<PAGE> 1
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
MFA SEPARATE ACCOUNTS I AND II
AND
VLI SEPARATE ACCOUNT
ANNUAL REPORT
MAINSTAY
VP SERIES FUND, INC.
December 31, 1999
This is a Report by the
MainStay VP Series
Fund,
Inc. for the general
information of Multi-
Funded Annuity and
Variable Life Insurance
policyowners. This
Report
does not offer for sale
or solicit orders to
purchase securities.
NEW YORK LIFE
INSURANCE
AND ANNUITY
CORPORATION
NY Life Logo
<PAGE> 2
LETTER FROM THE PRESIDENT
- --------------------------------------------------------------------------------
I am very pleased to present the 1999 Annual Report for the Facilitator(R)
Multi-Funded Variable Annuity (MFA) and Variable Life Insurance (VLI) policies
issued by New York Life Insurance and Annuity Corporation (NYLIAC).
NYLIAC MFA and VLI policies offer a diversified group of investment options. As
a policyowner, you benefit from the experience and professional management of
leading investment advisors MacKay Shields LLC and Madison Square Advisors LLC,
who work diligently on your behalf. As always, your financial well-being is our
goal.
This Annual Report contains valuable information, including financial statements
for each of the investment divisions available with our Facilitator(R) Variable
Annuity and Variable Life Insurance policies. Policyowners of NYLIAC MFA can
refer to page 3 and policyowners of NYLIAC VLI should refer to page 19 for their
respective financial statements. Commentaries from the Investment Advisers and
reports from the Portfolio Managers are also included in this report.
We owe our financial strength to you, our valued clients, who continue to place
your trust in us. This strength, in turn, allows us to keep our financial
promises to you. We are dedicated to the values of integrity and humanity, which
we employ toward one goal: to be there when our clients need us.
Thank you for making us "The Company You Keep(R)."
/s/ Frederick J. Sievert
Frederick J. Sievert
President
New York Life Insurance and Annuity Corporation
(A Delaware Corporation)
1
<PAGE> 3
(THIS PAGE INTENTIONALLY LEFT BLANK)
2
<PAGE> 4
NYLIAC MFA SEPARATE ACCOUNT-I
TAX-QUALIFIED POLICIES
STATEMENT OF ASSETS AND LIABILITIES
As of December 31, 1999
<TABLE>
<CAPTION>
COMMON STOCK BOND MONEY MARKET
INVESTMENT INVESTMENT INVESTMENT
DIVISIONS DIVISIONS DIVISIONS
--------------------------- --------------------------- ---------------------------
SINGLE FLEXIBLE SINGLE FLEXIBLE SINGLE FLEXIBLE
PREMIUM PREMIUM PREMIUM PREMIUM PREMIUM PREMIUM
POLICIES POLICIES POLICIES POLICIES POLICIES POLICIES
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investment in MainStay VP Series Fund,
Inc., at net asset value............ $126,387,914 $238,289,278 $ 27,280,581 $ 43,842,395 $ 3,496,485 $ 5,973,878
LIABILITIES:
Liability to New York Life Insurance
and Annuity Corporation for
mortality and expense risk
charges............................. 413,663 1,086,412 92,040 194,929 11,242 26,413
------------ ------------ ------------ ------------ ------------ ------------
Total equity...................... $125,974,251 $237,202,866 $ 27,188,541 $ 43,647,466 $ 3,485,243 $ 5,947,465
============ ============ ============ ============ ============ ============
TOTAL EQUITY REPRESENTED BY:
Equity of Policyowners:
Variable accumulation units
outstanding: 1,554,678; 3,171,283;
836,092; 1,454,071; 161,853;
299,215, respectively............. $125,974,251 $237,202,866 $ 27,188,541 $ 43,647,466 $ 3,485,243 $ 5,947,465
============ ============ ============ ============ ============ ============
Variable accumulation unit value.... $ 81.03 $ 74.80 $ 32.52 $ 30.02 $ 21.53 $ 19.88
============ ============ ============ ============ ============ ============
Identified Cost of Investment........... $ 88,054,649 $160,816,270 $ 29,219,989 $ 46,463,709 $ 3,496,484 $ 5,973,846
============ ============ ============ ============ ============ ============
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1999
<TABLE>
<CAPTION>
COMMON STOCK BOND MONEY MARKET
INVESTMENT INVESTMENT INVESTMENT
DIVISIONS DIVISIONS DIVISIONS
--------------------------- --------------------------- ---------------------------
SINGLE FLEXIBLE SINGLE FLEXIBLE SINGLE FLEXIBLE
PREMIUM PREMIUM PREMIUM PREMIUM PREMIUM PREMIUM
POLICIES POLICIES POLICIES POLICIES POLICIES POLICIES
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME (LOSS):
Dividend income....................... $ 670,906 $ 1,264,133 $ 1,652,873 $ 2,639,858 $ 188,684 $ 296,081
Mortality and expense risk charges.... (1,455,690) (3,759,690) (391,648) (839,271) (49,690) (109,026)
------------ ------------ ------------ ------------ ------------ ------------
Net investment income (loss)...... (784,784) (2,495,557) 1,261,225 1,800,587 138,994 187,055
------------ ------------ ------------ ------------ ------------ ------------
REALIZED AND UNREALIZED
GAIN (LOSS):
Proceeds from sale of investments..... 29,325,228 34,327,310 8,643,622 8,782,624 2,684,019 2,043,642
Cost of investments sold.............. (18,296,305) (19,405,732) (8,847,748) (8,026,745) (2,683,992) (2,043,649)
------------ ------------ ------------ ------------ ------------ ------------
Net realized gain (loss) on
investments..................... 11,028,923 14,921,578 (204,126) 755,879 27 (7)
Realized gain distribution received... 11,258,814 21,214,052 2,753 4,188 2 3
Change in unrealized appreciation
(depreciation) on investments....... 8,108,363 20,201,631 (1,937,481) (4,174,104) (31) 1
------------ ------------ ------------ ------------ ------------ ------------
Net gain (loss) on investments.... 30,396,100 56,337,261 (2,138,854) (3,414,037) (2) (3)
------------ ------------ ------------ ------------ ------------ ------------
Increase (decrease) attributable to
funds of New York Life Insurance
and Annuity Corporation retained
by Separate Account................. (77,545) (198,727) 509 873 (446) (968)
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in total
equity resulting from operation. $ 29,533,771 $ 53,642,977 $ (877,120) $ (1,612,577) $ 138,546 $ 186,084
============ ============ ============ ============ ============ ============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
3
<PAGE> 5
STATEMENT OF CHANGES IN TOTAL EQUITY
For the years ended December 31, 1999
and December 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK
INVESTMENT DIVISIONS
------------------------------------------------------------------
SINGLE PREMIUM FLEXIBLE PREMIUM
POLICIES POLICIES
------------------------------ ------------------------------
1999 1998 1999 1998
------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN TOTAL EQUITY:
Operations:
Net investment income (loss)........................ $ (784,784) $ (566,336) $ (2,495,557) $ (1,948,673)
Net realized gain (loss) on investments............. 11,028,923 6,358,217 14,921,578 13,009,953
Realized gain distribution received................. 11,258,814 9,090,185 21,214,052 15,881,971
Change in unrealized appreciation (depreciation) on
investments....................................... 8,108,363 11,324,734 20,201,631 17,478,811
Increase (decrease) attributable to funds of New
York Life Insurance and Annuity Corporation
retained by Separate Account...................... (77,545) (70,695) (198,727) (170,653)
------------ ------------ ------------ ------------
Net increase (decrease) in total equity resulting
from operations................................. 29,533,771 26,136,105 53,642,977 44,251,409
------------ ------------ ------------ ------------
Contributions and withdrawals:
Policyowners' premium payments...................... 596,868 867,915 3,391,122 3,915,025
Policyowners' surrenders............................ (20,813,746) (17,529,095) (31,808,658) (31,093,451)
Policyowners' annuity and death benefits............ (1,142,861) (328,002) (647,154) (909,451)
Net transfers from (to) Fixed Account............... 140,085 636,061 (295,946) 887,298
Transfers between Investment Divisions.............. (4,422,068) (1,288,107) (463,179) 210,211
------------ ------------ ------------ ------------
Net contributions and withdrawals................. (25,641,722) (17,641,228) (29,823,815) (26,990,368)
------------ ------------ ------------ ------------
Increase (decrease) in total equity............. 3,892,049 8,494,877 23,819,162 17,261,041
TOTAL EQUITY:
Beginning of year................................... 122,082,202 113,587,325 213,383,704 196,122,663
------------ ------------ ------------ ------------
End of year......................................... $125,974,251 $122,082,202 $237,202,866 $213,383,704
============ ============ ============ ============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
4
<PAGE> 6
NYLIAC MFA SEPARATE ACCOUNT-I
TAX-QUALIFIED POLICIES
<TABLE>
<CAPTION>
BOND MONEY MARKET
INVESTMENT DIVISIONS INVESTMENT DIVISIONS
--------------------------------------------------------- ---------------------------------------------------------
SINGLE PREMIUM FLEXIBLE PREMIUM SINGLE PREMIUM FLEXIBLE PREMIUM
POLICIES POLICIES POLICIES POLICIES
--------------------------- --------------------------- --------------------------- ---------------------------
1999 1998 1999 1998 1999 1998 1999 1998
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 1,261,225 $ 1,235,939 $ 1,800,587 $ 1,797,254 $ 138,994 $ 177,364 $ 187,055 $ 226,891
(204,126) 238,703 755,879 1,141,108 27 3 (7) (85)
2,753 802,262 4,188 1,353,476 2 -- 3 --
(1,937,481) 108,930 (4,174,104) (453,461) (31) 27 1 126
509 (5,876) 873 (14,113) (446) (549) (968) (1,129)
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
(877,120) 2,379,958 (1,612,577) 3,824,264 138,546 176,845 186,084 225,803
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
240,297 380,797 945,509 1,248,734 31,024 22,211 261,881 256,021
(6,691,341) (6,440,695) (7,737,790) (9,697,341) (2,163,184) (1,384,586) (1,853,807) (1,679,773)
(402,399) (97,091) (183,129) (254,292) (10,120) 1,261 (24,579) (68,684)
383,717 117,867 (227,092) 129,666 35,448 (5,137) (24,848) 1,871
3,376,669 997,456 (278,051) (565,295) 1,050,777 276,610 743,395 357,038
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
(3,093,057) (5,041,666) (7,480,553) (9,138,528) (1,056,055) (1,089,641) (897,958) (1,133,527)
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
(3,970,177) (2,661,708) (9,093,130) (5,314,264) (917,509) (912,796) (711,874) (907,724)
31,158,718 33,820,426 52,740,596 58,054,860 4,402,752 5,315,548 6,659,339 7,567,063
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
$ 27,188,541 $ 31,158,718 $ 43,647,466 $ 52,740,596 $ 3,485,243 $ 4,402,752 $ 5,947,465 $ 6,659,339
============ ============ ============ ============ ============ ============ ============ ============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
5
<PAGE> 7
STATEMENT OF ASSETS AND LIABILITIES
As of December 31, 1999
<TABLE>
<CAPTION>
COMMON STOCK BOND MONEY MARKET
INVESTMENT INVESTMENT INVESTMENT
DIVISIONS DIVISIONS DIVISIONS
--------------------------- --------------------------- ---------------------------
SINGLE FLEXIBLE SINGLE FLEXIBLE SINGLE FLEXIBLE
PREMIUM PREMIUM PREMIUM PREMIUM PREMIUM PREMIUM
POLICIES POLICIES POLICIES POLICIES POLICIES POLICIES
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investment in MainStay VP
Series Fund, Inc., at net asset
value............................... $148,830,828 $ 22,275,150 $ 47,672,629 $ 4,820,316 $ 5,703,576 $ 834,386
LIABILITIES:
Liability to New York Life Insurance
and Annuity Corporation for
mortality and expense risk
charges............................. 489,947 101,960 149,741 21,245 18,314 3,274
------------ ------------ ------------ ------------ ------------ ------------
Total equity...................... $148,340,881 $ 22,173,190 $ 47,522,888 $ 4,799,071 $ 5,685,262 $ 831,112
============ ============ ============ ============ ============ ============
TOTAL EQUITY REPRESENTED BY:
Equity of Policyowners:
Variable accumulation units
outstanding: 1,830,706; 296,444;
1,455,897; 159,628; 264,020;
41,813, respectively.............. $148,340,881 $ 22,173,190 $ 47,522,888 $ 4,799,071 $ 5,685,262 $ 831,112
============ ============ ============ ============ ============ ============
Variable accumulation
unit value........................ $ 81.03 $ 74.80 $ 32.64 $ 30.06 $ 21.53 $ 19.88
============ ============ ============ ============ ============ ============
Identified Cost of Investment........... $103,946,611 $ 15,546,820 $ 51,312,447 $ 5,146,257 $ 5,703,572 $ 834,387
============ ============ ============ ============ ============ ============
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1999
<TABLE>
<CAPTION>
COMMON STOCK BOND MONEY MARKET
INVESTMENT INVESTMENT INVESTMENT
DIVISIONS DIVISIONS DIVISIONS
--------------------------- --------------------------- ---------------------------
SINGLE FLEXIBLE SINGLE FLEXIBLE SINGLE FLEXIBLE
PREMIUM PREMIUM PREMIUM PREMIUM PREMIUM PREMIUM
POLICIES POLICIES POLICIES POLICIES POLICIES POLICIES
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME (LOSS):
Dividend income....................... $ 791,301 $ 118,040 $ 2,840,740 $ 291,056 $ 288,017 $ 36,202
Mortality and expense risk charges.... (1,739,188) (348,894) (619,095) (90,325) (75,639) (13,310)
------------ ------------ ------------ ------------ ------------ ------------
Net investment income (loss)...... (947,887) (230,854) 2,221,645 200,731 212,378 22,892
------------ ------------ ------------ ------------ ------------ ------------
REALIZED AND UNREALIZED
GAIN (LOSS):
Proceeds from sale of investments..... 39,004,304 2,946,551 8,344,899 748,637 3,030,952 595,199
Cost of investments sold.............. (24,676,602) (1,755,549) (8,409,670) (734,155) (3,030,911) (595,195)
------------ ------------ ------------ ------------ ------------ ------------
Net realized gain (loss) on
investments..................... 14,327,702 1,191,002 (64,771) 14,482 41 4
Realized gain distribution received... 13,279,222 1,980,884 4,411 452 3 --
Change in unrealized appreciation
(depreciation) on investments....... 8,518,794 2,078,624 (3,590,007) (390,084) (47) (5)
------------ ------------ ------------ ------------ ------------ ------------
Net gain (loss) on investments.... 36,125,718 5,250,510 (3,650,367) (375,150) (3) (1)
------------ ------------ ------------ ------------ ------------ ------------
Increase (decrease) attributable to
funds of New York Life Insurance
and Annuity Corporation retained
by Separate Account................. (92,516) (18,374) 900 102 (671) (117)
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in total
equity resulting from operations. $ 35,085,315 $ 5,001,282 $ (1,427,822) $ (174,317) $ 211,704 $ 22,774
============ ============ ============ ============ ============ ============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
6
<PAGE> 8
NYLIAC MFA SEPARATE ACCOUNT-II
NON-QUALIFIED POLICIES
(THIS PAGE INTENTIONALLY LEFT BLANK)
7
<PAGE> 9
STATEMENT OF CHANGES IN TOTAL EQUITY
For the years ended December 31, 1999
and December 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK
INVESTMENT DIVISIONS
------------------------------------------------------------------
SINGLE PREMIUM FLEXIBLE PREMIUM
POLICIES POLICIES
------------------------------ ------------------------------
1999 1998 1999 1998
------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN TOTAL EQUITY:
Operations:
Net investment income (loss)......................... $ (947,887) $ (650,333) $ (230,854) $ (173,745)
Net realized gain (loss) on investments.............. 14,327,702 5,393,836 1,191,002 1,049,228
Realized gain distribution received.................. 13,279,222 11,049,518 1,980,884 1,423,685
Change in unrealized appreciation (depreciation) on
investments........................................ 8,518,794 15,285,530 2,078,624 1,681,228
Increase (decrease) attributable to funds of New York
Life Insurance and Annuity Corporation retained by
Separate Account................................... (92,516) (83,962) (18,374) (15,209)
------------ ------------ ------------ ------------
Net increase (decrease) in total equity resulting
from operations.................................. 35,085,315 30,994,589 5,001,282 3,965,187
------------ ------------ ------------ ------------
Contributions and withdrawals:
Policyowners' premium payments....................... 99,271 13,517 194,032 219,509
Policyowners' surrenders............................. (20,510,328) (14,197,642) (1,956,076) (1,843,270)
Policyowners' annuity and death benefits............. (2,757,638) (1,742,537) (115,775) (239,308)
Net transfers from (to) Fixed Account................ 813,884 1,087,585 (123,361) (34,395)
Transfers between Investment Divisions............... (13,096,677) (644,487) 8,883 (213,208)
------------ ------------ ------------ ------------
Net contributions and withdrawals.................. (35,451,488) (15,483,564) (1,992,297) (2,110,672)
------------ ------------ ------------ ------------
Increase (decrease) in total equity.............. (366,173) 15,511,025 3,008,985 1,854,515
TOTAL EQUITY:
Beginning of year...................................... 148,707,054 133,196,029 19,164,205 17,309,690
------------ ------------ ------------ ------------
End of year............................................ $148,340,881 $148,707,054 $ 22,173,190 $ 19,164,205
============ ============ ============ ============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
8
<PAGE> 10
NYLIAC MFA SEPARATE ACCOUNT-II
NON-QUALIFIED POLICIES
<TABLE>
<CAPTION>
BOND MONEY MARKET
INVESTMENT DIVISIONS INVESTMENT DIVISIONS
--------------------------------------------------------- ---------------------------------------------------------
SINGLE PREMIUM FLEXIBLE PREMIUM SINGLE PREMIUM FLEXIBLE PREMIUM
POLICIES POLICIES POLICIES POLICIES
--------------------------- --------------------------- --------------------------- ---------------------------
1999 1998 1999 1998 1999 1998 1999 1998
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 2,221,645 $ 1,741,673 $ 200,731 $ 188,479 $ 212,378 $ 247,868 $ 22,892 $ 24,959
(64,771) 136,214 14,482 126,842 41 17 4 3
4,411 1,134,926 452 141,013 3 -- -- --
(3,590,007) 394,096 (390,084) (61,254) (47) 23 (5) 1
900 (8,365) 102 (1,451) (671) (758) (117) (121)
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
(1,427,822) 3,398,544 (174,317) 393,629 211,704 247,150 22,774 24,842
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
23,548 (83,812) 77,731 82,767 48,287 24,345 13,471 14,107
(6,463,773) (6,156,145) (558,266) (730,095) (2,181,374) (998,881) (91,760) (147,788)
(696,598) (600,364) (80,414) (132,284) (97,614) (53,573) (9,043) (120)
(27,434) 281,773 57,101 4,704 28,102 12,618 20,195 1,306
11,773,531 328,723 (31,331) 9,933 1,318,201 314,490 22,591 202,684
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
4,609,274 (6,229,825) (535,179) (764,975) (884,398) (701,001) (44,546) 70,189
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
3,181,452 (2,831,281) (709,496) (371,346) (672,694) (453,851) (21,772) 95,031
44,341,436 47,172,717 5,508,567 5,879,913 6,357,956 6,811,807 852,884 757,853
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
$ 47,522,888 $ 44,341,436 $ 4,799,071 $ 5,508,567 $ 5,685,262 $ 6,357,956 $ 831,112 $ 852,884
============ ============ ============ ============ ============ ============ ============ ============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
9
<PAGE> 11
NOTES TO FINANCIAL STATEMENTS
NOTE 1-- Organization and Accounting Policies:
- --------------------------------------------------------------------------------
NYLIAC MFA Separate Account-I ("Separate Account-I") and NYLIAC MFA Separate
Account-II ("Separate Account-II") were established on May 27, 1983, under
Delaware law by New York Life Insurance and Annuity Corporation, a wholly-owned
subsidiary of New York Life Insurance Company. These accounts were established
to receive and invest net premium payments under Qualified Multi-Funded
Retirement Annuity Policies ("Separate Account-I") and Non- Qualified
Multi-Funded Retirement Annuity Policies ("Separate Account-II") issued by New
York Life Insurance and Annuity Corporation.
Separate Account-I and Separate Account-II are registered under the Investment
Company Act of 1940, as amended, as unit investment trusts. The assets of
Separate Account-I and Separate Account-II are invested exclusively in shares of
the MainStay VP Series Fund, Inc., a diversified open-end management investment
company, and are clearly identified and distinguished from the other assets and
liabilities of New York Life Insurance and Annuity Corporation. Effective
December 19, 1994, sales of all such policies were discontinued.
MacKay Shields LLC and Madison Square Advisors LLC provide investment advisory
services to the MainStay VP Series Funds for a fee. MacKay Shields LLC and
Madison Square Advisors LLC are wholly-owned subsidiaries of NYLIFE LLC, which
is a wholly-owned subsidiary of New York Life Insurance Company.
There are six Investment Divisions within both Separate Account-I and Separate
Account-II, three of which invest Single Premium Policy net premium payments and
three of which invest Flexible Premium Policy net premium payments. The Common
Stock Investment Divisions invest in the Growth Equity Portfolio, the Bond
Investment Divisions invest in the Bond Portfolio, and the Money Market
Investment Divisions invest in the Cash Management Portfolio. Net premium
payments received are allocated to the Investment Divisions of Separate
Account-I or Separate Account-II according to Policyowner instructions. In
addition, the Policyowner has the option to transfer amounts between the
Investment Divisions of Separate Account-I and Separate Account-II and the Fixed
Account of New York Life Insurance and Annuity Corporation.
No Federal income tax is payable on investment income or capital gains of
Separate Account-I or Separate Account-II under current Federal income tax law.
Security Valuation--The investment in the MainStay VP Series Fund, Inc. is
valued at the net asset value of shares of the respective fund portfolios.
Security Transactions--Realized gains and losses from security transactions
are reported on the identified cost basis. Security transactions are accounted
for as of the date the securities are purchased or sold (trade date).
Distributions Received--Dividend income and capital gain distributions are
recorded on the ex-dividend date and reinvested in the corresponding portfolio.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates.
10
<PAGE> 12
NYLIAC MFA SEPARATE ACCOUNTS-I AND -II
TAX-QUALIFIED AND NON-QUALIFIED POLICIES
NOTE 2--Investments (in 000's):
- --------------------------------------------------------------------------------
At December 31, 1999, the investment in the MainStay VP Series Fund, Inc. by
the respective Investment Divisions of Separate Account-I and Separate
Account-II is as follows:
<TABLE>
<CAPTION>
GROWTH EQUITY CASH MANAGEMENT
PORTFOLIO BOND PORTFOLIO PORTFOLIO
---------------------- ---------------------- ----------------------
COMMON STOCK BOND MONEY MARKET
INVESTMENT DIVISIONS INVESTMENT DIVISIONS INVESTMENT DIVISIONS
---------------------- ---------------------- ----------------------
SINGLE FLEXIBLE SINGLE FLEXIBLE SINGLE FLEXIBLE
PREMIUM PREMIUM PREMIUM PREMIUM PREMIUM PREMIUM
POLICIES POLICIES POLICIES POLICIES POLICIES POLICIES
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SEPARATE ACCOUNT-I (TAX-QUALIFIED POLICIES)
Number of shares........................... 4,550 8,579 2,228 3,581 3,497 5,974
Identified cost*........................... $88,055 $160,816 $29,220 $46,464 $ 3,496 $ 5,974
SEPARATE ACCOUNT-II (NON-QUALIFIED
POLICIES)
Number of shares........................... 5,358 802 3,894 394 5,704 834
Identified cost*........................... $103,947 $15,547 $51,312 $ 5,146 $ 5,704 $ 834
</TABLE>
* The cost stated also represents the aggregate cost for Federal income tax
purposes.
Transactions in MainStay VP Series Fund, Inc. shares for the year ended
December 31, 1999 were as follows:
<TABLE>
<CAPTION>
GROWTH EQUITY CASH MANAGEMENT
PORTFOLIO BOND PORTFOLIO PORTFOLIO
---------------------- ---------------------- ----------------------
COMMON STOCK BOND MONEY MARKET
INVESTMENT DIVISIONS INVESTMENT DIVISIONS INVESTMENT DIVISIONS
---------------------- ---------------------- ----------------------
SINGLE FLEXIBLE SINGLE FLEXIBLE SINGLE FLEXIBLE
PREMIUM PREMIUM PREMIUM PREMIUM PREMIUM PREMIUM
POLICIES POLICIES POLICIES POLICIES POLICIES POLICIES
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SEPARATE ACCOUNT-I (TAX-QUALIFIED POLICIES)
Purchases.................................. $14,092 $23,137 $ 6,811 $ 3,068 $ 1,764 $ 1,330
Proceeds from sales........................ 29,325 34,327 8,644 8,783 2,684 2,044
SEPARATE ACCOUNT-II (NON-QUALIFIED
POLICIES)
Purchases.................................. $15,798 $ 2,701 $15,189 $ 412 $ 2,357 $ 573
Proceeds from sales........................ 39,004 2,947 8,345 749 3,031 595
</TABLE>
- --------------------------------------------------------------------------------
NOTE 3--Mortality and Expense Risk Charges:
- --------------------------------------------------------------------------------
Separate Account-I and Separate Account-II are charged for administrative
services provided for Flexible Premium Policies, and Single and Flexible Premium
Policies are charged for the mortality and expense risks assumed by New York
Life Insurance and Annuity Corporation. These charges are made daily at an
annual rate of 1.25% of the daily net asset value for Single Premium Policies
and 1.75% of the daily net asset value for Flexible Premium Policies of each
Investment Division. The amounts of these charges retained in the Investment
Divisions represent funds of New York Life Insurance and Annuity Corporation.
Accordingly, New York Life Insurance and Annuity Corporation participates in the
results of each Investment Division ratably with the Policyowners.
- --------------------------------------------------------------------------------
NOTE 4--Distribution of Net Income:
- --------------------------------------------------------------------------------
Separate Account-I and Separate Account-II do not expect to declare dividends to
Policyowners from accumulated net investment income and realized gains. The
income and gains are distributed to Policyowners as part of withdrawals of
amounts (in the form of surrenders, death benefits, transfers, or annuity
payments) in excess of the net premium payments.
11
<PAGE> 13
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 5--Unit Transactions (in 000's):
- --------------------------------------------------------------------------------
Transactions in accumulation units for the years ended December 31, 1999 and
December 31, 1998 were as follows:
<TABLE>
<CAPTION>
COMMON STOCK INVESTMENT DIVISIONS
-----------------------------------------------------
SINGLE PREMIUM FLEXIBLE PREMIUM
POLICIES POLICIES
----------------------- -----------------------
1999 1998 1999 1998
-----------------------------------------------------
<S> <C> <C> <C> <C>
SEPARATE ACCOUNT-I (TAX-QUALIFIED POLICIES)
Units issued on premium payments............................ 9 15 54 76
Units redeemed on surrenders................................ (301) (316) (503) (611)
Units redeemed on annuity and death benefits................ (17) (3) (10) (8)
Units issued (redeemed) on net transfers from (to)
Fixed Account............................................. 2 12 (5) 17
Units issued (redeemed) on transfers between
Investment Divisions...................................... (72) (23) (8) 3
----- ----- ----- -----
Net decrease............................................ (379) (315) (472) (523)
Units outstanding, beginning of year........................ 1,934 2,249 3,643 4,166
----- ----- ----- -----
Units outstanding, end of year.............................. 1,555 1,934 3,171 3,643
===== ===== ===== =====
SEPARATE ACCOUNT-II (NON-QUALIFIED POLICIES)
Units issued (redeemed) on premium payments................. 1 1 3 4
Units redeemed on surrenders................................ (297) (258) (30) (38)
Units redeemed on annuity and death benefits................ (41) (30) (2) (2)
Units issued (redeemed) on net transfers from (to)
Fixed Account............................................. 12 19 (2) (1)
Units issued (redeemed) on transfers between
Investment Divisions...................................... (200) (14) -- (4)
----- ----- ----- -----
Net increase (decrease)................................. (525) (282) (31) (41)
Units outstanding, beginning of year........................ 2,356 2,638 327 368
----- ----- ----- -----
Units outstanding, end of year.............................. 1,831 2,356 296 327
===== ===== ===== =====
</TABLE>
12
<PAGE> 14
NYLIAC MFA SEPARATE ACCOUNTS-I AND -II
TAX-QUALIFIED AND NON-QUALIFIED POLICIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BOND INVESTMENT DIVISIONS MONEY MARKET INVESTMENT DIVISIONS
----------------------------------------- -----------------------------------------
SINGLE PREMIUM FLEXIBLE PREMIUM SINGLE PREMIUM FLEXIBLE PREMIUM
POLICIES POLICIES POLICIES POLICIES
------------------- ------------------- ------------------- -------------------
1999 1998 1999 1998 1999 1998 1999 1998
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
7 12 30 42 1 1 13 14
(203) (202) (254) (331) (103) (68) (95) (90)
(12) (1) (6) (3) -- -- (1) (2)
11 4 (7) 4 2 -- (1) --
101 29 (9) (19) 50 13 38 18
----- ----- ----- ----- ----- ----- ----- -----
(96) (158) (246) (307) (50) (54) (46) (60)
932 1,090 1,700 2,007 212 266 345 405
----- ----- ----- ----- ----- ----- ----- -----
836 932 1,454 1,700 162 212 299 345
===== ===== ===== ===== ===== ===== ===== =====
1 (2) 3 3 2 1 1 1
(196) (192) (18) (27) (103) (48) (5) (9)
(21) (18) (3) (2) (4) (3) -- --
(1) 9 2 -- 1 1 1 --
352 10 (1) -- 62 15 1 11
----- ----- ----- ----- ----- ----- ----- -----
135 (193) (17) (26) (42) (34) (2) 3
1,321 1,514 177 203 306 340 44 41
----- ----- ----- ----- ----- ----- ----- -----
1,456 1,321 160 177 264 306 42 44
===== ===== ===== ===== ===== ===== ===== =====
</TABLE>
13
<PAGE> 15
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 6--Selected Per Unit Data+:
- --------------------------------------------------------------------------------
The following table presents selected per accumulation unit income and capital
changes (for an accumulation unit outstanding throughout each year) with
respect to each Investment Division of Separate Account-I and Separate
Account-II:
<TABLE>
<CAPTION>
SINGLE PREMIUM POLICIES
------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------
COMMON STOCK INVESTMENT DIVISIONS 1999 1998 1997 1996 1995
------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SEPARATE ACCOUNT-I (TAX-QUALIFIED POLICIES)
Unit value, beginning of year............................... $63.13 $50.50 $40.34 $32.81 $25.72
Net investment loss......................................... (0.46) (0.27) (0.24) (0.12) --
Net realized and unrealized gains (losses) on security
transactions and realized capital gain distributions
received (includes the effect of capital share
transactions)............................................. 18.36 12.90 10.40 7.65 7.09
------ ------ ------ ------ ------
Unit value, end of year..................................... $81.03 $63.13 $50.50 $40.34 $32.81
====== ====== ====== ====== ======
SEPARATE ACCOUNT-II (NON-QUALIFIED POLICIES)
Unit value, beginning of year............................... $63.13 $50.50 $40.34 $32.81 $25.72
Net investment loss......................................... (0.47) (0.26) (0.23) (0.12) --
Net realized and unrealized gains (losses) on security
transactions and realized capital gain distributions
received (includes the effect of capital share
transactions)............................................. 18.37 12.89 10.39 7.65 7.09
------ ------ ------ ------ ------
Unit value, end of year..................................... $81.03 $63.13 $50.50 $40.34 $32.81
====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
FLEXIBLE PREMIUM POLICIES
------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------
1999 1998 1997 1996 1995
------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SEPARATE ACCOUNT-I (TAX-QUALIFIED POLICIES)
Unit value, beginning of year............................... $58.57 $47.08 $37.80 $30.90 $24.34
Net investment loss......................................... (0.74) (0.50) (0.44) (0.29) (0.14)
Net realized and unrealized gains (losses) on security
transactions and realized capital gain distributions
received (includes the effect of capital share
transactions)............................................. 16.97 11.99 9.72 7.19 6.70
------ ------ ------ ------ ------
Unit value, end of year..................................... $74.80 $58.57 $47.08 $37.80 $30.90
====== ====== ====== ====== ======
SEPARATE ACCOUNT-II (NON-QUALIFIED POLICIES)
Unit value, beginning of year............................... $58.57 $47.08 $37.80 $30.90 $24.34
Net investment loss......................................... (0.74) (0.50) (0.43) (0.29) (0.14)
Net realized and unrealized gains (losses) on security
transactions and realized capital gain distributions
received (includes the effect of capital share
transactions)............................................. 16.97 11.99 9.71 7.19 6.70
------ ------ ------ ------ ------
Unit value, end of year..................................... $74.80 $58.57 $47.08 $37.80 $30.90
====== ====== ====== ====== ======
</TABLE>
+ Per unit data based on average monthly units outstanding during each year.
14
<PAGE> 16
NYLIAC MFA SEPARATE ACCOUNTS-I AND -II
TAX-QUALIFIED AND NON-QUALIFIED POLICIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SINGLE PREMIUM POLICIES
------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------
BOND INVESTMENT DIVISIONS 1999 1998 1997 1996 1995
------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SEPARATE ACCOUNT-I (TAX-QUALIFIED POLICIES)
Unit value, beginning of year............................... $33.44 $31.03 $28.66 $28.44 $24.34
Net investment income....................................... 1.33 1.25 1.42 1.29 1.30
Net realized and unrealized gains (losses) on security
transactions and realized capital gain distributions
received (includes the effect of capital share
transactions)............................................. (2.25) 1.16 0.95 (1.07) 2.80
------ ------ ------ ------ ------
Unit value, end of year..................................... $32.52 $33.44 $31.03 $28.66 $28.44
====== ====== ====== ====== ======
SEPARATE ACCOUNT-II (NON-QUALIFIED POLICIES)
Unit value, beginning of year............................... $33.57 $31.15 $28.76 $28.54 $24.43
Net investment income....................................... 1.49 1.23 1.42 1.30 1.31
Net realized and unrealized gains (losses) on security
transactions and realized capital gain distributions
received (includes the effect of capital share
transactions)............................................. (2.42) 1.19 0.97 (1.08) 2.80
------ ------ ------ ------ ------
Unit value, end of year..................................... $32.64 $33.57 $31.15 $28.76 $28.54
====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
FLEXIBLE PREMIUM POLICIES
------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------
1999 1998 1997 1996 1995
------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SEPARATE ACCOUNT-I (TAX-QUALIFIED POLICIES)
Unit value, beginning of year............................... $31.02 $28.93 $26.85 $26.78 $23.03
Net investment income....................................... 1.14 0.98 1.18 1.14 1.16
Net realized and unrealized gains (losses) on security
transactions and realized capital gain distributions
received (includes the effect of capital share
transactions)............................................. (2.14) 1.11 0.90 (1.07) 2.59
------ ------ ------ ------ ------
Unit value, end of year..................................... $30.02 $31.02 $28.93 $26.85 $26.78
====== ====== ====== ====== ======
SEPARATE ACCOUNT-II (NON-QUALIFIED POLICIES)
Unit value, beginning of year............................... $31.07 $28.98 $26.89 $26.82 $23.07
Net investment income....................................... 1.18 1.00 1.20 1.13 1.15
Net realized and unrealized gains (losses) on security
transactions and realized capital gain distributions
received (includes the effect of capital share
transactions)............................................. (2.19) 1.09 0.89 (1.06) 2.60
------ ------ ------ ------ ------
Unit value, end of year..................................... $30.06 $31.07 $28.98 $26.89 $26.82
====== ====== ====== ====== ======
</TABLE>
+ Per unit data based on average monthly units outstanding during each year.
15
<PAGE> 17
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 6--Selected Per Unit Data+ (Continued):
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SINGLE PREMIUM POLICIES
------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------
MONEY MARKET INVESTMENT DIVISIONS 1999 1998 1997 1996 1995
------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SEPARATE ACCOUNT-I (TAX-QUALIFIED POLICIES)
Unit value, beginning of year............................... $20.80 $20.02 $19.26 $18.57 $17.81
Net investment income....................................... 0.73 0.78 0.76 0.69 0.76
------ ------ ------ ------ ------
Unit value, end of year..................................... $21.53 $20.80 $20.02 $19.26 $18.57
====== ====== ====== ====== ======
SEPARATE ACCOUNT-II (NON-QUALIFIED POLICIES)
Unit value, beginning of year............................... $20.80 $20.02 $19.26 $18.57 $17.81
Net investment income....................................... 0.73 0.78 0.76 0.69 0.76
------ ------ ------ ------ ------
Unit value, end of year..................................... $21.53 $20.80 $20.02 $19.26 $18.57
====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
FLEXIBLE PREMIUM POLICIES
------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------
1999 1998 1997 1996 1995
------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SEPARATE ACCOUNT-I (TAX-QUALIFIED POLICIES)
Unit value, beginning of year............................... $19.29 $18.66 $18.05 $17.48 $16.85
Net investment income....................................... 0.59 0.63 0.61 0.57 0.63
------ ------ ------ ------ ------
Unit value, end of year..................................... $19.88 $19.29 $18.66 $18.05 $17.48
====== ====== ====== ====== ======
SEPARATE ACCOUNT-II (NON-QUALIFIED POLICIES)
Unit value, beginning of year............................... $19.29 $18.66 $18.05 $17.48 $16.85
Net investment income....................................... 0.59 0.63 0.61 0.57 0.63
------ ------ ------ ------ ------
Unit value, end of year..................................... $19.88 $19.29 $18.66 $18.05 $17.48
====== ====== ====== ====== ======
</TABLE>
+ Per unit data based on average monthly units outstanding during each year.
16
<PAGE> 18
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Board of Directors of New York Life Insurance and
Annuity Corporation and the MFA Policyowners:
In our opinion, the accompanying statement of assets and liabilities and the
related statement of operations, of changes in total equity and the selected per
unit data present fairly, in all material respects, the financial position of
the Single and Flexible Premium Policies Common Stock, the Single and Flexible
Premium Policies Bond, and the Single and Flexible Premium Policies Money Market
Investment Divisions (constituting the New York Life Insurance and Annuity
Corporation MFA Separate Account I and the New York Life Insurance and Annuity
Corporation MFA Separate Account II) at December 31, 1999, and the results of
each of their operations, the changes in each of their total equity, and the
selected per unit data for each of the periods presented, in conformity with
accounting principles generally accepted in the United States. These financial
statements and the selected per unit data (herein referred to as the "financial
statements") are the responsibility of management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these financial 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, which included confirmation of investments at
December 31, 1999 by correspondence with the MainStay VP Series Fund, Inc.,
provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York
February 17, 2000
17
<PAGE> 19
(THIS PAGE INTENTIONALLY LEFT BLANK)
18
<PAGE> 20
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
VLI SEPARATE ACCOUNT
STATEMENT OF ASSETS AND LIABILITIES
As of December 31, 1999
<TABLE>
<CAPTION>
COMMON STOCK BOND MONEY MARKET
INVESTMENT INVESTMENT INVESTMENT
DIVISION DIVISION DIVISION
--------------------------------------------
<S> <C> <C> <C>
ASSETS:
Investment in MainStay VP Series Fund, Inc., at net asset
value................................................... $44,360,658 $ 8,960,467 $ 1,656,496
LIABILITIES:
Liability to New York Life Insurance and Annuity
Corporation for mortality and expense risk charges...... 40,048 7,791 1,380
----------- ----------- -----------
Total equity.......................................... $44,320,610 $ 8,952,676 $ 1,655,116
=========== =========== ===========
TOTAL EQUITY REPRESENTED BY:
Equity of Policyowners.................................... $44,320,610 $ 8,952,676 $ 1,655,116
=========== =========== ===========
Identified Cost of Investment............................... $30,505,287 $ 9,657,222 $ 1,656,489
=========== =========== ===========
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1999
<TABLE>
<CAPTION>
COMMON STOCK BOND MONEY MARKET
INVESTMENT INVESTMENT INVESTMENT
DIVISION DIVISION DIVISION
--------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividend income........................................... $ 235,008 $ 539,065 $ 75,818
Mortality and expense risk charges........................ (134,477) (31,745) (5,480)
----------- ----------- -----------
Net investment income................................. 100,531 507,320 70,338
----------- ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS):
Proceeds from sale of investments......................... 3,352,732 887,589 184,993
Cost of investments sold.................................. (2,161,672) (910,607) (184,994)
----------- ----------- -----------
Net realized gain (loss) on investments............... 1,191,060 (23,018) (1)
Realized gain distribution received....................... 3,943,796 774 1
Change in unrealized appreciation (depreciation) on
investments............................................. 5,025,527 (655,165) (1)
----------- ----------- -----------
Net gain (loss) on investments........................ 10,160,383 (677,409) (1)
----------- ----------- -----------
Increase (decrease) attributable to funds of New York Life
Insurance and Annuity Corporation retained by Separate
Account................................................. (7,088) 39 (49)
----------- ----------- -----------
Net increase (decrease) in total equity resulting from
operations.......................................... $10,253,826 $ (170,050) $ 70,288
=========== =========== ===========
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
19
<PAGE> 21
STATEMENT OF CHANGES IN TOTAL EQUITY
For the years ended December 31, 1999
and December 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK BOND MONEY MARKET
INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION
------------------------- ------------------------- -------------------------
1999 1998 1999 1998 1999 1998
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN TOTAL EQUITY:
Operations:
Net investment income.................. $ 100,531 $ 149,558 $ 507,320 $ 455,963 $ 70,338 $ 77,681
Net realized gain (loss) on
investments.......................... 1,191,060 654,205 (23,018) 48,723 (1) (13)
Realized gain distribution received.... 3,943,796 2,687,134 774 239,545 1 --
Change in unrealized appreciation
(depreciation) on investments........ 5,025,527 4,181,360 (655,165) 24,227 (1) 23
Increase (decrease) attributable to
funds of New York Life Insurance and
Annuity Corporation retained by
Separate Account..................... (7,088) (5,572) 39 (465) (49) (53)
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in total
equity resulting from operations... 10,253,826 7,666,685 (170,050) 767,993 70,288 77,638
----------- ----------- ----------- ----------- ----------- -----------
Contributions and withdrawals:
Policyowners' premium payments......... 1,813,607 1,941,625 810,916 886,143 139,304 165,095
Cost of insurance...................... (547,746) (819,756) (104,553) (277,068) (28,765) (48,252)
Policyowners' surrenders............... (3,153,097) (2,763,667) (835,408) (850,657) (115,775) (339,185)
(Withdrawals), net of repayments, due
to policy loans...................... (384,046) (492,634) 111,344 37,637 15,745 74,986
Policyowners' death benefits........... (161,320) (44,633) (56,688) (13,128) (5,080) (2,027)
Transfers between Investment
Divisions............................ 192,603 61,688 (187,889) (99,438) (4,989) 44,740
----------- ----------- ----------- ----------- ----------- -----------
Net contributions and
withdrawals........................ (2,239,999) (2,117,377) (262,278) (316,511) 440 (104,643)
----------- ----------- ----------- ----------- ----------- -----------
Increase (decrease) in total
equity........................... 8,013,827 5,549,308 (432,328) 451,482 70,728 (27,005)
TOTAL EQUITY:
Beginning of year...................... 36,306,783 30,757,475 9,385,004 8,933,522 1,584,388 1,611,393
----------- ----------- ----------- ----------- ----------- -----------
End of year............................ $44,320,610 $36,306,783 $ 8,952,676 $ 9,385,004 $ 1,655,116 $ 1,584,388
=========== =========== =========== =========== =========== ===========
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
20
<PAGE> 22
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
VLI SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
NOTE 1-- Organization and Accounting Policies:
- --------------------------------------------------------------------------------
New York Life Insurance and Annuity Corporation VLI Separate Account ("VLI
Separate Account") was established on May 27, 1983, under Delaware law by New
York Life Insurance and Annuity Corporation, a wholly-owned subsidiary of New
York Life Insurance Company. This account was established to receive and invest
premium payments under variable life insurance policies issued by New York Life
Insurance and Annuity Corporation. Effective July 1, 1988, sales of such
policies were discontinued.
The VLI Separate Account is registered under the Investment Company Act of
1940, as amended, as a unit investment trust. The assets of VLI Separate Account
are invested in shares of the MainStay VP Series Fund, Inc., a diversified
open-end management investment company, and are clearly identified and
distinguished from the other assets and liabilities of New York Life Insurance
and Annuity Corporation.
MacKay Shields LLC and Madison Square Advisors LLC provide investment advisory
services to the MainStay VP Series Funds for a fee. MacKay Shields LLC and
Madison Square Advisors LLC are wholly-owned subsidiaries of NYLIFE LLC, which
is a wholly-owned subsidiary of New York Life Insurance Company.
There are three Investment Divisions within the VLI Separate Account: the
Common Stock Investment Division which invests in the Growth Equity Portfolio,
the Bond Investment Division which invests in the Bond Portfolio, and the Money
Market Investment Division which invests in the Cash Management Portfolio.
Premium payments received are allocated to the Investment Divisions of the VLI
Separate Account according to Policyowner instructions.
No Federal income tax is payable on investment income or capital gains of the
VLI Separate Account under current Federal income tax law.
Security Valuation--The investment in the MainStay VP Series Fund, Inc. is
valued at the net asset value of shares of the respective fund portfolios.
Security Transactions--Realized gains and losses from security transactions
are reported on the identified cost basis. Security transactions are accounted
for as of the date the securities are purchased or sold (trade date).
Distributions Received--Dividend income and capital gain distributions are
recorded on the ex-dividend date and reinvested in the corresponding portfolios.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates.
- --------------------------------------------------------------------------------
NOTE 2--Investments (in 000's):
- --------------------------------------------------------------------------------
At December 31, 1999, the investment in the Mainstay VP Series Fund, Inc. by
the respective Investment Divisions of the VLI Separate Account is as follows:
<TABLE>
<CAPTION>
GROWTH EQUITY CASH MANAGEMENT
PORTFOLIO BOND PORTFOLIO PORTFOLIO
------------------- ------------------- -------------------
COMMON STOCK BOND MONEY MARKET
INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION
--------------------------------------------------------------
<S> <C> <C> <C>
Number of shares................................. 1,597 732 1,657
Identified cost*................................. $30,505 $ 9,657 $ 1,656
</TABLE>
* The cost stated also represents the aggregate cost for Federal income tax
purposes.
Transactions in MainStay VP Series Fund, Inc. shares for the year ended
December 31, 1999, were as follows:
<TABLE>
<CAPTION>
GROWTH EQUITY CASH MANAGEMENT
PORTFOLIO BOND PORTFOLIO PORTFOLIO
------------------- ------------------- -------------------
COMMON STOCK BOND MONEY MARKET
INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION
--------------------------------------------------------------
<S> <C> <C> <C>
Purchases........................................ $ 5,157 $ 1,133 $ 256
Proceeds from sales.............................. 3,353 888 185
</TABLE>
21
<PAGE> 23
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 3--Mortality and Expense Risk Charges:
- --------------------------------------------------------------------------------
VLI Separate Account is charged for the mortality and expense risks assumed by
New York Life Insurance and Annuity Corporation. These charges are made daily
at an annual rate of 0.35% of the daily net asset value of each Investment
Division. New York Life Insurance and Annuity Corporation may increase these
charges in the future up to a maximum annual rate of 0.50%. The amount of these
charges retained by the Investment Divisions represents funds of New York Life
Insurance and Annuity Corporation. Accordingly, New York Life Insurance and
Annuity Corporation participates in the results of each Investment Division
ratably with the Policyowners.
- --------------------------------------------------------------------------------
NOTE 4--Distribution of Net Income:
- --------------------------------------------------------------------------------
VLI Separate Account does not expect to declare dividends to Policyowners from
accumulated net income and realized gains. The income and gains are distributed
to Policyowners as part of withdrawals of amounts (in the form of surrenders,
death benefits, policy loans, or transfers) in excess of the net premium
payments.
22
<PAGE> 24
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Board of Directors of New York Life Insurance and
Annuity Corporation and the VLI Policyowners:
In our opinion, the accompanying statement of assets and liabilities and the
related statement of operations and of changes in total equity present fairly,
in all material respects, the financial position of the Common Stock, Bond, and
Money Market Investment Divisions (constituting the New York Life Insurance and
Annuity Corporation VLI Separate Account) at December 31, 1999, the results of
each of their operations for the year then ended, and the changes in each of
their total equity for each of the two years in the period then ended, in
conformity with accounting principles generally accepted in the United States.
These financial statements are the responsibility of management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial 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, which included confirmation
of investments at December 31, 1999 by correspondence with the MainStay VP
Series Fund, Inc., provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York
February 17, 2000
23
<PAGE> 25
- --------------------------------------------------------------------------------
To Policyowners:
The assets of NYLIAC Variable Annuity Separate Account-I, NYLIAC Variable
Annuity Separate Account-II, NYLIAC Variable Annuity Separate Account-III,
NYLIAC Variable Universal Life Separate Account-I, NYLIAC Corporate Sponsored
Variable Universal Life Separate Account-I, New York Life Insurance and Annuity
Corporation MFA Separate Account-I, New York Life Insurance and Annuity
Corporation MFA Separate Account-II and New York Life Insurance and Annuity
Corporation VLI Separate Account are invested in shares of MainStay VP Series
Fund, Inc. In addition, the assets of NYLIAC Variable Annuity Separate
Account-I, NYLIAC Variable Annuity Separate Account-II, NYLIAC Variable Annuity
Separate Account-III, NYLIAC Variable Universal Life Separate Account-I and
NYLIAC Corporate Sponsored Variable Universal Life Separate Account-I may be
invested in shares of the Alger American Fund, the Calvert Variable Series,
Inc., Fidelity Variable Insurance Products Fund, Fidelity Variable Insurance
Products Fund II, the Janus Aspen Series, MFS Variable Insurance Trust, Morgan
Stanley Dean Witter Universal Funds, Inc., T. Rowe Price Equity Series, Inc.,
and Van Eck Worldwide Insurance Trust, which are not affiliated with MainStay VP
Series Fund, Inc. or NYLIAC and any of its subsidiaries.
At the Annual Meeting of the Board of Directors of the Fund held on November 16,
1999, executive officers of the Fund were elected. On December 29, 1999, a
dividend distribution was paid to NYLIAC Variable Annuity Separate Account-I,
NYLIAC Variable Annuity Separate Account-II, NYLIAC Variable Annuity Separate
Account-III, NYLIAC Variable Universal Life Separate Account-I, NYLIAC Corporate
Sponsored Variable Universal Life Separate Account-I, New York Life Insurance
and Annuity Corporation MFA Separate Account-I, New York Life Insurance and
Annuity Corporation MFA Separate Account-II and New York Life Insurance and
Annuity Corporation VLI Separate Account as the sole shareholders of record of
MainStay VP Series Fund, Inc.
/s/ Richard M. Kerman Jr.
Chairman of the Board
and Chief Executive Officer
MAINSTAY VP SERIES FUND, INC.
24
<PAGE> 26
- --------------------------------------------------------------------------------
MAINSTAY VP SERIES FUND, INC. PORTFOLIOS
MACKAY SHIELDS LLC
ADVISER'S REPORT
Market Overview
The main story of the financial markets in 1999 was that stocks rose higher than
any other time over the last decade. The best-performing stocks increased in
value by thousands of percentage points. All major market indices closed the
year at record highs. The S&P 500(R) Index(1) gained 21.04% in 1999 and
underperformed the Dow Jones Industrial Average(2), which returned 27.2%.
NASDAQ(3) returned more than 85%, with the highest-returning stocks skewing the
results. More than half the gain occurred after November 3, when the NASDAQ
reached 3000. Even small stocks rebounded in 1999, led by Internet stocks. At
the beginning of the year, market pundits were doubtful that four years of
double digit S&P 500(R) returns could continue for another year, but that is
exactly what happened. Despite the economy's 4% growth rate, inflation remained
low and interest rates, though rising, were still relatively low.
However, the unprecedented S&P 500(R) returns masked the huge gulfs between what
outperformed and what underperformed. Technology issues posted the most positive
results, with the average technology fund returning almost 114%. Investors seem
to have divided into two camps regarding this volatile sector. The fans assert
the high returns are indicative of a new era of technological innovation, which
is changing the economy and is shifting the way business is done. Skeptics on
the other hand, believe the high returns are proof that the bull market has
turned into a mania with a probable poor ending. Stocks associated with the
information revolution have been bid up to stellar heights, while the older
economy stocks have generally languished. In fact, over half the stocks on the
New York Stock Exchange, the S&P 500(R) and NASDAQ are selling at lower prices
today than they did on January 1, 1999. About two-thirds of the stocks on the
New York Stock Exchange were at least 20 percent below their 52-week highs.
Without technology and telecom stocks, the S&P 500(R) would have shown little if
any gain.
1999 also saw the U.S. stock market lag the rest of the world for the first time
in four years. According to Morgan Stanley Capital International EAFE Index
(MSCI EAFE Index)(4), the U.S. market gained 20.86% versus a 28.8% return for
the rest of the world's stock markets. Leading the international fray were
emerging markets which rebounded from a dismal 1998 to a gain of more than 63%.
Europe kept pace with the U.S., however, currency moves of the Euro vs. the
dollar eroded most gains for American investors. The biggest surprise was Japan,
which increased 60.6% in U.S. dollar terms.
In contrast to the ebullient stock market, bonds suffered their worst year since
1994, and second worst year since 1973. Rising interest rates, inflation fears
and Y2K jitters all contributed to the Lehman Brothers Aggregate Bond Index(5)
loss of more than 50 basis points (0.50%), compared to a positive 8.69% return
in 1998. What investors usually think of as the safest bonds, Treasuries, fell
more than 14%, after returning more than 17% last year. Yields moved
accordingly. By year end, the 30-year Treasury bond was yielding 6.48%, up from
5.10% at the beginning of the year. Only emerging market debt provided a
positive return, increasing 23.6%.
25
<PAGE> 27
- --------------------------------------------------------------------------------
Looking forward, diversification, asset allocation and a long term investment
plan may be effective tools for any investor as the markets remain unpredictable
and continue their volatility.
Ravi Akhoury
Chairman and Chief Executive Officer
MacKay Shields LLC
(1) "Standard & Poor's 500 Composite Stock Price Index(R)" and "S&P 500(R)" are
registered trademarks of The McGraw-Hill Companies, Inc. The product is not
sponsored, endorsed, sold or promoted by Standard & Poor's Corporation. The
S&P 500 is an unmanaged index considered generally representative of the
U.S. stock market. Results assume the reinvestment of all income and capital
gains distributions.
(2) The Dow Jones Industrial Average is a trademark of, and the property of, Dow
Jones and Co., Inc. The DJIA Index is a price-weighted average of 30
actively traded blue chip stocks, primarily industrials, but also including
financial, leisure, and other service-oriented firms.
(3) "NASDAQ Composite Index" is an unmanaged index and is considered generally
representative of the U.S. small capitalization stock market.
(4) Morgan Stanley Capital International EAFE Index (MSCI EAFE Index) is an
unmanaged index of the securities of over 1,000 companies traded on the
markets of Europe, Australasia, and the Far East.
(5) Lehman Brothers Aggregate Bond Index is an unmanaged index of more than
5,000 taxable government, investment-grade corporate and mortgage backed
securities. Results assume the reinvestment of all income and capital gains
distributions.
26
<PAGE> 28
- --------------------------------------------------------------------------------
MADISON SQUARE ADVISORS LLC
ADVISER'S REPORT
Market Overview
During 1999, stocks and bonds experienced a dramatic divergence in investment
returns. Strong domestic economic growth, impressive corporate earnings gains,
and modest inflationary pressure combined with the widespread recognition of the
importance and reality of the technology and communications revolution, resulted
in a fifth consecutive year of double-digit returns for the U.S. equity markets.
However, in recognition of this robust growth, the Federal Reserve Bank shifted
to a restrictive monetary policy from accommodative and raised the Federal Funds
rate three different times. As a consequence and in anticipation of future
tightening, the yield on 10 year Treasury bonds increased by over 1 3/4%,
reaching 6.44% by year-end. This significant increase in interest rates produced
returns for fixed income investments in a range of low single digit negative to
positive returns.
As we begin 2000, we anticipate that economic growth in the U.S. will remain
strong. We see a modest pick-up in inflation associated with higher energy
prices and labor costs, partially offset by continued limitations on pricing
power associated with worldwide excess industrial capacity. We anticipate that
economic growth overseas will be stronger than that of the U.S. and believe that
the U.S. dollar will experience downward pressure relative to other major
currencies. These factors should produce some pressure on profit margins of U.S.
corporations, especially those without leading positions in their respective
marketplaces.
We believe that upward pressure on interest rates will continue as inflationary
pressure increases. Separately, one of the most powerful factors for the bond
market will be stock market volatility which should have an especially strong
impact on market technicals, increasing the risk associated with spread fixed
income products despite positive fundamentals.
Looking forward, we believe that the upcoming year will present some challenges,
especially for equity investors accustomed to the returns of the recent past. We
perceive that valuation levels for certain sectors may come under attack.
Nevertheless, we are continuing to benefit from fundamental factors such as
technological innovation, deregulation, improved inventory management, and
increased global trade. Such powerful factors lead us to remain positive in our
outlook for the investment environment.
Jean E. Hoysradt
President, Madison Square Advisors LLC
Senior Vice President
in Charge of the Investment Department,
New York Life Insurance Company
27
<PAGE> 29
MAINSTAY VP CASH MANAGEMENT PORTFOLIO
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
Three major factors impacted the money markets over the year ending December 31,
1999 -- strong domestic economic growth, Federal Reserve ("Fed") actions, and
liquidity concerns surrounding Y2K. These factors combined to push yields on
short-term money market securities significantly higher.
Rapid U.S. economic growth, benign inflation, low unemployment, and a
spectacular run-up in the U.S. equity market resulted in strong consumer
spending in 1999. Concerned about the pace of economic growth and the
possibility of inflation, the Federal Reserve raised the targeted federal funds
rate three times in 1999 -- on June 30, August 24, and November 16 -- by 0.25%
each time. The year ended with the targeted federal funds rate at 5.50% and the
discount rate at 5.00%.
Money market investors and issuers alike believed liquidity would be scarce as
the end of the year approached and concern over Y2K heightened. Both corporate
and asset-backed issuers flooded the market with paper early on, hoping to
secure their year-end financing. The resulting supply of debt securities caused
both interest rates and credit spreads to increase substantially during the
summer.
To help calm the markets and ensure liquidity in the financial markets leading
up to the end of the year, the Federal Reserve announced in October that it
would provide the market with several temporary liquidity programs. One such
program was a repurchase-agreement facility with expanded collateral guidelines
to include pass-through mortgage securities of GNMA, FHLMC, and FNMA, STRIP
securities of the U.S. Treasury, and "stripped" securities of other government
agencies. The Federal Reserve also established a temporary standby financing
facility. As with most other secular Y2K fears, the money markets' liquidity
concerns turned out to be for naught.
STRONG RELATIVE PERFORMANCE
For the twelve months ended December 31, 1999, the Portfolio returned 4.84%,
exceeding the 4.75% return of the average Lipper(1) Variable Products Money
Market Portfolio over the same period.
STRATEGIC MATURITY AND SECTOR POSITIONING
During the first half of the year, we lengthened the maturity of the Portfolio
relative to the average money-market fund when we felt that short-term interest
rates had already priced in more than a 0.25% increase in the federal funds rate
even before the Fed made its first official tightening move at the end of June.
This maturity-extending strategy proved effective for Portfolio performance as
the portfolio benefited from the higher rates during this time. Also, when
interest rates declined after the June 30, 1999 Federal Reserve rate hike, the
Portfolio had a comparatively smaller percentage of its assets to reinvest at
the lower rates.
Early in the fourth quarter, we positioned the Portfolio to be able to provide
sufficient liquidity during the months of December and January. We also arranged
to have a certain percentage of the securities in the Portfolio maturing daily
during the months just preceding and following the new year. In October 1999, we
also began to invest in securities maturing after January 1, 2000. The yields on
these securities further benefited Portfolio performance. As of December 31,
1999, the Portfolio's average maturity stood at 58 days.
HIGH CREDIT QUALITY
The Portfolio's investments throughout the year centered on floating-rate notes,
bank certificates of deposit (CDs), commercial paper, and asset-backed
commercial paper. We primarily invested the Portfolio in securities of finance,
insurance, brokerage, industrial, banks, and bank holding companies. We
continued to invest only in first-tier securities, or generally those
money-market instruments in the highest rating category. The Portfolio did not
invest in any second-tier securities nor did it invest in split-rated issues
(those rated in the highest rating category by one credit rating agency and in
the second-highest rating category by another). The Portfolio's concentration on
the highest-quality securities helped manage portfolio risk.
LOOKING AHEAD
As the Federal Reserve Board's 1999 interest-rate increases filter through the
economy, we believe they may help contain inflationary pressures and slow
economic growth in the first half of 2000. Although the consumer remains
confident, higher borrowing costs and fewer opportunities to increase disposable
income will likely temper spending patterns. For example, current 30-year
mortgage rates offer far less incentive to refinance than
28
<PAGE> 30
those available at the beginning of 1999. We believe business spending, however,
may be on the rise early in the year 2000, as cash set aside for potential Y2K
compliance issues is redirected to capital spending.
Recent comments by Federal Reserve officials continue to indicate that they view
the tight labor market as an imminent inflationary risk. The Fed does not
believe that the "new economy" repeals the old rules of supply and demand, which
means we may see further moves to raise rates during the first part of the new
year.
The degree of tightening and the timing of the Federal Reserve's next moves will
be key to U.S. money-market performance. For the near term, we will likely
manage the Portfolio with a shorter maturity than in 1999 to be well positioned
for any potential rate increases. We also intend to remain focused on quality,
as the Portfolio seeks as high a level of current income as is considered
consistent with the preservation of capital and liquidity.
Edward Munshower
Claude Athaide
Portfolio Managers
MacKay Shields LLC
(1) The Lipper Variable Insurance Products Performance Analysis Service
(L-VIPPAS) ranks the portfolios that invest in the separate accounts of
insurance companies. Its rankings are based on total returns with capital
gains and dividends reinvested. Results do not reflect any deduction of
sales charges.
Total returns for the Portfolio shown indicate past performance and are not
indicative of future results. Investment return and principal value will
fluctuate so that shares, upon redemption, may be worth more or less than
their original cost. These results do not reflect any deduction of sales
charges, mortality and expense charges, contract charges, or administrative
charges.
Though an investment in a money market portfolio is generally considered
to be protected from market risk, this investment is neither insured nor
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although the Portfolio seeks to preserve the value of
your investment, it is possible to lose money by investing in this
Portfolio.
29
<PAGE> 31
MAINSTAY VP BOND PORTFOLIO
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
Early in the year, investor sentiment shifted from an accommodating/neutral
Federal Reserve Bank ("Fed") to a restrictive Federal Reserve Bank. Concerns
about the Fed in conjunction with rising oil prices, a robust stock market and
the potential for strong economic growth and rising inflation put selling
pressure on domestic fixed income assets in 1999. Corporate bonds outperformed
U.S. Treasury securities during the year, with lower quality assets
outperforming higher quality assets in the investment grade sector. The
additional income generated by corporate bonds contributed to the majority of
this sector's strong performance relative to U.S. Treasury securities.
PERFORMANCE/MARKET REVIEW
For the year ended December 31, 1999, the MainStay VP Bond Portfolio had a
return of -1.53%, outperforming both the average portfolio in its Lipper(1) peer
group (Corporate Debt A Rated), which returned -1.96% and the Merrill Lynch
Corporate and Government Master Index(2), which returned -2.05%. Market risk was
limited by maintaining a relatively neutral duration posture throughout the
year. Credit risk was limited by maintaining an average quality of the
investments in the Portfolio of at least AA(3) throughout the year.
Expectations of a restrictive Federal Reserve Bank assisted in putting severe
pressure on interest rates in 1999. During the course of the year, the Fed
tightened rates three times, raising the Federal Funds target to 5.50%. The U.S.
bond market experienced a significant trade off in 1999. Most investment grade
bond sectors experienced negative returns for the year. The yield on the
ten-year U.S. Treasury note increased 179 basis points (1.79%).
PORTFOLIO STRATEGY
The Portfolio continued to maintain a concentration in lower quality investment
grade corporate bonds. This asset allocation worked well as these securities
outperformed in their sector.
The Portfolio increased its allocation to the mortgage-backed sector
significantly during the course of the year. The majority of this asset shift
came from the U.S. Treasury sector. We took these actions because of our belief
that reduced pre-payments in the mortgage-backed sector associated with rising
interest rates, generally result in a strong relative performance versus U.S.
Treasuries.
Our adjustments to the Portfolio during the year added some call risk to the
Portfolio. However, the Portfolio's overall structure continued to be consistent
with our long-term conservative approach to managing the Portfolio. We will
continue to monitor the Portfolio and make the necessary adjustments that our
interest rate forecast dictates.
LOOKING AHEAD
The prospect of a restrictive Federal Reserve Bank should continue to put upward
pressure on U.S. Treasury yields. Lower quality assets should outperform as
investors' risk tolerance increases with fading Y2K, liquidity and supply
concerns. We believe asset allocation trades precipitated by volatility in the
stock market will continue to have a powerful effect on interest rates.
Albert R. Corapi, Jr.
Celia M. Holtzberg
Portfolio Managers
Madison Square Advisors LLC
30
<PAGE> 32
$10,000 INVESTED IN THE
MAINSTAY VP BOND PORTFOLIO
ON 1/23/84 VS MERRILL LYNCH CORPORATE AND
GOVERNMENT MASTER INDEX AND THE CONSUMER PRICE INDEX(4)
Line Chart
<TABLE>
<CAPTION>
MERRILL LYNCH CORPORATE
AND GOVERNMENT MASTER
BOND PORTFOLIO INDEX CONSUMER PRICE INDEX
-------------- ----------------------- --------------------
<S> <C> <C> <C>
1/23/84 10000 10000 10000
1984 11028 11422 10365
1985 13370.4 13583 10758.9
1986 15532.3 15706.1 10877.2
1987 17637 16035.9 11359.1
1988 17390 17273.9 11861.1
1989 19396.9 19714.7 12412.7
1990 20948.6 21388.4 13171.1
1991 24390.5 24787.1 13574.1
1992 26373.4 26690.7 13967.8
1993 29380 29642.7 14351.9
1994 28384 28673.4 14735.1
1995 33581.1 34138.5 15065.2
1996 34269.5 35132 15563.8
1997 37576.5 38567.9 15828.4
1998 42243 41004 16083
1999 40376 41377 16514
</TABLE>
One Year: -1.53% Five Years: 7.30% Ten Years: 7.60%
Since Inception: 9.26% (1/23/84)
(1) The Lipper Variable Insurance Products Performance Analysis Service
(L-VIPPAS) ranks the portfolios that invest in the separate accounts of
insurance companies. Its rankings are based on total returns with capital
gains and dividends reinvested. Results do not reflect any deduction of
sales charges.
(2) The Merrill Lynch Corporate and Government Master Index is an unmanaged
index consisting of issues of the U.S. Government and agencies as well as
investment-grade corporate securities. Results assume the reinvestment of
all income and capital gains distributions.
(3) Debt rated AA by Standard & Poor's differs from the highest rated issues
only in small degree.
(4) The Consumer Price Index (CPI) is a commonly used measure of the rate of
inflation.
Included is the reinvestment of all distributions at net asset value and the
change in share price for the stated period. Total returns for the Portfolio
shown indicate past performance and are not indicative of future results.
Investment return and principal value will fluctuate so that shares, upon
redemption, may be worth more or less than their original cost. These results do
not reflect any deduction of sales charges, mortality and expense charges,
contract charges, or administrative charges.
31
<PAGE> 33
MAINSTAY VP GROWTH EQUITY PORTFOLIO
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
The U.S. equity market experienced its fifth consecutive year of double-digit
returns in 1999. Strong domestic economic growth and impressive corporate
earnings gains combined with modest inflation to positively influence the
market, sending equity valuations to historically high levels, despite rising
interest rates.
In retrospect, we believe that 1999 will be remembered as a year in which
momentum investing generated superior returns. Investors continued to pay
increasingly higher prices for future earnings growth potential, while virtually
ignoring many relatively cheaper stocks with more predictable earnings trends.
This environment created a favorable backdrop for new equity issues, the
majority of which came from the technology and Internet-related sectors. These
new issues received a good deal of media attention, as investors placed extreme
valuations on a small number of stocks with limited operating history.
Favorable supply/demand dynamics also became a dominant influence in 1999,
benefiting the U.S. equity market overall. Demand was bolstered by the continued
growth of U.S. equity mutual funds and from inflows of foreign money due to the
strength of the U.S. dollar. At the same time, supply contracted with a level of
merger and acquisition activity in 1999 that surpassed the previous year's
record pace.
PORTFOLIO REVIEW
For the twelve months ended December 31, 1999, the MainStay VP Growth Equity
Portfolio returned 29.96%. The Portfolio outperformed the S&P 500(R) Index(1)
return of 21.04% for the same period but underperformed the average Lipper(2)
Variable Products Growth Portfolio, which returned 31.47% during the same
period.
Our ability to reposition the Portfolio's blend of value and growth stocks and
shift the Portfolio's style emphasis during the year had a positive impact on
the Portfolio's performance while helping us manage volatility.
STRATEGIC STYLE AND SECTOR ALLOCATION
The Portfolio entered 1999 with a strong growth bias. Early in March, however,
we began moving into some value-oriented stocks, as corporate earnings started
to come in ahead of expectations. The market maintained its value bias through
mid-June, when growth stocks, led by technology issues, reestablished their
market leadership. We moved the Portfolio's holdings back toward more
growth-oriented equities as soon as it became apparent that the market's move
into traditional value stocks was going to be short-lived, despite continued
strong earnings growth. Although value stocks have historically outperformed
when earnings are accelerating, we believed that the underlying growth trend in
the technology sector would enable that group to outpace traditional value
stocks in this cycle.
Given this view, we moderately overweighted the Portfolio in technology, the
market's best performing sector, through most of the year. Although Internet
stocks gathered most of the headlines in 1999, the Portfolio profited by
investing primarily in Internet-infrastructure companies, enabling the growth of
this medium. We also added to the Portfolio's positions in the semiconductor
industry, where we saw favorable supply/demand dynamics that we believe may
remain in place throughout the year 2000.
One of the Portfolio's best-performing holdings was Nortel Networks (+304%), a
telecommunications equipment manufacturer that benefited from its ability to
offer integrated network solutions spanning data and telephony. Another strong
performer for the Portfolio was Sun Microsystems (+261%), a leading network
integration company that has been a major beneficiary of the ongoing growth in
servers. Texas Instruments (+126%) is a leading semiconductor manufacturer that
capitalized on the growth in digitalization. Finally, two companies that we
highlighted last year, EMC (+157%), the dominant provider of memory storage for
computers, and Cisco Systems (+130%), the preeminent provider of networking and
communications equipment, were once again among the Portfolio's strongest
performers in 1999.
The Portfolio's most significant purchase during the year was Cendant, a
franchiser and direct marketer. We bought the stock based upon the company's
attractive relative valuation and our expectation that the company's
well-publicized shareholder lawsuit would be favorably resolved. The Portfolio
was rewarded with a 34% return from the stock, as the lawsuit ended positively
for the company and Liberty Media made a $400 million investment in Cendant.
Perhaps the worst performers in the Portfolio were Kroger and Safeway, two of
the nation's largest supermarket operators, which suffered as investors turned
their attention to faster-growing industries. We sold the Portfolio's position
in Safeway in November. We continue to hold Kroger, believing that the market
has undervalued its future earnings growth potential. Impacted by rising
interest rates, Freddie Mac, the government sponsored mortgage provider, was
another poor performer, despite strong earnings performance. Our most
significant sale of
32
<PAGE> 34
the year was Iridium World Communications, a satellite phone provider. Having
sold the position in February at about $25 per share, the prudence of our action
was proven when the company filed for bankruptcy later in 1999, rendering its
stock virtually worthless.
LOOKING AHEAD
We maintain a positive outlook for the year 2000. At the same time, however, we
believe that U.S. equity market performance will likely be more moderate than in
the last few years. First, although inflation at the consumer level has remained
modest throughout the current economic expansion, any Federal Reserve action may
impact the market. Second, while we continue to believe in the role of
technology and the Internet over the long term, we are concerned about the
valuation parameters attached to many of these stocks. Eventually, these
companies will have to be evaluated for their real earnings and profitability
and not solely on potential revenue growth. We intend to seek companies that are
early adapters of technology in all sectors, as we believe they will be the
greatest beneficiaries of the information revolution. We also plan to remain
attentive to valuations as we search for attractive growth stocks trading at
discounts to their true potential. No matter where the markets may move, the
Portfolio will continue to seek long-term growth of capital, with income as a
secondary consideration.
James Agostisi
Patricia S. Rossi
Portfolio Managers
Madison Square Advisors LLC
$10,000 INVESTED IN THE
MAINSTAY VP GROWTH EQUITY PORTFOLIO
ON 1/23/84 VS S&P 500(R) AND
THE CONSUMER PRICE INDEX(3)
[LINE CHART]
<TABLE>
<CAPTION>
GROWTH EQUITY PORTFOLIO S&P 500(R) CONSUMER PRICE INDEX
----------------------- ---------- --------------------
<S> <C> <C> <C>
1/23/84 10000 10000 10000
1984 9824 10755 10365
1985 12162.1 14199.8 10758.9
1986 12648.6 16833.9 10877.2
1987 13035.6 17712.6 11359.1
1988 14791.5 20691.9 11861.1
1989 18632.9 27216 12421.7
1990 17535.4 26350.6 13171.1
1991 23472.9 34405.9 13574.1
1992 26423.5 37051.8 13967.8
1993 30046.1 40753.2 14351.9
1994 30406.7 41278.9 14735.1
1995 39273.3 56791.5 15065.2
1996 48895.2 69829.6 15563.8
1997 61975 93111 15828
1998 78454 119723 16083
1999 101959 144912 16514
</TABLE>
One Year: 29.96% Five Years: 27.38% Ten Years: 18.53%
Since Inception: 15.68% (1/23/84)
(1) "Standard & Poor's 500 Composite Stock Price Index(R)" and "S&P 500(R)" are
registered trademarks of The McGraw-Hill Companies, Inc. The product is not
sponsored, endorsed, sold or promoted by Standard & Poor's Corporation. The
S&P 500(R) is an unmanaged index considered generally representative of the
U.S. stock market. Results assume the reinvestment of all income and capital
gains distributions.
(2) The Lipper Variable Insurance Products Performance Analysis Service
(L-VIPPAS) ranks the portfolios that invest in the separate accounts of
insurance companies. Its rankings are based on total returns with capital
gains and dividends reinvested. Results do not reflect any deduction of
sales charges.
(3) The Consumer Price Index (CPI) is a commonly used measure of the rate of
inflation.
Included is the reinvestment of all distributions at net asset value and the
change in share price for the stated period. Total returns for the Portfolio
shown indicate past performance and are not indicative of future results.
Investment return and principal value will fluctuate so that shares, upon
redemption, may be worth more or less than their original cost. These results do
not reflect any deduction of sales charges, mortality and expense charges,
contract charges, or administrative charges.
33
<PAGE> 35
GLOSSARY
ASSET-BACKED SECURITIES: Securities backed by loan paper, receivables, or an
anticipated income stream from the sale of merchandise or services. The
securities are generally originated by banks, credit card companies, or other
providers of credit and often "enhanced" by a bank letter of credit or by
insurance from an institution other than the issuer.
BASIS POINT: One hundredth of one percent in the yield of an investment, i.e.,
100 basis points equals 1%.
BOTTOM-UP INVESTING: Security selection based on the specific portfolio
fundamental merits of individual issues. The opposite of "top-down" investing,
which starts with general economic trends, compares market sectors, and uses
relative security values to narrow the range of issues to examine.
BULL MARKET/BEAR MARKET: A bull market occurs when security prices are rising;
a bear market occurs when security prices decline. A bullish attitude therefore
suggests a positive outlook, while a bearish attitude represents a negative view
of the market or the opportunities it may present.
CALL OPTION: A security that gives its holder the right, but not the
obligation, to buy 100 shares of common stock at a fixed price (the option's
strike price) for a fixed period of time.
CALL RISK: A bondholder's risk that the bond may be redeemed by the issuer
prior to maturity.
CAPITALIZATION: The amount of outstanding equity and debt a company has issued.
Companies may vary greatly in the amount of equity capital they have raised, and
their capitalization may change with new issues or stock repurchases.
COMMERCIAL PAPER: Short-term obligations with maturities ranging from 2 to 270
days issued by banks, corporations, and other borrowers to investors with
temporarily idle cash. Such instruments are unsecured and usually discounted,
although some are interest-bearing. They can be issued directly -- direct
issuers do it that way -- or through brokers equipped to handle the enormous
clerical volume involved. Issuers like commercial paper because the maturities
are flexible and because the rates are usually marginally lower than bank rates.
Investors -- actually lenders, since commercial paper is a form of debt -- like
the flexibility and safety of an instrument that is issued only by top-rated
concerns and is nearly always backed by bank lines of credit. Both Moody's and
Standard & Poor's assign ratings to commercial paper.
COMMODITIES: Bulk goods, such as grains, precious metals, industrial metals,
and foods traded on a commodities exchange.
CREDIT RISK: The risk that the issuer of a security may go into bankruptcy or
default on payments, causing the investor to lose all or part of the investment.
CYCLICALS (CYCLICAL STOCK): A security or stock that tends to rise quickly with
economic upturns and fall quickly when the economy slows. Noncyclical
industries, such as food, insurance, and pharmaceuticals, are likely to have
more consistent performance regardless of economic changes.
DURATION: A measure of price sensitivity, which adjusts for the time value of
the payments investors will receive and which takes into account interest
payments as well as principal payments. Duration is a better gauge of
interest-rate sensitivity than average maturity alone.
EARNINGS PER SHARE: The portion of a company's profit allocated to each share
of outstanding common stock.
EMERGING MARKETS: Countries with smaller or more recently established capital
markets.
FEDERAL RESERVE BOARD: The seven member governing board of the Federal Reserve
System, which is the central bank of the United States. The Board sets policies
on reserve requirements, bank regulations, sets the discount rate, tightens or
loosens the availability of credit in the economy and regulates the purchase of
securities on margin.
FIRST-TIER/SECOND-TIER: Money market instruments in the highest rating category
by two or more major rating agencies are called first-tier or top-tier
securities, while securities in the second-highest rating category by two or
more major rating agencies are referred to as second-tier securities.
FLOATING RATE NOTE: Debt instrument with a variable interest rate. Interest
adjustments are made periodically, often every six months, and are tied to a
money-market index such as Treasury bill rates. Floating rate notes usually have
a maturity of about five years. They provide holders with protection against
rises in interest rates, but pay lower yields than fixed rate notes of the same
maturity. Also known as a FLOATER.
34
<PAGE> 36
GROSS DOMESTIC PRODUCT (GDP): The total value of goods and services produced in
the U.S. economy over a particular period of time, usually one year. The GDP
growth rate measures strictly domestic output and is a primary indicator of the
status of the economy.
GROWTH VERSUS VALUE: Growth investments typically include stocks with rising
prices and positive earnings trends. Value investments typically include
equities that are currently trading below their fair market value, even if they
have the potential to increase in value over time.
HIGH MULTIPLE ISSUES: Represent the highest price-to-earnings companies in the
market. They are considered expensive relative to their earnings.
INFLATION/DEFLATION: Inflation is an increase in the cost of goods and services
over time. As prices rise, the purchasing power of the dollar declines.
Deflation is a reduction in the cost of goods over time. When deflation occurs,
the purchasing power of the dollar increases.
LEVERAGED DERIVATIVES: Financial instrument whose value is based on another
security, such as an option, and whose purchase has been financed with credit.
LIQUIDITY: Securities are said to be liquid when they can be easily bought or
sold in large volume without substantially affecting their price. Some
securities, such as private placements or stocks that have few shares
outstanding are considered illiquid either because there are few market
participants interested in buying or selling the securities or because purchases
and sales may cause wide price swings.
MERGERS AND ACQUISITIONS: A merger is a combination of two companies. An
acquisition is the purchase of a company, division, or business unit. Companies
that engage in mergers and acquisitions often pay shareholders a premium, or an
amount over the current share price, to complete the transaction quickly and
under favorable terms.
MORTGAGE-BACKED SECURITIES: Securities representing interests in "pools" of
mortgages in which principal and interest payments by the holders of underlying
fixed- or adjustable-rate mortgages are, in effect, "passed through" to
investors (net of fees paid to the issuer or guarantor of the securities).
PREPAYMENT: When mortgage or loan holders repay their obligations before they
mature, shortening the stream of interest payments investors receive.
PRICE-TO-BOOK VALUE RATIO: Comparison of a company's market price per share and
its book value per share to determine how much above its "real" value the
company is selling.
PRICE-TO-EARNINGS RATIO: The price of a stock divided by its earnings per
share.
PUT OPTION: A security that gives its holder the right to sell 100 shares of
common stock at a fixed price for a fixed period of time.
REAL ESTATE INVESTMENT TRUST (REIT): A publicly traded company that purchases
and manages a portfolio of real estate properties for the benefit of
shareholders.
RESTRUCTURING: Any action designed to improve the overall financial structure,
labor relations, or productivity of a company. Restructuring may include such
steps as changing management, investing in new plant and equipment, engaging in
mergers and acquisitions, or taking other action to increase output or lower
costs.
SPIN-OFF: A form of corporate divestiture that results in a subsidiary or
division becoming an independent company.
SPLIT ISSUES (SPLIT-RATED ISSUES): Securities rated top tier by one credit
rating agency and second tier by another.
SUPPLY AND DEMAND: In the bond market, supply is influenced by the amount of
new securities issued and the amount of bonds investors wish to sell. Demand
reflects the amount of bonds investors wish to buy, which may decrease when
other markets offer greater opportunities.
In the stock market, an oversupply of a product or service can reduce demand and
lower stock prices. When demand increases relative to supply, stock prices may
recover.
TIGHTEN/EASE: When the Federal Reserve Board moves to raise interest rates, it
is said to be "tightening" or making borrowing more expensive. When it moves to
lower rates, it is said to be "easing" or making borrowing more affordable.
35
<PAGE> 37
TOTAL RETURN: The performance of an investment with all income and capital
gains reinvested.
VOLATILITY: Fluctuations in the price of securities or markets, up or down,
over a short period of time.
WEIGHTING: The proportion of a portfolio allocated to a specific security,
market sector or country, i.e., a portfolio is said to be overweighted in a
sector or country when that portion of the portfolio is greater than the
sector's general relationship to the market as a whole or the country's total
equities relative to the international equity markets as a whole.
YIELD: The income per share (or current value of a security) paid to investors
over a specified period of time as a percentage of the cost of the security.
Mutual fund yields are expressed as a percentage of the fund's current price per
share.
YIELD CURVE: When interest rates available from various short-, intermediate-,
and long-term securities are plotted on a graph, the resulting line is known as
a yield curve.
YIELD SPREAD: The difference in yield between securities in different market
sectors, such as government and mortgage-backed securities -- or between
different securities in a single sector, such as 2- and 30-year Treasuries or
PRIME-1 and PRIME-2 rated commercial paper.
Y2K: A reference to the Year 2000.
36
<PAGE> 38
(THIS PAGE INTENTIONALLY LEFT BLANK)
37
<PAGE> 39
CASH MANAGEMENT PORTFOLIO
PORTFOLIO OF INVESTMENTS
December 31, 1999
- ------------
<TABLE>
<CAPTION>
SHORT-TERM
INVESTMENTS (103.1%)+
PRINCIPAL AMORTIZED
AMOUNT COST
----------------------
<S> <C> <C>
ASSET-BACKED SECURITIES (5.1%)
AT&T Corp.
6.14%, due 7/13/00 (a)(b)(c)..... $4,000,000 $ 3,999,797
6.18%, due 8/7/00 (a)(b)(c)...... 3,000,000 2,999,364
New Holland Equipment
Recreation Trust
6.15%, due 11/15/00 (a)(c)....... 3,188,510 3,188,510
Riverwoods Funding Corp.
6.00%, due 2/11/00............... 3,000,000 2,979,500
6.03%, due 1/26/00............... 3,000,000 2,987,437
6.08%, due 1/13/00............... 3,000,000 2,993,920
SBC Communications Inc.
5.80%, due 3/6/00 (a)............ 4,000,000 3,958,111
------------
23,106,639
------------
CERTIFICATES OF DEPOSIT (13.2%)
ABN Amro Bank Chicago
5.50%, due 6/5/00 (c)............ 2,000,000 1,999,590
Bank of North America
6.17%, due 12/6/00 (b)(c)........ 4,000,000 4,005,369
Bayerische Hypo Vereinbank New
York
6.38%, due 5/15/00 (b)(c)........ 4,000,000 3,998,610
Bayerische Landesbank New York
5.12%, due 3/21/00 (c)........... 2,000,000 1,999,074
Commerzbank AG New York
5.01%, due 1/10/00 (c)........... 2,000,000 1,999,995
5.09%, due 2/16/00 (c)........... 2,000,000 1,999,915
5.16%, due 2/25/00 (c)........... 2,000,000 1,999,879
6.39%, due 4/10/00 (c)........... 2,000,000 1,999,783
Deutsche Bank New York
5.02%, due 1/11/00 (c)........... 2,000,000 2,000,021
5.06%, due 2/8/00 (c)............ 2,000,000 1,999,930
5.25%, due 5/18/00 (c)........... 2,000,000 1,998,639
Lloyds Bank PLC New York
5.65%, due 7/17/00 (c)........... 3,000,000 2,999,376
Nationsbank North America
4.99%, due 1/11/00 (c)........... 2,000,000 1,999,995
Rabobank Nederland N.V. New York
5.29%, due 5/19/00 (c)........... 2,000,000 1,999,597
5.60%, due 6/14/00 (c)........... 2,000,000 1,999,566
San Paolo New York
5.90%, due 3/7/00 (c)............ 5,000,000 4,998,074
Societe Generale New York
5.29%, due 3/3/00 (c)............ 2,000,000 1,999,771
Svenska Handelsbanken New York
5.23%, due 3/1/00 (c)............ 2,000,000 1,999,810
UBS AG Stamford Connecticut
5.29%, due 3/1/00 (c)............ 2,000,000 1,999,887
5.34%, due 5/30/00 (c)........... 2,000,000 1,999,605
6.24%, due 12/6/00 (c)........... 5,000,000 4,999,064
Westdeutsche Landesbank New York
6.01%, due 6/6/00 (c)............ 4,000,000 4,000,000
Wells Fargo Co. Series J
6.01%, due 3/10/00 (b)(c)........ 3,000,000 2,998,768
------------
59,994,318
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL AMORTIZED
AMOUNT COST
----------------------
<S> <C> <C>
COMMERCIAL PAPER (71.3%)
Abbey National North America
5.90%, due 1/5/00................ $3,000,000 $ 2,998,033
6.18%, due 1/10/00............... 4,000,000 3,993,820
Alliance & Leicester PLC
6.03%, due 2/4/00 (a)............ 3,000,000 2,982,915
Allianz of America Finance Corp.
5.80%, due 4/18/00 (a)........... 4,000,000 3,930,400
5.92%, due 3/7/00 (a)............ 4,000,000 3,956,587
American Express Credit Corp.
4.00%, due 1/3/00................ 1,500,000 1,499,667
5.50%, due 2/18/00............... 4,000,000 3,970,667
5.80%, due 1/31/00............... 4,000,000 3,980,667
6.35%, due 1/7/00................ 4,000,000 3,995,767
6.42%, due 1/4/00................ 4,000,000 3,997,860
American General Finance Corp.
5.50%, due 2/9/00................ 4,000,000 3,976,167
5.91%, due 3/13/00............... 4,000,000 3,952,720
5.97%, due 2/10/00............... 3,000,000 2,980,100
ANZ Delaware Inc.
6.00%, due 2/3/00................ 3,000,000 2,983,500
Associates Corp. of North America
5.90%, due 4/3/00................ 4,000,000 3,939,033
5.92%, due 3/3/00................ 4,000,000 3,959,218
Associates First Capital Corp.
6.50%, due 2/1/00................ 4,000,000 3,977,611
Atlantis One Funding Corp.
5.97%, due 2/7/00................ 4,000,000 3,975,457
6.06%, due 1/25/00............... 4,000,000 3,983,840
Bayerische Landesbank New York
6.22%, due 1/5/00................ 4,000,000 3,997,236
BellSouth Telecommunications Inc.
5.80%, due 2/10/00............... 3,200,000 3,179,378
5.88%, due 2/3/00................ 3,000,000 2,983,830
British Telecommunications PLC
5.70%, due 2/28/00............... 3,000,000 2,972,450
5.80%, due 1/28/00............... 3,000,000 2,986,950
5.95%, due 1/20/00............... 3,000,000 2,990,579
Caisse Centrale Desjardins Du
Quebec
6.02%, due 1/19/00............... 3,000,000 2,990,970
6.05%, due 1/18/00............... 3,000,000 2,991,426
Chevron USA Inc.
5.80%, due 1/28/00............... 4,000,000 3,982,600
5.90%, due 2/8/00................ 4,000,000 3,975,089
Cregem North America Inc.
5.90%, due 3/1/00................ 4,000,000 3,960,667
Deutsche Bank New York
6.00%, due 2/2/00................ 2,100,000 2,088,800
Edison International
6.25%, due 2/11/00 (a)........... 5,100,000 5,063,698
6.50%, due 2/4/00 (a)............ 4,000,000 3,975,444
Ford Motor Credit Co.
5.58%, due 2/17/00............... 4,000,000 3,970,860
6.36%, due 1/13/00............... 4,500,000 4,490,460
6.38%, due 4/3/00................ 4,000,000 3,998,924
Formosa Plastics Corp. USA
5.95%, due 3/6/00................ 3,000,000 2,967,771
</TABLE>
+ Percentages indicated are based on Portfolio net assets.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
38
<PAGE> 40
MAINSTAY VP SERIES FUND, INC.
<TABLE>
<CAPTION>
SHORT-TERM
INVESTMENTS (CONTINUED)
PRINCIPAL AMORTIZED
AMOUNT COST
----------------------
<S> <C> <C>
COMMERCIAL PAPER (Continued)
Franklin Resources Inc.
6.04%, due 3/6/00 (a)............ $3,000,000 $ 2,967,310
6.08%, due 3/17/00 (a)........... 4,000,000 3,948,658
General Electric Capital Corp.
5.25%, due 1/25/00............... 3,000,000 2,989,500
5.79%, due 3/3/00................ 4,000,000 3,960,113
6.00%, due 2/17/00............... 3,000,000 2,976,500
6.02%, due 3/31/00............... 3,000,000 2,954,850
Goldman Sachs Group L.P. (The)
5.92%, due 2/29/00............... 3,000,000 2,970,893
5.98%, due 2/22/00............... 4,000,000 3,965,449
6.00%, due 4/7/00................ 4,000,000 3,935,333
6.04%, due 5/19/00............... 4,000,000 3,906,715
IBM Credit Corp.
5.69%, due 3/20/00............... 3,000,000 2,962,541
International Nederlanden (U.S.)
Funding Corp.
5.77%, due 2/4/00................ 3,000,000 2,983,652
5.88%, due 3/24/00............... 3,000,000 2,959,330
Invensys PLC
6.28%, due 1/24/00............... 4,000,000 3,983,951
KFW International Finance Inc.
5.83%, due 2/14/00............... 4,000,000 3,971,498
5.86%, due 2/3/00................ 3,400,000 3,381,736
5.92%, due 3/24/00............... 3,000,000 2,959,053
6.05%, due 6/12/00............... 4,000,000 3,890,428
Lloyds Banks PLC
5.75%, due 4/3/00................ 4,000,000 3,940,583
Merrill Lynch & Co. Inc.
5.86%, due 1/31/00............... 4,000,000 3,980,467
5.86%, due 2/2/00................ 4,000,000 3,979,164
5.90%, due 2/25/00............... 4,000,000 3,963,944
Morgan (J.P.) & Co. Inc.
5.87%, due 4/14/00............... 3,000,000 2,949,127
6.00%, due 2/24/00............... 3,000,000 2,973,000
Morgan Stanley Dean Witter & Co.
4.55%, due 6/7/00 (b)(c)......... 8,000,000 8,000,000
5.43%, due 1/31/00............... 3,000,000 2,986,425
National Rural Utilities
Cooperative
Finance Corp.
5.75%, due 2/18/00............... 3,000,000 2,977,000
5.87%, due 3/17/00............... 4,000,000 3,950,431
Nationwide Building Society
5.90%, due 2/7/00................ 4,000,000 3,975,744
6.08%, due 1/6/00................ 4,000,000 3,996,622
Pemex Capital Inc.
6.10%, due 3/23/00............... 4,000,000 3,944,422
Petrobras International Finance
Co.
6.07%, due 3/15/00............... 4,000,000 3,950,091
Prudential Funding Corp.
5.70%, due 1/12/00............... 3,000,000 2,994,775
5.90%, due 1/27/00............... 3,000,000 2,987,217
6.00%, due 1/24/00............... 3,000,000 2,988,500
6.04%, due 1/20/00............... 3,000,000 2,990,437
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL AMORTIZED
AMOUNT COST
----------------------
<S> <C> <C>
COMMERCIAL PAPER (Continued)
Quebec (Province of)
5.80%, due 5/26/00............... $4,000,000 $ 3,903,478
5.95%, due 5/26/00............... 4,000,000 3,905,911
Rabobank Netherland N.V.
5.83%, due 6/8/00................ 4,000,000 3,897,003
Receivables Capital Corp.
5.90%, due 2/15/00............... 3,000,000 2,977,875
6.01%, due 1/25/00............... 3,000,000 2,987,980
Salomon Smith Barney Holdings Inc.
5.98%, due 1/19/00............... 4,000,000 3,988,040
6.00%, due 1/21/00............... 4,000,000 3,990,683
6.45%, due 1/14/00............... 4,000,000 3,986,667
San Paolo U.S. Financial Co.
5.85%, due 2/7/00................ 4,000,000 3,975,950
5.86%, due 5/22/00............... 4,000,000 3,907,542
Santander Finance (DE) Inc.
6.03%, due 1/28/00............... 3,000,000 2,986,444
Transportadora De Gas Del Sur S.A.
(TGS)
6.12%, due 3/27/00............... 4,000,000 3,941,520
Unifunding Inc.
5.92%, due 2/4/00................ 4,000,000 3,977,635
Wells Fargo & Co.
5.92%, due 2/1/00................ 3,000,000 2,984,707
6.00%, due 2/9/00................ 4,000,000 3,974,000
6.02%, due 3/21/00............... 4,000,000 3,946,489
Wood Street Funding Corp.
6.05%, due 1/14/00 (a)........... 3,000,000 2,993,446
6.75%, due 1/7/00 (a)............ 4,000,000 3,995,500
Xerox Corp.
5.85%, due 2/14/00............... 4,000,000 3,971,400
------------
332,088,890
------------
FEDERAL AGENCIES (4.8%)
Federal Home Loan Mortgage Corp.
(Discount Note)
5.56%, due 2/23/00............... 4,000,000 3,967,258
Federal Mortgage Corporation
(Discount Note)
5.54%, due 2/15/00 - 2/24/00..... 8,000,000 7,939,060
5.56%, due 1/10/00............... 3,000,000 2,995,830
Federal National Mortgage
Association (Discount Note)
5.53%, due 1/18/00............... 4,000,000 3,989,555
5.59%, due 1/21/00............... 3,000,000 2,990,683
------------
21,882,386
------------
MEDIUM-TERM NOTES (5.5%)
IBM Credit Corp.
5.898%, due 8/7/00............... 3,000,000 2,999,445
Merrill Lynch & Co. Inc.
6.47%, due 2/15/00 (b)........... 2,000,000 2,000,784
Morgan (J.P.) & Co. Inc.
6.42%, due 7/6/00 (b)............ 3,000,000 2,998,707
Morgan Stanley Dean Witter & Co.
6.18%, due 3/10/00 (b)........... 3,000,000 3,000,023
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
39
<PAGE> 41
CASH MANAGEMENT PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1999
<TABLE>
<CAPTION>
SHORT-TERM
INVESTMENTS (CONTINUED)
PRINCIPAL AMORTIZED
AMOUNT COST
----------------------
<S> <C> <C>
MEDIUM-TERM NOTES (Continued)
National Rural Utilities
Cooperative
Finance Corp.
6.18%, due 7/14/00............... $4,000,000 $ 3,998,979
Xerox Corp., Series F
5.64%, due 7/14/00............... 2,000,000 1,999,534
------------
16,997,472
------------
<CAPTION>
SHARES
----------
<S> <C> <C>
INVESTMENT COMPANY (3.2%)
Merrill Lynch Premier
Institutional Fund............... 14,518,362 14,518,362
------------
Total Short-Term Investments
(Amortized Cost $468,588,067)
(d).............................. 103.1% 468,588,067
Liabilities in Excess of
Cash and Other Assets............ (3.1) (14,117,837)
---------- ------------
Net Assets........................ 100.0% $454,470,230
========== ============
</TABLE>
- ------------
(a) May be sold to institutional investors only.
(b) Floating rate. Rate shown is the rate in effect at December 31, 1999.
(c) Interest bearing security.
(d) The cost stated also represents the aggregate cost for Federal income tax
purposes.
The table below sets forth the diversification of Cash
Management Portfolio investments by industry.
INDUSTRY
DIVERSIFICATION
<TABLE>
<CAPTION>
AMORTIZED
COST PERCENT +
-------------------------
<S> <C> <C>
Auto Finance................ $ 12,460,244 2.7%
Banks #..................... 140,384,478 30.9
Brokerage................... 60,857,304 13.4
Computer & Office Equipment... 7,961,519 1.8
Conglomerates............... 12,880,963 2.8
Consumer Financial
Services.................. 17,444,627 3.8
Diversified Financial
Services.................. 11,998,979 2.7
Diversified Manufacturing... 3,983,951 0.9
Domestic Oils............... 11,907,780 2.6
Equipment Loans............. 3,188,510 0.7
Federal Agencies............ 21,882,386 4.8
Finance..................... 84,402,889 18.6
Foreign Government.......... 7,809,389 1.7
Insurance................... 10,908,987 2.4
Investment Company.......... 14,518,362 3.2
Special Purpose Finance..... 3,960,667 0.9
Telecommunication
Services.................. 26,070,459 5.7
Utilities................... 15,966,573 3.5
----------- ---------
468,588,067 103.1
Liabilities in Excess of
Cash and Other Assets..... (14,117,837) (3.1)
----------- ---------
Net Assets.................. $454,470,230 100.0%
=========== =========
</TABLE>
- ------------
+ Percentages indicated are based on Portfolio net assets.
# The Portfolio will invest more than 25% of the market value of its total
assets in the securities of banks and bank holding companies, including
certificates of deposit, bankers' acceptances and securities guaranteed by
banks and bank holding companies.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
40
<PAGE> 42
MAINSTAY VP SERIES FUND, INC.
CASH MANAGEMENT PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
As of December 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investment in securities, at value
(amortized cost $468,588,067).......... $468,588,067
Cash..................................... 58,141
Interest receivable...................... 2,140,306
Fund shares sold......................... 428,729
------------
Total assets..................... 471,215,243
------------
LIABILITIES:
Payables:
Fund shares redeemed................... 16,510,769
Adviser................................ 96,063
Administrator.......................... 76,850
Custodian.............................. 10,472
Directors.............................. 288
Accrued expenses......................... 50,571
------------
Total liabilities................ 16,745,013
------------
Net assets applicable to outstanding
shares................................. $454,470,230
============
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.01 per
share) 600 million shares authorized... $ 4,544,743
Additional paid-in capital............... 449,925,517
Accumulated net realized loss on
investments............................ (30)
------------
Net assets applicable to outstanding
shares................................. $454,470,230
============
Shares of capital stock outstanding...... 454,473,289
============
Net asset value per share outstanding.... $ 1.00
============
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Income:
Interest............................... $ 17,162,292
------------
Expenses:
Advisory............................... 809,273
Administration......................... 647,418
Shareholder communication.............. 100,025
Professional........................... 45,631
Custodian.............................. 33,562
Directors.............................. 12,774
Miscellaneous.......................... 14,730
------------
Total expenses................... 1,663,413
------------
Net investment income.................... 15,498,879
------------
REALIZED LOSS ON INVESTMENTS:
Net realized loss on investments......... (30)
------------
Net increase in net assets resulting from
operations............................. $ 15,498,849
============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
41
<PAGE> 43
CASH MANAGEMENT PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1999
and December 31, 1998
<TABLE>
<CAPTION>
1999 1998
--------------------------
<S> <C> <C>
INCREASE IN NET ASSETS:
Operations:
Net investment income..................................... $ 15,498,879 $ 9,018,849
Net realized gain (loss) on investments................... (30) 2,765
------------- -------------
Net increase in net assets resulting from operations...... 15,498,849 9,021,614
------------- -------------
Dividends and distributions to shareholders:
From net investment income................................ (15,498,879) (9,018,849)
From net realized gain on investments..................... (141) (2,107)
------------- -------------
Total dividends and distributions to shareholders....... (15,499,020) (9,020,956)
------------- -------------
Capital share transactions:
Net proceeds from sale of shares.......................... 977,607,004 485,909,046
Net asset value of shares issued to shareholders in
reinvestment of dividends and distributions............. 16,403,044 8,752,871
------------- -------------
994,010,048 494,661,917
Cost of shares redeemed................................... (771,091,687) (403,892,045)
------------- -------------
Increase in net assets derived from capital share
transactions............................................ 222,918,361 90,769,872
------------- -------------
Net increase in net assets.................................. 222,918,190 90,770,530
NET ASSETS:
Beginning of year........................................... 231,552,040 140,781,510
------------- -------------
End of year................................................. $ 454,470,230 $ 231,552,040
============= =============
</TABLE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(Selected Per Share Data and Ratios)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1999 1998 1997 1996 1995
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of
year...................................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------------ ------------ ------------ ------------ ------------
Net investment income....................... 0.05 0.05 0.05 0.05 0.05
------------ ------------ ------------ ------------ ------------
Less dividends:
From net investment income................ (0.05) (0.05) (0.05) (0.05) (0.05)
------------ ------------ ------------ ------------ ------------
Net asset value at end of year.............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
============ ============ ============ ============ ============
Total investment return..................... 4.84% 5.18% 5.25% 4.95% 5.59%
Ratios (to average net assets)/Supplemental
Data:
Net investment income..................... 4.79% 5.05% 5.13% 4.92% 5.44%
Net expenses.............................. 0.51% 0.54% 0.54% 0.62% 0.62%
Expenses (before reimbursement)........... 0.51% 0.54% 0.54% 0.64% 0.94%
Net assets at end of year
(in 000's)................................ $ 454,470 $ 231,552 $ 140,782 $ 118,347 $ 87,839
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
42
<PAGE> 44
MAINSTAY VP SERIES FUND, INC.
BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS
December 31, 1999
<TABLE>
<CAPTION>
LONG-TERM BONDS (97.1%)+
CORPORATE BONDS (52.6%)
PRINCIPAL
AMOUNT VALUE
-----------------------
<S> <C> <C>
AUTOMOBILES (1.7%)
DaimlerChrysler North America
Holding Corp.
6.90%, due 9/1/04............... $ 5,000,000 $ 4,950,000
------------
BANKS--MAJOR REGIONAL (3.2%)
Fleet National Bank
5.75%, due 1/15/09.............. 5,000,000 4,393,750
Popular Inc.
6.20%, due 4/30/01.............. 5,000,000 4,925,000
------------
9,318,750
------------
BANKS--MONEY CENTER (1.4%)
Bank of America Corp.
7.75%, due 7/15/02.............. 4,000,000 4,065,000
------------
BANKS--SAVINGS & LOANS (0.4%)
Golden West Financial Corp.
10.25%, due 12/1/00 (a)......... 1,000,000 1,027,500
------------
BROADCAST/MEDIA (1.5%)
News America Inc.
7.125%, due 4/8/28.............. 5,000,000 4,375,000
------------
CHEMICALS (2.4%)
Rohm & Haas Co.
6.95%, due 7/15/04.............. 2,000,000 1,977,028
7.85%, due 7/15/29.............. 5,000,000 5,025,100
------------
7,002,128
------------
CONTAINERS--METAL & GLASS (1.5%)
Owens-Illinois, Inc.
7.80%, due 5/15/18.............. 5,000,000 4,381,250
------------
DISTRIBUTION/WHOLESALE (2.2%)
Pepsi Bottling Group, Inc.
Series B
7.00%, due 3/1/29............... 7,000,000 6,361,250
------------
ELECTRIC POWER COMPANIES (2.9%)
Commonwealth Edison Co.
6.95%, due 7/15/18.............. 5,000,000 4,518,750
Niagara Mohawk Power Corp.
7.125%, due 7/1/01.............. 3,780,489 3,775,763
------------
8,294,513
------------
ELECTRONICS--DEFENSE (1.7%)
Raytheon Co.
5.95%, due 3/15/01.............. 5,000,000 4,912,500
------------
FINANCIAL--MISCELLANEOUS (15.3%)
Chrysler Financial Corp.
5.875%, due 2/7/01.............. 5,000,000 4,950,000
CIT Group Inc.
6.50%, due 6/14/02.............. 3,000,000 2,958,750
7.125%, due 10/15/04............ 2,000,000 1,985,000
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
-----------------------
<S> <C> <C>
FINANCIAL--MISCELLANEOUS (Continued)
Finova Capital Corp.
7.25%, due 11/8/04.............. $ 5,000,000 $ 4,943,750
Ford Motor Credit Corp.
7.375%, due 10/28/09............ 5,000,000 4,942,050
General Motors Acceptance Corp.
5.625%, due 2/15/01............. 6,000,000 5,917,500
Household Finance Corp.
6.50%, due 11/15/08............. 7,000,000 6,474,370
John Deere Capital Corp.
5.35%, due 10/23/01............. 5,000,000 4,862,500
Norwest Financial, Inc.
6.85%, due 7/15/09.............. 7,000,000 6,702,500
------------
43,736,420
------------
OIL--INTEGRATED DOMESTIC (1.6%)
Conoco, Inc.
6.95%, due 4/15/29.............. 5,000,000 4,518,750
------------
PAPER & FOREST PRODUCTS (1.6%)
Champion International Corp.
9.875%, due 6/1/00 (a).......... 4,500,000 4,556,250
------------
RAILROADS (4.8%)
CSX Corp.
7.05%, due 5/1/02............... 7,000,000 6,973,750
Norfolk Southern Corp.
7.80%, due 5/15/27.............. 7,000,000 6,851,250
------------
13,825,000
------------
RETAIL STORES--DEPARTMENT (2.4%)
Harcourt General, Inc.
9.50%, due 3/15/00 (a).......... 2,000,000 2,010,000
Penney (J.C.) Co., Inc.
6.95%, due 4/1/00 (a)........... 5,000,000 5,000,000
------------
7,010,000
------------
RETAIL STORES--GENERAL
MERCHANDISE (1.7%)
Wal-Mart Stores, Inc.
6.875%, due 8/10/09............. 5,000,000 4,870,800
------------
TELECOMMUNICATIONS--
LONG DISTANCE (4.6%)
MCI Worldcom Inc.
6.40%, due 8/15/05.............. 8,000,000 7,680,000
Sprint Capital Corp.
6.90%, due 5/1/19............... 6,000,000 5,460,000
------------
13,140,000
------------
UTILITY--ELECTRIC (1.7%)
Cleveland Electric Illuminating
Co.
7.88%, due 11/1/17.............. 5,000,000 4,756,250
------------
Total Corporate Bonds
(Cost $157,334,282)............. 151,101,361
------------
</TABLE>
- ------------
+ Percentages indicated are based on Portfolio net assets.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
43
<PAGE> 45
BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1999
<TABLE>
<CAPTION>
U.S. GOVERNMENT &
FEDERAL AGENCIES (44.5%)
PRINCIPAL
AMOUNT VALUE
-----------------------
<S> <C> <C>
FEDERAL HOME LOAN BANK (1.7%)
5.625%, due 3/19/01........... $ 5,000,000 $ 4,953,250
------------
FEDERAL NATIONAL MORTGAGE
ASSOCIATION (2.4%)
5.91%, due 8/25/03............ 7,000,000 6,755,350
------------
FEDERAL NATIONAL MORTGAGE
ASSOCIATION (MORTGAGE
PASS-THROUGH SECURITIES) (27.4%)
5.125%, due 2/15/04........... 15,000,000 14,096,550
6.00%, due 2/1/14-10/1/28..... 12,905,251 11,965,280
6.375%, due 6/15/09........... 5,000,000 4,773,050
6.50%, due 11/1/09-6/1/29..... 18,044,861 17,128,634
7.00%, due 2/1/27-1/1/28...... 15,308,922 14,796,992
7.50%, due 7/1/28............. 4,567,651 4,516,266
8.00%, due 5/1/25-12/1/29..... 11,409,996 11,495,571
------------
78,772,343
------------
GOVERNMENT NATIONAL
MORTGAGE ASSOCIATION I
(MORTGAGE PASS-THROUGH
SECURITY) (0.6%)
9.00%, due 4/15/26............ 1,685,432 1,764,950
------------
UNITED STATES TREASURY
BONDS (3.8%)
5.25%, due 2/15/29............ 8,000,000 6,614,960
7.125%, due 2/15/23........... 4,000,000 4,161,760
------------
10,776,720
------------
UNITED STATES TREASURY
NOTES (8.6%)
6.00%, due 8/15/09............ 5,000,000 4,843,750
6.125%, due 8/15/07........... 5,000,000 4,876,350
6.50%, due 8/15/05............ 10,000,000 9,997,400
7.00%, due 7/15/06............ 5,000,000 5,120,000
------------
24,837,500
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
-----------------------
<S> <C> <C>
Total U.S. Government &
Federal Agencies
(Cost $132,476,931)........... $127,860,113
------------
Total Long-Term Bonds
(Cost $289,811,213)............. 278,961,474
------------
SHORT-TERM
INVESTMENT (1.2%)
COMMERCIAL PAPER (1.2%)
Associates Corp. of North America
5.07%, due on demand (b)...... $ 3,457,000 3,457,000
------------
Total Short-Term Investment
(Cost $3,457,000)............... 3,457,000
------------
Total Investments
(Cost $293,268,213) (c)......... 98.3% 282,418,474(d)
Cash and Other Assets,
Less Liabilities................ 1.7 4,942,648
---------- ----------
Net Assets....................... 100.0% $287,361,122
========== ==========
</TABLE>
- ------------
(a) Long-term security maturing within the subsequent twelve month period.
(b) Adjustable rate. Rate shown is the rate in effect at December 31, 1999.
(c) The cost stated also represents the aggregate cost for Federal income tax
purposes.
(d) At December 31, 1999, net unrealized depreciation was $10,849,739, based on
cost for Federal income tax purposes. This consisted of aggregate gross
unrealized appreciation for all investments on which there was an excess of
market value over cost of $122,546 and aggregate gross unrealized
depreciation for all investments on which there was an excess of cost over
market value of $10,972,285.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
44
<PAGE> 46
MAINSTAY VP SERIES FUND, INC.
BOND PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
As of December 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investment in securities, at value
(identified cost $293,268,213)......... $282,418,474
Cash..................................... 2,415
Receivables:
Interest............................... 4,754,200
Fund shares sold....................... 638,384
------------
Total assets..................... 287,813,473
------------
LIABILITIES:
Payables:
Fund shares redeemed................... 296,053
Adviser................................ 61,474
Administrator.......................... 49,180
Shareholder communication.............. 23,567
Directors.............................. 260
Accrued expenses......................... 21,817
------------
Total liabilities................ 452,351
------------
Net assets applicable to outstanding
shares................................. $287,361,122
============
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.01 per
share) 100 million shares authorized... $ 234,721
Additional paid-in capital............... 301,427,423
Accumulated net realized loss on
investments............................ (3,451,283)
Net unrealized depreciation on
investments............................ (10,849,739)
------------
Net assets applicable to outstanding
shares................................. $287,361,122
============
Shares of capital stock outstanding...... 23,472,084
============
Net asset value per share outstanding.... $ 12.24
============
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Income:
Interest............................... $ 18,603,215
------------
Expenses:
Advisory............................... 731,761
Administration......................... 585,409
Shareholder communication.............. 56,494
Professional........................... 54,015
Directors.............................. 12,485
Portfolio pricing...................... 8,142
Miscellaneous.......................... 13,454
------------
Total expenses................... 1,461,760
------------
Net investment income.................... 17,141,455
------------
REALIZED AND UNREALIZED LOSS ON
INVESTMENTS:
Net realized loss on investments......... (3,386,687)
Net change in unrealized appreciation on
investments............................ (18,241,917)
------------
Net realized and unrealized loss on
investments............................ (21,628,604)
------------
Net decrease in net assets resulting from
operations............................. $ (4,487,149)
============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
45
<PAGE> 47
BOND PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1999
and December 31, 1998
<TABLE>
<CAPTION>
1999 1998
---------------------------
<S> <C> <C>
INCREASE IN NET ASSETS:
Operations:
Net investment income..................................... $ 17,141,455 $ 14,515,227
Net realized gain (loss) on investments................... (3,386,687) 6,948,226
Net change in unrealized appreciation on investments...... (18,241,917) 19,352
------------ ------------
Net increase (decrease) in net assets resulting from
operations.............................................. (4,487,149) 21,482,805
------------ ------------
Dividends and distributions to shareholders:
From net investment income................................ (17,287,214) (14,391,518)
From net realized gain on investments..................... (25,226) (7,064,292)
------------ ------------
Total dividends and distributions to shareholders....... (17,312,440) (21,455,810)
------------ ------------
Capital share transactions:
Net proceeds from sale of shares.......................... 59,285,805 63,383,438
Net asset value of shares issued to shareholders in
reinvestment of dividends and distributions............. 17,312,440 21,455,810
------------ ------------
76,598,245 84,839,248
Cost of shares redeemed................................... (44,829,765) (36,423,049)
------------ ------------
Increase in net assets derived from capital share
transactions............................................ 31,768,480 48,416,199
------------ ------------
Net increase in net assets.................................. 9,968,891 48,443,194
NET ASSETS:
Beginning of year........................................... 277,392,231 228,949,037
------------ ------------
End of year................................................. $287,361,122 $277,392,231
============ ============
Accumulated undistributed net investment income at end of
year...................................................... $ -- $ 7,643
============ ============
</TABLE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(Selected Per Share Data and Ratios)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1999 1998 1997 1996 1995
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of year...... $ 13.23 $ 13.14 $ 12.83 $ 13.42 $ 12.09
------------ ------------ ------------ ------------ ------------
Net investment income..................... 0.78 0.74 0.88 0.87 0.88
Net realized and unrealized gain (loss) on
investments............................. (0.99) 0.46 0.35 (0.59) 1.33
------------ ------------ ------------ ------------ ------------
Total from investment operations.......... (0.21) 1.20 1.23 0.28 2.21
------------ ------------ ------------ ------------ ------------
Less dividends and distributions:
From net investment income.............. (0.78) (0.74) (0.88) (0.87) (0.88)
From net realized gain
on investments........................ (0.00)(a) (0.37) (0.04) -- --
------------ ------------ ------------ ------------ ------------
Total dividends and distributions......... (0.78) (1.11) (0.92) (0.87) (0.88)
------------ ------------ ------------ ------------ ------------
Net asset value at end of year............ $ 12.24 $ 13.23 $ 13.14 $ 12.83 $ 13.42
============ ============ ============ ============ ============
Total investment return................... (1.53%) 9.12% 9.65% 2.05% 18.31%
Ratios (to average net
assets)/Supplemental Data:
Net investment income................... 5.86% 5.86% 6.42% 6.31% 6.55%
Net expenses............................ 0.50% 0.52% 0.50% 0.58% 0.62%
Expenses (before reimbursement)......... 0.50% 0.52% 0.50% 0.58% 0.91%
Portfolio turnover rate................... 161% 206% 187% 103% 81%
Net assets at end of year (in 000's)...... $ 287,361 $ 277,392 $ 228,949 $ 226,375 $ 235,030
</TABLE>
- ---------------
(a) Less than one cent per share.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
46
<PAGE> 48
MAINSTAY VP SERIES FUND, INC.
GROWTH EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
December 31, 1999
<TABLE>
<CAPTION>
COMMON STOCKS (93.9%)+
SHARES VALUE
------------------------
<S> <C> <C>
AEROSPACE/DEFENSE (1.1%)
United Technologies Corp........ 220,000 $ 14,300,000
--------------
ALUMINUM (1.1%)
Alcoa Inc....................... 175,000 14,525,000
--------------
BANKS--MAJOR REGIONAL (1.7%)
Bank of New York Co., Inc.
(The).......................... 300,000 12,000,000
Mellon Financial Corp........... 286,000 9,741,875
--------------
21,741,875
--------------
BANKS--MONEY CENTER (0.8%)
Chase Manhattan Corp. (The)..... 140,000 10,876,250
--------------
BEVERAGES--ALCOHOLIC (0.9%)
Anheuser-Busch Cos., Inc........ 160,000 11,340,000
--------------
BIOTECHNOLOGY (0.2%)
Genentech, Inc. (a)............. 15,000 2,017,500
--------------
BROADCAST/MEDIA (6.8%)
AMFM Inc. (a)................... 189,578 14,834,479
CBS Corp. (a)................... 266,000 17,007,375
Clear Channel Communications,
Inc. (a)....................... 100,000 8,925,000
Comcast Corp. Special Class A... 450,000 22,753,125
MediaOne Group Inc. (a)......... 180,000 13,826,250
Spanish Broadcasting System,
Inc. (a)....................... 25,000 1,006,250
USA Networks, Inc. (a).......... 197,000 10,884,250
--------------
89,236,729
--------------
CHEMICALS (1.4%)
Eastman Chemical Co............. 137,500 6,557,031
Praxair, Inc.................... 125,000 6,289,063
Rohm & Haas Co.................. 133,600 5,435,850
--------------
18,281,944
--------------
COMMUNICATIONS--EQUIPMENT
MANUFACTURERS (12.6%)
ADC Telecommunications, Inc.
(a)............................ 250,000 18,140,625
Cisco Systems, Inc. (a)......... 275,000 29,459,375
Hughes Electronics Corp. (a).... 160,000 15,360,000
JDS Uniphase Corp. (a).......... 50,000 8,065,625
Lucent Technologies Inc......... 200,000 14,962,500
Nokia Corp. ADR (b)............. 125,000 23,750,000
Nortel Networks Corp............ 235,000 23,735,000
QUALCOMM, Inc. (a).............. 88,000 15,499,000
Tellabs, Inc. (a)............... 260,000 16,688,750
--------------
165,660,875
--------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------------------------
<S> <C> <C>
COMPUTER SOFTWARE & SERVICES
(4.3%)
ACNielson Corp. (a)............. 230,000 $ 5,663,750
America Online Inc. (a)......... 220,000 16,596,250
Mercury Interactive Corp. (a)... 60,000 6,476,250
Microsoft Corp. (a)............. 125,000 14,593,750
Oracle Corp. (a)................ 76,400 8,561,575
Yahoo! Inc. (a)................. 11,800 5,105,713
--------------
56,997,288
--------------
COMPUTER SYSTEMS (4.5%)
Comdisco, Inc................... 500,000 18,625,000
Compaq Computer Corp............ 232,000 6,278,500
EMC Corp. (a)................... 155,000 16,933,750
Sun Microsystems, Inc. (a)...... 230,000 17,810,625
--------------
59,647,875
--------------
COMPUTERS--NETWORKING (0.2%)
Sycamore Networks, Inc. (a)..... 10,000 3,080,000
--------------
CONTAINERS--PAPER (0.9%)
Smurfit-Stone Container Corp.
(a)............................ 500,000 12,250,000
--------------
COSMETICS/PERSONAL CARE (1.0%)
Avon Products, Inc.............. 400,000 13,200,000
--------------
ELECTRIC POWER COMPANIES (0.4%)
Duke Energy Corp................ 100,000 5,012,500
--------------
ELECTRICAL EQUIPMENT (3.3%)
General Electric Co............. 200,000 30,950,000
SCI Systems, Inc. (a)........... 150,000 12,328,125
--------------
43,278,125
--------------
ELECTRONICS--SEMICONDUCTORS
(7.4%)
Advanced Micro Devices, Inc.
(a)............................ 300,000 8,681,250
Applied Materials, Inc. (a)..... 120,000 15,202,500
Intel Corp...................... 175,000 14,404,688
Motorola, Inc................... 110,000 16,197,500
National Semiconductor Corp.
(a)............................ 250,000 10,703,125
Rambus Inc. (a)................. 40,000 2,697,500
Texas Instruments Inc........... 200,000 19,375,000
Vitesse Semiconductor Corp.
(a)............................ 180,000 9,438,750
--------------
96,700,313
--------------
ENTERTAINMENT (1.1%)
Time Warner Inc................. 200,000 14,487,500
--------------
</TABLE>
- ------------
+ Percentages indicated are based on Portfolio net assets.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
47
<PAGE> 49
GROWTH EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1999
<TABLE>
<CAPTION>
COMMON STOCKS (CONTINUED)
SHARES VALUE
------------------------
<S> <C> <C>
FINANCIAL-- MISCELLANEOUS (3.9%)
American Express Co............. 90,000 $ 14,962,500
American General Corp........... 140,000 10,622,500
Citigroup Inc................... 300,000 16,668,750
Freddie Mac..................... 200,000 9,412,500
--------------
51,666,250
--------------
FOOD (0.3%)
International Home Foods, Inc.
(a)............................ 216,000 3,753,000
--------------
FOOD & HEALTH CARE DISTRIBUTORS
(1.1%)
SYSCO Corp...................... 360,000 14,242,500
--------------
HEALTH CARE-- DIVERSIFIED (3.3%)
Bristol-Myers Squibb Co......... 190,000 12,195,625
Johnson & Johnson............... 130,000 12,106,250
Warner-Lambert Co............... 227,250 18,620,297
--------------
42,922,172
--------------
HEALTH CARE--DRUGS (2.7%)
Glaxo Wellcome PLC ADR (b)...... 180,000 10,057,500
Lilly (Eli) & Co................ 200,000 13,300,000
SmithKline Beecham PLC ADR (b).. 182,300 11,746,956
--------------
35,104,456
--------------
HEALTH CARE--MEDICAL PRODUCTS
(0.5%)
Guidant Corp. (a)............... 125,000 5,875,000
--------------
HEALTH CARE--MISCELLANEOUS
(0.7%)
Amgen Inc. (a).................. 160,000 9,610,000
--------------
HOUSEHOLD PRODUCTS (1.0%)
Procter & Gamble Co. (The)...... 120,000 13,147,500
--------------
INSURANCE BROKERS (1.0%)
Marsh & McLennan Cos., Inc...... 135,000 12,917,813
--------------
INSURANCE--LIFE (0.8%)
ReliaStar Financial Corp........ 275,000 10,776,562
--------------
INSURANCE--MULTI-LINE (1.0%)
American International Group,
Inc............................ 119,750 12,947,969
--------------
INSURANCE--PROPERTY & CASUALTY
(0.8%)
Allstate Corp. (The)............ 443,000 10,632,000
--------------
LEISURE TIME (0.5%)
Mirage Resorts, Inc. (a)........ 400,000 6,125,000
--------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------------------------
<S> <C> <C>
MANUFACTURING--DIVERSIFIED
(1.1%)
Honeywell International Inc..... 260,000 $ 14,998,750
--------------
NATURAL GAS DISTRIBUTORS &
PIPELINES (1.7%)
Coastal Corp. (The)............. 280,000 9,922,500
Enron Corp...................... 270,000 11,981,250
--------------
21,903,750
--------------
OIL & GAS--EQUIPMENT & SERVICES
(1.7%)
Halliburton Co.................. 250,000 10,062,500
Schlumberger Ltd................ 185,000 10,406,250
Transocean Sedco Forex Inc...... 35,816 1,206,551
--------------
21,675,301
--------------
OIL--INTEGRATED DOMESTIC (0.5%)
USX-Marathon Group.............. 250,000 6,171,875
--------------
OIL--INTEGRATED INTERNATIONAL
(2.5%)
BP Amoco PLC ADR (b)............ 131,582 7,804,457
Chevron Corp.................... 120,000 10,395,000
Exxon Mobil Corp................ 184,821 14,889,642
--------------
33,089,099
--------------
PAPER & FOREST PRODUCTS (0.5%)
Boise Cascade Corp.............. 175,000 7,087,500
--------------
PUBLISHING (1.0%)
McGraw-Hill Cos., Inc. (The).... 214,000 13,187,750
--------------
REAL ESTATE INVESTMENT/
MANAGEMENT (1.0%)
First Industrial Realty Trust,
Inc............................ 350,000 9,603,125
Liberty Property Trust.......... 166,500 4,037,625
--------------
13,640,750
--------------
RETAIL STORES--FOOD (0.9%)
Kroger Co. (The) (a)............ 540,000 10,192,500
Smart & Final Inc............... 163,000 1,181,750
--------------
11,374,250
--------------
RETAIL STORES--GENERAL
MERCHANDISE (2.1%)
Dayton Hudson Corp.............. 140,000 10,281,250
Wal-Mart Stores, Inc............ 250,000 17,281,250
--------------
27,562,500
--------------
RETAIL STORES-- SPECIALTY (1.0%)
Circuit City Stores-Circuit City
Group.......................... 300,000 13,518,750
--------------
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
48
<PAGE> 50
MAINSTAY VP SERIES FUND, INC.
<TABLE>
<CAPTION>
COMMON STOCKS (CONTINUED)
SHARES VALUE
------------------------
<S> <C> <C>
SEMICONDUCTORS (0.9%)
Novellus Systems, Inc. (a)...... 100,000 $ 12,253,130
--------------
SPECIALIZED SERVICES (2.2%)
Cendant Corp. (a)............... 630,000 16,734,375
Young & Rubicam Inc. (a)........ 175,000 12,381,250
--------------
29,115,625
--------------
TECHNOLOGY (0.0%) (c)
Symyx Technologies, Inc. (a).... 17,500 525,000
--------------
TELECOMMUNICATIONS--LONG
DISTANCE (5.8%)
Allegiance Telecom, Inc. (a).... 126,000 11,623,500
Loral Space & Communications
Ltd. (a)....................... 500,000 12,156,250
MCI WorldCom, Inc. (a).......... 225,000 11,939,062
Qwest Communications
International Inc. (a)......... 400,000 17,200,000
Sprint Corp. (FON Group)........ 250,000 16,828,125
Sprint Corp. (PCS Group) (a).... 55,000 5,637,500
Time Warner Telecom Inc. Class A
(a)............................ 22,500 1,123,594
--------------
76,508,031
--------------
TELECOMMUNICATIONS--SERVICES
(0.1%)
Triton PCS Holdings, Inc. Class
A (a).......................... 30,000 1,365,000
--------------
TELEPHONE (3.2%)
ALLTEL Corp..................... 175,000 14,470,312
Bell Atlantic Corp.............. 200,000 12,312,500
GTE Corp........................ 30,000 2,116,875
SBC Communications Inc.......... 271,096 13,215,930
--------------
42,115,617
--------------
TEXTILES--HOME FURNISHINGS
(0.4%)
WestPoint Stevens Inc........... 260,000 4,550,000
--------------
Total Common Stocks (Cost
$774,206,199).................. 1,232,996,674
--------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
------------------------
SHORT-TERM
INVESTMENTS (5.8%)
<S> <C> <C>
COMMERCIAL PAPER (5.8%)
Associates Corp. of North
America
5.20%, due on demand (d)....... $ 3,675,000 $ 3,675,000
Federal Home Loan Banks Discount
Note
2.00%, due 1/06/00............. 25,000,000 24,993,055
Federal Home Loan Banks Discount
Note
5.76%, due 1/21/00............. 20,000,000 19,935,949
Federal National Mortgage Corp.
Discount Note
5.75%, due 1/18/00............. 18,700,000 18,649,184
Galaxy Funding Inc.
5.60%, due 1/03/00............. 9,100,000 9,097,168
--------------
Total Short-Term Investments
(Cost $76,350,356)............. 76,350,356
--------------
Total Investments
(Cost $850,556,555) (e)........ 99.7% 1,309,347,030(f)
Cash and Other Assets,
Less Liabilities............... 0.3 3,558,448
---------- -------------
Net Assets...................... 100.0% $1,312,905,478
========== =============
</TABLE>
- ------------
(a) Non-income producing security.
(b) ADR--American Depository Receipt.
(c) Less than one tenth of a percent.
(d) Adjustable rate. Rate shown is the rate in effect at December 31, 1999.
(e) The cost for Federal income tax purposes is $850,361,598.
(f) At December 31, 1999 net unrealized appreciation was $458,985,432, based on
cost for Federal income tax purposes. This consisted of aggregate gross
unrealized appreciation for all investments on which there was an excess of
market value over cost of $477,898,129 and aggregate gross unrealized
depreciation for all investments on which there was an excess of cost over
market value of $18,912,697.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
49
<PAGE> 51
GROWTH EQUITY PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
As of December 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investment in securities, at value
(identified cost $850,556,555)....... $1,309,347,030
Receivables:
Fund shares sold..................... 4,299,435
Dividends and interest............... 771,954
--------------
Total assets................... 1,314,418,419
--------------
LIABILITIES:
Payables:
Fund shares redeemed................. 898,925
Adviser.............................. 263,295
Administrator........................ 210,634
Shareholder communication............ 103,205
Custodian............................ 11,787
Directors............................ 957
Accrued expenses....................... 24,138
--------------
Total liabilities.............. 1,512,941
--------------
Net assets applicable to outstanding
shares............................... $1,312,905,478
==============
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.01 per
share) 100 million shares
authorized........................... $ 472,692
Additional paid-in capital............. 853,447,354
Accumulated undistributed net realized
gain on investments.................. 194,957
Net unrealized appreciation on
investments.......................... 458,790,475
--------------
Net assets applicable to outstanding
shares............................... $1,312,905,478
==============
Shares of capital stock outstanding.... 47,269,160
==============
Net asset value per share
outstanding.......................... $ 27.78
==============
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Income:
Dividends (a)........................ $ 9,381,337
Interest............................. 2,920,456
--------------
Total income................... 12,301,793
--------------
Expenses:
Advisory............................. 2,737,555
Administration....................... 2,190,044
Shareholder communication............ 258,197
Professional......................... 90,803
Directors............................ 45,294
Miscellaneous........................ 49,342
--------------
Total expenses................. 5,371,235
--------------
Net investment income.................. 6,930,558
--------------
REALIZED AND UNREALIZED GAIN ON
INVESTMENTS:
Net realized gain on investments....... 116,289,799
Net change in unrealized appreciation
on investments....................... 175,477,844
--------------
Net realized and unrealized gain on
investments.......................... 291,767,643
--------------
Net increase in net assets resulting
from operations...................... $ 298,698,201
==============
- ------------
(a) Dividends recorded net of foreign withholding taxes
in the amount of $61,298.
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
50
<PAGE> 52
MAINSTAY VP SERIES FUND, INC.
GROWTH EQUITY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1999
and December 31, 1998
<TABLE>
<CAPTION>
1999 1998
--------------------------------
<S> <C> <C>
INCREASE IN NET ASSETS:
Operations:
Net investment income..................................... $ 6,930,558 $ 7,259,332
Net realized gain on investments.......................... 116,289,799 73,678,921
Net change in unrealized appreciation on investments...... 175,477,844 123,768,075
---------------- -------------
Net increase in net assets resulting from operations...... 298,698,201 204,706,328
---------------- -------------
Dividends and distributions to shareholders:
From net investment income................................ (6,931,381) (7,247,513)
From net realized gain on investments..................... (116,319,036) (73,678,921)
---------------- -------------
Total dividends and distributions to shareholders....... (123,250,417) (80,926,434)
---------------- -------------
Capital share transactions:
Net proceeds from sale of shares.......................... 163,123,595 121,819,072
Net asset value of shares issued to shareholders in
reinvestment of dividends and distributions............. 123,250,417 80,926,434
---------------- -------------
286,374,012 202,745,506
Cost of shares redeemed................................... (145,652,758) (88,843,247)
---------------- -------------
Increase in net assets derived from capital share
transactions............................................ 140,721,254 113,902,259
---------------- -------------
Net increase in net assets.................................. 316,169,038 237,682,153
NET ASSETS:
Beginning of year........................................... 996,736,440 759,054,287
---------------- -------------
End of year................................................. $ 1,312,905,478 $ 996,736,440
================ =============
</TABLE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(Selected Per Share Data and Ratios)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1999 1998 1997 1996 1995
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of year..... $ 23.62 $ 20.31 $ 18.63 $ 17.22 $ 14.69
------------- ------------- ------------- ------------- -------------
Net investment income.................... 0.16 0.19 0.16 0.18 0.22
Net realized and unrealized gain on
investments............................ 6.89 5.21 4.74 4.06 4.06
------------- ------------- ------------- ------------- -------------
Total from investment operations......... 7.05 5.40 4.90 4.24 4.28
------------- ------------- ------------- ------------- -------------
Less dividends and distributions:
From net investment income............. (0.16) (0.19) (0.16) (0.18) (0.22)
From net realized gain
on investments....................... (2.73) (1.90) (3.06) (2.65) (1.53)
------------- ------------- ------------- ------------- -------------
Total dividends and distributions........ (2.89) (2.09) (3.22) (2.83) (1.75)
------------- ------------- ------------- ------------- -------------
Net asset value at end of year........... $ 27.78 $ 23.62 $ 20.31 $ 18.63 $ 17.22
============= ============= ============= ============= =============
Total investment return.................. 29.96% 26.59% 26.75% 24.50% 29.16%
Ratios (to average net assets)/
Supplemental Data:
Net investment income.................. 0.63% 0.84% 0.80% 0.98% 1.29%
Net expenses........................... 0.49% 0.51% 0.50% 0.58% 0.62%
Expenses (before reimbursement)........ 0.49% 0.51% 0.50% 0.58% 0.91%
Portfolio turnover rate.................. 71% 69% 103% 104% 104%
Net assets at end of year (in 000's)..... $ 1,312,905 $ 996,736 $ 759,054 $ 564,685 $ 427,507
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
51
<PAGE> 53
NOTES TO FINANCIAL STATEMENTS
NOTE 1-- Organization and Business:
- --------------------------------------------------------------------------------
MainStay VP Series Fund, Inc. (the "Fund") was incorporated under Maryland law
on June 3, 1983. The Fund is registered under the Investment Company Act of
1940, as amended, ("Investment Company Act") as an open-end diversified
management investment company. Cash Management Portfolio, which commenced
operations on January 29, 1993, and Bond and Growth Equity Portfolios, which
commenced operations on January 23, 1984, (the "Portfolios"; each separately a
"Portfolio") are separate Portfolios of the Fund. Shares of the Portfolios are
currently offered only to New York Life Insurance and Annuity Corporation
("NYLIAC"), a wholly owned subsidiary of New York Life Insurance Company ("New
York Life"). NYLIAC allocates shares of the Portfolios to, among others, New
York Life Insurance and Annuity Corporation's MFA Separate Account-I, MFA
Separate Account-II and VLI Separate Account (collectively "Separate Accounts").
The MFA Separate Accounts are used to fund multi-funded retirement annuity
policies and the VLI Separate Account is used to fund variable life insurance
policies issued by NYLIAC.
The investment objectives for each of the Portfolios of the Fund are as follows:
Cash Management: to seek as high a level of current income as is considered
consistent with the preservation of capital and liquidity.
Bond: to seek the highest income over the long term consistent with
preservation of principal.
Growth Equity: to seek long-term growth of capital, with income as a secondary
consideration.
- --------------------------------------------------------------------------------
NOTE 2--Significant Accounting Policies:
- --------------------------------------------------------------------------------
The following is a summary of significant accounting policies followed by the
Fund:
(A)
VALUATION OF FUND SHARES. The net asset value per share of each Portfolio is
calculated on each day the New York Stock Exchange (the "Exchange") is open for
trading as of the close of regular trading on the Exchange. The net asset value
per share is calculated for each Portfolio by dividing the current market value
(amortized cost, in the case of Cash Management Portfolio) of the Portfolio's
total assets, less liabilities, by the total number of outstanding shares of
that Portfolio. Each Portfolio's net asset value will fluctuate, and although
the Cash Management Portfolio seeks to preserve the value of your investment of
$1.00 per share, an investor could lose money by investing in any Portfolio. An
investment in the Cash Management Portfolio is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.
(B)
SECURITIES VALUATION. Portfolio securities of Cash Management Portfolio are
valued at amortized cost, which approximates market value. The amortized cost
method involves valuing a security at its cost on the date of purchase and
thereafter assuming a constant amortization to maturity of the difference
between such cost and the value on maturity date.
Securities of each of the other Portfolios are stated at value determined (a) by
appraising common and preferred stocks which are traded on the Exchange at the
last sale price on that day or, if no sale occurs, at the mean between the
closing bid and asked prices, (b) by appraising common and preferred stocks
traded on other United States national securities exchanges or foreign
securities exchanges as nearly as possible in the manner described in (a) by
reference to their principal exchange, including the National Association of
Securities Dealers National Market System, (c) by appraising over-the-counter
securities quoted on the National Association of Securities Dealers NASDAQ
system (but not listed on the National Market System) at the bid price supplied
through such system, (d) by appraising over-the-counter securities not quoted on
the
52
<PAGE> 54
MAINSTAY VP SERIES FUND, INC.
National Association of Securities Dealers NASDAQ system and securities listed
or traded on certain foreign exchanges whose operations are similar to the U.S.
over-the-counter market, at prices supplied by the pricing agent or brokers
selected by the Adviser (see Note 3) if these prices are deemed to be
representative of market values at the regular close of business of the
Exchange, (e) by appraising debt securities at prices supplied by a pricing
agent selected by the Adviser, whose prices reflect broker/dealer supplied
valuations and electronic data processing techniques if those prices are deemed
by the Adviser to be representative of market values at the regular close of
business of the Exchange, (f) by appraising options and futures contracts at the
last sale price on the market where such options or futures contracts are
principally traded, and (g) by appraising all other securities and other assets,
including debt securities for which prices are supplied by a pricing agent but
are not deemed by the Adviser to be representative of market values, but
excluding money market instruments with a remaining maturity of sixty days or
less and including restricted securities and securities for which no market
quotations are available, at fair value in accordance with procedures approved
by the Directors. Short-term securities which mature in more than 60 days are
valued at current market quotations. Short-term securities which mature in 60
days or less are valued at amortized cost if their term to maturity at purchase
was 60 days or less, or by amortizing the difference between market value on the
61st day prior to maturity and value on maturity date if their original term to
maturity at purchase exceeded 60 days.
Events affecting the values of certain portfolio securities that occur between
the close of trading on the principal market for such securities (foreign
exchanges and over-the-counter markets) and the regular close of the Exchange
will not be reflected in the Portfolios' calculations of net asset values unless
the Adviser believes that the particular event would materially affect net asset
value, in which case an adjustment would be made.
(C)
SECURITY TRANSACTIONS AND INVESTMENT INCOME. The Fund records security
transactions on the trade date. Realized gains and losses on security
transactions are determined using the identified cost method and include gains
and losses from repayments of principal on mortgage related and other
asset-backed securities. Dividend income is recognized on the ex-dividend date
and interest income is accrued daily except when collection is not expected.
Discounts on securities purchased for all Portfolios are accreted on the
constant yield method over the life of the respective securities or, if
applicable, over the period to the first call date. Premiums on securities
purchased are not amortized for any Portfolio except Cash Management Portfolio
which amortizes the premium on the constant yield method over the life of the
respective securities.
(D)
SECURITIES LENDING. The Portfolios may lend their securities to broker-dealers
and financial institutions. The loans are secured by collateral (cash or
securities) at least equal at all times to the market value of the securities
loaned. The Portfolios may bear the risk of delay in recovery of, or loss of
rights in, the securities loaned should the borrower of the securities
experience financial difficulty. The Portfolios receive compensation for lending
their securities in the form of fees or they retain a portion of interest on the
investment of any cash received as collateral. The Portfolios also continue to
receive interest and dividends on the securities loaned, and any gain or loss in
the market price of the securities loaned that may occur during the term of the
loan will be for the account of the Portfolios.
Net income earned on securities lending amounted to $112,983 net of broker fees
and rebates, for the Growth Equity Portfolio, for the year ended December 31,
1999, which is included as interest income on the Statement of Operations.
(E)
FEDERAL INCOME TAXES. Each of the Portfolios is treated as a separate entity for
Federal income tax purposes. The Fund's policy is to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of the taxable income to the shareholders of
each Portfolio within the allowable time limits. Therefore, no Federal income
tax provision is required.
53
<PAGE> 55
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Investment income received by a Portfolio from foreign sources may be subject to
foreign income taxes withheld at the source.
(F)
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions are
recorded on the ex-dividend date. For Cash Management Portfolio, dividends are
declared daily and paid monthly. Each of the other Portfolios intends to declare
and pay, as a dividend, substantially all of their net investment income and net
realized gains no less frequently than once a year. Income dividends and capital
gain distributions are determined in accordance with Federal income tax
regulations which may differ from generally accepted accounting principles.
These "book/tax differences" are either considered temporary or permanent in
nature. To the extent these differences are permanent in nature, such amounts
are reclassified within the capital accounts based on their Federal tax basis
treatment; temporary differences do not require reclassification. Dividends and
distributions which exceed net investment income and net realized capital gains
for financial reporting purposes but not for Federal tax purposes are reported
as dividends in excess of net investment income or distributions in excess of
net realized capital gains.
The following table discloses the current year reclassifications between
accumulated undistributed net investment income (loss) and accumulated
undistributed net realized gain (loss) on investments and paid-in capital
arising from permanent differences: net assets are not affected.
<TABLE>
<CAPTION>
ACCUMULATED
ACCUMULATED UNDISTRIBUTED
UNDISTRIBUTED NET REALIZED ADDITIONAL
NET INVESTMENT GAIN (LOSS) PAID-IN
INCOME (LOSS) ON INVESTMENTS CAPITAL
-------------- -------------- ----------
<S> <C> <C> <C>
Bond Portfolio.............................................. $138,116 $(39,370) $ (98,746)
Growth Equity Portfolio..................................... 823 224,194 (225,017)
</TABLE>
The reclassifications for the Portfolios are primarily due to distribution
reclassifications, investments in real estate investment trusts and paydown gain
(loss).
(G)
EXPENSES. Expenses with respect to the Fund are allocated to the individual
Portfolios in proportion to the net assets of the respective Portfolios when the
expenses are incurred except when direct allocations of expenses can be made.
(H)
USE OF ESTIMATES. The preparation of financial statements in accordance with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts and disclosures in the
financial statements. Actual results could differ from those estimates.
- --------------------------------------------------------------------------------
NOTE 3--Fees and Related Party Policies:
- --------------------------------------------------------------------------------
(A)
INVESTMENT ADVISORY AND ADMINISTRATION FEES. MacKay Shields LLC ("MacKay
Shields") acts as investment adviser to Cash Management Portfolio under an
Investment Advisory Agreement. MacKay Shields is a registered investment
adviser, a wholly-owned subsidiary of NYLIFE LLC and an indirect wholly-owned
subsidiary of New York Life. As of May 1, 1999, Madison Square Advisors LLC
("Madison Square Advisors") acts as investment adviser to Bond and
54
<PAGE> 56
MAINSTAY VP SERIES FUND, INC.
Growth Equity Portfolios under an Investment Advisory Agreement. Madison Square
Advisors is a registered investment adviser, a wholly-owned subsidiary of NYLIFE
LLC and an indirect subsidiary of New York Life. Prior to May 1, 1999, New York
Life acted as investment adviser to the Bond and Growth Equity Portfolios and
was replaced by Madison Square Advisors under a Substitution Agreement. The
substitution had no effect on investment personnel, investment strategies or
fees of the Portfolios.
NYLIAC is Administrator for the Fund.
The Fund, on behalf of each Portfolio, pays the Advisers and Administrator a
monthly fee for the services performed and the facilities furnished at an
approximate annual rate of the average daily net assets of each Portfolio as
follows:
<TABLE>
<CAPTION>
ADVISER ADMINISTRATOR
------- -------------
<S> <C> <C>
Cash Management Portfolio................................... 0.25% 0.20%
Bond Portfolio.............................................. 0.25% 0.20%
Growth Equity Portfolio..................................... 0.25% 0.20%
</TABLE>
(B)
DIRECTORS FEES. Directors, other than those affiliated with New York Life,
MacKay Shields or NYLIFE Distributors, are paid an annual fee of $35,000, and
$1,500 for each Board meeting and each Committee meeting attended plus
reimbursement for travel and out-of-pocket expenses. The Fund allocates this
expense in proportion to the net assets of the respective Portfolios.
(C)
OTHER. Fees for the cost of legal services provided to the Fund by the Office of
General Counsel of New York Life are charged to the Portfolios. For the year
ended December 31, 1999, these fees in the following amounts, were included in
Professional fees shown on the Statement of Operations:
<TABLE>
<S> <C>
Cash Management Portfolio................................... $ 7,697
Bond Portfolio.............................................. 7,893
Growth Equity Portfolio..................................... 31,508
</TABLE>
- --------------------------------------------------------------------------------
NOTE 4--Federal Income Tax:
- --------------------------------------------------------------------------------
At December 31, 1999, for Federal income tax purposes, capital loss
carryforwards were available to the extent provided by regulations to offset
future realized gains of Bond Portfolio, in the amount of approximately
$3,451,000, through the year 2007. To the extent that these loss carryforwards
are used to offset future capital gains, it is probable that the capital gains
so offset will not be distributed to shareholders.
- --------------------------------------------------------------------------------
NOTE 5--Line of Credit:
- --------------------------------------------------------------------------------
Bond and Growth Equity Portfolios participate in a line of credit of
$375,000,000 with a syndicate of banks in order to secure a source of funds for
temporary purposes to meet unanticipated or excessive shareholder redemption
requests. The Portfolios pay a commitment fee, at an annual rate of 0.075% of
the average commitment amount, regardless of usage to The Bank of New York,
which acts as agent to the syndicate. Such commitment fees are allocated amongst
the Portfolios based upon net assets and other factors. Interest on any
revolving credit loan is charged based upon the Federal Funds Advances rate.
There were no borrowings on this line of credit during the year ended December
31, 1999.
55
<PAGE> 57
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 6--Purchases and Sales of Securities (in 000's):
- --------------------------------------------------------------------------------
During the year ended December 31, 1999, purchases and sales of securities,
other than securities subject to repurchase transactions and short-term
securities, were as follows:
<TABLE>
<CAPTION>
BOND GROWTH EQUITY
PORTFOLIO PORTFOLIO
PURCHASES SALES PURCHASES SALES
--------------------------------------------
<S> <C> <C> <C> <C>
U.S. Government Securities.................................. $227,240 $204,186 $ -- $ --
All others.................................................. 275,225 252,536 765,368 742,896
--------------------------------------------
Total....................................................... $502,465 $456,722 $765,368 $742,896
============================================
</TABLE>
- --------------------------------------------------------------------------------
NOTE 7--Capital Share Transactions (in 000's):
- --------------------------------------------------------------------------------
Transactions in capital shares for the years ended December 31, 1999 and
December 31, 1998 were as follows:
<TABLE>
<CAPTION>
CASH MANAGEMENT BOND GROWTH EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO
1999 1998 1999 1998 1999 1998
------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold.......................................... 977,614 485,911 4,522 4,582 6,274 5,372
Shares issued in reinvestment of
dividends and distributions........................ 16,403 8,753 1,412 1,627 4,477 3,440
------------------------------------------------------------
994,017 494,664 5,934 6,209 10,751 8,812
Shares redeemed...................................... (771,097) (403,894) (3,431) (2,659) (5,689) (3,977)
------------------------------------------------------------
Net increase......................................... 222,920 90,770 2,503 3,550 5,062 4,835
============================================================
</TABLE>
56
<PAGE> 58
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Board of Directors and Shareholders of
MainStay VP Series Fund, Inc.:
In our opinion, the accompanying statements of assets and liabilities, including
the portfolios of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Cash Management Portfolio, Bond
Portfolio and Growth Equity Portfolio (three of the fifteen portfolios
constituting MainStay VP Series Fund, Inc., hereafter referred to as the "Fund")
at December 31, 1999, the results of each of their operations for the year then
ended, the changes in each of their net assets for each of the two years in the
period then ended and the financial highlights for each of the five years in the
period then ended, in conformity with accounting principles generally accepted
in the United States. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial 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, which included confirmation of securities at December 31, 1999 by
correspondence with the custodians and brokers, provide a reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York
February 22, 2000
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MAINSTAY VP SERIES FUND, INC.
OFFICERS AND DIRECTORS
Richard M. Kernan, Jr., Chairman,
Chief Executive Officer and Director
Anne F. Pollack, President,
Chief Administrative Officer and Director
Michael J. Drabb, Director
Jill Feinberg, Director
Daniel Herrick, Director
Robert D. Rock, Director and Vice President
Roman L. Weil, Director
John Weisser, Director
John A. Flanagan, Treasurer
Joseph McBrien, Secretary
Richard D. Levy, Controller
INVESTMENT ADVISERS
MacKay Shields LLC
Madison Square Advisors LLC
ADMINISTRATOR
New York Life Insurance and Annuity Corporation
CUSTODIANS
The Bank of New York
The Chase Manhattan Bank, N.A.
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
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NY LIFE LOGO
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
51 MADISON AVENUE, ROOM 2304
NEW YORK, NY 10010
Bulk Rate
U.S. Postage
PAID
NYLIAC
[RECYCLED LOGO]
Printed on
recycled
paper
18503 (2/2000)
