962 840,642
SAFECO Corp..................... 11,628 528,347
St. Paul Cos., Inc. (The)....... 19,418 816,770
------------
9,961,651
------------
PUBLISHING (0.1%)
McGraw-Hill Cos., Inc. (The).... 8,156 665,224
Meredith Corp................... 4,352 204,272
------------
869,496
------------
PUBLISHING--NEWSPAPER (0.6%)
Dow Jones & Co., Inc............ 7,551 420,968
Gannett Co., Inc................ 23,424 1,664,568
Knight-Ridder, Inc.............. 6,564 361,430
New York Times Co. (The) Class
A.............................. 7,950 630,037
Times Mirror Co. (The) Class
A.............................. 7,305 459,302
Tribune Co...................... 10,141 697,828
------------
4,234,133
------------
RAILROADS (0.5%)
Burlington Northern Santa Fe
Corp........................... 13,044 1,280,758
CSX Corp........................ 18,103 823,686
Norfolk Southern Corp........... 31,291 932,863
Union Pacific Corp.............. 20,392 899,797
------------
3,937,104
------------
RESTAURANTS (0.6%)
Darden Restaurants, Inc......... 11,819 187,627
McDonald's Corp................. 56,822 3,920,718
Tricon Global Restaurants, Inc.
(a)............................ 12,502 396,157
Wendy's International, Inc...... 10,846 254,881
------------
4,759,383
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
-------------------------
<S> <C> <C>
RETAIL STORES--APPAREL (0.4%)
Gap, Inc. (The)................. 32,510 $ 2,003,429
Limited Inc. (The).............. 18,796 622,618
TJX Cos., Inc. (The)............ 26,548 640,471
------------
3,266,518
------------
RETAIL STORES--DEPARTMENT (0.6%)
Dillard's, Inc. Class A......... 8,907 369,084
Federated Department Stores,
Inc. (a)....................... 17,357 934,024
May Department Stores Co.
(The).......................... 19,014 1,245,417
Mercantile Stores Co., Inc...... 3,065 241,943
Nordstrom, Inc.................. 6,376 492,546
Penney (J.C.) Co., Inc.......... 20,649 1,493,181
------------
4,776,195
------------
RETAIL STORES--DRUGS (0.3%)
Longs Drug Stores Corp.......... 3,139 90,639
Rite Aid Corp................... 21,252 798,278
Walgreen Co..................... 41,008 1,694,143
------------
2,583,060
------------
RETAIL STORES-- FOOD (0.5%)
Albertson's, Inc................ 20,201 1,046,664
American Stores Co.............. 22,488 543,929
Giant Food Inc. Class A......... 4,989 214,839
Great Atlantic & Pacific Tea
Co., Inc. (The)................ 3,154 104,279
Kroger Co. (The) (a)............ 21,118 905,434
Winn-Dixie Stores, Inc.......... 12,272 628,173
------------
3,443,318
------------
RETAIL STORES--GENERAL
MERCHANDISE (2.1%)
Dayton Hudson Corp.............. 36,035 1,747,697
Kmart Corp. (a)................. 40,331 776,372
Sears, Roebuck & Co............. 32,266 1,970,243
Wal-Mart Stores, Inc............ 185,454 11,266,330
------------
15,760,642
------------
RETAIL STORES--SPECIALTY (1.5%)
AutoZone, Inc. (a).............. 12,563 401,231
Circuit City Stores, Inc.-
Circuit City Group............. 8,169 382,922
Consolidated Stores Corp. (a)... 8,909 322,951
Costco Cos., Inc. (a)........... 17,782 1,121,377
CVS Corp........................ 31,760 1,236,655
Home Depot, Inc. (The).......... 60,683 5,040,482
Lowe's Cos., Inc................ 28,898 1,172,175
Pep Boys-Manny, Moe & Jack
(The).......................... 5,254 99,498
Tandy Corp...................... 8,378 444,558
Toys "R" Us, Inc. (a)........... 23,088 544,011
Venator Group Inc. (a).......... 11,101 212,306
------------
10,978,166
------------
SAVINGS & LOANS (0.3%)
Ahmanson (H.F.) & Co............ 9,053 642,763
Golden West Financial Corp...... 4,657 495,097
Washington Mutual, Inc.......... 31,961 1,388,284
------------
2,526,144
------------
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
122
<PAGE> 123
MAINSTAY VP SERIES FUND, INC.
<TABLE>
<CAPTION>
COMMON STOCKS (CONTINUED)
SHARES VALUE
-------------------------
<S> <C> <C>
SHOES (0.2%)
NIKE, Inc. Class B.............. 23,811 $ 1,159,298
Reebok International Ltd. (a)... 4,597 127,279
------------
1,286,577
------------
SPECIALIZED SERVICES (0.8%)
Block (H&R), Inc................ 8,657 364,676
Cendant Corp. (a)............... 70,276 1,467,012
Cognizant Corp.................. 13,329 839,727
Dun & Bradstreet Corp. (The).... 14,066 508,134
Ecolab Inc...................... 10,653 330,243
Interpublic Group of Cos., Inc.
(The).......................... 11,215 680,610
Laidlaw Inc..................... 27,116 330,476
National Service Industries,
Inc............................ 3,510 178,571
Omnicom Group Inc............... 14,118 704,135
Service Corp. International..... 21,186 908,350
------------
6,311,934
------------
SPECIALTY PRINTING (0.1%)
Deluxe Corp..................... 6,672 238,941
Donnelley (R.R.) & Sons Co...... 11,674 534,086
------------
773,027
------------
STEEL (0.2%)
Allegheny Teledyne Inc.......... 16,129 368,950
Armco Inc. (a).................. 8,919 56,859
Bethlehem Steel Corp. (a)....... 10,562 131,365
Nucor Corp...................... 7,242 333,132
USX Corp.-U.S. Steel Group,
Inc............................ 7,124 235,092
Worthington Industries, Inc..... 8,027 120,907
------------
1,246,305
------------
TELECOMMUNICATIONS--LONG
DISTANCE (2.4%)
AT&T Corp....................... 134,144 7,662,976
MCI Communications Corp......... 59,864 3,479,595
Sprint Corp..................... 35,598 2,509,659
WorldCom, Inc. (a).............. 85,238 4,128,716
------------
17,780,946
------------
TELEPHONE (3.9%)
ALLTEL Corp..................... 22,171 1,030,951
Ameritech Corp.................. 90,835 4,076,221
Bell Atlantic Corp.............. 128,010 5,840,456
BellSouth Corp.................. 81,750 5,487,469
Frontier Corp................... 14,100 444,150
GTE Corp........................ 79,540 4,424,413
SBC Communications Inc.......... 151,885 6,075,400
US West Communications Group.... 41,395 1,945,578
------------
29,324,638
------------
TEXTILES--APPAREL MANUFACTURERS
(0.2%)
Fruit of the Loom, Inc. Class A
(a)............................ 6,041 200,486
Liz Claiborne, Inc.............. 5,456 285,076
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
-------------------------
<S> <C> <C>
TEXTILES--APPAREL MANUFACTURERS
(Continued)
Russell Corp.................... 3,018 $ 91,106
Springs Industries, Inc. Class
A.............................. 1,634 75,368
Valley Forge Corp............... 10,042 516,535
------------
1,168,571
------------
TOBACCO (1.1%)
Philip Morris Cos. Inc.......... 200,593 7,898,349
UST Inc......................... 15,251 411,777
------------
8,310,126
------------
TOYS (0.2%)
Hasbro, Inc..................... 10,996 432,280
Mattel, Inc..................... 24,285 1,027,559
------------
1,459,839
------------
TRANSPORTATION--MISCELLANEOUS
(0.1%)
FDX Corp. (a)................... 12,049 756,075
Ryder System, Inc............... 6,109 192,815
------------
948,890
------------
Total Common Stocks
(Cost $539,295,682)............ 741,413,062(c)
------------
SHORT-TERM
INVESTMENTS (1.6%)
PRINCIPAL
AMOUNT
----------
COMMERCIAL PAPER (0.8%)
Bridgestone/Firestone, Inc.
6.50%, due 7/1/98 (d).......... $6,300,000 6,300,000
------------
Total Commercial Paper
(Cost $6,300,000).............. 6,300,000
------------
U.S. GOVERNMENT (0.8%)
United States Treasury Bills
4.82%, due 8/6/98 (d).......... 3,000,000 2,985,840
4.86%, due 8/13/98 (d)......... 3,000,000 2,982,606
------------
Total U.S. Government
(Cost $5,968,446).............. 5,968,446
------------
Total Short-Term Investments
(Cost $12,268,446)............. 12,268,446
------------
Total Investments
(Cost $551,564,128) (f)........ 100.2% 753,681,508(g)
Liabilities in Excess of
Cash and Other Assets.......... (0.2) (1,414,809)
---------- -----------
Net Assets...................... 100.0% $752,266,699
========== ===========
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
123
<PAGE> 124
INDEXED EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
SHORT POSITIONS (-0.0%) (b)
SHARES VALUE
--------------------------
<S> <C> <C>
COMMON STOCKS (-0.0%) (b)
ADVERTISING/ MARKETING (-0.0%)
(b)
R.H. Donnelley Corp. W/I (e).... (14,066) $ (43,077)
------------
BROADCAST/MEDIA (-0.0%) (b)
Nielsen Media Research, Inc. W/I
(e)............................ (13,329) (58,315)
------------
Total Short Positions
(Proceeds $111,837)............ $ (101,392)
============
FUTURES CONTRACTS (0.0%) (b)
<CAPTION>
UNREALIZED
CONTRACTS APPRECIATION/
LONG (DEPRECIATION)(h)
--------------------------
<S> <C> <C>
Standard & Poor's 500
September 1998................. 36 $ 143,898
Mini September 1998............ 3 (821)
------------
Total Futures Contracts
(Settlement Value $10,458,450)
(c)............................ $ 143,077
============
</TABLE>
- ------------
(a) Non-income producing security.
(b) Less than one tenth of a percent.
(c) The combined market value of common stocks and settlement value of Standard
& Poor's 500 Index futures contracts represents 99.9% of net assets.
(d) Segregated as collateral for futures contracts.
(e) W/I (when-issued security)--this security is a commitment by the Portfolio
to sell at a future settlement date.
(f) The cost for Federal income tax purposes is $551,640,395.
(g) At June 30, 1998 net unrealized appreciation was $201,939,721, based on cost
for Federal income tax purposes. This consisted of aggregate gross
unrealized appreciation for all investments on which there was an excess of
market value over cost of $207,904,936 and aggregate gross unrealized
depreciation for all investments on which there was an excess of cost over
market value of $5,965,215.
(h) Represents the difference between the value of the contracts at the time
they were opened and the value at June 30, 1998.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
124
<PAGE> 125
MAINSTAY VP SERIES FUND, INC.
INDEXED EQUITY PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
As of June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investment in securities, at value
(identified cost $551,564,128)......... $753,681,508
Receivables:
Investment securities sold............. 12,854,948
Fund shares sold....................... 1,084,141
Dividends and interest................. 762,732
------------
Total assets..................... 768,383,329
------------
LIABILITIES:
Securities sold short (proceeds
$111,837).............................. 101,392
Payables:
Investment securities purchased........ 10,448,591
Fund shares redeemed................... 5,036,078
Administrator.......................... 118,139
Custodian.............................. 92,481
Adviser................................ 59,069
Directors.............................. 145
Accrued expenses......................... 181,194
Variation margin payable on futures
contracts.............................. 79,541
------------
Total liabilities................ 16,116,630
------------
Net assets applicable to outstanding
shares................................. $752,266,699
============
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.01 per
share) 50 million shares authorized.... $ 313,656
Additional paid-in capital............... 539,852,107
Accumulated undistributed net investment
income................................. 4,313,172
Accumulated undistributed net realized
gain on investments.................... 5,516,862
Net unrealized appreciation on
investments and futures................ 202,270,902
------------
Net assets applicable to outstanding
shares................................. $752,266,699
============
Shares of capital stock outstanding...... 31,365,559
============
Net asset value per share outstanding.... $ 23.98
============
</TABLE>
STATEMENT OF OPERATIONS
For the six months ended June 30, 1998 (Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Income:
Dividends (a).......................... $ 4,292,066
Interest............................... 1,149,646
------------
Total income..................... 5,441,712
------------
Expenses:
Administration......................... 612,589
Advisory............................... 306,294
Shareholder communication.............. 100,366
Custodian.............................. 42,548
Professional........................... 31,997
Directors.............................. 17,549
Portfolio pricing...................... 1,153
Miscellaneous.......................... 16,044
------------
Total expenses................... 1,128,540
------------
Net investment income.................... 4,313,172
------------
REALIZED AND UNREALIZED GAIN ON
INVESTMENTS:
Net realized gain from:
Securities transactions................ 3,032,781
Futures transactions................... 2,783,293
------------
Net realized gain on investments......... 5,816,074
------------
Net change in unrealized appreciation on
investments:
Securities transactions................ 85,702,433
Futures transactions................... 33,685
------------
Net unrealized gain on investments....... 85,736,118
------------
Net realized and unrealized gain on
investments............................ 91,552,192
------------
Net increase in net assets resulting from
operations............................. $ 95,865,364
============
- ------------
(a) Dividends recorded net of foreign withholding taxes
in the amount of $32,844.
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
125
<PAGE> 126
INDEXED EQUITY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 1998 (Unaudited)
and the year ended December 31, 1997
<TABLE>
<CAPTION>
1998 1997
---------------------------
<S> <C> <C>
INCREASE IN NET ASSETS:
Operations:
Net investment income..................................... $ 4,313,172 $ 6,190,031
Net realized gain on investments.......................... 5,816,074 15,123,092
Net change in unrealized appreciation on investments and
futures................................................. 85,736,118 72,131,454
------------ ------------
Net increase in net assets resulting from operations...... 95,865,364 93,444,577
------------ ------------
Dividends and distributions to shareholders:
From net investment income................................ (32,358) (6,158,063)
From net realized gain on investments..................... (5,518,941) (11,301,944)
------------ ------------
Total dividends and distributions to shareholders....... (5,551,299) (17,460,007)
------------ ------------
Capital share transactions:
Net proceeds from sale of shares.......................... 185,849,951 184,972,008
Net asset value of shares issued to shareholders in
reinvestment of dividends and distributions............. 5,551,299 17,460,007
------------ ------------
191,401,250 202,432,015
Cost of shares redeemed................................... (26,220,897) (5,588,851)
------------ ------------
Increase in net assets derived from capital share
transactions............................................ 165,180,353 196,843,164
------------ ------------
Net increase in net assets.................................. 255,494,418 272,827,734
NET ASSETS:
Beginning of period......................................... 496,772,281 223,944,547
------------ ------------
End of period............................................... $752,266,699 $496,772,281
============ ============
Accumulated undistributed net investment income at end of
period.................................................... $ 4,313,172 $ 32,358
============ ============
</TABLE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(Selected Per Share Data and Ratios)
<TABLE>
<CAPTION>
JANUARY 29,
SIX MONTHS 1993 (a)
ENDED THROUGH
JUNE 30, YEAR ENDED DECEMBER 31 DECEMBER 31,
1998* 1997 1996 1995 1994 1993
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of
period............................. $ 20.58 $ 16.10 $ 13.53 $ 10.38 $ 10.58 $ 10.00
----------- ---------- ---------- ---------- ---------- -----------
Net investment income................ 0.14 0.27 0.24 0.27 0.24 0.19
Net realized and unrealized gain
(loss) on investments.............. 3.45 4.99 2.79 3.55 (0.15) 0.67
----------- ---------- ---------- ---------- ---------- -----------
Total from investment operations..... 3.59 5.26 3.03 3.82 0.09 0.86
----------- ---------- ---------- ---------- ---------- -----------
Less dividends and distributions:
From net investment income......... (0.00)(b) (0.27) (0.24) (0.28) (0.24) (0.19)
From net realized gain
on investments................... (0.19) (0.51) (0.22) (0.39) (0.05) (0.08)
In excess of net realized gain on
investments...................... -- -- -- -- -- (0.01)
----------- ---------- ---------- ---------- ---------- -----------
Total dividends and distributions.... (0.19) (0.78) (0.46) (0.67) (0.29) (0.28)
----------- ---------- ---------- ---------- ---------- -----------
Net asset value at end of period..... $ 23.98 $ 20.58 $ 16.10 $ 13.53 $ 10.38 $ 10.58
=========== ========== ========== ========== ========== ===========
Total investment return (c).......... 17.49% 32.84% 22.42% 36.89% 0.76% 8.53%
Ratios (to average net assets)/
Supplemental Data:
Net investment income.............. 1.41%+ 1.75% 2.14% 2.52% 2.61% 2.54%+
Net expenses....................... 0.38%+ 0.39% 0.47% 0.47% 0.47% 0.47%+
Expenses (before reimbursement).... 0.38%+ 0.39% 0.50% 0.62% 0.68% 0.96%+
Portfolio turnover rate.............. 1% 5% 3% 5% 8% 7%
Net assets at end of period (in
000's)............................. $ 752,267 $ 496,772 $ 223,945 $ 105,171 $ 63,164 $ 43,081
</TABLE>
- ------------
(a) Commencement of Operations.
(b) Less than one cent per share.
(c) Total return is not annualized.
+ Annualized.
* Unaudited.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
126
<PAGE> 127
MAINSTAY VP SERIES FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1-- Organization and Business:
- --------------------------------------------------------------------------------
MainStay VP Series Fund, Inc. (the "Company") was incorporated under
Maryland law on June 3, 1983. The Company is registered under the Investment
Company Act of 1940, as amended, ("Investment Company Act") as an open-end
diversified management investment company. Convertible Portfolio, which
commenced operations on October 1, 1996, High Yield Corporate Bond,
International Equity and Value Portfolios, which commenced operations on May 1,
1995, Capital Appreciation, Cash Management, Government, Total Return and
Indexed Equity Portfolios, which commenced operations on January 29, 1993 and
Bond and Growth Equity Portfolios, which commenced operations on January 23,
1984, (the "Funds"; each separately a "Portfolio") are separate portfolios of
the Company. Shares of the Funds are currently offered only to New York Life
Insurance and Annuity Corporation ("NYLIAC"), a wholly owned subsidiary of New
York Life Insurance Company ("New York Life"). NYLIAC allocates shares of the
Funds to, among others, New York Life Insurance and Annuity Corporation's
Corporate Sponsored Variable Universal Life Separate Account-I. The Separate
Account is used to fund flexible premium corporate sponsored variable life
insurance policies.
The investment objectives for each of the Portfolios of the Company are as
follows:
Capital Appreciation: to seek long-term growth of capital.
Cash Management: to seek as high a level of current income as is considered
consistent with the preservation of capital and liquidity.
Convertible: to seek capital appreciation together with current income.
Government: to seek a high level of current income, consistent with safety of
principal.
High Yield Corporate Bond: to maximize current income through investment in a
diversified portfolio of high yield, high risk debt securities which are
ordinarily in the lower rating categories of recognized rating agencies.
International Equity: to seek long-term growth of capital by investing in a
portfolio consisting primarily of non-U.S. equity securities.
Total Return: to realize current income consistent with reasonable opportunity
for future growth of capital and income.
Value: to realize maximum long-term total return from a combination of capital
growth and income.
Bond: to seek the highest income over the long term consistent with
preservation of principal.
Growth Equity: to seek long-term growth of capital with income as a secondary
consideration.
Indexed Equity: 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.
There are certain risks involved in investing in foreign securities that are in
addition to the usual risks inherent in domestic instruments. These risks
include those resulting from future adverse political and economic developments
and possible imposition of currency exchange blockages or other foreign
governmental laws or restrictions.
127
<PAGE> 128
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
NOTE 2--Significant Accounting Policies:
- --------------------------------------------------------------------------------
The following is a summary of significant accounting policies followed by
the Company:
(A)
VALUATION OF FUND SHARES. The net asset value per share of each Portfolio is
calculated on each day the New York Stock Exchange (the "Exchange") is open for
trading as of the close of regular trading on the Exchange. The net asset value
per share is calculated for each Portfolio by dividing the current market value
(amortized cost, in the case of Cash Management Portfolio) of the Portfolio's
total assets, less liabilities, by the total number of outstanding shares of
that Portfolio.
(B)
SECURITIES VALUATION. Portfolio securities of Cash Management Portfolio are
valued at amortized cost, which approximates market value. The amortized cost
method involves valuing a security at its cost on the date of purchase and
thereafter assuming a constant amortization to maturity of the difference
between such cost and the value on maturity date.
Securities of each of the other Portfolios are stated at value determined (a) by
appraising common and preferred stocks which are traded on the Exchange at the
last sale price on that day or, if no sale occurs, at the mean between the
closing bid and asked prices, (b) by appraising common and preferred stocks
traded on other United States national securities exchanges or foreign
securities exchanges as nearly as possible in the manner described in (a) by
reference to their principal exchange, including the National Association of
Securities Dealers National Market System, (c) by appraising over-the-counter
securities quoted on the National Association of Securities Dealers NASDAQ
system (but not listed on the National Market System) at the bid price supplied
through such system, (d) by appraising over-the-counter securities not quoted on
the National Association of Securities Dealers NASDAQ system and securities
listed or traded on certain foreign exchanges whose operations are similar to
the U.S. over-the-counter market, at prices supplied by the pricing agent or
brokers selected by the Adviser if these prices are deemed to be representative
of market values at the regular close of business of the Exchange, (e) by
appraising debt securities at prices supplied by a pricing agent selected by the
Adviser, whose prices reflect broker/dealer supplied valuations and electronic
data processing techniques if those prices are deemed by the Adviser to be
representative of market values at the regular close of business of the
Exchange, (f) by appraising options and futures contracts at the last sale price
on the market where such options or futures contracts are principally traded,
and (g) by appraising all other securities and other assets, including debt
securities for which prices are supplied by a pricing agent but are not deemed
by the Adviser to be representative of market values, but excluding money market
instruments with a remaining maturity of sixty days or less and including
restricted securities and securities for which no market quotations are
available, at fair value in accordance with procedures approved by the
Directors. Short-term securities which mature in more than 60 days are valued at
current market quotations. Short-term securities which mature in 60 days or less
are valued at amortized cost if their term to maturity at purchase was 60 days
or less, or by amortizing the difference between market value on the 61st day
prior to maturity and value on maturity date if their original term to maturity
at purchase exceeded 60 days.
Events affecting the values of certain portfolio securities that occur between
the close of trading on the principal market for such securities (foreign
exchanges and over-the-counter markets) and the regular close of the Exchange
will not be reflected in the Portfolios' calculations of net asset values unless
the Adviser believes that the particular event would materially affect net asset
value, in which case an adjustment would be made.
(C)
FORWARD FOREIGN CURRENCY CONTRACTS. A forward foreign currency contract is an
agreement to buy or sell currencies of different countries on a specified future
date at a specified rate. During the period the forward contract is open,
changes in the value of the contract are recognized as unrealized gains or
losses by "marking to market" such contract on a daily basis to
128
<PAGE> 129
MAINSTAY VP SERIES FUND, INC.
reflect the market value of the contract at the end of each day's trading. When
the forward contract is closed, the Portfolio records a realized gain or loss
equal to the difference between the proceeds from (or cost of) the closing
transaction and the Portfolio's basis in the contract. The High Yield Corporate
Bond and International Equity Portfolios enter into forward foreign currency
contracts in order to hedge their foreign currency denominated investments and
receivables and payables against adverse movements in future foreign exchange
rates.
The use of forward contracts involves, to varying degrees, elements of market
risk in excess of the amount recognized in the statement of assets and
liabilities. The contract amount reflects the extent of the Portfolio's
involvement in these financial instruments. Risks arise from the possible
movements in the foreign exchange rates underlying these instruments. The
unrealized appreciation (depreciation) on forward contracts reflects the
Portfolio's exposure at period-end to credit loss in the event of a
counterparty's failure to perform its obligations.
HIGH YIELD CORPORATE BOND PORTFOLIO
Forward foreign currency contracts open at June 30, 1998:
<TABLE>
<CAPTION>
CONTRACT CONTRACT UNREALIZED
AMOUNT AMOUNT APPRECIATION/
SOLD PURCHASED (DEPRECIATION)
------------------ ------------------ --------------
<S> <C> <C> <C>
FOREIGN CURRENCY SALE CONTRACTS
- --------------------------------------------------------
Deutsche Mark vs. U.S. Dollar, expiring 8/24/98......... DM 360,000 $ 200,222 $ 103
Pound Sterling vs. U.S. Dollar, expiring 9/9/98......... L 4,885,700 $ 7,995,326 (123,759)
--------------
Net unrealized depreciation on forward foreign currency
contracts............................................. $ (123,656)
==============
</TABLE>
INTERNATIONAL EQUITY PORTFOLIO
Forward foreign currency contracts open at June 30, 1998:
<TABLE>
<CAPTION>
CONTRACT CONTRACT UNREALIZED
AMOUNT AMOUNT APPRECIATION/
SOLD PURCHASED (DEPRECIATION)
------------------ ------------------ --------------
<S> <C> <C> <C>
FOREIGN CURRENCY SALE CONTRACTS
- --------------------------------------------------------
Australian Dollar vs. U.S. Dollar, expiring 7/10/98..... A$ 471,750 $ 279,040 $ (13,159)
Deutsche Mark vs. Italian Lira, expiring 7/14/98........ DM 1,276,874 IL 1,259,125,000 851
Deutsche Mark vs. Pound Sterling, expiring 7/1/98....... DM 7,153,930 L 2,420,700 75,544
Deutsche Mark vs. Spanish Peseta, expiring 7/14/98...... DM 460,534 SP 39,095,000 116
Deutsche Mark vs. U.S. Dollar, expiring 7/24/98......... DM 5,437,394 $ 3,036,061 19,074
Deutsche Mark vs. U.S. Dollar, expiring 7/24/98......... DM 3,277,000 $ 1,808,649 (9,624)
Italian Lira vs. Deutsche Mark, expiring 7/14/98........ IL 1,259,125,000 DM 1,271,587 (3,782)
Pound Sterling vs. Deutsche Mark, expiring 7/1/98....... L 2,420,700 DM 7,197,163 (51,592)
Pound Sterling vs. Deutsche Mark, expiring 9/30/98...... L 548,800 DM 1,635,424 162
Spanish Peseta vs. Deutsche Mark, expiring 7/14/98...... SP 74,326,000 DM 874,918 (572)
Swiss Franc vs. Deutsche Mark, expiring 9/29/98......... CF 354,000 DM 424,018 673
</TABLE>
<TABLE>
<CAPTION>
CONTRACT CONTRACT
AMOUNT AMOUNT
PURCHASED SOLD
------------------ ------------------
<S> <C> <C> <C>
FOREIGN CURRENCY BUY CONTRACTS
- --------------------------------------------------------
Australian Dollar vs. U.S. Dollar, expiring 7/10/98..... A$ 471,750 $ 287,154 5,045
Deutsche Mark vs. U.S. Dollar, expiring 7/24/98......... DM 477,668 $ 266,140 (1,102)
--------------
Net unrealized appreciation on forward foreign currency
contracts............................................. $ 21,634
==============
</TABLE>
129
<PAGE> 130
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
(D)
FUTURES CONTRACTS. A futures contract is an agreement to purchase or sell a
specified quantity of an underlying instrument at a specified future date and
price, or to make or receive a cash payment based on the value of a securities
index. During the period the futures contract is open, changes in the value of
the contract are recognized as unrealized gains or losses by "marking to market"
such contract on a daily basis to reflect the market value of the contract at
the end of each day's trading. The Portfolio agrees to receive from or pay to
the broker an amount of cash equal to the daily fluctuation in the value of the
contract. Such receipts or payments are known as "variation margin". When the
futures contract is closed, the Portfolio records a realized gain or loss equal
to the difference between the proceeds from (or cost of) the closing transaction
and the Portfolio's basis in the contract. The Indexed Equity Portfolio invests
in stock index futures contracts to gain full exposure to changes in stock
market prices to fulfill its investment objective.
The use of futures contracts involves, to varying degrees, elements of market
risk in excess of the amount recognized in the statement of assets and
liabilities. The contract or notional amounts and variation margin reflect the
extent of the Portfolio's involvement in open futures positions. Risks arise
from the possible imperfect correlation in movements in the price of futures
contracts and the underlying hedged assets, and the possible inability of
counterparties to meet the terms of their contracts. However, the Portfolio's
activities in futures contracts are conducted through regulated exchanges which
minimize counterparty credit risks.
(E)
SECURITY TRANSACTIONS AND INVESTMENT INCOME. The Company records security
transactions on the trade date. Realized gains and losses on security
transactions are determined using the identified cost method and include gains
and losses from repayments of principal on mortgage related and other
asset-backed securities. Dividend income is recognized on the ex-dividend date
and interest income is accrued daily except when collection is not expected.
Discounts on securities purchased for all Portfolios are accreted on the
constant yield method over the life of the respective securities or, if
applicable, over the period to the first call date. Premiums on securities
purchased are not amortized for any Portfolio except Cash Management Portfolio
which amortizes the premium on the constant yield method over the life of the
respective securities.
(F)
FOREIGN CURRENCY INVESTING. The books and records of the Company are recorded in
U.S. dollars. Foreign currency amounts are translated into U.S. dollars at the
mean between the buying and selling rates last quoted by any major U.S. bank at
the following dates:
(i) market value of investment securities, other assets and
liabilities--at the valuation date,
(ii) purchases and sales of investment securities, income and
expenses--at the date of such transactions.
The assets and liabilities of High Yield Corporate Bond and International Equity
Portfolios are presented at the exchange rates and market values at the close of
the period. The changes in net assets arising from fluctuations in exchange
rates and the changes in net assets resulting from changes in market prices are
not separately presented. However, gains and losses from certain foreign
currency transactions are treated as ordinary income for Federal income tax
purposes.
Net realized gain (loss) on foreign currency transactions represents net gains
and losses on forward currency contracts, net currency gains or losses realized
as a result of differences between the amounts of securities sale proceeds or
purchase cost, dividends, interest and withholding taxes recorded on the
Portfolio's books and the U.S. dollar equivalent amount actually received or
paid. Net currency gains or losses from valuing foreign currency denominated
assets and liabilities, other than investments, at period-end exchange rates are
reflected in unrealized foreign exchange gains (losses).
130
<PAGE> 131
MAINSTAY VP SERIES FUND, INC.
INTERNATIONAL EQUITY PORTFOLIO
Foreign currency held at June 30, 1998:
<TABLE>
<CAPTION>
CURRENCY COST VALUE
- ------------------------------------------ ---------- ----------
<S> <C> <C> <C> <C>
Australian Dollar A$ 22,889 $ 1,800 $ 1,803
Belgian Franc BF 802,184 21,723 21,558
Canadian Dollar C$ 2,632,706 1,798,235 1,790,227
Deutsche Mark DM 228,173 127,693 126,412
French Franc FF 219,238 36,583 36,262
Hong Kong Dollar HK 3,877,502 500,419 500,415
Italian Lira IL 20,089,322 11,364 11,310
Japanese Yen Y 4,406,166 31,133 31,746
Netherland Guilder NG 3,891,610 1,911,955 1,913,092
New Zealand Dollar N$ 2,476 1,311 1,285
Norwegian Krone NK 1,386 188 181
Portuguese Escudo PE 5,520,263 30,239 29,887
Pound Sterling L 6,949 11,584 11,595
Spanish Peseta SP 358,392 2,360 2,341
Swiss Franc CF 8,340 5,495 5,498
---------- ----------
$4,492,082 $4,483,612
========== ==========
</TABLE>
(G)
MORTGAGE DOLLAR ROLLS. Certain of the Portfolios enter into mortgage dollar roll
transactions ("MDRs") in which they sell mortgage backed securities ("MBS") from
their portfolio to a counterparty from whom they simultaneously agree to buy a
similar security on a delayed delivery basis. The MDR transactions of the
Portfolios are classified as purchase and sale transactions. The securities sold
in connection with the MDRs are removed from the portfolio and a realized gain
or loss is recognized. The securities the Portfolios have agreed to acquire are
included at market value in the portfolio of investments and liabilities for
such purchase commitments are included as payables for investments purchased.
The Portfolios maintain a segregated account with the custodian containing
securities from the respective portfolios having a value not less than the
repurchase price, including accrued interest. MDR transactions involve certain
risks, including the risk that the MBS returned to the Portfolios at the end of
the roll, while substantially similar, could be inferior to what was initially
sold to the counterparty.
(H)
RESTRICTED SECURITIES. A restricted security is a security which has been
purchased through a private offering and cannot be resold to the general public
without prior registration under the Securities Act of 1933. Disposal of these
securities may involve time-consuming negotiations and expense, and prompt sale
at an acceptable price may be difficult. The issuers of the securities will bear
the costs involved in registration under the Securities Act of 1933 and in
connection with the disposition of such securities. The Convertible, High Yield
Corporate Bond and Total Return Portfolios do not have the right to demand that
such securities be registered. The Portfolios may not invest more than 15%, 10%
and 15%, respectively, of their net assets in illiquid securities.
131
<PAGE> 132
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
CONVERTIBLE PORTFOLIO
Restricted security held at June 30, 1998:
<TABLE>
<CAPTION>
PERCENT
ACQUISITION 6/30/98 OF
SECURITY DATE SHARES COST VALUE NET ASSETS
- ------------------------------------------ ------------------ ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
United International Holdings, Inc.
Convertible Preferred Stock, 4.00%,
Series A................................. 8/1/97 10,400 $ 1,416,743 $ 1,674,400 3.1%
=========== =========== ====
</TABLE>
HIGH YIELD CORPORATE BOND PORTFOLIO
Restricted securities held at June 30, 1998:
<TABLE>
<CAPTION>
PRINCIPAL PERCENT
ACQUISITION AMOUNT/ 6/30/98 OF
SECURITY DATE(S) SHARES COST VALUE NET ASSETS
- ----------------------------------------- ------------------ ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Buenos Aires Embotelladora
Sociedad Anonima
Bank debt
9.479%, due 8/1/98...................... 9/19/97-4/17/98 $ 5,000,000 $ 4,260,000 $ 3,100,000 0.6%
FRI-MRD Corp.
(zero coupon), due 1/24/02
15.00%, beginning 6/30/99............... 8/12/97-4/3/98 $ 5,400,000 4,325,480 4,981,500 0.9
GPA Group, PLC
Preferred Stock......................... 3/7/96-11/20/97 4,750,000 2,353,175 2,707,500 0.5
Kronos International, Inc.
Bank debt
6.34375%, due 9/15/00................... 2/25/97-3/31/98 DM 186,005 101,369 102,277 0.0(b)
Bank debt
6.4375%, due 9/15/99.................... 2/25/97 DM 166,135 90,665 91,351 0.0(b)
Metawave Communications Corp.
13.75%, due 4/28/00(a).................. 4/28/98 $ 2,500,000 2,500,000 2,575,000 0.5
Warrants, expire 4/28/00................ 4/28/98 46,336 0(c) 463 0.0(b)
Paperboard Industries
International, Inc.
Preferred Stock, 5.00%, Class A......... 5/4/98 145,000 2,413,129 2,372,544 0.4
Primestar, Inc.
10.9375%, due 4/1/99.................... 4/1/98 $ 9,600,000 9,600,000 9,600,000 1.8
Rocky Mountain Internet, Inc.
Warrants, expire 7/29/03................ 6/8/98 23,833 0(c) 139,425 0.0(b)
Supercanal Holding, S.A.
Warrants, Series A, expire 11/14/99..... 11/20/97 492,587 39,407 68,962 0.0(b)
Titan Tire Corp.
7.00%, due 2/11/00...................... 6/24/97 $ 6,000,000 5,795,395 5,895,000 1.1
United International Holdings, Inc.
Convertible Preferred Stock, 4.00%,
Series A................................ 8/1/97 44,600 6,075,648 7,180,600 1.3
--------- --------- -------
$37,554,268 $38,814,622 7.1%
========= ========= =======
</TABLE>
- ---------------
(a) CIK ("Cash in kind")-interest payment is made with cash or additional
securities.
(b) Less than one tenth of a percent.
(c) These warrants have no cost.
DM--Deutsche Mark
132
<PAGE> 133
MAINSTAY VP SERIES FUND, INC.
TOTAL RETURN PORTFOLIO
Restricted security held at June 30, 1998:
<TABLE>
<CAPTION>
PERCENT
ACQUISITION 6/30/98 OF
SECURITY DATE SHARES COST VALUE NET ASSETS
- ----------------------------------------- ------------------ ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Paperboard Industries
International, Inc.
Preferred Stock, 5.00%, Class A......... 5/4/98 15,000 $ 249,634 $ 245,435 0.1%
========= ========= =======
</TABLE>
(I)
SECURITIES LENDING. The Portfolios may lend their securities to broker-dealers
and financial institutions. The loans are secured by collateral (cash or
securities) at least equal at all times to the market value of the securities
loaned. The Portfolios may bear the risk of delay in recovery of, or loss of
rights in, the securities loaned should the borrower of the securities fail
financially. The Portfolios receive compensation for lending their securities in
the form of fees or they retain a portion of interest on the investment of any
cash received as collateral. The Portfolios also continue to receive interest
and dividends on the securities loaned, and any gain or loss in the market price
of the securities loaned that may occur during the term of the loan will be for
the account of the Portfolios.
(J)
COMMITMENTS AND CONTINGENCIES. As of June 30, 1998, High Yield Corporate Bond
Portfolio had an unfunded loan commitment pursuant to the following loan
agreement:
<TABLE>
<CAPTION>
UNFUNDED
BORROWER COMMITMENT
-------- ----------
<S> <C>
Kronos International, Inc. ................................. $94,342
=======
</TABLE>
(K)
FINANCIAL INSTRUMENTS WITH CONCENTRATION OF CREDIT RISK. High Yield Corporate
Bond Portfolio invests in Loan Participations. When the Portfolio purchases a
Participation, the Portfolio typically enters into a contractual relationship
with the lender or third party selling such Participation ("Selling
Participant"), but not with the Borrower. As a result, the Portfolio assumes the
credit risk of the Borrower, the Selling Participant and any other persons
interpositioned between the Portfolio and the Borrower ("Intermediate
Participants"). The Portfolio may not directly benefit from the collateral
supporting the Senior Loan in which it has purchased the Participation. The
Portfolio may be considered to have a concentration of credit risk in the
banking industry, since the Portfolio will only acquire Participations if the
Selling Participant and each Intermediate Participant is a financial
institution.
(L)
FEDERAL INCOME TAXES. Each of the Portfolios is treated as a separate entity for
Federal income tax purposes. The Company's policy is to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of the taxable income to the shareholders of
each Portfolio within the allowable time limits. Therefore, no Federal income
tax provision is required.
Investment income received by a Portfolio from foreign sources may be subject to
foreign income taxes withheld at the source.
133
<PAGE> 134
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
(M)
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions are
recorded on the ex-dividend date. For Cash Management Portfolio, dividends are
declared daily and paid monthly. Each of the other Portfolios intends to declare
and pay, as a dividend, substantially all of their net investment income and net
realized gains no less frequently than once a year. Income dividends and capital
gain distributions are determined in accordance with Federal income tax
regulations which may differ from generally accepted accounting principles.
(N)
EXPENSES. Expenses with respect to the Company are allocated to the individual
Portfolios in proportion to the net assets of the respective Portfolios when the
expenses are incurred except when direct allocations of expenses can be made.
(O)
USE OF ESTIMATES. The preparation of financial statements in accordance with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts and disclosures in the
financial statements. Actual results could differ from those estimates.
134
<PAGE> 135
MAINSTAY VP SERIES FUND, INC.
NOTE 3--Fees and Related Party Policies:
- --------------------------------------------------------------------------------
(A)
INVESTMENT ADVISORY AND ADMINISTRATION FEES. MacKay-Shields Financial
Corporation ("MacKay-Shields") acts as investment adviser to Capital
Appreciation, Cash Management, Convertible, Government, High Yield Corporate
Bond, International Equity, Total Return and Value Portfolios under an
Investment Advisory Agreement. MacKay-Shields is a registered investment
adviser, a wholly-owned subsidiary of NYLIFE Inc. and an indirect wholly-owned
subsidiary of New York Life. New York Life acts as investment adviser to Bond
and Growth Equity Portfolios under an Investment Advisory Agreement. Monitor
Capital Advisors Inc. ("Monitor") acts as investment adviser to Indexed Equity
Portfolio under an Investment Advisory Agreement. Monitor is a registered
investment adviser, a wholly-owned subsidiary of NYLIFE Inc. and an indirect
wholly-owned subsidiary of New York Life.
NYLIAC is Administrator for the Company.
The Company, on behalf of each Portfolio, pays the Advisers and Administrator a
monthly fee for the services performed and the facilities furnished at an
approximate annual rate of the average daily net assets of each Portfolio as
follows:
<TABLE>
<CAPTION>
ADVISER ADMINISTRATOR
------- -------------
<S> <C> <C>
Capital Appreciation Portfolio.............................. 0.36% 0.20%
Cash Management Portfolio................................... 0.25% 0.20%
Convertible Portfolio....................................... 0.36% 0.20%
Government Portfolio........................................ 0.30% 0.20%
High Yield Corporate Bond Portfolio......................... 0.30% 0.20%
International Equity Portfolio.............................. 0.60% 0.20%
Total Return Portfolio...................................... 0.32% 0.20%
Value Portfolio............................................. 0.36% 0.20%
Bond Portfolio.............................................. 0.25% 0.20%
Growth Equity Portfolio..................................... 0.25% 0.20%
Indexed Equity Portfolio.................................... 0.10% 0.20%
</TABLE>
The Administrator has voluntarily agreed to assume the operating expenses of
Convertible and International Equity Portfolios through December 31, 1998, which
on an annualized basis exceed the percentage indicated below.
<TABLE>
<S> <C>
Convertible Portfolio....................................... 0.73%
International Equity Portfolio.............................. 0.97%
</TABLE>
In connection with such expense limitation, the Administrator assumed certain of
the expenses of the above listed Portfolios for the six month period ended June
30, 1998 as shown on the Statement of Operations.
The Capital Appreciation, Cash Management, Government, High Yield Corporate
Bond, Total Return, Value, Bond, Growth Equity and Indexed Equity Portfolios
will not have an expense limitation in 1998.
135
<PAGE> 136
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
(B)
DISTRIBUTOR. NYLIFE Distributors Inc. ("NYLIFE Distributors"), a wholly-owned
subsidiary of NYLIFE Inc. and an indirect wholly-owned subsidiary of New York
Life, serves as the Company's distributor and principal underwriter (the
"Distributor") pursuant to a Distribution agreement. NYLIFE Distributors is not
obligated to sell any specific amount of the Company's shares, and receives no
compensation from the Company pursuant to the Distribution Agreement.
(C)
DIRECTORS FEES. Directors, other than those affiliated with New York Life,
MacKay-Shields, Monitor or NYLIFE Distributors, are paid an annual fee of
$35,000 and $1,500 for each Board meeting and each Committee meeting attended
plus reimbursement for travel and out-of-pocket expenses. The Company allocates
this expense in proportion to the net assets of the respective Portfolios.
(D)
CAPITAL. At June 30, 1998 NYLIAC was the beneficial owner of shares of the
Convertible Portfolio with a net asset value of $12,671,908. This value
represents 23.5% of the net assets of the Convertible Portfolio at period-end.
(E)
OTHER. Fees for the cost of legal services provided to the Company by the Office
of General Counsel of New York Life are charged to the Portfolios. For the six
month period ended June 30, 1998 these fees were as follows:
<TABLE>
<S> <C>
Capital Appreciation Portfolio.............................. $19,666
Cash Management Portfolio................................... 3,529
Convertible Portfolio....................................... 1,054
Government Portfolio........................................ 1,816
High Yield Corporate Bond Portfolio......................... 10,786
International Equity Portfolio.............................. 768
Total Return Portfolio...................................... 11,274
Value Portfolio............................................. 6,888
Bond Portfolio.............................................. 5,512
Growth Equity Portfolio..................................... 19,361
Indexed Equity Portfolio.................................... 13,264
</TABLE>
- --------------------------------------------------------------------------------
NOTE 4--Federal Income Tax:
- --------------------------------------------------------------------------------
At December 31, 1997, for Federal income tax purposes, capital loss
carryforwards, as shown in the table below, were available to the extent
provided by regulations to offset future realized gains of each respective
Portfolio through the years indicated. To the extent that these loss
carryforwards are used to offset future capital gains, it is probable that the
136
<PAGE> 137
MAINSTAY VP SERIES FUND, INC.
capital gains so offset will not be distributed to shareholders. Additionally,
as shown in the table below, certain Portfolios intend to elect, to the extent
provided by regulations, to treat certain qualifying capital losses that arose
during the year after October 31, 1997 as if they arose on January 1, 1998.
<TABLE>
<CAPTION>
CAPITAL LOSS CAPITAL LOSS
AVAILABLE THROUGH AMOUNT (000'S) DEFERRED (000'S)
----------------- -------------- ----------------
<S> <C> <C> <C>
Government Portfolio........................................ 2002 $3,119
2004 1,523
------
$4,642 $ 63
====== ======
International Equity Portfolio.............................. 2005 $ 268 $ 368
====== ======
</TABLE>
- --------------------------------------------------------------------------------
NOTE 5--Financial Investments:
- --------------------------------------------------------------------------------
High Yield Corporate Bond Portfolio invests primarily in high yield bonds.
These bonds may involve special risks in addition to the risks associated
with investment in higher rated debt securities. High yield bonds may be
more susceptible to real or perceived adverse economic and competitive
industry conditions than higher grade bonds. Also, the secondary market on which
high yield bonds are traded may be less liquid than the market for higher grade
bonds.
- --------------------------------------------------------------------------------
NOTE 6--Portfolio Securities Loaned:
- --------------------------------------------------------------------------------
At June 30, 1998, Government and Total Return Portfolios had portfolio
securities with a fair market value of $19,499,863 and $61,413,856,
respectively on loan to broker-dealers and government securities dealers.
Cash collateral received by Government and Total Return Portfolios is invested
in investment grade commercial paper, or other securities in accordance with the
Portfolios securities lending procedures. Such investments are included as an
asset and a corresponding liability in the Statement of Assets and Liabilities.
While the Portfolios invest cash collateral in investment grade securities or
other "high quality" investment vehicles, the Portfolios bear the risk that
liability for the collateral may exceed the value of the investment.
Net income earned on securities lending amounted to $29,573 and $62,431, net of
broker fees and rebates, respectively, for the six month period ended June 30,
1998, which is included as interest income on the Statement of Operations.
- --------------------------------------------------------------------------------
NOTE 7--Line of Credit:
- --------------------------------------------------------------------------------
Capital Appreciation, Cash Management, Convertible, Government, High Yield
Corporate Bond, International Equity, Total Return, Value and Indexed Equity
Portfolios maintain a line of credit with The Bank of New York in order to
secure a source of funds for temporary purposes to meet unanticipated or
excessive shareholder redemption requests. There was no outstanding balance on
this line of credit at June 30, 1998.
137
<PAGE> 138
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
NOTE 8--Purchases and Sales of Securities (in 000's):
- --------------------------------------------------------------------------------
During the six month period ended June 30, 1998, purchases and sales of
securities, other than securities subject to repurchase transactions and
short-term securities, were as follows:
<TABLE>
<CAPTION>
CAPITAL APPRECIATION CONVERTIBLE GOVERNMENT
PORTFOLIO PORTFOLIO PORTFOLIO
PURCHASES SALES PURCHASES SALES PURCHASES SALES
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
U.S. Government Securities......................... $ -- $ -- $ -- $ -- $172,913 $162,606
All others......................................... 186,255 93,033 69,717 57,097 7,044 6,458
------------------------------------------------------------------
Total.............................................. $186,255 $ 93,033 $ 69,717 $ 57,097 $179,957 $169,064
==================================================================
</TABLE>
<TABLE>
<CAPTION>
GROWTH EQUITY INDEXED EQUITY
PORTFOLIO PORTFOLIO
PURCHASES SALES PURCHASES SALES
----------------------------------------
<S> <C> <C> <C> <C>
U.S. Government Securities......................... $ -- $ -- $ -- $ --
All others......................................... 324,393 296,747 178,026 7,000
----------------------------------------------
Total.............................................. $324,393 $296,747 $178,026 $ 7,000
==============================================
</TABLE>
- --------------------------------------------------------------------------------
NOTE 9--Capital Share Transactions (in 000's):
- --------------------------------------------------------------------------------
Transactions in capital shares for the six month period ended June 30, 1998
and the year ended December 31, 1997 were as follows:
<TABLE>
<CAPTION>
CAPITAL APPRECIATION CASH MANAGEMENT CONVERTIBLE
PORTFOLIO PORTFOLIO PORTFOLIO
1998 1997 1998 1997 1998 1997
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold........................................ 4,168 7,339 230,737 285,484 1,190 2,001
Shares issued in reinvestment of dividends and
distributions.................................... 3 470 3,715 6,346 120 335
-----------------------------------------------------------------
4,171 7,809 234,452 291,830 1,310 2,336
Shares redeemed.................................... (951) (1,119) (185,085) (269,397) (254) (148)
-----------------------------------------------------------------
Net increase (decrease)............................ 3,220 6,690 49,367 22,433 1,056 2,188
=================================================================
</TABLE>
<TABLE>
<CAPTION>
GROWTH EQUITY INDEXED EQUITY
PORTFOLIO PORTFOLIO
1998 1997 1998 1997
--------------------------------------
<S> <C> <C> <C> <C>
Shares sold........................................ 3,121 4,700 8,111 9,651
Shares issued in reinvestment of dividends and
distributions.................................... -- 5,219 235 872
--------------------------------------------
3,121 9,919 8,346 10,523
Shares redeemed.................................... (1,836) (2,855) (1,122) (294)
--------------------------------------------
Net increase....................................... 1,285 7,064 7,224 10,229
============================================
</TABLE>
138
<PAGE> 139
MAINSTAY VP SERIES FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HIGH YIELD INTERNATIONAL
CORPORATE BOND EQUITY TOTAL RETURN VALUE BOND
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
PURCHASES SALES PURCHASES SALES PURCHASES SALES PURCHASES SALES PURCHASES SALES
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ -- $ 6,873 $ -- $ -- $303,223 $302,040 $ -- $ -- $141,533 $103,787
461,744 328,771 5,389 8,303 159,034 115,254 138,064 68,410 157,004 178,168
- --------------------------------------------------------------------------------------------------------------------
$461,744 $335,644 $ 5,389 $ 8,303 $462,257 $417,294 $138,064 $ 68,410 $298,537 $281,955
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HIGH YIELD INTERNATIONAL
GOVERNMENT CORPORATE BOND EQUITY TOTAL RETURN VALUE
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
1998 1997 1998 1997 1998 1997 1998 1997 1998 1997
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1,446 954 8,827 16,421 943 958 2,654 4,296 3,826 7,460
-- 478 180 3,743 25 227 116 1,080 166 920
- ---------------------------------------------------------------------------------------------------------------
1,446 1,432 9,007 20,164 968 1,185 2,770 5,376 3,992 8,380
(732) (1,553) (659) (1,638) (859) (1,489) (478) (1,116) (121) (626)
- ---------------------------------------------------------------------------------------------------------------
714 (121) 8,348 18,526 109 (304) 2,292 4,260 3,871 7,754
===============================================================================================================
<CAPTION>
BOND
PORTFOLIO
1998 1997
- --- -------------------
<S> <C> <C>
1,830 1,611
-- 1,140
- ---
1,830 2,751
(1,427) (2,980)
- ---
403 (229)
===
</TABLE>
139
