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New York Life Insurance and Annuity Corporation
MFA Separate Accounts I and II
UNAUDITED SEMI-ANNUAL REPORT
MainStay
VP Series Fund, Inc. JUNE 30, 1997
This is a Report by the
MainStay VP Series Fund,
Inc. for the general
information of Multi-
Funded Annuity policy-
owners. It must be accom-
panied or preceded by a
current prospectus if it is
given to anyone who
is not an owner of a Multi-
Funded Annuity policy.
This Report does not offer
for sale or solicit orders to
purchase securities.
New York Life Insurance
and Annuity Corporation LOGO
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To the Owners of The Facilitator(R):
I am pleased to present the unaudited Semi-Annual Report for The Facilitator(R)
and the MainStay VP Series Fund, Inc. for the six month period ended June 30,
1997. This Semi-Annual Report also contains financial statements, notes and
other pertinent data for each of the MainStay VP Series Fund, Inc. Portfolios
available in The Facilitator(R).
MID-YEAR REVIEW
The United States stock market outperformed even the most optimistic
expectations during the first half of 1997. The bull market for equities
continues to be driven by healthy investment-led growth, strong earnings gains,
low inflation, and a downward interest rate environment. The Dow Jones
Industrial Average(1) closed at 7,672, gaining another 19% in the first half of
the year after rising 26% in 1996 and 33.5% the year before. The Standard and
Poor's 500 Composite Stock Price Index(2) also showed an impressive return of
20.62% through the end of June, closing at 885. The soaring stock market added
to the United States' strong economy, while inflation remained subdued. Combined
with a low unemployment rate of 5%, growth of the economy is expected to
re-accelerate in the second half of 1997 and remain strong in 1998. Bond yields
are also expected to rise as a result of increases in wages and prices.
VARIABLE ANNUITIES IN GENERAL
The fastest growing segment of the United States population are those over the
age of 50. Effective retirement planning is a top priority for the majority of
these people, since many are retiring earlier and having longer life
expectancies. Many are concerned that their investments will not be able to keep
up with the pace of inflation or provide them with enough income to maintain
their current standard of living when they retire. Variable annuities offer a
variety of domestic and international investment options that have the potential
to address these concerns. The unique benefits of tax deferral, lifetime income,
an enhanced death benefit and tax-free transfers between investment options and
other product features also set variable annuities apart from other taxable
investment vehicles(3).
New York Life Insurance and Annuity Corporation received over $728 million in
variable annuity premiums during the first half of 1997, a 45% increase above
the amount received during the first half of 1996. We are on pace to set a
record year in variable annuity sales and expect the rise to continue in the
second half of 1997.
COMMITMENT TO YOUR NEEDS
We thank you for selecting us to be "The Company You Keep(R)," and we look
forward to helping you build a solid foundation for your future.
/s/ FREDERICK J. SIEVERT
Frederick J. Sievert
President
New York Life Insurance and Annuity Corporation
(1) The Dow Jones Industrial Average is a trademark, and the property of, Dow
Jones and Co., Inc.
(2) "Standard & Poor's 500 Composite Stock Price Index" and "S&P 500" are
registered trademarks of the Standard & Poor's Corporation. The S&P 500 is
an unmanaged index considered generally representative of the U.S. Stock
Market.
(3) Withdrawals prior to age 59 1/2 may be subject to a 10% IRS penalty.
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MAINSTAY VP SERIES FUND, INC. PORTFOLIOS
MACKAY-SHIELDS FINANCIAL CORPORATION
ADVISER'S REPORT
Market Overview
The first half of 1997 was a tale of two markets: interest rate fears in the
first quarter and corporate earnings in the second. In February, Alan Greenspan,
Chairman of the Federal Reserve Board, "the Fed," began to suggest strongly and
repeatedly that the equity market was experiencing "irrational exuberance", with
resulting conditions that were not sustainable. Nevertheless, the stock market
continued its upward ascent to record levels. Finally, the Federal Funds' rate
was raised 25 basis points at the end of March, which contributed to the S&P
500's(1) subsequent nine percent dip that lasted until April 11.
Shortly after the Fed tightening, however, economic growth began to
substantially moderate. The rise in personal income slowed, resulting in softer
retail sales. The deceleration in growth was also evident in the industrial
sector as construction expenditures and orders for durable goods declined.
Currently, the general consensus on second quarter GDP growth is between
1 1/2% - 2 1/2%. This moderation has caused a strong rebound in bond prices as
the odds of another tightening by the Fed have been greatly reduced. The
benchmark 30-year Treasury yield decreased from just over 7.00% in the early
part of June to 6.78% by the end of June.
In the first weeks of the second quarter as companies reported their first
quarter earnings, investors realized earnings trends remained strong.
Approximately 70% of the S&P 500 companies reported better than expected
earnings. The earnings picture in combination with a slowly growing economy,
relatively low interest rates, benign inflationary pressures, high employment
and greater productivity enabled investors to bury their economic fears and ride
the market up to record highs through the end of the second quarter of 1997. The
average Lipper(2) U.S. stock fund returned in excess of 15% during the second
quarter, more than stocks have historically returned annually since 1929. The
S&P 500 returned 17.47%, the Dow Jones Industrial Average(3) 17.05% and the
NASDAQ(4) returned 18.04%.
However, not all stocks and sectors participated equally in this stellar
performance. The largest 10 stocks in the S&P 500 which constitute 19% of the
Index's market capitalization, contributed more than half of the entire market's
return during the second quarter. And when analyzing returns since the beginning
of 1995, the "nifty fifty" (fifty of the largest S&P 500 stocks measured by
market capitalization) have returned twice what their smaller capitalization
siblings have returned. This phenomena has not occurred in the past to the same
degree as today. Almost all industries were affected; the largest companies
posted the highest returns, with large gaps between the best performers and all
others. Most managers were encouraged by the behavior of the economy-- growth
without inflationary pressures--and diversified their holdings to include
smaller capitalization issues and cyclical issues. As a result, most stock
mutual funds did not outpace the S&P 500 Index for the first half of 1997.
This market euphoria extended to international funds as well, with the average
Lipper international equity fund returning 10.55% in the latest quarter.
International equity markets rebounded as they refocused on the positives of
world growth. For the most part, foreign economies, particularly in Europe, have
begun to show an increase in activity and consequently, equity markets have
begun to adjust prices to reflect better future earnings. During the second
quarter, there was an initial negative knee-jerk reaction to the uncertain
politics in the formation of the European Union and the surprise victory of a
Socialist coalition government in France. European equity markets then realized
the positive impact of the French electorate's vote for growth and lower
unemployment. In Asia, both Hong Kong and Japan performed well. In the case of
Hong Kong, the celebration of the return to a unified country, helped spur the
market to return 20.3%. Growing evidence of Japan's economic recovery coupled
with low inflation and low interest rates is starting to benefit the stock
market.
While the specter of rising interest rates in the U.S. and Japan made for stormy
international fixed income markets in the first quarter, clear skies and calm
seas dominated the second quarter. A slowing U.S. economy and continued low
inflation put the Fed on hold while in parts of Europe, official interest rates
continued to decline and inflation reached post-war lows. In the dollar block,
Australia and New Zealand bonds rallied strongly due to lower rates engineered
by their respective central banks.
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While investors continued to pour money into the stock market through mutual
funds (in excess of $50 billion in the second quarter alone), bond funds are now
gaining some attention from investors who seek diversification and some
potential protection in the midst of the stock market rise. Bond funds saw
approximately $4 billion added to their coffers during the second quarter. The
soaring gains of the stock market during the second quarter overshadowed the
average Lipper taxable bond fund return of 3.55%. If a stock market correction
were to take place, traditional bond funds could make a comeback. As was proven
in 1994, bonds can be volatile, and investors should not count on consistent
returns. Moreover, currently investors' largest inflows are towards the high
yield and emerging market debt--the riskiest sectors of the bond market. If the
economy continues its slowing pace, a longer term bond rally could result as
inflation and interest rate fears dwindle.
Several factors have influenced and will continue to influence the market for
the foreseeable future. Companies are globalizing, and competition makes it
nearly impossible to raise prices. As a result, inflation remains muted. Rather
than raising prices, companies are increasing productivity through technology
and improved utilization of resources. Lastly, baby boomers are pouring money
into the market for their retirement. The average investor has more information
now than many professional investors had twenty years ago.
There are, however, a number of risks over the coming months. A major risk would
be if unemployment falls much further, wage pressure will inevitably build, and
since wages comprise two thirds of the CPI(5), inflation could become more
pronounced, derailing the progress of the markets. Another risk is whether
mutual fund inflows will continue at their torrid pace. It is at this point
undetermined if the baby boomers who are responsible for most mutual fund
inflows, would continue their contributions in the wake of a market correction.
Ravi Akhoury
Chairman and Chief Executive Officer
MacKay-Shields Financial Corporation
(1) "Standard and Poor's 500 Composite Stock Price Index" and "S&P 500" are
registered trademarks of the Standard & Poor's Corporation. The MainStay VP
Series Fund, Inc. is neither sponsored by nor affiliated with Standard &
Poor's Corporation. The S&P 500 is an unmanaged index considered generally
representative of the U.S. stock market. Results assume the reinvestment of
all income and capital gains distributions.
(2) Lipper Analytical Services, Inc. is an independent monitor of mutual fund
performance. Its rankings are based on total returns with capital gains and
dividends reinvested. Results do not reflect any deduction of sales charges.
The Lipper Variable Insurance Products Performance Analysis Service
(L-VIPPAS) ranks the portfolios that invest in the separate accounts of
insurance companies.
(3) The Dow Jones Industrial Average is a trademark, and the property of, Dow
Jones and Co., Inc.
(4) "NASDAQ Composite Index" is an unmanaged index and is considered to be
generally representative of the U.S. small capitalization stock market.
(5) The Consumer Price Index (CPI) is a commonly used measure of the rate of
inflation.
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NEW YORK LIFE INSURANCE COMPANY
ADVISER'S REPORT
Market Overview
The first half of 1997 produced another period of attractive investment returns
for the U.S. financial markets, with particularly strong performance from the
stock market with the S&P 500(1) up 20.62%.
The year began on a positive note, but with some weakness in the debt markets as
continued economic growth led to investor fears of accelerating inflationary
pressures. During the second quarter these fears abated and interest rates
returned to levels close to where they began the year. By June 30, inflation was
running at 1.4%, down from 3.2% at year end. Corporate earnings have continued
to grow and the dollar remains strong.
The stock market has reached historically high price levels in both absolute and
relative terms. By the end of the second quarter, the valuation multiple for the
S&P 500 had increased to over 22 times earnings and the dividend yield declined
to 1.87%. The market was led by large capitalization stocks which benefited from
significant inflows into index funds.
The bond market produced returns close to the underlying interest income rate,
with little price movement from year-end to mid-year. In general, spreads have
continued to narrow on corporate and mortgage-backed securities as the credit
quality of corporate America improves and interest rate volatility stays
subdued.
Looking forward, we see continued economic growth in the U.S. and a pick-up in
growth overseas. Ultimately, we believe some modest increase in inflation is
inevitable, which, combined with growing demand for financing from overseas, can
be expected to lead to modestly higher rates.
We continue to see value in both markets. In the bond market, we see value in
corporate debt relative to mortgage-backed securities. We continue to emphasize
quality. In the stock market, we will be looking for opportunities in
mid-capitalization stocks selling at acceptable multiples and non-cyclical
sectors such as multinationals, consumer staples and healthcare.
Jean Hoysradt
Senior Vice President
in Charge of the Investment Department
New York Life Insurance Company
(1) "Standard and Poor's 500 Composite Stock Price Index" and "S&P 500" are
registered trademarks of the Standard & Poor's Corporation.
The MainStay VP Series Fund, Inc. is neither sponsored by nor affiliated
with Standard & Poor's Corporation.
The S&P 500 is an unmanaged index considered generally representative of
the U.S. stock market. Results assume the reinvestment of all income and
capital gains distributions.
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MAINSTAY VP
CASH MANAGEMENT PORTFOLIO
MARKET HIGHLIGHTS FOR THE SIX MONTHS ENDED 6/30/97
- - Strong economic growth in the first quarter led to a Federal Reserve Board
move to raise interest rates 25 basis points at the end of March.
- - Slower economic growth in the second quarter led to uncertainty over whether
the Federal Reserve Board would continue to raise interest rates.
- - In this environment, longer maturity money market securities offered higher
yields and we extended maturities to add yield.
- - As interest rates became more uniform across the maturity spectrum in the
second quarter, the advantages of having longer securities decreased and we
shortened our average days to maturity.
PORTFOLIO HIGHLIGHTS FOR THE SIX MONTHS ENDED 6/30/97
- - For the 7-day period ended 6/30/97, the MainStay VP Cash Management Portfolio
provided an effective yield of 5.33% and a current yield of 5.19%.
- - The Portfolio outperformed the average Lipper(1) money market fund for the
six-month and one-year periods and since its inception through 6/30/97.
- - The Portfolio's outperformance resulted from the managers' adjustments in days
to maturity and careful selection of yield-enhancing securities.
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
During the first half of 1997, the money market was strongly influenced by
perceptions of when and how the Federal Reserve Board (Fed) would move to adjust
interest rates. At the end of March, a preemptive 25 basis point increase in the
Federal Funds rate shifted the opportunity spectrum and raised concerns about
whether-- and if so, when--further Fed tightening might occur.
Investors with short average maturities in the first quarter and longer ones in
the second were able to pick up substantial improvements in yield. Domestic
money market securities tended to underperform U.S. dollar-denominated Yankee
issues. Other yield-enhancing securities offered attractive opportunities to
investors who could properly assess the risks and reward potential.
GIVEN THIS CONTEXT, HOW DID THE MAINSTAY VP CASH MANAGEMENT PORTFOLIO DO IN THE
FIRST HALF OF 1997?
For the 7-day period ended 6/30/97, the MainStay VP Cash Management Portfolio
provided an effective yield of 5.33% and a current yield of 5.19%. For the
six-month, one-year, and since-inception periods, the Portfolio outperformed the
average Lipper money market fund.
WHAT ACCOUNTED FOR THE PORTFOLIO'S PERFORMANCE?
In the first quarter, we kept the average maturity short because there was no
yield advantage to lengthening. When the Federal Reserve raised rates, the
Portfolio was well positioned. In the second quarter, we lengthened the
Portfolio's average maturity, which also proved to be beneficial for investors
when the Fed failed to make another move.
WHAT GAVE YOU THE CONFIDENCE TO LENGTHEN?
Amid all the speculation and conflicting reports, we looked at the overall
probability of the Fed taking further action. We saw stable unemployment, stable
inflation, and declining commodity prices. We looked at auto sales and housing
starts, which are general indicators of the rate of economic growth. On balance,
these factors gave us the confidence to extend the Portfolio's days to maturity
in the second quarter, and it proved to be the right decision.
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WHICH SECURITIES HELPED PERFORMANCE THE MOST?
In the first quarter, the Portfolio's floating-rate notes contributed
significantly to performance. In the second quarter, short fixed-coupon notes
helped us extend the Portfolio's days to maturity and enhance yield.
HOW FAR DID YOU EXTEND THE PORTFOLIO'S DAYS TO MATURITY?
Over the first six months, the Portfolio's days to maturity averaged in the low
to mid-50s. In the second quarter, we went out as far as 65 days, but we didn't
make any huge bets. We tried to stay within 10 days of what we took to be the
average in the Portfolio's universe. An important point to keep in mind is that
when we extended the days to maturity, the yield curve was relatively steep, so
we were well paid for the extensions. As the second quarter came to a close, the
yield curve flattened considerably, so we moved the Portfolio to a more neutral
position. If rates are relatively similar across the maturity spectrum, we don't
think it is worthwhile to tie up the Portfolio's money for longer periods.
HOW ELSE DID YOU SEEK TO INCREASE YIELD?
We didn't put all of the Portfolio's money in plain vanilla domestic securities.
We do a considerable amount of research to find opportunities in asset-backed
securities, callable certificates of deposit, and Yankee issues. We have a
sufficient understanding of these securities to take greater advantage of
opportunities than newcomers to these markets.
WHAT'S A CALLABLE CERTIFICATE OF DEPOSIT?
It's generally a 6- to 12-month CD that can be called every one or three months,
depending on what looks attractive to the issuer. We put these CDs into the
Portfolio at times when we think interest rates are going to be stable. But
sometimes, when you think rates are going up, they'll give you a higher rate,
and if they're called before they mature, they can become a very attractive
three-month piece of paper. We've invested in callable CDs, but have recently
decreased the Portfolio's holdings as they matured.
WHY HAVE YOU DONE THAT?
We've taken them about as far as we can. Approximately 10% of the Portfolio's
holdings were in callable CDs, but we have since reduced the Portfolio's
position to around 4%. As volatility has decreased over the reporting period,
the attractiveness--and issuance--of callable paper has also declined.
ARE THERE AREAS WHERE YOUR RESEARCH IS BENEFITING THE PORTFOLIO?
Definitely. We've added several Yankee issues to the Portfolio, which required a
good deal of research and analysis. During the first half of the year, the
Portfolio held paper from Japan and Europe. Of course, all of this paper is
denominated in U.S. dollars and rated in the top-tier of quality, so there's no
currency risk.
Given the problems Japan has had in the past, investors were skeptical, which
helped us buy at attractive prices. Europe has also offered better opportunities
than it has in the past, but it is important to research and analyze these
issues to know which names to buy.
WHAT TYPE OF RESEARCH SUPPORT DO YOU HAVE?
We have a quantitative credit research team, experts in asset-backed securities,
and our own background in managing these types of securities on a daily basis.
Together, we believe these resources help put us in a favorable position on the
education curve and help us analyze potential yield opportunities for the
Portfolio more effectively.
DOES THE SIZE OF THE PORTFOLIO OFFER ANY ADVANTAGES?
It may. The Portfolio is not like some large money market funds that need to own
huge amounts of Treasury paper just to meet prospectus requirements or daily
liquidity needs. We can pretty much invest where we believe yield opportunities
exist while maintaining quality. Additionally, we can ladder the Portfolio's
maturities across the spectrum, rather than having a lot of short paper to meet
daily liquidity concerns and a lot of longer paper to increase the Portfolio's
average days to maturity. That gives us a relatively balanced approach in
managing the Portfolio, as compared to other money markets, which we think is
good for investors.
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WHAT IS THE CREDIT QUALITY OF THE SECURITIES WITHIN THE PORTFOLIO?
A1-P1(2), which is the highest quality rating. Much of the paper the Portfolio
owns is backed by letters of credit. The Portfolio's asset-backed paper is high
quality, often overcollateralized or backed by guarantees. We're very attentive
to quality in our day-to-day management of the Portfolio.
WHAT DO YOU ANTICIPATE DURING THE REST OF THE YEAR?
We can't say exactly where interest rates will head or whether inflation will
heat up, but we're relatively optimistic. We think there will be enough earnings
improvement to keep companies growing at a modest pace, and we don't anticipate
the market trading much higher in terms of yield--at least not in the
foreseeable future. Whatever happens, we'll continue to seek as high a level of
current income as is consistent with the preservation of capital and liquidity.
Ravi Akhoury
Frank Salem
Jessica Terc
Portfolio Managers
MacKay-Shields Financial Corporation
EASING/TIGHTENING When the Federal Reserve lowers interest rates on benchmark
securities, it is said to be "easing" or making borrowing more affordable. When
it raises interest rates, it is said to be "tightening" or making borrowing more
expensive.
AVERAGE MATURITY Maturity is the termination date of an obligation or the length
of time an income security is required to pay interest. Average maturity
reflects the average of the maturities of all income securities in a portfolio.
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.
YANKEE ISSUES Dollar-denominated income securities issued in the United States
by foreign banks and corporations, usually when conditions in the U.S. are more
favorable than in other markets, including the issuer's domestic market
overseas.
LIQUIDITY The ability of a security to be readily traded or exchanged for cash.
Generally speaking, the larger an issuer's capitalization, the more liquid its
securities are likely to be. For a money market fund, liquidity may refer to the
amount of cash that must be readily available to meet day-to-day redemptions.
CREDIT QUALITY A measure of an individual issuer's ability to repay principal
and interest on its income securities--or a measure of the general credit risk
of securities in an income portfolio.
(1) Lipper Analytical Services, Inc. is an independent monitor of mutual fund
performance. Its rankings are based on total returns with capital gains and
dividends reinvested. Results do not reflect any deduction of sales charges.
The Lipper Variable Insurance Products Performance Analysis Service
(L-VIPPAS) ranks the portfolios that invest in the separate accounts of
insurance companies.
(2) Rated by Moody's Investor Service and Standard & Poor's.
Included is the reinvestment of all distributions at net asset value and the
change in share price for the stated period. Total returns 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.
An investment in the Portfolio is neither insured nor guaranteed by the U.S.
Government and there can be no assurance that the Portfolio will be able to
maintain a stable net asset value of $1.00 per share.
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MAINSTAY VP
BOND PORTFOLIO
The MainStay VP Bond Portfolio registered a return of 2.69% for the six months
ended June 30, 1997. The Portfolio's performance was in line with the average A
rated corporate bond fund in the Lipper(1) universe, which returned 2.84% over
the same period.
During the first quarter, fixed income market participants were concerned about
an overheating economy and a restrictive Federal Reserve Bank. The ten year U.S.
Treasury note rose 49 basis points to 6.90%. In the second quarter, market
sentiment shifted. Weak retail sales numbers caused the market to ponder whether
the U.S. consumer was finally taking a break. The market also focused on an
improving budget deficit and benign inflation statistics. The price of a ten
year U.S. Treasury note rallied as its yield dropped 41 basis points to 6.49%.
Consistent with our constructive outlook for the economy, during the first six
months of 1997, we shifted assets from the government to the corporate and
mortgage-backed sectors, enhancing the Portfolio's income, and adding some
credit risk. We accomplished this while maintaining our long-term conservative
approach to managing the Portfolio.
Looking forward, we will watch for signs of economic growth picking up after a
second quarter lull. If this occurs, the Federal Reserve could resume
tightening. We will adjust the Portfolio accordingly, seeking to outperform the
market.
Albert R. Corapi, Jr.
Celia M. Holtzberg
Portfolio Managers
New York Life Insurance Company
(1) Lipper Analytical Services, Inc. is an independent monitor of mutual fund
performance. Its rankings are based on total returns with capital gains and
dividends reinvested. Results do not reflect any deduction of sales charges.
The Lipper Variable Insurance Products Performance Analysis Service
(L-VIPPAS) ranks the portfolios that invest in the separate accounts of
insurance companies.
Included is the reinvestment of all distributions at net asset value and the
change in share price for the stated period. Total returns 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.
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MAINSTAY VP
GROWTH EQUITY PORTFOLIO
The MainStay VP Growth Equity Portfolio reported a strong return of 14.16% for
the six month period ended June 30, 1997. The Portfolio's results in the first
half of 1997 were favorable versus the Lipper(1) Growth Fund Average return of
13.57%; however, the Portfolio trailed the S&P 500(2) return of 20.62%. The
Portfolio's outperformance of its peer group was a result of the strong
performance of its health care holdings, particularly its pharmaceutical stocks.
The solid performance of technology stocks also contributed to the Portfolio's
positive first half results. The Portfolio's underperformance relative to the
S&P 500 was due to the superior performance of a narrow group of larger
capitalization issues within the index.
The equity market reported its fourth strongest first half gain in the past 50
years. Equity prices rose faster than most investors expected, largely owing to
positive surprises regarding inflation, which was lower than forecast, and
corporate profits, which exceeded consensus expectations. In fact, the equity
market shrugged off the Federal Reserve tightening in March as more of a
preventive action against future inflation. To add further fuel to the market,
liquidity remained positive throughout the first half of the year, given the
structural demand for stocks via strong equity mutual fund inflows and record
levels of mergers and acquisitions.
As we approach the second half of 1997, we remain positive on the equity market,
given our forecast for moderate economic growth and low price inflation, which
should continue to have a favorable impact on long-term interest rates. We
expect the equity market to extend its upward trend as inflation remains under
control and price/earnings ratios expand. Further, given the performance of the
equity market for the last few years and underlying favorable economic
conditions in place, we expect the supply/demand environment for stocks to
remain strong. Thus, we continue to focus the Portfolio toward more stable
larger capitalization multinational stocks which typically generate consistent
earnings growth. In particular, we are adding to positions in the less cyclical
consumer staple and health care sectors.
Our investment strategy continues to focus on identifying and investing in
quality growth companies which sell at reasonable valuations. We remain
disciplined in our stock selection process, weighing both the long-term and
short-term probabilities for price appreciation of each stock in the Portfolio.
James Agostisi
Patricia Rossi
Portfolio Managers
New York Life Insurance Company
(1) Lipper Analytical Services, Inc. is an independent monitor of mutual fund
performance. Its rankings are based on total returns with capital gains and
dividends reinvested. Results do not reflect any deduction of sales charges.
The Lipper Variable Insurance Products Performance Analysis Service
(L-VIPPAS) ranks the portfolios that invest in the separate accounts of
insurance companies.
(2) "Standard and Poor's 500 Composite Stock Price Index" and "S&P 500" are
registered trademarks of the Standard & Poor's Corporation. The MainStay VP
Series Fund, Inc. is neither sponsored by nor affiliated with Standard &
Poor's Corporation. The S&P 500 is an unmanaged index considered generally
representative of the U.S. stock market. Results assume the reinvestment of
all income and capital gains distributions.
Included is the reinvestment of all distributions at net asset value and the
change in share price for the stated period. Total returns 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.
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STATEMENT OF ASSETS AND LIABILITIES
As of June 30, 1997
(Unaudited)
<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 (Identified
Cost: $83,922,792; $137,736,396;
$34,645,762; $57,391,541;
$5,757,892; $8,510,692,
respectively)....................... $108,860,559 $189,208,702 $ 34,715,984 $ 59,932,395 $ 5,757,845 $ 8,510,430
LIABILITIES:
Liability for mortality and expense
risk charges........................ 341,510 835,926 110,410 268,706 18,832 38,287
------------ ------------ ------------ ------------ ------------ ------------
Total equity...................... $108,519,049 $188,372,776 $ 34,605,574 $ 59,663,689 $ 5,739,013 $ 8,472,143
============ ============ ============ ============ ============ ============
TOTAL EQUITY REPRESENTED BY:
Equity of Policyowners:
Variable accumulation units
outstanding: 2,371,055; 4,403,296;
1,183,333; 2,182,695; 292,412;
461,825, respectively............. $108,519,049 $188,372,776 $ 34,605,574 $ 59,663,689 $ 5,739,013 $ 8,472,143
============ ============ ============ ============ ============ ============
Variable accumulation unit value.... $ 45.77 $ 42.78 $ 29.24 $ 27.33 $ 19.63 $ 18.34
============ ============ ============ ============ ============ ============
</TABLE>
STATEMENT OF OPERATIONS
For the six months ended June 30, 1997
(Unaudited)
<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....................... $ -- $ -- $ -- $ -- $ 158,893 $ 223,104
Mortality and expense risk charges.... (639,272) (1,567,143) (220,319) (537,963) (39,183) (76,908)
------------ ------------ ------------ ------------ ------------ ------------
Net investment income (loss)...... (639,272) (1,567,143) (220,319) (537,963) 119,710 146,196
------------ ------------ ------------ ------------ ------------ ------------
REALIZED AND UNREALIZED
GAIN (LOSS):
Proceeds from sale of investments..... 6,339,244 12,183,914 3,706,039 6,987,258 1,739,810 1,736,595
Cost of investments sold.............. (4,438,985) (8,505,520) (3,732,843) (6,621,666) (1,739,905) (1,736,717)
------------ ------------ ------------ ------------ ------------ ------------
Net realized gain (loss)
on investments.................. 1,900,259 3,678,394 (26,804) 365,592 (95) (122)
Realized gain distribution received... 25,333 44,466 -- -- -- --
Change in unrealized appreciation
(depreciation) on investments....... 11,818,074 20,372,580 948,030 1,240,268 134 175
------------ ------------ ------------ ------------ ------------ ------------
Net gain on investments........... 13,743,666 24,095,440 921,226 1,605,860 39 53
------------ ------------ ------------ ------------ ------------ ------------
Decrease attributable to funds of
New York Life Insurance and Annuity
Corporation retained by Separate
Account............................. (19,705) (48,497) (394) (953) (140) (392)
------------ ------------ ------------ ------------ ------------ ------------
Net increase in total equity
resulting from operations....... $ 13,084,689 $ 22,479,800 $ 700,513 $ 1,066,944 $ 119,609 $ 145,857
============ ============ ============ ============ ============ ============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
10
<PAGE> 12
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
MFA SEPARATE ACCOUNT I
TAX-QUALIFIED POLICIES
(THIS PAGE INTENTIONALLY LEFT BLANK)
11
<PAGE> 13
STATEMENT OF CHANGES IN TOTAL EQUITY
For the six months ended June 30, 1997 (Unaudited)
and the year ended December 31, 1996
<TABLE>
<CAPTION>
COMMON STOCK
INVESTMENT DIVISIONS
-------------------------------------------------------------------
SINGLE PREMIUM FLEXIBLE PREMIUM
POLICIES POLICIES
------------------------------ -------------------------------
1997 1996 1997 1996
===================================================================
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN TOTAL EQUITY:
Operations:
Net investment income (loss).................... $ (639,272) $ (320,492) $ (1,567,143) $ (1,414,088)
Net realized gain (loss) on investments......... 1,900,259 3,173,694 3,678,394 5,239,879
Realized gain distribution received............. 25,333 12,396,168 44,466 21,908,560
Change in unrealized appreciation (depreciation)
on investments................................ 11,818,074 4,212,928 20,372,580 8,090,871
Decrease attributable to funds of New York
Life Insurance and Annuity Corporation
retained by
Separate Account.............................. (19,705) (29,535) (48,497) (73,374)
------------ ------------ ------------ ------------
Net increase (decrease) in total equity
resulting
from operations............................. 13,084,689 19,432,763 22,479,800 33,751,848
------------ ------------ ------------ ------------
Contributions and withdrawals:
Policyowners' premium payments.................. 483,833 892,545 2,824,622 5,245,235
Policyowners' surrenders........................ (5,451,021) (10,349,553) (13,299,751) (19,870,464)
Policyowners' annuity and death benefits........ (590,957) (756,854) (922,718) (1,053,485)
Net transfers from (to) Fixed Account........... 337,632 1,306,116 358,134 768,815
Transfers between Investment Divisions.......... 386,663 1,984,443 744,477 1,256,201
------------ ------------ ------------ ------------
Net contributions and withdrawals............. (4,833,850) (6,923,303) (10,295,236) (13,653,698)
------------ ------------ ------------ ------------
Increase (decrease) in total equity......... 8,250,839 12,509,460 12,184,564 20,098,150
TOTAL EQUITY:
Beginning of period............................. 100,268,210 87,758,750 176,188,212 156,090,062
------------ ------------ ------------ ------------
End of period................................... $108,519,049 $100,268,210 $188,372,776 $176,188,212
============ ============ ============ ============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
12
<PAGE> 14
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
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
--------------------------- --------------------------- --------------------------- ----------------------------
1997 1996 1997 1996 1997 1996 1997 1996
============================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
$ (220,319) $ 1,870,069 $ (537,963) $ 2,964,471 $ 119,710 $ 281,440 $ 146,196 $ 318,455
(26,804) 792,321 365,592 (103,187) (95) (241) (122) (213)
-- -- -- -- -- -- -- --
948,030 (2,518,451) 1,240,268 (2,886,635) 134 205 175 172
(394) (1,918) (953) (4,673) (140) (292) (392) (837)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
700,513 142,021 1,066,944 (30,024) 119,609 281,112 145,857 317,577
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
123,948 418,803 1,114,072 2,261,015 29,358 41,170 154,505 370,550
(2,479,744) (6,143,986) (6,032,954) (9,830,346) (1,283,429) (1,160,675) (1,375,232) (2,213,470)
(168,074) (515,470) (298,559) (494,572) (12,338) (49,194) (58,514) (82,067)
(60,393) (94,904) (40,796) (73,881) (14,933) (45,276) (23,916) (158,369)
(537,467) (1,426,456) (1,117,209) (1,137,466) 153,628 (558,653) 372,732 (118,735)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
(3,121,730) (7,762,013) (6,375,446) (9,275,250) (1,127,714) (1,772,628) (930,425) (2,202,091)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
(2,421,217) (7,619,992) (5,308,502) (9,305,274) (1,008,105) (1,491,516) (784,568) (1,884,514)
37,026,791 44,646,783 64,972,191 74,277,465 6,747,118 8,238,634 9,256,711 11,141,225
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
$34,605,574 $37,026,791 $59,663,689 $64,972,191 $ 5,739,013 $ 6,747,118 $ 8,472,143 $ 9,256,711
=========== =========== =========== =========== =========== =========== =========== ===========
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
13
<PAGE> 15
STATEMENT OF ASSETS AND LIABILITIES
As of June 30, 1997
(Unaudited)
<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
(Identified Cost: $97,052,315;
$12,572,128; $48,993,114;
$5,814,984; $7,200,768; $844,991,
respectively)....................... $124,769,548 $ 16,586,685 $ 48,813,282 $ 5,996,161 $ 7,200,746 $ 844,985
LIABILITIES:
Liability for mortality and
expense risk charges................ 389,164 72,229 155,300 26,947 23,749 3,775
------------ ------------ ------------ ------------ ------------ ------------
Total equity...................... $124,380,384 $ 16,514,456 $ 48,657,982 $ 5,969,214 $ 7,176,997 $ 841,210
============ ============ ============ ============ ============ ============
TOTAL EQUITY REPRESENTED BY:
Equity of Policyowners:
Variable accumulation units
outstanding: 2,717,608; 386,024;
1,657,581; 218,034; 365,678;
45,855, respectively.............. $124,380,384 $ 16,514,456 $ 48,657,982 $ 5,969,214 $ 7,176,997 $ 841,210
============ ============ ============ ============ ============ ============
Variable accumulation
unit value........................ $ 45.77 $ 42.78 $ 29.35 $ 27.38 $ 19.63 $ 18.34
============ ============ ============ ============ ============ ============
</TABLE>
STATEMENT OF OPERATIONS
For the six months ended June 30, 1997
(Unaudited)
<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....................... $ -- $ -- $ -- $ -- $ 191,517 $ 22,168
Mortality and expense risk charges.... (728,406) (134,447) (310,691) (53,586) (47,204) (7,642)
------------ ------------ ------------ ------------ ------------ ------------
Net investment income (loss)...... (728,406) (134,447) (310,691) (53,586) 144,313 14,526
------------ ------------ ------------ ------------ ------------ ------------
REALIZED AND UNREALIZED
GAIN (LOSS):
Proceeds from sale of investments..... 7,914,720 779,754 5,245,385 618,643 2,222,056 214,122
Cost of investments sold.............. (6,207,803) (587,621) (5,212,558) (587,809) (2,222,088) (214,136)
------------ ------------ ------------ ------------ ------------ ------------
Net realized gain (loss)
on investments.................. 1,706,917 192,133 32,827 30,834 (32) (14)
Realized gain distribution received... 28,797 3,826 -- -- -- --
Change in unrealized appreciation
(depreciation) on investments....... 13,958,605 1,881,525 1,259,958 129,775 78 20
------------ ------------ ------------ ------------ ------------ ------------
Net gain on investments........... 15,694,319 2,077,484 1,292,785 160,609 46 6
------------ ------------ ------------ ------------ ------------ ------------
Decrease attributable to funds of
New York Life Insurance and Annuity
Corporation retained by Separate
Account............................. (22,388) (4,143) (547) (102) (145) (40)
------------ ------------ ------------ ------------ ------------ ------------
Net increase in total equity
resulting from operations....... $ 14,943,525 $ 1,938,894 $ 981,547 $ 106,921 $ 144,214 $ 14,492
============ ============ ============ ============ ============ ============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
14
<PAGE> 16
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
MFA SEPARATE ACCOUNT II
NON-QUALIFIED POLICIES
(THIS PAGE INTENTIONALLY LEFT BLANK)
15
<PAGE> 17
STATEMENT OF CHANGES IN TOTAL EQUITY
For the six months ended June 30, 1997 (Unaudited)
and the year ended December 31, 1996
<TABLE>
<CAPTION>
COMMON STOCK
INVESTMENT DIVISIONS
----------------------------------------------------------------
SINGLE PREMIUM FLEXIBLE PREMIUM
POLICIES POLICIES
----------------------------- ------------------------------
1997 1996 1997 1996
================================================================
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN TOTAL EQUITY:
Operations:
Net investment income (loss)........................ $ (728,406) $ (341,227) $ (134,447) $ (119,592)
Net realized gain (loss) on investments............. 1,706,917 2,863,179 192,133 730,753
Realized gain distribution received................. 28,797 14,237,172 3,826 1,855,445
Change in unrealized appreciation (depreciation)
on investments.................................... 13,958,605 5,082,531 1,881,525 378,417
Decrease attributable to funds of New York
Life Insurance and Annuity Corporation retained by
Separate Account.................................. (22,388) (33,143) (4,143) (6,179)
------------ ------------ ------------ ------------
Net increase (decrease) in total equity resulting
from operations................................. 14,943,525 21,808,512 1,938,894 2,838,844
------------ ------------ ------------ ------------
Contributions and withdrawals:
Policyowners' premium payments...................... 361,177 395,084 147,315 334,233
Policyowners' surrenders............................ (5,160,456) (7,029,217) (619,875) (1,361,255)
Policyowners' annuity and death benefits............ (1,051,595) (1,776,084) (59,750) (361,605)
Net transfers from (to) Fixed Account............... 412,022 1,824,875 16,756 53,354
Transfers between Investment Divisions.............. 102,066 2,267,603 154,565 194,671
------------ ------------ ------------ ------------
Net contributions and withdrawals................. (5,336,786) (4,317,739) (360,989) (1,140,602)
------------ ------------ ------------ ------------
Increase (decrease) in total equity............. 9,606,739 17,490,773 1,577,905 1,698,242
TOTAL EQUITY:
Beginning of period................................... 114,773,645 97,282,872 14,936,551 13,238,309
------------ ------------ ------------ ------------
End of period......................................... $124,380,384 $114,773,645 $ 16,514,456 $ 14,936,551
============ ============ ============ ============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
16
<PAGE> 18
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
MFA SEPARATE ACCOUNT II
NON-QUALIFIED POLICIES
<TABLE>
<CAPTION>
BOND MONEY MARKET
INVESTMENT DIVISIONS INVESTMENT DIVISIONS
--------------------------------------------------------------- ------------------------------
SINGLE PREMIUM FLEXIBLE PREMIUM SINGLE PREMIUM
POLICIES POLICIES POLICIES
----------------------------- ----------------------------- ------------------------------
1997 1996 1997 1996 1997 1996
==================================================================================================
<S> <C> <C> <C> <C> <C>
$ (310,691) $ 2,615,387 $ (53,586) $ 290,551 $ 144,313 $ 341,914
32,827 885,700 30,834 101,932 (32) (218)
-- -- -- -- -- --
1,259,958 (3,278,935) 129,775 (396,619) 78 195
(547) (2,743) (102) (460) (145) (399)
------------ ------------ ------------ ------------ ------------ ------------
981,547 219,409 106,921 (4,596) 144,214 341,492
------------ ------------ ------------ ------------ ------------ ------------
87,791 293,618 59,290 162,387 10,352 144,933
(3,452,993) (6,156,264) (467,230) (801,419) (727,123) (5,114,726)
(693,908) (1,864,016) (42,343) (203,473) (31,900) (145,938)
(36,828) 224,591 (8,532) (15,179) 36,629 (84,802)
(270,316) (2,803,497) (75,219) (147,893) 176,898 566,995
------------ ------------ ------------ ------------ ------------ ------------
(4,366,254) (10,305,568) (534,034) (1,005,577) (535,144) (4,633,538)
------------ ------------ ------------ ------------ ------------ ------------
(3,384,707) (10,086,159) (427,113) (1,010,173) (390,930) (4,292,046)
52,042,689 62,128,848 6,396,327 7,406,500 7,567,927 11,859,973
------------ ------------ ------------ ------------ ------------ ------------
$ 48,657,982 $ 52,042,689 $ 5,969,214 $ 6,396,327 $ 7,176,997 $ 7,567,927
============ ============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
MONEY MARKET
INVESTMENT DIVISIONS
------------------------------
FLEXIBLE PREMIUM
POLICIES
------------------------------
1997 1996
==============================
<S> <C>
$ 14,526 $ 34,405
(14) (37)
-- --
20 33
(40) (94)
------------ ------------
14,492 34,307
------------ ------------
13,190 45,316
(45,577) (223,883)
(957) (29,102)
2 (3,919)
(79,346) (46,777)
------------ ------------
(112,688) (258,365)
------------ ------------
(98,196) (224,058)
939,406 1,163,464
------------ ------------
$ 841,210 $ 939,406
============ ============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
17
<PAGE> 19
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1-- Organization and Accounting Policies:
- --------------------------------------------------------------------------------
New York Life Insurance and Annuity Corporation MFA Separate Account I
("Separate Account I") and New York Life Insurance and Annuity Corporation 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. (formerly, "New York Life MFA 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.
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.
Annuity Reserves--The reserves are computed for currently payable contracts in
accordance with rates taken from approved valuation mortality tables. The
assumed interest rate is 4%, unless issued in Florida or Texas where the rate is
3 1/2%. Separate Account II Common Stock Investment Division for Single Premium
Policies had variable annuity unit values as of June 30, 1997 and December 31,
1996 of $2.41 and $2.04, respectively.
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.
18
<PAGE> 20
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
MFA SEPARATE ACCOUNTS I AND II
TAX-QUALIFIED AND NON-QUALIFIED POLICIES
NOTE 2--Investments (in 000's):
- --------------------------------------------------------------------------------
At June 30, 1997, 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........................... 5,119 8,898 2,636 4,550 5,758 8,511
Identified cost*........................... $83,923 $137,736 $34,646 $57,392 $ 5,758 $ 8,511
SEPARATE ACCOUNT II (NON-QUALIFIED
POLICIES)
Number of shares........................... 5,868 780 3,706 455 7,201 845
Identified cost*........................... $97,052 $12,572 $48,993 $ 5,815 $ 7,201 $ 845
</TABLE>
* The cost stated also represents the aggregate cost for Federal income tax
purposes.
Transactions in MainStay VP Series Fund, Inc. shares for the six months ended
June 30, 1997, 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.................................. 888 350 $ 352 $ 45 $ 728 $ 948
Proceeds from sales........................ $ 6,339 $12,184 3,706 6,987 1,740 1,737
SEPARATE ACCOUNT II (NON-QUALIFIED
POLICIES)
Purchases.................................. $ 1,875 $ 288 $ 552 $ 29 $ 1,831 $ 115
Proceeds from sales........................ 7,915 780 5,245 619 2,222 214
</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.
19
<PAGE> 21
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
NOTE 5-- Cost to Policyowners (in 000's):
- --------------------------------------------------------------------------------
At June 30, 1997, the cost to Policyowners for accumulation units outstanding,
with adjustments for net investment income, market appreciation (depreciation)
and deduction for expenses is as follows:
<TABLE>
<CAPTION>
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)
Cost to Policyowners (net of withdrawals).... $ 25,026 $ 36,259 $ 8,094 $ 19,209 $ 876 $ 2,799
Accumulated net investment income (loss)..... 2,315 (1,005) 24,785 37,502 4,892 5,724
Accumulated net realized gain (loss)
on investments and realized gain
distributions received..................... 56,461 102,208 1,811 721 (1) (1)
Unrealized appreciation (depreciation)
on investments............................. 24,938 51,472 70 2,541 -- --
Decrease attributable to funds of New York
Life Insurance and Annuity Corporation
retained by Separate Account............... (221) (561) (154) (309) (28) (50)
-------- -------- -------- -------- ------- -------
Net amount applicable to Policyowners........ $108,519 $188,373 $ 34,606 $ 59,664 $ 5,739 $ 8,472
======== ======== ======== ======== ======= =======
SEPARATE ACCOUNT II (NON-QUALIFIED POLICIES)
Cost to Policyowners (net of withdrawals).... $ 33,980 $ 3,410 $ 11,529 $ 1,171 $ 1,413 $ 127
Accumulated net investment income (loss)..... 2,318 (64) 35,018 4,336 5,801 723
Accumulated net realized gain (loss)
on investments and realized gain
distributions received..................... 60,607 9,201 2,551 325 (1) --
Unrealized appreciation (depreciation)
on investments............................. 27,717 4,015 (180) 181 -- --
Decrease attributable to funds of New York
Life Insurance and Annuity Corporation
retained by Separate Account............... (242) (48) (260) (44) (36) (9)
-------- -------- -------- -------- ------- -------
Net amount applicable to Policyowners........ $124,380 $ 16,514 $ 48,658 $ 5,969 $ 7,177 $ 841
======== ======== ======== ======== ======= =======
</TABLE>
20
<PAGE> 22
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
MFA SEPARATE ACCOUNTS I AND II
TAX-QUALIFIED AND NON-QUALIFIED POLICIES
(THIS PAGE INTENTIONALLY LEFT BLANK)
21
<PAGE> 23
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
NOTE 6--Unit Transactions (in 000's):
- --------------------------------------------------------------------------------
Transactions in accumulation units were as follows:
<TABLE>
<CAPTION>
COMMON STOCK INVESTMENT DIVISIONS
----------------------------------------------------------
SINGLE PREMIUM FLEXIBLE PREMIUM
POLICIES POLICIES
-------------------------- -------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
JUNE 30, DEC. 31, JUNE 30, DEC. 31,
1997 1996 1997 1996
==========================================================
<S> <C> <C> <C> <C>
SEPARATE ACCOUNT I (TAX-QUALIFIED POLICIES)
Units issued on premium payments........................ 12 25 72 154
Units redeemed on surrenders............................ (141) (298) (354) (599)
Units redeemed on annuity and death benefits............ (3) (4) (4) (6)
Units issued (redeemed) on net transfers from (to)
Fixed Account......................................... 8 36 9 22
Units issued (redeemed) on transfers between
Investment Divisions.................................. 9 52 19 38
----- ----- ----- -----
Net decrease........................................ (115) (189) (258) (391)
Units outstanding, beginning of year.................... 2,486 2,675 4,661 5,052
----- ----- ----- -----
Units outstanding, end of year.......................... 2,371 2,486 4,403 4,661
===== ===== ===== =====
SEPARATE ACCOUNT II (NON-QUALIFIED POLICIES)
Units issued on premium payments........................ 10 13 4 10
Units redeemed on surrenders............................ (137) (219) (17) (48)
Units redeemed on annuity and death benefits............ (11) (22) -- (2)
Units issued (redeemed) on net transfers from (to)
Fixed Account......................................... 10 51 -- 2
Units issued (redeemed) on transfers between
Investment Divisions.................................. 2 56 4 5
----- ----- ----- -----
Net decrease........................................ (126) (121) (9) (33)
Units outstanding, beginning of period.................. 2,844 2,965 395 428
----- ----- ----- -----
Units outstanding, end of period........................ 2,718 2,844 386 395
===== ===== ===== =====
</TABLE>
22
<PAGE> 24
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
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
----------------------- ----------------------- ----------------------- -----------------------
SIX MONTHS YEAR SIX MONTHS YEAR SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
JUNE 30, DEC. 31, JUNE 30, DEC. 31, JUNE 30, DEC. 31, JUNE 30, DEC. 31,
1997 1996 1997 1996 1997 1996 1997 1996
===========================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
4 15 41 86 2 2 9 21
(88) (234) (232) (391) (67) (63) (76) (129)
(4) (4) (2) (3) -- (2) (3) --
(2) (3) (2) (3) (1) (2) (1) (9)
(19) (52) (42) (43) 8 (29) 20 (7)
----- ----- ----- ----- ----- ----- ----- -----
(109) (278) (237) (354) (58) (94) (51) (124)
1,292 1,570 2,420 2,774 350 444 513 637
----- ----- ----- ----- ----- ----- ----- -----
1,183 1,292 2,183 2,420 292 350 462 513
===== ===== ===== ===== ===== ===== ===== =====
3 7 2 6 1 8 1 3
(129) (257) (19) (36) (37) (277) (3) (14)
(15) (29) -- (2) (2) (2) -- (1)
(1) 8 -- -- 2 (5) -- --
(9) (97) (3) (6) 9 30 (4) (3)
----- ----- ----- ----- ----- ----- ----- -----
(151) (368) (20) (38) (27) (246) (6) (15)
1,809 2,177 238 276 393 639 52 67
----- ----- ----- ----- ----- ----- ----- -----
1,658 1,809 218 238 366 393 46 52
===== ===== ===== ===== ===== ===== ===== =====
</TABLE>
23
<PAGE> 25
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
NOTE 7--Selected Per Unit Data+:
- --------------------------------------------------------------------------------
The following table presents selected per accumulation unit income and capital
changes (for an accumulation unit outstanding throughout each period) with
respect to each Investment Division of Separate Account I and Separate Account
II:
<TABLE>
<CAPTION>
SINGLE PREMIUM POLICIES
--------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ------------------------------------------------------
COMMON STOCK INVESTMENT DIVISIONS 1997 1996 1995 1994 1993 1992
====================================================================
<S> <C> <C> <C> <C> <C> <C>
SEPARATE ACCOUNT I (TAX-QUALIFIED POLICIES)
Unit value, beginning of period..................... $40.34 $32.81 $25.72 $25.73 $22.90 $20.61
Net investment income (loss)........................ (0.26) (0.12) -- 0.03 0.06 0.05
Net realized and unrealized gains (losses) on
security transactions and realized capital gain
distributions received (includes the effect of
capital share transactions)....................... 5.69 7.65 7.09 (0.04) 2.77 2.24
------ ------ ------ ------ ------ ------
Unit value, end of period........................... $45.77 $40.34 $32.81 $25.72 $25.73 $22.90
====== ====== ====== ====== ====== ======
SEPARATE ACCOUNT II (NON-QUALIFIED POLICIES)
Unit value, beginning of period..................... $40.34 $32.81 $25.72 $25.73 $22.90 $20.61
Net investment income (loss)........................ (0.26) (0.12) -- 0.03 0.07 0.06
Net realized and unrealized gains (losses) on
security transactions and realized capital gain
distributions received (includes the effect of
capital share transactions)....................... 5.69 7.65 7.09 (0.04) 2.76 2.23
------ ------ ------ ------ ------ ------
Unit value, end of period........................... $45.77 $40.34 $32.81 $25.72 $25.73 $22.90
====== ====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
FLEXIBLE PREMIUM POLICIES
---------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, -------------------------------------------------------
1997 1996 1995 1994 1993 1992
=====================================================================
<S> <C> <C> <C> <C> <C> <C>
SEPARATE ACCOUNT I (TAX-QUALIFIED POLICIES)
Unit value, beginning of period..................... $37.80 $30.90 $24.34 $24.48 $21.90 $19.80
Net investment loss................................. (0.34) (0.29) (0.14) (0.09) (0.06) (0.08)
Net realized and unrealized gains (losses) on
security transactions and realized capital gain
distributions received (includes the effect of
capital share transactions)....................... 5.32 7.19 6.70 (0.05) 2.64 2.18
------ ------ ------ ------ ------ ------
Unit value, end of period........................... $42.78 $37.80 $30.90 $24.34 $24.48 $21.90
====== ====== ====== ====== ====== ======
SEPARATE ACCOUNT II (NON-QUALIFIED POLICIES)
Unit value, beginning of period..................... $37.80 $30.90 $24.34 $24.48 $21.90 $19.80
Net investment loss................................. (0.34) (0.29) (0.14) (0.09) (0.06) (0.08)
Net realized and unrealized gains (losses) on
security transactions and realized capital gain
distributions received (includes the effect of
capital share transactions)....................... 5.32 7.19 6.70 (0.05) 2.64 2.18
------ ------ ------ ------ ------ ------
Unit value, end of period........................... $42.78 $37.80 $30.90 $24.34 $24.48 $21.90
====== ====== ====== ====== ====== ======
</TABLE>
+ Per unit data based on average monthly units outstanding during each period.
24
<PAGE> 26
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
MFA SEPARATE ACCOUNTS I AND II
TAX-QUALIFIED AND NON-QUALIFIED POLICIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SINGLE PREMIUM POLICIES
--------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ------------------------------------------------------
BOND INVESTMENT DIVISIONS 1997 1996 1995 1994 1993 1992
====================================================================
<S> <C> <C> <C> <C> <C> <C>
SEPARATE ACCOUNT I (TAX-QUALIFIED POLICIES)
Unit value, beginning of period..................... $28.66 $28.44 $24.34 $25.51 $23.19 $21.69
Net investment income (loss)........................ (0.18) 1.29 1.30 1.22 1.39 1.40
Net realized and unrealized gains (losses) on
security transactions and realized capital gain
distributions received (includes the effect of
capital share transactions)....................... 0.76 (1.07) 2.80 (2.39) 0.93 0.10
------ ------ ------ ------ ------ ------
Unit value, end of period........................... $29.24 $28.66 $28.44 $24.34 $25.51 $23.19
====== ====== ====== ====== ====== ======
SEPARATE ACCOUNT II (NON-QUALIFIED POLICIES)
Unit value, beginning of period..................... $28.76 $28.54 $24.43 $25.60 $23.28 $21.77
Net investment income (loss)........................ (0.18) 1.30 1.31 1.19 1.44 1.43
Net realized and unrealized gains (losses) on
security transactions and realized capital gain
distributions received (includes the effect of
capital share transactions)....................... 0.77 (1.08) 2.80 (2.36) 0.88 0.08
------ ------ ------ ------ ------ ------
Unit value, end of period........................... $29.35 $28.76 $28.54 $24.43 $25.60 $23.28
====== ====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
FLEXIBLE PREMIUM POLICIES
--------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ------------------------------------------------------
1997 1996 1995 1994 1993 1992
====================================================================
<S> <C> <C> <C> <C> <C> <C>
SEPARATE ACCOUNT I (TAX-QUALIFIED POLICIES)
Unit value, beginning of period..................... $26.85 $26.78 $23.03 $24.26 $22.17 $20.84
Net investment income (loss)........................ (0.23) 1.14 1.16 1.11 1.20 1.10
Net realized and unrealized gains (losses) on
security transactions and realized capital gain
distributions received (includes the effect of
capital share transactions)....................... 0.71 (1.07) 2.59 (2.34) 0.89 0.23
------ ------ ------ ------ ------ ------
Unit value, end of period........................... $27.33 $26.85 $26.78 $23.03 $24.26 $22.17
====== ====== ====== ====== ====== ======
SEPARATE ACCOUNT II (NON-QUALIFIED POLICIES)
Unit value, beginning of period..................... $26.89 $26.82 $23.07 $24.30 $22.20 $20.87
Net investment income (loss)........................ (0.23) 1.13 1.15 1.10 1.13 1.09
Net realized and unrealized gains (losses) on
security transactions and realized capital gain
distributions received (includes the effect of
capital share transactions)....................... 0.72 (1.06) 2.60 (2.33) 0.97 0.24
------ ------ ------ ------ ------ ------
Unit value, end of period........................... $27.38 $26.89 $26.82 $23.07 $24.30 $22.20
====== ====== ====== ====== ====== ======
</TABLE>
+ Per unit data based on average monthly units outstanding during each period.
25
<PAGE> 27
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
NOTE 7--Selected Per Unit Data+ (Continued):
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SINGLE PREMIUM POLICIES
--------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ------------------------------------------------------
MONEY MARKET INVESTMENT DIVISIONS 1997 1996 1995 1994 1993 1992
====================================================================
<S> <C> <C> <C> <C> <C> <C>
SEPARATE ACCOUNT I (TAX-QUALIFIED POLICIES)
Unit value, beginning of period..................... $19.26 $18.57 $17.81 $17.36 $17.07 $16.70
Net investment income............................... 0.37 0.69 0.76 0.45 0.29 0.37
------ ------ ------ ------ ------ ------
Unit value, end of period........................... $19.63 $19.26 $18.57 $17.81 $17.36 $17.07
====== ====== ====== ====== ====== ======
SEPARATE ACCOUNT II (NON-QUALIFIED POLICIES)
Unit value, beginning of period..................... $19.26 $18.57 $17.81 $17.36 $17.07 $16.70
Net investment income............................... 0.37 0.69 0.76 0.45 0.29 0.37
------ ------ ------ ------ ------ ------
Unit value, end of period........................... $19.63 $19.26 $18.57 $17.81 $17.36 $17.07
====== ====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
FLEXIBLE PREMIUM POLICIES
--------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ------------------------------------------------------
1997 1996 1995 1994 1993 1992
====================================================================
<S> <C> <C> <C> <C> <C> <C>
SEPARATE ACCOUNT I (TAX-QUALIFIED POLICIES)
Unit value, beginning of period..................... $18.05 $17.48 $16.85 $16.51 $16.32 $16.04
Net investment income............................... 0.29 0.57 0.63 0.34 0.19 0.28
------ ------ ------ ------ ------ ------
Unit value, end of period........................... $18.34 $18.05 $17.48 $16.85 $16.51 $16.32
====== ====== ====== ====== ====== ======
SEPARATE ACCOUNT II (NON-QUALIFIED POLICIES)
Unit value, beginning of period..................... $18.05 $17.48 $16.85 $16.51 $16.32 $16.04
Net investment income............................... 0.29 0.57 0.63 0.34 0.19 0.28
------ ------ ------ ------ ------ ------
Unit value, end of period........................... $18.34 $18.05 $17.48 $16.85 $16.51 $16.32
====== ====== ====== ====== ====== ======
</TABLE>
+ Per unit data based on average monthly units outstanding during each period.
26
<PAGE> 28
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
MFA SEPARATE ACCOUNTS I AND II
TAX-QUALIFIED AND NON-QUALIFIED POLICIES
(THIS PAGE INTENTIONALLY LEFT BLANK)
27
<PAGE> 29
MAINSTAY VP SERIES FUND, INC.
- --------------------------------------------------------------------------------
To Policyowners:
The assets of NYLIAC Variable Annuity Separate Account I, NYLIAC Variable
Annuity Separate Account II, NYLIAC Variable Annuity Separate Account III
(formerly NYLIAC LifeStages(SM) Separate Account), NYLIAC Variable Universal
Life Separate Account I, New York Life Insurance and Annuity Corporation MFA
Separate Account I, New York Life Insurance and Annuity Corporation MFA Separate
Account II and New York Life Insurance and Annuity Corporation VLI Separate
Account are invested in shares of MainStay VP Series Fund, Inc. (formerly New
York Life MFA Series Fund, Inc.). In addition, the assets of NYLIAC Variable
Annuity Separate Account I, NYLIAC Variable Annuity Separate Account II, NYLIAC
Variable Annuity Separate Account III and NYLIAC Variable Universal Life
Separate Account I may be invested in Acacia Capital Corporation, the Alger
American Fund, Fidelity Variable Insurance Products Fund, Fidelity Variable
Insurance Products Fund II, the Janus Aspen Series and the Morgan Stanley
Universal Funds Inc., which are not affiliated with MainStay VP Series Fund,
Inc. or NYLIAC and any of its subsidiaries.
At the Annual Meeting of the Board of Directors of the Fund held on February 18,
1997, executive officers of the Fund were elected. On May 14, 1997, 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, New York Life Insurance
and Annuity Corporation MFA Separate Account I, New York Life Insurance and
Annuity Corporation MFA Separate Account II and New York Life Insurance and
Annuity Corporation VLI Separate Account as the sole shareholders of record of
MainStay VP Series Fund, Inc.
The financial information included herein as of June 30, 1997, and for the
period then ended, is taken from the records of the Fund without examination by
independent accountants who do not express an opinion thereon.
/s/ RICHARD M. KERNAN, JR.
Chairman of the Board
and Chief Executive Officer
MAINSTAY VP SERIES FUND, INC.
28
<PAGE> 30
MAINSTAY VP SERIES FUND, INC.
CASH MANAGEMENT PORTFOLIO
PORTFOLIO OF INVESTMENTS
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
SHORT-TERM
INVESTMENTS (100.1%)+
PRINCIPAL AMORTIZED
AMOUNT COST
==========================
<S> <C> <C>
BANK NOTES (2.9%)
American Express Centurion Bank
5.66%, due 9/12/97 (b)(c)........ $1,000,000 $ 999,979
Boatmens Credit Card Bank
5.67%, due 8/8/97 (b)(c)......... 3,000,000 2,999,941
------------
3,999,920
------------
CERTIFICATES OF DEPOSIT (2.9%)
Abbey National Treasury Services
PLC 5.64%, due 11/3/97 (c)....... 1,000,000 998,651
Sanwa Bank Ltd. 6.28%, due 7/10/97
(c).............................. 3,000,000 3,000,369
------------
3,999,020
------------
COMMERCIAL PAPER (85.6%)
Allianz of America Finance Corp.
5.60%, due 10/22/97 (a).......... 2,400,000 2,357,813
American General Corp.
5.58%, due 7/15/97............... 1,975,000 1,975,000
Banca CRT Financial Corp.
5.38%, due 9/2/97................ 1,000,000 990,585
5.72%, due 11/17/97.............. 5,000,000 4,889,572
Banco Real S.A., Grand Cayman
5.60%, due 10/2/97............... 4,400,000 4,336,347
BankAmerica Corp.
5.65%, due 9/19/97............... 3,000,000 2,962,333
BCI Funding Corp.
5.41%, due 7/7/97................ 5,100,000 5,095,402
BEAL Cayman Ltd. (Brazil) Series A
5.57%, due 8/26/97............... 2,400,000 2,379,205
BHF Finance (DE) Inc.
5.68%, due 12/1/97............... 2,000,000 1,951,720
BTR Dunlop Finance Inc.
5.67%, due 11/18/97 (a).......... 4,000,000 3,911,800
China International Marine
Containers (Group) Ltd.
5.66%, due 8/5/97................ 4,000,000 3,977,989
China Light & Power Co. Ltd.
5.65%, due 7/14/97............... 2,000,000 1,995,919
Compagnie Bancaire USA Finance
Corp.
5.40%, due 7/21/97............... 5,000,000 4,985,000
5.65%, due 7/10/97............... 1,000,000 998,588
Cregem North America Inc.
5.62%, due 8/18/97............... 3,000,000 2,977,520
Demir Funding Corp. II Series B
5.65%, due 7/16/97............... 3,000,000 2,992,937
Formosa Plastics Corp. U.S.A.
5.60%, due 9/2/97................ 3,000,000 2,970,600
Garanti Funding Corp. II Series B
5.63%, due 7/10/97............... 2,300,000 2,296,763
General Electric Capital Corp.
5.58%, due 7/8/97 (c)............ 3,500,000 3,500,000
- ------------
+ Percentages indicated are based on Fund net assets.
<CAPTION>
PRINCIPAL AMORTIZED
AMOUNT COST
==========================
<S> <C> <C>
COMMERCIAL PAPER (Continued)
Goldman, Sachs & Co.
5.55%, due 7/2/97................ $2,650,000 $ 2,649,591
Gotham Funding Corp.
5.72%, due 8/7/97 (a)............ 1,000,000 994,121
Great Lakes Chemical Corp.
5.53%, due 7/3/97 (a)............ 2,400,000 2,399,263
Hitachi Credit America Corp.
5.66%, due 7/25/97............... 2,300,000 2,291,321
Industrial Bank of Korea
5.70%, due 9/12/97............... 2,950,000 2,915,903
5.72%, due 8/26/97............... 3,500,000 3,468,858
Korea Development Bank
5.65%, due 9/3/97................ 5,900,000 5,840,738
Merrill Lynch International
(Australia) Ltd.
5.56%, due 7/7/97................ 1,650,000 1,648,471
Minmetals Capitals & Securities
Inc.
5.30%, due 8/12/97............... 2,000,000 1,987,633
5.67%, due 8/12/97............... 2,000,000 1,986,770
Mitsui & Co. (USA) Inc.
5.61%, due 8/15/97............... 400,000 397,195
Monsanto Co.
5.61%, due 9/23/97 (a)........... 2,000,000 1,973,820
Nacional Financiera S.N.C., Grand
Cayman Series A
5.60%, due 8/20/97............... 2,000,000 1,984,444
Pemex Capital Inc.
5.62%, due 9/26/97............... 2,000,000 1,972,837
Petroleo Brasileiro S.A.-Petrobras
5.61%, due 7/10/97............... 1,000,000 998,597
Philip Morris Cos. Inc.
6.10%, due 7/1/97................ 5,170,000 5,170,000
Rubbermaid Inc.
5.55%, due 7/1/97 (a)............ 2,309,000 2,309,000
San Paolo U.S. Financial Co.
5.60%, due 9/11/97............... 3,850,000 3,806,880
5.77%, due 9/10/97............... 2,500,000 2,471,551
Songs Fuel Co.
5.60%, due 8/4/97................ 3,092,000 3,075,647
Svenska Handelsbanken Inc.
5.62%, due 7/25/97............... 2,500,000 2,490,633
Twin Towers Inc.
5.64%, due 7/17/97 (a)........... 875,000 872,807
UNIfunding Inc.
5.39%, due 7/9/97................ 5,000,000 4,994,011
5.70%, due 11/12/97.............. 1,600,000 1,566,053
------------
117,811,237
------------
FEDERAL AGENCIES (5.4%)
Federal Home Loan Bank
5.67%, due 3/5/98
(call date 9/5/97) (c)........... 5,000,000 5,000,000
5.84%, due 11/24/97 (c).......... 2,500,000 2,500,000
------------
7,500,000
------------
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
29
<PAGE> 31
CASH MANAGEMENT PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
SHORT-TERM
INVESTMENTS (CONTINUED)
PRINCIPAL AMORTIZED
AMOUNT COST
==========================
<S> <C> <C>
MEDIUM-TERM NOTES (3.3%)
American General Finance Corp.
7.70%, due 11/15/97 (c).......... $2,500,000 $ 2,514,449
Sony Capital Corp. 5.78%, due
8/29/97 (a)(b)(c)................ 2,000,000 2,000,000
------------
4,514,449
------------
Total Short-Term Investments
(Amortized Cost $137,824,626)
(d).............................. 100.1% 137,824,626
Liabilities in Excess of
Cash and Other Assets............ (0.1) (206,115)
--------- ------------
Net Assets........................ 100.0% $137,618,511
========= ============
</TABLE>
- ------------
(a) May be sold to institutional investors only.
(b) Floating rate. Rate shown is the rate in effect at June 30, 1997.
(c) Coupon interest bearing security.
(d) The cost stated also represents the aggregate cost for Federal income tax
purposes.
The table below sets forth the diversification of Cash Management Portfolio
investments by industry.
INDUSTRY
DIVERSIFICATION
<TABLE>
<CAPTION>
AMORTIZED
COST PERCENT +
=========================
<S> <C> <C>
Banks #..................... $ 87,177,816 63.3%
Brokerage................... 4,298,063 3.1
Chemicals................... 4,373,083 3.2
Conglomerates............... 5,897,195 4.3
Federal Agencies............ 7,500,000 5.4
Finance..................... 11,695,090 8.5
Household Products.......... 2,309,000 1.7
Insurance................... 4,332,813 3.1
Tobacco..................... 5,170,000 3.8
Utilities................... 3,075,647 2.2
Utilities-Electric.......... 1,995,919 1.5
------------ --------
137,824,626 100.1
Liabilities in Excess of
Cash and Other Assets..... (206,115) (0.1)
------------ --------
Net Assets.................. $137,618,511 100.0%
============ ========
</TABLE>
- ------------
+ Percentages indicated are based on Fund net assets.
# The Fund 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.
30
<PAGE> 32
MAINSTAY VP SERIES FUND, INC.
CASH MANAGEMENT PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
As of June 30, 1997 (Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investment in securities, at value
(amortized cost $137,824,626)........ $137,824,626
Cash................................... 1,250
Receivables:
Fund shares sold..................... 3,193,006
Investment securities sold........... 2,000,000
Interest............................. 466,372
------------
Total assets..................... 143,485,254
------------
LIABILITIES:
Payables:
Investment securities purchased...... 5,169,124
Adviser.............................. 26,044
Fund shares redeemed................. 22,876
Administrator........................ 10,418
NYLIAC............................... 10,418
Custodian............................ 3,642
Directors............................ 76
Accrued expenses....................... 62,069
Dividend payable....................... 562,076
------------
Total liabilities................ 5,866,743
------------
Net assets applicable to outstanding
shares............................... $137,618,511
============
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.01 per
share) 600 million shares
authorized........................... $ 1,376,209
Additional paid-in capital............. 136,243,588
Accumulated net realized loss on
investments.......................... (1,286)
------------
Net assets applicable to outstanding
shares............................... $137,618,511
============
Shares of capital stock outstanding.... 137,620,936
============
Net asset value per share
outstanding.......................... $ 1.00
============
</TABLE>
STATEMENT OF OPERATIONS
For the six months ended June 30, 1997 (Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Income:
Interest............................. $ 3,379,079
------------
Expenses:
Advisory............................. 150,271
Administration....................... 120,217
Shareholder communication............ 24,447
Professional......................... 15,731
Custodian............................ 8,732
Directors............................ 2,337
Miscellaneous........................ 1,536
------------
Total expenses................... 323,271
------------
Net investment income.................. 3,055,808
------------
REALIZED GAIN ON INVESTMENTS:
Net realized gain on investments....... 780
------------
Net increase in net assets resulting
from operations...................... $ 3,056,588
============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
31
<PAGE> 33
CASH MANAGEMENT PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 1997 (Unaudited)
and the year ended December 31, 1996
<TABLE>
<CAPTION>
1997 1996
============================
<S> <C> <C>
INCREASE IN NET ASSETS:
Operations:
Net investment income............................................................. $ 3,055,808 $ 4,723,279
Net realized gain (loss) on investments........................................... 780 (733)
------------ ------------
Net increase in net assets resulting from operations.............................. 3,056,588 4,722,546
------------ ------------
Dividends to shareholders:
From net investment income........................................................ (3,055,808) (4,723,279)
------------ ------------
Capital share transactions:
Net proceeds from sale of shares.................................................. 140,646,031 237,101,140
Net asset value of shares issued to shareholders in reinvestment of dividends..... 2,995,478 4,585,514
------------ ------------
143,641,509 241,686,654
Cost of shares redeemed........................................................... (124,370,700) (211,178,343)
------------ ------------
Increase in net assets derived from capital share transactions.................... 19,270,809 30,508,311
------------ ------------
Net increase in net assets.......................................................... 19,271,589 30,507,578
NET ASSETS:
Beginning of period................................................................. 118,346,922 87,839,344
------------ ------------
End of period....................................................................... $137,618,511 $118,346,922
============ ============
</TABLE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(Selected Per Share Data and Ratios)
<TABLE>
<CAPTION>
JANUARY 29,
SIX MONTHS 1993 (a)
ENDED THROUGH
JUNE 30, YEAR ENDED DECEMBER 31 DECEMBER 31,
1997* 1996 1995 1994 1993
============================================================================
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of period.... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------------ ------------ ------------ ------------ -----------
Net investment income..................... 0.03 0.05 0.05 0.04 0.02
------------ ------------ ------------ ------------ -----------
Less dividends:
From net investment income.............. (0.03) (0.05) (0.05) (0.04) (0.02)
------------ ------------ ------------ ------------ -----------
Net asset value at end of period.......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
============ ============ ============ ============ ===========
Total investment return (b)............... 2.54% 4.95% 5.59% 3.82% 2.40%
Ratios (to average net
assets)/Supplemental Data:
Net investment income................... 5.08%+ 4.92% 5.44% 3.97% 2.65% +
Net expenses............................ 0.54%+ 0.62% 0.62% 0.62% 0.62% +
Expenses (before reimbursement)......... 0.54%+ 0.64% 0.94% 0.89% 1.10% +
Net assets at end of period (in 000's).... $ 137,619 $ 118,347 $ 87,839 $ 71,116 $ 26,733
</TABLE>
- ------------
(a) Commencement of Operations.
(b) Total return is not annualized.
+ Annualized.
* Unaudited.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
32
<PAGE> 34
MAINSTAY VP SERIES FUND, INC.
BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
LONG-TERM BONDS (96.0%) +
CORPORATE BONDS (47.2%)
PRINCIPAL
AMOUNT VALUE
===========================
<S> <C> <C>
AUTO PARTS/EQUIPMENT (2.2%)
Borg-Warner Automotive, Inc.
7.00%, due 11/1/06.............. $ 5,000,000 $ 4,950,000
------------
BANKS (7.0%)
BankAmerica Corp.
7.75%, due 7/15/02.............. 4,000,000 4,150,000
First Union Capital Corp.
7.935%, due 1/15/27............. 5,000,000 4,918,750
Golden West Financial Corp.
10.25%, due 12/1/00............. 1,000,000 1,106,250
Republic New York Corp.
7.75%, due 5/15/09.............. 5,000,000 5,225,000
------------
15,400,000
------------
CONGLOMERATES-- DIVERSIFIED
(1.0%)
Harcourt General, Inc.
9.50%, due 3/15/00.............. 2,000,000 2,135,000
------------
CONTAINERS (1.7%)
Federal Paper Board Co., Inc.
10.00%, due 4/15/11............. 3,100,000 3,801,375
------------
DATA PROCESSING (1.4%)
International Business Machines
Corp.
6.375%, due 6/15/00............. 3,000,000 2,992,500
------------
DIVERSIFIED UTILITIES (5.2%)
Consumers Energy Co.
7.375%, due 9/15/23............. 7,000,000 6,615,000
Niagara Mohawk Power Corp.
7.375%, due 8/1/03.............. 2,000,000 1,957,500
Public Service Co. of Colorado
6.00%, due 1/1/01............... 3,000,000 2,940,000
------------
11,512,500
------------
ELECTRIC UTILITIES (2.2%)
Texas Utilities
5.75%, due 7/1/98............... 5,000,000 4,981,250
------------
FINANCE (6.7%)
Chrysler Financial Corp.
5.875%, due 2/7/01.............. 5,000,000 4,875,000
General Motors Acceptance Corp.
5.625%, due 2/15/01............. 6,000,000 5,797,500
9.625%, due 12/15/01............ 1,000,000 1,108,750
Mellon Financial Co.
7.625%, due 11/15/99............ 3,000,000 3,090,000
------------
14,871,250
------------
<CAPTION>
PRINCIPAL
AMOUNT VALUE
===========================
<S> <C> <C>
FOOD (0.5%)
ConAgra, Inc.
9.875%, due 11/15/05............ $ 1,000,000 $ 1,170,000
------------
OIL & GAS (2.0%)
Oryx Energy Co.
9.50%, due 11/1/99.............. 4,235,000 4,462,631
------------
PAPER PRODUCTS (2.2%)
Champion International Corp.
9.875%, due 6/1/00.............. 4,500,000 4,876,875
------------
RAILROADS (4.6%)
Norfolk Southern Corp.
6.95%, due 5/1/02............... 5,000,000 5,025,000
7.80%, due 5/15/27.............. 5,000,000 5,112,500
------------
10,137,500
------------
RETAIL STORES (7.8%)
Penney (J.C.) Co., Inc.
6.95%, due 4/1/00............... 5,000,000 5,050,000
Price/Costco, Inc.
7.125%, due 6/15/05............. 5,000,000 4,987,500
Sears Roebuck & Co.
8.45%, due 11/1/98.............. 7,000,000 7,212,940
------------
17,250,440
------------
TELECOMMUNICATION SERVICES (2.7%)
360 Communications Co.
7.60%, due 4/1/09............... 6,000,000 6,022,500
------------
Total Corporate Bonds
(Cost $102,615,931)............. 104,563,821
------------
U.S. GOVERNMENT & FEDERAL
AGENCIES (38.9%)
FEDERAL NATIONAL MORTGAGE
ASSOCIATION (4.5%)
4.95%, due 9/30/98.............. 10,000,000 9,898,200
------------
FEDERAL NATIONAL MORTGAGE
ASSOCIATION (MORTGAGE PASS-
THROUGH SECURITIES) (14.2%)
7.00%, due 6/1/12-2/1/27........ 17,541,234 17,323,238
8.00%, due 5/1/25............... 13,861,711 14,203,929
------------
31,527,167
------------
</TABLE>
- ------------
+ Percentages indicated are based on Fund net assets.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
33
<PAGE> 35
BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
U.S. GOVERNMENT &
FEDERAL AGENCIES (CONTINUED)
PRINCIPAL
AMOUNT VALUE
===========================
<S> <C> <C>
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION I (MORTGAGE
PASS-THROUGH SECURITY) (2.4%)
9.00%, due 4/15/26.............. $ 5,000,000 $ 5,303,125
------------
UNITED STATES TREASURY BONDS
(9.9%)
6.50%, due 11/15/26............. 13,000,000 12,449,710
6.75%, due 8/15/26.............. 5,500,000 5,440,655
7.125%, due 2/15/23............. 4,000,000 4,119,240
------------
22,009,605
------------
UNITED STATES TREASURY NOTES
(7.9%)
6.25%, due 2/28/02.............. 5,000,000 4,968,550
7.125%, due 2/29/00............. 5,000,000 5,107,400
7.25%, due 5/15/04.............. 7,000,000 7,297,640
------------
17,373,590
------------
Total U.S. Government &
Federal Agencies
(Cost $85,473,978).............. 86,111,687
------------
YANKEE BONDS (9.9%)
BANKS (1.0%)
National Westminster Bancorp,
Inc.
9.375%, due 11/15/03............ 2,000,000 2,250,000
------------
COMMERCIAL PRINTER (2.2%)
Quebecor Printing Capital Corp.
7.25%, due 1/15/07.............. 5,000,000 5,037,500
------------
CRUDE PETROLEUM NATURAL GAS
(2.4%)
Gulf Canada Resources Ltd.
9.00%, due 8/15/99.............. 5,000,000 5,237,500
------------
FINANCE (2.3%)
Ford Motor Credit Co.
7.20%, due 6/15/07.............. 5,000,000 5,043,750
------------
<CAPTION>
PRINCIPAL
AMOUNT VALUE
===========================
<S> <C> <C>
TELECOMMUNICATION SERVICES (2.0%)
British Telecommunications
Finance Inc.
9.375%, due 2/15/99............. $ 4,200,000 $ 4,404,750
------------
Total Yankee Bonds
(Cost $21,509,461).............. 21,973,500
------------
Total Long-Term Bonds
(Cost $209,599,370)............. 212,649,008
------------
<CAPTION>
SHORT-TERM
INVESTMENTS (2.6%)
<S> <C> <C>
COMMERCIAL PAPER (2.6%)
American Express Credit Corp.
6.00%, due 7/1/97............... 915,000 915,000
Associates Corp. of North America
5.50%, due on demand (a)........ 4,925,000 4,925,000
------------
Total Short-Term Investments
(Cost $5,840,000)............... 5,840,000
------------
Total Investments
(Cost $215,439,370) (b)......... 98.6% 218,489,008(c)
Cash and Other Assets,
Less Liabilities................ 1.4 3,065,654
---------- ----------
Net Assets....................... 100.0% $221,554,662
========== ==========
</TABLE>
- ------------
(a) Adjustable rate. Rate shown is the rate in effect at June 30, 1997.
(b) The cost stated also represents the aggregate cost for Federal income tax
purposes.
(c) At June 30, 1997 net unrealized appreciation was $3,049,638, 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 $3,614,639 and aggregate gross unrealized
depreciation for all investments on which there was an excess of cost over
market value of $565,001.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
34
<PAGE> 36
MAINSTAY VP SERIES FUND, INC.
BOND PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
As of June 30, 1997 (Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investment in securities, at value
(identified cost $215,439,370)....... $218,489,008
Cash................................... 731
Receivables:
Investment securities sold........... 10,399,969
Interest............................. 3,368,051
Fund shares sold..................... 56,385
------------
Total assets..................... 232,314,144
------------
LIABILITIES:
Payables:
Investment securities purchased...... 10,303,150
Fund shares redeemed................. 151,971
Adviser.............................. 137,254
Administrator........................ 18,204
NYLIAC............................... 18,204
Directors............................ 48
Accrued expenses....................... 130,651
------------
Total liabilities................ 10,759,482
------------
Net assets applicable to outstanding
shares............................... $221,554,662
============
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.01 per
share) 100 million shares
authorized........................... $ 168,205
Additional paid-in capital............. 213,824,377
Accumulated undistributed net
investment income.................... 7,125,688
Accumulated net realized loss on
investments.......................... (2,613,246)
Net unrealized appreciation on
investments.......................... 3,049,638
------------
Net assets applicable to outstanding
shares............................... $221,554,662
============
Shares of capital stock outstanding.... 16,820,513
============
Net asset value per share
outstanding.......................... $ 13.17
============
</TABLE>
STATEMENT OF OPERATIONS
For the six months ended June 30, 1997 (Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Income:
Interest............................. $ 7,689,659
------------
Expenses:
Advisory............................. 275,765
Administration....................... 220,612
Shareholder communication............ 39,551
Professional......................... 15,671
Directors............................ 4,213
Portfolio pricing.................... 3,384
Miscellaneous........................ 4,775
------------
Total expenses................... 563,971
------------
Net investment income.................. 7,125,688
------------
REALIZED AND UNREALIZED LOSS ON
INVESTMENTS:
Net realized loss on investments....... (826,934)
Net change in unrealized appreciation
on investments....................... (474,654)
------------
Net realized and unrealized loss on
investments.......................... (1,301,588)
------------
Net increase in net assets resulting
from operations...................... $ 5,824,100
============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
35
<PAGE> 37
BOND PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 1997 (Unaudited)
and the year ended December 31, 1996
<TABLE>
<CAPTION>
1997 1996
============================
<S> <C> <C>
DECREASE IN NET ASSETS:
Operations:
Net investment income............................................................. $ 7,125,688 $ 14,382,960
Net realized gain (loss) on investments........................................... (826,934) 961,896
Net change in unrealized appreciation on investments.............................. (474,654) (10,866,414)
------------ ------------
Net increase in net assets resulting from operations.............................. 5,824,100 4,478,442
------------ ------------
Dividends to shareholders:
From net investment income........................................................ -- (14,405,743)
------------ ------------
Capital share transactions:
Net proceeds from sale of shares.................................................. 10,108,172 25,643,335
Net asset value of shares issued to shareholders in reinvestment of dividends..... -- 14,405,743
------------ ------------
10,108,172 40,049,078
Cost of shares redeemed........................................................... (20,752,496) (38,777,335)
------------ ------------
Increase (decrease) in net assets derived from capital share transactions......... (10,644,324) 1,271,743
------------ ------------
Net decrease in net assets.......................................................... (4,820,224) (8,655,558)
NET ASSETS:
Beginning of period................................................................. 226,374,886 235,030,444
------------ ------------
End of period....................................................................... $221,554,662 $226,374,886
============ ============
Accumulated undistributed net investment income..................................... $ 7,125,688 $ --
============ ============
</TABLE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(Selected Per Share Data and Ratios)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED DECEMBER 31
1997* 1996 1995 1994 1993 1992
============================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning
of period................... $ 12.83 $ 13.42 $ 12.09 $ 13.43 $ 12.91 $ 12.77
-------- -------- -------- -------- -------- --------
Net investment income......... 0.43 0.87 0.88 0.88 0.95 0.92
Net realized and unrealized
gain (loss) on
investments................. (0.09) (0.59) 1.33 (1.34) 0.53 0.13
-------- -------- -------- -------- -------- --------
Total from investment
operations.................. 0.34 0.28 2.21 (0.46) 1.48 1.05
-------- -------- -------- -------- -------- --------
Less dividends:
From net investment
income.................... -- (0.87) (0.88) (0.88) (0.96) (0.91)
-------- -------- -------- -------- -------- --------
Net asset value at end of
period...................... $ 13.17 $ 12.83 $ 13.42 $ 12.09 $ 13.43 $ 12.91
======== ======== ======== ======== ======== ========
Total investment return (a)... 2.69% 2.05% 18.31% (3.39%) 11.40% 8.26%
Ratios (to average net
assets)/Supplemental Data:
Net investment income....... 6.46%+ 6.31% 6.55% 6.53% 6.79% 7.54%
Net expenses................ 0.51%+ 0.58% 0.62% 0.62%# 0.27%# 0.25%
Expenses (before
reimbursement)............ 0.51%+ 0.58% 0.91% 0.67%# 0.27%# 0.25%
Portfolio turnover rate....... 141% 103% 81% 88% 41% 10%
Net assets at end of period
(in 000's).................. $ 221,555 $ 226,375 $ 235,030 $ 206,686 $ 228,683 $ 203,947
</TABLE>
- ------------
(a) Total return is not annualized.
# At the MainStay VP Series Fund, Inc.'s shareholders meeting on December 14,
1993, the shareholders voted to have the Bond Portfolio assume certain
administrative and operating expenses of the Fund previously borne by New
York Life.
+ Annualized.
* Unaudited.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
36
<PAGE> 38
MAINSTAY VP SERIES FUND, INC.
GROWTH EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
COMMON STOCKS (97.8%) +
SHARES VALUE
===========================
<S> <C> <C>
ADVERTISING SALES (0.7%)
Outdoor Systems, Inc. (a)........ 126,200 $ 4,827,150
------------
AEROSPACE/DEFENSE (2.3%)
Coltec Industries Inc. (a)....... 270,000 5,265,000
Lockheed Martin Corp. ........... 61,200 6,338,025
Loral Space & Communications Ltd.
(a)............................. 258,500 3,877,500
------------
15,480,525
------------
APPAREL MANUFACTURERS (0.7%)
Fruit of the Loom, Inc. Class A
(a)............................. 150,000 4,650,000
------------
AUTO & AUTO SERVICES (0.9%)
Tower Automotive, Inc. (a)....... 146,200 6,286,600
------------
BANKS (5.7%)
Bank of New York Co., Inc.
(The)........................... 150,000 6,525,000
Chase Manhattan Corp. ........... 90,000 8,735,625
NationsBank Corp. ............... 117,200 7,559,400
Norwest Corp. ................... 125,000 7,031,250
Republic New York Corp. ......... 75,000 8,062,500
------------
37,913,775
------------
BEVERAGES (2.0%)
Anheuser-Busch Cos., Inc. ....... 137,000 5,745,437
PepsiCo, Inc. ................... 200,000 7,512,500
------------
13,257,937
------------
BUILDING PRODUCTS (1.5%)
Masco Corp. ..................... 96,000 4,008,000
Sherwin-Williams Co. ............ 200,000 6,175,000
------------
10,183,000
------------
BUSINESS SERVICES (0.8%)
AccuStaff, Inc. (a).............. 215,700 5,109,394
------------
CAPITAL GOODS (0.5%)
Checkpoint Systems, Inc. (a)..... 214,400 3,443,800
------------
CHEMICALS (3.7%)
Du Pont (E.I.) De Nemours &
Co. ............................ 110,000 6,916,250
IMC Global Inc. ................. 150,000 5,250,000
Praxair, Inc. ................... 100,000 5,600,000
Sealed Air Corp. (a)............. 150,000 7,125,000
------------
24,891,250
------------
COMMERCIAL SERVICES (1.2%)
CUC International Inc. (a)....... 300,000 7,743,750
------------
COMMUNICATIONS (1.2%)
Northern Telecom Ltd. ........... 60,000 5,460,000
Qwest Communications
International Inc. (a).......... 103,000 2,806,750
------------
8,266,750
------------
<CAPTION>
SHARES VALUE
===========================
<S> <C> <C>
COMPUTERS & OFFICE EQUIPMENT
(8.5%)
Computer Associates
International, Inc. ............ 115,000 $ 6,404,062
Computer Sciences Corp. (a)...... 90,000 6,491,250
Compuware Corp. (a).............. 125,000 5,968,750
Danka Business Systems PLC ADR
(b)............................. 158,800 6,490,950
FIserv, Inc. (a)................. 155,000 6,916,875
FORE Systems Inc. (a)............ 200,000 2,725,000
Micron Electronics, Inc. ........ 184,000 3,277,500
Microsoft Corp. (a).............. 65,000 8,214,375
Sungard Data Systems Inc. (a).... 150,000 6,975,000
Zebra Technologies Corp. Class A
(a)............................. 110,000 3,066,250
------------
56,530,012
------------
DRUGS (8.0%)
American Home Products Corp. .... 70,000 5,355,000
Amgen Inc. (a)................... 50,000 2,906,250
Bristol-Meyers Squibb Co. ....... 87,000 7,047,000
Centocor Inc. (a)................ 100,000 3,106,250
Genzyme Corp. (a)................ 120,000 3,330,000
Johnson & Johnson................ 100,000 6,437,500
Lilly (Eli) & Co. ............... 80,000 8,745,000
NABI Inc. (a).................... 245,000 1,623,125
SmithKline Beecham PLC ADR (b)... 90,000 8,246,250
Warner-Lambert Co. .............. 50,000 6,212,500
------------
53,008,875
------------
ELECTRICAL (2.8%)
General Electric Co. ............ 200,000 13,075,000
Mark IV Industries, Inc. ........ 234,945 5,638,680
------------
18,713,680
------------
ELECTRONICS (3.8%)
LSI Logic Corp (a)............... 120,000 3,840,000
Philips Electronics N.V. ........ 150,000 10,781,250
Teradyne, Inc. (a)............... 180,000 7,065,000
Texas Instruments, Inc. ......... 45,300 3,808,031
------------
25,494,281
------------
FINANCE (3.5%)
Comdisco Inc. ................... 275,000 7,150,000
Fannie Mae....................... 160,000 6,980,000
Federal Home Loan Mortgage
Corp. .......................... 160,000 5,500,000
Student Loan Marketing
Association .................... 30,000 3,810,000
------------
23,440,000
------------
</TABLE>
- ------------
+ Percentages indicated are based on Fund net assets.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
37
<PAGE> 39
GROWTH EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
COMMON STOCKS (CONTINUED)
SHARES VALUE
===========================
<S> <C> <C>
FOOD (5.1%)
Archer-Daniels-Midland Co. ...... 295,000 $ 6,932,500
Chiquita Brands International,
Inc. ........................... 124,200 1,707,750
CPC International Inc. .......... 80,000 7,385,000
Dole Food Co., Inc. ............. 145,000 6,198,750
Sysco Corp. ..................... 180,000 6,570,000
Tyson Foods Inc. Class A......... 265,000 5,068,125
------------
33,862,125
------------
HEAVY INDUSTRIAL (0.6%)
U.S. Filter Corp. (a)............ 139,300 3,795,925
------------
HOSPITAL & MEDICAL SERVICES
(2.1%)
HEALTHSOUTH Corp. (a)............ 280,000 6,982,500
Orthodontic Centers of America
Inc. (a)........................ 200,000 3,637,500
Quorum Health Group, Inc. (a).... 100,000 3,575,000
------------
14,195,000
------------
HOUSEHOLD PRODUCTS (1.1%)
Colgate-Palmolive Co. ........... 110,000 7,177,500
------------
INSURANCE-PROPERTY & CASUALTY
(4.0%)
Allstate Corp. (The) ............ 90,000 6,570,000
American International Group,
Inc. ........................... 50,000 7,468,750
Chubb Corp. ..................... 60,400 4,039,250
Equitable Cos., Inc. (The)....... 100,000 3,325,000
Provident Cos., Inc. ............ 100,000 5,350,000
------------
26,753,000
------------
LODGING &
RESTAURANTS (3.0%)
Carnival Corp. Class A........... 110,000 4,537,500
Marriott International Inc. ..... 110,000 6,751,250
McDonald's Corp. ................ 103,200 4,985,850
Wendy's International, Inc. ..... 150,000 3,890,625
------------
20,165,225
------------
MACHINERY/CAPITAL GOODS (2.5%)
AGCO Corp. ...................... 200,000 7,187,500
Stewart & Stevenson Services,
Inc. ........................... 100,000 2,600,000
Tyco International Ltd. ......... 100,000 6,956,250
------------
16,743,750
------------
MANUFACTURING (1.4%)
AlliedSignal Inc. ............... 111,000 9,324,000
------------
MEDIA & INFORMATION
SERVICES (3.1%)
Cognizant Corp. ................. 175,000 7,087,500
Jacor Communications Inc. (a).... 125,500 4,800,375
Time Warner Inc. ................ 175,000 8,443,750
------------
20,331,625
------------
<CAPTION>
SHARES VALUE
===========================
<S> <C> <C>
MEDICAL EQUIPMENT (2.2%)
Becton, Dickinson & Co. ......... 125,000 $ 6,328,125
Cardinal Health, Inc. ........... 60,000 3,435,000
Medtronic, Inc. ................. 60,000 4,860,000
------------
14,623,125
------------
OIL & ENERGY SERVICES (6.5%)
Apache Corp. .................... 105,000 3,412,500
Halliburton Co. ................. 70,000 5,547,500
McDermott International, Inc. ... 175,000 5,107,813
Mobil Corp. ..................... 80,000 5,590,000
Quaker State Corp. .............. 333,000 5,078,250
Schlumberger Ltd. ............... 55,000 6,875,000
Smith International, Inc. (a).... 110,000 6,682,500
Triton Energy Ltd. (a)........... 100,000 4,581,250
XCL Ltd. (a)..................... 1,316,800 246,900
------------
43,121,713
------------
PACKAGING (0.9%)
Crown Cork & Seal Co., Inc. ..... 110,000 5,878,125
------------
PAPER & FOREST PRODUCTS (0.7%)
Boise Cascade Corp. ............. 138,600 4,894,312
------------
POLLUTION CONTROL (0.8%)
Philip Environmental, Inc. (a)... 350,000 5,556,250
------------
REAL ESTATE (2.5%)
Chelsea GCA Realty, Inc. ........ 96,300 3,659,400
First Industrial Realty Trust,
Inc. ........................... 175,000 5,118,750
Healthcare Realty Trust Inc. .... 125,000 3,484,375
Liberty Property Trust........... 166,500 4,141,688
------------
16,404,213
------------
RETAIL TRADE & MERCHANDISING
(5.9%)
American Stores Co. ............. 150,000 7,406,250
Costco Cos., Inc. (a)............ 200,000 6,575,000
CVS Corp. ....................... 120,000 6,150,000
Kroger Co. (a)................... 296,000 8,584,000
Smart & Final Inc. .............. 163,000 3,993,500
Wal-Mart Stores, Inc. ........... 200,000 6,762,500
------------
39,471,250
------------
</TABLE>
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>
COMMON STOCKS (CONTINUED)
SHARES VALUE
===========================
<S> <C> <C>
TELECOMMUNICATIONS (1.6%)
DSC Communication Corp. (a)...... 250,000 $ 5,562,500
Lucent Technologies Inc. ........ 67,000 4,828,187
------------
10,390,687
------------
TRANSPORTATION (1.0%)
Wisconsin Central Transport Corp.
(a)............................. 175,000 6,518,750
------------
UTILITIES--ELECTRIC (1.4%)
Cinergy Corp. ................... 125,000 4,351,563
CMS Energy Corp. ................ 135,000 4,758,750
------------
9,110,313
------------
UTILITIES--GAS (0.8%)
Consolidated Natural Gas Co. .... 100,000 5,381,250
------------
UTILITIES--TELEPHONE (1.3%)
WorldCom, Inc. (a)............... 262,800 8,409,600
------------
WASTE DISPOSAL (1.5%)
Republic Industries Inc. (a)..... 150,000 3,637,500
USA Waste Services Inc. (a)...... 160,000 6,180,000
------------
9,817,500
------------
Total Common Stocks
(Cost $508,671,935)............. 651,166,017
------------
<CAPTION>
SHORT-TERM
INVESTMENTS (2.8%)
PRINCIPAL
AMOUNT VALUE
===========================
<S> <C> <C>
COMMERCIAL PAPER (2.8%)
American Express Credit Corp.
6.00%, due 7/1/97............... $ 2,692,000 $ 2,692,000
Associates Corp. of North America
5.50%, due on demand (c)........ 15,240,000 15,240,000
PG&E Corp.
5.56%, due 7/21/97.............. 452,000 450,604
------------
Total Short-Term Investments
(Cost $18,382,604).............. 18,382,604
------------
Total Investments
(Cost $527,054,539) (d)......... 100.6% 669,548,621(e)
Liabilities in Excess of
Cash and Other Assets........... (0.6) (3,637,204)
---------- ------------
Net Assets....................... 100.0% $665,911,417
========== ============
</TABLE>
- ------------
(a) Non-income producing securities.
(b) ADR--American Depository Receipt.
(c) Adjustable rate. Rate shown is the rate in effect at June 30, 1997.
(d) The cost stated also represents the aggregate cost for Federal income tax
purposes.
(e) At June 30, 1997 net unrealized appreciation was $142,494,082, 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 $151,340,560 and aggregate gross unrealized
depreciation for all investments on which there was an excess of cost over
market value of $8,846,478.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
39
<PAGE> 41
GROWTH EQUITY PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
As of June 30, 1997 (Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investment in securities, at value
(identified cost $527,054,539)....... $669,548,621
Cash................................... 1,163,464
Receivables:
Investment securities sold........... 8,855,155
Dividends and interest............... 700,014
Fund shares sold..................... 327,265
------------
Total assets..................... 680,594,519
------------
LIABILITIES:
Payables:
Investment securities purchased...... 13,834,929
Adviser.............................. 386,551
Fund shares redeemed................. 96,966
Administrator........................ 54,090
NYLIAC............................... 54,090
Directors............................ 182
Accrued expenses....................... 256,294
------------
Total liabilities................ 14,683,102
------------
Net assets applicable to outstanding
shares............................... $665,911,417
============
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.01 per
share) 100 million shares
authorized........................... $ 313,159
Additional paid-in capital............. 477,147,479
Accumulated undistributed net
investment income.................... 2,626,362
Accumulated undistributed net realized
gain on investments.................. 43,330,335
Net unrealized appreciation on
investments.......................... 142,494,082
------------
Net assets applicable to outstanding
shares............................... $665,911,417
============
Shares of capital stock outstanding.... 31,315,890
============
Net asset value per share
outstanding.......................... $ 21.26
============
</TABLE>
STATEMENT OF OPERATIONS
For the six months ended June 30, 1997 (Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Income:
Dividends (a)........................ $ 3,201,912
Interest............................. 957,543
------------
Total income..................... 4,159,455
------------
Expenses:
Advisory............................. 750,553
Administration....................... 600,443
Shareholder communication............ 140,155
Professional......................... 20,072
Directors............................ 10,796
Miscellaneous........................ 11,074
------------
Total expenses................... 1,533,093
------------
Net investment income.................. 2,626,362
------------
REALIZED AND UNREALIZED GAIN ON
INVESTMENTS:
Net realized gain on investments....... 43,331,368
Net change in unrealized appreciation
on investments....................... 35,721,033
------------
Net realized and unrealized gain on
investments.......................... 79,052,401
------------
Net increase in net assets resulting
from operations...................... $ 81,678,763
============
</TABLE>
- ------------
(a) Dividends recorded net of foreign withholding taxes
in the amount of $3,626.
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.
GROWTH EQUITY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 1997 (Unaudited)
and the year ended December 31, 1996
<TABLE>
<CAPTION>
1997 1996
============================
<S> <C> <C>
INCREASE IN NET ASSETS:
Operations:
Net investment income............................................................. $ 2,626,362 $ 4,810,773
Net realized gain on investments.................................................. 43,331,368 69,850,131
Net change in unrealized appreciation on investments.............................. 35,721,033 32,938,177
------------ ------------
Net increase in net assets resulting from operations.............................. 81,678,763 107,599,081
------------ ------------
Dividends and distributions to shareholders:
From net investment income........................................................ -- (4,810,773)
From net realized gain on investments............................................. (152,000) (69,699,164)
------------ ------------
Total dividends and distributions to shareholders............................. (152,000) (74,509,937)
------------ ------------
Capital share transactions:
Net proceeds from sale of shares.................................................. 48,905,156 74,877,524
Net asset value of shares issued to shareholders in reinvestment of dividends and
distributions.................................................................... 152,000 74,509,937
------------ ------------
49,057,156 149,387,461
Cost of shares redeemed........................................................... (29,357,913) (45,298,015)
------------ ------------
Increase in net assets derived from capital share transactions.................... 19,699,243 104,089,446
------------ ------------
Net increase in net assets.......................................................... 101,226,006 137,178,590
NET ASSETS:
Beginning of period................................................................. 564,685,411 427,506,821
------------ ------------
End of period....................................................................... $665,911,417 $564,685,411
============ ============
Accumulated undistributed net investment income..................................... $ 2,626,362 $ --
============ ============
</TABLE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(Selected Per Share Data and Ratios)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED DECEMBER 31
1997* 1996 1995 1994 1993 1992
============================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning
of period................... $ 18.63 $ 17.22 $ 14.69 $ 15.64 $ 15.53 $ 15.57
------------ ------------ ------------ ------------ ------------ ------------
Net investment income......... 0.08 0.18 0.22 0.22 0.24 0.22
Net realized and unrealized
gain (loss) on
investments................. 2.55 4.06 4.06 (0.03) 1.88 1.72
------------ ------------ ------------ ------------ ------------ ------------
Total from investment
operations.................. 2.63 4.24 4.28 0.19 2.12 1.94
------------ ------------ ------------ ------------ ------------ ------------
Less dividends and
distributions:
From net investment
income.................... -- (0.18) (0.22) (0.22) (0.25) (0.22)
From net realized gain on
investments............... (0.00)(a) (2.65) (1.53) (0.92) (1.76) (1.76)
------------ ------------ ------------ ------------ ------------ ------------
Total dividends and
distributions............... (0.00) (2.83) (1.75) (1.14) (2.01) (1.98)
------------ ------------ ------------ ------------ ------------ ------------
Net asset value at end of
period...................... $ 21.26 $ 18.63 $ 17.22 $ 14.69 $ 15.64 $ 15.53
============ ============ ============ ============ ============ ============
Total investment return (b)... 14.16% 24.50% 29.16% 1.20% 13.71% 12.42%
Ratios (to average net
assets)/Supplemental Data:
Net investment income....... 0.87%+ 0.98% 1.29% 1.41% 1.42% 1.50%
Net expenses................ 0.51%+ 0.58% 0.62% 0.62%# 0.27%# 0.27%
Expenses (before
reimbursement)............ 0.51%+ 0.58% 0.91% 0.65%# 0.27%# 0.27%
Portfolio turnover rate....... 53% 104% 104% 108% 121% 82%
Average commission rate
paid........................ $ 0.0595 $ 0.0595 (c) (c) (c) (c)
Net assets at end of period
(in 000's).................. $ 665,911 $ 564,685 $ 427,507 $ 330,161 $ 319,196 $ 272,834
</TABLE>
- ------------
(a) Less than one cent per share.
(b) Total return is not annualized.
(c) Disclosure of amount required for fiscal years beginning on or after
September 1, 1995.
# At the MainStay VP Series Fund, Inc.'s shareholders meeting on December 14,
1993, the shareholders voted to have the Growth Equity Portfolio assume
certain administrative and operating expenses of the Fund previously borne
by New York Life.
+ Annualized.
* Unaudited.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
41
<PAGE> 43
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1-- Organization and Business:
- --------------------------------------------------------------------------------
MainStay VP Series Fund, Inc. (formerly New York Life MFA Series Fund, Inc.)
(the "Company") was incorporated under Maryland law on June 3, 1983. The
Company is registered under the Investment Company Act of 1940, as amended,
("Investment Company Act") as an open-end diversified management investment
company. Cash Management Portfolio, which commenced operations on January 29,
1993 and Bond and Growth Equity Portfolios, which commenced operations on
January 23, 1984, (the "Funds") are separate portfolios of the Company. Shares
of the Funds are currently offered only to New York Life Insurance and Annuity
Corporation ("NYLIAC"), a wholly owned subsidiary of New York Life Insurance
Company ("New York Life"). NYLIAC allocates shares of the Funds to, among
others, New York Life Insurance and Annuity Corporation's MFA Separate Account
I, MFA Separate Account II and VLI Separate Account ("Separate Accounts",
collectively). 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 Company 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
Company:
(A)
VALUATION OF FUND SHARES. The net asset value per share of each Portfolio is
calculated on each day the New York Stock Exchange (the "Exchange") is open for
trading as of the regular close of the Exchange (normally 4:00 P.M., Eastern
Time). Net asset value per share is calculated for each Portfolio by dividing
the current market value (amortized cost, in the case of Cash Management
Portfolio) of the Portfolio's total assets, less liabilities, by the total
number of outstanding shares of that Portfolio.
(B)
SECURITIES VALUATION. Portfolio securities of Cash Management Portfolio are
valued at amortized cost, which approximates market value. The amortized cost
method involves valuing a security at its cost on the date of purchase and
thereafter assuming a constant amortization to maturity of the difference
between such cost and the value on maturity date.
Securities of each of the other Portfolios are stated at value determined (a) by
appraising common and preferred stocks which are traded on the New York Stock
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 NASDAQ system and securities listed or traded on certain foreign exchanges
whose operations are similar to the U.S. over-the-counter market, at prices
supplied by the pricing agent or brokers selected by the Adviser if these prices
are
42
<PAGE> 44
MAINSTAY VP SERIES FUND, INC.
deemed to be representative of market values at the regular close of business of
the New York Stock 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 New York Stock 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 New York
Stock 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)
REPURCHASE AGREEMENTS. At the time the Funds enter into a repurchase agreement,
the value of the underlying security, including accrued interest, will be equal
to or exceed the value of the repurchase agreement and, in the case of
repurchase agreements exceeding one day, the value of the underlying security,
including accrued interest, is required during the term of the agreement to be
equal to or exceed the value of the repurchase agreement. The underlying
securities for all repurchase agreements are held in a segregated account of the
respective Funds' custodian. In the case of repurchase agreements exceeding one
day, the market value of the underlying securities are monitored by the Adviser
by pricing them daily. (Also see Note 5).
(D)
SECURITY TRANSACTIONS AND INVESTMENT INCOME. The Company records security
transactions on the trade date. Realized gains and losses on security
transactions are determined using the identified cost method and include gains
and losses from repayments of principal on mortgage related and other
asset-backed securities. Dividend income is recognized on the ex-dividend date
and interest income is accrued daily except when collection is not expected.
Discounts on securities purchased for all Portfolios are accreted on the
constant yield method over the life of the respective securities or, if
applicable, over the period to the first call date. Premiums on securities
purchased are not amortized for any Portfolio except Cash Management Portfolio
which amortizes the premium on the constant yield method over the life of the
respective securities.
(E)
FEDERAL INCOME TAXES. Each of the Portfolios is treated as a separate entity for
Federal income tax purposes. The Company's policy is to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of the taxable income to the shareholders of
each Portfolio within the allowable time limits. Therefore, no Federal income
tax provision is required.
Investment income received by a Portfolio from foreign sources may be subject to
foreign income taxes withheld at the source.
43
<PAGE> 45
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
(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.
(G)
EXPENSES. Expenses with respect to the Company are allocated to the individual
Portfolios in proportion to the net assets of the respective Portfolios when the
expenses are incurred except where allocations of direct expenses can otherwise
fairly 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 Financial
Corporation ("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 Inc. and an
indirect wholly-owned subsidiary of New York Life Insurance Company ("New York
Life"). New York Life acts as investment adviser to Bond and Growth Equity
Portfolios under an Investment Advisory agreement.
NYLIAC is Administrator for the Company.
The Company, on behalf of each Portfolio, pays the Advisers and Administrator a
monthly fee for the services performed and the facilities furnished at an
approximate annual rate of the average daily net assets of each Fund as follows:
<TABLE>
<CAPTION>
ADVISER ADMINISTRATOR
======= =============
<S> <C> <C>
Cash Management Portfolio............................................................. .25% .20%
Bond Portfolio........................................................................ .25% .20%
Growth Equity Portfolio............................................................... .25% .20%
</TABLE>
The Cash Management, Bond and Growth Equity Portfolios will not have an expense
limitation in 1997.
44
<PAGE> 46
MAINSTAY VP SERIES FUND, INC.
(B)
DIRECTORS FEES. Directors, other than those affiliated with New York Life,
MacKay-Shields, NYLIFE Distributors or NYLIFE Securities, are paid an annual fee
of $16,000 and $750 for each Board meeting attended plus reimbursement for
travel and out-of-pocket expenses. The Company allocates this expense in
proportion to the net assets of the respective Portfolios.
(C)
OTHER. Fees for the cost of legal services provided to the Company by the Office
of General Counsel of New York Life are charged to the Portfolios. For the
period ended June 30, 1997, these fees were as follows:
<TABLE>
<S> <C>
Cash Management Portfolio.............................................................................. $ 2,727
Bond Portfolio......................................................................................... 4,920
Growth Equity Portfolio................................................................................ 12,582
</TABLE>
- --------------------------------------------------------------------------------
NOTE 4--Federal Income Tax:
- --------------------------------------------------------------------------------
At December 31, 1996, for Federal income tax purposes, capital loss
carryforwards, as shown in the table below, are available to the extent
provided by regulations to offset future realized gains of each respective
Portfolio through the years indicated. To the extent that these loss
carryforwards are used to offset future capital gains, it is probable that the
capital gains so offset will not be distributed to shareholders.
<TABLE>
<CAPTION>
CAPITAL LOSS
AVAILABLE THROUGH AMOUNT (000'S)
================= ==============
<S> <C> <C>
Cash Management Portfolio........................................................ 2003 $ 1
2004 1
------
$ 2
======
Bond Portfolio................................................................... 2002 $1,786
======
</TABLE>
- --------------------------------------------------------------------------------
NOTE 5--Financial Investments:
- --------------------------------------------------------------------------------
Each Portfolio may enter into repurchase agreements to earn income. In the event
of the bankruptcy of the seller or the failure of the seller to repurchase the
securities as agreed, a Portfolio could suffer losses, including loss of
interest on or principal of the security and costs associated with delay and
enforcement of the repurchase agreement.
45
<PAGE> 47
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
NOTE 6--Purchases and Sales of Securities (in 000's):
- --------------------------------------------------------------------------------
During the six month period ended June 30, 1997, 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............................................. $146,698 $ 181,020 $ -- $ --
All others............................................................. 150,806 117,258 339,534 300,749
---------------------------------------------------
Total.................................................................. $297,504 $ 298,278 $339,534 $ 300,749
===================================================
</TABLE>
- --------------------------------------------------------------------------------
NOTE 7--Capital Share Transactions (in 000's):
- --------------------------------------------------------------------------------
Transactions in capital shares for the six month period ended June 30, 1997
and the year ended December 31, 1996 were as follows:
<TABLE>
<CAPTION>
CASH MANAGEMENT BOND GROWTH EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO
1997 1996 1997 1996 1997 1996
=======================================================================
<S> <C> <C> <C> <C> <C> <C>
Shares sold.......................................... 140,649 237,105 783 1,940 2,503 3,863
Shares issued in reinvestment of dividends and
distributions...................................... 2,995 4,586 -- 1,117 8 3,968
-----------------------------------------------------------------------
143,644 241,691 783 3,057 2,511 7,831
Shares redeemed...................................... (124,373) (211,181) (1,611) (2,923) (1,503) (2,346)
-----------------------------------------------------------------------
Net increase (decrease).............................. 19,271 30,510 (828) 134 1,008 5,485
=======================================================================
</TABLE>
46
<PAGE> 48
MAINSTAY VP SERIES FUND, INC.
(THIS PAGE INTENTIONALLY LEFT BLANK)
47
<PAGE> 49
(THIS PAGE INTENTIONALLY LEFT BLANK)
48
<PAGE> 50
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
Anthony W. Polis, Treasurer
A. Thomas Smith III, Secretary
Marc J. Chalfin, Controller
INVESTMENT ADVISERS
MacKay-Shields Financial Corporation
New York Life Insurance Company
ADMINISTRATOR
New York Life Insurance and Annuity Corporation
CUSTODIANS
The Bank of New York
The Chase Manhattan Bank, N.A. (formerly Chemical Bank)
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
The financial information included herein is taken from the records of the Funds
without examination by the Funds' independent accountants, who do not express an
opinion thereon.
<PAGE> 51
New York Life Insurance and Annuity Corporation
[NEW YORK LIFE LOGO] 51 Madison Avenue
New York, NY 10010
Bulk Rate
U.S. Postage
PAID
Secaucus, NJ
Permit No. 38
LOGO
Printed on
recycled
paper
18513 (897)
