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As filed with the Securities and Exchange Commission on October 20, 2000
Registration No. 333-
811-07697
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
FORM S-6
------------------------------
FOR THE REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT TRUSTS
REGISTERED ON FORM N-8B-2
------------------------------
A. Exact name of trust:
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
CORPORATE SPONSORED VARIABLE UNIVERSAL LIFE SEPARATE ACCOUNT-I
B. Name of depositor:
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
C. Complete address of depositor's principal executive office:
51 Madison Avenue
New York, New York 10010
D. Name and complete address of agent for service:
Sheldon Winicour, Esq.
New York Life Insurance and
Annuity Corporation
51 Madison Avenue
New York, New York 10010
Copy to:
Jeffrey S. Puretz, Esq. Sheila K. Davidson, Esq.
Dechert Price & Rhoods Senior Vice President
1775 Eye Street, N.W. and General Counsel
Washington, DC 20036 New York Life Insurance Company
51 Madison Avenue
New York, New York 10010
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E. Title of securities being registered:
Units of interest in a separate account under corporate executive series
variable universal life insurance policies.
F. Approximate date of proposed public offering: As soon as practicable after
the effective date of the Registration Statement.
Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a)
of the Securities Act of 1933 or until the Registration Statement shall
become effective on such date as the Securities and Exchange Commission,
acting pursuant to Section 8(a), may determine.
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CROSS REFERENCE SHEET
INFORMATION REQUIRED IN A PROSPECTUS
Item of Form N-8B-2 Prospectus Caption
------------------- ------------------
1 Cover Page; Basic Questions and Answers
About Us and Our Policy
2 Cover Page
3 Not Applicable
4 Sales and Other Agreements
5 The Separate Account
6 The Separate Account
9 Legal Proceedings
10 General Provisions of the Policy; Death
Benefit Under the Policy; Free Look
Provision; Exchange Privilege; Cash Value
and Cash Surrender Value; Loans; The
Separate Account; The Fixed Account;
Charges Under the Policy; Sales and Other
Agreements; When We Pay Proceeds; Payment
Options; Our Rights; Your Voting Rights;
Basic Questions and Answers About Us and
Our Policy
11 The Separate Account; MainStay VP
Series Fund, Inc.; The Alger American
Fund; Calvert Variable Series, Inc.;
Fidelity Variable Insurance Products
Fund and Fidelity Variable Insurance
Products Fund II; Janus Aspen Series;
The MFS Variable Insurance Trust;
The Universal Institutional Funds, Inc.
12 The Separate Account; Sales and Other
Agreements
13 The Separate Account; Charges Under
the Policy; MainStay VP Series Fund,
Inc.; The Alger American Fund; Calvert
Variable Series, Inc.; Fidelity
Variable Insurance Products Fund and
Fidelity Variable Insurance Products
Fund II; Janus Aspen Series; The MFS
Variable Insurance Trust; The Universal
Institutional Funds, Inc.
14 Basic Questions and Answers About Us and
Our Policy; The Separate Account; Sales
and Other Agreements
15 Basic Questions and Answers About Us and
Our Policy; General Provisions of the
Policy
16 The Separate Account; Investment
Return; Basic Questions and Answers
About Us and Our Policy; MainStay VP
Series Fund, Inc.; The Alger American
Fund; Calvert Variable Series, Inc.;
Fidelity Variable Insurance Products
Fund and Fidelity Variable Insurance
Products Fund II; Janus Aspen Series;
The MFS Variable Insurance Trust;
The Universal Institutional Funds, Inc.
<PAGE> 4
Item of Form N-8B-2 Prospectus Caption
------------------- ------------------
17 Cash Surrender Value; Partial
Withdrawals; General Provisions
of the Policy
18 The Separate Account; MainStay VP
Series Fund, Inc.; The Alger American
Fund; Calvert Variable Series, Inc.;
Fidelity Variable Insurance Products
Fund and Fidelity Variable Insurance
Products Fund II; Janus Aspen Series;
The MFS Variable Insurance Trust;
The Universal Institutional Funds,
Inc.; Investment Return
19 Records and Reports
20 Not Applicable
21 Loans
22 Not Applicable
23 Not Applicable
24 Additional Information
25 What are NYLIAC and New York Life?
26 Not Applicable
27 What are NYLIAC and New York Life?
28 Directors and Principal Officers of
NYLIAC
29 What are NYLIAC and New York Life?
30 Not Applicable
31 Not Applicable
32 Not Applicable
33 Not Applicable
34 Not Applicable
35 Not Applicable
37 Not Applicable
38 Sales and Other Agreements
39 Sales and Other Agreements
40 Not Applicable
41 Sales and Other Agreements
42 Not Applicable
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Item of Form N-8B-2 Prospectus Caption
------------------- ------------------
43 Not Applicable
44 The Separate Accounts; Investment
Return; General Provisions of the Policy
45 Not Applicable
46 The Separate Accounts; Investment Return
47 The Separate Accounts; MainStay VP
Series Fund, Inc.; The Alger American
Fund; Calvert Variable Series, Inc.;
Fidelity Variable Insurance Products
Fund and Fidelity Variable Insurance
Products Fund II; Janus Aspen Series;
The MFS Variable Insurance Trust;
Morgan Stanley Universal Funds, Inc.
48 Not Applicable
49 Not Applicable
50 The Separate Accounts
51 Cover Page; Basic Questions and Answers
About Us and Our Policy
52 The Separate Accounts; Our Rights
53 Federal Income Tax Considerations
54 Not Applicable
55 Not Applicable
59 Financial Statements
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE. IT MAY ALSO BE
CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SEC IS EFFECTIVE. THIS PROSPECTUS IS NOT AN
OFFER TO SELL THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS
NOT PERMITTED.
NYLIAC CORPORATE SPONSORED VARIABLE UNIVERSAL LIFE SEPARATE ACCOUNT-I
PROSPECTUS DATED OCTOBER 20, 2000
FOR
CORPORATE EXECUTIVE SERIES VARIABLE
UNIVERSAL LIFE INSURANCE POLICIES
OFFERED BY
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A DELAWARE CORPORATION)
51 MADISON AVENUE, NEW YORK, NEW YORK 10010
<TABLE>
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PREMIUM REMITTANCE CENTER: SERVICE OFFICE:
New York Life Insurance and Annuity Corporation New York Life Insurance and Annuity Corporation
P.O. Box 930652 NYLIFE Distributors Inc.
Kansas City, MO 64193-0652 Attention: Executive Benefits
Telephone: (913) 906-4000 11400 Tomahawk Creek Parkway, Suite 200
Leawood, KS 66211
(913) 906-4000
</TABLE>
This prospectus describes a flexible premium corporate sponsored variable
universal life insurance policy which New York Life Insurance and Annuity
Corporation ("NYLIAC") issues. We designed the policy to provide insurance
protection for group or sponsored arrangements. Group arrangements include those
in which a trustee or an employer, for example, purchases policies covering a
group of individuals. Sponsored arrangements include those in which an employer
allows us to sell policies to its employees or retirees on an individual basis.
The policyowner(s) is/are the person(s) and/or entity(ies) who own(s) the
policy. The policyowner has all rights of ownership while the insured is alive.
The policy offers flexible premium payments, a choice of three death benefit
options, loan privileges, increases and decreases to the policy's face amount of
insurance and a choice of funding options, including a guaranteed interest
option and thirty variable investment options. The variable investment options
invest in a corresponding portfolio of a mutual fund, as specified below:
<TABLE>
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MAINSTAY VP SERIES FUND, INC.
-- 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
-- American Century Income & Growth
-- Dreyfus Large Company Value
-- Eagle Asset Management Growth Equity
THE ALGER AMERICAN FUND
-- Alger American Small Capitalization
-- Alger American Leveraged AllCap
CALVERT VARIABLE SERIES, INC.
-- Calvert Social Balanced
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
-- Fidelity VIP Equity-Income
-- Fidelity VIP Growth
-- Fidelity VIP Mid-Cap
-- Fidelity VIP Overseas
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
-- Fidelity VIP II Contrafund(R)
-- Fidelity VIP II Index 500
JANUS ASPEN SERIES
-- Janus Aspen Series Balanced
-- Janus Aspen Series Worldwide Growth
-- Janus Aspen Series Aggressive Growth
MFS(R) VARIABLE INSURANCE TRUST(SM)
-- MFS(R) Growth with Income Series
-- MFS(R) Research Series
THE UNIVERSAL INSTITUTIONAL FUNDS, INC.
-- Morgan Stanley UIF Emerging Markets Equity
T. ROWE PRICE EQUITY SERIES, INC.
-- T. Rowe Price Equity Income
</TABLE>
We do not guarantee the investment performance of these investment options,
which involve varying degrees of risk.
The death benefit may, and the cash surrender value of a policy will, vary
up or down depending on the performance of the investment options. There is no
guaranteed minimum cash surrender value for a policy. However, while a policy is
in force, a policy's death benefit will never be less than its face amount, less
any policy debt less the undeducted portion of any monthly deduction charges.
Although premiums are flexible, the policyowner may have to make additional
premium payments to keep the policy in effect. We may terminate the policy if
its cash surrender value less any policy debt is too small to pay the policy's
monthly charges, unless the Guaranteed Minimum Death Benefit is in effect. (See
"Section V: Death Benefit Under Policy -- The Guaranteed Minimum Death
Benefit.") We may also terminate the policy if its policy debt exceeds the cash
surrender value. In either case, we will give you a limited amount of time to
make a sufficient payment and avoid termination.
The policyowner can borrow against or withdraw money from the policy, within
limits. Loans and withdrawals will reduce the policy's death benefit and cash
surrender value. The policyowner can also surrender the policy.
The policyowner may examine the policy for a limited period of time
following its delivery, and cancel it for a full refund of the greater of the
cash value or premiums paid. Replacing existing insurance with this policy may
not be to the policyowner's advantage.
The policyowner should read this prospectus and keep it for further
reference. It contains information that the policyowner should know before
investing in the Corporate Executive Series, a NYLIAC corporate sponsored
variable universal life insurance policy. This prospectus is valid only when
accompanied by the prospectuses of the MainStay VP Series Fund, Inc., The Alger
American Fund, the Calvert Variable Series, Inc., the Fidelity Variable
Insurance Products Fund, the Fidelity Variable Insurance Products Fund II, the
Janus Aspen Series, MFS(R) Variable Insurance Trust(SM), The Universal
Institutional Funds, Inc., and the T. Rowe Price Equity Series, Inc., (the
"Funds," each individually a "Fund").
THE SECURITIES AND EXCHANGE COMMISSION ("SEC") HAS NOT APPROVED OR
DISAPPROVED THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE POLICIES INVOLVE RISKS, INCLUDING POTENTIAL LOSS OF PRINCIPAL INVESTED.
THE POLICIES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY,
ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FDIC, THE FEDERAL RESERVE BOARD,
OR ANY OTHER AGENCY.
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TABLE OF CONTENTS
<TABLE>
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SECTION I: DEFINITION OF TERMS......... 5
SECTION II: BASIC QUESTIONS AND ANSWERS
ABOUT US AND OUR POLICY.............. 7
1. What are NYLIAC and New York
Life?........................... 7
2. What variable life insurance
policy are we offering?......... 7
3. How is the policy available?..... 7
4. What is the Cash Value of the
policy?......................... 7
5. What are the Investment Divisions
of the Separate Account?........ 7
6. How is the value of an
Accumulation Unit determined?... 8
7. What is the Fixed Account?....... 8
8. Does the policy have a Cash
Surrender Value?................ 8
9. What is the guaranteed minimum
death benefit?.................. 8
10. How long will the policy remain
in force?....................... 9
11. Is the amount of the death
benefit guaranteed?............. 9
12. Is the death benefit subject to
income taxes?................... 9
13. What is a modified endowment
contract?....................... 9
14. Can the policy become a modified
endowment contract?............. 9
15. What are planned premiums?....... 10
16. What are unplanned premiums?..... 10
17. What happens when the first
premium is paid?................ 10
18. When are subsequent premiums put
into the Fixed Account and the
Separate Account?............... 10
19. How are Net Premiums allocated
among the Allocation
Alternatives?................... 10
20. What are the current charges
associated with the policy?..... 11
21. Are loans available under the
policy?......................... 11
22. Does the policyowner have a right
to cancel?...................... 11
23. Can the policyowner exchange the
policy?......................... 12
24. How is a person's age
calculated?..................... 12
</TABLE>
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25. When should coverage be purchased
under the Supplementary Term
Rider or the Level Term
Rider?.......................... 12
SECTION III: CHARGES UNDER THE
POLICY............................... 13
Deductions from Premiums............. 15
Current Sales Expense Charge...... 15
Guaranteed Sales Expense Charge... 15
State Tax Charge.................. 15
Federal Tax Charge................ 15
Deductions from Accumulation Value
and Fixed Account Value........... 15
Monthly Contract Charge........... 16
Cost of Insurance Charge.......... 16
Deductions from the Separate
Account........................... 16
Mortality and Expense Risk
Charge.......................... 16
Other Charges for Federal Income
Taxes........................... 16
Fund Charges......................... 17
How the Policy Works................. 17
SECTION IV: THE SEPARATE ACCOUNT, THE
FUNDS AND THE FIXED ACCOUNT.......... 18
The Separate Account................. 18
Your Voting Rights................ 18
Our Rights........................ 18
The Funds and the Portfolios...... 19
MainStay VP Series Fund, Inc......... 19
The MainStay VP Capital
Appreciation Portfolio.......... 19
The MainStay VP Cash Management
Portfolio....................... 19
The MainStay VP Convertible
Portfolio....................... 19
The MainStay VP Government
Portfolio....................... 19
The MainStay VP High Yield
Corporate Bond Portfolio........ 19
The MainStay VP International
Equity Portfolio................ 19
The MainStay VP Total Return
Portfolio....................... 19
The MainStay VP Value Portfolio... 19
The MainStay VP Bond Portfolio.... 19
The MainStay VP Growth Equity
Portfolio....................... 19
The MainStay VP Indexed Equity
Portfolio....................... 19
</TABLE>
2
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<TABLE>
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The MainStay VP American Century
Income & Growth Portfolio....... 19
The MainStay VP Dreyfus Large
Company Value Portfolio......... 19
The MainStay VP Eagle Asset
Management Growth Equity
Portfolio....................... 20
The Alger American Fund.............. 20
The Alger American Small
Capitalization Portfolio........ 20
The Alger American Leveraged All
Cap Portfolio................... 20
Calvert Variable Series, Inc......... 20
The Calvert Social Balanced
Portfolio....................... 20
Fidelity Variable Insurance Products
Fund (VIP) and Fidelity Variable
Insurance Products Fund II (VIP
II)............................... 20
The Fidelity VIP II Contrafund(R)
Portfolio....................... 20
The Fidelity VIP Equity-Income
Portfolio....................... 20
The Fidelity VIP Growth
Portfolio....................... 20
The Fidelity VIP II Index 500
Portfolio....................... 20
The Fidelity VIP Mid-Cap
Portfolio....................... 20
The Fidelity VIP Overseas
Portfolio....................... 20
Janus Aspen Series................... 20
The Janus Aspen Series Aggressive
Growth Portfolio................ 20
The Janus Aspen Series Balanced
Portfolio....................... 20
The Janus Aspen Series Worldwide
Growth Portfolio................ 20
MFS Variable Insurance Trust(SM)..... 20
The MFS(R) Growth with Income
Series Portfolio................ 20
The MFS(R) Research Series
Portfolio....................... 20
The Universal Institutional Funds,
Inc............................... 20
The Morgan Stanley UIF Emerging
Markets Equity Portfolio........ 20
T. Rowe Price Equity Series, Inc..... 20
The T. Rowe Price Equity Income
Portfolio....................... 20
The Fixed Account.................... 21
Interest Crediting................ 21
Investment Return....................
Performance Calculations............. 22
SECTION V: GENERAL PROVISIONS OF THE
POLICY............................... 23
When Life Insurance Coverage
Begins............................ 23
Premiums............................. 23
</TABLE>
<TABLE>
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Payments Returned for Insufficient
Funds............................. 23
Termination.......................... 23
Death Benefit Under the Policy....... 24
The Guaranteed Minimum Death
Benefit......................... 24
Selection of Life Insurance
Benefit Table................... 24
The Effect of Investment
Performance on the Death
Benefit......................... 25
Face Amount Changes............... 25
Life Insurance Benefit Option
Changes......................... 26
Cash Value and Cash Surrender
Value............................. 26
Cash Value........................ 26
Cash Surrender Value.............. 26
Transfers............................ 26
Dollar Cost Averaging................ 27
Automatic Asset Reallocation......... 27
Third Party Investment Advisory
Arrangements...................... 28
Partial Withdrawals.................. 28
Loans................................ 29
Loan Account...................... 29
Interest on Value in Loan
Account......................... 29
Loan Interest..................... 30
Repayment......................... 30
Free Look Provision.................. 30
Exchange Privilege................... 30
SECTION VI: ADDITIONAL INFORMATION..... 32
Directors and Principal Officers of
NYLIAC............................ 32
Federal Income Tax Considerations.... 33
Tax Status of NYLIAC and the Separate
Account........................... 34
Charges for Taxes................. 34
Diversification Standards and
Control Issues.................. 34
Life Insurance Status of Policy... 35
Modified Endowment Contract
Status.......................... 35
Surrenders and Partial
Withdrawals..................... 35
Loans and Interest Deductions..... 36
Corporate Alternative Minimum
Tax............................. 37
Exchanges or Assignments of
Policies........................ 37
Other Tax Issues.................. 37
Withholding....................... 37
</TABLE>
3
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Reinstatement Option................. 37
Additional Benefits Available by
Rider............................. 38
Supplementary Term Rider.......... 38
Level Term Rider.................. 39
Term Rider vs. Base Policy
Coverage........................ 39
Payment Options...................... 40
Payees............................ 40
Proceeds at Interest Options
(Options 1A and 1B)............. 40
Life Income Option (Option 2)..... 40
Beneficiary.......................... 41
Change of Ownership.................. 41
</TABLE>
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Assignment........................... 41
Limits on Our Rights to Challenge the
Policy............................ 41
Misstatement of Age or Sex........... 42
Suicide.............................. 42
When We Pay Proceeds................. 42
Records and Reports.................. 42
Sales and Other Agreements........... 42
Legal Proceedings.................... 43
Experts.............................. 43
Financial Statements................. 43
</TABLE>
THE POLICY IS NOT AVAILABLE IN ALL JURISDICTIONS. THIS PROSPECTUS IS NOT
CONSIDERED AN OFFERING IN ANY JURISDICTION WHERE THE SALE OF THIS POLICY CANNOT
LAWFULLY BE MADE. NYLIAC DOES NOT AUTHORIZE ANY INFORMATION OR REPRESENTATIONS
REGARDING THE OFFERING OTHER THAN AS DESCRIBED IN THIS PROSPECTUS OR IN ANY
ATTACHED SUPPLEMENT TO THIS PROSPECTUS OR IN ANY SUPPLEMENTAL SALES MATERIAL
NYLIAC PRODUCES AND/OR AUTHORIZES.
IN CERTAIN JURISDICTIONS, DIFFERENT PROVISIONS MAY APPLY TO THE POLICY.
PLEASE REFER TO THE POLICY OR ASK YOUR REGISTERED REPRESENTATIVE FOR DETAILS
REGARDING YOUR PARTICULAR POLICY.
4
<PAGE> 10
SECTION I:
DEFINITION OF TERMS
ACCUMULATION UNIT--An accounting unit we use to calculate the value in the
Investment Divisions. Net Premiums and transfers that are allocated to the
Investment Divisions purchase Accumulation Units in those Investment Divisions.
ACCUMULATION VALUE--The sum of the dollar value of the Accumulation Units in all
of the Investment Divisions.
ALLOCATION ALTERNATIVES--The 30 Investment Divisions of the Separate Account and
the Fixed Account. Policyowners may invest in a total of 20 Allocation
Alternatives at any one time.
BENEFICIARY--The person(s) and/or entity(ies) you name to receive the death
benefit after the Insured dies.
BUSINESS DAY--Generally, any day on which NYLIAC is open and the New York Stock
Exchange is open for trading. We are closed on national holidays, the day after
Thanksgiving and Christmas Eve. Our Business Day ends at 4:00 p.m. Eastern Time
or the closing of regular trading on the New York Stock Exchange, if earlier.
CASH SURRENDER VALUE--At any time during the first 4 Policy Years, the Cash
Value plus any premiums paid during the Policy Year less the corresponding Net
Premiums for that Policy Year. For Policy Years 5 and later, the Cash Value.
CASH VALUE--The sum of (a) the Accumulation Value, (b) the value in the Fixed
Account and (c) the value in the Loan Account.
CUMULATIVE PREMIUM AMOUNT--An amount representing the sum of the total planned
and unplanned premium payments made under the policy less the total partial
withdrawals and partial withdrawal fees taken under the policy. Reductions due
to partial withdrawals will never cause this amount to be less than zero.
FACE AMOUNT--The initial face amount shown on page 2 of the policy, plus or
minus any changes made to the initial face amount.
FIXED ACCOUNT--The Allocation Alternative that credits interest at fixed rates
subject to a minimum guarantee. Funds in the Fixed Account are part of NYLIAC's
general account.
FUND--An open-end management investment company.
GENERAL ACCOUNT--An account representing all of NYLIAC's assets, liabilities,
capital and surplus, income, gains or losses that are not included in the
Separate Account or any other separate account. We allocate any Net Premiums you
pay during the free look period to this account.
INSURED--The person whose life the policy insures.
INVESTMENT DIVISIONS--The divisions of the Separate Account that are available
as Allocation Alternatives under the policy.
ISSUE DATE--The date we issue the policy, as shown on page 2 of the policy.
LOAN ACCOUNT--The account that holds a portion of Cash Value for the purpose of
securing any outstanding loans, including accrued interest. It is part of
NYLIAC's General Account.
MONTHLY DEDUCTION DAY--The date as of which we deduct the monthly contract
charge, the cost of insurance charge and a rider charge for the cost of any
additional riders from the Cash Surrender Value. The first Monthly Deduction Day
will be the first monthly anniversary of the Policy Date on or following the
Issue Date. However, if on the Issue Date, we have not yet received the Initial
Premium payment for the policy, the first Monthly Deduction Day will be the
first occurrence of this calendar day that falls on or after the date we receive
such payment.
NET PREMIUM--Premium you pay less the sales expense, state tax and federal tax
charges.
POLICY DATE--The starting date for determining policy anniversaries, Policy
Years and Monthly Deduction Days, as shown on page 2 of the policy.
POLICY DEBT--The amount of any outstanding loans under the policy, including
accrued interest.
POLICY YEAR--The twelve-month period starting with the Policy Date, and each
twelve-month period thereafter.
5
<PAGE> 11
PORTFOLIOS--The mutual fund portfolios of the Funds that are available for
investment through the Investment Divisions of the Separate Account.
SEPARATE ACCOUNT--NYLIAC Corporate Sponsored Variable Universal Life Separate
Account-I, a segregated asset account NYLIAC established to receive and invest
premiums paid under the policies as well as premiums paid under certain other
policies.
TARGET PREMIUM--an amount used to determine the sales load that is derived from
the Face Amount.
WE OR US--NYLIAC
6
<PAGE> 12
SECTION II:
BASIC QUESTIONS AND ANSWERS ABOUT US AND OUR POLICY
1. WHAT ARE NYLIAC AND NEW YORK LIFE?
New York Life Insurance and Annuity Corporation ("NYLIAC") is a stock life
insurance company incorporated in Delaware in 1980. NYLIAC is licensed to sell
life, accident and health insurance and annuities in all states and the District
of Columbia. NYLIAC is the issuer of the policies and the depositor of the
Separate Account. In addition to the policies described in this prospectus,
NYLIAC issues other life insurance policies and annuities. NYLIAC is also the
depositor for other NYLIAC separate accounts.
NYLIAC is a wholly-owned subsidiary of New York Life Insurance Company
("New York Life"), a mutual insurance company founded in New York in 1845.
NYLIAC held assets of $29.669 billion at the end of 1999. New York Life has
invested in NYLIAC, and will occasionally make additional contributions to
NYLIAC in order to maintain capital and surplus in accordance with state
requirements.
2. WHAT VARIABLE LIFE INSURANCE POLICY ARE WE OFFERING?
In this prospectus we offer a flexible premium corporate sponsored variable
universal life insurance policy. The policy provides a death benefit--the amount
payable to the named Beneficiary when the Insured dies, Cash Surrender Value,
loan privileges, withdrawal privileges and flexible premiums. It is called
"flexible" because the policyowner may select the timing and amount of premiums
and adjust the death benefit by increasing or decreasing the Face Amount
(subject to certain restrictions). It is called "variable" because the death
benefits, policy duration and Cash Surrender Values may go up or down depending
on the performance of the Investment Division(s) to which the policyowner
allocates his or her Cash Value.
The policy is a legal contract between the policyowner and NYLIAC. The
entire contract consists of the policy, the application and any riders or
endorsements to the policy.
3. HOW IS THE POLICY AVAILABLE?
The policy is available as a non-qualified policy. This means that the
policy is not available for use in connection with certain employee retirement
plans that qualify for special treatment under the federal tax law. The minimum
Face Amount of a policy is $25,000. The policyowner may increase the Face
Amount, subject to our underwriting rules in effect at the time of the request.
The Insured may not be older than age 85 as of the Policy Date or the date of
any increase in Face Amount. Before issuing any policy (or increasing its face
amount), the policyowner must give us satisfactory evidence of insurability.
We may issue the policy based on underwriting rules and procedures, which
are based on NYLIAC's eligibility standards. These may include guaranteed issue
underwriting. If our procedures for any group or sponsored arrangements call for
less than full medical underwriting, insureds in good health may be able to
obtain coverage more economically under a policy that requires full medical
underwriting.
We may issue the policy in certain states on a unisex basis. For policies
issued on a unisex basis, the policyowner should disregard any reference in this
prospectus that makes a distinction based on the gender of the Insured.
4. WHAT IS THE CASH VALUE OF THE POLICY?
The Cash Value is determined by (1) the amount, frequency and timing of
premiums, (2) the investment experience of the Investment Divisions the
policyowner selects, (3) the interest we credit to amounts in the Fixed Account
and the Loan Account, (4) any partial withdrawals, and (5) any charges we impose
on the policy. The policyowner bears the investment risk of any depreciation in
value of the assets underlying the Investment Divisions, but he or she may reap
the benefit of any appreciation in their value.
5. WHAT ARE THE INVESTMENT DIVISIONS OF THE SEPARATE ACCOUNT?
After we deduct the sales expense, state tax and federal tax charges from
your premium, the policyowner may allocate the remaining amount to 31 Allocation
Alternatives. The Allocation Alternatives consist of 30 Investment Divisions and
the Fixed Account. The 30 Investment Divisions are listed on the first page of
this prospectus.
7
<PAGE> 13
6. HOW IS THE VALUE OF AN ACCUMULATION UNIT DETERMINED?
We calculate the value of an Accumulation Unit at the end of each day the
New York Stock Exchange ("NYSE") is open for business. We determine the value of
an Accumulation Unit by multiplying the value of that unit on the prior day when
the NYSE was open by the net investment factor. The net investment factor we use
to calculate the value of an Accumulation Unit is equal to:
(a/b)-c
Where: a = the sum of:
(1) the net asset value of a Portfolio share held in the
Separate Account for that Investment Division
determined at the end of the current day on which we
calculate the Accumulation Unit value, plus
(2) the per share amount of any dividends paid or capital
gain distributions made by the Portfolio for shares
held in the Separate Account for that Investment
Division if the ex-dividend date occurs since the end
of the immediately preceding day on which we
calculate an Accumulation Unit value for that
Investment Division.
b = the net asset value of a Portfolio share held in the
Separate Account for that Investment Division determined
as of the end of the immediately preceding day on which
we calculated an Accumulation Unit value for that
Investment Division.
c = a factor representing the mortality and expense risk
charge. This factor is deducted on a daily basis. For
Policy Years one through ten, it is currently equal to an
annual rate of .60% of the average daily net asset value
of each Investment Division's assets. For Policy Years
eleven through twenty, we currently expect to reduce this
charge to an annual rate of .20% of the average daily net
asset value of each Investment Division's assets. For
Policy Years twenty-one and later, we currently expect to
reduce this charge to an annual rate of .10% of the
average daily net asset value of each Investment
Division's assets.
7. WHAT IS THE FIXED ACCOUNT?
In addition to the Investment Divisions, the policyowner may allocate or
transfer amounts to the Fixed Account. We will credit Net Premiums applied to,
and any amounts transferred to, the Fixed Account with a fixed interest rate. We
will set the interest rate in advance at least annually. This rate will never be
less than 3% per year. Interest accrues daily and is credited on each Monthly
Deduction Day. All Net Premiums applied to, or amounts transferred to, less
amounts withdrawn, transferred from or charged against the Fixed Account receive
the interest rate in effect at that time.
8. DOES THE POLICY HAVE A CASH SURRENDER VALUE?
The policyowner may surrender the policy at any time and receive its Cash
Surrender Value less any Policy Debt. We also allow partial withdrawals subject
to certain restrictions. See "Section V: General Provisions of the Policy--Cash
Value and Cash Surrender Value." The Cash Surrender Value of a policy fluctuates
with the investment performance of the Investment Divisions in which the
policyowner has allocated Cash Value and the amounts held in the Fixed Account
and the Loan Account. It may increase or decrease daily.
For federal income tax purposes, the policyowner usually is not taxed on
increases in the Cash Surrender Value until he or she actually surrenders the
policy. However, the policyowner may be taxed on all or a part of the amount
distributed for certain surrenders, partial withdrawals and loans. See "Section
V: General Provisions of the Policy--Cash Value and Cash Surrender Value" and
"Section VI: Additional Information--Federal Income Tax Considerations."
9. WHAT IS THE GUARANTEED MINIMUM DEATH BENEFIT?
The Guaranteed Minimum Death Benefit ("GMDB") provides protection from
policy lapse if it is in effect. Under the GMDB, if at any time within the first
5 Policy Years the policyowner has made certain minimum required premium
payments and the Cash Surrender Value less any Policy Debt is still insufficient
to pay the charges deducted on each Monthly Deduction Day, we will deduct as
much as is available from the Cash
8
<PAGE> 14
Surrender Value and include the undeducted portion with the required charges due
on the next Monthly Deduction Day.
During the first 5 Policy Years, the GMDB provides a guaranteed minimum
level of death benefit protection which is equal to the policy's Face Amount
less: (a) the Policy Debt and (b) the undeducted portion of any charges deducted
on a Monthly Deduction Day. In order to maintain the GMDB, on each Monthly
Deduction Day, the Cumulative Premium Amount less Policy Debt must equal or
exceed the cumulative sum of all the required monthly GMDB premiums from the
Policy Date up to that Monthly Deduction Day.
The GMDB will terminate once the premium requirement is not met. It will
not be in effect if the Supplementary Term Rider ("STR") or Level Term Rider
("LTR") is included in the policy at issue. Once the GMDB terminates, it cannot
be reinstated. For more information about the STR and LTR, see "Section VI:
Additional Information--Additional Benefits Available By Rider--Supplementary
Term Rider, Level Term Rider."
10. HOW LONG WILL THE POLICY REMAIN IN FORCE?
The policy does not automatically terminate if the policyowner does not pay
the planned premiums. Payment of these premiums, however, does not guarantee the
policy will remain in force. If the GMDB is not in effect, the policy terminates
only when and if the Cash Surrender Value less any Policy Debt is insufficient
to pay the charges deducted on each Monthly Deduction Day and the late period
expires without sufficient payment.
If the GMDB is in effect, the policy will remain in force for the first 5
Policy Years regardless of whether the policy's Cash Surrender Value less any
Policy Debt is sufficient to cover the policy's charges deducted on a Monthly
Deduction Day.
There will be no more benefits under the policy once it terminates.
However, you can apply to reinstate the policy (and the STR or LTR, if you
elected it when you first purchased the policy) at any time within five years
after termination. If you apply for reinstatement within 31 days after the late
period, you do not need to provide us with proof of insurability. Otherwise, you
must provide us with acceptable proof of insurability.
11. IS THE AMOUNT OF THE DEATH BENEFIT GUARANTEED?
As long as the policy remains in force, and we receive satisfactory proof
of death, we will pay the death benefit less any Policy Debt. We will reduce the
amount we pay by the undeducted portion of any charges deducted on a Monthly
Deduction Day.
12. IS THE DEATH BENEFIT SUBJECT TO INCOME TAXES?
A death benefit paid under the policy may be fully excludable from the
gross income of the Beneficiary for federal income tax purposes. See "Section
VI: Additional Information--Federal Income Tax Considerations."
13. WHAT IS A MODIFIED ENDOWMENT CONTRACT?
A modified endowment contract is a life insurance policy under which the
cumulative premiums paid during the first seven policy years are greater than
the cumulative premiums payable under a hypothetical policy providing for
guaranteed benefits upon the payment of seven level annual premiums. Certain
changes to a policy after it is issued can subject it to re-testing for a new
seven-year period. If your policy is determined to be a modified endowment
contract, any distributions, including collateral assignments, loans and partial
withdrawals, are taxable if there is a gain in the policy. In addition, the
policyowner may incur a penalty tax if he or she is not yet age 59 1/2 and no
other exception is applicable.
14. CAN THE POLICY BECOME A MODIFIED ENDOWMENT CONTRACT?
The policy may become a modified endowment contract. We currently test a
policy when it is issued to determine whether it will be classified as a
modified endowment contract. This at-issue test examines the policy for the
first seven Policy Years. We base the test on the policy as issued, the first
premium received, and on the assumption that there are no increases in premiums
or decreases in benefits during the period. We also have procedures to monitor
whether a policy may become a modified endowment contract after
9
<PAGE> 15
issue. See "Section VI: Additional Information--Federal Income Tax
Considerations--Modified Endowment Contract Status."
15. WHAT ARE PLANNED PREMIUMS?
The amount and interval of any planned premiums are shown on page two of
the policy. The policyowner does not have to pay a planned premium to keep the
policy in force if the Cash Surrender Value, less any Policy Debt, is enough to
cover the charges made on the Monthly Deduction Day. The policyowner may
increase or decrease the amount of any planned premium subject to the limits we
set. However, the policyowner may not make a premium payment which would
jeopardize the policy's qualification as "life insurance" under Section 7702 of
the Internal Revenue Code. The policyowner may also change the frequency of
premiums subject to our minimum premium rules. Planned premiums end on the
policy anniversary on which the Insured is age 100.
16. WHAT ARE UNPLANNED PREMIUMS?
While the Insured is living, the policyowner may make unplanned premium
payments at any time before the policy anniversary on which the Insured is age
100. However, the policyowner may not make a premium payment which would
jeopardize the policy's qualification as "life insurance" under Section 7702 of
the Internal Revenue Code. If an unplanned premium would result in an increase
in the death benefit greater than the increase in the Cash Surrender Value, we
reserve the right to require proof of insurability before accepting that payment
and applying it to the policy. We also reserve the right to limit the number and
amount of any unplanned premiums. See "Section V: General Provisions of the
Policy--Premiums."
17. WHAT HAPPENS WHEN THE FIRST PREMIUM IS PAID?
We will allocate the first premium (and any other premiums received on or
before the last day of the free look period) to our General Account. We will
deduct sales expense, state tax and federal tax charges from premiums received.
Deductions made on the Issue Date will be calculated as of the latter of the
Policy Date or the date the premium is received. We will also deduct the monthly
contract charges, cost of insurance charges and cost for any riders as of the
first Monthly Deduction Day and as of each subsequent Monthly Deduction Day. The
first Monthly Deduction Day will be the monthly anniversary of the Policy Date
on or following the Issue Date. If the Policy Date is prior to the Issue Date,
the deductions made on the first Monthly Deduction Day will cover the period
from the Policy Date until the first Monthly Deduction Day. The Net Premium less
the monthly charges will remain in the General Account through the last day of
the free look period. We will credit amounts in the General Account with
interest beginning on the later of the Policy Date or the date we receive such
amounts and ending on the last day of the free look period. We set the rate of
interest using a fixed interest rate, which we declare periodically. We will
allocate Net Premiums less the charges deducted on a Monthly Deduction Day plus
interest to the Investment Divisions and/or to the Fixed Account in accordance
with the policyowner's instructions when the free look period ends.
18. WHEN ARE SUBSEQUENT PREMIUMS PUT INTO THE FIXED ACCOUNT AND THE SEPARATE
ACCOUNT?
On the Business Day that we receive a subsequent premium, we will apply the
Net Premium to the Separate Account and to the Fixed Account in accordance with
the policyowner's allocation election. We apply Net Premiums at the next
determined Accumulation Unit value.
19. HOW ARE NET PREMIUMS ALLOCATED AMONG THE ALLOCATION ALTERNATIVES?
The policyowner may allocate Net Premiums to the Fixed Account and any of
the 30 Investment Divisions. The policyowner may also raise or lower the
percentages of the Net Premium (which must be in whole number percentages)
allocated to each Allocation Alternative at any time. The policyowner may invest
in a total of 20 Allocation Alternatives at any one time.
10
<PAGE> 16
20. WHAT ARE THE CURRENT CHARGES ASSOCIATED WITH THE POLICY?
We deduct three charges from each premium, whether planned or unplanned. We
make deductions of 2% and 1.25% for state tax and federal tax charges,
respectively. We also deduct a sales expense charge, to partially cover sales
expenses, as follows:
(1) During each of the first seven Policy Years, we currently deduct a
sales expense charge of 8% from any premiums paid up to the Target Premium.
Once the Target Premium for that Policy Year has been reached, we currently
deduct a sales expense charge of 1% from any additional premiums paid in
that Policy Year. (2) During Policy Years eight through ten, we currently
expect to deduct a sales expense charge of 3% from any premiums paid up to
the Target Premium. Once the Target Premium for that Policy Year has been
reached, we currently do not expect to deduct a sales expense charge from
any additional premiums paid in that Policy Year. (3) Beginning in the
eleventh Policy Year, we currently do not expect to deduct a sales expense
charge from any premiums paid up to the Target Premium for a given Policy
Year, nor do we currently expect to deduct any charge from any premiums
paid in excess of the Target Premium.
The Target Premium, as shown on page two of the policy, is determined from
the Face Amount of the policy. Any change to the policy which results in a
change to the Face Amount, will change the Target Premium.
In addition, on each Monthly Deduction Day, we make the following
deductions:
(a) a monthly contract charge currently equal to $7.50 ($90.00
annually);
(b) a monthly cost of insurance charge; and
(c) if applicable, the monthly cost for any riders attached to the
policy.
For certain underwritten policies, we may also make a deduction for any
temporary flat extras as set forth on page 2 of the policy. A temporary flat
extra is a charge per $1,000 of Face Amount made against the Cash Value for the
amount of time specified on the policy data page. It is designed to cover the
risk of substandard mortality experience, which is not permanent in nature.
The Monthly Deduction Day is shown on page two of the policy. The first
Monthly Deduction Day is the first monthly anniversary of the Policy Date on or
following the Issue Date. All monthly deductions are made from each of the
Investment Divisions and the Fixed Account in proportion to the amount of the
policy's Cash Value in each.
Also, we deduct a mortality and expense risk charge on a daily basis
against the assets of each Investment Division. For Policy Years one through
ten, we currently charge an annual rate of .60% of the average daily net asset
value of each Investment Division's assets. For Policy Years eleven through
twenty, we currently expect to reduce this charge to an annual rate of .20% of
the average daily net asset value of each Investment Division's assets. For
Policy Years twenty-one and later, we currently expect to reduce this charge to
an annual rate of .10% of the average daily net asset value of each Investment
Division's assets. At our option, we may change the mortality and expense risk
charge, subject to a maximum annual rate of .90%.
Currently, we are not making any charges for income taxes against the
Separate Account. We reserve the right to make charges in the future for federal
income taxes attributable to it.
Partial withdrawals are subject to a $25 charge.
See "Section III: Charges Under the Policies" and "Section VI: Additional
Information--Federal Income Tax Considerations."
21. ARE LOANS AVAILABLE UNDER THE POLICY?
Using the policy as sole security, the policyowner may make a request to
borrow any amount up to the loan value of the policy. The loan value on any
given date is equal to (i) 90% of the Cash Value, less (ii) any Policy Debt.
22. DOES THE POLICYOWNER HAVE A RIGHT TO CANCEL?
The policyowner has the right to cancel the policy at any time during the
free look period and receive a refund. The free look period begins on the date
the policy is delivered to the policyowner and the policyowner
11
<PAGE> 17
signs for it and ends 20 days later (or such period as may be required by state
law in some cases). If this policy is returned, the policy will be void from the
start and a refund will be made. The amount we refund will equal the greater of
(i) the policy's Cash Value as of the date the policy is returned or (ii) the
premiums paid, less Policy Debt, withdrawals, and applicable fees. The
policyowner can return the policy to our Service Office or to the registered
representative who sold the policy. See "Section V: General Provisions of the
Policy--Free Look Provision."
23. CAN THE POLICYOWNER EXCHANGE THE POLICY?
The policyowner has the right during the first 24 months following the
Issue Date to exchange the policy for a permanent plan of life insurance that we
offer for this purpose. See "Section V: General Provisions of the
Policy--Exchange Privilege."
24. HOW IS A PERSON'S AGE CALCULATED?
When we refer to a person's age in this prospectus on a Policy Anniversary,
we mean the Insured's age on the birthday nearest that date. At any other time,
age means the age on the birthday that is nearest to the date of the most recent
Policy Anniversary.
25. WHEN SHOULD COVERAGE BE PURCHASED UNDER THE SUPPLEMENTARY TERM RIDER OR THE
LEVEL TERM RIDER?
There are a number of important cost and policy differences depending on
whether you purchase death benefit coverage under the base policy only or as a
combination of: (i) base and STR; or (ii) base and LTR. Depending on your
premium funding levels and your priorities, it may be advantageous to maximize
coverage under one of these riders because certain charges may be lower. For a
more detailed discussion, see "Section VI: Additional Information--Additional
Benefits Available By Rider."
12
<PAGE> 18
SECTION III:
CHARGES UNDER THE POLICY
SUMMARY OF FEES AND CHARGES
DEDUCTIONS FROM PREMIUMS
<TABLE>
<CAPTION>
CHARGE AMOUNT DEDUCTED
<S> <C> <C>
Sales Expense Charge Current Guaranteed Maximums
Policy Years 1 through 7
(up to Target Premium) 8% 10%
(premiums in excess of Target Premium) 1% 3%
Policy Years 7 through 10
(up to Target Premium) 3% 5%
(premiums in excess of Target Premium) 0% 3%
Policy Years 11+
(up to Target Premium) 0% 5%
(premiums in excess of Target Premium) 0% 3%
State Tax Charge 2% of each premium (subject to
increase consistent
with changes in
applicable law)
Federal Tax Charge 1.25% of each premium (subject to
increase consistent
with changes in
applicable law)
</TABLE>
DEDUCTIONS FROM ACCUMULATION VALUE
AND FIXED ACCOUNT VALUE (MONTHLY DEDUCTIONS)
<TABLE>
<CAPTION>
CHARGE AMOUNT DEDUCTED
<S> <C> <C>
Monthly Contract Charge Current Guaranteed Maximums
$7.50 $9.00
($90.00 annually) ($108.00 annually)
Cost of Insurance Charge Individualized, depending upon age, gender, policy duration,
- Base Policy Coverage smoker class and underwriting class of the Insured, and whether
- Supplementary Term Rider (optional) any optional riders were selected.
- Level Term Rider (optional)
</TABLE>
DEDUCTIONS FROM THE SEPARATE ACCOUNT
<TABLE>
<CAPTION>
CHARGE
------ AMOUNT DEDUCTED
(as annual percentage
of the average Daily Accumulation Value)
<S> <C> <C>
Mortality and Expense Risk Charge Current Guaranteed Maximums
Policy Years 1 through 10 .60% .90%
Policy Years 11 through 20 .20% .90%
Policy Years 21 and later .10% .90%
</TABLE>
As shown above, we deduct certain charges to compensate for us providing
the insurance benefits under the policy, for the STR and LTR, for administering
the policy, for assuming certain risks and for incurring certain expenses in
distributing the Policy.
13
<PAGE> 19
PORTFOLIO FEES AND EXPENSES
The following chart reflects fees and charges that are provided by the
Funds or their agents, which are based on 1999 expenses and may reflect
estimated charges:
<TABLE>
<CAPTION>
MAINSTAY VP
MAINSTAY VP MAINSTAY VP HIGH YIELD MAINSTAY VP
CAPITAL CASH MAINSTAY VP MAINSTAY VP CORPORATE INTERNATIONAL
APPRECIATION MANAGEMENT CONVERTIBLE GOVERNMENT BOND EQUITY
------------ ----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
FUND ANNUAL EXPENSES AFTER
REIMBURSEMENT (as a % of
average net assets for the
fiscal year ended
December 31, 1999)(a)
Advisory Fees................... 0.36% 0.25% 0.36% 0.30% 0.30% 0.60%
Administration Fees............. 0.20% 0.20% 0.20% 0.20% 0.20% 0.20%
Other Expenses.................. 0.06% 0.06% 0.15% 0.09% 0.07% 0.27%
Total Fund Annual Expenses...... 0.62% 0.51% 0.71% 0.59% 0.57% 1.07%
<CAPTION>
MAINSTAY VP
TOTAL MAINSTAY VP MAINSTAY VP
RETURN VALUE BOND
----------- ----------- -----------
<S> <C> <C> <C>
FUND ANNUAL EXPENSES AFTER
REIMBURSEMENT (as a % of
average net assets for the
fiscal year ended
December 31, 1999)(a)
Advisory Fees................... 0.32% 0.36% 0.25%
Administration Fees............. 0.20% 0.20% 0.20%
Other Expenses.................. 0.06% 0.07% 0.05%
Total Fund Annual Expenses...... 0.58% 0.63% 0.50%
</TABLE>
<TABLE>
<CAPTION>
ALGER ALGER
MAINSTAY VP MAINSTAY VP AMERICAN AMERICAN CALVERT FIDELITY VIP
GROWTH INDEXED LEVERAGED SMALL SOCIAL FIDELITY VIP II EQUITY-
EQUITY EQUITY ALLCAP CAPITALIZATION BALANCED CONTRAFUND INCOME
----------- ----------- --------- -------------- -------- --------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
FUND ANNUAL EXPENSES AFTER
REIMBURSEMENT (as a % of
average net assets for the
fiscal year ended December
31, 1999)(a)
Advisory Fees............... 0.25% 0.10% 0.85% 0.85% 0.43% 0.58% 0.48%
Administration Fees......... 0.20% 0.20% 0.00% 0.00% 0.27% 0.00% 0.00%
Other Expenses.............. 0.04% 0.06% 0.08%(c) 0.05% 0.18%(d) 0.09% 0.09%
Total Fund Annual
Expenses................... 0.49% 0.36% 0.93% 0.90% 0.88%(d) 0.67%(e) 0.57%(e)
<CAPTION>
FIDELITY VIP FIDELITY VIP II FIDELITY VIP FIDELITY VIP
GROWTH INDEX 500 MID CAP OVERSEAS
------------ --------------- ------------ ------------
<S> <C> <C> <C> <C>
FUND ANNUAL EXPENSES AFTER
REIMBURSEMENT (as a % of
average net assets for the
fiscal year ended December
31, 1999)(a)
Advisory Fees............... 0.58% 0.24% 0.57% 0.73%
Administration Fees......... 0.00% 0.00% 0.00% 0.00%
Other Expenses.............. 0.08% 0.10% 0.43%(f) 0.18%
Total Fund Annual
Expenses................... 0.66%(e) 0.34%(e) 1.00%(e) 0.91%(e)
</TABLE>
<TABLE>
<CAPTION>
JANUS ASPEN
JANUS ASPEN JANUS ASPEN SERIES MORGAN STANLEY
SERIES SERIES WORLDWIDE MFS(R) GROWTH MFS(R) UIF EMERGING
AGGRESSIVE GROWTH BALANCED GROWTH WITH INCOME RESEARCH MARKETS
----------------- ----------- ----------- ------------- -------- --------------
<S> <C> <C> <C> <C> <C> <C>
FUND ANNUAL EXPENSES AFTER
REIMBURSEMENT (as a % of
average net assets for the
fiscal year ended December
31, 1999)(a)
Advisory Fees.............. 0.65% 0.65% 0.65% 0.75% 0.75% 0.42%
Administration Fees........ 0.00% 0.00% 0.00% 0.00% 0.00% 0.25%
Other Expenses............. 0.02% 0.02% 0.05% 0.13% 0.11% 1.12%
Total Fund Annual
Expenses.................. 0.67%(g) 0.67%(g) 0.70%(g) 0.88%(h) 0.86%(h) 1.79%(i)
<CAPTION>
MAINSTAY VP MAINSTAY VP MAINSTAY VP
AMERICAN DREYFUS EAGLE ASSET
CENTURY LARGE MANAGEMENT T. ROWE
INCOME & COMPANY GROWTH PRICE EQUITY
GROWTH VALUE EQUITY INCOME
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
FUND ANNUAL EXPENSES AFTER
REIMBURSEMENT (as a % of
average net assets for the
fiscal year ended December
31, 1999)(a)
Advisory Fees.............. 0.50% 0.60% 0.50% 0.85%(j)
Administration Fees........ 0.20% 0.20% 0.20%
Other Expenses............. 0.15%(b) 0.15%(b) 0.15%(b)
Total Fund Annual
Expenses.................. 0.85% 0.95% 0.85% 0.85%
</TABLE>
---------------
(a) The Fund or its agents provided the fees and charges which are based on
1999 expenses and may reflect estimated charges, except for Janus. We have
not verified the accuracy of the information provided by the agents.
(b) "Other Expenses" and "Total Fund Annual Expenses" for the MainStay VP
American Century Income & Growth, MainStay VP Dreyfus Large Company Value
and MainStay VP Eagle Asset Management Growth Equity Portfolios reflect an
expense reimbursement agreement that ended December 31, 1999 limiting "Other
Expenses" to 0.15% annually. In the absence of the expense reimbursement
arrangement, the "Total Fund Annual Expenses" would have been 0.92%, 1.00%
and 0.87% for the MainStay VP American Century Income & Growth, MainStay VP
Dreyfus Large Company Value and MainStay VP Eagle Asset Management Growth
Equity Portfolios, respectively.
(c) Included in "Other Expenses" of the Alger American Leveraged AllCap
Portfolio is .01% of interest expense.
(d) "Other Expenses" reflect an indirect fee. Net fund operating expenses after
reductions for fees paid indirectly would be 0.86%.for Social Balanced
Portfolio. Total expenses have been restated to reflect expenses expected to
be incurred in 2000.
(e) Through arrangements with certain funds or FMR on behalf of certain funds'
custodian, credits realized as a result of uninvested cash balances were
used to reduce a portion of each applicable fund's expenses. Including
these reductions, total operating expenses presented in the table would
have been 0.65% for the Fidelity VIP II Contrafund(R) Portfolio, 0.56% for
the Fidelity VIP Equity-Income Portfolio, 0.65% for the Fidelity VIP Growth
Portfolio, 0.28% for the Fidelity VIP II Index 500 Portfolio, 0.97% for the
Fidelity VIP Mid Cap Portfolio and 0.87% for the Fidelity VIP Overseas
Portfolio.
(f) Effective December 29, 1995, FMR has voluntarily agreed to reimburse the
Initial Class of the Fidelity VIP Mid Cap Portfolio to the extent that
Total Fund Annual Expenses (excluding interest, taxes, certain securities
lending costs, brokerage commissions, and extraordinary expenses), as a
percentage of its average net assets, exceed 1.00%. This arrangement can be
discontinued by FMR at any time. If this arrangement had not been in
effect, Other Expenses would have been 2.77% and Total Fund Annual Expenses
would have been 3.34%.
(g) Expenses are based upon expenses for the fiscal year ended December 31,
1999, restated to reflect a reduction in the management fee for Aggressive
Growth, Worldwide Growth and Balanced portfolios. All expenses are shown
without the effect of expense offset arrangements.
(h) Each series has an expense offset arrangement which reduces the series'
custodian fee based upon the amount of cash maintained by the series with
its custodian and dividend disbursing agent. Each series may enter into
other such arrangements and directed brokerage arrangements, which would
also have the effect of reducing the series' expenses. "Other Expenses" do
not take into account these expense reductions, and are therefore higher
than actual expenses of the series. Had these fee reductions been taken
into account, "Net Expenses" would be lower for certain series and would
equal 0.85% for Research Series and 0.87% for Growth with Income Series.
(i) Morgan Stanley Asset Management has voluntarily agreed to waive its
"Advisory Fees" and/or reimburse the Portfolio, if necessary, to the extent
that the "Total Fund Annual Expenses" of the Portfolio exceeds 1.75% of
average daily net assets. For purposes of determining the amount of the
voluntary advisory fee waiver and/or reimbursement, if any, the portfolio's
annual operating expenses include certain investment related expenses such
as foreign country tax expense and interest expense on amounts borrowed
which were 0.04% of the average daily net assets for 1999. The fee waivers
and reimbursements described above may be terminated by Morgan Stanley
Asset Management at any time without notice. Absent such reductions, it is
estimated that "Advisory Fees", "Administration Fees" and "Total Fund
Annual Expense" would have been 1.25%, 0.25% and 2.62% respectively.
(j) The "Advisory Fees" include the ordinary operating expenses of the Fund.
14
<PAGE> 20
DEDUCTIONS FROM PREMIUMS
When we receive a premium, whether planned or unplanned, we will deduct a
sales expense charge, a state tax charge and a federal tax charge.
CURRENT SALES EXPENSE CHARGE
The sales expense charge is deducted as follows: (1) During each of the
first seven Policy Years, we currently deduct a sales expense charge of 8% from
any premiums paid up to the Target Premium. Once the Target Premium for that
Policy Year has been reached, we currently deduct a sales expense charge of 1%
from any additional premiums paid in that Policy Year. (2) During Policy Years
eight through ten, we currently expect to deduct a sales expense charge of 3%
from any premiums paid up to the Target Premium. Once the Target Premium for
that Policy Year has been reached, we currently do not expect to deduct a sales
expense charge from any additional premiums paid in that Policy Year. (3)
Beginning in the eleventh Policy Year, we currently do not expect to deduct a
sales expense charge from any premiums paid up to the Target Premium for a given
Policy Year, nor do we currently expect to deduct any charge from any premiums
paid in excess of the Target Premium.
GUARANTEED SALES EXPENSE CHARGE
We may change the sales expense charge at any time. During each of the
first seven Policy Years, we guarantee that any sales expense charge we deduct
will never exceed 10% of any premiums paid up to the Target Premium. Once the
Target Premium for that Policy Year has been reached, we will never deduct a
sales expense charge of more than 3% from any additional premiums in that Policy
Year. Beginning in the eighth Policy Year, we guarantee that any sales expense
charge we deduct will never exceed 5% of any premiums paid up to the Target
Premium. Once the Target Premium for that Policy Year has been reached, we will
never deduct a sales expense charge of more than 3% from any additional premiums
paid in that Policy Year.
We reserve the right to increase this charge in the future, but it will
never exceed the maximums as stated above. The amount of the sales expense
charge in a Policy Year is not necessarily related to our actual sales expenses
for that particular year. To the extent that the sales expense charge does not
cover sales expenses, they will be recovered from NYLIAC surplus, including any
amounts derived from the mortality and expense risk charge and the cost of
insurance charge.
STATE TAX CHARGE
Various states and jurisdictions impose a tax on premiums received by
insurance companies. State tax rates vary from state to state and currently
range from 0.5% to 3.5%. We deduct 2% of each premium to cover state taxes. Two
percent represents the approximate average of the taxes assessed by the states,
and will be assessed uniformly to all policies. We reserve the right to increase
this charge consistent with changes in applicable law. In Oregon, this charge is
referred to as a "State Tax Charge Back," and the rate may not be changed for
the life of the policy.
FEDERAL TAX CHARGE
NYLIAC's federal tax obligations will increase based upon premiums received
under the policies. We deduct 1.25% of each premium to cover this federal tax
charge. We reserve the right to change this charge consistent with changes in
applicable law.
DEDUCTIONS FROM ACCUMULATION VALUE AND FIXED ACCOUNT VALUE
On each Monthly Deduction Day, we deduct a monthly contract charge and a
cost of insurance charge (which may include a charge for the cost of any
additional riders, if selected by the policyowner). The first Monthly Deduction
Day will be the monthly anniversary of the Policy Date on or following the Issue
Date. If the Policy Date is prior to the Issue Date, the deductions made on the
first Monthly Deduction Day will cover the period from the Policy Date until the
first Monthly Deduction Day. We deduct these charges from the policy's Cash
Value in each Investment Division and the Fixed Account in proportion to the
policy's Cash Value in each.
15
<PAGE> 21
MONTHLY CONTRACT CHARGE
The monthly charge, currently equal to $7.50 ($90.00 annually), compensates
us for costs incurred in providing certain administrative services including
premium collection, record-keeping, processing claims and communicating with
Policyowners. This charge is not designed to produce a profit. If the cost of
providing these administrative services increases, we reserve the right to
increase this charge, subject to a maximum of $9.00 monthly ($108.00 annually).
COST OF INSURANCE CHARGE
A charge for the cost of insurance is deducted on each Monthly Deduction
Day. Maximum cost of insurance rates are set forth on page 2.2 of your policy.
The current rates are based on the gender, smoker class, policy duration,
underwriting class and issue age of the Insured. We may change the current cost
of insurance rates based on changes in future expectations of such factors as
mortality, investment income, expenses, and persistency. The cost of insurance
charge for any month will equal:
a*(b - c)
Where: a = the applicable cost of insurance rate
b = the number of thousands of death benefit as of the Monthly
Deduction Day divided by 1.0032737
c = the number of thousands of Cash Surrender Value as of the
Monthly Deduction Day (before this cost of insurance charge,
but after the monthly contract charge and any charges for
riders are deducted).
For insureds rated sub-standard risks, an additional charge may be assessed
as part of the cost of insurance charge. Any additional flat extra charges
(which might apply to certain insureds based on our underwriting) and charges
for optional benefits added by rider will also be deducted on each Monthly
Deduction Day.
The monthly cost of insurance for any additional riders will also be
deducted, on each Monthly Deduction Day.
DEDUCTIONS FROM THE SEPARATE ACCOUNT
MORTALITY AND EXPENSE RISK CHARGE
We charge the Investment Divisions for the mortality and expense risks we
assume. We deduct the mortality and expense risk charge on a daily basis. For
Policy Years one through ten, we currently charge an annual rate of .60% of the
average daily net asset value of each Investment Division's assets. For Policy
Years eleven through twenty, we currently expect to reduce this charge to an
annual rate of .20% of the average daily net asset value of each Investment
Division's assets. For Policy Years twenty-one and later, we currently expect to
reduce this charge to an annual rate of .10% of the average daily net asset
value of each Investment Division's assets. At our option, we may change the
mortality and expense risk charge, subject to a maximum annual rate of .90%.
The mortality risk we assume is that the group of lives insured under our
policies may, on average, live for shorter periods of time than we estimated.
The expense risk we assume is that our costs of issuing and administering
policies may be more than we estimated.
If these charges are insufficient to cover actual costs and assumed risks,
the loss will be deducted from the NYLIAC surplus. Conversely, if the charge
proves more than sufficient, any excess will be added to the NYLIAC surplus. We
may use these funds for any corporate purpose, including expenses relating to
the sale of the policies, to the extent that surrender charges do not adequately
cover sales expenses.
OTHER CHARGES FOR FEDERAL INCOME TAXES
We reserve the right to make a charge for Separate Account federal income
tax liabilities, should the law change to require the taxation of separate
accounts. See "Section VI: Additional Information--Federal Income Tax
Considerations."
16
<PAGE> 22
FUND CHARGES
Each Investment Division of the Separate Account purchases shares of the
corresponding Portfolio at net asset value. The net asset value reflects the
investment advisory fees, administration fees and other expenses that are
deducted from the assets of the Portfolios. The Portfolios do not impose a sales
charge. The advisory fees and other expenses are not fixed or specified under
the terms of the policy, and they may vary from year to year. These fees and
expenses are described in the Funds' prospectuses.
HOW THE POLICY WORKS
This example is based on the charges applicable to a policy during the
first Policy Year, issued on a medically underwritten, non-smoking Insured male,
issue age 45, with an initial Face Amount of $350,000, with a Target Premium of
$18,407, who has selected Life Insurance Benefit Option 1 and the guideline
premium test, assuming current charges and a 6% hypothetical gross annual
investment return, which results in a net annual investment return of 4.57% for
Policy Years 1-10, 4.99% for Policy Years 11-20 and 5.09% for Policy Years 21
and later :
<TABLE>
<S> <C> <C>
Premium Paid......................................................... $ 7,500
less: Below Target Premium Sales Expense Charge................... 600.00
Above Target Premium Sales Expense Charge................... 0.00
State Tax Charge (2%)....................................... 150.00
Federal Tax Charge (1.25%).................................. 93.75
---------
equals: Net Premium................................................. $6,656.25
less: Monthly contract charge
(7.50 per month)............................................ 90.00
less: Charges for cost of insurance
(varies monthly)............................................ 484.75
plus: Net investment performance
(varies daily).............................................. 290.03
---------
equals: Cash Value.................................................. $6,371.53
If in Policy Years 1 -- 4
Plus: Premium paid in that Policy Year............................. 7,500.00
Less corresponding Net Premium..................................... 6,656.25
---------
Equals: Cash Surrender Value....................................... $7,215.28
</TABLE>
17
<PAGE> 23
SECTION IV:
THE SEPARATE ACCOUNT, THE FUNDS AND THE FIXED ACCOUNT
THE SEPARATE ACCOUNT
The Separate Account was established under the laws of Delaware as of May
24, 1996, pursuant to resolutions of the NYLIAC Board of Directors. The Separate
Account is registered as a unit investment trust with the SEC under the
Investment Company Act of 1940 (the "1940 Act"), but such registration does not
mean that the SEC supervises the management, or the investment practices or
policies, of the Separate Account.
Although the assets of the Separate Account belong to NYLIAC, they are held
separately from the other assets of NYLIAC. The Separate Account's assets are
not chargeable with liabilities incurred in any of NYLIAC's other business
operations (except to the extent that assets in the Separate Account exceed the
reserves and other liabilities of that Account). The income, capital gains and
capital losses incurred on the assets of the Separate Account are credited to,
or are charged against, the assets of the Separate Account, without regard to
the income, capital gains or capital losses arising out of any other business
NYLIAC may conduct. NYLIAC may accumulate in the Separate Account the charge for
mortality and expense risks, monthly charges assessed against the policy and
investment results applicable to those assets that are in excess of net assets
supporting the policies.
The Separate Account currently has 30 Investment Divisions, each of which
invests solely in a corresponding Portfolio of the relevant Fund. We may,
subject to any required regulatory approvals, add or delete Investment Divisions
at our discretion.
YOUR VOTING RIGHTS
Because we own the assets of the Separate Account, we are the legal owner
of the shares and, as such, have the right to vote on certain matters. Among
other things, we may vote:
- to elect the Boards of Directors/Trustees of the Funds;
- to ratify the selection of independent auditors for the Funds; and
- on any other matters described in the Funds' current prospectuses or
requiring a vote by shareholders under the 1940 Act.
The Funds are not required to and typically do not hold annual shareholder
meetings. Whenever a shareholder vote is taken, we will give policyowners the
opportunity to instruct us how to vote the number of shares attributable to
their policies. If we do not receive instructions in time from all policyowners,
we will vote the shares of a Portfolio for which no instructions have been
received in the same proportion as we vote shares of that Portfolio for which we
have received instructions.
The policyowner holds a voting interest in each Investment Division to
which Cash Value is allocated. The number of votes which are available to a
policyowner will be calculated separately for each Investment Division and will
be determined by dividing the Accumulation Value attributable to an Investment
Division by the net asset value per share of the applicable Portfolios.
OUR RIGHTS
We reserve the right to take certain actions in connection with the
operation of the Separate Account. These actions will be taken in accordance
with applicable laws (including obtaining any required approval of the SEC). If
necessary, we will seek policyowner approval.
Specifically, we reserve the right to:
- substitute, add or remove any Investment Division;
- create new separate accounts;
- combine the Separate Account with one or more other separate accounts;
- operate the Separate Account as a management investment company or in any
other form permitted by law;
18
<PAGE> 24
- deregister the Separate Account;
- manage the Separate Account under the direction of a committee or
discharge such committee at any time;
- transfer the assets of the Separate Account to one or more other separate
accounts; and
- restrict or eliminate any of the voting rights of policyowners or other
persons who have voting rights as to the Separate Account.
THE FUNDS AND THE PORTFOLIOS
The Separate Account currently invests in 30 Portfolios of nine Funds. The
Portfolios of each Fund, along with their investment objectives, are listed in
the following table. The Funds' prospectuses contain more information about each
Portfolio, including its portfolio manager.
The assets of each Portfolio are separate from the others and each
Portfolio has different investment objectives and policies. As a result, each
Portfolio operates as a separate investment fund and the investment performance
of one Portfolio has no effect on the investment performance of any other
Portfolio. Portfolios described in this prospectus are different from portfolios
available directly to the general public. Investment results may differ.
<TABLE>
<CAPTION>
FUND PORTFOLIOS INVESTMENT OBJECTIVES
---- ---------- ---------------------
<S> <C> <C>
MainStay VP Series Fund, Inc. MainStay VP Capital Appreciation long-term growth of capital
MainStay VP Cash Management as high a level of current income as
is considered consistent with the
preservation of capital and
liquidity
MainStay VP Convertible capital appreciation together with
current income
MainStay VP Government high level of current income,
consistent with safety of principal
MainStay VP High Yield Corporate Bond maximum current income
MainStay VP International Equity long-term growth of capital and, as a
secondary objective, current income
MainStay VP Total Return current income consistent with
reasonable opportunity for future
growth of capital and income
MainStay VP Value maximum long-term total return from a
combination of capital growth and
income
MainStay VP Bond highest income over the long term
consistent with preservation of
principal
MainStay VP Growth Equity long-term growth of capital, with
income as a secondary consideration
MainStay VP Indexed Equity to provide investment results that
correspond to the total return
performance (and reflect
reinvestment of dividends) of
publicly traded common stocks
represented by the S&P 500(R) Index
American Century Income & Growth dividend growth, current income and
capital appreciation
Dreyfus Large Company Value capital appreciation
</TABLE>
19
<PAGE> 25
<TABLE>
<CAPTION>
FUND PORTFOLIOS INVESTMENT OBJECTIVES
---- ---------- ---------------------
<S> <C> <C>
MainStay VP Series Fund, Inc. Eagle Asset Management Growth Equity growth through long-term capital
appreciation
The Alger American Fund Alger American Small Capitalization long-term capital appreciation
Alger American Leveraged AllCap long-term capital appreciation
Calvert Variable Series, Inc Calvert Social Balanced competitive total return
Fidelity Variable Insurance Products Fidelity VIP Equity-Income reasonable current income and
Fund long-term capital appreciation
Fidelity VIP Growth capital appreciation
Fidelity VIP Mid-Cap long-term growth of capital
Fidelity VIP Overseas long-term growth of capital
Fidelity Variable Insurance Products Fidelity VIP II Contrafund(R) long-term capital appreciation
Fund II
Fidelity VIP II Index 500 investment results that correspond to
the total return of common stocks
as represented by the S&P 500 Index
Janus Aspen Series Janus Aspen Series Balanced long-term capital growth, consistent
with preservation of capital and
balanced by current income
Janus Aspen Series Worldwide Growth long-term growth of capital in a
manner consistent with the
preservation of capital
Janus Aspen Series Aggressive Growth long-term growth of capital
MFS(R) Variable Insurance Trust(SM) MFS(R) Growth with Income Series reasonable current income and
long-term growth of capital and
income
MFS(R) Research Series long-term growth of capital and
future income
The Universal Institutional Funds, Morgan Stanley UIF Emerging Markets long-term capital appreciation
Inc. Equity
T. Rowe Price Equity Series, Inc. T. Rowe Price Equity Income substantial dividend income and also
long-term capital appreciation
</TABLE>
The S&P 500(R) is an unmanaged index considered representative of the U.S.
stock market. The MainStay VP Indexed Equity Portfolio and the Fidelity VIP II
Index 500 Portfolio are neither sponsored by nor affiliated with the S&P 500(R).
Standard & Poor's(R), S&P 500(R), "S&P(R)"; "Standard & Poor's 500" and "500"
are trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use
by Monitor Capital Advisors LLC and Fidelity Management and Research Company.
S&P does not sponsor, endorse, sell or promote the MainStay VP Indexed Equity
Portfolio or the Fidelity VIP II Index 500 Portfolio or represent the
advisability of investing in the Portfolios.
------------------------
Additional information concerning the Funds, investment objectives and
policies of the Portfolios, the risks associated with such objectives and
policies, investment advisory services and charges can be found in the current
prospectuses for the Funds, each of which is attached to this prospectus. The
prospectuses of the Funds should be read carefully before any decision is made
concerning the allocation of premiums to an Investment Division.
20
<PAGE> 26
The Funds' shares may also be available to certain separate accounts
funding variable annuity contracts offered by NYLIAC. This is called "mixed
funding." Except for the MainStay VP Series Fund, shares of all other Funds may
also be available to separate accounts of insurance companies unaffiliated with
NYLIAC. This is called "shared funding." Although we do not anticipate any
inherent difficulties arising from mixed and shared funding, it is theoretically
possible that, due to differences in tax treatment or other considerations, the
interests of owners of various contracts participating in a certain Fund might
at some time be in conflict. The Board of Directors/Trustees of each Fund, each
Fund's investment adviser(s) and NYLIAC are required to monitor events to
identify any material conflicts that arise from the use of the Funds for mixed
and shared funding. For more information about the risks of mixed and shared
funding, please refer to the relevant Fund prospectus.
We provide certain services to policyowners in connection with investment
of premiums in the Investment Divisions, which, in turn, invest in the
Portfolios. These services include, among others, providing information about
the Portfolios. We receive a service fee from the investment advisers or other
service providers of some of the Funds in return for providing services of this
type. Currently, we receive service fees at annual rates ranging from .10% to
.21% of the aggregate net asset value of the shares of some of the Portfolios
held by the Investment Divisions.
NYLIAC retains the right, subject to any applicable law, to make additions
to, deletions from, or substitutions for, the Portfolio shares held by any
Investment Division. NYLIAC reserves the right to eliminate the shares of any of
the Portfolios and to substitute shares of another portfolio of the Funds, or of
another registered open-end management investment company. We may do this if the
shares of the Portfolios are no longer available for investment or if we believe
investment in any Portfolio would become inappropriate in view of the purposes
of the Separate Account. To the extent required by the law, substitutions of
shares attributable to a policyowner's interest in an Investment Division will
not be made until the policyowner has been notified of the change.
THE FIXED ACCOUNT
We credit amounts in the Fixed Account with interest at fixed rates subject
to a minimum guarantee. Funds in the Fixed Account are part of NYLIAC's general
account. NYLIAC has sole discretion to invest the assets of the Fixed Account
subject to applicable law. The Fixed Account is not registered under the federal
securities laws as an investment company and interests in the Fixed Account are
not registered under the federal securities laws. Accordingly, neither the Fixed
Account nor any interests in the Fixed Account are subject to the provisions of
these statutes. NYLIAC has been advised that the staff of the SEC has not
reviewed the disclosures in this prospectus relating to the Fixed Account. These
disclosures regarding the Fixed Account may, however, be subject to certain
applicable provisions of the federal securities laws relating to the accuracy
and completeness of statements made in prospectuses.
INTEREST CREDITING
Any amounts in the Fixed Account are credited with interest using a fixed
interest rate, which we will declare periodically. We will set this rate in
advance at least annually. This rate will never be less than 3% per year.
Currently, we expect that this rate will be determined from a base interest rate
(x%) which may be less than 3% per year as shown below.
<TABLE>
<CAPTION>
POLICY YEAR FIXED INTEREST RATE
<S> <C> <C>
1 - 10 greater of x% or 3%
11 - 20 greater of x% +.40% or 3%
20 + greater of x% +.50% or 3%
</TABLE>
Interest accrues daily and is credited on each Monthly Deduction Day. All
Net Premiums applied to, and amounts transferred to, less amounts withdrawn,
transferred from or charged against the Fixed Account receive the rate in effect
at that time.
INVESTMENT RETURN
The investment return of a Policy is based on:
- the Accumulation Units held in each Investment Division for that policy;
- the investment experience of each Investment Division as measured by its
actual net rate of return;
21
<PAGE> 27
- the interest rate credited on amounts held in the Fixed Account; and
- the interest rate credited on amounts held in the Loan Account, if any.
The investment experience of an Investment Division reflects increases or
decreases in the net asset value of the shares of the underlying Portfolio, any
dividend or capital gains distributions declared by the Funds, and the policy's
mortality and expense risk charge. These performance figures do not reflect any
other policy charges, and, if they did, the returns shown would be reduced.
PERFORMANCE CALCULATIONS
From time to time, we may advertise the performance of the Investment
Divisions. These performance figures do not include contract charges such as the
policy service fee, sales expense charge, tax charges, cost of insurance, and
rider charges.
Performance data for the Investment Divisions may be compared, in
advertisements, sales literature and reports to shareholders, to: (i) the
investment returns on various mutual funds, stocks, bonds, certificates of
deposit, tax free bonds or common stock and bond indexes; and (ii) other groups
of variable annuity separate accounts or other investment products tracked by
Lipper Analytical Services, a widely used independent research firm which ranks
mutual funds and other investment companies by overall performance, investment
objectives, and assets, or tracked by other services, companies, publications or
persons who rank such investment companies on overall performance or other
criteria.
Reports and promotional literature may also contain the ratings New York
Life and NYLIAC have received from independent rating agencies. New York Life
and NYLIAC are among only a few companies that have consistently received among
the highest possible ratings from the four major independent rating companies:
A.M. Best and Moody's (for financial stability and strength) and Standard and
Poor's and Duff & Phelps (for claims paying ability). However, neither New York
Life nor NYLIAC guarantees the investment performance of the Investment
Divisions.
We may also advertise a hypothetical illustration of policy values,
including all contract charges.
22
<PAGE> 28
SECTION V:
GENERAL PROVISIONS OF THE POLICY
This section of the prospectus describes the general provisions of the
policy, and is subject to the terms of the policy. You may review a copy of the
policy upon request.
WHEN LIFE INSURANCE COVERAGE BEGINS
Insurance coverage under the policy will begin on the later of the date the
policy is approved by our underwriters or the date we receive the first premium
payment. However, in no event will coverage begin prior to the Policy Date.
PREMIUMS
While the policy is in force, the policyowner may make premium payments at
any time while the Insured is living and before the policy anniversary on which
the Insured is age 100. Subject to certain restrictions, the policyowner may
make premium payments at any interval and by any method we make available.
Premiums must be sent to our Premium Remittance Center or to the address
indicated for payment on the premium notice. The policyowner selects a premium
schedule in the application and this amount, along with the amount of the first
premium, is set forth on page two of the policy. The policyowner may elect not
to make a planned premium payment at any time.
The policyowner may also make other premium payments that are not planned.
If an unplanned premium payment would result in an increase in the death benefit
greater than the increase in the Cash Surrender Value, we reserve the right to
require proof of insurability before accepting that payment and applying it to
the policy. We also reserve the right to limit the number and amount of any
unplanned premiums.
There is no penalty if a planned premium is not paid, since premiums, other
than the first premium, are not specifically required. Paying planned premiums,
however, does not guarantee coverage for any period of time, unless the GMDB is
in effect as described later in this section under Death Benefit Under the
Policy -- The Guaranteed Minimum Death Benefit. Instead, the duration of the
policy depends upon the policy's Cash Surrender Value, less any Policy Debt.
No premium, planned or unplanned, may be an amount that would jeopardize
the policy's qualification as life insurance under Section 7702 of the Internal
Revenue Code.
PAYMENTS RETURNED FOR INSUFFICIENT FUNDS
If your premium payment is returned for insufficient funds, we reserve the
right to reverse the investment options chosen and charge you a $20.00 fee for
each returned payment. In addition, the Fund may also redeem shares to cover any
losses it incurs as a result of a returned payment. If payment by check is
returned for insufficient funds for two consecutive periods, the privilege to
pay by check or electronically will be suspended until you notify us to
reinstate it and we agree.
TERMINATION
If, on a Monthly Deduction Day, the Cash Surrender Value less any Policy
Debt is less than the amount of the charges to be deducted for the next policy
month and the GMDB is not in effect, the policy will go into default status. The
policy will continue for a late period of 62 days commencing with the current
Monthly Deduction Day. If we do not receive a premium sufficient to take the
policy out of default status before the end of the late period, the policy will
lapse and terminate and there will be no Cash Value or death benefit.
We will mail a notice to the policyowner at his or her last known address,
and a copy to the last known assignee on our records, at least 31 days before
the end of the late period. During the late period, the policy remains in force.
If the Insured dies during the late period, we will pay the death benefit.
However, these proceeds will be reduced by the amount of any Policy Debt and the
amount of the charges to be deducted on each Monthly Deduction Day from the
beginning of the late period through the policy month in which the Insured dies.
The GMDB may provide protection from policy lapse and termination under
certain circumstances. See discussion later in this section under Death Benefit
Under the Policy--The Guaranteed Minimum Death
23
<PAGE> 29
Benefit. A policyowner also can apply to reinstate the policy, under certain
circumstances. See "Section VI: Additional Information--Reinstatement Option."
DEATH BENEFIT UNDER THE POLICY
The death benefit is the amount payable to the named Beneficiary when the
Insured dies. Upon receiving due proof of death at our Service Office, we will
pay the Beneficiary the death benefit determined as of the date the Insured
dies, less any Policy Debt and charges incurred and not yet deducted. All or
part of the death benefit can be paid in cash or applied under one or more of
our payment options described under "Section VI: Additional Information--Payment
Options."
The amount of the death benefit is determined by the Life Insurance Benefit
Option the policyowner has chosen. The policyowner may choose one of three Life
Insurance Benefit Options:
(1) Life Insurance Benefit Option 1 provides a death benefit equal to the
greater of (i) the Face Amount of the policy or (ii) a percentage of the Cash
Surrender Value equal to the minimum necessary for this policy to qualify as
life insurance under Section 7702 of the Internal Revenue Code, as amended.
(2) Life Insurance Benefit Option 2 provides a death benefit equal to the
greater of (i) the Face Amount of the policy plus the Cash Value or (ii) a
percentage of the Cash Surrender Value equal to the minimum necessary for this
policy to qualify as life insurance under Section 7702 of the Internal Revenue
Code, as amended.
(3) Life Insurance Benefit Option 3 provides a death benefit equal to the
greater of (i) the Face Amount of the policy plus the Cumulative Premium Amount
or (ii) a percentage of the Cash Surrender Value equal to the minimum necessary
for this policy to qualify as life insurance under Section 7702 of the Internal
Revenue Code, as amended.
The value of any additional benefits provided by rider is added to the
amount of the death benefit. We pay interest on the death benefit from the date
of death to the date the death benefit is paid or a payment option becomes
effective. The interest rate equals the rate determined under the Interest
Payment Option as described in "Section VI: Additional Information--Payment
Options." We subtract any Policy Debt and any charges incurred but not yet
deducted, and then credit the interest on the balance.
Beginning on the policy anniversary on which the Insured is age 100, the
Face Amount, as shown on page 2 of the policy, will no longer apply. Instead,
the death benefit under the policy will equal the Cash Value. We will reduce the
amount of the death benefit proceeds by any Policy Debt. Also, no further
monthly deductions will be made for cost of insurance.
THE GUARANTEED MINIMUM DEATH BENEFIT
During the first 5 Policy Years, the GMDB provides a guaranteed minimum
level of death benefit protection which is equal to the policy's Face Amount,
less the undeducted portion of any monthly deduction charges. If on any Monthly
Deduction Day, the premium requirement is met and the policy's Cash Surrender
Value less any Policy Debt is not enough to cover the required monthly deduction
charges, we will deduct as much as is available from the Cash Surrender Value
and include the undeducted portion with the required charges due on the next
Monthly Deduction Day.
This benefit will remain in effect during the first 5 Policy Years if the
premium requirement is met. If the STR or LTR is included in the policy at
issue, this benefit will not be in effect.
On each Monthly Deduction Day, the Cumulative Premium Amount less Policy
Debt must equal or exceed the cumulative sum of all the required monthly GMDB
Premiums from the Policy Date up to and including that Monthly Deduction Day.
Once the premium requirement is not met, this benefit will end and cannot be
reinstated.
The required monthly GMDB premium is disclosed on page 2 of the policy, but
may change as a result of a change to the policy.
SELECTION OF LIFE INSURANCE BENEFIT TABLE
Under any of the Life Insurance Benefit Options, the death benefit cannot
be less than the policy's Cash Surrender Value times a percentage determined
from the appropriate Internal Revenue Code Section 7702 table. The policyowner
may choose either the "Corridor" table or the "CVAT" table, before the policy is
24
<PAGE> 30
issued. The death benefit will vary depending on which table is selected. If the
policyowner does not choose a table, the Corridor table will be used. Once the
policy is issued, the policyowner may not change to a different table. You can
find the table that contains the percentages in the Policy Data pages.
Under Internal Revenue Code Section 7702, a policy may be treated as life
insurance for federal tax purposes if at all times it meets either (1) a
"guideline premium" test and a "cash value corridor" test or (2) a "cash value
accumulation" test. The Corridor table is designed to meet the cash value
corridor test while the CVAT table is designed to meet the cash value
accumulation test. A policy using the Corridor table must also satisfy the
"guideline premium" test of Code Section 7702, which test limits the amount of
premiums that may be paid into the policy.
Also, because the percentages used for a corridor test under the guideline
premium test are lower than under the cash value accumulation test, a guideline
premium/cash value corridor policy must attain a higher level of Cash Value
before the relevant Internal Revenue Code table will result in an automatic
death benefit increase. Any such automatic increase in death benefit can result
in additional cost of insurance charges. Therefore, a cash value accumulation
test policy is more likely to incur such additional charges.
THE EFFECT OF INVESTMENT PERFORMANCE ON THE DEATH BENEFIT
Positive investment experience in the Investment Divisions may result in a
death benefit that will be greater than the Face Amount, but negative investment
experience will never result in a death benefit that will be less than the Face
Amount, so long as the policy remains in force.
Example 1: The following example shows how the death benefit varies as a
result of investment performance on a policy, assuming that Life Insurance
Benefit Option 1 and the Corridor Table have been selected, and that the Insured
is a male non-smoker, and assuming that the age at death is 45:
<TABLE>
<CAPTION>
POLICY A POLICY B
-------- --------
<S> <C> <C>
(1) Face Amount............................................. $100,000 $100,000
(2) Cash Value on Date of Death............................. $ 50,000 $ 40,000
(3) Percentage on Date of Death from Corridor Table......... 215% 215%
(4) Cash Value multiplied by Percentage from Corridor
Table..................................................... $107,500 $ 86,000
(5) Death Benefit = Greater of (1) and (4).................. $107,500 $100,000
</TABLE>
Example 2: The following example shows how the death benefit varies as a
result of investment performance on a policy, assuming that Life Insurance
Benefit Option 1 and the CVAT Table have been selected and that the Insured is a
male non-smoker, and assuming that the age at death is 45:
<TABLE>
<CAPTION>
POLICY A POLICY B
-------- --------
<S> <C> <C>
(1) Face Amount............................................. $100,000 $100,000
(2) Cash Value on Date of Death............................. $ 50,000 $ 30,000
(3) Percentage on Date of Death from CVAT Table............. 307% 307%
(4) Cash Value multiplied by Percentage from CVAT Table..... $153,500 $ 92,100
(5) Death Benefit = Greater of (1) and (4).................. $153,500 $100,000
</TABLE>
FACE AMOUNT CHANGES
The policyowner can apply in writing to increase the Face Amount of the
policy. In addition, on or after the first policy anniversary, the policyowner
can apply in writing to decrease the Face Amount of the policy. The policyowner
can change the Face Amount while the Insured is living, but only if the policy
will continue to qualify as life insurance under Internal Revenue Code Section
7702 after the change is made. An increase or decrease in Face amount will cause
a corresponding change in the required GMDB premium and the Target Premium.
The amount of an increase in Face Amount is subject to our maximum
retention limits. We require evidence of insurability that is satisfactory to us
for an increase. If this evidence results in a change of underwriting class, we
will issue a new policy for the amount of the increase. We reserve the right to
limit increases. Any increase will take effect on the Monthly Deduction Day on
or after the Business Day we approve the policyowner's request for the increase.
An increase in Face Amount may increase the cost of insurance charge. The
minimum amount allowed for an increase in Face Amount is $1,000.
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<PAGE> 31
The policyowner may also request decreases in coverage. A decrease in Face
Amount is effective on the Monthly Deduction Day on or after the Business Day we
receive the policyowner's signed request for the decrease in a form acceptable
to us at our Service Office. The decrease will first be applied to reduce the
most recent increase in Face Amount. It will then be applied to reduce other
increases in the Face Amount and then to the initial Face Amount in the reverse
order in which they took place. Decreases are subject to the minimum Face Amount
of $25,000. The minimum amount allowed for a decrease in Face Amount is $1,000.
LIFE INSURANCE BENEFIT OPTION CHANGES
On or after the first Policy Anniversary, the policyowner can change the
Life Insurance Benefit Option. However, option changes to Option 3 will not be
allowed at any time. We reserve the right to limit the number of changes in the
Life Insurance Benefit Option. Any change will take effect on the Monthly
Deduction Day on or after the date we approve the policyowner's signed request.
The Face Amount of the policy after a change in option will be an amount that
results in the death benefit after the change being equal to the death benefit
before the change. For example, if the policyowner changes from Option 1 to
Option 2, the Face Amount of the policy will be decreased by the Cash Value. If
the policyowner changes from Option 2 to Option 1, the Face Amount of the policy
will be increased by the Cash Value. We reserve the right to limit changes in
the Life Insurance Benefit Option that would cause the Face Amount to fall below
our minimum amount requirements.
CASH VALUE AND CASH SURRENDER VALUE
CASH VALUE
After the free look period, the Cash Value of the policy is the sum of the
Accumulation Value in the Separate Account, the value in the Fixed Account and
the value in the Loan Account.
CASH SURRENDER VALUE
The policy may be surrendered for its Cash Surrender Value, less any Policy
Debt, at any time before the Insured dies. Unless a later effective date is
selected, the surrender is effective on the Business Day we receive a signed
surrender request in proper form at our Service Office. All insurance will end
on the date we receive your request for a full surrender at our office. At any
time during the first 4 Policy Years, the Cash Surrender Value is the Cash Value
plus any premiums paid during the Policy Year less the corresponding Net
Premiums for that Policy Year. For Policy Years 5 and later, the Cash Surrender
Value is the Cash Value.
TRANSFERS
All or part of the Cash Value may be transferred among Investment Divisions
or from an Investment Division to the Fixed Account. Transfers may also be made
from the Fixed Account to the Investment Divisions in certain situations. If,
after the transfer, the value of the remaining Accumulation Units in an
Investment Division or the value in the Fixed Account would be less than $500,
we have the right to include that amount as part of the transfer.
The minimum amount that can be transferred from one Investment Division to
another Investment Division or to the Fixed Account, is the lesser of (i) $500
or (ii) the value of the Accumulation Units in the Investment Division from
which the transfer is being made, unless we agree otherwise. If, after the
transfer, the value of the remaining Accumulation Units in an Investment
Division or the value in the Fixed Account would be less than $500, we have the
right to include that amount in the transfer. There is no charge for the first
twelve transfers in any one Policy Year. NYLIAC reserves the right to charge $30
for each transfer in excess of twelve per year. This charge will be applied on a
pro-rata basis to the Allocation Alternatives to which the transfer is being
made.
In each Policy Year, the policyowner may make one transfer from the Fixed
Account to the Investment Divisions, subject to the following three conditions:
1. Maximum Transfer. An amount not greater than 10% of the value in
the Fixed Account at the beginning of the Policy Year may be transferred
during that Policy Year. During the retirement year ((i) the Policy Year
following the Insured's 65th birthday; (ii) the date you indicate in the
application; or (iii) another date if we approve) only, the 10% maximum
transfer limitation does not apply.
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<PAGE> 32
2. Minimum Transfer. The minimum amount that may be transferred is
$500, unless we agree otherwise.
3. Minimum Remaining Value. The value remaining in the Fixed Account
after the transfer must be at least $500. If the remaining value would be
less than $500, we have the right to include that amount as part of the
transfer.
Transfer requests must be made in writing on a form we have approved.
Transfers to or from Investment Divisions will be made based on the Accumulation
Unit values on the Business Day on which NYLIAC receives the transfer request.
DOLLAR COST AVERAGING
Dollar Cost Averaging is a systematic method of investing which allows you
to purchase shares of the Investment Divisions at regular intervals in fixed
dollar amounts so that the cost of your shares is averaged over time and over
various market cycles. The main objective of Dollar Cost Averaging is to achieve
an average cost per share that is lower than the average price per share in a
fluctuating market. Because you transfer the same dollar amount to a given
Investment Division on each transfer, you purchase more units in an Investment
Division if the value per unit is low and fewer units if the value per unit is
high. Therefore, you may achieve a lower than average cost per unit if prices
fluctuate over the long term. Similarly, for each transfer out of an Investment
Division, you sell more units in an Investment Division if the value per unit is
low and fewer units if the value per unit is high. Dollar Cost Averaging does
not assure growth or protect against a loss in declining markets.
If you decide to use the Dollar Cost Averaging feature, we will ask you to
specify:
- the dollar amount you want to have transferred (minimum transfer $100);
- the Investment Division you want to transfer money from;
- the Investment Division(s) and/or Fixed Account you want to transfer
money to;
- the date on which you want the transfers to be made, within limits; and
- how often you would like the transfers made, either monthly, quarterly,
semi-annually or annually.
You are not allowed to make Dollar Cost Averaging transfers from the Fixed
Account, but you can make Dollar Cost Averaging transfers into the Fixed
Account. We do not count Dollar Cost Averaging transfers against any limitations
we may impose on the number of free transfers.
We will make all Dollar Cost Averaging transfers on the date you specify,
or on the next business day. You may specify any day of the month with the
exception of the 29th, 30th or 31st of a month. We will not process a Dollar
Cost Averaging transfer unless we have received a written request at the Service
Office at the address listed on the cover page of this prospectus (or any other
address we indicate to you in writing). We must receive this request at least
one week before the date Dollar Cost Averaging transfers are scheduled to begin.
The minimum Cash Value required to elect this option is $2,500. We will
automatically suspend this feature if the Cash Value is less than $2,000 on a
transfer date. Once the Cash Value equals or exceeds this amount, the Dollar
Cost Averaging transfers will automatically resume as scheduled.
You may cancel the Dollar Cost Averaging option at any time by written
request. You may not elect Dollar Cost Averaging if you have chosen Automatic
Asset Reallocation. However, you have the option of alternating between these
two policy features.
This option is available to you at no additional cost.
AUTOMATIC ASSET REALLOCATION
If you choose the Automatic Asset Reallocation feature, we will
automatically reallocate your assets among the Investment Divisions in order to
maintain a pre-determined percentage invested in the Investment Division(s) you
have selected. For example, you could specify that 50% of the amount you have in
the Separate Account be allocated to a particular Investment Division and the
other 50% be allocated to another Investment Division. Over time, the variations
in each of these Investment Division's investment results would cause this
balance to shift. If you elect the Automatic Asset Reallocation feature, we will
automatically
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<PAGE> 33
reallocate the amounts you have in the Separate Account among the various
Investment Divisions so that they are invested in the percentages you specify.
You can choose to schedule the investment reallocations quarterly,
semi-annually or annually, but not on a monthly basis. The minimum Cash Value
you must have allocated to the Separate Account in order to elect this option is
$2,500. We will automatically suspend this feature if the Cash Value is less
than $2,000 on a reallocation date. Once the Cash Value equals or exceeds this
amount, Automatic Asset Reallocation will automatically resume as scheduled.
There is no minimum amount which you must allocate among the Investment
Divisions under this feature. We do not count Automatic Asset Reallocation
transfers against any limitations we may impose on the number of free transfers.
You can cancel the Automatic Asset Reallocation feature at any time by
written request. You cannot elect Automatic Asset Reallocation if you have
chosen Dollar Cost Averaging. However, you have the option of alternating
between these two policy features.
This option is available to you at no additional cost.
THIRD PARTY INVESTMENT ADVISORY ARRANGEMENTS
In some cases, the policy may be sold to policyowners who independently
utilize the services of a third party advisor offering asset allocation and/or
market timing services. NYLIAC may honor transfer and withdrawal instructions
from such asset allocation and market timing services if it has received
authorization to do so from the policyowner participating in the service. We do
not endorse, approve or recommend such services in any way and you should be
aware that fees paid for such services are separate from and in addition to fees
paid under the policy.
Because the amounts associated with some of these transactions may be
unusually large, the investment advisers may have difficulty processing the
transactions. In addition, execution of such transactions may possibly adversely
affect the Accumulation Values of policyowners who are not utilizing asset
allocation or market timing services. Accordingly, NYLIAC reserves the right to
not accept transfer instructions which are submitted by asset allocation and/or
market timing services on behalf of policyowners. We will exercise this right
only in accordance with uniform procedures that we may establish from time to
time and that will not unfairly discriminate against similarly situated
policyowners.
PARTIAL WITHDRAWALS
The policyowner can make a partial withdrawal of the policy's Cash Value,
at any time while the Insured is living. The minimum partial withdrawal is $500,
provided that the Cash Value less the amount of any Policy Debt that would
remain after the withdrawal is at least $500. There will be a processing charge
of $25 applied to any partial withdrawal. The partial withdrawal and any
associated processing fee will be made from the Fixed Account and the Investment
Divisions in proportion to the amount in each, or only from the Investment
Divisions in an amount or ratio that you tell us. When you take a partial
withdrawal, the Cash Value, the Cash Surrender Value and the Cumulative Premium
Amount will be reduced by the surrender proceeds. To withdraw funds from the
policy, we must receive the policyowner's signed request in a form acceptable to
us at our Service Office.
We reserve the right to require a full surrender if a partial withdrawal
would cause the (i) policy Face Amount to drop below our minimum amount
($25,000); and/or (ii) Cash Value less any Policy Debt to drop below $500.
For policies where Life Insurance Benefit Option 1 is in effect, a partial
withdrawal may reduce the Face Amount. The Face Amount will be reduced by the
greater of (a) or (b), where:
(a) is zero, and
(b) is the partial withdrawal less the greater of
(i) zero, or
(ii) the Cash Surrender Value immediately prior to the partial
withdrawal less the result of the Face Amount immediately prior to the
partial withdrawal divided by the applicable percentage, as shown on the
appropriate table under Section 7702 of the Internal Revenue Code, for
the Insured's age at time of withdrawal.
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<PAGE> 34
For policies where Life Insurance Benefit Option 2 is in effect, a partial
withdrawal will not affect the Face Amount.
For policies where Life Insurance Benefit Option 3 is in effect, a partial
withdrawal will first reduce the Cumulative Premium Amount and may reduce the
Face Amount. The Face Amount will be reduced by the greater of (a) or (b),
where:
(a) is zero, and
(b) is the excess, if any, of the partial withdrawal over the
Cumulative Premium Amount immediately prior to the partial withdrawal less
the greater of
(i) zero, or
(ii) the Cash Surrender Value immediately prior to the partial
withdrawal less the result of the Face Amount immediately prior to the
partial withdrawal divided by the applicable percentage, as shown on the
appropriate table under Section 7702 of the Internal Revenue Code, for
the Insured's age at time of withdrawal.
Proceeds from a surrender benefit or partial withdrawal will be paid in one
sum. The amount of proceeds will be determined as of the date we receive the
policyowner's signed request in a form acceptable to us at our Service Office.
LOANS
Using the policy as sole security, the policyowner may make a request to
borrow up to the loan value of the policy. The loan value on any given date is
equal to (i) 90% of the Cash Value, less (ii) any Policy Debt.
LOAN ACCOUNT
The Loan Account secures any Policy Debt, and is part of our General
Account. When a loan is requested, an amount is transferred to the Loan Account
from the Investment Divisions and the Fixed Account (on a pro-rata basis unless
the policyowner requests otherwise) equal to: (1) the requested loan amount;
plus (2) any Policy Debt; plus (3) the interest, to the next policy anniversary,
on the requested loan amount and on any Policy Debt; minus (4) the amount in the
Loan Account. The effective date of the loan is the Business Day we make
payment.
The value in the Loan Account will never be less than (a+b) - c, where:
a = the amount in the Loan Account on the prior policy anniversary;
b = the amount of any loan taken since the prior policy anniversary; and
c = any loan amount repaid since the prior policy anniversary.
On each Policy Anniversary, if the outstanding loan plus interest to the
next Policy Anniversary exceeds the loan amount, the excess will be transferred
from the Investment Divisions and the Fixed Account to the Loan Account.
On each policy anniversary, if the amount in the Loan Account exceeds the
amount of any outstanding loans plus interest to the next policy anniversary,
the excess will be transferred from the Loan Account to the Investment Divisions
and to the Fixed Account. We reserve the right to do this on a monthly basis.
Amounts transferred will first be transferred to the Fixed Account up to an
amount equal to the total amounts transferred from the Fixed Account to the Loan
Account. Any additional amounts transferred will be allocated according to the
policyowner's premium allocation in effect at the time of transfer unless the
policyowner tells us otherwise.
INTEREST ON VALUE IN LOAN ACCOUNT
The amount held in the Loan Account earns interest at a rate we determine.
Such rate will never be lower than 2% less than the effective annual loan
interest rate and in no event will it be less than 3%. Interest accrues daily
and is credited on each Monthly Deduction Day. Currently, the amount in the Loan
Account is credited with interest at a rate that is 1% less than the effective
annual loan interest rate during the first 10 Policy Years, and we currently
expect to credit 0.5% less than the effective annual loan interest rate in
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<PAGE> 35
subsequent Policy Years. These rates are not guaranteed and we can change them
at any time, subject to the above mentioned minimums.
LOAN INTEREST
Unless we set a lower rate for any period, the effective annual loan
interest rate is 6%, payable in arrears. Loan interest accrues each day and is
compounded annually. Loan interest not paid as of the policy anniversary becomes
part of the loan. An amount may need to be transferred to the Loan Account to
cover this increased loan amount.
On the date of death, the date the policy ends, the date of a loan
repayment or on any other date we specify, we will make any adjustment in the
loan that is required to reflect any interest paid for any period beyond that
date.
If we have set a rate lower than 6% per year, any subsequent increase in
the interest rate will be subject to the following conditions:
(1) The effective date of any increase in the interest rate for loans will
not be earlier than one year after the effective date of the
establishment of the previous rate.
(2) The amount by which the interest rate can be increased will not exceed
one percent per year, but the interest will in no event ever exceed 6%.
(3) We will give notice of the interest rate in effect when a loan is made
and when sending notice of loan interest due.
(4) If a loan is outstanding 40 days or more before the effective date of
an increase in the interest rate, we will notify the policyowner of
that increase at least 30 days prior to the effective date of the
increase.
(5) We will give notice of any increase in the interest rate when a loan is
made during the 40 days before the effective date of the increase.
REPAYMENT
All or part of an unpaid loan can be repaid before the Insured's death or
before the policy is surrendered. When a loan repayment is made, we will
transfer immediately the excess amount in the Loan Account resulting from the
loan repayment in accordance with the procedures set forth under "Loan Account"
above. We will also transfer excess amounts in the Loan Account resulting from
interest accrued in accordance with those procedures. Payments received by New
York Life will be applied as directed by the policyowner.
If a loan is outstanding when the death benefit or surrender proceeds
become payable, we will deduct the amount of any Policy Debt, from these
proceeds. In addition, if the Policy Debt exceeds the Cash Surrender Value of
the policy, we will mail a notice to the policyowner at his or her last known
address, and a copy to the last known assignee on our records. All insurance
will end 31 days after the date on which we mail that notice to the policyowner
if the excess of the Policy Debt over the Cash Surrender Value is not paid
within that 31 days. See, however, "Section VI: Additional
Information--Reinstatement Option."
FREE LOOK PROVISION
The policy contains a provision that permits cancellation by returning it
to our Service Office, or to the registered representative through whom it was
purchased, at any time during the free look period. The free look period begins
on the date the policy is delivered to the policyowner and the policyowner signs
for it and ends 20 days later. Unless otherwise required by state law, the
policyowner will then receive from us the greater of the policy's Cash Value as
of the date the policy is returned or the premiums paid, less loans and
withdrawals.
EXCHANGE PRIVILEGE
At any time within 24 months of the Issue Date, the policyowner can
exchange the policy for a policy on a permanent plan of life insurance on the
Insured which we offer for this purpose. NYLIAC will not require evidence of
insurability. Upon an exchange of a policy, all riders and benefits will end
unless we agree otherwise or unless required under state law. The replacement
policy will have the same Policy Date, issue
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<PAGE> 36
age, risk classification and initial Face Amount as the original policy, but
will not offer variable investment options such as the Investment Divisions.
In order to exchange the policy, we will require: (a) that the policy be in
effect on the date of exchange; (b) repayment of any Policy Debt; and (c) an
adjustment, if any, for differences in premiums and cash values under the old
policy and the new policy. On the Business Day we receive a written request for
an exchange, the Accumulation Value of the policy will be transferred into the
Fixed Account, where it will remain until these requirements are met. The date
of exchange will be the later of: (a) the Business Day the policyowner sends us
the policy along with a signed request; or (b) the Business Day we receive the
policy at our Service Office, or such other location that we indicate to the
policyowner in writing and the necessary payment for the exchange, if any.
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<PAGE> 37
SECTION VI:
ADDITIONAL INFORMATION
DIRECTORS AND PRINCIPAL OFFICERS OF NYLIAC*
DIRECTORS: POSITIONS DURING LAST FIVE YEARS:
Seymour Sternberg.........Chairman of the Board, Chief Executive Officer and
President of New York Life from April 1997 to date;
President and Chief Operating Officer of New York Life
from October 1995 to April 1997; Vice Chairman and
President Elect from February 1995 to October 1995;
Executive Vice President prior thereto. President of
NYLIAC from November 1995 to May 1997.
Frederick J. Sievert......Vice Chairman of New York Life from January 1997 to
date; Executive Vice President from February 1995 to
January 1997; Senior Vice President and Chief
Financial Officer--Individual Operations prior
thereto. President of NYLIAC from May 1997 to date;
Executive Vice President from November 1995 to May
1997; Senior Vice President prior thereto.
Gary G. Benanav...........Vice Chairman of New York Life from November 1999 to
date, Executive Vice President from 1997 to November
1999. Chairman and Chief Executive Officer of New York
Life international from December 1997 to date.
Executive Vice President and Chairman of Taiwan Branch
of NYLIAC from May 1998 to date. President of Aeris
Ventures, LLC from January to December, 1997. Prior
thereto, Executive Vice President of Aetna Life and
Casualty Company.
Richard M. Kernan, Jr.....Executive Vice President and Chief Investment Officer
of New York Life from March 1991 to date.
George G. Trapp...........Executive Vice President of New York Life from June
1995 to date and Corporate Secretary of New York Life
from November 1995 to date; Senior Vice President of
New York Life from 1991 until June 1995. Member of the
Executive Management Committee of New York Life since
1994.
Phillip J. Hildebrand.....Executive Vice President of New York Life from March
1999 to date; Senior Vice President in charge of the
Agency Department of New York Life from 1996 to March
1999. Executive Vice President of NYLIAC from June
1999 to date; prior thereto, Senior Vice President
from January 1997. Managing Partner of Dallas General
Office of New York Life from 1994 to 1996.
Howard I. Atkins..........Executive Vice President and Chief Financial Officer
of New York Life and NYLIAC from April 1996 to date;
Chief Financial Officer of Midlantic Corporation prior
thereto.
Robert D. Rock............Senior Vice President in charge of the Individual
Annuity Department of New York Life from March 1992 to
date; Vice President prior thereto. Senior Vice
President of NYLIAC from April 1992 to date.
Frank M. Boccio...........Senior Vice President in charge of Individual Policy
Services Department of New York Life since July 1995;
Vice President of New York Life from 1994 to 1995.
Michael G. Gallo..........Senior Vice President in charge of the Individual Life
Department of New York Life from July 1995 to date;
Senior Vice President--Northeastern Agencies from
February 1994 to July 1995; Vice President prior
thereto. Senior Vice President of NYLIAC from August
1995 to date.
Solomon Goldfinger........Senior Vice President, Chief Financial Officer and
Chief of Staff--Life and Annuity in charge of the
Financial Management Department of New York Life from
July 1995 to date; Senior Vice President in charge of
the Individual Life Department prior thereto. Senior
Vice President of NYLIAC from April 1992 to date.
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<PAGE> 38
OFFICERS:
Gary E. Wendlandt.........Executive Vice President in charge of the Asset
Management business of New York Life from May 1999 to
date. Executive Vice President of NYLIAC from March
2000 to date. Executive Vice President and Chief
Investment Officer of MassMutual Life Insurance
Company, June 1992 to April 1999.
Jay S. Calhoun, III.......Senior Vice President and Treasurer of New York Life
from March 1997 to date; Vice President and Treasurer
from November 1992 to March 1997; Corporate Vice
President prior thereto. Senior Vice President and
Treasurer of NYLIAC from May 1997 to date; Vice
President and Treasurer of NYLIAC from January 1993 to
May 1997.
Patrick G. Colloton.......Senior Vice President of New York Life from January
1998 to date; Vice President from April 1996 to
January 1998. Senior Vice President of NYLIAC from
June 1999 to date; prior thereto, Vice President from
November 1996. Senior Vice President, Individual
Strategic Business Unit, Business Men's Assurance
Company, prior thereto.
Frank J. Ollari...........Senior Vice President in charge of the Real Estate
Department of New York Life from October 1989 to date.
Senior Vice President of NYLIAC from April 1992 to
date.
Richard C. Schwartz.......Senior Vice President of New York Life from March 1998
to date. Senior Vice President of NYLIAC from March
2000 to date. Vice President of New York Life from
1993.
Stephen N. Steinig........Senior Vice President and Chief Actuary of New York
Life from February 1994 to date; Chief Actuary and
Controller prior thereto. Senior Vice President and
Chief Actuary of NYLIAC from May 1991 to date.
David F. Boyle............Vice President of New York Life from October 1999 to
date. Vice President of NYLIAC from November 1999 to
date. Vice President, Large Corporate Markets,
MassMutual Life Insurance Company prior thereto.
John A. Cullen............Vice President and Deputy Controller of New York Life
from November 1999 to date; Vice President prior
thereto. Vice President and Controller of NYLIAC from
December 1999 to date; Vice President and Assistant
Controller prior thereto.
Joel M. Steinberg.........Vice President and Actuary of New York Life from March
1998 to date; Corporate Vice President and Actuary
from March 1996 to March 1998. Actuary prior to March
1996. Vice President and Actuary of NYLIAC from
December 1999 to date.
* Principal business address is 51 Madison Avenue, New York, New York 10010.
FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is general in nature. It is not an exhaustive
discussion of all tax questions that might arise under the policies and is not
intended as tax advice. No attempt is made to consider any applicable state or
other tax laws and no representation is made as to the likelihood of
continuation of current federal income tax laws and treasury regulations or of
current interpretations of the Internal Revenue Service. Future legislation,
regulations or interpretations could adversely affect the tax treatment of life
insurance policies. Lastly, there are many areas of the tax law where minimal
guidance exists in the form of treasury regulations or revenue rulings.
While we reserve the right to make changes in the policy to assure that it
continues to qualify as life insurance for tax purposes, we cannot make any
guarantee regarding the future tax treatment of any policy. For complete
information on the tax treatment of the policies, the tax treatment under the
laws of your state, or the impact of proposed or future changes in tax
legislation, regulations or interpretations, the policyowner should consult with
a tax advisor.
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<PAGE> 39
The ultimate effect of federal income taxes on values under the policy and
on the economic benefit to the policyowner or Beneficiary depends upon NYLIAC's
tax status, upon the terms of the policy and upon the tax status of the
individual concerned.
TAX STATUS OF NYLIAC AND THE SEPARATE ACCOUNT
NYLIAC is taxed as a life insurance company under Subchapter L of the
Internal Revenue Code. The Separate Account is not a separate taxable entity
from NYLIAC and its operations are taken into account by NYLIAC in determining
its income tax liability. All investment income and realized net capital gains
on the assets of the Separate Account are reinvested and taken into account in
determining Cash Values and are automatically applied to increase the book
reserves associated with the policies. Under existing federal income tax law,
neither the investment income nor any net capital gains of the Separate Account
are taxed to NYLIAC to the extent those items are applied to increase reserves
associated with the policies.
CHARGES FOR TAXES
We impose a federal tax charge equal to 1.25% of premiums received under
the policy to compensate NYLIAC for the federal income tax liability it incurs
under Internal Revenue Code Section 848 by reason of its receipt of premiums
under the policy. We may increase the federal tax charge if the federal
government increases this tax liability. NYLIAC believes that this charge is
reasonable in relation to the increased tax burden it incurs as a result of
Section 848. No other charge is currently made to the Separate Account for
federal income taxes of NYLIAC that may be attributable to the Separate Account.
Periodically, NYLIAC reviews the appropriateness of charges to the Separate
Account for NYLIAC's federal income taxes, and in the future, a charge may be
made for federal income taxes incurred by NYLIAC that are attributable to the
Separate Account. In addition, depending on the method of calculating interest
on policy values allocated to the Fixed Account (see preceding section), a
charge may also be imposed for the policy's share of NYLIAC's federal income
taxes attributable to the Fixed Account.
DIVERSIFICATION STANDARDS AND CONTROL ISSUES
In addition to other requirements imposed by the Internal Revenue Code, a
policy will qualify as life insurance only if the diversification requirements
of Internal Revenue Code Section 817(h) are satisfied by the Separate Account.
To assure that each policy continues to qualify as life insurance for federal
income tax purposes, the Funds are responsible for ensuring compliance with
Section 817(h) and its regulations for each Portfolio. To satisfy these
diversification standards, the regulations generally require that on the last
day of each quarter of a calendar year: no more than 55% of the value of a
Separate Account's assets can be represented by any one investment; no more than
70% can be represented by any two investments; no more than 80% can be
represented by any three investments; and no more than 90% can be represented by
any four investments. For purposes of these rules, all securities of the same
issuer generally are treated as a single investment, but each U.S. government
agency or instrumentality is treated as a separate issuer. In addition a
"look-through" rule applies to treat a pro-rata portion of each asset of each
Portfolio as an asset of the Separate Account.
The general diversification requirements of Section 817(h) are modified
with regard to assets of the Separate Account that are direct obligations of the
United States Treasury. Even if a separate account invests only in United States
Treasury securities it will be treated as adequately diversified under Section
817(h). In addition, for purposes of determining whether its holdings of assets
other than United States Treasury securities are adequately diversified, the
generally applicable percentage limitations are increased based on the value of
a separate account's investment in United States Treasury securities.
Notwithstanding this modification of the general diversification requirements,
however, the investments of the Portfolios will be structured to comply with the
general diversification standards because they serve as investment vehicles for
certain variable annuity contracts that must comply with the general standards.
In connection with its issuance of temporary regulations under Section
817(h) in 1986, the Treasury Department announced that such temporary
regulations did not provide guidance concerning the extent to which policyowners
could be permitted to direct their investments to particular divisions of a
separate account and that guidance on this issue would be forthcoming.
Regulations addressing this issue have not yet been issued or proposed, and it
is not clear, at this time, whether such regulations will ever be issued or what
such regulations might provide. If such regulations were to be issued in the
future, it is possible that the policy
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<PAGE> 40
might need to be modified to comply with such regulations. For these reasons,
NYLIAC reserves the right to modify the policy, as necessary, to prevent the
policyowner from being considered the owner of the assets of the Separate
Account.
LIFE INSURANCE STATUS OF POLICY
NYLIAC believes that the policy meets the statutory definition of life
insurance under Internal Revenue Code Section 7702 and that the policyowner and
Beneficiary of any policy will receive the same federal income tax treatment as
that accorded to owners and beneficiaries of fixed benefit life insurance
policies. Specifically, the death benefit under the policy will be excludable
from the gross income of the Beneficiary subject to the terms and conditions of
Internal Revenue Code Section 101(a)(1). (Death benefits under a "modified
endowment contract" as discussed below are treated in the same manner as death
benefits under life insurance contracts that are not so classified.)
In addition, unless the policy is a "modified endowment contract," in which
case the receipt of any loan under the policy may result in recognition of
income to the policyowner, the policyowner will not be deemed to be in
constructive receipt of the Cash Values, including increments under the policy
until proceeds of the policy are received upon a surrender of the policy or a
partial withdrawal.
MODIFIED ENDOWMENT CONTRACT STATUS
A policy will be a modified endowment contract if it satisfies the
definition of life insurance contained in the Internal Revenue Code, but it
either fails the additional "7-pay test" set forth in Internal Revenue Code
Section 7702A or was received in exchange for a modified endowment contract. A
policy will fail the 7-pay test if the accumulated amount paid under the
contract at any time during the first seven contract years exceeds the total
premiums that would have been payable under a policy providing for guaranteed
benefits upon the payment of seven level annual premiums. A policy received in
exchange for a modified endowment contract will be taxed as a modified endowment
contract even if it would otherwise satisfy the 7-pay test.
While the 7-pay test is generally applied as of the time the policy is
issued, certain changes in the contractual terms of a policy will require a
policy to be re-tested to determine whether the change has caused the policy to
become a modified endowment contract. For example, a reduction in death benefits
during the first seven contract years will cause the policy to be re-tested as
if it had originally been issued with the reduced death benefit.
In addition, if a "material change" occurs at any time while the policy is
in force, a new 7-pay test period will start and the policy will need to be
re-tested to determine whether it continues to meet the 7-pay test. The term
"material change" generally includes increases in death benefits, but does not
include an increase in death benefits attributable to the payment of premiums
necessary to fund the lowest level of death benefits payable during the first
seven contract years, or which is attributable to the crediting of interest with
respect to such premiums.
Because the policy provides for flexible premiums, we have procedures to
monitor whether, under our current interpretations of the law, increases in the
death benefit or additional premiums either cause the start of a new seven-year
test period or cause the policy to be a modified endowment contract. All
additional premiums will be considered in these determinations.
If the policyowner pays a premium that exceeds the 7-pay limit, we will
notify and give the policyowner the opportunity to prevent the policy from
becoming a modified endowment contract by requesting that the excess premium be
returned to him or her. If the policy becomes a modified endowment contract, all
distributions (including loans) occurring in the year of failure and thereafter
will be subject to the rules for modified endowment contracts. A recapture
provision also applies to loans and distributions that are received in
anticipation of failing the 7-pay test. Any distribution or loan made within two
years prior to the date that a policy fails the 7-pay test is considered to have
been made in anticipation of the failure.
SURRENDERS AND PARTIAL WITHDRAWALS
Upon a surrender of a policy for its Cash Surrender Value, less any Policy
Debt, the policyowner will recognize ordinary income for federal tax purposes to
the extent that the Cash Surrender Value exceeds the investment in the contract
(the total of all premiums paid but not previously recovered plus any other
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<PAGE> 41
consideration paid for the policy). The tax consequences of a partial withdrawal
from a policy will depend upon whether the partial withdrawal results in a
reduction of future benefits under the policy and whether the policy is a
modified endowment contract.
If the policy is not a modified endowment contract, the general rule is
that a partial withdrawal from a policy is taxable only to the extent that it
exceeds the total investment in the contract. An exception to this general rule
applies, however, if a reduction of future benefits occurs during the first 15
years after a policy is issued and there is a cash distribution associated with
that reduction. In such a case, Internal Revenue Code Section 7702(f)(7)
overrides the general rule and prescribes a formula under which the policyowner
may be taxed on all or a part of the amount distributed. After 15 years, the
rule of Internal Revenue Code Section 7702(f)(7) no longer applies so that cash
distributions from a policy that is not a modified endowment contract will not
be subject to federal income tax, except to the extent they exceed the total
investment in the contract. We suggest that a policyowner consult with a tax
advisor in advance of a proposed decrease in Face Amount or a partial
withdrawal. In addition, any amounts distributed under a "modified endowment
contract" (including proceeds of any loan) are taxable to the extent of any
accumulated income in the policy. In general, the amount that may be subject to
tax is the excess of the Cash Value (both loaned and unloaned) over the
previously unrecovered premiums.
Under certain circumstances, a distribution under a modified endowment
contract (including a loan) may be taxable even though it exceeds the amount of
accumulated income in the policy. This can occur because for purposes of
determining the amount of income received upon a distribution (or loan) from a
modified endowment contract, the Internal Revenue Code requires the aggregation
of all modified endowment contracts issued to the same policyowner by an insurer
and its affiliates within the same calendar year. Therefore, loans and
distributions from any one such policy are taxable to the extent of the income
accumulated in all the modified endowment contracts required to be so
aggregated.
If any amount is taxable as a distribution of income under a modified
endowment contract (as a result of a policy surrender, a partial withdrawal or a
loan), it may also be subject to a 10% penalty tax under Internal Revenue Code
Section 72(v). Limited exceptions from the additional penalty tax are available
for certain distributions to individual policyowners. This penalty tax will not
apply to distributions: (i) that are made on or after the date the taxpayer
attains age 59 1/2; or (ii) that are attributable to the taxpayer's becoming
disabled; or (iii) that are part of a series of substantially equal periodic
payments (made not less frequently than annually) made for the life or life
expectancy of the taxpayer.
LOANS AND INTEREST DEDUCTIONS
We also believe that under current law any loan received under the policy
will be treated as Policy Debt and that, unless the policy is a modified
endowment contract, no part of any loan under a policy will constitute income to
the policyowner. If the policy is a modified endowment contract (see discussion
above) loans will be fully taxable to the extent of the income in the policy
(and in any other contracts with which it must be aggregated) and could be
subject to the additional 10% penalty tax.
Internal Revenue Code Section 264 provides that interest paid or accrued on
a loan in connection with a policy is generally nondeductible. Certain
exceptions apply, however, with respect to policies covering key employees. In
addition, in the case of policies not held by individuals, special rules may
limit deductibility of interest on loans that are not made in connection with a
policy. We suggest consultation with a tax advisor for further guidance.
Certain changes to the Internal Revenue Code were recently proposed that
would negatively impact corporate owned and corporate sponsored life insurance,
including the policies offered by this prospectus. The proposals, if enacted,
would reduce the amount of interest that is deductible on loans that are not
made in connection with a policy.
Present law provides that interest on policy loans or other indebtedness
that can be traced to life insurance policies generally is not deductible unless
the policy insures the life of one of a limited number of key persons of a
business. A key person includes an officer or 20% owner. In addition, the
interest deductions for most companies for interest on other indebtedness are
reduced under a proration rule if the business is a direct or indirect
beneficiary of certain life insurance, endowment or annuity contracts. The
proration rule does not apply if the contract covers an employee, director,
officer or 20% owner. The proposals would repeal the exception under the
proration rule for contracts covering employees, directors, or officers, other
than 20%
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<PAGE> 42
owners, for taxable years beginning after the date of enactment. The effect of
this proposed partial repeal of the exception to the proration rule would be to
increase the after-tax cost of such policies in most cases.
NYLIAC cannot, at this time, predict or otherwise represent whether, when
or in what form any of the proposals may, in fact, be enacted.
In addition, if your policy lapses or you surrender it with an outstanding
loan, and the amount of the loan plus the cash surrender value is more than the
sum of premiums you paid, you will generally be liable for taxes on the excess.
Such amount will be taxed as ordinary income.
CORPORATE ALTERNATIVE MINIMUM TAX
Ownership of a policy by a corporation may affect the policyowner's
exposure to the corporate alternative minimum tax. In determining whether it is
subject to alternative minimum tax, a corporate policyowner must make two
computations. First, the corporation must take into account a portion of the
current year's increase in the "inside build up" or income on the contract gain
in its corporate-owned policies. Second, the corporation must take into account
a portion of the amount by which the death benefits received under any policy
exceed the sum of (i) the premiums paid on that policy in the year of death, and
(ii) the corporation's basis in the policy (as measured for alternative minimum
tax purposes) as of the end of the corporation's tax year immediately preceding
the year of death.
EXCHANGES OR ASSIGNMENTS OF POLICIES
A change of the policyowner or the Insured or an exchange or assignment of
a policy may have significant tax consequences depending on the circumstances.
For example, an assignment or exchange of a policy may result in taxable income
to the transferring policyowner. Further, Internal Revenue Code Section 101(a)
provides, subject to certain exceptions, that where a policy has been
transferred for value, only the portion of the death benefit that is equal to
the total consideration paid for the policy may be excluded from gross income.
For complete information with respect to policy assignments and exchanges, a
policyowner should consult with a qualified tax advisor.
OTHER TAX ISSUES
Federal estate and state and local estate, inheritance, and other tax
consequences of ownership or receipt of policy proceeds depend on the
circumstances of each policyowner or Beneficiary.
WITHHOLDING
Under Internal Revenue Code Section 3405, withholding is generally required
with respect to certain taxable distributions under insurance contracts. In the
case of periodic payments (payments made as an annuity or on a similar basis),
the withholding is at graduated rates (as though the payments were employee
wages). With respect to non-periodic distributions, the withholding is at a flat
rate of 10%. A policyholder can elect to have either non-periodic or periodic
payments made without withholding except where the policyowner's tax
identification number has not been furnished to NYLIAC or the Internal Revenue
Service has notified us that the tax identification number furnished by the
policyowner is incorrect.
Different withholding rules apply to payments made to U.S. citizens living
outside the United States and to non-U.S. citizens living outside of the United
States. U.S. citizens who live outside of the United States generally are not
permitted to elect not to have federal income taxes withheld from payments.
Payments to non-U.S. citizens who are not residents of the United States
generally are subject to 30% withholding, unless an income tax treaty between
their country of residence and the United States provides for a lower rate of
withholding or an exemption from withholding.
REINSTATEMENT OPTION
A policyowner can apply to reinstate the policy (and any other benefits
provided by riders) within five years after the policy is terminated if the
policyowner did not surrender it for its full Cash Surrender Value. When the
policyowner applies for reinstatement, the policyowner must provide proof of
insurability that is acceptable to us, unless the required payment is made
within 31 days after the end of the late period. Note
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<PAGE> 43
that a termination and subsequent reinstatement may cause the policy to become a
modified endowment contract.
In order to reinstate the policy, a payment must be made in an amount which
is sufficient to keep the policy (and any riders) in force for at least 3
months. This payment will be in lieu of the payment of all premiums in arrears.
If, at the time the policy ended, an outstanding policy loan was in effect, that
loan will also be reinstated. However, accrued simple loan interest at 6% from
the end of the late period to the date of reinstatement must also be paid as
part of the consideration paid for the reinstatement. If a policy loan interest
rate of less than 6% is in effect when the policy is reinstated, the interest
rate for any Policy Debt at the time of reinstatement will be the same as the
policy loan interest rate.
The Cash Value that will be reinstated is equal to the Cash Value at the
time of lapse. The effective date of the reinstatement will be the Monthly
Deduction Day on or following the date we approve the signed request for
reinstatement on a form acceptable to us at our Service Office.
ADDITIONAL BENEFITS AVAILABLE BY RIDER
The policy can include additional benefits that we approve based on our
standards and limits for issuing insurance and classifying risks. An additional
"Term Insurance Benefit" is provided by a rider and is subject to the terms of
both the policy and the rider. The policyowner may select either rider, but not
both riders. If desired, the riders must be elected at policy application.
Election of either rider eliminates GMDB coverage. Unlike the STR (which adjusts
to maintain a targeted death benefit in combination with the base policy) the
LTR provides for a level amount of Term Insurance Benefit in addition to the
base policy as shown on the Policy Data Page. The following riders are currently
available.
SUPPLEMENTARY TERM RIDER
This rider provides a Term Insurance Benefit that is payable when the
Insured dies while this rider was in effect. It insures the same individual
covered by the base policy. On the Issue Date, the Term Insurance Benefit is the
amount specified in the application. The initial Term Insurance Benefit is shown
on the Policy Data page of the policy. The initial Term Insurance Benefit when
added to the initial Face Amount of the base policy equals the initial Target
Face Amount, which is also shown on the Policy Data page.
As described under the SELECTION OF LIFE INSURANCE BENEFIT TABLE, the Life
Insurance Benefit amount could automatically increase or decrease. In such a
case, the Term Insurance Benefit will automatically be adjusted.
On the each Monthly Deduction Day beginning with the second, the Term Insurance
Benefit will automatically be set in accordance with the Life Insurance Benefit
Option that is in effect on the policy as follows:
Option 1: The Term Insurance Benefit will equal the Target Face Amount
minus the death benefit amount.
Option 2: The Term Insurance Benefit will equal the Target Face Amount
plus the Cash Value minus the death benefit amount.
Option 3: The Term Insurance Benefit will equal the Target Face Amount
plus the Cumulative Premium Amount minus the death benefit amount.
However, if on a Monthly Deduction Day, the Term Insurance Benefit is
automatically reduced to zero, the rider will still remain in force. If the
policy's Life Insurance Benefit subsequently decreases as described in Section
1.3 of the policy, the Term Insurance Benefit will again be adjusted based on
the Life Insurance Benefit Option specified.
Within certain limits, the policyowner may:
- Increase or decrease the Term Insurance Benefit, which will result in a
corresponding change to the Target Face Amount; and/or
- Convert this rider to increase the Face Amount of the policyowner's base
policy. The Target Face Amount of the policyowner's policy after this
conversion will be the same as the Target Face Amount of your policy
before the conversion.
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The policyowner may request changes to the policy under this rider if:
(a) the Target Face Amount is not decreased to an amount below
$150,000, unless the decrease is due to a partial withdrawal under the
policy.
(b) the Term Insurance Benefit does not exceed 10 times the policy's
death benefit. This requirement prohibits the policyowner from either
increasing the Term Insurance Benefit or decreasing the base policy Face
Amount to an amount that would violate this maximum ratio.
Coverage under this rider ends on the earliest of:
(a) the Monthly Deduction Day on or next following our receipt of the
policyowner's signed request to cancel the rider,
(b) the policy anniversary on which the Insured is or would have been
100,
(c) the date the rider is fully converted, or
(d) the date the policy ends or is surrendered.
LEVEL TERM RIDER
This rider provides a Term Insurance Benefit that is payable when the
insured dies while this rider is in effect. It insures the same individual
covered by the base policy. On the Issue Date, the Face Amount of this rider is
the amount specified in the application and is shown on the Policy Data page of
the policy.
Within certain limits, the policyowner may:
- Increase or decrease the Face Amount of the rider; and/or
- Convert this rider to increase the Face Amount of the Policyowner's base
policy.
If this rider is in effect, the policyowner may request changes to the
policy if:
(a) The total of the Face Amount of this rider and the Face Amount of
the Policy is not decreased to an amount below $150,000, unless the
decrease is due to a partial withdrawal under the policy.
(b) The Face Amount of the rider does not exceed 10 times the policy's
death benefit. This requirement prohibits the policyowner from either
increasing the Face Amount of the rider or decreasing the base policy Face
Amount to an amount that would violate this maximum ratio.
Coverage under this rider ends on the earliest of:
(a) the Monthly Deduction Day on or next following our receipt of your
signed request to cancel the rider,
(b) the policy anniversary on which the insured is or would have been
100,
(c) the date the rider is fully converted, or
(d) the date the policy ends or is surrendered.
TERM RIDER VS. BASE POLICY COVERAGE
You should consider a number of factors when deciding whether to purchase
death benefit coverage under the base policy only or in combination with the STR
or LTR. The death benefit coverage may be the same in either case and, currently
the cost of insurance rates are the same. However, there may be important cost
differences and some restrictions may apply.
WHEN TO ELECT A TERM RIDER. If you compare a policy with a term rider to
one that provides the same initial death benefit without a term rider, the
policy with the rider will have a lower Target Premium and sales expense charges
may be lower. (See page 10, question 20 for information on the Target Premium)
This will depend on how much premium is paid each year.
Generally, if you plan to fund the policy each year at levels above the
Target Premium, your sales expense charges will be lower with either the STR or
LTR and your cash value can build more quickly. The higher the premium you
choose to pay, the greater the potential cost savings and positive impact on
cash value growth.
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<PAGE> 45
For example, if you plan to fully fund the policy in the early years, you
should consider maximizing coverage under one of the term riders. (However in
some cases, if maximum funding causes the policy's death benefit to increase to
satisfy Section 7702 requirements, the advantages of a term rider can be reduced
in later policy years.)
WHEN TO ELECT BASE POLICY COVERAGE ONLY. If you are funding the policy
each year at levels lower than the Target Premium, you should consider base
policy coverage only because the STR or LTR may not provide much cost savings
under these circumstances and certain restrictions will apply (see descriptions
of the STR and LTR above). Also, if a guaranteed minimum death benefit (GMDB) is
an important feature to you, you should choose base policy coverage only since
the GMDB is not available if you elect the STR or LTR. Please note that the
guaranteed cost of insurance rates are higher for the STR and LTR.
PAYMENT OPTIONS
We will pay death benefits in one sum or, if elected, we will apply all or
part of the death benefit under one or more of the options described in this
section. If we agree, the death benefit may be placed under some other method of
payment instead. Any death benefits, less Policy Debt, paid in one sum will bear
interest compounded each year from the Insured's death to the date of payment.
We set the interest rate each year. This rate will be at least 3% per year, and
will not be less than required by law.
While the Insured is living, the policyowner can elect or change a payment
option. The policyowner can also elect or change one or more beneficiaries who
will be the payee or payees under that option. After the Insured dies, any
person who is to receive proceeds in one sum (other than an assignee) can
instead elect a payment option and name payees. The person who elects an option
can also name one or more successor payees to receive any amount remaining at
the death of the payee. Naming these payees cancels any prior choice of
successor payees. A payee who did not elect the option does not have the right
to advance or assign payments, take the payments in one sum, or make any other
change. However, the payee may be given the right to do one or more of these
things if the person who elects the option tells us in writing and we agree.
If we agree, a payee who has elected a payment option may later elect to
have any unpaid amount, or the present value of any elected payments, placed
under another option described in this section. When any payment under an option
would be less than $100, we may pay any unpaid amount or present value in one
sum.
PAYEES
Only individuals who are to receive payments in their own behalf may be
named as payees or successor payees, unless we agree to some other payee. We may
require proof of the age or the survival of a payee. It may happen that when the
last surviving payee dies, we still have an unpaid amount, or there are some
payments that remain to be made. If so, we will pay the unpaid amount with
interest to the date of payment, or pay the present value of the remaining
payments, to that payee's estate in one sum. The present value of the remaining
payments is based on the interest rate used to compute them, and is always less
than their sum.
PROCEEDS AT INTEREST OPTIONS (OPTIONS 1A AND 1B)
The policy proceeds may be left with us at interest. We will set the
interest rate each year. This rate will be at least 3% per year.
For the Interest Accumulation Option (Option 1A), we credit interest each
year on the amount we still have. This amount can be withdrawn at any time in
sums of $100 or more. We pay interest to the date of withdrawal on sums
withdrawn.
For the Interest Payment Option (Option 1B), we pay interest once each
month, every 3 months, every 6 months, or once each year, as chosen, based on
the amount we still have.
LIFE INCOME OPTION (OPTION 2)
We make equal payments each month during the lifetime of the payee or
payees. We determine the amount of the monthly payment by applying the death
benefit to purchase a corresponding single premium life annuity contract that is
being issued when the first payment is due. Payments are based on the
appropriately
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<PAGE> 46
adjusted annuity premium rate in effect at that time, but will not be less than
the corresponding minimum amount shown in the Option 2 Table, which appears in
Section 10 of your policy. These minimum amounts are based on the 1983 Table "a"
with Projection Scale G and with interest compounded each year at 3%.
Upon request, we will state in writing what the minimum amount of each
monthly payment would be under this option. It is based on the sex and adjusted
age of the payee or payees. To find the adjusted age in the year the first
payment is due, we increase or decrease the payee's age at that time, as
follows:
<TABLE>
<CAPTION>
2036 AND
2000-2005 2006-2015 2016-2025 2026-2035 LATER
--------- --------- --------- --------- --------
<S> <C> <C> <C> <C>
+1 YEAR 0 -1 YEAR -2 YEARS -3 YEARS
</TABLE>
We make a payment each month while the payee is living. Payments do not
change, and are guaranteed for 10 years, even if both payees die sooner.
BENEFICIARY
A Beneficiary is any person or entity the policyowner names to receive the
death benefit after the Insured dies. The policyowner names the Beneficiary when
he or she applies for the policy. There may be different classes of
Beneficiaries, such as primary and secondary. These classes set the order of
payment. There may be more than one Beneficiary in a class.
The Beneficiary may be changed during the Insured's lifetime by writing to
our Service Office or such other location that we indicate to you providing us
with the information we need to record the name and class of the new Beneficiary
you have named. Generally, the change will take effect as of the date the
request is signed subject to any payments we made or action we took before
recording these changes. If no Beneficiary is living when the Insured dies,
unless provided otherwise, the death benefit is paid to the policyowner or, if
deceased, the policyowner's estate.
CHANGE OF OWNERSHIP
A successor policyowner can be named in the application, or in a signed
notice that gives us the facts we need. The successor policyowner will become
the new policyowner when the original policyowner dies, if the original
policyowner dies before the Insured. If no successor policyowner survives the
original policyowner and the original policyowner dies before the Insured, the
original policyowner's estate becomes the new policyowner.
The policyowner can also change the policyowner in a signed notice that
gives us the facts we need. When this change takes effect, all rights of
ownership in this policy will pass to the new policyowner.
When we record a change of policyowner or successor policyowner, these
changes will take effect as of the date of the policyowner's signed notice. This
is subject to any payments we made or action we took before recording these
changes. We may require that these changes be endorsed in the policy. Changing
the policyowner or naming a new successor policyowner cancels any prior choice
of policyowner or successor policyowner, respectively, but does not change the
Beneficiary.
ASSIGNMENT
While the Insured is living, the policyowner can assign the policy, or any
interest in it. For an assignment to be binding on us, we must receive a signed
copy of it at our Service Office or such other location that we indicate to the
policyowner in writing. We are not responsible for the validity of any
assignment.
LIMITS ON OUR RIGHTS TO CHALLENGE THE POLICY
Except for any increases in Face Amount, other than one due solely to a
change in the Life Insurance Benefit Option, we must bring any legal action to
contest the validity of a policy within two years from its Issue Date. After
that we cannot contest its validity, except for failure to pay premiums or
unless the Insured died within that two year period. For any increase in the
Face Amount, Target Face Amount or Term Insurance Benefit provided by a rider,
other than one due solely to a change in the Life Insurance Benefit Option, we
must bring legal action to contest that increase within two years from the
effective date of the increase.
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However, if the increase in Face Amount is the result of a corresponding
decrease in the amount of insurance under any attached term rider, the 2-year
contestable period for the amount of increase in Face Amount will be measured
from the date this corresponding portion of term insurance became effective.
MISSTATEMENT OF AGE OR SEX
If the Insured's age or sex is misstated in the policy application, the
death benefit payable under the policy will be adjusted based on what the policy
would provide according to the most recent mortality charge for the correct date
of birth or correct sex.
SUICIDE
If the Insured commits suicide within two years from the Issue Date or less
where required by law (or, with respect to an increase in Face Amount, Target
Face Amount or Term Insurance Benefit provided by a rider, on the effective date
of the increase), and while the policy is in force, the policy will end, and the
only amount payable to the Beneficiary will be the premiums paid, less any
Policy Debt and any partial withdrawals. If the policy has been reinstated, the
2-year suicide exclusion period will begin on the date of reinstatement.
If the policyowner increased the Face Amount, then the 2-year suicide
exclusion period for each increase will begin on the effective date of such
increase. If the suicide exclusion applies to an increase in the Face Amount,
the only amount payable with respect to that increase will be the total Cost of
Insurance we deducted for that increase. However, if the increase in Face Amount
is the result of a corresponding decrease in the amount of insurance under any
attached term rider, the 2-year suicide exclusion period for the increase in
Face Amount will be measured from the date this corresponding portion of term
insurance became effective.
WHEN WE PAY PROCEEDS
If the policy has not terminated, payment of the Cash Surrender Value less
any Policy Debt, partial withdrawal, loan proceeds or the death benefit are made
within 7 days after we receive all requirements at our Service Office or such
other location that we indicate to the policyowner in writing. However, we can
defer payment of the Cash Surrender Value or any partial withdrawal from the
Separate Account, loan proceeds attributable to the Separate Account, or the
death benefit for any period during which: (1) the NYSE is closed (other than
customary weekend and holiday closings) or trading on the NYSE is restricted;
(2) the SEC restricts trading or has determined that an emergency exists; or (3)
the SEC, by order, permits us to delay payment in order to protect our
policyowners.
Amounts payable from the Fixed Account may be deferred for up to 6 months
from the date the request is received at our Service Office.
We can also delay payment of any amounts attributable to a check the
policyowner has given us for a reasonable time (but not more than 2 weeks) to
allow the check to clear.
We can delay payment of the entire death benefit if payment is contested.
We investigate all death claims arising within the 2-year limit on our right to
challenge the policy. Upon receiving the information from a completed
investigation, we generally make a determination within 5 days as to whether the
claim should be authorized for payment. Payments are made promptly after
authorization. If payment of a Cash Surrender Value or partial withdrawal is
delayed for 30 days or more, we add interest at an annual rate of 3%. We add
interest to a death benefit from the date of death to the date of payment at the
same rate as is paid under the Interest Payment Option. See "Section VI:
Additional Information--Payment Options."
RECORDS AND REPORTS
All records and accounts relating to the Separate Account and the Fixed
Account are maintained by New York Life or NYLIAC. Each year we will mail the
policyowner a report showing the Cash Value and any Policy Debt as of the latest
policy anniversary. This report contains any additional information required by
applicable law or regulation.
SALES AND OTHER AGREEMENTS
NYLIFE Distributors Inc., ("NYLIFE Distributors"), a member of the National
Association of Securities Dealers, is the principal underwriter and the
distributor of the policies. NYLIFE Distributors is an indirect
42
<PAGE> 48
wholly-owned subsidiary of New York Life. NYLIFE Distributors is engaged in the
business of underwriting and distributing units of the Separate Account and
shares of open-end investment companies, including The MainStay Funds and
MainStay Institutional Funds Inc.
The commissions paid to registered representatives of broker-dealers who
have entered into dealer agreements with NYLIFE Distributors during the policy's
first year will not exceed 17.5% of the premiums paid up to a policy's target
premium plus 3% of premiums paid in excess of such amount. Commissions paid
during Policy Years two through four will not exceed 11% of the policy's target
premium plus 3% of premiums paid in excess of such amount. Commissions paid
during Policy Years five through ten will not exceed 5% of the policy's target
premium plus 3% of premiums paid in excess of such amount. There are no
commissions paid in Policy Years eleven and beyond. Apart from commissions,
registered representatives may receive compensation for policy administration
services which they provide pursuant to the terms of a service agreement.
LEGAL PROCEEDINGS
NYLIAC is a defendant in individual and/or alleged class action suits
arising from its agency sales force, insurance (including variable contracts
registered under the federal securities law), investment, retail securities,
employment and benefits and/or other operations, including actions involving
retail sales practices. Most of these actions also seek substantial or
unspecified compensatory and punitive damages. NYLIAC is also from time to time
involved in various governmental, administrative, and investigative proceedings
and inquiries.
Notwithstanding the uncertain nature of litigation and regulatory
inquiries, the outcome of which cannot be predicted, NYLIAC believes that, after
provisions made in the financial statements, the ultimate liability that could
result from litigation and proceedings would not have a material adverse effect
on NYLIAC's financial position; however, it is possible that settlements or
adverse determinations in one or more actions or other proceedings in the future
could have a material adverse effect on NYLIAC's operating results for a given
year.
EXPERTS
The financial statements of NYLIAC as of December 31, 1999 and 1998 and for
each of the three years in the period ended December 31, 1999 included in this
prospectus have been so included in reliance on the report (which includes an
explanatory paragraph relating to a change in its method of accounting for the
cost of computer software developed or obtained for internal use as described in
Note 2 to the financial statements) of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
FINANCIAL STATEMENTS
We have included in this prospectus the audited financial statements of
NYLIAC (including the auditor's report) for the fiscal years ended December 31,
1999, 1998, and 1997, and of the Separate Account (including the Auditor's
report) for the year ended December 31, 1999. You should consider the financial
statements of NYLIAC as bearing only upon the ability of NYLIAC to meet its
obligations under the policy.
As of the date of this prospectus, the sale of Corporate Executive Series
Variable Universal Life Insurance Policies had not begun. Therefore, no
financial statements for the Separate Account are presented.
43
<PAGE> 49
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1999 1998
------- -------
(IN MILLIONS)
<S> <C> <C>
ASSETS
Fixed maturities
Available for sale, at fair value $13,289 $13,081
Held to maturity, at amortized cost 681 725
Equity securities 89 100
Mortgage loans 1,850 1,622
Real estate 72 116
Policy loans 512 491
Other long-term investments 21 26
------- -------
Total investments 16,514 16,161
Cash and cash equivalents 1,087 948
Deferred policy acquisition costs 1,507 859
Deferred taxes 53 --
Other assets 316 282
Separate account assets 10,192 6,852
------- -------
Total assets $29,669 $25,102
======= =======
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES
Policyholders' account balances $16,065 $14,743
Future policy benefits 356 315
Policy claims 69 60
Deferred taxes -- 101
Other liabilities 1,113 943
Separate account liabilities 10,134 6,792
------- -------
Total liabilities 27,737 22,954
------- -------
STOCKHOLDER'S EQUITY
Capital stock -- par value $10,000
(20,000 shares authorized, 2,500 issued and outstanding) 25 25
Additional paid in capital 480 480
Accumulated other comprehensive income (loss) (191) 201
Retained earnings 1,618 1,442
------- -------
Total stockholder's equity 1,932 2,148
------- -------
Total liabilities and stockholder's equity $29,669 $25,102
======= =======
</TABLE>
See accompanying notes to financial statements.
F-1
<PAGE> 50
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
STATEMENT OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1999 1998 1997
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
REVENUES
Universal life and annuity fees $ 442 $ 364 $ 314
Net investment income 1,179 1,108 1,084
Investment gains, net 12 63 108
Other income 97 51 35
------ ------ ------
Total revenues 1,730 1,586 1,541
------ ------ ------
EXPENSES
Interest credited to policyholders' account balances 858 784 748
Policyholder benefits 182 175 141
Operating expenses 405 405 352
------ ------ ------
Total expenses 1,445 1,364 1,241
------ ------ ------
Income before Federal income taxes 285 222 300
Federal income taxes:
Current 52 97 114
Deferred 57 (17) (1)
------ ------ ------
Total Federal income taxes 109 80 113
------ ------ ------
NET INCOME $ 176 $ 142 $ 187
====== ====== ======
</TABLE>
See accompanying notes to financial statements.
F-2
<PAGE> 51
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
STATEMENT OF COMPREHENSIVE INCOME/(LOSS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1999 1998 1997
------ ----- -----
(IN MILLIONS)
<S> <C> <C> <C>
NET INCOME $ 176 $142 $187
Other comprehensive income (loss), net of tax:
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during
period (393) 79 --
Unrealized holding gains (losses) arising during
period, including reclassification adjustments -- -- 89
Less: reclassification adjustment for gains (losses)
included in net income (1) 35 --
----- ---- ----
OTHER COMPREHENSIVE INCOME (LOSS) (392) 44 89
----- ---- ----
COMPREHENSIVE INCOME (LOSS) $(216) $186 $276
===== ==== ====
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE> 52
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
STATEMENT OF STOCKHOLDER'S EQUITY
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(IN MILLIONS)
<TABLE>
<CAPTION>
ACCUMULATED
ADDITIONAL OTHER TOTAL
CAPITAL PAID IN COMPREHENSIVE RETAINED STOCKHOLDERS'
STOCK CAPITAL INCOME (LOSS) EARNINGS EQUITY
------- ---------- ------------- -------- -------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1997 $25 $480 $ 68 $1,113 $1,686
Net income for 1997 -- -- -- 187 187
Net change in unrealized gains and losses of
available for sale securities -- -- 89 -- 89
--- ---- ----- ------ ------
BALANCE AT DECEMBER 31, 1997 25 480 157 1,300 1,962
Net income for 1998 -- -- -- 142 142
Net change in unrealized gains and losses of
available for sale securities -- -- 44 -- 44
--- ---- ----- ------ ------
BALANCE AT DECEMBER 31, 1998 25 480 201 1,442 2,148
Net income for 1999 -- -- -- 176 176
Net change in unrealized gains and losses of
available for sale securities -- -- (392) -- (392)
--- ---- ----- ------ ------
BALANCE AT DECEMBER 31, 1999 $25 $480 $(191) $1,618 $1,932
=== ==== ===== ====== ======
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE> 53
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1999 1998 1997
------- ------- --------
(IN MILLIONS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 176 $ 142 $ 187
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization (3) 2 (43)
Net capitalization of deferred policy acquisition costs (298) (192) (85)
Universal life and annuity fees (215) (198) (202)
Interest credited to policyholders' account balances 858 784 748
Net realized investment losses (13) (56) (126)
Deferred income taxes 57 (17) (1)
(Increase) decrease in:
Net separate account assets 1 (42) 30
Other assets and other liabilities (90) (98) 124
Increase (decrease) in:
Policy claims 9 4 (2)
Future policy benefits 41 39 25
------- ------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 523 368 655
------- ------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from:
Sale of available for sale fixed maturities 3,981 5,325 13,378
Maturity of available for sale fixed maturities 1,505 1,610 1,137
Sale of held to maturity fixed maturities -- -- 3
Maturity of held to maturity fixed maturities 121 102 112
Sale of equity securities 170 77 140
Repayment of mortgage loans 227 238 220
Sale of real estate and other invested assets 62 47 40
Cost of:
Available for sale fixed maturities acquired (6,679) (7,670) (14,391)
Held to maturity fixed maturities acquired (75) (49) (281)
Equity securities acquired (152) (83) (163)
Mortgage loans acquired (451) (558) (413)
Real estate and other invested assets acquired (13) (20) (29)
Policy loans (net) (21) (10) (17)
Increase (decrease) in loaned securities (222) 425 --
Securities sold under agreements to repurchase (net) 480 (45) 134
------- ------- --------
NET CASH USED IN INVESTING ACTIVITIES (1,067) (611) (130)
------- ------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Policyholders' account balances:
Deposits 2,195 1,501 1,191
Withdrawals (1,335) (1,151) (1,235)
Net transfers from (to) the separate accounts (181) 67 58
------- ------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 679 417 14
------- ------- --------
Effect of exchange rate changes on cash and cash equivalents 4 1 (2)
------- ------- --------
Net increase in cash and cash equivalents 139 175 537
------- ------- --------
Cash and cash equivalents, beginning of year 948 773 236
------- ------- --------
Cash and cash equivalents, end of year $ 1,087 $ 948 $ 773
======= ======= ========
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE> 54
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
NOTE 1 -- NATURE OF OPERATIONS
New York Life Insurance and Annuity Corporation ("NYLIAC") is a direct,
wholly owned subsidiary of New York Life Insurance Company ("New York Life")
domiciled in the State of Delaware. NYLIAC offers a wide variety of interest
sensitive insurance and annuity products to a large cross section of the
insurance market. NYLIAC markets its products in all 50 of the United States,
the District of Columbia and Taiwan, primarily through its agency force. In
addition, NYLIAC markets Corporate Owned Life Insurance through independent
brokers and brokerage general agents.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles ("GAAP"). The preparation of financial
statements of life insurance enterprises requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements. Actual results may differ from estimates.
Certain reclassifications have been made to the 1998 and 1997 financial
statements to conform to the current presentation.
INVESTMENTS
Fixed maturity investments, which NYLIAC has both the ability and the
intent to hold to maturity, are stated at amortized cost. Investments identified
as available for sale are reported at fair value. Unrealized gains and losses on
available for sale securities are reported in stockholder's equity, net of
deferred taxes and related adjustments. The cost basis of fixed maturity and
equity securities are adjusted for impairments in value deemed to be other than
temporary, with the associated realized loss reported in net income. Equity
securities are carried at fair value with related unrealized gains and losses
reflected in comprehensive income, net of deferred taxes and related
adjustments. Mortgage loans are carried at unpaid principal balances, net of
impairment reserves, and are generally secured. Investment real estate, which
NYLIAC has the intent to hold for the production of income, is carried at
depreciated cost net of write-downs for other than temporary declines in fair
value. Properties held for sale are carried at the lower of cost or fair value
less estimated selling costs. Policy loans are stated at the aggregate balance
due, which approximates fair value since loans on policies have no defined
maturity date and reduce amounts payable at death or surrender. Cash equivalents
include investments that have maturities of 90 days or less at date of purchase
and are carried at amortized cost, which approximates fair value. Short-term
investments that have maturities of between 91-365 days at date of purchase are
included in fixed maturities on the balance sheet and are carried at amortized
cost, which approximates fair value.
Mortgage backed bonds are carried at amortized cost using the interest
method considering anticipated prepayments at the date of purchase. Significant
changes in future anticipated cash flows from the original purchase assumptions
are accounted for using the retrospective adjustment method.
Derivative financial instruments hedging exposure to interest rate
fluctuation on available for sale securities are accounted for at fair market
value. Unrealized gains and losses are reported in comprehensive income, net of
deferred taxes and related adjustments. Amounts payable or receivable under
interest rate and commodity swap agreements and interest rate floor agreements
are recognized as investment income or expense when earned. Premiums paid for
interest rate floor agreements are amortized into interest expense over the life
of the agreement. Realized gains and losses are recognized in net income upon
termination or maturity of the contracts.
DEFERRED POLICY ACQUISITION COSTS
The costs of acquiring new and maintaining renewal business and certain
costs of issuing policies that vary with and are primarily related to the
production of new and renewal business have been deferred and
F-6
<PAGE> 55
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
DEFERRED POLICY ACQUISITION COSTS -- (CONTINUED)
recorded as an asset in the balance sheet. These consist primarily of
commissions, certain expenses of underwriting and issuing contracts, and certain
agency expenses. Acquisition costs for universal life and annuity contracts are
amortized in proportion to estimated gross profits over the effective life of
the contracts, which is assumed to be 25 years for universal life contracts and
15 years for annuities. Changes in assumptions are reflected in the current
year's amortization.
The carrying amount of the deferred policy acquisition cost asset is
adjusted at each balance sheet date as if the unrealized gains or losses on
investments associated with these insurance contracts had been realized and
included in the gross profits used to determine current period amortization. The
increase or decrease in the deferred policy acquisition cost asset due to
unrealized gains or losses is recorded in comprehensive income.
RECOGNITION OF INCOME AND RELATED EXPENSES
Amounts received under universal life and annuity contracts are reported as
deposits to policyholders' account balances. Revenues from these contracts
consist of amounts assessed during the period for mortality and expense risk,
policy administration and surrender charges. Amounts previously assessed to
compensate the insurer for services to be performed over future periods are
deferred and recognized into income in the period benefited using the same
assumptions and factors used to amortize capitalized acquisition costs. Policy
benefits and claims that are charged to expenses include benefit claims incurred
in the period in excess of related policyholders' account balances.
POLICYHOLDERS' ACCOUNT BALANCES
Policyholders' account balances on universal life and annuity contracts are
equal to cumulative deposits plus credited interest less withdrawals and
charges. This liability also includes a liability for amounts that have been
assessed to compensate the insurer for services to be performed over future
periods.
FEDERAL INCOME TAXES
NYLIAC is a member of a group which files a consolidated Federal income tax
return with New York Life. The consolidated income tax provision or benefit is
allocated among the members of the group in accordance with a tax allocation
agreement. The tax allocation agreement provides that NYLIAC is allocated its
share of the consolidated tax provision or benefit determined generally on a
separate company basis. Current Federal income taxes are charged or credited to
operations based upon amounts estimated to be payable or recoverable as a result
of taxable operations for the current year and any adjustments to such estimates
from prior years. Deferred income tax assets and liabilities are recognized for
the future tax consequence of temporary differences between financial statement
carrying amounts and income tax bases of assets and liabilities.
Current Federal income taxes include a provision for NYLIAC's share of the
equity base tax applicable to mutual life insurance companies and their
insurance subsidiaries. The amount recorded is based on NYLIAC's estimate of the
differential earnings rate ("DER") (the actual rate will be announced at a later
date by the Internal Revenue Service ("IRS")) used to compute the equity base
tax.
REINSURANCE
NYLIAC enters into reinsurance agreements in the normal course of its
insurance business to reduce overall risk. NYLIAC remains liable for reinsurance
ceded if the reinsurer fails to meet its obligation on the business it has
assumed. NYLIAC evaluates the financial condition of its reinsurers to minimize
its exposure to significant losses from reinsurer insolvencies.
SEPARATE ACCOUNTS
NYLIAC has established separate accounts with varying investment objectives
which are segregated from NYLIAC's general account and are maintained for the
benefit of separate account policyholders' and NYLIAC. Separate account assets
are stated at market value. The liability for separate accounts represents
F-7
<PAGE> 56
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
SEPARATE ACCOUNTS -- (CONTINUED)
policyholders' interests in the separate account assets. For its registered
separate accounts, these liabilities include accumulated net investment income
and realized and unrealized gains and losses on those assets, and generally
reflect market value. For its guaranteed, non-registered separate account, the
liability includes interest credited to the policies.
FAIR VALUES OF FINANCIAL INSTRUMENTS
Fair values of various assets and liabilities are included throughout the
notes to financial statements. Specifically, fair value disclosure of fixed
maturities, short-term investments, cash equivalents, equity securities and
mortgage loans is reported in Note 2 -- Significant Accounting Policies and Note
3 -- Investments. Fair values for policyholders' account balances are reported
in Note 5 -- Insurance Liabilities. Fair values for derivative financial
instruments are included in Note 10 -- Derivative Financial Instruments and Risk
Management. Fair values for repurchase agreements are included in Note
11 -- Commitments and Contingencies.
BUSINESS RISKS AND UNCERTAINTIES
The development of policy reserves and deferred policy acquisition costs
for NYLIAC's products requires management to make estimates and assumptions
regarding mortality, morbidity, lapse, expense and investment experience. Such
estimates are primarily based on historical experience and future expectations
of mortality, morbidity, expense, persistency and investment assumptions. Actual
results could differ from those estimates. Management monitors actual
experience, and where circumstances warrant, revises its assumptions and the
related estimates for policy reserves and deferred policy acquisition costs.
NYLIAC regularly invests in mortgage loans, mortgage-backed securities and
other securities subject to prepayment and/or call risk. Significant changes in
prevailing interest rates and/or geographic conditions may adversely affect the
timing and amount of cash flows on such securities, as well as their related
values. In addition, the amortization of market premium and accretion of market
discount for mortgage-backed and asset-backed securities is based on historical
experience and estimates of future payment experience on the underlying assets.
Actual prepayment speeds will differ from original estimates and may result in
material adjustments to asset values and amortization or accretion recorded in
future periods.
As a subsidiary of a mutual life insurance company, NYLIAC is subject to a
tax on its equity base. The rates applied to NYLIAC's equity base are determined
annually by the IRS after comparison of mutual life insurance company earnings
for the year to the average earnings of the 50 largest stock life insurance
companies for the prior three years. Due to the timing of earnings information,
estimates of the current year's tax rate must be made by management. The
ultimate amounts of equity base tax incurred may vary considerably from the
original estimates.
RECENT ACCOUNTING PRONOUNCEMENTS
During 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position ("SOP") 98-1, "Accounting for the Costs
of Computer Software Developed or Obtained for Internal Use", which requires
capitalization of external and certain internal costs incurred to obtain or
develop internal-use computer software during the application development stage.
NYLIAC applied the provisions of SOP 98-1 prospectively effective January
1, 1999. The adoption of SOP 98-1 resulted in net capitalization of $37 million
at December 31, 1999, which is included in other assets in the accompanying
Balance Sheet. Capitalized internal-use software is amortized on a straight-line
basis over the estimated useful life of the software, not to exceed five years.
During 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". This Statement establishes new GAAP
accounting and reporting standards for derivative instruments, including
derivative instruments embedded in other contracts, and for hedging activities.
In 1999, the FASB issued SFAS No. 137, "Accounting for Derivative Instruments
and Hedging Activities -- Deferral of the Effective Date of FASB Statement No.
133", which postpones the implementation until the 2001 financial statements.
NYLIAC is currently evaluating what impact, if any, this Statement will have on
its financial results.
F-8
<PAGE> 57
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
RECENT ACCOUNTING PRONOUNCEMENTS -- (CONTINUED)
This Statement requires that derivatives be reported in the balance sheet
at their fair value, regardless of any hedging relationship that may exist.
Accounting for the gains or losses resulting from changes in the values of those
derivatives would depend on the use of the derivative and whether it qualifies
for hedge accounting. Changes in fair value of derivatives that are not
designated as hedges or that do not meet the hedge accounting criteria will be
reported in earnings.
NOTE 3 -- INVESTMENTS
FIXED MATURITIES
For publicly traded fixed maturities, estimated fair value is determined
using quoted market prices. For fixed maturities without a readily ascertainable
market value, NYLIAC has determined an estimated fair value using either a
discounted cash flow approach, including provisions for credit risk generally
based upon the assumption such securities will be held to maturity, broker
dealer quotations, or a proprietary matrix pricing model.
At December 31, 1999 and 1998, the maturity distribution of fixed
maturities was as follows (in millions):
<TABLE>
<CAPTION>
1999 1998
----------------------- -----------------------
AMORTIZED ESTIMATED AMORTIZED ESTIMATED
AVAILABLE FOR SALE COST FAIR VALUE COST FAIR VALUE
------------------ --------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Due in one year or less $ 514 $ 514 $ 518 $ 521
Due after one year through five years 3,196 3,153 3,473 3,533
Due after five years through ten years 2,167 2,099 1,804 1,885
Due after ten years 3,138 2,938 3,028 3,235
Mortgage and asset-backed securities:
Government or government agency 3,114 2,996 2,080 2,121
Other 1,631 1,589 1,740 1,786
------- ------- ------- -------
Total Available for Sale $13,760 $13,289 $12,643 $13,081
======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
HELD TO MATURITY
----------------
<S> <C> <C> <C> <C>
Due in one year or less $ 17 $ 17 $ 27 $ 28
Due after one year through five years 272 360 225 291
Due after five years through ten years 165 159 219 228
Due after ten years 206 194 193 207
Asset-backed securities 21 21 61 62
------- ------- ------- -------
Total Held to Maturity $ 681 $ 751 $ 725 $ 816
======= ======= ======= =======
</TABLE>
F-9
<PAGE> 58
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
FIXED MATURITIES -- (CONTINUED)
At December 31, 1999 and 1998, the distribution of gross unrealized gains
and losses on investments in fixed maturities was as follows (in millions):
<TABLE>
<CAPTION>
1999
---------------------------------------------------
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
AVAILABLE FOR SALE COST GAINS LOSSES FAIR VALUE
------------------ --------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
U.S. Treasury and U.S. Government
Corporations and agencies $ 635 $ 7 $ 16 $ 626
U.S. agencies, state and municipal 3,046 7 129 2,924
Foreign Governments 20 -- -- 20
Corporate 8,428 61 359 8,130
Other 1,631 4 46 1,589
------- ---- ---- -------
Total Available for Sale $13,760 $ 79 $550 $13,289
======= ==== ==== =======
HELD TO MATURITY
----------------
Corporate $ 661 $ 91 $ 22 $ 730
Other 20 1 -- 21
------- ---- ---- -------
Total Held to Maturity $ 681 $ 92 $ 22 $ 751
======= ==== ==== =======
</TABLE>
<TABLE>
<CAPTION>
1998
---------------------------------------------------
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
AVAILABLE FOR SALE COST GAINS LOSSES FAIR VALUE
------------------ --------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
U.S. Treasury and U.S. Government
Corporations and agencies $ 1,006 $ 45 $ 1 $ 1,050
U.S. agencies, state and municipal 1,927 39 4 1,962
Foreign Governments 234 22 -- 256
Corporate 7,736 338 47 8,027
Other 1,740 48 2 1,786
------- ---- ---- -------
Total Available for Sale $12,643 $492 $ 54 $13,081
======= ==== ==== =======
HELD TO MATURITY
-----------------
Corporate $ 664 $ 91 $ 1 $ 754
Other 61 1 -- 62
------- ---- ---- -------
Total Held to Maturity $ 725 $ 92 $ 1 $ 816
======= ==== ==== =======
</TABLE>
EQUITY SECURITIES
Estimated fair value of equity securities has been determined using quoted
market prices for publicly traded securities and a matrix pricing model for
private placement securities. At December 31, 1999 and 1998, the distribution of
gross unrealized gains and losses on equity securities is as follows (in
millions):
<TABLE>
<CAPTION>
UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES FAIR VALUE
---- ---------- ---------- ----------
<S> <C> <C> <C> <C>
1999 $80 $13 $4 $ 89
1998 $76 $27 $3 $100
</TABLE>
MORTGAGE LOANS
NYLIAC's mortgage loans are diversified by property type, location and
borrower, and are generally collateralized by the related property.
The fair market value of the mortgage loan portfolio at December 31, 1999
and 1998 is estimated to be $1,858 million and $1,728 million, respectively.
Market values are determined by discounting the projected cash flows for each
loan to determine the current net present value. The discount rate used
approximates the current rate for new mortgages with comparable characteristics
and similar remaining maturities.
F-10
<PAGE> 59
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
MORTGAGE LOANS -- (CONTINUED)
At December 31, 1999 and 1998, contractual commitments to extend credit
under commercial and residential mortgage loan agreements amounted to
approximately $37 million and $76 million, respectively, at a fixed market rate
of interest. These commitments are diversified by property type and geographic
region.
The general reserve provision for losses on mortgage loans was $4 million
and $1 million at December 31, 1999 and 1998, respectively. There were no
specific provisions for losses as of December 31, 1999 and 1998. The activity in
the general reserves as of December 31, 1999 and 1998 is summarized below (in
millions):
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Beginning Balance $ 1 $14
Additions/(reductions) charged/(credited) to operations 3 (5)
Recoveries of amounts previously written-down -- (8)
--- ---
Ending Balance $ 4 $ 1
=== ===
</TABLE>
NYLIAC accrues interest income on impaired loans to the extent it is deemed
collectible and the loan continues to perform under its original or restructured
contractual terms. Interest income on problem loans is generally recognized on a
cash basis. Cash payments on loans in the process of foreclosure are generally
treated as a return of principal.
At December 31, 1999 and 1998, the distribution of the mortgage loan
portfolio by property type and geographic region was as follows (in millions):
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Property Type:
Office building $ 795 $ 753
Retail 385 330
Apartments 185 187
Residential 302 247
Other 183 105
------ ------
Total $1,850 $1,622
====== ======
Geographic Region:
Central $ 438 $ 359
Pacific 255 211
Middle Atlantic 444 451
South Atlantic 534 418
New England 121 121
Other 58 62
------ ------
Total $1,850 $1,622
====== ======
</TABLE>
REAL ESTATE
At December 31, 1999 and 1998, NYLIAC's real estate portfolio consisted of
the following (in millions):
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Investment $63 $105
Acquired through foreclosures 9 11
--- ----
Total real estate $72 $116
=== ====
</TABLE>
Accumulated depreciation on real estate at December 31, 1999 and 1998, was
$11 million and $12 million, respectively. Depreciation expense totaled $3
million in 1999, 1998 and 1997.
F-11
<PAGE> 60
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
NOTE 4 -- INVESTMENT INCOME AND CAPITAL GAINS AND LOSSES
The components of net investment income for the years ended December 31,
1999, 1998 and 1997, were as follows (in millions):
<TABLE>
<CAPTION>
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Fixed Maturities $1,013 $ 972 $ 961
Equity Securities 10 7 6
Mortgage Loans 134 116 96
Real Estate 15 15 18
Policy Loans 41 40 39
Derivative Instruments 1 1 1
Other 16 1 18
------ ------ ------
Gross investment income 1,230 1,152 1,139
Investment expenses (51) (44) (55)
------ ------ ------
Net investment income $1,179 $1,108 $1,084
====== ====== ======
</TABLE>
During 1999 a fixed maturity investment that had been classified as held to
maturity was transferred to available for sale and subsequently sold due to
credit deterioration. The investment had an amortized cost of $10,052,000, and
the sale resulted in a realized gain of $82,000. In addition, in 1997 a fixed
maturity investment that had been classified as held to maturity was sold due to
credit deterioration. The investment had an amortized cost of $2,791,000, and
the sale resulted in a realized gain of $14,000.
For the years ended December 31, 1999, 1998 and 1997, realized investment
gains (losses) computed under the specific identification method are as follows
(in millions):
<TABLE>
<CAPTION>
1999 1998 1997
------------------------- ------------------------- -------------------------
GAINS LOSSES GAINS LOSSES GAINS LOSSES
----- ------ ----- ------ ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fixed Maturities $ 64 $(87) $ 87 $(29) $172 $ (83)
Equity Securities 34 (8) 7 (7) 9 (4)
Mortgage Loans 4 -- 16 (8) 12 (8)
Real Estate 5 (2) 6 (2) 3 (2)
Derivative Instruments -- -- -- -- 80 (71)
Other 2 -- 3 (10) 1 (1)
---- ---- ---- ---- ---- -----
Subtotal $109 $(97) $119 $(56) $277 $(169)
---- ---- ---- ---- ---- -----
Investment gains, net $12 $63 $108
=== === ====
</TABLE>
NET UNREALIZED INVESTMENT GAINS
Net unrealized investment gains on fixed maturities available for sale are
included in the Balance Sheet as a component of "Accumulated other comprehensive
income". Changes in these amounts include reclassification adjustments to avoid
double counting in "Comprehensive income" items that are part of "Net income"
for
F-12
<PAGE> 61
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
NET UNREALIZED INVESTMENT GAINS -- (CONTINUED)
a period that also had been part of "Other comprehensive income" in earlier
periods. The amounts for the years ended December 31, are as follows (in
millions):
<TABLE>
<CAPTION>
1999 1998 1997
----- ---- ----
<S> <C> <C> <C>
Net unrealized investments gains, beginning of the year $ 201 $157 $ 68
Changes in net unrealized investment gains attributable to:
Investments:
Net unrealized investment gains (losses) arising
during the period (612) 24 --
Reclassification adjustments for gains (losses)
included in net income (1) 35 --
Net unrealized investment gains (losses) arising
during the period, including reclassification
adjustments -- -- 142
----- ---- ----
Change in net unrealized investment gains (losses),
net of adjustments (613) 59 142
Impact of net unrealized investment gains (losses) on:
Policyholders' account balance (7) (1) 3
Deferred policy acquisition costs 228 (14) (56)
----- ---- ----
Change in net unrealized investment gains (losses) (392) 44 89
----- ---- ----
Net unrealized investment gains (losses), end of year $(191) $201 $157
===== ==== ====
</TABLE>
Net unrealized gains (losses) on investments arising during the periods
reported in the above table are net of income tax expense (benefit) of $(330)
million, $31 million and $76 million for the years ended December 31, 1999, 1998
and 1997, respectively.
Reclassification adjustments reported in the above table for the years
ended December 31, 1999, 1998 and 1997 are net of income tax expense of $0
million, $19 million and $0 million, respectively.
Policyholders' account balance reported in the above table are net of
income tax expense (benefit) of $(3) million, $0 million and $1 million for the
years ended December 31, 1999, 1998 and 1997, respectively.
Deferred policy acquisition costs in the above table for the years ended
December 31, 1999, 1998 and 1997 are net of income tax expense (benefit) of $122
million, $(8) million and $(31) million, respectively.
NOTE 5 -- INSURANCE LIABILITIES
NYLIAC's annuity contracts are primarily deferred annuities. The carrying
value, which approximates fair value, of NYLIAC's liabilities for deferred
annuities at December 31, 1999 and 1998, was $7,279 million and $6,905 million,
respectively.
NOTE 6 -- SEPARATE ACCOUNTS
NYLIAC maintains eight non-guaranteed, registered separate accounts for its
variable deferred annuity and variable life products. NYLIAC maintains
investments in the registered separate accounts of $71 million and $54 million
at December 31, 1999 and 1998, respectively. The assets of the separate
accounts, which are carried at market value, represent investments in shares of
the New York Life sponsored MainStay VP Series Fund and other non-proprietary
funds.
NYLIAC maintains one guaranteed separate account for universal life
insurance policies. This account provides a minimum guaranteed interest rate
with a market value adjustment imposed upon certain surrenders. The assets of
this separate account are carried at market value.
F-13
<PAGE> 62
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
NOTE 7 -- DEFERRED POLICY ACQUISITION COSTS
An analysis of deferred policy acquisition costs (DAC) for the years ended
December 31, 1999, 1998 and 1997 is as follows (in millions):
<TABLE>
<CAPTION>
1999 1998 1997
------ ------ -----
<S> <C> <C> <C>
Balance at beginning of year before adjustment
for unrealized gains (losses) on investments $1,028 $ 836 $ 751
Current year additions 372 286 200
Amortized during year (74) (94) (115)
------ ------ -----
Balance at end of year before adjustment for
unrealized gains (losses) on investments 1,326 1,028 836
Adjustment for unrealized gains (losses) on investments 181 (169) (148)
------ ------ -----
Balance at end of year $1,507 $ 859 $ 688
====== ====== =====
</TABLE>
NOTE 8 -- FEDERAL INCOME TAXES
The components of the net deferred tax liability as of December 31, 1999
and 1998 are as follows (in millions):
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Deferred tax assets:
Future policyholder benefits $258 $196
Employee and agents benefits 52 53
Investments 131 --
---- ----
Gross deferred tax assets 441 249
==== ====
Deferred tax liabilities
Deferred policy acquisition costs 374 168
Investments -- 174
Other 14 8
---- ----
Gross deferred tax liabilities 388 350
---- ----
Net deferred tax (asset) liability $(53) $101
==== ====
</TABLE>
The gross deferred tax asset relates to temporary differences that are
expected to reverse as net ordinary deductions. Management believes that
NYLIAC's taxable income in future years will be sufficient to realize the
deferred tax benefits and therefore, no valuation allowance has been recorded.
Set forth below is a reconciliation of the Federal income tax rate to the
effective tax rate for 1999, 1998 and 1997:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Statutory federal income tax rate 35.0% 35.0% 35.0%
Equity base tax 5.9 1.7 3.3
Tax exempt income (1.1) (.5) (.5)
Other (1.5) (.2) (.1)
---- ---- ----
Effective tax rate 38.3% 36.0% 37.7%
==== ==== ====
</TABLE>
NYLIAC's Federal income tax returns are routinely examined by the IRS and
provisions are made in the financial statements in anticipation of the results
of these audits. The IRS has completed audits through 1995. There were no
material effects on NYLIAC's results of operations as a result of these audits.
NYLIAC believes that its recorded income tax liabilities are adequate for all
open years.
F-14
<PAGE> 63
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
NOTE 9 -- REINSURANCE
NYLIAC has entered into cession reinsurance agreements on a coinsurance
basis with non-affiliated companies and on a yearly renewable term basis with
affiliated and non-affiliated companies.
NYLIAC has ceded yearly renewable term reinsurance with affiliated
companies. Under this agreement, included in the accompanying consolidated
statement of income are $1.5 million, $.9 million and $.4 million of ceded
premiums at December 31, 1999, 1998 and 1997, respectively.
On April 1, 1997, NYLIAC, under the terms of an assumption reinsurance
agreement, acquired certain bank owned life insurance policies that had been
issued by Confederation Life Insurance Company. In conjunction with this
transaction, NYLIAC recorded a liability for policyholder account balances of
$277 million, and received cash of $245 million and a note receivable of $11
million. The difference of $21 million between the liability recorded and the
assets received has been recorded as DAC, which is being amortized over the
remaining life of the policies, assumed to be 25 years.
NOTE 10 -- DERIVATIVE FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
NYLIAC uses derivative financial instruments to manage interest rate,
commodity and market risk. These derivative financial instruments include
interest rate floors and interest rate and commodity swaps. NYLIAC has not
engaged in derivative financial instrument transactions for speculative
purposes.
Notional or contractual amounts of derivative financial instruments provide
only a measure of involvement in these types of transactions and do not
represent the amounts exchanged between the parties engaged in the transaction.
The amounts exchanged are determined by reference to the notional amounts and
other terms of the derivative financial instruments which relate to interest
rates or other financial indices.
NYLIAC is exposed to credit-related losses in the event that a counterparty
fails to perform its obligations under contractual terms. The credit exposure of
derivative financial instruments is represented by the sum of fair values of
contracts with each counterparty, if the net value is positive, at the reporting
date.
NYLIAC deals with highly rated counterparties and does not expect the
counterparties to fail to meet their obligations. NYLIAC has controls in place
to monitor credit exposures by limiting transactions with specific
counterparties within specified dollar limits and assessing the future
creditworthiness of counterparties. NYLIAC uses master netting agreements and
adjusts transaction levels, when appropriate, to minimize risk.
INTEREST RATE RISK MANAGEMENT
NYLIAC enters into various types of interest rate contracts primarily to
minimize exposure of specific assets held by NYLIAC to fluctuations in interest
rates.
The following table summarizes the notional amounts and credit exposures of
interest rate related derivative transactions (in thousands):
<TABLE>
<CAPTION>
1999 1998
-------------------- --------------------
NOTIONAL CREDIT NOTIONAL CREDIT
AMOUNT EXPOSURE AMOUNT EXPOSURE
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Interest Rate Swaps $225,000 $-- $125,000 $9,125
Interest Rate Floors $150,000 $92 $150,000 $ 748
</TABLE>
Interest rate swaps are agreements with other parties to exchange, at
specified intervals, the difference between fixed-rate and floating-rate
interest amounts calculated by reference to an agreed upon notional amount. Swap
contracts outstanding at December 31, 1999 are between four years, seven months
and nineteen years in maturity. At December 31, 1998 such contracts were between
six years, eight months and nineteen years, four months in maturity. NYLIAC does
not act as an intermediary or broker in interest rate swaps.
F-15
<PAGE> 64
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
INTEREST RATE RISK MANAGEMENT -- (CONTINUED)
The following table shows the type of swaps used by NYLIAC and the weighted
average interest rates. Average variable rates are based on the rates which
determine the last payment received or paid on each contract; those rates may
change significantly, affecting future cash flows:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Receive -- fixed swaps -- Notional amount (in thousands) $225,000 $125,000
Average receive rate 6.50% 6.64%
Average pay rate 5.17% 5.65%
</TABLE>
During the term of the swap, net settlement amounts are recorded as
investment income or expense when earned. Fair values of interest rate swaps
were ($8,420,000) and $9,125,000 at December 31, 1999 and 1998, respectively,
based on broker/dealer quotations.
Interest rate floor agreements entitle NYLIAC to receive amounts from
counterparties based upon the difference between a strike price and current
interest rates. Such agreements serve as hedges against declining interest rates
on a portfolio of assets. Amounts received during the term of interest rate
floor agreements are recorded as investment income.
At December 31, 1999 and 1998, unamortized premiums on interest rate floors
amounted to $315,000 and $372,000, respectively. Fair values of such agreements
were $92,000 and $748,000 at December 31, 1999 and 1998, respectively, based on
broker/dealer quotations.
COMMODITY RISK MANAGEMENT
NYLIAC has a bond investment with interest payments linked to the price of
crude oil. NYLIAC has entered into a commodity swap with a total notional amount
of $7,500,000 as a hedge against this commodity risk. The credit exposure of the
swap was $0 and $136,000 at December 31, 1999 and 1998, respectively.
NOTE 11 -- COMMITMENTS AND CONTINGENCIES
LITIGATION
NYLIAC is a defendant in individual suits arising from its agency sales
force, insurance (including variable contracts registered under the federal
securities law), investment, retail securities and/or other operations,
including actions involving retail sales practices. Most of these actions seek
substantial or unspecified compensatory and punitive damages. NYLIAC is also
from time to time involved as a party in various governmental, administrative,
and investigative proceedings and inquiries.
Notwithstanding the uncertain nature of litigation and regulatory
inquiries, the outcome of which cannot be predicted, NYLIAC nevertheless
believes that, after provisions made in the financial statements, the ultimate
liability that could result from litigation and proceedings would not have a
material adverse effect on NYLIAC's financial position; however, it is possible
that settlements or adverse determinations in one or more actions or other
proceedings in the future could have a material adverse effect on NYLIAC's
operating results for a given year.
LOANED SECURITIES AND REPURCHASE AGREEMENTS
NYLIAC participates in a securities lending program for the purpose of
enhancing income on securities held. At December 31, 1999 and 1998, $246 million
and $571 million, respectively, of NYLIAC's fixed maturities and equity
securities were on loan to others, but were fully collateralized in an account
held in trust for NYLIAC. Such assets reflect the extent of NYLIAC's involvement
in securities lending, not NYLIAC's risk of loss.
NYLIAC enters into agreements to sell and repurchase securities for the
purpose of enhancing income on securities held. Under these agreements, NYLIAC
obtains the use of funds from a broker for approximately one month. The
liability reported in the accompanying Balance Sheet (included in other
liabilities) at December 31, 1999 of $620 million ($139 million at December 31,
1998) approximates fair value. The
F-16
<PAGE> 65
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
LOANED SECURITIES AND REPURCHASE AGREEMENTS -- (CONTINUED)
investments acquired with the funds received from the securities sold are
primarily included in cash and cash equivalents in the accompanying Balance
Sheet.
NOTE 12 -- RELATED PARTY TRANSACTIONS
New York Life provides NYLIAC with services and facilities for the sale of
insurance and other activities related to the business of insurance. New York
Life charges NYLIAC for the identified costs associated with these services and
facilities under the terms of a Service Agreement between New York Life and
NYLIAC. Such costs, amounting to $393 million for the year ended December 31,
1999 ($335 million for 1998 and $239 million for 1997) are reflected in
operating expenses and net investment income in the accompanying Statement of
Income.
In addition, NYLIAC is allocated post-retirement and post-employment
benefits other than pensions, which are held by New York Life. NYLIAC was
allocated $12 million for its share of the net periodic post-retirement benefits
expense in 1999 ($8 million and $9 million in 1998 and 1997, respectively) and
$3 million for the post-employment benefits expense in 1999 ($2 million in 1998
and 1997) under the provisions of the Service Agreement. The expenses are
reflected in operating expenses and net investment income in the accompanying
Statement of Income.
In addition, in 1999 New York Life concluded a comprehensive expense
reduction program expected to streamline processes and improve profitability. As
a result of job eliminations and early retirement benefits as defined in
management's termination plan, NYLIAC was allocated $16 million for its share of
these restructuring costs in 1999, which are reflected in operating expenses and
net investment income in the accompanying Statement of Income.
At December 31, 1999 and 1998, NYLIAC has a net liability of $80 million
and $63 million, respectively for the above described services which are
included in other liabilities in the accompanying Balance Sheet.
In 1999 NYLIAC sold a $197 million Corporate Sponsored Variable Universal
Life (CSVUL) policy and a $82 million Corporate Sponsored Universal Life (CSUL)
policy to a Voluntary Employee Benefit Association (VEBA) trust. This trust was
established to fund New York Life's retired employees medical and dental
benefits. In addition, in 1999 and 1998, NYLIAC sold a Corporate Owned Life
(COLI) policy to New York Life for $180 million and $250 million in premiums,
respectively. These policies were sold on the same basis as policies sold to
unrelated customers.
NOTE 13 -- SUPPLEMENTAL CASH FLOW INFORMATION
Federal income taxes paid were $48 million, $67 million, and $126 million
during 1999, 1998 and 1997, respectively.
Total interest paid was $30 million, $27 million and $35 million during
1999, 1998 and 1997, respectively.
NOTE 14 -- STATUTORY FINANCIAL INFORMATION
Accounting practices used to prepare statutory financial statements for
regulatory filings of life insurance companies differ in certain instances from
GAAP. The Delaware Insurance Department recognizes only statutory accounting
practices for determining and reporting the financial condition and results of
operations of an insurance company, and for determining its solvency under the
Delaware Insurance Law. No consideration is given by the Department to financial
statements prepared in accordance with generally accepted accounting principles
in making such determinations.
In 1998, the NAIC adopted the Codification of Statutory Accounting
Principles guidance, which will replace the current Accounting Practices and
Procedures manual as the NAIC's primary guidance on statutory accounting. The
Delaware Insurance Department has adopted the Codification guidance, effective
January 1, 2001. NYLIAC has not estimated the potential effect of the
Codification guidance on its financial statements.
At December 31, 1999 and 1998, statutory stockholder's equity was $1,130
million and $1,095 million, respectively.
F-17
<PAGE> 66
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
NOTE 14 -- STATUTORY FINANCIAL INFORMATION -- (CONTINUED)
NYLIAC is restricted as to the amounts it may pay as dividends to New York
Life. Under Delaware Insurance Law, dividends on capital stock can be
distributed only out of earned surplus. Furthermore, without prior approval of
the Delaware Insurance Commissioner, dividends can not be declared or
distributed which exceed the greater of ten percent of the Company's surplus or
one hundred percent of net gain from operations.
No dividends were paid or declared for the years ended December 31, 1999,
1998 and 1997.
As of December 31, 1999, the amount of available and accumulated funds
derived from earned surplus from which NYLIAC can pay dividends is $625 million.
The maximum amount of dividend which may be paid in 2000 without prior approval
is $113 million.
F-18
<PAGE> 67
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholder of
New York Life Insurance and Annuity Corporation
In our opinion, the accompanying balance sheet and the related statements of
income, of comprehensive income, of stockholder's equity and of cash flows
present fairly, in all material respects, the financial position of New York
Life Insurance and Annuity Corporation at December 31, 1999 and 1998, and the
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1999, in conformity with accounting principles
generally accepted in the United States. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with auditing standards generally
accepted in the United States, which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
As discussed in Note 2 to the financial statements, the Company changed its
method of accounting in 1999 for the cost of computer software developed or
obtained for internal use.
PRICEWATERHOUSECOOPERS LLP
1177 Avenue of the Americas
New York, New York 10036
March 1, 2000
F-19
<PAGE> 68
PART II
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned Registrant hereby undertakes to file
with the Securities and Exchange Commission such supplementary and periodic
information, documents and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.
RULE 484 UNDERTAKING
Reference is made to Article VIII of the Depositor's By-Laws.
New York Life maintains Directors and Officers Liability/Company
Reimbursement ("D&O") insurance which covers directors, officers and trustees
of New York Life, its subsidiaries, and its subsidiaries and certain affiliates
including the Depositor while acting in their capacity as such. The total
annual aggregate of D&O coverage is $150 million applicable to all insureds
under the D&O policies. There is no assurance that such coverage will be
maintained by New York Life or for the Depositor in the future as, in the past,
there have been large variances in the availability of D&O insurance for
financial institutions.
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Depositor pursuant to the foregoing provisions, or otherwise, the Depositor
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Depositor of expenses incurred
or paid by a director, officer or controlling person of the Depositor in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Depositor will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication
of such issue.
REPRESENTATION AS TO THE REASONABLENESS OF AGGREGATE FEES AND CHARGES
New York Life Insurance and Annuity Corporation ("NYLIAC"), the
sponsoring insurance company of the NYLIAC Corporate Sponsored Variable
Universal Life Separate Account-I, hereby represents that the fees and charges
deducted under the Corporate Executive Series Variable Universal Life Insurance
Policies are reasonable in relation to the services rendered, the expenses
expected to be incurred and the risks assumed by NYLIAC.
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
The facing sheet.
The prospectus consisting of 62 pages.
The undertaking to file reports.
The undertaking pursuant to Rule 484.
II-1
<PAGE> 69
The representation as to the reasonableness of aggregate fees and charges.
The signatures.
Written consents of the following persons:
(a) Thomas F. English, Esq. (To be filed by amendment)
(b) Irwin L. Don, Actuary (To be filed by amendment)
(c) PricewaterhouseCoopers LLP - Filed herewith.
The following exhibits:
1. The following exhibits correspond to those required by paragraph A of the
instructions as to exhibits in Form N-8B-2:
(1) Resolution of the Board of Directors of NYLIAC establishing
the Separate Account - Previously filed in accordance with
Regulation S-T, 17 CFR 232.102(e) as Exhibit (1) to
Registrant's initial Registration Statement on Form S-6 (File
No. 07617) filed 7/3/96 and incorporated herein by reference.
(2) Not applicable.
(3)(a) Distribution Agreement between NYLIFE Distributors Inc. and
NYLIAC - Previously filed in accordance with Regulation S-T,
17 CFR 232.102(e) as Exhibit (3)(a) to Registrant's
Pre-Effective Amendment No. 1 on Form S-6 (File No. 07617)
filed 1/2/97 and incorporated herein by reference.
(3)(b) Form of Sales Agreement, by and between NYLIFE Distributors
Inc., as Underwriter, NYLIAC as Issuer, and Dealers -
Previously filed in accordance with Regulation S-T, 17 CFR
232.102(e) as Exhibit (3)(b) to Registrant's Pre-Effective
Amendment No. 1 on Form S-6 (File No. 07617) filed 1/2/97 and
incorporated herein by reference.
(3)(c) Not applicable.
(4) Not applicable.
(5) Form of Policy for Corporate Executive Series Variable
Universal Life Insurance Policies - Filed herewith.
(5)(a) Supplementary Term Rider for Corporate Executive Series
Variable Universal Life Insurance Policies - Filed herewith.
(5)(b) Level Term Rider for Corporate Executive Series Variable
Universal Life Insurance Policies - Filed herewith.
(6)(a) Restated Certificate of Incorporation of NYLIAC - Previously
filed in accordance with Regulation S-T, 17 CFR 232.102(e) as
Exhibit (6)(a) to Registrant's initial Registration Statement
on Form S-6 (File No. 07617) filed 7/3/96 and incorporated
herein by reference.
(6)(b)(1) By-Laws of NYLIAC - Previously filed in accordance with
Regulation S-T, 17 CFR 232.102(e) as Exhibit (6)(b) to
Registrant's initial Registration Statement on Form S-6 (File
No. 07617) filed 7/3/96 and incorporated herein by reference.
(6)(b)(2) Amendments to By-Laws of NYLIAC - Previously filed in
accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit
(6)(b) to Pre-Effective Amendment No. 1 to the registration
statement on Form S-6 for NYLIAC Variable Universal Life
Separate Account-I (File No. 333-39157) filed 4/3/98 and
incorporated herein by reference.
(7) Not applicable.
II-2
<PAGE> 70
(8) Not applicable.
(9)(a) Stock Sales Agreement between NYLIAC and MainStay VP Series
Fund, Inc. (formerly New York Life M.F.A. Series Fund, Inc.)
- Previously filed in accordance with Regulation S-T, 17 CFR
232.102(e) as Exhibit (9)(a) to Registrant's Pre-Effective
Amendment No. 1 on Form S-6 (File No. 07617) filed 1/2/97 and
incorporated herein by reference.
(9)(b)(1) Participation Agreement among Acacia Capital Corporation,
Calvert Asset Management Company, Inc. and NYLIAC, as amended
- Previously filed in accordance with Regulation S-T, 17 CFR
232.102(e) as Exhibit (9)(b)(1) to Registrant's Pre-Effective
Amendment No. 1 on Form S-6 (File No. 07617) filed 1/2/97 and
incorporated herein by reference.
(9)(b)(2) Participation Agreement among The Alger American Fund, Fred
Alger and Company, Incorporated and NYLIAC - Previously filed
in accordance with Regulation S-T, 17 CFR 232.102(e) as
Exhibit (9)(b)(2) to Registrant's Pre-Effective Amendment No.
1 on Form S-6 (File No. 07617) filed 1/2/97 and incorporated
herein by reference.
(9)(b)(3) Participation Agreement between Janus Aspen Series and NYLIAC
- Previously filed in accordance with Regulation S-T, 17 CFR
232.102(e) as Exhibit (9)(b)(3) to Registrant's Pre-Effective
Amendment No. 1 on Form S-6 (File No. 07617) filed 1/2/97 and
incorporated herein by reference.
(9)(b)(4) Participation Agreement among Morgan Stanley Universal Funds,
Inc., Morgan Stanley Asset Management, Inc. and NYLIAC -
Previously filed in accordance with Regulation S-T, 17 CFR
232.102(e) as Exhibit (9)(b)(4) to Registrant's Pre-Effective
Amendment No. 1 on Form S-6 (File No. 07617) filed 1/2/97 and
incorporated herein by reference.
(9)(b)(5) Participation Agreement among Variable Insurance Products
Fund, Fidelity Distributors Corporation and NYLIAC -
Previously filed in accordance with Regulation S-T, 17 CFR
232.102(e) as Exhibit (9)(b)(5) to Registrant's Pre-Effective
Amendment No. 1 on Form S-6 (File No. 07617) filed 1/2/97 and
incorporated herein by reference.
(9)(b)(6) Participation Agreement among Variable Insurance Products
Fund II, Fidelity Distributors Corporation and NYLIAC -
Previously filed in accordance with Regulation S-T, 17 CFR
232.102(e) as Exhibit (9)(b)(6) to Registrant's Pre-Effective
Amendment No. 1 on Form S-6 (File No. 07617) filed 1/2/97 and
incorporated herein by reference.
(9)(b)(7) Participation Agreement among T. Rowe Price Equity Series,
Inc., T. Rowe Price Associates, Inc. and NYLIAC - Previously
filed in accordance with Regulation S-T, 17 CFR 232.102(e) as
Exhibit (8)(h) to Post-Effective Amendment No. 7 to the
registration statement on Form N-4 for NYLIAC Variable
Annuity Separate Account - I (File No. 33-53342) filed 4/16/98
and incorporated herein by reference.
(9)(b)(8) Form of Participation Agreement among MFS Variable Insurance
Trust, Massachusetts Financial Services Company and NYLIAC -
Previously filed in accordance with Regulation S-T, 17 CFR
232.102(e) as Exhibit (8)(j) to Post-Effective Amendment No.
7 to the registration statement on Form N-4 for NYLIAC
Variable Annuity Separate Account-I (File No.33-53342) filed
4/16/98 and incorporated herein by reference.
(9)(c) Powers of Attorney for the Directors and Officers of NYLIAC -
Previously filed in accordance with Regulation S-T, 17 CFR
232.102(e) as Exhibit (9)(c) to Registrant's Pre-Effective
Amendment No. 2 on Form S-6 (File No. 07617) filed 4/25/97 for
the following, and incorporated herein by reference:
Jay S. Calhoun, Vice President, Treasurer and Director
(Principal Financial Officer)
Richard M. Kernan, Jr., Director
Robert D. Rock, Senior Vice President and Director
Frederick J. Sievert, President and Director
(Principal Executive Officer)
Stephen N. Steinig, Senior Vice President, Chief Actuary
and Director
Seymour Sternberg, Director
(9)(d) Power of Attorney for Maryann L. Ingenito, Vice President and
Controller (Principal Accounting Officer) - Previously filed
in accordance with Regulation S-T, 17 CFR 232.102(e) as
Exhibit (9)(d) to Registrant's Pre-Effective Amendment No. 1
on Form S-6 (File No. 07617) filed 1/2/97 and incorporated
herein by reference.
II-3
<PAGE> 71
(9)(e) Power of Attorney for Howard I. Atkins, Executive Vice
President (Principal Financial Officer) - Previously filed as
Exhibit 8(d) to Pre-Effective Amendment No. 1 to the
registration statement on Form S-6 for NYLIAC Variable
Universal Life Separate Account-I (File No. 333-39157) filed
4/3/98 and incorporated herein by reference.
(9)(f) Memorandum describing NYLIAC's issuance, transfer and
redemption procedures for the Policies - Previously filed as
Exhibit (9)(e) to Registrant's Pre-Effective Amendment No. 2
on Form S-6 (File No. 333-07617) filed 4/25/97 and
incorporated herein by reference.
(9)(g) Supplement to Memorandum describing NYLIAC's issuance,
transfer and redemption procedures for the Policies -
Previously filed as Exhibit 1.9(g) to Registrant's Post-
Effective Amendment No. 1 on Form S-6 (File No. 333-07617)
filed 4/24/98 and incorporated herein by reference.
(9)(h) Power of Attorney for Certain Directors of NYLIAC -
Previously filed as Exhibit 10(e) to Post-Effective Amendment
No. 6 to the registration statement on Form N-4 for NYLIAC
Variable Annuity Separate Account - III (File No. 33-87382)
filed 2/18/99 and incorporated herein by reference for the
following: filed
George J. Trapp, Director
Frank M. Boccio, Director
Phillip J. Hildebrand, Director
Michael G. Gallo, Director
Solomon Goldfinger, Director
Howard I. Atkins, Director
(9)(i) Power of Attorney for John A. Cullen, Vice President and
Controller (Principal Accounting Officer) - Previously filed
in accordance with Regulation S-T, 17 CFR 232.102 (e) as
Exhibit (10)(f) to Post-Effective Amendment No. 21 to the
registration statement on Form N-4 for NYLIAC MFA Separate
Account - I (File No. 2-86083) filed 4/13/00 and incorporated
herein by reference.
(9)(j) Power of Attorney for Gary G. Benavav, Director and Executive
Vice President - Previously filed in accordance with
Regulation S-T, 17 CFR 232.102(e) as Exhibit (9)(o) to
initial Registration Statement on Form S-6 for NYLIAC
Variable Universal Life Separate Account-I (File No.
033-64410) filed 10/11/00 and incorporated herein by
reference.
(10) Form of Application - Filed herewith.
(11) Illustrations - To be filed by amendment.
2. Opinion and Consent of Thomas F. English, Esq. - To be filed by amendment.
3. Not applicable.
4. Not applicable.
5. Not applicable.
6. Opinion and Consent of Irwin L. Don, Actuary. - To be filed by amendment.
7. Consent of PricewaterhouseCoopers LLP - Filed herewith.
II-4
<PAGE> 72
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, NYLIAC Corporate Sponsored Variable Universal Life Separate
Account-I, certifies that it has duly caused this Amendment to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City and State of New York on the 20th day of October, 2000.
NYLIAC CORPORATE SPONSORED VARIABLE
UNIVERSAL LIFE SEPARATE ACCOUNT-I
(Registrant)
By /s/ Patrick Colloton
--------------------------------
Patrick Colloton
Vice President
NEW YORK LIFE INSURANCE AND
ANNUITY CORPORATION
(Depositor)
By /s/ Patrick Colloton
--------------------------------
Patrick Colloton
Vice President
As required by the Securities Act of 1933, this initial Registration Statement
has been signed by the following persons in the capacities and on the date
indicated.
Howard I. Atkins* Executive Vice President and Director
(Principal Financial Officer)
Gary G. Benanav* Director and Executive Vice President
Frank M. Boccio* Director
John A. Cullen* Vice President and Controller (Principal
Accounting Officer)
Michael G. Gallo* Director
Solomon Goldfinger* Director
Phillip J. Hildebrand* Director
Richard M. Kernan, Jr.* Director
Robert D. Rock* Senior Vice President and Director
Frederick J. Sievert* President and Director (Principal
Executive Officer)
Seymour Sternberg* Director
George J. Trapp* Director
*By /s/ Patrick Colloton
-----------------------
Patrick Colloton
Attorney-in-Fact
October 20, 2000
* Pursuant to Powers of Attorney previously filed.
<PAGE> 73
EXHIBIT INDEX
Exhibit
Number Description
------- -----------
(5) Form of Policy for Corporate Executive Series
Variable Universal Life Insurance Policies
(5)(a) Supplementary Term Rider
(5)(b) Level Term Rider
(10) Form of application
7 Consent of Pricewaterhousecoopers LLP
